Temper Telecommunication Ltd is a listed public company that manufactures communication equipment. Last year the company engaged itself in a contract involving the engineering and infrastructure for a highly complex broadband network in Adelaide. The company has a 30 June year-end, and the statutory accounts are due to be signed one week after the board of directors meeting on 5 August 2015. During the course of the audit, you become aware that the due to the complex negotiations with the Australian Government on broadband networks, and the likely change in government policies, the company was advised that the plan for the broadband network engineering project may be suspended until further notice. Temper Telecommunications had bought sophisticated equipment which was to be paid off through the life of the project over 3 years. It also commenced the architectural planning, employing two highly paid experts in broadband architecture. Temper Telecommunications is now experiencing growing cash flow difficulties (the project was meant to be able to save its business).

It has recently applied for a significant increase to a borrowing facility that is already fully drawn.

Management is adamant that the company will continue to be viable. If necessary, it claims it can resort to cutbacks in its other future capital expenditure program, seek additional off-balancesheet financing and/or reschedule existing debt arrangements.

Required

a. Explain the concept of going concern. Discuss the reporting options open to an auditor when going concern issues arise.

b. Discuss the potential auditor's report options in relation to Temper Telecommunications Ltd.