C. A. Mellon has been appointed auditor of Mamolite Inc. and its subsidiary companies for the year

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C. A. Mellon has been appointed auditor of Mamolite Inc. and its subsidiary companies for the year ended May 31, 19X4, replacing another CPA who had retired. No information is available from the former auditor. The company's consolidated balance sheet as at May 31, 19X4 contained the following account, amounting to about 8 percent of the net assets:

Investment in unconsolidated subsidiary (see Note), $612,478.

The company acquired 57 percent of the common shares of Bastrop Corporation on July 1, 19X1, for $500,000. The investment is carried at cost plus equity in undistributed earnings since acquisition.

What procedures should the auditor carry out in order to form an opinion on the above item?

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