Metropolitan Corporation has a significant investment in a closely-held corporation, Wake Forest Company. Metropolitan’s investment does not enable the company to exercise significant influence over the operating and financial operations of Wake Forest. To evaluate whether the investment is impaired, Management of Metropolitan has engaged a securities valuation firm to value the investment. In your audit of Metropolitan, you have been provided with the valuation report of securities valuation firm.
a. Describe the procedures that you should perform in evaluating the evidence provided by the report.
b. How would you determine which assumptions in the report are significant?