(a) Auditor’s responsibilities for subsequent events:

(i) Between the year-end date and the date the auditor’s report is signed:
The auditor is responsible for performing audit procedures to identify subsequent events that may require adjustment or disclosure in the financial statements. These procedures include:

• Reviewing management’s procedures for identifying subsequent events.
• Reading minutes of meetings of shareholders, directors, or other relevant committees held after the year-end.
• Reviewing the latest available interim financial statements, budgets, cash flow forecasts, and other related management reports.
• Making inquiries of management and those charged with governance about whether subsequent events have occurred that might affect the financial statements.
• Obtaining written representations from management regarding the completeness of information about subsequent events.
  If events are identified, the auditor assesses whether they provide evidence of conditions existing at the year-end (adjusting events) or conditions arising after the year-end (non-adjusting events requiring disclosure).

(ii) Between the date the auditor’s report is signed and the date the financial statements are issued:
The auditor has no active responsibility to perform procedures to identify subsequent events during this period unless they become aware of facts that may affect the financial statements. If the auditor becomes aware of such facts:

• Discuss with management and, where appropriate, those charged with governance to determine whether the financial statements need amendment.
• If management amends the financial statements, the auditor performs procedures to ensure the amendments are appropriate and extends the subsequent events review to the date of the new auditor’s report.
• If management does not amend the financial statements and the auditor believes they should, the auditor considers modifying the audit opinion or withdrawing from the engagement, depending on the circumstances.

(b) Going concern:

(i) Responsibilities of directors and auditors in relation to going concern:

• Directors’ responsibilities: Directors are responsible for assessing the entity’s ability to continue as a going concern, typically for at least 12 months from the date of approval of the financial statements. They must prepare the financial statements on a going concern basis unless it is inappropriate to do so, and disclose any material uncertainties related to going concern.
• Auditors’ responsibilities: Auditors are responsible for obtaining sufficient appropriate audit evidence to conclude whether the going concern basis is appropriate and whether material uncertainties exist that may cast significant doubt on the entity’s ability to continue as a going concern. The auditor evaluates management’s assessment and considers whether disclosures in the financial statements are adequate.

(ii) Audit procedures for going concern review of TechWorks Co:

• Obtain a copy of the cash flow and statement of profit or loss forecasts for the year ahead. Discuss with management the basis on which they have been prepared and obtain supporting documentation, if possible, for any assumptions which are inconsistent with the performance of the current period. Compare the performance of the business post year end with the forecasts.
• Discuss with management whether there have been any breaches of Health and Safety legislation or potential litigation which may influence TechWorks Co’s ability to trade.
• Discuss with management whether there have been any supply problems and whether there are alternative suppliers available to the business should supply problems arise.
• Review the order book in the post year period for evidence of continued demand for TechWorks Co’s products.

(c) Differences between external and internal audit’s report to management:

External auditor’s report:
The external auditor’s report to management only details significant deficiencies in the system of internal control which have come to the attention of the auditor as part of their normal audit procedures. It is not a comprehensive list of all deficiencies. This reflects the wider role of the external auditor and that internal audit staff have the time available to take a more detailed approach. It also reflects the narrower aim of the external auditor, focussing on the accuracy of the financial statements.

Internal audit reports:
Reporting on internal control deficiencies is one of the internal audit function’s main roles. They carry out tests on systems and controls according to the needs of the business to ensure effective control and effective use of resources. This is likely to require internal auditors carrying out a series of assignments, each focusing on a particular aspect of operations and control. The overall objective will be to assess the effectiveness of the organisation’s control systems and the potential risks that the business faces. The impact of the risks can be assessed and alternative controls put into place if required. The internal auditors have a wider focus than the external auditors. The external auditors will observe controls with a view to the impact on the financial statements. The internal auditors will have a wider more wide-ranging perspective, and will include operational efficiency and compliance issues as well as financial issues.

There is no prescriptive format to the internal audit function’s reports, however the report should contain the following:

• Executive summary: This will summarise the terms of reference, the key objectives of the assignment and the major findings and recommendations.
• Body of the report: This will set out the detail of what work has been done, by whom, observations were drawn, what recommendations have been made, when they should be implemented and by whom.
• Appendices: These may contain details of the tests carried out and the results thereof. They may also include analyses of potential impacts of controls the report deficiencies.