Reporting issues including issues associated with

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reporting issues, including issues associated with acquisition accounting, pensions and consolidation entries. A successful candidate will understand fully the principles and mechanics of a consolidation and be able to identify issues from the information provided. The scenario also tests the candidate’s ability to determine what is significant to a group (as opposed to an individual subsidiary) audit and to consider wider implications across the group of issues identified at a particular subsidiary. In addition, the requirement to assess the adequacy of a report from a subsidiary auditor tests the candidate’s knowledge of reporting and their ability to assess whether it is appropriate to rely on another firm. Available Marks Requirement Technical marks Skills marks Skills assessed Identify and explain any known and potential issues which you believe may give rise to material audit adjustments or significant audit risk in the group accounts. 6 10 Linking issues with audit risk e.g. no fair value review, growing business leads to potential undervalue of other intangibles Appreciate potential difference between Ruritanian accounting standards and IFRS and impact on group accounts Identify potential risk from use of overseas auditors Identify potential non compliance with IFRS impacts on group accounts (e.g. IAS 19) Identify lack of fair value adjustment and implications for accounts Identify that goodwill adjustments will be material Outline for each issue the additional audit procedures, if any, required to enable us to sign our audit opinion on the group accounts. 4 5 Ascertain gaps in work performed and recommend appropriate audit work Identify the need for tax expert to determine adjustment to the group accounts Identify need for expert advice in respect of fair value adjustments and IAS 19 Appreciate inadequate work simply to agree to bank statement Identify appropriate audit tests Total marks 10 15 Maximum marks 25
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TI BR – Advanced Stage – July 2010 © The Institute of Chartered Accountants in England and Wales 2010 14 BR3 – Ed Holdings Issues identified which may give rise to an adjustment or an indication of a significant audit risk in the group accounts and additional audit procedures to enable sign off of group accounts Bhagat’s results are very significant to the group and reliance has been placed on other auditors to audit this entity. Need to assess their competence by reviewing size, reputation, experience, client base etc of the firm. Additional audit procedure A formal confirmation of their independence will be required and this is not covered in the clearance supplied. The audit of Bhagat has been conducted under Ruritanian Standards of Auditing which may not be equivalent to IAS. Need to assess adequacy of work performed, Additional audit procedure This could be achieved by asking them to complete a questionnaire based on IAS or by asking for a clearance under IAS if they have the experience and training to supply this. Bhagat has prepared financial statements under group accounting policies supplied by group financial
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reporting issues including issues associated with...

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