You are the auditor of Innovative Creations Pty Ltd (Innovative Creations), a wholly owned subsidiary of Global Inc. (Global), a company listed on the New York Stock Exchange. Innovative Creations was established in 2012 to provide Global with access to the Australian market. Since its establishment, Innovative Creations has found trading conditions difficult.

The audit evidence obtained suggests that unless Innovative Creations receives a significant cash flow injection, or trading conditions improve dramatically, it will be bankrupt in six months. You have approached the CEO of Innovative Creations with your concerns and she has indicated that there is nothing for you to worry about, as Global has guaranteed financial support of the company for as long as it takes to establish a market presence in Australia.

Required

a. How would the parent companys support affect your assessment of the going concern status of Innovative Creations?

b. Describe any further evidence you will require to assess the appropriateness of the going concern assumption at Innovative Creations.

c. Assuming that Innovative Creations is considered a going concern, explain the effect that the guaranteed financial support by Global will have on Innovative Creations financial report.