(c) Audit procedures
Generally 1 mark for each well explained audit procedure:
(i) Investment in WTC
– Obtain the legal documentation supporting the investment and agree the details of the investment (max 2 marks for details of items to be verified)
– Read board minutes for approval of the investment understanding of the business rationale for the investment
– Read minutes of relevant meetings between ZCG and Wolf Communications to confirm shared control and shared decision-making process
– Confirm that ZCG has successfully appointed members to the board of WTC and that board decisions are made equally
Maximum marks 4
(ii) Amortisation of licence
– Obtain the licence agreement and confirm the length of the licence period
– Confirm whether the licence can be renewed at the end of the 10-year period
– Re-perform management’s calculation of the amortisation charged as an expense in 2016
– Discuss with management the process for determining the method of amortisation
– Review management accounts to confirm that the Farland network became operational on 1 July 2016 and that Farland is generating a revenue stream from that date
– Review customer contracts to confirm network operational from 1 July 2016
– Enquire with management on the existence of factors indicating that a shorter useful life is appropriate
– Review management accounts and cash flow forecasts to confirm that Farland is generating an income stream and is predicted to continue to generate cash
– Obtain a management representation to confirm that there are no indications of impairment of the licence of which management is aware
Maximum marks 6
Professional marks – generally 1 mark each for heading, introduction, structure and clarity of explanations 4