Paul Smitten is the partner in charge of the audit for a new client, Umbrella Holdings (UH).
Question:
Paul Smitten is the partner in charge of the audit for a new client, Umbrella Holdings (UH). The client engaged Paul’s audit firm in November 2019, in preparation for the 2020 audit. From 30 January 2020 onwards, UH has consistently paid its suppliers late, well in excess of the suppliers’ agreed credit terms.
This has resulted in some suppliers demanding cash on delivery from UH. Paul is also aware from his review of correspondence between UH and its bank that the company has been experiencing cash flow problems since 2018.
Required
Identify any significant events or conditions that individually or collectively may cast significant doubt on UH’s ability to continue as a going concern.
Step by Step Answer:
Auditing A Practical Approach
ISBN: 9780730382645
4th Edition
Authors: Robyn Moroney, Fiona Campbell, Jane Hamilton