Reference no: EM132668868

Super-E Inc. (SI) manufactures component parts and sells them to major electronics companies. SI is a public company that reports under IFRS.

• Fiscal 2019 was a year of growth for SI. It launched several new product lines, and so far, these products have been a success. During the year, SI experienced revenue growth and an increase in market share. The CEO was very satisfied, as her main goal for 2019 was to improve profitability. She is very focused on share price and earnings per share, and she tends to reward decisions that she believes will improve these measures. She hopes that the increases in revenue and market share will soon trickle down to the bottom line.

• The rapid growth has resulted in the internal audit department at SI being very busy. They have had to work overtime to implement appropriate internal controls as part of the processes for the new product lines and the changes in customer credit-granting policies. This challenge has been exacerbated by the fact that this department has been understaffed for much of the year.

• You, CPA, are the external auditor for SI's December 31, 2019, financial statement audit. This is your firm's first year auditing SI; however, the predecessor's files suggest limited errors were identified in prior years.

As you perform the year-end audit work, some concerning information comes to light:

• After year end, a lawsuit was filed against SI by a competing firm. The competitor claims that the products SI launched in 2019 copied patented technology to which the competitor holds exclusive rights. SI's lawyer believes that SI will be found guilty and that damages will be material. This lawsuit has been in the news, and SI is not being portrayed favourably. SI's share price has declined.
• SI is struggling to manage its working capital. Cash is tied up in inventory that may not be saleable due to the lawsuit, and management has taken this inventory off the shelves until the lawsuit is resolved. In addition, accounts receivable collection continues to be slow. The bank has been reluctant to extend the operating line of credit due to recent circumstances.
• Management had performed an assessment of SI's ability to operate as a going concern and concluded that the going-concern basis of accounting was appropriate. However, the above information was not considered in this assessment.
• Your firm considers these factors to be indicative of conditions that could cast significant doubt on the entity's ability to continue as a going concern.

Problem 1:  what are the auditors responsibilities and objectives related to the going concern basis as they relate to SI's circumstances? (Be sure to outline the CPA Canada Handbook - Assurance requirements and expand on the specifics with regard to SI)