AUDIT REPORTING

Able Ltd has recently started exportngther designer f umiture to Australia and South-EastAsta, but the companyhas found business conditions difficult. The audit evidence obtained and final review of this evidence suggests that unless Able Ltd receives a significant cash flow injection or business conditions improve, it will be bankrupt within nine months. You have approached the CEO of Able Ltd with your concerns and he has Indicated there is nothing toworry about. The parent company, Shib Ltd, which operates in the US, is a very successful company and it hasguaranteed financial support of Able Ltd for as long as it takes the company to establish a market presence.

Required:

1. Discuss the factors would you consider in your assessment of gong concern at Able Ltd?
2. Three weeks after the financial year end, the parent company transferred sufficient funds to assist Able'soperations. Assuming all other aspects of the financial statements are fine. Explain what type of audit report should the auditorgwe?
3. You are convinced that the company only be a going concern on the basis of the parent's financial assistance.Assuming that you obtained the parent company's audited financial statements and find that the parentcompany does not sufficient funds available to Inject to Able Ltd withinnine months. Explain what type of a udtreport should the auditorgive?
4. Assum ing that the parent company would only provide financial assistance, If Able Ltd is able to maintain a25% gross profits for three consecutive months. The management of Able is confident that selling to Australiaand Southeast Asia is able to achieve the profitability, but it has disclosed about the going concern issues onthe financial statements. Explain what type of audit report would you pre?