(i) Matters and procedures on funding

Up to 1 mark each point:

Matters:

– Area of critical importance to the audit
 – Bank reluctant to confi rm arrangements
 – Assets impaired – little collateral to offer
 – Have alternative providers been discussed?
 – Potential impact on FS and audit report if signifi cant doubt remains over going concern
 – ½ mark ref ISA 570/ISA 706

Procedures:

– Review assumptions used in forecasts and projections
 – Management representation on reasonableness of assumptions used
 – Review potential fi nance for adequacy
 – Consider if any previous defaults
 – Consider terms of fi nance – can the company meet repayment terms?
 – Written confi rmation from bank
 – Discuss with bank
 – Discuss with management

Maximum marks 6

(ii) Ethical and other implications

Up to 1 mark each point explained:

– Advice is a non-audit service
 – Self-review threat
 – Advocacy threat
 – Management threat
 – Safeguards should be used to reduce threats
 – Firm may decide that no safeguards can reduce threats to an acceptable level
 – Attending meeting could create legal proximity

Maximum marks 6