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What are auditor responsibilities for a going concern issue

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Reference no: EM132743536

Question: ACT Ltd (ACTL) has placed a deposit with an overseas supplier totalling $5 million for the manufacture of toy products on 14 July 2018. This deposit equals to 70% of this year purchase. On 29 th July 2018, the supplier closed due to floods and earth quakes. The opinions from experts on 30 th August 2018 indicated that it was unlikely that the deposits would be recovered. ACTL purchases over 65% of total annual purchase from this every year. Therefore, the company is facing a going concern issue, although the company's director refuse to accommodate this information in the company's reports.

The year-end for ACTL audit is 31 December 2018, and the audit report is due to be signed and issued on 28 January 2019.

Required: a. Discuss whether the deposit is material and if so, explain why it is material.

b. What are the auditor's responsibilities for a going concern issue of a client?

c. If you are the auditor of the company, what is the audit opinion you will issue for the company's reports, if its director's refusal to adjust the reports in relation to the deposits placed overseas. Discuss.

Reference no: EM132743536

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