Question

Discuss the items an auditor communicates at the end of the audit to those charged with governance.

Answer 1

Ans : Those charged with governance :

* ISA 260 does not specify this exactly, but states that ‘governance is the term used to describe the role of persons entrusted with the supervision, control and direction of an entity’.

* This implies that the communication should be with the highest level of management, including the executive and non-executive directors, and the audit committee, where relevant. The identity of the relevant person(s) to whom the communication will be addressed may be clarified in the engagement letter.

* Matters to be communicated :
In the second step, the auditor should consider the type of issues that should be communicated. ISA 260 provides some guidance as to the matters which ordinarily could be incorporated in the communication, including:

• the overall approach and scope of the audit, including any limitations on the scope of the audit
• the accounting policies, and any changes to them, that could materially affect the financial statements
• adjustments arising as a result of audit procedures which could materially impact the financial statements
• material events or uncertainties which could jeopardise the going concern status, and which require disclosure within the financial statements
• disagreements with management over accounting treatments or disclosures
• any expected modifications to the audit report
• material weaknesses discovered in the internal systems and controls.