The following scenario relates to questions 6–10 You are an audit manager of Elm & Co and are finalising the audit of the financial statements of Oak Co for the year ended 31 May 20X6. You are reviewing the results of the final analytical procedures and other outstanding points on the audit file, prior to recommending the final audit opinion, which is due to be signed on 12 December 20X6. The following ratio analysis has been completed as part of the final analytical procedures: Discussions with the finance director have also revealed the following: (1)Oak Co lost a major customer, Beech Co, in May 20X6, but new business has been won post year end which has mitigated the impact of the loss of Beech Co. (2) Oak Co is due to repay a substantial loan on 31 January 20X7. Oak Co is currently negotiating revised terms with the bank but it is unlikely that negotiations will be concluded before the auditor's report is signed. This will be disclosed in the financial statements. The financial statements for the year ended 31 May 20X6 have been prepared on a going concern basis. As part of the going concern assessment, some additional issues have been noted on the audit file. 6. Which TWO of the following issues could individually cast doubt over the going concern assumption for Oak Co?
A.
A number of personnel in the purchasing department left during the year and have not been replaced
B.
A major supplier to Oak Co has just gone out of business with a number of unfulfilled orders
C.
A new product which was due to account for 30% of revenue has proved to be unsuccessful
D.
A litigation claim has been raised against Oak Co after the year end with potential damages totaling 3% of this year's profit