Able Ltd has recently started exporting their designer furniture to Australia and South-East Asia, but the company has found business conditions difficult. The audit evidence obtained and final review of this evidence suggests that

unless Able Ltd receives a significant cash flow injection or business conditions improve, it will be bankrupt within nine months. You have approached the CEO of Able Ltd with your concerns and he has indicated there is nothing

to worry about. The parent company, Shilo Ltd, which operates in the US, is a very

successful company and it has guaranteed financial support of Able Ltd for as long as it takes the company to establish a market presence.

Required:

a) Discuss the factors would you consider in your assessment of going concern at Able Ltd?

b) Three weeks after the financial year end, the parent company transferred sufficient funds to assist Able's operations. Assuming all other aspects of the financial statements are fine. Explain what type of audit report should the auditor give?

c) You are convinced that the company only be a going concern on the basis of the parent's financial assistance.

Assuming that you obtained the parent company's audited financial statements and find that the parent company does not sufficient funds available to inject to Able Ltd within nine months. Explain what type of audit report should the auditor give?

d) Assuming that the parent company would only provide financial assistance, if Able Ltd is able to maintain a 25% gross profits for three consecutive months. The management of Able is confident that selling to Australia

and Southeast Asia is able to achieve the profitability, but it has disclosed about the going concern issues on the financial statements. Explain what type of audit report would you give?