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4. Your firm is the external auditor of Pharmarep plc (Pharmarep) for the year ended 31 May 2019. Pharmarep distributes pharmaceutical products and 40% of
4. Your firm is the external auditor of Pharmarep plc (Pharmarep) for the year ended 31 May 2019. Pharmarep distributes pharmaceutical products and 40% of its revenue comes from Canada where the government requires Pharmarep to have a licence to operate. Pharmarep expects its licence to operate in Canada to be withdrawn. However, after carrying out an assessment of the entity's ability to continue as a going concern, the directors have decided that Pharmarep has sufficient resources to continue operating for the 18 months ending 30 November 2020. Additional funding may be required from that date but Pharmarep does not currently have this in place. Required a) Describe the work you will carry out to ascertain whether the directors' going concern assessment of Pharmarep is appropriate. (8 marks) b) Discuss, the implications for the auditor's report on Pharmarep's financial statements for the year ended 31 May 2019 if the directors of Pharmarep adequately disclose the information in respect of the licence to operate in Canada in the notes to the financial statements. (6 marks) c) Discuss the implications for the auditor's report on Pharmarep's financial statements for the year ended 31 May 2019 if the directors of Pharmarep do not adequately disclose the information in respect of the licence to operate in Canada in the notes to the financial statements. (6 marks)
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