Michael Cheung has drafted an audit plan for a new client. The client is Countrywide Capers, a party rental business. Countrywide Capers earns 80 percent of its revenue from renting out tents, tables, dishes, cutlery, napkins, and tablecloths. Michael's plan shows that audit time is divided to reflect this revenue pattern (that is, 80 percent of the audit time is spent on the rental business and 20 percent of the time is spent on the retail business). Michael believes that the significance of the revenue activities should be the only driver of the audit plan because the client has no related parties and has a simple, effective corporate governance structure. What are some of the questions you would have for Michael before accepting his audit plan? (Several choices may be correct.) 00000000 What are the significant transactions and accounts? Are controls the same for both segments of the business? Have the controls been tested? Is there any going concern risk? What is the acceptable level of audit risk? What audit opinion will be issued? What work has been done to ensure there are no issues with the client's corporate governance structure? Is the risk of misstatement the same for both segments of the business?

A new client, an oil and gas explorer in Western Canada, is currently negotiating a loan worth $3 million to avoid defaulting on its longterm debt that is due in three months. Its latest quarterly earnings report indicated the entity has a working capital deficiency of $500,000, while its cash balance fell to $250,000, down from $500,000 a year earlier. There is a 0.5:1 current ratio. With little expectation of improved sales, the entity plans to cut back on production to preserve cash. It has also been paying suppliers late consistently and as a result some suppliers have begun demanding cash on delivery from the client. As a result, the share price has plunged and the entity has lost more than half of its market value in the past week. What conditions or events cast doubt on the new client's ability to continue as a going concern? (Several choices may be correct.) Lack of cash for paying the long-term debt which is due in three months Renegotiation of a loan Current working capital deficiency Suppliers demanding cash on delivery Declining share price Fall in cash balance