You are an audit manager and your firm has been approached by a prospective client, World Resource Group (WRG), to be its auditor for the financial year ending 30 June 20x1. On 1 July 20x0, WRG acquired 100% equity interests of three companies in China, Japan and Indonesia. The subsidiary companies in China and Indonesia are audited by local audit firms and there are no requirements for statutory audit in Japan.

The whole group is in the business of logistics and transportation business. All the companies in the group have 30 June financial year end. The separate management accounts of WRG and its three subsidiary companies for the nine months ended 31 March 20x1 were provided to you as follows:

The financial controller of WRG has represented to you that there are no significant intra-company transactions and the combined revenue and profit before tax are therefore expected to be similar to the consolidated revenue and profit before tax.

You have assembled a team of technically competent auditors who are independent of WRG. You are also satisfied that all the requirements of SSA 200 (Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Singapore Standards on Auditing) relating to new client acceptance have been met.

Required:

You are tasked to make a recommendation to your audit partner on whether your firm should accept WRG as an audit client. Evaluate the client acceptance considerations carefully and identify additional key information that you need to consider before making a recommendation on whether to accept the appointment as the auditors of WRG group for the year ending 30 June 20x1.

Combined Company Name Country of incorporation Holding WRG (Singapore) S$'000 Subsidiary Company 1 2 3 (China) (Japan) (Indonesia) S$'000 S$'000 S$'000 S$'000 PROFIT OR LOSS (EXTRACTS) for 9 months ended 31 March 20x1 Revenue 10,870 22,600 16,300 Profit before tax 1,180 2,383 1,500 7,500 2,980 57,270 8,043 580 STATEMENTS OF FINANCIAL POSITION as at 31 March 20x1 Assets Investment property 6,300 Property, plant & equipment 2,300 1,822 Investment in subsidiaries 6,000 Other investments 500 Deferred Tax 800 Inventories 460 2,880 750 Accounts receivable 670 1,295 890 Cash 330 180 230 Total 10,560 6,677 8,170 Liabilities and Equities Accounts payable 780 1,210 760 Other payable 23 760 2 Deposits 680 Lease liability Current tax payable 277 704 1,420 Share capital 2,000 500 500 Retained earnings 7,480 3,503 4,808 Total 10,560 6,677 8,170 6,300 4,702 6,000 500 800 4,410 5,705 850 29,267 320 2,850 110 3,860 255 18 880 541 200 1,966 3,860 3,005 803 680 880 2,942 3,200 17,757 29,267