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A fund has invested in 9 different unit trusts all invested in property (all unrelated) - these are material to the fund when all added together. The trustees have provided an acknowledgement of trust confirming ownership and valuation of all the trusts. Financials for all unit trusts have been provided (some of which are audited but not all), however, no further documents are provided to support how the unit prices.
Can the trustee's valuation as per the acknowledgement of trust be accepted as market value in the above scenario?
Hi Yuvraj
My view is the trustee's valuation can only be accepted if you have done audit procedures to verify them. That is, they are not sufficient audit evidence by themself. You need to obtain documentation as to how the unit prices have been determined.
As an example, if a Unit Trust owned a property you would need to review the valuation of those units. Your audit procedures should include reviewing the financial statements and verifying material assets such as property by reviewing a recent valuation and doing a title search. The estimated net market of the net assets should then be divided by the number of units issued to determine the market price.
Thanks
The Auditors Institute