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If a Group purchases a new Co. during the year what would be the things the auditor would have to look for?

+2 Votes
If a Group purchases a new Co. during the year what would be the things the auditor would have to look for?

Is there a standard check list? I had just thought of its year end, its location (if its a foreign country), how its goodwill was calculated, if the auditor is familiar with the nature of its industry. There was a question I was looking at and it was asking to Identify and explain the implications of the acquisition of the Group purchasing the new Company and the answer had much more than what I had thought of.

November 21st 2014 AN ACCA USER 290 Points
Edited November 21th 2014 AN ACCA USER

2 Replies

+3 Votes

Goodwill calculation (IFRS 3) components of goodwill and treatment of legal expense - discounting contingent consideration to PV etc.
Underlying assumptions i.e. FV of net assets.
Retranslation of goodwill at year end according to closing forex rate
Impairment of goodwill IAS 36
Retranslation of gains and losses at correct rates (IAS 21)
If co. acquired was a associate only include share of income post purchase
If subsidiary acquired then the consolidation of assets and liabilities would be subject to rules of IAS 21
Apply ISA 315 i.e. understand risk of material misstatement by understanding entity and associated business risks
Document internal control procedures of company acquired
Materiality levels for the group would change due to enlarged status of the group.
Are the year ends co terminus
Disclosures re ISA 600 Special considerations i.e. is the acquisition a material component to the group.
See question Stow. I think it was on the December 2013 exam.

November 25th 2014 AN ACCA USER 200 Points 1 Flag
0 Votes
The amount purchased (if less than 50% not a sub)
So will need to ensure correct accounting treatment is performed either every line in accounts needs to include the subs figures


Understand structure of firm
Last years audit issues

If an associate, joint venture a 1 liner is needed in Non current assets only

Looking out for fraud and errors
Mgt manipulation of figures
November 28th 2014 AN ACCA USER 1,230 Points