One of the clients of MMM Chartered Accountants is a restaurant and you are conducting the 30 June 2019 audit. From January 2019, the business has consistently paid its suppliers late, well in excess of the suppliers normal credit terms. This has resulted in some suppliers requesting cash on delivery from the business. The auditor has reviewed the correspondence between the business and its bank and finds that the business has been experiencing cashflow problems for two years.

Required

a) Discuss whether there are any events or conditions that may cast significant doubt on the new clients ability to continue as a going concern. (5 Marks)

b) Explain whether (and, if so, how) the information provided above impacts the auditors assessment of preliminary materiality. (5 Marks)