Group Audits Flashcards
What is the difference between group audits and individual audits
Generally each separate company in the group will have to be audited as normal. The group financial statements audit requires some additional steps in considerations not seen in the audit of individual companies
What is the proper way to deal with the companies investments and other companies
What happens if the auditor of the group is not the auditor of all components (A component is the general name for a part of a group)
Care is needed with intergroup balances
Unrealised profits must be eliminated
Goodwill must be verified and checked for possible impairments
If a company has been acquired partway through the year and the profits will have to be apportioned
Uniform accounting policies
What is a component auditor
Auditor who performs all work related to a components for purposes of the group audits. components auditor is a part of the engagement team for a group or it
What are common controls
Comp controls are controls designed by group management that are intended to operate in a common man across multiple entities or business units
What are the principal adjustments for an appropriate consolidation
Goodwill and pre-acquisition reserves
Eliminate on realise inter group profits
Reconcile inter group balances
Adjustments to align the components financial statements for the purpose of consolidation
Fair values to be use where appropriate
What is the accounting treatment for deferred consideration
The deferred amount must be discounted to its present value and included as part of the acquisition cost e.g. for the calculation of goodwill. Auditing this figure will mean that as well as inspecting the acquisition agreement the order so I’ll have to verify that the discount rate shoes as appropriate. Each year as a date of the payments of the deferred consideration approaches the goodwill and provision for the deferred payments will have been altered as the amounts will be discounted by one year less
What is the accounting treatment for contingent Consideration
IFRS3 requires that contingent consideration is included as part of the consideration for acquisition measure and its goodwill at the acquisition date and exam question will either tell you what the fair value is or how it should be calculated
What is a letter of support/comfort letter
If a subsidiary has a great concern issue and is unable to acquire capital from lenders than they can look to the parents to ask for help. In the circumstances the group board must provide the group auditor with a letter of confidence or support letter in which they set out their intentions. But of course this letter is relatively weak form of evidence and a group auditor should look at other evidence that the support for the subsidiary is Real
What is a joint audit
A joint audit is where two firms of auditors are both appointed and both responsible for the authors opinion. This is relatively unusual arrangement and has probably come about through the merger of two companies with different auditors as they can then benefit in a joint approach.
What are transnational audits
Transnational orders are not the same as international audits. International audit simply refer to an audience of a company a group that has operations in more than one country so that auditing has to take place in more than one country
A transnational audit is the orders of financial statements where those financial statements will be relied upon outside the auditing entities home jurisdiction for the purpose of significant lending, investing or regulatory decisions.
