(A) You are the manager responsible for performing hot reviews on audit files where there is a potential disagreement between your firm and the client regarding a material issue. You are reviewing the going concern section of the audit file of Rockland Company Ltd., a client with considerable cash flow difficulties and other less significant operational indicators of going concern problems. The working papers indicate that Rockland Company is currently trying to raise finance to fund operating cash flows, and state that if the finance is not received, there is significant doubt over the going concern status of the company. The working papers concluded that the going concern assumption is appropriate, but it is recommended that the financial statements should contain a note to explain the cash flow problems faced by the company, along with a description of the finance being sought, and an evaluation of the going concern status of the company. The directors do not wish to include the note in the financial statements. Required:

(i) Consider and comment on the possible reasons why the directors of Rockland Company Ltd. are reluctant to provide the note to the financial statements.

(ii) Discuss the implications for the auditors if the directors refuse to include the disclosure note.

(B) Digwell Mining Company operates in the Nkawkaw Community of the Eastern Region as a Sand Wining Company. The youth of the area had been opposing the activities of the company of late. Dr. Digtempo Bush, the Managing Director of Digwell Mining Company approached DelMax & Associates, a Chartered Accounting firm to accept an attest engagement to examine and report on the environmental issues of Digwell Mining

Company Ltd. for the year ended 31st December, 2021.

Required:

(i) Evaluate the environmental issues that may lead to the risk of misstatements in the Financial Statements.

(ii) Recommend the actions and the audit procedures that DelMax & Associates should undertake when they realize that Digwell Mining Company Ltd. has environmental issues that may affect the Financial Statements.