Question 1

SECTION A - CASE 2: AERODYNAMICS LOGISTICS

AeroDynamics Logistics is a drone delivery startup. You are the audit senior for the year ended 30 September 20X6. During the audit, you note the following:
1. The company has a significant cash burn rate and its main operating license expires in two months, with renewal pending a safety review.
2. On 15 October 20X6, a major warehouse fire destroyed 40% of their drone fleet.
3. A key customer, accounting for 25% of revenue, declared bankruptcy on 5 November 20X6.
The financial statements are due to be signed on 30 November 20X6.

Which TWO of the following are operating indicators that AeroDynamics Logistics may not be a going concern? (Select TWO)

Accepted Answer

Differentiate between financial indicators (cash flow, ratios) and operating indicators (loss of licenses, key staff, or major customers) of going concern problems.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Selecting cash burn rate, failing to distinguish between financial and operating indicators.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA AA — Audit and Assurance Practice Exam 2

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