審計學

第二題 (17 分)：

Assume you are a senior audit manager at a CPA firm. During the risk assessment process for your clients, you identified the following key audit matters (KAMs). Each KAM highlights specific risks associated with significant accounts or disclosures in the financial statements, as well as the complexities involved in auditing them.

Goodwill

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the Oncology reporting unit is a key audit matter include:

i. the significant judgment by management in developing the fair value estimate of the Oncology reporting unit.

ii. the high degree of auditor judgment, subjectivity, and effort required in evaluating management's significant assumptions related to revenue growth rates, expected regulatory approvals, projected margins, and discount rates.

Revenue from customer contracts

The principal considerations for our determination that performing procedures related to revenue recognition for the Advanced Therapeutics segment is a key audit matter include:

i. the complexity of management's judgments in estimating the transaction price, including the assessment of variable consideration linked to developmental and regulatory milestones; and

ii. significant auditor judgment and effort required in evaluating the assumptions used by management to estimate the probability of achieving these milestones.

Business combinations

Auditing the accounting for the Company's acquisition of MedEquip Inc. was complex and required significant auditor judgment because the purchase price allocation involved determining the fair value of acquired intangible assets, including customer relationships and proprietary technology. Management used the income approach to estimate the fair values, which involved significant assumptions such as future cash flows, revenue growth rates, customer attrition rates, and discount rates.

Required

Your task is to:

• Recommend appropriate audit procedures to address the identified risks by matching the procedures (labeled a–y) with the KAMs provided.
• Ensure that your selected procedures are aligned with the specific risks described in each KAM and provide the most relevant evidence for each risk.
• Note that a single procedure may be applicable to address more than one risk.

Use the details provided for each KAM as the basis for your response.

Audit procedures:

• A. Evaluated the design and tested the operating effectiveness of controls over the accuracy of forecasting demand activity as well as the completeness and accuracy of the significant components included in the final sales deduction estimates.
• B. Evaluated the design and tested the operating effectiveness of controls over management's review of significant assumptions, the approval of revenue forecasts, and the oversight of valuation models.
• C. Evaluated the design and tested the operating effectiveness of controls over the review and approval of key assumptions used to estimate the fair values of customer relationships and proprietary technology.
• D. Evaluated the design and tested the operating effectiveness of controls over the valuation of the reserve for losses and loss adjustment expenses.
• E. Evaluated the design and tested the operating effectiveness of controls related to the identification of performance obligations.
• F. Read the purchase agreement and closing documents to understand the terms of the acquisition and validate the identified assets and liabilities subject to fair value measurement.
• G. Reviewed management's determination of the total transaction price by inspecting customer contracts and assessing whether all material terms were appropriately considered.
• H. Evaluated the appropriateness of the discounted cash flow model and other valuation methodologies.
• I. Tested management's estimation process over the determination of sales discount accruals by developing an independent expectation of the estimated accrual balances.
• J. Performed sensitivity analyses on significant assumptions to assess the impact of changes on the fair value estimate.
• K. Verified the accuracy and completeness of data used in estimating variable consideration by reconciling to management's supporting documentation and performing analytical procedures on cost and milestone projections.
• L. Verified the accuracy and completeness of the underlying data used in the discounted cash flow model.
• M. Reconciled the fair value of the acquired assets to the total purchase consideration.
• N. Reviewed the reconciliation of the estimated fair value of the reporting unit to the Company's market capitalization and evaluated the implied control premium.
• O. Conducted a lookback analysis to assess the historical accuracy of management's assumptions in prior acquisitions.
• P. Tested individual loan risk ratings for a selection of higher risk-rated and pass-rated commercial and institutional credits by evaluating the financial performance of the borrower, sources of repayment, and any relevant guarantees or underlying collateral.
• Q. Engaged specialists to independently assist in evaluating the methodology and significant assumptions.
• R. Reviewed progress reports and documentation provided by individuals responsible for contract execution.
• S. Assessed the sufficiency of the audit evidence obtained related to the quantitative component of the pooled allowance for higher risk-rated and pass-rated commercial and institutional credits and loans secured by commercial real estate.
• T. Compared management's assumptions to market data, industry benchmarks, and third-party industry reports.
• U. Conducted a lookback analysis to assess the historical accuracy of management's estimates of milestone achievement probabilities and cost projections.

Provide your response in the following table: