Economics · Auditing and Assurance
A manufacturing company client exhibits negative cash flows from operations and has a major loan repayment due in 14 months that it is unlikely to meet. Management has prepared a cash flow forecast covering the next 12 months. Which of the following is the most appropriate additional audit procedure related to the going concern assessment?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Obtain written representation from the directors stating that they will not liquidate the company within the next 12 months.
- 2Extend the cash flow forecast review period to at least 14 months and critically assess the feasibility of management's mitigating actions.✓
- 3Confirm the market value of non-current assets for preparation of the break-up basis financial statements.
- 4Review post-year-end capital expenditure to assess if the company is actively investing for growth.
Correct answer
Extend the cash flow forecast review period to at least 14 months and critically assess the feasibility of management's mitigating actions.
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