auditors report to TCWG Flashcards
Why is communication to those charged with governance important in an audit?
-Understanding Issues: Ensures those in charge understand significant issues from the audit.
-Action: Allows management to address and resolve identified matters.
Who should the auditor communicate with according to ISA 260?
-Governance Role: Highest level of management, including executive and non-executive directors, and the audit committee.
Identity may be specified in the engagement letter.
What issues should be communicated to those charged with governance?
-Overall Audit approach, scope, and limitations.
-Accounting Policies: Changes that could affect financial statements.
-Audit Adjustments: Adjustments with material impact.
-Material uncertainties affecting going concern status.
-Disagreements with management on accounting or disclosures.
-Expected modifications to the audit report.
-Internal Controls: Material weaknesses discovered.
Why should audit findings be communicated to management?
-Corrective Action: Allows management to correct control weaknesses or accounting policy breaches.
-Avoid Modified Report: Ensures management can correct errors to avoid a modified audit report.
What additional matters should be communicated beyond audit findings?
-Independence Threats and safeguards
-Audit Approach: Explanation of the audit approach, including materiality.
-Business Risks: Summary of identified business risks and their likelihood.
-Management’s Representation Letter: Review of the letter’s contents.
-Recommendations: Suggestions for improving internal systems and controls.
When and how should communication with those charged with governance occur?
-Timing: Before the approval of financial statements.
-Form: Typically written (UK and Ireland) or oral (outside the UK and Ireland, with a written record).
-Dialogue: Should be a two-way dialogue allowing management to respond.
What is the requirement for written communication in the UK and Ireland?
Must be in writing.
Even if there are no significant findings, a written statement must be issued.
What should auditors do if communication is oral?
Keep a written record in audit working papers of significant oral discussions.
What is the overall significance of communicating with those charged with governance?
-Essential part of the audit process.
-Allows management to address issues and improve financial reporting.
