Question Tag: Review Engagements

Bolokupalemo Pharmaceuticals Limited is a fast-growing company operating with its head office in Onitsha. The management of the company is targeting the takeover of another company located in the South-South zone of Nigeria with the intention of expanding its business frontier. Preliminary discussions reveal that the management of the other company has not shown any effective resistance to the proposed takeover. However, the management of Bolokupalemo wants a clear due diligence work to be performed to determine the viability of the acquisition.

As the auditor of the acquiring company, its management has approached you to carry out a due diligence work on the company that it has proposed to acquire. The management also requires your firm to carry out the engagement in accordance with the provisions of International Standard on Review Engagements (ISRE 2400).

You are required to:
a. Explain the concept of “due diligence engagement.” (2 Marks)
b. Discuss the items to be investigated in a due diligence exercise. (5 Marks)
c. Explain the benefits of using an audit firm for due diligence engagement. (5 Marks)
d. Discuss the objectives of “International Standard on Review Engagement” (ISRE 2400). (5 Marks)
e. Explain the principles to be applied in review engagements as set out by ISRE 2400. (3 Marks)