Reference no: EM132466948

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:

a. 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:

Point 1: '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.)

Point 2: '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.)

b. In order to maintain steady supply of quality barley to the Australian breweries, BZ has entered a three-year contract with a supplier. This contract provides in part:

Point 3: "BZ guarantees to purchase the supplier's entire stock of Grade A barley over the period of the contract. The price paid will be market rate less 10%".

Question 1: "Should the supply of Grade A barley fall below BZ's requirements, BZ can purchase barley to the amount of the shortfall from other sources".

Question 2: Explain how each situation would effect your overall edit plan. include reference to the nature and extent of audit evidence which would need to be accumulated