You are the senior auditor involved in planning the audit of See Through Lenses Ltd, a subsidiary of a US glasses and contact lenses retailer that entered the Australian market in September 2019. See Through Lenses has built several large retail stores in Western Australia and Queensland, and sources much of its stock from Chinese suppliers. The store development has been financed by a long term loan from the parent company and short term loans from Clearview Bank Ltd.

As part of the planning process you have noticed:

See Through Lenses has not yet made a profit.

COVID, and Australia's ongoing trade disputes with Chinese, continues to impact supplies and is significantly increasing the cost of inventory purchases.

Clearview Bank Ltd has requested cash flow forecasts for the coming year to support the financing arrangements that are currently in place.

Required:

Identify the business risks that exist in this situation. Describe any further evidence that you will need to assess the appropriateness of the going concern assumption.

Answer rating: 100% (QA)

The business risks that exist in this situation are as follows Financial Performance The fact that See Through Lenses has not yet made a profit sugges... View the full answer