One of the clients of MMM Chartered Accountants operates a restaurant. From January of the current year, the business has consistently paid its suppliers late, well in excess of the suppliers' normal credit terms. This has resulted in some suppliers requesting cash on delivery from the business. The auditor has reviewed the correspondence between the business and its bank and finds that the business has been experiencing cash flow problems for two years. Required: (a) Explain why determination of materiality is a matter of auditor judgment. Refer to both qualitative and quantitative materiality assessments .(150 - 200 words) (b) Explain whether (and, if so, how) the information provided impacts on the auditor's assessment of preliminary materiality .(250 - 300 words) (a) What are the auditor's responsibilities for 'going concern assumptions"?| (250 - 300 words) (b) Maxim Stewart is the partner in charge of the audit for a new client, Southern Southerland (SS). The client engaged Maxim's audit firm in November 2017, in preparation for the 2018 audit. From 30 January 2018 onwards, SS has consistently paid its suppliers late, well in excess of the suppliers' agreed credit terms. This has resulted in some suppliers demanding cash on delivery from SS. Maxim is also aware from his review of correspondence between SS and its bank that the company has been experiencing cash flow problems since 2016. Required: Identify any significant events or conditions that individually or collectively may cast significant doubt on SS's ability to continue as a going concerr 290 - 320 words)
One of the clients of MMM Chartered Accountants operates a restaurant. From January of the current year, the business has consistently paid its suppliers late, well in excess of the suppliers' normal credit terms. This has resulted in some suppliers requesting cash on delivery from the business. The auditor has reviewed the correspondence between the business and its bank and finds that the business has been experiencing cash flow problems for two years. Required: (a) Explain why determination of materiality is a matter of auditor judgment. Refer to both qualitative and quantitative materiality assessments .(150 - 200 words) (b) Explain whether (and, if so, how) the information provided impacts on the auditor's assessment of preliminary materiality .(250 - 300 words) (a) What are the auditor's responsibilities for 'going concern assumptions"?| (250 - 300 words) (b) Maxim Stewart is the partner in charge of the audit for a new client, Southern Southerland (SS). The client engaged Maxim's audit firm in November 2017, in preparation for the 2018 audit. From 30 January 2018 onwards, SS has consistently paid its suppliers late, well in excess of the suppliers' agreed credit terms. This has resulted in some suppliers demanding cash on delivery from SS. Maxim is also aware from his review of correspondence between SS and its bank that the company has been experiencing cash flow problems since 2016. Required: Identify any significant events or conditions that individually or collectively may cast significant doubt on SS's ability to continue as a going concerr 290 - 320 words)
Auditing: A Risk Based-Approach to Conducting a Quality Audit
10th Edition
ISBN:9781305080577
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Chapter5: Professional Auditing Standards And The Audit Opinion Formulation Process
Section: Chapter Questions
Problem 51RSCQ: Ray, the owner of a small company, asked Holmes, CPA, to conduct an audit of the company’s records....
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Question
Transcribed Image Text:One of the clients of MMM Chartered Accountants operates a restaurant. From January of
the current year, the business has consistently paid its suppliers late, well in excess of the
suppliers' normal credit terms. This has resulted in some suppliers requesting cash on delivery
from the business. The auditor has reviewed the correspondence between the business and
its bank and finds that the business has been experiencing cash flow problems for two years.
Required:
(a) Explain why determination of materiality is a matter of auditor judgment. Refer to
both qualitative and quantitative materiality assessments
.(150 - 200 words)
(b) Explain whether (and, if so, how) the information provided impacts on the auditor's
assessment of preliminary materiality
.(250 - 300 words)
(a) What are the auditor's responsibilities for 'going concern assumptions"?|
(250 -
300 words)
(b) Maxim Stewart is the partner in charge of the audit for a new client, Southern Southerland
(SS). The client engaged Maxim's audit firm in November 2017, in preparation for the 2018
audit. From 30 January 2018 onwards, SS has consistently paid its suppliers late, well in excess
of the suppliers' agreed credit terms. This has resulted in some suppliers demanding cash on
delivery from SS. Maxim is also aware from his review of correspondence between SS and its
bank that the company has been experiencing cash flow problems since 2016.
Required: Identify any significant events or conditions that individually or collectively may
cast significant doubt on SS's ability to continue as a going concerr
290 - 320 words)
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