Response to the following problem:
Taylor, CPA, has been engaged to audit the financial statements of Palmer Company, a continuing audit client. Taylor is about to perform substantive audit procedures on Palmer's goodwill (excess of cost over fair value of net assets purchased) and trademark assets that were acquired in prior years' business combinations. An industry slowdown has occurred recently, and the operations purchased have not met profit expectations.
During the planning process, Taylor determined that there was a high risk that goodwill and the trademark are impaired and may be materially misstated. Taylor obtained an understanding of internal control and set the control risk at the maximum level for the assertions related to intangible assets. Required:
a. Describe the substantive audit procedures Taylor should consider performing in auditing Palmer's goodwill and trademark assets. Do not discuss Palmer's internal controls.
b. If Taylor engages a valuation specialist, describe what the auditor's responsibility is if the work of the specialist will be used as audit evidence.