Case Study Audit
Case Study 3 a) What events or condition above may cause substantial doubt about the entity’s ability to continue as a going concern?
Events or condition that may cause substantial doubt about the entity’s ability to continue as a going concern are the first one, because of the high competition in the industry, it has affected the sales of the Fast Go. The effect of vigorous competition in the markets has makes it difficult for Fast Go to attract and retain customers and to grow their customer base and revenue. Furthermore, many competitors of Fast Go’s are larger and have greater financial resources, less average, and their coverage are more extensive.
Furthermore, Fast Go also suffer high turnover of staff of the company. It is resulted from the high competition in the industry. Many staff left Fast Go and join bigger companies that offer better pay for them. Besides that, Fast Go also predicts that the market prices will be decline in the future, it just make them unable to attract more customer.
And the important thing that cause the substantial doubt in order Fast Go to carry on the business is, the company has debt totaling RM 25 Million. The debt has financial covenants as well as material adverse change clause. Furthermore, Fast Go must maintain Debt Ratio to Total Assets not exceeding 35%. If Fast Go unable to comply with the agreement, they need to pay the loan in full.
b) Assuming the events of conditions identified in (a) above cause the audit team to have substantial doubt about Fast Go ability to continue as a going concern, what is the next step the audit team needs to perform?
The next step that the audit needs to perform are, the audit team must seek information about management’s plans to mitigate all the problem that Fast Go suffer for example the debt, the competition and etc. Besides, the audit team also must assess the likelihood that such plans can be successfully implemented. Furthermore, the audit team also must
Events or condition that may cause substantial doubt about the entity’s ability to continue as a going concern are the first one, because of the high competition in the industry, it has affected the sales of the Fast Go. The effect of vigorous competition in the markets has makes it difficult for Fast Go to attract and retain customers and to grow their customer base and revenue. Furthermore, many competitors of Fast Go’s are larger and have greater financial resources, less average, and their coverage are more extensive.
Furthermore, Fast Go also suffer high turnover of staff of the company. It is resulted from the high competition in the industry. Many staff left Fast Go and join bigger companies that offer better pay for them. Besides that, Fast Go also predicts that the market prices will be decline in the future, it just make them unable to attract more customer.
And the important thing that cause the substantial doubt in order Fast Go to carry on the business is, the company has debt totaling RM 25 Million. The debt has financial covenants as well as material adverse change clause. Furthermore, Fast Go must maintain Debt Ratio to Total Assets not exceeding 35%. If Fast Go unable to comply with the agreement, they need to pay the loan in full.
b) Assuming the events of conditions identified in (a) above cause the audit team to have substantial doubt about Fast Go ability to continue as a going concern, what is the next step the audit team needs to perform?
The next step that the audit needs to perform are, the audit team must seek information about management’s plans to mitigate all the problem that Fast Go suffer for example the debt, the competition and etc. Besides, the audit team also must assess the likelihood that such plans can be successfully implemented. Furthermore, the audit team also must