The profit and loss account for the year ended 31 December 2020 and balance sheet at 31 December 2020 of Crail Limited, a trading company, are set out below.

Required:
1 Perform an analytical review of the financial statements of Crail Limited at 31 December 2020 and make a list of matters that you regard as puzzling and significant.
2 Describe the general matters that you would discuss with management, after you have gained an overall view of the company’s affairs. Assume that your firm had performed the audit in the prior year and had formed the view that the going concern status of the company was at risk, but management had acceptable plans to secure the future of the company.
3 Once you have formed a view on profitability and liquidity of the company, suggest what audit steps might be appropriate under the headings:

(a) profitability

(b) liquidity.

Required:
Perform an analytical review of these figures and state what you believe are the important factors needing investigation by the auditors. You do not need to describe detailed procedures, but suggest main thrusts. You may assume that your firm audited Crail Limited in the prior year as well.

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PROFIT AND LOSS ACCOUNT FOR YEAR ENDED 31 DECEMBER Turnover Wages and salaries Cost of sales Gross proft Other expenses Interest Net (loss)/profit before taxation Taxation Net (loss)/profit after taxation 2020 2019 000 000 5 600 4 400 -1 500 -1 400 -2 600 -2 200 1 500 800 -800 -650 -350 -250 350 -100 100 450 -100