Question

The new SOX framework for the US Accounting Profession states that auditors must report directly to the audit committee on several critical matters. Name at least four of these matters and explain in detail.

Answer 1

The certain critical audit matters to be communicating are as follows:

1) The auditor has to communicate in writing to management and audit committee on prior basis about the material weakness identified during audit so that the audit report on internal control should not be made without rectifying it.

2) The auditor has to give it in written to board of directors about the ineffectiveness of company external financial report over internal financial reports.

3) The auditor doesn't want to perform procedure for identification of control deficiencies rather he has to communicate the deficiencies he is aware of.

4) The auditor has to communicate in writing to management and audit committee about the deficiencies found during audit. If deficiencies are significant then they have to be communicated to audit committee before issue of audit report. While communicating, auditor should not repeat the deficiencies he has already communicated. Since the audit of internal control over financial reports audit doesn't provide auditor an assurance that he has covered all deficiencies less than material weakness the auditor should not issue report.