What are the auditor's responsibilities for 'going concern assumptions
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Q: What are the auditor's responsibilities for 'going concern assumptions’'? Maxim Stewart is the…
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(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 concern (290 - 320 words)
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- (a) What are the auditor's responsibilities for 'going concern assumptions’'? (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 2018audit. From 30 January 2018 onwards, SS has consistently paid its suppliers late, well in excessof the suppliers' agreed credit terms. This has resulted in some suppliers demanding cash ondelivery from SS. Maxim is also aware from his review of correspondence between SS and itsbank 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 concern.Various Completion Matters. For each of the following independent situations, describe the most appropriate course of action that the auditors should take.a. Drew Allison is conducting the audit of Anderson Inc. as of December 31, 2017. At the beginning of the evidence gathering, Allison becomes aware that one of Anderson’s major customers (Jones) is experiencing significant financial difficulties. Jones normally accounts for 5 percent of Anderson’s net sales. After performing the necessary procedures, Allison believes that $2.8 million of Jones’s receivable balance will ultimately become uncollectible. Allison further believes this amount is material to Anderson’s financial condition and results of operations.b. Nagan Carmelo is completing the December 31, 2017, audit of Nugget Company. As part of the final procedures, Carmelo has requested representations from Nugget’s management regarding their assertion as to the fairness of the financial statements and other important matters…Oscar Wylee Women Glass Ltd is a supplier of fashion women sunglasses. The audit report for the year ended 30 June 2021 was signed on 8 August 2021, and the financial report was mailed to shareholders on 12 August. Requirement: Consider the following independent events. Assume that each event is material. For each of the individual misstatements listed, explain auditors' responsibility and consequence auditing report On 5 July, Oscar Wylee entered into a new contract to deliver sunglasses to Specsavers, a new major department store. The contract was similar to other previously contracted contracts. Oscar Wylee has financed huge funds in developing a new type of solid sunglasses lens. On 8 July, Oscar Wylee applied for a patent for the lens, only to identify that a competitor had lodged a similar application on 25 June. The granting of Oscar Wylee application is now of major concern.
- MNO Co. has been audited by RS & Co. for two years (2015-2017) under a senior auditor Alexa. After numerous discussions and reminders from Alexa, MNO controller promised that the audit fee would be paid before the audit report for 2017 was issued. Alexa called the partner at RS & Co., Dr. James, to ensure that the audit report was not issued because MNO had only paid 10% of the outstanding amount. She discovers that Dr. James is about to sign the audit report. • Explain the ethical problem faced by Alexa (and/or her audit firm) with MNO. Why is it a problem? What can be done about it?You are the audit partner at Parkville & Associates, a mid-tier audit firm. You are responsible for the audits of the following four independent entities for the year ended 30 June 2018:(a) Human Help Ltd is a non-profit entity. You have discovered that it has not kept substantiating vouchers or receipts for more than 55 per cent of its expenses, excluding salaries and allowances (b) JJ King Ltd is a building contractor with a varying workload. In order to compensate for the irregularity of its contracted building projects, JJ King also purchases large vacant blocks of land that it later subdivides for the construction of houses and units. JJ King then sells these on its own account. Your analysis strongly suggests that the apportionment of costs to houses and units sold has been kept low to boost profits. In your opinion, this has resulted in the overvaluation of the unsold properties. The directors of the company do not agree and hold to their view that the stock of properties…You are the audit partner at Parkville & Associates, a mid-tier audit firm. You are responsible for the audits of the following four independent entities for the year ended 30 June 2018:(a) Human Help Ltd is a non-profit entity. You have discovered that it has not kept substantiating vouchers or receipts for more than 55 per cent of its expenses, excluding salaries and allowances(b) JJ King Ltd is a building contractor with a varying workload. In order to compensate for the irregularity of its contracted building projects, JJ King also purchases large vacant blocks of land that it later subdivides for the construction of houses and units. JJ King then sells these on its own account. Your analysis strongly suggests that the apportionment of costs to houses and units sold has been kept low to boost profits. In your opinion, this has resulted in the overvaluation of the unsold properties. The directors of the company do not agree and hold to their view that the stock of properties is…
- ou are the audit manager at KPMG & Coopers a medium-sized audit firm undertaking the audit for the year ended 30 June 2018 of Vesta Tech Ltd, an electronic component manufacturer located in Sydney. During the planning stage of the audit you discovered that one of Vesta Tech Ltd’s major suppliers went bankrupt one month ago, causing major product shortages. To overcome the problem, Jonathon Marshall, the husband of the finance director, Nimat Marshall provided electronic components to Vesta Tech Ltd through his private company. There is no formal agreement in place with Jonathon Marshall, however, the goods are being provided at competitive prices. You are concerned about the electronic components that Jonathon Marshall’s company is supplying, because his products are new to the market and you have heard some of Vesta Tech Ltd’s staff complaining that they are of poor quality.The board has informed you that although sales have been strong this year, Vesta Tech Ltd has suffered…You are an audit manager at Foyer & Associates and have been assigned to the audit of Modern Electrical Limited (MEL) for the year ending 30 June 2021. During the planning stage of the audit, you become aware of the following matters: a.MEL has significant loans from its bank. The bank has Indicated that it is concerned about MEL'S ability to meet specific loan covenants, particularly the return on total assets (net b. The aped trade accounts receivable listing indicates that the percentage of accounts receivable exceeding 90 days has jumped from 15 per cent to 37.5 per cent during the last 12 months. The credit manager hasindicated that the is because some of MEL'S Customers are currently'experiencing financial difficulty. This question.includos Part A and B part- a for each of the following scenerio describe briefly how this matter is a fraud audit risk factor in relation to mel's financial report.You are the audit manager at KPMG & Coopers a medium-sized audit firm undertaking the audit forthe year ended 30 June 2018 of Vesta Tech Ltd, an electronic component manufacturer located inSydney. During the planning stage of the audit you discovered that one of Vesta Tech Ltd’s majorsuppliers went bankrupt one month ago, causing major product shortages. To overcome the problem,Jonathon Marshall, the husband of the finance director, Nimat Marshall provided electroniccomponents to Vesta Tech Ltd through his private company. There is no formal agreement in placewith Jonathon Marshall, however, the goods are being provided at competitive prices. You areconcerned about the electronic components that Jonathon Marshall’s company is supplying, becausehis products are new to the market and you have heard some of Vesta Tech Ltd’s staff complainingthat they are of poor quality.The board has informed you that although sales have been strong this year, Vesta Tech Ltd hassuffered significant…