It is 1 July 2015. You are a manager in Barnes & Barnett Co, a firm of Certified Public Accountants (CPA) responsible for auditing of the Browns Group, a listed entity, for the year ended 31 May 2015. The Group operates in the textile industry, buying silk, cotton, along with other raw materials needed to manufacture a wide range of goods including soft furnishings, linen, and clothing. Goods are sold under the Browns brand name, which was acquired by the Group many years ago. Barnes and Barnett Co, was appointed as auditor in January 2015. The following information have been provided in the exhibits: 1. An email which you have received from Cavone Brown, the audit engagement partner. 2. Information about the Browns Groups general background and activities. 3. Extracts from the draft Group financial statements for the year ended 31 May 2015. 4. Notes from a meeting held between Cavone Brown and the Groups finance director and representatives from its audit committee.

To: Audit manager

From: Cavone Brown

Subject: Browns Group Audit Planning

Date: 1 July 2015

Hello, I need you to begin planning the audit of the Browns Group (the Group) for the year ended 31 May 215. It would have been brought to your attention that we have been appointed to audit the Group financial statements, and we have also been appointed to audit the financial statements of the parent company and all subsidiaries of the Group except for a foreign subsidiary, Pennington Co, which is audited by a local firm, Davis & Co. All components of the Group have the same year end of 31 May, report under IFRS Standards and in the same currency.

Exhibit 1 Background and Structure of the Browns Group

The Group information about each of the components of the Group is shown below:

Ross Co., Lynott Co., and Beard Co. are all wholly owned, acquired subsidiaries that manufacture different textiles. Browns Co also owns 25% of Stewart Co, a company which is classified as an associate in the Group statement of financial position at a value of $12 million on 31 May 2015. The shares in Stewart Co. were acquired in January 2015 for a consideration of $115 million. Other than this recent investment in Stewart Co, the Group structure has remained unchanged for many years. Information relevant to each of the group companies Browns Co is the parent company in the group and its main activities relate to holding the investments in its subsidiaries and also the brand name which was purchased many years ago. Browns Co imposes an annual management charge of $800,000 on each of its subsidiaries, with the charge for each financial year payable in the subsequent August. Ross Co manufactures luxury silk clothing, with almost all of its output sold through approximately 200 department stores. Ross Cos draft statement of financial position recognizes assets of $215 million on 31 May 2015. Any silk clothing that has not been sold within 12 months is transferred to Lynott Co., where the silk material is recycled in its manufacturing process. Lynott Co is located in Farland, where it can benefit from low-cost labor in its factories. It produces low price fashion clothing for the mass market. A new inventory system was introduced in March 2015 in order to introduce stronger controls over the movement of inventory between factories and stores. Lynott Co is audited by Clapton & Co, and its auditors reports in all previous years have been unmodified. Clapton & Co is a small accounting and audit firm but is a member of an international network of firms. Lynott Cos draft statement of financial position recognizes assets of $24 million on 31 May 2015. Beard Co manufactures soft furnishings which it sells through an extensive network of retailers. The company is cashrich, and surplus cash is invested in a large portfolio of investment properties, which generate rental income. The Groups accounting policy is to measure investment properties at fair value. Beard Cos draft statement of financial position recognizes assets of $28 million on 31 May 2015, of which investment properties represent $10 million.

Questtion

Using the information, you have been provided with, you are required to prepare briefing notes for my use, in which you are expected to:

a) Explain the matters to be considered, and the procedures to be performed, in respect of planning to use the work of Davis & Co.