Reference no: EM132590712

Question - John & Co, is currently reviewing the audit work for the Roxanne Corp group which is a manufacturer of electronic components for various industries. One of Roxanne's subsidiaries, Rose Pte Ltd, specializes in designing various telecommunication equipment for sale by other companies in the group. The telecommunication products were then sold to more than 15 countries. Among the subsidiaries of Roxanne is Bestow Pte Ltd, a nanotechnology company in the United States newly acquired by Roxanne Corp in the middle of the current year with a 60 % stake. The turnover was USD7 million. The net assets of Bestow Pte Ltd company are USD5.5 million. Since its acquisition, Bestow Pte Ltd suffered losses of USD1.5 million, but it is expected to make a huge profit in the coming years. The auditors of Bestow Pte Ltd are Mark & Co, an audit firm based in the United States. Since John & Co does not have a representative and office in the United States, Mark & Co continues to perform their audit work with Bestow Pte Ltd to audit the financial statements for the current year.

John &Co HQ is in Singapore and Roxanne is a Singapore company.

1) Discuss two (2) factors to consider before John & Co accepts an offer as a group auditor of Roxanne Corp.

2) Give TWO (2) audit procedures to be performed by John & Co as group auditors for transactions involving Roxanne Corp by:

i. Rose Pte Ltd

ii. Bestow Pte Ltd.

3. Discuss the appropriate actions that John & Co should take if they finds that their level of dependence on Mark & Co is low.