Question
Your client, BZ Limited (BZ), operates brewery and bottling plants in various locations around the world. Each country has a Regional Processing Centre (RPC), which
Your client, BZ Limited (BZ), operates brewery and bottling plants in various locations around the world. Each country has a Regional Processing Centre (RPC), which acts as the accounting and administrative centre for that country. Each country prepares financial data and summarises the information into a standardised package format. This package is submitted to head office in Perth on a monthly basis. Material balance sheet items consist of inventories, trade receivables, trade payables, brand names and property, plant and equipment. It is February 2016, you are currently planning the June 2016 audit and have the following information. Each situation is to be considered independently:
Senior management has been engaged in high-level discussions with a major competitor, L Limited, with the view to establishing a joint venture operation in the UK. The joint venture agreement, signed in early February, states in part:
· 'BZ agrees to close down its current operations in the United Kingdom within one year of the agreement being signed.' (These operations currently contribute 4 percent of total net profit.)
· 'BZ agrees that two of its six directors will be seconded to the joint venture for two years to oversee its operations.' (This will involve the directors moving from Australia to the United Kingdom.)
Required: For each independent situation provide:
A) the effect on the audit plan, and
B) Include the nature and extent of audit evidence needed must be considered.
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