案例分析题You are a manager in the audit department of Bison Co, a firm of Chartered Certified Accountants, responsible for the audit of the Eagle Group (the Group), which has a financial year ending 31 December 20X8. Your firm is appointed to audit the parent company, Eagle Co, and all of its subsidiaries, with the exception of Lynx Co, a newly acquired subsidiary located in a foreign country which is audited by a local firm of auditors, Vulture Associates. All companies in the Group report using IFRS Standards as the applicable financial reporting framework and have the same financial year end. You are provided with the following exhibits: 1. An email which you have received from Maya Crag, the audit engagement partner. 2. Background information about the Group including a request from the Group finance director in respect of a non‑audit engagement. 3. Extracts from the Group financial statements projected to 31 December 20X8 and comparatives, extracted from the management accounts, and accompanying explanatory notes. 4. Managements determination of the goodwill arising on the acquisition of Lynx Co. 5. An extract from the audit strategy document prepared by Vulture Associates relating to Lynx Co. Required: Respond to the instructions in the email from the audit engagement partner. Note: The split of the mark allocation is shown in the partners email (Exhibit 1). Professional marks will be awarded for the presentation and logical flow of the briefing notes and the clarity of the explanations provided. Exhibit 1 Email from audit engagement partner To: Audit manager From: Maya Crag, Audit engagement partner Subject: Audit planning for the Eagle Group Hello I have provided you with some information in the form of a number of exhibits which you should use in planning the audit of the Eagle Group (the Group). I held a meeting yesterday with the Group finance director and representatives from the Group audit committee, and we discussed a number of issues which will impact on the audit planning. Using the information provided, I require you to prepare briefing notes for my use in which you: (a) Evaluate the audit risks to be considered in planning the Group audit. You should use analytical procedures to assist in identifying audit risks. You are not required to consider audit risks relating to disclosure, as these will be planned for later in the audit process. (b) Design the principal audit procedures to be used in the audit of the goodwill arising on the acquisition of Lynx Co. Managements calculation of the goodwill is shown in Exhibit 4. You do not need to consider the procedures relating to impairment testing, or to foreign currency retranslation, as these will be planned later in the audit. (c) Using the information provided in Exhibit 5, evaluate the extract of the audit strategy prepared by Vulture Associates in respect of their audit of Lynx Co and discuss any implications for the Group audit. (d) After considering the request in Exhibit 2 from the Group finance director in respect of our firm providing advice on the Groups integrated report, discuss the ethical and professional implications of this request, recommending any further actions which should be taken by our firm. Exhibit 2 Background information about the Group and request from Group finance director Group operational activities The Group, which is a listed entity, operates in distribution, supply chain and logistics management. Its operations are worldwide, spanning more than 200 countries. The Groups strategy is to strengthen its market share and grow revenue in a sustainable manner by expansion into emerging markets. There are over 50 subsidiaries in the Group, many of which are international. There are three main business divisions: post and parcel delivery, commercial freight and supply chain management, each of which historically has provided approximately one third of the Groups revenue. A fourth business division which focuses purely on providing distribution channels for the oil and coal sector was established two years ago, and in 20X8 began to grow quite rapidly. It is forecast to provide 12% of the Groups revenue this year, growing to 15% in 20X9. This division is performing particularly well in developing economies. In recent years, revenue has grown steadily, based mainly on growth in some locations where e commerce is rapidly developing. This year, revenue is projected to decline slightly, which the Group attributes to increased competition, as a new distribution company has taken some of the Groups market share in a number of countries. However, the Group management team is confident that this is a short term drop in revenue, and forecasts a return to growth in 20X9. Innovation The Group has invested in automating its warehousing facilities, and while it still employs more than 250,000 staff, many manual warehouse jobs are now performed by robots. Approximately 5,000 staff were made redundant early in this financial year due to automation of their work. Other innovations include increased use of automated loading and unloading of vehicles, and improvements in the technology used to monitor and manage inventory levels. Integrated reporting The Group is proud of this innovation and is keen to highlight these technological developments in its integrated report. The Group finance director has been asked to lead a project tasked with producing the Groups first integrated report. The finance director has sent the following request to