Details of investments and sale are required to check against market value that prevailed at the time of sale and reason why they had to be sold at loss should be ascertained.
There has been an increase of $ 77,318 in property, plant and equipment and $ 76,737 in brand names and a decrease of $ 13,595 in investments. The increase in the value of property, plant and equipment needs to be physically verified with reference to the relative purchase invoices and a comparison with market rates conducted. The increase in brand names also needs to be physically checked with new brand names acquired or it should be ascertained whether increase has been due to revaluation of the brand names. Policy regarding treatment of brand names in the balance sheet has been separately dealt with. As regards decrease in investments, it should investigated, the reason for there being no correlation with the loss reported and the decrease. Whether the values reported in the balance sheet represent cost of acquisition or market value has also to be ascertained.
The increase in creditors and borrowings represents an amount of $ 186,041. This is to be ensured against any possible inclusion of proforma purchase invoices without corresponding entry in the value of inventories. Policy regarding payment based on proforma invoices without receiving stocks has also been separately dealt with.
The break up details of provisions is required to ensure whether previous year's pattern has been followed this year. Besides the reason for the decrease of $ 48,631 needs to be obtained.
The net increase of $ 44,240 in total non-current liabilities should be analyzed. While there is increase in creditors and borrowings, provisions have reduced. Whether there is under provision of liabilities to avoid possible reduction in profits or liabilities have been terminated requiring no further provisions, need to be ascertained.
Net asset has a net increase of $ 30,310 reflected by net increase as much in shareholders' equity. This year substantial dividend has been paid to the tune of $53,274, the reason for limited increase in the equity.
(2) Memo to Audit partner
M/S XYZ & Co who have performed audit of this company's (ABC Ltd) overseas operations are the auditors for another U.S Company who is major share holder (49%) in this company. The U.S. Company's brand names have been purchased by ABC Ltd. Hence care should be had to ensure that value of the Brand names reflected in the balance sheet is worth that much. Whether purchase price has been converted into shares or share capital has been separately received in cash needs to be ascertained. As the auditing firm XYZ Ltd who happens to be the auditor for the major