Advanced Audit and Assurance

Question:

a) Definedue diligence and describe the nature and purpose of a due diligence review.

b) Describe the procedures that you will conduct on MTC.

Fisher Pride Sdn Bhd (FPSB) is a company that makes soft toys for children. The toys are sold throughout Malaysia through FPSB's 12 retail outlets. After it's successful in Malaysia, FPSB is now planning to expand its business to other Asian regions. FPSB has decided to purchase Malek Toys PLC (MTC). MTC place of business is in Indonesia. FPSB's the cost of production would be cheaper.as labour. cost in Indonesia is cheaper. In-addition, m purchased in Indonesia are 20% cheaper than in Malaysia. management believe that by buying MTC, MTC has been supplying raw materials to FPSB for the last six years. Shaun, FPSB's Chief Financial Officer (CFO), approached your audit firm, Adam & Associates, for an advice on the purchase of MTC. FPSB's business is spread all over the world. FPSB has two business segments local and international business. The local business comprises ten branches and the audited financial statements show revenue of RP80 billion for the year ended 30 September 2014. FPSB's International business comprises four branches and the revenue comes to RP20 billion for the year ended 30 September 2014. Adam, the audit partner in Adam & Associates has asked you to conduct due diligence review for MTC