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Describe the audit evidence needed

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In 2010, Nelson Communications purchased a controlling interest in Telnetco that resulted in goodwill in the 2010 consolidated financial statements of $4,500,000. There are no other intangible assets. Telnetco continues to be listed on NASDAQ. Near the end of 2011, Nelson estimated that the fair market value of Telnetco was $50,500,000 based on the present value of its future cash flows. Using the assistance of a professional appraisal firm, the fair market value of its net tangible assets was determined to be $46,900,000, resulting in a goodwill write down of $900,000.

a. Describe the inherent risks to the write down.

b. Describe the audit evidence needed to evaluate the fairness of this write down.

c. How might a specialist be of help?

Reference no: EM13144762

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