You are auditing the financial statements for your new client, Academia Paper company, a manufacturer of paper containers, for the year ended 31 December 2019. Academia Paper's previous auditors issued an audit report that included an emphasis of matter paragraph for a going-concern uncertainty on the 31 December 2018 financial statements for the following reasons:

• Academia Paper had defaulted on RM10 millions of unregistered debentures sold to three insurance companies, which were due in 2019, and the default constituted a possible violation of other debt agreements.
• The interest and principle payments due on the remainder of a ten-year credit agreement, which began in 2015, would exceed the cash flows generated from operations in recent years.
• The company had disposed of certain operating units. The proceeds from the sales were subject to possible adjustment through arbitration proceedings, the outcome of which was uncertain at year end.
• Various lawsuits were pending against the company
• The company was in the midst of tax proceedings as a result of an examination of company's income tax returns for a period of 12 years

You find that the status of the above matters is as follows at the year-end, 31 December 2019:

• The company is still in default on RM4.6 million of the debentures due in 2019 but is trying to negotiate a settlement with remaining bondholders. A large number of bondholders have settled their claims at significantly less than par.
• The company has renegotiated the 2015 credit agreement, which provides for a two year moratorium on principal payments and interest at 8 percent. It also limits net losses for 2019 and requires a certain level of defined cumulative quarterly operating income to be maintained.
• The arbitration proceedings were resolved in 2019.
• The legal actions were settled in 2019.
• Most of the tax issues have been resolved, and, according to the company's legal counsel, those remaining will result in a net cash inflow to the company.

At year end Academia Paper had a cash balance of RM5.5 million and expects to generate a net cash flow of RM3.2 million in the upcoming fiscal year.

The following information about Academia Paper's plan for its operations in fiscal year 2020 may also be useful in arriving at a decision.

Fiscal Year 2020 Fiscal Year 2019 Fiscal Year 2019 Budget (RM) Actual (RM) Budget (RM) Millions Millions Millions Net revenues 66.2 60.9 79.8 Gross margin 34.7 33.6 45.6 Operating 27.9 34.7 31.4 expenses Interest - net 5.1 6.0 5.7 Other income (0.8) 2.1 (expenses) - net Profit before tax 1.5 (5.1) (0.2) and extraordinary items Cash flows: Receipts 69.9 79.7 Disbursements 66.7 96.9 Excess/deficit 3.2 (22.8