Question: "The firm is quoting for an audit for a UK holding company with a number of UK-based subsidiaries, and also a Spanish and an American subsidiary.
What work is required in respect of the Spanish and American subsidiaries for the audit of the group accounts?"
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Question: "A parent company heads a group which qualifies as medium size and is needing to have audited group accounts for the first time.
The group includes 2 overseas companies where accounts are prepared by local accountants but neither need an audit under local legislation.
There is a French subsidiary which represents approx 12% of group turnover and gross assets.
There is a German subsidiary which represents approx 30% of group turnover and gross assets.
Both subsidiaries have approx 50% of their sales being product purchased from the UK parent.
Group audit materiality is £75k.
At a lecture we were advised that we could treat a subsidiary representing less than 15% of the group as insignificant.
Our planned audit approach is as follows:
France.
Ask the local accountants (who are also registered auditors) to attend the year end stock take and report to us. The stock value is approx £100k.
What else should we do in respect of this subsidiary?
Germany
Although we have audit programmes and questionnaires for auditors of subsidiaries, we would prefer to do the audit work ourselves, especially because the local accounts have not been audited.
The stock value is £150k.
How should we approach the audit this year?
What changes might be possible in future year?"
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Question: "The UK parent company is medium sized and must prepare consolidated accounts.
The parent has a US subsidiary which is a significant component of the consolidated accounts.
All the books and records for the US subsidiary are maintained in the UK.
What audit work needs to be carried out for the consolidation on the US subsidiary?"
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Question: "We have been asked to quote for the audits of effectively 3 companies. It is an existing client who runs an expanding business and the main limited company would have probably expanded sufficiently to fall within the audit threshold in any case. In addition, there has been a hive-up which leaves a parent and 2 subsidiary companies, all of which will probably require an audit.
My manager has prepared an estimated quote of £x per company for the audit. We are being challenged over whether we can achieve any efficiencies/short-cuts to minimise the time costs given there are 3 companies in the group i.e. £x sounds palatable if all of the business had been in one company, but £3x for all 3 companies sounds excessive."
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Question: "The lease for each tenant of flats in a property includes the following in respect of service charges:
Paragraph 2 of Part 2 sets out the requirement to submit to the tenant a written account of the service charge costs incurred and a statement of the certified amount (being the % attributable to that tenant). This would suggest that the engagement is one of making a 'factual report on service charge accounts' and not an audit.
However, Part 3 which sets out the facilities to be provided by the management company, specifically paragraph 11, suggests that one of the allowable costs is for the 'keeping of accounts and management records and the preparing and auditing of the service charge accounts and other statements'.
Given that reference to an audit in this instance is stated in part 3 (facilities), and not in part 2 which sets out the reporting requirement, do you think that this is merely a poor choice of wording, or are you of the opinion that this paragraph infers that an audit of the service charge accounts should be undertaken.
The property is a fairly small property, and to my mind the undertaking of an audit would result in a disproportionate expense being incurred."
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