some cash flow difficulties, although this is not unusual in the industry. Management has recently fully extended their overdraft facility in order to pay day-to-day expenses such as wages and salaries. The audit partner is c
Sky-blue Pty Ltd is a large private company that manufactures special reinforced concrete and other products used in the construction of airport runways and heavy use motor vehicle freeways. During the course of the audit for the year ended 30 June 20X7, the government announced that it intends to scrap its proposed third runway project. You know that Skyblue Pty Ltd’s projections include a major share of the work expected to flow from this project.
The company has been experiencing some
Required:
What would be the impact on the audit of a comfort letter from a related company promising to provide financial support in the event that Skyblue Pty Ltd was unable to meet its debts?
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