Essay on Audit

1309 Words Dec 22nd, 2013 6 Pages
Group Case 4, Billy’s Beats

Billy’s Beats Inc. Completing the Audit Due Date: December 10 by 8PM Please read the instructions below carefully. Failure to follow these instructions may adversely affect your grade for this assignment. As outlined in the syllabus, the penalty for unexcused late assignments is 10% of the maximum points for each day that the assignment is late, and no assignment will be accepted after three days from its due date. • Read the case and the “Required” section of the case assignment below. Complete the four questions in the “Required” section. Refer to the “Further Guidance” section to help you structure your answers. Your group should only submit one case solution through Blackboard. Keep the submission receipt
…show more content…
(Billy’s), a public SEC registrant, is a new audit client with a fiscal year-end of December 31, 2012. Billy’s manufactures musical instruments. Billy’s acquired Little Drummer Boy Inc. (Little Drummer) in 2012 for $925 million in cash. Significant assets acquired included property, plant, and equipment totaling $865 million and other assets totaling $145 million. Billy’s also assumed a substantial amount of Little Drummer’s liabilities. The useful lives assigned to the plant, and equipment acquired were 30 years for the plant and 15 years for the equipment. The useful lives for the plant and equipment already owned by Billy’s are 20 years and 10 years, respectively. Acquired customer lists, included in other assets, were assigned a useful life of 15 years.

To test the useful lives of the operating assets, the engagement team asked management why the number of years assigned to the plant and equipment acquired differed from the years assigned to the plant and equipment which Billy’s had already owned. Management stated that the useful lives for the acquired assets were the amounts used by Little Drummer before the acquisition. The engagement team discussed the useful lives of the acquired plant, and equipment with the plant manager of Little Drummer, who stated that 30 years and 15 years for the plant and the equipment, respectively, were the useful lives used before the acquisition. This discussion was documented in the audit

Related Documents