Tag (SQ): ISA 570

You are an audit senior for an audit firm and are currently working on the audit of TechWorks Co, a company which produces sophisticated electronic laboratory equipment. The company imports a high proportion of the components it uses from China. The equipment is used by some laboratories dealing with hazardous chemicals.

As the audit draws to a close, the partner in charge has asked you to ensure that all procedures relating to subsequent events and going concern are properly performed. You are to consider the audit work to be performed in relation to ISA 560 Subsequent Events and ISA 570 Going Concern.

Required:
(a) Describe the auditor’s responsibilities for subsequent events occurring between:
(i) The year-end date and the date the auditor’s report is signed.
(ii) The date the auditor’s report is signed and the date the financial statements are issued. (6 marks)

(b) Going concern relates to the judgement that an entity will continue to trade for the foreseeable future.

(i) Explain the responsibilities of directors and auditors in relation to going concern. (3 marks)

(ii) Explain the audit procedures that audit could carry out when conducting the going concern review of TechWorks Co.

(c) TechWorks Co has an internal audit function. The partner in charge of the audit is seeking clarification regarding how any deficiencies in internal control should be identified and communicated to management. The partner feels the report produced by the external auditors may duplicate the produced by the internal audit function.

Required:
Explain how the purpose and content of an internal auditor’s report on internal control deficiencies differs from one prepared by the external auditor.