Final answer:
Increased competition, requests for cash flow forecasts, and fluctuations in sales due to large contracts are all potential issues that could affect Komsu Air Limited's ability to continue as a going concern. Factors such as market competition and demand can greatly impact a company's financial stability and market position.
Step-by-step explanation:
When auditing Komsu Air Limited (KAL) which manufactures and installs large commercial air conditioning systems, there are several potential issues that could have implications for KAL's ability to continue as a going concern. These include:
- Increased competition in the industry, which can lead to reduced market share and profits.
- Requests for cash flow forecasts from the bank, suggesting concerns about the company's liquidity and financial health.
- Fluctuations in sales due to the timing of large contracts, which can create variability in revenues and challenge financial stability.
Each of these factors alone, and certainly all combined, could raise substantial doubt about KAL's ability to continue as a going concern. For instance, in the U.S. airline industry, a string of mergers has altered competitive dynamics, suggesting that increased competition can have significant effects on a company's market position. Moreover, if the market does not have enough demand to support multiple large producers, as in the case of the airline industry where entry at a non-competitive scale would lead to higher average costs or an inability to sell produced units due to insufficient market demand, a similar scenario could pose a risk to KAL's operational viability.