Mr. Kimani and Mr. Mathenge are each 50% shareholders and the only directors of K&M Ltd., a company which operates as a building contractor involved in civil engineering contracts which frequently take more than one year to complete. The turnover of the company in the year ended 31 March 2000 was in the region of Sh.1,200 million. The company has been suffering cash flow problems in recent times. Mr. Kimani and Mr. Mathenge have disagreed on the management policies of the company. As a result of this disagreement, Mr. Mathenge has agreed to sell his shares to Mr. Kimani and has resigned as a director with effect from 31 March 2000. The consideration for the shares is to be fixed by a valuation of the shares based on the audited accounts for the year ended 31 March 2000.

You have been appointed the investigating accountant to review the valuation of the shares. Mr. Kimani and the auditors of K&M Ltd. have agreed to cooperate fully.


As the investigating accountant, detail those matters which you would pay particular attention to in carrying out your review. (Total: 20 marks)







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