ExpertACCA · Question 09 · Review and Reporting
SECTION A - CASE 2: GREENHARVEST CO-OP
SCENARIO:
You are the audit senior for GreenHarvest Co-op, a large agricultural cooperative, for the year ended 31 March 20X5. The audit is nearing completion. During the review phase, you note the following:
- A major customer, representing 15% of receivables, went into liquidation on 15 April 20X5.
- GreenHarvest is facing a lawsuit from a supplier regarding contaminated fertilizer, which the legal counsel advises has a 30% chance of success.
- The directors have refused to disclose a key executive's remuneration, which is required by local legislation, though the amount is immaterial to the financial statements as a whole.
QUESTION:
During the review, you also assess GreenHarvest's ability to continue as a going concern. Which TWO of the following would be considered financial indicators of going concern problems for an agricultural cooperative?
SECTION A - CASE 2: GREENHARVEST CO-OP
SCENARIO:
You are the audit senior for GreenHarvest Co-op, a large agricultural cooperative, for the year ended 31 March 20X5. The audit is nearing completion. During the review phase, you note the following:
- A major customer, representing 15% of receivables, went into liquidation on 15 April 20X5.
- GreenHarvest is facing a lawsuit from a supplier regarding contaminated fertilizer, which the legal counsel advises has a 30% chance of success.
- The directors have refused to disclose a key executive's remuneration, which is required by local legislation, though the amount is immaterial to the financial statements as a whole.
QUESTION:
During the review, you also assess GreenHarvest's ability to continue as a going concern. Which TWO of the following would be considered financial indicators of going concern problems for an agricultural cooperative?
Answer options:
A severe drought destroying 40% of the cooperative's crop yield.
Negative operating cash flows indicated by historical financial statements.
Denial of usual trade credit from fertilizer suppliers.
The unexpected resignation of the Chief Agronomist.
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