You are the manager responsible for the audit of Setter Stores Co, a company which operates supermarkets across the country. The final audit for the year ended 31 January 2013 is nearing completion and you are reviewing the audit working papers. The draft financial statements recognise total assets of $300 million, revenue of $620 million and profit before tax of $47•5 million.

An issue from the audit working papers is summarised below:

Distribution licence

The statement of financial position includes an intangible asset of $15 million, which is the cost of a distribution licence acquired on 1 September 2012. The licence gives Setter Stores Co the exclusive right to distribute a popular branded soft drink in its stores for a period of five years. (5 marks)

Required:

Comment on the matters to be considered, and explain the audit evidence you should expect to find during your file review in respect of each of the issues described above.