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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:
- The company has a significant cash burn rate and its main operating license expires in two months, with renewal pending a safety review.
- On 15 October 20X6, a major warehouse fire destroyed 40% of their drone fleet.
- 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)
ACCA · Question 10 · Review and Reporting
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:
- The company has a significant cash burn rate and its main operating license expires in two months, with renewal pending a safety review.
- On 15 October 20X6, a major warehouse fire destroyed 40% of their drone fleet.
- 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.
Assume the auditor concludes that a material uncertainty exists related to going concern. Management has adequately disclosed this material uncertainty in the notes to the financial statements. What is the impact on the auditor's report?
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:
- The company has a significant cash burn rate and its main operating license expires in two months, with renewal pending a safety review.
- On 15 October 20X6, a major warehouse fire destroyed 40% of their drone fleet.
- 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.
Assume the auditor concludes that a material uncertainty exists related to going concern. Management has adequately disclosed this material uncertainty in the notes to the financial statements. What is the impact on the auditor's report?
Answer options:
A qualified opinion is issued due to the material uncertainty.
An adverse opinion is issued because the company may not survive.
An unmodified opinion is issued, but an Emphasis of Matter paragraph is added.
An unmodified opinion is issued, but a separate 'Material Uncertainty Related to Going Concern' section is added to the report.
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