- 6 Marks
AA – May 2016 – L2 – Q7a – Audit Evidence
Identify additional information needed to determine the audit opinion for Musky Fresh Ltd following supplier difficulties.
Question
Musky Fresh Limited has been in existence, for a number of years, importing perfume. The managing director had built up the business using contacts he already had in the industry. The company imports only one brand of perfume which is manufactured exclusively by one company. The perfume is distributed via ‘shops within shops’ at 20 branches of a well-known store. Under this agreement, Musky Fresh Limited pays a percentage of its takings to the store, with a minimum annual payment of N100,000 per store.
The audit is nearing completion, but you have just heard that the Arabian manufacturer is facing serious financial difficulties, and that supplies have ceased.
Required:
a. Set out the further information the auditor would require before reaching his audit opinion. (6 Marks)
Find Related Questions by Tags, levels, etc.
- Tags: Audit opinion, Financial difficulties, Going Concern, Supplier Risks, Trade Payables
- Level: Level 2
- Topic: Audit evidence
- Series: MAY 2016
