Question 1

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:
1) A major customer, representing 15% of receivables, went into liquidation on 15 April 20X5.
2) GreenHarvest is facing a lawsuit from a supplier regarding contaminated fertilizer, which the legal counsel advises has a 30% chance of success.
3) 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?

Accepted Answer

Distinguish between financial, operating, and other indicators of going concern as categorized by ISA 570.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Failing to distinguish between 'financial' and 'operating' indicators, selecting A or D because they are bad events, even though they aren't financial indicators.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA AA — Audit and Assurance Practice Exam 1

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