As Part of a Loan Agreement That It Is Thinking

question 24

Essay

As part of a loan agreement that it is thinking of obtaining,Always Quick Manufacturing Limited has decided that it will use accounts receivable and inventory as security for working capital funds.The bank has indicated that in addition to an annual financial statement audit,it would require quarterly assurance on the accounts receivable and inventory amounts.The type of assurance required has not been stated.The bank has told Jose,the owner of the company,that he would need to provide a detailed inventory list and an aged accounts receivable trial balance on the fifteenth of each month for the information as at the preceding month end.Jose would like to know what his alternatives are.
Required:
Your partner is going to meet with Jose next week and would like you to prepare a memo to file that will be used as part of the meeting.Draft a brief memo that includes a list of alternative types of engagements that could be used to provide assurance on the accounts receivable and inventory balances.

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Definitions:

Gout

A type of arthritis caused by excess uric acid in the bloodstream, leading to painful swelling in the joints, especially the big toe.

Ewing's Tumors

A rare type of cancer that occurs in bones or in the soft tissue around the bones, primarily affecting children and young adults.

Paget's Disease

A chronic bone disorder that can lead to enlarged and misshapen bones due to abnormal bone destruction and regrowth.

Scoliosis

A condition characterized by an abnormal lateral curvature of the spine.