Johore Fashion Berhad is a leading garment manufacturer, distributor and retailer with sales outlets in all major towns and cities. You are the audit manager in charge of the audit of the company and the final audit for the year ended 31 March 2021 is due to commence shortly. The draft financial statements recorded revenue of RM1.35 billion (2020 - RM1.78 billion), profit before taxation of RM107 million (2020- RM219 million) and total assets of RM1.4 billion (2020 - RM1.0 billion). Sales and profitability had declined as the company had been adversely impacted by the government enforced lockdown due to the Covid19 pandemic. The following matters have been brought to your attention:

(a) Trade receivables Johore Fashion's trade receivables comprised of a large number of customers. During the audit of the 31 March 2020 financial statements, which was in the midst of a government enforced lockdown, the audit team had undertaken a positive trade receivables circularisation to confirm year-end balances. However, the customer response rate was extremely low and so alternative audit procedures had been undertaken. A decision has been made that for the current year audit a circularisation will not be performed. The year-end trade receivables balance is RM58 million (2020: RM47 million) and the allowance for trade receivables is RM3 million (2020: RM4.1 million).

Required: Design substantive procedures that the auditor should perform to obtain sufficient and appropriate audit evidence in relation to Johore Fashion's trade receivables. (6 marks)

(b) Bank balances The bank and cash figure included in Johore Fashion's draft financial statements comprised a number of bank account balances, an overdraft of RM51 million which is the company's main current account and RM2 million relating to several deposit accounts. The finance director had informed the audit senior that all accounts have been reconciled as at the year end. The overdraft of RM51 million has increased significantly since the prior year (2020: RM12 million). The directors of the company have informed you that the overdraft facility, which the company requires in order to operate on a daily basis, is due for renewal in October 2021 and that they are confident it will be renewed.

Required: Design substantive procedures the auditor should perform to obtain sufficient and appropriate audit evidence in relation to Johore Fashion's bank balances. (6 marks)

During the final audit, the finance director informed the audit team that Johore Fashion's bankers will only make a decision on the renewal of the overdraft facility after the auditor's report is signed. The directors of the company are satisfied that the use of the going concern basis is appropriate. The directors have agreed to include some brief going concern disclosures in the draft financial statements and the audit team will have to assess the adequacy of these disclosures.

Required:

(a) Design substantive procedures that the auditor should perform in assessing whether Johore Fashion is a going concern. (6 marks)

(b) Critically discuss the impact on the auditor's report of Johore Fashion of adequate AND inadequate going concern disclosure. (7 marks)