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Ryder Group (c)(d)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AAA Exams › Ryder Group (c)(d)

  • This topic has 1 reply, 2 voices, and was last updated 3 years ago by Kim Smith.
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  • February 24, 2020 at 4:00 am #562876
    toushiga
    Participant
    • Topics: 424
    • Replies: 172
    • ☆☆☆☆

    Hello Sir, for PYQ Sept/Dec 2019 Q1(c)&(d)

    (c)(i)
    1. Why the first paragraph and last two-point (nature of access and no restriction of the group’s shared control) really matter for investment in Peppers Co?

    2. I observe that examiner answer always include “understand the business/management rationale” for disposal or acquire a company/subsidiary/joint venture. Why it’s important as an audit procedure?

    c(ii)
    1. Apart from using the forecast/marketing plan to verify the use of the grant, can we verify through cap exp document /NCA register /cash book (analysis column)?

    (d)
    1.Why recommend another firm which would earn a referral fee will create threat to professional competence and due care?

    Thank you.

    February 24, 2020 at 9:15 am #562913
    Kim Smith
    Keymaster
    • Topics: 111
    • Replies: 7579
    • ☆☆☆☆☆

    (c)(i)
    1. Because, for example, if Ryder Co were to have control rather than joint control (e.g. through different voting rights attached to any or all of the 50% of the shares or through control of the board), Pepper would be a subsidiary – which would make equity accounting incorrect treatment of the investment.
    2. The auditor must always understand the business rationale of significant transactions. If business/commercial rationale seems dubious in any way that might suggest a related party transaction or a special purpose vehicle (for example) which would require further audit consideration.
    (c)(ii)
    1. No – you cannot contradict the scenario “None of the amount received has yet been spent …”
    (d)
    1. “professional competence” and “due care” get wrapped up together in one fundamental principle – in this case I suggest that Squire & Co’s duty of due care to its audit client, Ryder Co, would be compromised if it were to make an unsuitable recommendation of another firm.

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