Frank Walsh is an audit senior with Williams & Associates. Frank is involved in planning the audit of Outboard Ltd (Outboard), a manufacturer of engines for luxury leisure boats. Outboard’s operations are financed by a combination of long term debt and short term loans from a financial institution Big Bank Ltd.

As part of the planning process Frank has noted the following matters:

• Outboard has been profitable for several years and has recently successfully expanded its operations to manufacture a new type of engine for export to NZ
• One of Outboard’s major customers (Leisure Boats), which represents 30% of Outboard’s annual sales, has indicated that it has started to manufacture its own engines
• The strength of the Australian dollar against foreign currencies has had an adverse effect on demand for locally produced engines. Competition in the industry is becoming more intense, with some other customers of Outboard indicating they may now purchase their engines from Korean suppliers at a much lower cost.
• Big Bank Ltd has requested cash flow forecasts for the coming year to support the financing arrangements that are currently in place. Outboard’s level of debt has remained constant in recent years and it had a positive working cash flow position to 30 June 2015.

REQUIRED

1. 1. Identify whether there are events or conditions that may indicate material going concern uncertainties.
1. 2. Identify any mitigating factors.

Answer rating: 100% (QA)

1 Yes there are events or conditions that may indicate material going concern uncertainties The fact ... View the full answer