Assignment

You are planning the audit of Panda Ltd, which is a subsidiary of Roo Ltd. Panda Ltd was acquired to provide the group with access to the growing premium wine market in China. However, Panda Ltd has found trading conditions difficult due to impeccable reputation of French wine (competitor) in China market and has sustained significant losses and has a negative cash flow in current year.

The CEO of Panda Ltd, Peter Chung, has indicated that there is nothing to worry about as Roo Ltd has signed an agreement to support the company for as long as it takes to establish a presence in the premium wine market in China.

1)Provide a concise statement in less than two lines below in regards to your assessment of the appropriateness of the going concern basis for Panda Ltd ignoring the facts of the full support from the parent company.

2)Provide a concise statement in less than forty words below in regards to your assessment of the appropriateness of the going concern basis for Panda Ltd giving the facts that the parent company fully support

3)Continue with the case, Panda Ltd has an internal audit function that is attached to the accounting and finance division, and reports directly to the finance director in his capacity as chair of the audit committee.

During your review of internal audit, you have noted the following matters:

(i) The staff of the internal audit function changed significantly during the year. The division employed three new staff to undertake the testing of the financial accounting records, while the more senior personnel who had previously done these tests concentrated on the performance auditing schedule of the internal audit function. The new staff had no previous audit or accounting experience.

(ii) The work that has been documented appears to be quite thorough and competent. However, for some of the audit tests prescribed, the staff have not prepared detailed documentation of the work that has been completed. They have simply initialled the audit program and noted that the test has been satisfactorily performed.

Based on the above available information, write in total less than fifty words or five lines the three audit procedures that you would undertake in relation to this going concern issue.

(4) Based on the information of internal audit, write in total less than fifty words or five lines your assessment as to whether the external auditor can rely on the work of internal audit. Give reasons for reliance or non-reliance of internal audit.