Reference no: EM132382029

Question

Mark Jackson is the partner on the audit team for a new client, Central Companies (CC). The client hired Mark's firm in August 2022 in preparation for the December 31, 2022, audit. Mark's firm is replacing the predecessor firm that audited CC for the last 12 years. Since January 2022, CC has experiencd a slowdown in sales as evidenced by lower inventory turnover rations. Slower inventory turnover has negatively impacted operating cash flow, which has resulted in CC paying some of its supplies late. Some of the smaller suppliers are demanding that CC pay cash on delivery of inventory items.

Mark is also aware of correspondence between CC and its bank that the company started having cash flow problems as far back as 2021. CC has attempted to obtain short-team financing from its bank but has not been successful. CC's management has adequately disclosed these issues in the 2022 financial statements. Based on the audit evidence, CC's financial statements are presented fairly in accordance with the financial reporting framework, but Mark has concluded that CC has a substantial going concern issue.

Required: Prepare the appropriate audit report for Central Companies.