Question
You are an audit manager of P & Associates and you are the one responsible of performing hot reviews of the client's audit files and
You are an audit manager of P & Associates and you are the one responsible of performing hot reviews of the client's audit files and you have noted that there will be a potential issue of disagreement that will exist between your firm and the client regarding the issue of materiality level. As part of my assurance assignment, you are responsible for reviewing the going concern of the client BEE Ltd, a client that is considered to be having problems with cashflows and also less significant operational issues related to the going concern problems.
After reviewing the working papers of BEE Ltd, you have noted that the client is trying to raise funds in order to be able to fund the existing casfliws. The working papers also indicate that if the funds are not raised, BEE Ltd will have major issues regarding the going concern status of thr company. The conclusion from the working papers has concluded that the going concern assumption will be very appropriate but it is recommended that the company financial statements must have a note that will be explaining the existing cash flow challenges that are being faced by the BeecLtd as well as a description of the funds or finance that the company is looking for as well as the evaluation of BEE Ltd's going concern status.
The Directors of BEE Ltd are not wishing to include the note in their financial statements forvthe period under review.
REQUIRED
a. In relation to the assessment of going concern aspect, do a comparison of the responsibilities of the external auditors and those of the management. (7marks)
b. Discuss the possible reasons why those charged with governance (Directors, ) of BEE Ltd are reluctant to provide a note in their year end financial statements.(5marks)
c. Explain the implications on the auditor's report if:
(i) The Directors of BEE Ltd do Agee to include the disclosure note in the financial statements.
(ii)The Directors of BEE Ltd refuse to make a disclosure note in their financial statements for the year (8marks)
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