MAA303 Audit And Assurance - Chapter 3: Risk Assessment Help

3.27 Risk assessment — considering going concern: financial

A new client has been paying its suppliers late consistently; well in excess of the suppliers’ agreed credit terms. As a result, some suppliers have begun demanding cash on delivery from the client. You are also aware that a review of correspondence between the new client and its bank reveals that the new client has been experiencing cash flow problems for two years.

Required
Discuss whether there are any events or conditions that may cast significant doubt on the new client’s ability to continue as a going concern.

Source: Adapted from the CA Program’s Audit & assurance exam, December 2010.