Answered: affect the audit report

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Analyse and explain how the following situation would affect the audit report for the financial year ended on 31 December 2020.

Your client, Tasty Ltd, is running cafés and restaurants in Australia. Its business is affected by COVID. Although the client is struggling to deliver a profit for the 2020 financial year, its cafes located in suburbs are doing reasonably well – people working from home still appreciate good coffee. As a result, the auditor believes that the company will be a going concern in the foreseeable future. The client continues to apply the going concern assumption in the financial statements and has disclosed the going concern uncertainty in the footnotes of the financial report.

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