Reference no: EM132560191

You have been assigned to the 2020 audit of Oshikango (Pty) Ltd (hereafter Oshikango). Oshikango's period end is 30 April 2020. The company has been established in 2013, it is situated in the Northern part of Namibia and they are operating in the automotive industry, selling new and used vehicles.

With the Covid-19 pandemic that has caused uncertainties to the operation of many businesses, the audit team is worried about the going concern of Oshikango Pty Ltd. The company has made losses in the current year and they are facing a difficult financial position mainly due to the current economic status of Namibia. The decrease in the sales of vehicles has been noticed in the recent years. Oshikango has recently announced that they will be retrenching 15 of their employees post lockdown.

Trade receivables audit

You are currently busy testing trade receivables balance and you have selected 2 samples of debtors from the accounting records as at 30 April 2020 and request positive confirmations from the debtors

Note A: The audit team has send a confirmation to Elizabeth Adolf (Debtor) who preferred to send the original written confirmation back to Oshikango Pty Ltd as a matter of convenience and Oshikango's Financial manager Mrs Haufiku has received the confirmation and submitted the response to the audit team.

Note B: The driver of Oshikango was due to deliver documents to Fitness Centre (Pty) Ltd (Debtor) and therefore the audit team has requested the driver to deliver confirmations to the debtor. The debtor phoned the audit partner to confirm the balance, who in turn informed the audit team

Required:

Question 1. With reference to notes A and B above, discuss the concerns with the reliability of the audit evidence gathered for audit purposes.

Question 2. With reference to the background information, describe the audit procedures that the audit team can perform to obtain sufficient evidence about the going concern of the company.