QUESTION TWO You are the Audit Manager of Integrity & Associates. You are currently reviewing the audit files for several of your clients for which the audit fieldwork is completed. The Audit Seniors have raised the following issues: Gaint Ltd (Gaint) Gaint was incorporated over two decades ago. Due to the leadership philosophy of the founders, the company has expanded significantly. As a result, it has won many local and international awards for the quality of services to customers.

However, after the Government announced the outbreak of the Corona Virus in March 2020, it negatively impacted the company's operations. Gaint has experienced difficult business conditions due to the impact of the Corona Virus and has lost significant market share. The prior year's financial statements showed a profit before tax of GH1.2 million; however, the current year loss before tax is GH 4.4 million. The forecast net cash outflow for the next 12 months is GH3.2 million. The cash flow forecast has been reviewed during the audit fieldwork, and it shows a significant net cash outflow. Management is confident that further funding can be obtained and has prepared the financial statements on a going concern basis with no additional disclosures. However, the audit senior is highly sceptical about this. Falcon Ltd (Falcon) Falcons year end is 30 September, however, subsequent to the year end the companys purchases ledger has been corrupted by a computer virus. Falcons Finance Director was able to produce the financial statements prior to this occurring. However, the audit team has been unable to access the sales ledger to undertake detailed revenue or year-end receivables testing. All other accounting records are unaffected, and there are no backups available for the sales ledger. Falcons revenue is GH15.6 million. Its receivables are GH3.4 million and profit before tax is GH2 million. The company's directors have provided the external audit firm with an oral representation confirming that the bank overdraft balances included within current liabilities are complete. An associate of your team approached you if the oral representation could be relied on or a written representation is needed. Required: a) For each of the two issues: i. Discuss the issue, including an assessment of whether it is material; ii. Recommend procedures the audit team should undertake at the completion stage to resolve the issue; and iii. Discuss the impact on the audit report if the issue remains unresolved. b) Explain the purpose of and procedures for obtaining written representations. c) Explain the relevance and reliability of this oral representation as a source of evidence to confirm the completeness of the bank overdraft balance