Question

The audit needs to have a good working relationship withe the audit committee. After all they are the group that hired them and ultimately approves all fees that are paid to the auditor. During the course of the audit what matters that arise that the auditor must communicate to audit committees of public companies?

Answer 1

Auditor needs to maintain a good relation with audit committe, but it should not be because they are the one who hired him and ultimately approves fees paid by the company . The communication should not be dependent. Auditor should be independent, it is his one of the ethical requirement.

As per accounting standard AS16 communication with audit committee includes objectives as follows.:

1. Communicating the auditors responsibility with the audit and establish an undurstanding on the terms of engagement.

2. Obtaining the information which is needed for the audit of such company.

3. communication should includes an overview of the overall audit strategy and the nature timing and extent of audit planning and procedures .

4. Providing the committee with timely obesravations and giving suggestions and reporting them as quickly as possible.

Auditor should have independent communication system with respect to all the Matters discussed above.

Auditor should not communicate with audit committee for the reason they hired him but for the requirement he has in audit process for giving opinion on financial statements.

Auditor needs to communicate with audit committee regarding the engagement letter and starts with the planning of audit . Auditor can also take information and suggestions where necessary from audit committee regarding plannjng and performing the audit procedures.

Auditor has obligation in some cases to report discrepancy if any to higher authorities even with central government where fraud involves with audit committee indulging with management.