Describe the impact on the auditor’s report of John and Jane Co if the auditor believes the company is a going concern but that this is subject to a material uncertainty.
UGB 225 and 238- writer can use any
John and Jane that they intend to take legal action against them for loss of earnings. John and Jane has investigated the problem post year end and discovered that other work-in-progress is similarly affected, and inventory should be written down. The finance director believes that as this misstatement was identified after the year end, it can be amended in the 2015 financial statements.
Required
Describe the procedures the auditors of John and Jane Co should undertake in relation to the uncorrected inventory misstatement identified above.
Explain SIX potential indicators that John and Jane Co is not a going concern.
Describe the audit procedures which you should perform in assessing whether or not John and Jane Co is a going concern.
The auditors have been informed that John and Jane’s bankers will not make a decision on the overdraft facility until after the auditor’s report is completed. The directors have now agreed to include some going concern disclosures.
Required
Describe the impact on the auditor’s report of John and Jane Co if the auditor believes the company is a going concern but that this is subject to a material uncertainty.
