The facts and scenario in this are completely fictional.

In this scenario, your engagement team has the role of the component auditor, while the network firm, ADG (the BIG FOUR network affiliate), is referred to as the group auditor.

SCENARIO:

You are part of an engagement team that has received inter-office instructions from ADG, a BIG FOURnetwork firm in France, to conduct an audit of a component of the consolidated entity - Dassault Systemes (Dassault or "Company"), a multinational French corporation. ADG has the overall responsibility of reporting on the consolidated financial statements of Dassault and needs your team to conduct an audit of the US subsidiary of the Company. Dassault is a public company listed on the Euronext (largest stock exchange in Europe) and also has a secondary listing in the United States. Your audit of the US subsidiary will be used by ADG to support its report on the consolidated financial statements of Dassault.

The instructions that your team received were fairly broad, asking you to conduct an audit of the subsidiary under International Auditing and Assurance Standards Board, or IAASB, standards, which are very similar to both the American Institute of Certified Public Accounts, or AICPA, standards and the PCAOB standards. The instructions also set forth the form of clearance that ADG required from your team to deliver to them at the completion of the audit.

During the course of executing your assignment, your team encountered difficulties relative to the work on certain revenue contracts and reported these difficulties to ADG. Specifically, your team had difficulty fully understanding how the US subsidiary was recognizing revenue for a number of long-term contracts. More specifically, the company was not able to provide - for certain large contracts - detailed project to date budget vs. actual analyses; updated estimate to complete analyses; or analyses of the ability of the company to bill for overruns. All of these items are critical to your completion of the audit relative to revenue. The detail presented by the client was incomplete and very difficult to follow. Even after numerous discussions with management, your team still had a great deal of uncertainty around what was actually happening. Your team decided that it was not in a position to conclude on revenue - and hence not deliver a clean clearance to ADG - because of this.

Your team spoke to ADG, indicating that the audit was complete with the exception of the revenue testing because of concerns about revenue. Your concerns about revenue would prevent you from issuing a clearance report. After a great deal of discussion, the team from ADG became frustrated and indicated that they would address revenue themselves - you need not perform any additional procedures. They asked you to simply send the clearance memorandum as instructed and include a scope limitation relative to revenue. (See supporting materials for an example of this type of clearance memorandum).

Your team lead has asked you to review the situation at hand and decide how best to respond to AD

WHAT TO SUBMIT:

1. A revised org chart for Dassault Systems that shows the legal structure of the company and includes notes regarding how to audit the entire group. Please provide this in Word or PDF format.
2. An organizational chart of firms within the BIG FOUR International Network
3. An organizational chart for ADG, highlighting group auditor and component auditor responsibilities. Please provide this in Word or PDF format.
4. A memo of no more than 700 words that includes all of the required elements listed in Part 4 of the Key Tasks.