AUDIT PROCEDURES/ EVIDENCE

IAS-12 Review of management working Cast the working Confirm management working to supportive records Availability of profit for deferred tax assets Proper disclosures in FS

Principal audit procedures recoverability of deferred tax asset 1. Obtain a copy of Bluebell Cos current tax computation and deferred tax calculations and agree figures to any relevant tax correspondence and/or underlying accounting records. 2. Develop an independent expectation of the estimate to corroborate the reasonableness of managements estimate. 3. Obtain forecasts of profitability and agree that there is sufficient forecast taxable profit available for the losses to be offset against. Evaluate the assumptions used in the forecast against business understanding. In particular consider assumptions regarding the growth rate of taxable profit in light of the underlying detrimental trend in profit before tax. 4. Assess the time period it will take to generate sufficient profits to utilise the tax losses. If it is going to take a number of years to generate such profits, it may be that the recognition of the asset should be restricted. 5. Using tax correspondence, verify that there is no restriction on the ability of Bluebell Co to carry the losses forward and to use the losses against future taxable profits.

IAS-16 Capitalization vs. revenue nature items Asset capitalized breakup of cost capitalized ensure revenue nature item included Budgets Board approval / minutes for capital expenditure Any borrowing cost capitalized versus criteria ( should be or not capitalized) Related depreciation charge Review notes to FS to ensure addition properly disclosed.

IAS-17 Lease agreement vs. Finance or operating Proper disclosure Lease rentals PV of MLP Finance charge

Audit evidence 1. A review of the lease contract (using a copy of the lease obtained from the lessor) including consideration of the major clauses of the lease which indicate whether risk and reward has passed to Robster Co. 2. A calculation of the present value of minimum lease payments and comparison with the fair value of the assets at the inception of the lease (the fair value should be obtained from the lease contract). 3. A recalculation of the finance charge expensed during the accounting period, and agreement of the interest rate used in the lease contract. 4. Agreement to the cash book of amounts paid to the lessor i.e. deposit and instalments paid before the year end. 5. A recalculation of the depreciation charged, and agreement that the period used in the calculation is the shorter of the lease term and the useful life of the assets. 6. Confirmation using the lease contract that the amounts capitalised relate only to the buildings element of the lease. 7. For the land elements which should be treated as operating leases, a recalculation of the lease expense recognized in the income statement (this should be calculated on a straight-line basis over the lease term). 8. A recalculation and confirmation of the split of the total finance lease payable between current and non-current liabilities. 9. A confirmation of the adequacy of the disclosure made in the notes to the financial statements, and agreement of the future payments disclosed to the lease contract.

IAS-20 AUDIT PROCEDURES ON GOVERNMENT GRANT 1. Obtain the grant document and review the terms, to verify that a 25% reduction is stated in the document. 2. Determine over what period the 25% reduction must be demonstrated e.g. must it be achieved by a certain point in time and sustained for a certain period 3. Review the terms to establish the fi nancial repercussions of breaching the condition would the grant be repayable in full or in part, and when would repayment be made. 4. Obtain documentation from management showing the monitoring procedures that have been put in place regarding energy use. 5. Identify how the energy effi ciency is monitored internally, or through third party inspection and confi rmation. 6. Review the results and adequacy of any monitoring that has taken place before the year end to see if the condition has been breached (for example, compare electricity meter readings pre and post installation of the packing line to confi rm reduced levels of electricity are being used). 7. Discuss the energy effi ciency of the packing lines with an appropriate employee to obtain their views on how well the assets are performing.

IAS-23 Borrowing cost review loan agreement for interest rate / and that loan was specifically taken Recalculation of borrowing cost capitalized Period of capitalization Period when ceased / completion certificate/ board minutes etc Mortgage or charge on loan taken / disclosure Disclosure of loan taken / finance cost etc

IAS-24 Related party disclosure given Name of related party / amount payable receivable / total amount of transaction Board minutes for any related party discussion Director interest in other companies or transaction ( register) Written representation ( because evidence could not be complete)

IAS-36 1. A review of managements impairment test (if conducted), including: a. assessment that an appropriate discount rate has been used b. agreement that the assumptions to determine future cash fl ows are reasonable and in line with business understanding c. agreement that the correct carrying value of assets has been used for comparison of recoverable amount d. agreement that all identifi able assets have been included in the cash generating unit recalculation of all fi gures. 2. Discussion with management over the expected future performance of Shellys Cruises including any strategies to be put in place to combat the declining performance. 3. A review of post year-end management accounts for the performance of Shellys Cruises after the reporting date. 4. A review of the level of bookings made in advance for cruises to be taken in the future.

IAS-37 Restructuring decision / closure of a factory etc: 1. Review board minutes for discussion of the closure and restructuring, noting the date the decision was made to restructure, which should be before the year end. 2. Obtain any detailed and formal plan relating to the closure of the factory and relocation of its operations, noting the date the plan was approved, which should be before the year end. 3. Discuss with management any indication that the company has started to implement the plan prior to the year end, e.g. the date of any public announcement, the date that plant began to be dismantled. 4. Physically inspect the factory for evidence that dismantling has commenced. 5. Obtain a breakdown of the $125 million costs of closure and review to ensure that only relevant costs have been included, e.g. redundancy payments, lease cancellation fees. This is an important procedure for the potential overstatement of the provision. 6. Cast the schedule for arithmetic accuracy. 7. Agree a sample of relevant costs included in the provision to supporting documentation, e.g. redundancy payments to employees contracts, lease cancellation fees (if any) to lease agreement. 8. Enquire as to whether any gain is expected to be made on the sale of assets, and ensure that if so, the gain has not been taken into account when measuring the provision. 9. Review the relevant disclosure note to the financial statements for accuracy and adequacy, where the provision should be treated as a separate numerical class and a description of it given.

