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The following is written in the question:
The finance director has informed you that the company intends to restructure its debt finance after the year end and will be looking to consolidate its loans to reduce the overall cost of borrowing.
What does restructuring of debt finance and consolidation of loans mean and why is this an audit risk
Also what does securing the debt finance restructure mean
It means what it says – here, “restructure” will take the form of “consolidating” (i.e. combining) “loans” (i.e. it clearly has more than one and in the context of the scenario presumably several). A business (or individual) with lots of loans may shop around loan providers to have all their debt in one place (with one provider) with the overall aim of reducing borrowing costs.
Audit risk is explained in the answer:
“In order to maximise the chances of securing the debt
finance restructure, Harlem Co will need to present financial
statements which show the best possible position and
performance. The worsening interest cover and gearing ratio
increases the risk that the directors may manipulate the
financial statements, by overstating profits and assets and
understating debt liabilities.”“Securing” here just means obtaining/getting.
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