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Chapter 9 3 4

2.4 Procedures

 Analyse and discuss cash flow, profit and other relevant forecasts with
management. This should include assessment of the reasonableness of the
assumptions used to prepare the forecasts.

 Review the terms of debentures and loan agreements and determining whether
any have been breached.

 Read minutes of the meetings of shareholders, the board of directors and
important committees for reference to financing difficulties.

 Enquire of the entity’s lawyer regarding the existence of litigation and claims
and the reasonableness of management’s assessments of their outcome and
the estimate of their financial implications.

 Review events after the year-end to identify those that either mitigate or
otherwise affect the entity’s ability to continue as a going concern.

 Review correspondence with customers for evidence of any disputes that might
impact recoverability of debts and affect future sales.

 Review correspondence with suppliers for evidence of issues regarding
payments that might impact the company's ability to obtain supplies or credit.

 Review correspondence with the bank for indication that a bank loan or
overdraft may be recalled.

 Obtain written representations from management regarding its plans for the
future and how it plans to address the going concern issues.

2.5 Financial statements disclosures

Disclosures relating to going concern are required to be made by the directors in the
following circumstances:

 Material uncertainty over the future of the company

 Where the going concern assessment has not covered a twelve month period

 Where the financial statements are prepared on a basis other than the going
concern basis

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