6.25 MEDIUM Mitchell Hazlewood is an audit senior with Lyon & Associates. Mitchell is involved in...

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6.25 MEDIUM Mitchell Hazlewood is an audit senior with Lyon & Associates. Mitchell is involved in planning the audit for the year ended 30 June 2018 of Blue Water Ltd, a manufacturer of engines for luxury leisure boats. Blue Water's operations are financed by a combination of long-term debt and short-term loans from a financial institution, My Bank Ltd. As part of the planning process Mitchell has noted the following matters: Blue Water has been profitable for several years and has recently successfully expanded its operations to manufacture a new type of engine for export to New Zealand. One of Blue Water's major customers, Bob's Boats, which represents 35 per cent of Blue Water's annual sales, has indicated that it has started to manufacture its own engines. The strength of the Australian dollar against foreign currencies has had an adverse effect on demand for locally produced engines. Competition in the industry is becoming more intense, with some other customers of Blue Water indicating they may now purchase their engines from Korean suppliers at a much lower cost. My Bank has requested cash flow forecasts for the coming year to support the financing arrangements that are currently in place. Blue Water's level of debt has remained constant in recent years and it had a positive working cash flow position to 30 June 2018. REQUIRED (a) Identify whether there are events or conditions that may indicate material going concern uncertainties. (b) Identify any mitigating factors. LO 6.4

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