Audit Opinion Case

INFORMATION REGARDING NIGHTSHADE

It is May of $2024$ and your firm is auditing Nightshade, Inc. $-$ privately held company. Nightshade has the following financial information for the fiscal year ended December $31,2023$:

December $31$

$20232022$

Total Current Assets $$181,833,000$ $$182,203,000$

Total Assets $$460,102,000$ $$540,938,000$

Total Current Liabilities $$544,782,000$ $$129,234,000$

Total Revenue $$1,226,000,000$ $$1,023,923,000$

Net Income $($loss$)($$$25,992,000)$ $$1,397,000$

Cash Flows provided

by $($used in$)$ Operations $($$$37,394,000)$ $$677,000$

Included in the information above is the fact that $$300$ million due to WF Bank matures in January $2025$ and has not been refinanced or restructured prior to the issuance of the report in May $2024.$ To remedy the situation, Nightshade has plans in the works to create a new product line that it believes will revolutionize the industry, but it will take a large investment in time and dollars to execute the plan.

Nightshade also has plans to remedy the situation in fiscal $2024$ and $2025$ and other information follows:

During fiscal $2023,$ the most expensive component of the company$$s most popular product increased in vendor product and regulatory costs by $120\%$ at the same time demand increased. However, many large customers were unwilling to accept increased prices.

Nightshade$$s projections, which you tested, show the company requiring substantial additional cash from external sources to cover operational cash deficiencies over the next $12-15$ months, as well as the requirement to repay the debt and fund the new product line. Following the next $12-15$ month time$-$span, Nightshade projections show large increases to sales from the new product under development. Nightshade also shows expanding margins in that period, as well as excess cash inflows from operations due to an alternative component to it's most popular product that is currently in development that Nightshade believes can be purchased at lower costs on a timeline that is greater than one year from now.

Nightshade is talking to WF Bank in attempt to amend or refinance the debt, but WF is not showing much interest. Nightshade is talking to other banks and investors who appear interested, but no serious conversations have ensued prior to issuance of the financial statements in May $2024.$

Nightshade has included the following disclosures in its fiscal $2023$ financial statements $($which you are auditing$)$:

$$MANAGEMENT$$S PLANS REGARDING LIQUIDITY

Our revenues increased over $$200,000,000$ in fiscal $2023$ and the company has no concerns regarding its ability to maintain positive cash flows in the future as it has plans to introduce new product lines and lower the cost of production of its main product line.$$

INSTRUCTIONS

In a written submission, define the issues related to audit opinions and Nightshade financial reporting requirements. Analyze, discuss and argue the options for audit reporting relative to the liquidity matter noted above and conclude. Determine whether Nightshade has appropriately met GAAP requirements related to the matter and the impact of your conclusions on your audit opinion. Support your thoughts and conclusions using the professional standards and accounting principles $($Checkpoint Edge, Accounting, Auditing and Corp Finance Practice Area in the Marriott database $-$ AU$-$C $570$ AICPA and ASC $205-40$ FASB$)$ to support your arguments and conclusions. Create your audit report $($the full report$)$ as an additional exhibit to your analysis.

Rubric

Grading Criteria $($these will be given after submission to help you understand grading$)$

Grading Criteria $($these will be given after submission to help you understand grading$)$

Criteria Ratings Pts

This criterion is linked to a Learning OutcomeSubstantial doubt $-$ concept and analysis

Did the student$($s$)$ define the concept of "Substantial Doubt" $($ASC $205-40-20)$ and analyze the indicators at Nightmare to determine if there is substantial doubt $($ASC $205-40-20)?$

$5$ pts

This criterion is linked to a Learning OutcomeManagement Plans Regarding Substantial Doubt

Did the student$($s$)$ appropriately evaluate management's plans regarding the company's ability to overcome substantial doubt? $($ASC $205-40-50-6)$

$5$ pts

This criterion is linked to a Learning OutcomeDisclosure r

PLease NO AI and be sure with your work