(ii) Explain the key audit procedures to be performed on the impairment of goodwill. Question 2 (25 marks) (a) The IAASB's International Standards on Auditing (IASs) explicitly recognize the fundamental importance of professional skepticism. However, the its adoption and application is ultimately a personal and professional responsibility of auditors. Required: Discuss the importance of professional skepticism in the performance of an audit engagement. [8 marks] (b) Whidespread Group is a multinational company with some subsidiaries operating in different countries in Europe and Asia. The Group has just completed the draft consolidated financial statements for the year ended 30 June 2018. The profit before tax and total assets that have been recognized for year ended 30 June 2018 and 2017 are as follows: 30 June 2018 30 June 2017 Profit before tax $ 7 million $ 10 million Total assets $ 85 million $ 79 million Due to the several business combinations over the years, the Group had recognized a goodwill of $ 15 million as at 30 June 2017. This year an impairment of $ 85,000 is to be recognized in respect to goodwill after an impairment review carried out by the finance director of the Group in June 2018. The Chief Internal Auditor of the Group has verified the assumptions used and calculations performed by the finance director and is satisfied with the conclusions drawn. The assumptions used are consistent with previous impairment reviews. Required: (1) Discuss how professional skepticism should be applied to the impairment review. [8 marks] [9 marks] Page 2 of 4 (ii) Explain the key audit procedures to be performed on the impairment of goodwill. Question 2 (25 marks) (a) The IAASB's International Standards on Auditing (IASs) explicitly recognize the fundamental importance of professional skepticism. However, the its adoption and application is ultimately a personal and professional responsibility of auditors. Required: Discuss the importance of professional skepticism in the performance of an audit engagement. [8 marks] (b) Whidespread Group is a multinational company with some subsidiaries operating in different countries in Europe and Asia. The Group has just completed the draft consolidated financial statements for the year ended 30 June 2018. The profit before tax and total assets that have been recognized for year ended 30 June 2018 and 2017 are as follows: 30 June 2018 30 June 2017 Profit before tax $ 7 million $ 10 million Total assets $ 85 million $ 79 million Due to the several business combinations over the years, the Group had recognized a goodwill of $ 15 million as at 30 June 2017. This year an impairment of $ 85,000 is to be recognized in respect to goodwill after an impairment review carried out by the finance director of the Group in June 2018. The Chief Internal Auditor of the Group has verified the assumptions used and calculations performed by the finance director and is satisfied with the conclusions drawn. The assumptions used are consistent with previous impairment reviews. Required: (1) Discuss how professional skepticism should be applied to the impairment review. [8 marks] [9 marks] Page 2 of 4