Springsteen Ltd. is a new audit client for the 2020 financial year. Springsteen’s financial statements for the 2019 year, the last with the previous auditor, were prepared on the assumption of a going concern. An unmodified audit opinion with a going concern heading was included in the auditor’s report because of a going concern issue. The issue identified by the auditor was that Springsteen was due to refinance a material amount of debt shortly after the prior year end. You are aware that Eastcoast Bank appeared unwilling to extend further financing, and Springsteen had taken no steps to secure other financing. Springsteen did not disclose any information about the debt refinancing matter in its financial statements.

It is August 2020 and the first audit for Springsteen Ltd. with your audit fi rm for the 2019–20 year is almost complete. Prior to reaching your final conclusions, you are reviewing the working papers for the year ended June 30, 2020. The material bank loan with Eastcoast Bank was extended in September 2019 for another 12 months.

Required

a. Given the history of the bank loan, outline two types of documentation you would expect to see included in the audit file to provide audit evidence that this year’s financial statements can be prepared on a going concern basis.

b. Was the opinion in the auditor’s report appropriate? Explain.