Ican 2026 Advanced Audit Assurance And Forensics Question 5

Clement Nigeria Limited was incorporated as a private limited liability company on October 4, 2020 under the Companies and Allied Matters Act. The company commenced commercial production on January 20, 2021, and currently engages in the manufacturing, distribution, and selling of foods and related products. In 2023, the entity recognised a revenue of N3,128,444,186 (2022: N2,544,182,062), and a loss of N3,555,104,123 (2022: N2,722,942,805.14). The entity has, however, continued to make recurring losses in the years, which has led to an increase in the accumulated losses and the erosion of its equity. The entity’s current working capital position is a net liability position of N19.660 billion (2022: net liability of N16.105 billion); and positive cashflows of N0.333 billion (2022: 0.201billion). Also, the entity’s shareholder’s equity has been eroded in the current year to N1.102 billion (2022: N894 million). The direct parent company, Wagge Limited, is also not in a financially viable position to provide support to Clement Nigeria Limited. However, the parent company and beneficial shareholders have provided letters of comfort explaining that they would support Clement Nigeria Limited for a period of 12 months from the date of the financial statements for the year ended December 31, 2024. They expect that this would enable the company to continue as a going concern and meet their obligations as and when they fall due, for at least 12 months from that date. The letter is irrevocable and would remain in force for 12 months from the date of the audited financial statements. The comfort letter was signed by a director (Stephen Konibaje), on the strength of which management believes that there is no further threat to the going concern assumption of the company. You are the partner in charge of the audit of Clement Nigeria Limited in your firm.