Reference no: EM132873600

Irwin Corporation has reported a loss for the sixth year in a row. Irwin also has a large bank loan due in the coming year, bringing its current ratio to 0.60. Further, due to recent economic slowdown, Irwin had to increase its bad debt expense by 4% and saw its largest client, Forest Woods file for bankruptcy. Forest Woods' purchases made up 18% of Irwin's total sales in the past year. Forest Woods also had an unpaid balance to Irwin at year end.

To reduce expenses, Irwin has reduced employee training from 5 days to 1 day. During the year, an employee was seriously injured in the production process when his arm was caught in a press. The employee has filed a lawsuit against Irwin for $1,000,000 and claims that he was not properly trained to use the equipment.

The legal proceeding for this case should begin in the next fiscal year. Since Irwin has never been involved in such a lawsuit before, the legal counsel indicated that they were not able to estimate the amount and likelihood that Irwin would have to pay.

Required:

Question 1: Evaluate the going concern situation at Irwin and indicate what the auditor would be required to do under the Canadian Auditing Standards.