LIMITED TIME OFFER – Get 40% OFF on KNOWLEDGE LEVEL – Click Here
For example: -10234.35
No other characters, including commas, are accepted.
(a) Identify what a key audit matter (KAM) is and explain how the auditor determines and communicates KAM.
During the year, a number of the company’s significant customers have experienced a fall in sales, and consequently they have purchased fewer items from Science. As a result, Science has paid a number of its suppliers later than usual and some of them have withdrawn credit terms meaning the company must pay cash on delivery. One of Science’s main suppliers is threatening legal action to recover the sums owing. As a result of the increased level of payables, the company’s current ratio has fallen below 1 to 0·9 for the first time.
Science has produced a cash flow forecast to 30 June 2016 and this shows net cash outflows until May 2016. Science has a loan of $2·3 million which is due for repayment in full by 30 September 2016. The finance director has just informed the audit manager that there is a possible change in legislation which will result in one of Science’s top product lines becoming obsolete as it will not comply with the proposed law. The prepared cash flow forecasts do not reflect this possible event.
(a) Explain FIVE potential indicators that Science Motoring Co is NOT a going concern.
(b) Describe the audit procedures which you should perform in assessing whether or not Science Motoring Co is a going concern.
Describe FOUR elements of an unmodified auditor’s report and for each explain why they are included.
Explain the steps Pumpkin & Co should now take and the impact on the audit report in relation to the directors’ refusal to amend the financial statements.
Your email address will not be published. Required fields are marked *
Save my name, email, and website in this browser for the next time I comment.