ased each year. SLL’s bank has continued to provide SLL with loan facilities; however, it has indicated that it expects to see improved results in the next financial report and has placed a number of quite restrictive covenants in SLL’s lending agreements.
HI6026
Question 4
You are currently involved in planning for the audit of Spot Light Ltd (SLL), a national company producing curtains and blinds. The curtain and the blind market is highly competitive, and SLL has been experiencing declining sales over the past three years. Cost-cutting has proven very difficult, as the cost of materials used in the company’s production lines has increased each year. SLL’s bank has continued to provide SLL with loan facilities; however, it has indicated that it expects to see improved results in the next financial report and has placed a number of quite restrictive covenants in SLL’s lending agreements. Recent articles appearing in the financial press concerning SLL’s expected financial results have been very pessimistic about its likely performance.
Required:
Based on the information provided:
Discuss the overall impact on audit risk. Which specific component(s) of audit risk would be affected?
Note: If you use any material, book, journal or case study etc. then, Please provide the references also. Reference sources must be cited in the text of the question and listed appropriately at the end of the question, Please provide all references in Adapted Harvard Referencing style.
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