Question

It is Monday, September 16, 2013. You, CA, work at Fahmy & Gingras LLP, a CA firm. Ken Ndiaye, one of the partners, approaches you mid-morning regarding Brennan & Sons Limited (BSL), a private company client for which you performed the August 31, 2012, year-end audit.
“It seems there have been substantial changes at BSL this year,” Ken explains. “I’m going there tomorrow, and since you will be on the audit again this year, it would be beneficial for you to come. I took the liberty of retrieving information from last year’s files so you can refresh your memory about this client (Exhibit C5-1(a)).”
The next day, you and Ken meet with Jack Wright, the accounting manager at BSL. Jack gives you the internally prepared financial statements. To your surprise, there are also financial statements for two new companies. Jack quickly explains that BSL incorporated two subsidiaries in January 2013, each with the same year end as BSL:
Brennan Transport Ltd. (Transport) - 100% owned by BSL
Brennan Fuel Tank Installations Inc. (Tanks) - 75% owned by BSL
You diligently take notes during the meeting. Jack states that BSL will prepare consolidated financial statements for audit based on Canadian Generally Accepted Accounting Principles (GAAP) to satisfy the bank’s request.
Ken asks that you work on the overall planning for these engagements. As part of your planning, he asks you to discuss the new accounting issues that arise as a result of the changes during the year and to evaluate their implications for the engagements.
Later that day, Ken also forwards you an email from Jack.
Required
Prepare the report requested by Ken.


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  • CreatedJune 09, 2015
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