ISA 260 - Communication with Those Charged With Governance - TCWG

Question 1

ISA 260: Understand who are these People - TCWG and How are they different from Management:

Answer 1

TCWG

Management:
> Given execution responsibility.
> Responsible for:
- Preparation of Financial Statements,
- Designing Internal Control Systems,
- Comply with Laws and Regulations, etc.

Those Charged With Governance (TCWG)
> Supervise the functions of Management.
> This is Top Level and they do Make Strategic Plans.
> Board of Directors but some are both part of Management and TCWG.

Establish:
> Two-way communication between Auditor and TCWG.
> It assists the Auditor to develop a Constructive relationship.
> Auditor can obtain all the information required during Audit.
> It also helps TCWG to supervise the functions of the Management.

Question 2

ISA 260: Objective of the Auditor

Answer 2

> Clear communication with TCWG about his responsibility as an Auditor and Plan, time, and Scope of Audit.
Obtain all the information that is relevant for Audit.
To prompt effective two way communication between Auditor and TCWG.
Communicate significant matter or any risk that has come across, timely.

Question 3

ISA 260: Requirements of the Standard:

Answer 3

> Identify the people who are Charged With Governance - TCWG, because according to the Standard, you are supposed to communicate with them.
If there are Subgroups like, Audit Committee, then you must identify them.
If it’s a small company and it’s two in one where Those Charged with Governance are Management, identify and take note of that.

Question 4

ISA 260: Matters Communicated by the Auditor to TCWG:

Answer 4

1) Auditors Responsibility in relation to Audit of Financial Statements.
2) Plan, Scope and Timing of the Audit, basically the overall Audit Strategy.
3) All significant Matters that Auditor came across in course of Audit.
4) Statement of Auditors Independence.

Significant Matters:
> Clear communication with TCWG about his responsibility as an Auditor as well as Plan, Time, and Scope of the Audit.
> Significant Matter or any Risk that has come across.
> Obtain all the information that is relevant for Audit.
> To promote effective two way communication between Auditor and TCWG.

Question 5

ISA 260: Communication Process:

Answer 5

> Inform TCWG about Form, Content and Time of Audit.
Communication may be - oral / written, structured/ unstructured, detailed/ summarized.
NB: Basically, Written Communication is required for Significant Matters.
In case of any oral Communication, supporting Documents and record of what is communicated should be maintained.
Auditors’ Independence is communicated in writing.

> Timing of Communication vary on Circumstance, Matter and Nature of Event.
If Auditors doubt to the Adequacy of Communication, there is possibility of Material Misstatement. Auditor should enhance the Audit Procedures in such a case.

Question 6

ISA 260: Documentation:

Answer 6

Written
> Copy of written communication.

Oral:
> Maintain corresponding Documentation of it.
> It includes:
- What is the Matter Communicated?
- When is it or was it communicated?
- Whom is it communicated?
> Copy of Minutes of the Meeting is kept for future reference.