Analyze and explain how the following situation would affect the audit report for the financial year ended on 31 December 2020, assuming you are the audit partner of Coffee Infusion Ltd.

Coffee Infusion Ltd runs a café chain in Queensland. When you are reviewing the company’s ability to remain a going concern for the financial year ended 31 December 2020, you note that a fixed term borrowing of $80 million is approaching maturity and Coffee Infusion has not successfully renegotiated any terms of refinancing. You are also aware that Coffee Infusion has been reporting significant losses in the past five years and the shareholders are unlikely to provide additional funding to the company. You are concerned that Coffee Infusion will be struggling to remain in business without the $80 million. After communicating your assessment to the client’s senior management and directors, the client insists on using going concern assumption in the financial report.

Answer rating: 100% (QA)

In this case Coffee Infusion is struggling to remain in business without the finance of 80 million ... View the full answer