(solution) Auditing

(solution) Auditing

You are the auditor of Globe Ltd, a manufacturer of colour printers. You have closely scrutinised the financial reports of the company and are concerned about its ‘going concern status’. The summarised financial reports for the past three years plus the unaudited draft accounts for the current year are shown below. Document Preview: You are the auditor of Globe Ltd, a manufacturer of colour printers. You have closely scrutinised the financial reports of the company and are concerned about its ‘going concern status’. The summarised financial reports for the past three years plus the unaudited draft accounts for the current year are shown below. Globe Pty Ltd     2009201020112012Statement of Financial Performance $’000s    Sales131196266298Cost of Goods Sold(116)(175)(231)(262)Gross Profit15213536Other Expenses(14)(27)(39)(48)Interest(2)(10)(15)(25)Net Profit (Loss)(1)(16)(19)(37)     Statement of Financial Position $’000s2009201020112012Current assetsDebtors22325072Inventory25355263Total current assets4767102135Non-current assetsProperty, plant and equipment3792100111Total assets84159202246Current liabilitiesCreditors404582112Bank Overdraft16516278Total current liabilities5696144190Non-current liabilitiesSecured loan0505050Total liabilities56146194240     Capital and ReservesShare capital3333Retained earnings251053Total Liabilities and Owners Equity84159202246 In an attempt to expand into overseas markets, Globe automated a lot of its operations in 2010 with the purchase of some highly sophisticated plant and machinery. The new plant and machinery was largely financed with a secured variable loan of $50,000 and a bank overdraft facility. The company purchases the component parts that make up the printers from a variety of local and overseas suppliers. The company has plans to broaden its sales base (currently 85% of its sales are to one discount chain store) to both local and overseas markets. This broadening of the company’s sales base revolves around the development and production of a state of the art printer that will be tailored to meet the needs of the top end of the market. The new printer however will require a significant amount of money that the directors hope will come via a new public issue of shares and promises of loans and other forms of assistance from business acquaintances of…