IAS-38 AUDIT PROCEDURES ON BRAND Principal audit procedures in respect of the JLC brand 1. Agree the cost of the brand to supporting documentation provided by management. A purchase invoice may not be available depending on the length of time since the acquisition of the brand name. 2. Agree the cost of the brand to prior year audited financial statements. 3. Review the monthly income streams generated by the JLC brand, for indication of any decline in sales. 4. Review the results of impairment reviews performed by management, establishing the validity of any assumptions used in the review, such as the discount rate used to discount future cash fl ows, and any growth rates used to predict the cash infl ows from revenue. 5. Perform an independent impairment review on the brand, and compare to managements impairment review. 6. Review the level of planned expenditure on marketing and advertising to support the brand name, and consider its adequacy to maintain the image of the brand. 7. Inquire as to the results of any customer satisfaction or marketing surveys, to gain an understanding as to the public perception of the JLC brand as a high fashion brand. 8. Consider whether non-amortisation of brand names is a generally accepted accounting practice in the fashion retail industry by reviewing the published fi nancial statements of competitors. 9. Discuss with management the reasons why they feel that non-amortisation is a justifi able accounting treatment

IFRS-2 Principal audit procedures measurement of share-based payment expense 1. Obtain management calculation of the expense and agree the following from the calculation to the contractual terms of the scheme: a. Number of employees and executives granted options b. Number of options granted per employee c. The official grant date of the share options d. Vesting period for the scheme e. Required performance conditions attached to the options. 2. Recalculate the expense and check that the fair value has been correctly spread over the stated vesting period. 3. Agree fair value of share options to specialists report and calculation, and evaluate whether the specialist report is a reliable source of evidence. 4. Agree that the fair value calculated is at the grant date. 5. Obtain and review a forecast of staffing levels or employee turnover rates for the duration of the vesting period, and scrutinise the assumptions used to predict level of staff turnover. 6. Discuss previous levels of staff turnover with a representative of the human resources department and query why 0% staff turnover has been predicted for the next three years. 7. Check the sensitivity of the calculations to a change in the assumptions used in the valuation, focusing on the assumption of 0% staff turnover. 8. Obtain written representation from management confirming that the assumptions used in measuring the expense are reasonable.

IFRS- 3 BUSINESS COMBINATION ( PAST PAPERS) AUDIT PROCEDURES ON GOODWILL 1. Obtain the legal purchase agreement and confirm the date of the acquisition as being the date that control 2. From the legal purchase agreement, confirm the consideration paid, and the details of the contingent consideration, including its amount, date potentially payable, and the factors on which payment depends. 3. Confirm that _______Co is wholly owned by _______Co through a review of its register of shareholders, and by agreement to legal documentation or by a Companies House search. 4. Agree the cash payment of $______million to cash book and bank statements. 5. Review the board minutes for discussion regarding, and approval of, the purchase of ______Co. 6. Discuss with management the reason for providing for the full amount of contingent consideration, and obtain written representation concerning the accounting treatment. 7. Ask management to recalculate the contingent consideration on a discounted basis, and confirm goodwill is recognized on this basis in the consolidated financial statements.

Audit procedures- non controlling interest Audit procedures on classification of non-controlling interests: 1. Determine the percentage shareholding acquired, using purchase

documentation, legal agreements, etc. 2. Confirm that the percentage shareholding is within the normal range for an associate i.e. between 20 and 50% of equity shares. 3. Obtain a list of directors (using published fi nancial statements or an internet search) for the companies to confi rm whether Grissom Co has appointed director(s) to the boards. 4. Discuss with the directors of Grissom Co their level of involvement in policy decisions made at the companies. 5. Obtain a written representation detailing the nature of involvement and infl uence exerted over the companies (for example, a letter from the investees board of directors confi rming the voting power of Grissom Co).

6. Consider the identity of the other shareholders and the relationship between them and Grissom Co. This may reveal that the situation is in substance a joint venture and would need to be accounted for as such. Audit procedures on the consolidation schedule of the Rosie Group: 1. Agree correct extraction of individual company figures by reference to individual company audited financial statements. 2. Cast and cross cast all consolidation schedules. 3. Recalculate all consolidation adjustments, including goodwill, elimination of pre acquisition reserves, cancellation of intercompany balances, fair value adjustments and accounting policy adjustments. 4. By reference to prior year audited consolidated accounts, agree accounting policies have been consistently applied. 5. Agree brought down figures to prior year audited consolidated accounts and audit working papers (e.g. goodwill figures for Timber Co and Ben Co, consolidated reserves). 6. Agree that any post acquisition profits consolidated for Dylan Co arose since the date of acquisition by reference to date of control passing per the purchase agreement. 7. Reconcile opening and closing group reserves and agree reconciling items to group financial statements.