that in January 20X7 YouNeek would provide the additional 200000 in financial

That in january 20x7 youneek would provide the

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that in January 20X7 YouNeek would provide the additional $200,000 in financial support to HomeFit.HomeFit’s management has included the following note in the 31 December 20X6 financial statements:Extract from Note 1: Going concern basis of accountingThese financial statements have been prepared on the basis that the entity is a going concern. The entity has experienced challenging trading conditions over the past year, which will impact on the ongoing operations of the entity. We have prepared a cash flow analysis that indicates that $1 million is required to support the entity’s continued operations over the next 12 months. This additional financing has been funded by $800,000 from our current bank and the remaining $200,000 will be provided by our parent entity, YouNeek Limited. The directors believe that the additional $1 million in funding will be adequate and that no other funding is required to continue operations in the next 12 months. Although these conditions indicate the existence of a material uncertainty that may cast significant doubt about the entity’s ability to continue as a going concern and therefore realise its assets and discharge its liabilities in the normal course of business, in the event that additional funding is required, the directors are of the opinion that they will be able to secure the necessary ongoing financing through additional financial support from YouNeek Limited.Required(a) Outline three (3) pieces of evidence that will be required by EA to assess the appropriateness of the use of the going concern basis of accounting for HomeFit’s 31 December 20X6 financial statements. Justify why each piece of evidence is required.(6 marks)(b) Assume that all the HomeFit audit work has now been completed and no other issues have been identified. EA has concluded that using the going concern basis of accounting is appropriate for HomeFit’s 31 December 20X6 financial statements. Determine and justify the appropriate auditor’s opinion and explain any further implications on the auditor’s report.(4 marks) 10 marks End of Question 3 Exam paper continues, please turn over
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Audit & Assurance Chartered Accountants Program Page 10 of 12 AAA316 Supplementary exam Question 4 (20 marks)Part A (11 marks)Earthy is a listed mining and energy supply company that has environmentally conscious shareholders. At last year’s shareholders meeting, the shareholders requested Earthy to prepare a sustainability report for the company. Earthy subsequently prepared a sustainability report for the year ended 31 December 20X6. The report was prepared in accordance with the Global Reporting Initiative (GRI) G4 Sustainability Reporting Guidelines, and included reporting principles and standard disclosures. The report disclosed material environmental impacts and related key indicators. To enhance the credibility of the sustainability report, Earthy wished to obtain assurance over the sustainability report.FP Chartered Accountants (FPCA) has been the auditor of Earthy’s financial statements for a number of years. Given their longstanding relationship, Earthy requested FPCA to undertake
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