1.
18-29 You are auditing the financial statements for your new client, Paper Pack-aging
Corporation, a manufacturer of paper containers, for the year ended March 31, 2014. Paper
Packaging
Solution
The going concern assumption states that bUsinesses should be treated as they will continue to
operate indefinetly or atleast long enough to accomplish their objectives.
a)1Default in repayment of debentures of $ 4.16 million as well as negotiation with bond holder
and selling of bond by bondholders significantly at less than par value.
2)Renegotiation on 2009 credit agreement which provide for payment in 2 years limiting the
operating losses for coming years.
3)Report of previous auditor
b) The auditor of 2014 shall consider whether the reason due to which going concern assumption
is effected in 2013 also exists in current year.
If auditor considers that reasons also exists in current year,The auditor shall ensure that Financial
statement have appropriately incorporates such consideration in its preparation
And all asset and liabilities should be recorded at their realisable value in financial statement.
c)Yes, The report should mention the reasons due to which going concern assumption was
affected in last year and
their effect on current financial statement..
The report should also mention whether such reason also exists in current year and their possible
effect on current financial statement.