the audit engagement partner: We would like your firm to assist us in developing our integrated report, and to provide assurance on it, as we believe this will enhance the credibility of the information it contains. Specifically, we would like your input into the choice of key performance indicators which should be presented, how to present them, and how they should be reconciled, where relevant, to financial information from the audited financial statements. The publication of an integrated report is not a requirement in the jurisdiction in which the Group is headquartered, but there is a growing pressure from stakeholders for an integrated report to be produced by listed reporting entities. If Bison Co accepts the engagement in relation to the Groups integrated report, the work would be performed by a team separate from the audit team. Exhibit 3 Extracts from consolidated financial statements Statement of financial position Statement of profit or loss Notes to the extracts from financial statements Goodwill 1. Goodwill relates to the Groups subsidiaries, and is tested for impairment on an annual basis. Management will conduct the annual impairment review in December 20X8, but it is anticipated that no impairment will need to be recognised this year due to anticipated growth in revenue which is forecast for the next two years. In March 20X8, the Group acquired an 80% controlling shareholding in Lynx Co, a listed company located in a foreign country, for consideration of $351 million. Managements determination of the goodwill arising on this acquisition is shown in Exhibit 4. Other intangible assets 2. Other intangible assets relates mostly to software and other technological development costs. During the year $35 million was spent on developing a new IT system for dealing with customer enquiries and processing customer orders. A further $20 million was spent on research and development into robots being used in warehouses, and $5 million on developing new accounting software. These costs have been capitalised as intangible assets and are all being amortised over a 15 year useful life. Equity and non-current liabilities 3. A share issue in July 20X8 raised cash of $100 million, which was used to fund capital expenditure. 4. Non current liabilities includes borrowings of $550 million (20X7 $500 million) and provisions of $100 million (20X7 $120 million). Changes in financing during the year have impacted on the Groups weighted average cost of capital. Information from the Groups treasury management team suggests that the weighted average cost of capital is currently 10%. Financial performance 5. Revenue has decreased by 37% over the year, due to a new competitor in the market taking some of the Groups market share. 6. Other operating income comprises the following items: 7. Operating expenses includes the following items: Exhibit 4 Determination of goodwill on the acquisition of Lynx Co Notes:​​​​​​​ 1. The contingent consideration will be payable four years after the acquisition date and is calculated based on a payment of $525 million, only payable if Lynx Co reaches revenue and profit targets outlined in the purchase documentation. The amount included in the goodwill calculation has been discounted to present value using a discount factor based on an 18% interest rate. 2. The non controlling interest is measured at fair value, the amount being based on Lynx Cos share price on 1 March 20X8. 3. The assets and liabilities acquired and their fair values were determined by an independent firm of Chartered Certified Accountants, Sidewinder Co, who was engaged by the Group to perform due diligence on Lynx Co prior to the acquisition taking place. A fair value uplift of $12 million was made in relation to property, plant and equipment. Exhibit 5 Extract from audit strategy prepared by Vulture Associates in respect of the audit of Lynx Co The two points below are an extract from the audit strategy. Other sections of the audit strategy, including the audit risk assessment, have been reviewed by the Group audit team and are considered to be satisfactory. Lynx Co is projected to be loss making this year, and the Group audit team is confident that sufficient procedures on going concern have been planned for. Controls effectiveness We will place reliance on internal controls, which will reduce the amount of substantive testing which needs to be performed. This is justified on the grounds that in the previous years audit, controls were tested and found to be highly effective. We do not plan to re test the controls, as according to management there have been no changes in systems or the control environment during the year. Internal audit Lynx Co has offered the services of its internal audit team to help perform audit procedures. We are planning to use the internal auditors to complete the audit work in respect of trade receivables, as they have performed work on this area during the year. It will be efficient for them to perform and conclude on the relevant audit procedures, including the trade receivables circularisation, and evaluation of the allowance for trade receivables, which we will instruct them to carry out.

案例分析题You are an audit manager in Thomasson Co, a firm of Chartered Certified Accountants

案例分析题2、You are the manager responsible for the audit of Thurman Co, a manufacturing company which supplies stainless steel components to a wide range of industries

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