Showing posts with label ISA (UK) 260. Show all posts
Showing posts with label ISA (UK) 260. Show all posts

Thursday, February 10, 2022

ISA (UK) – 260: COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCE

According to ISA (UK) 260, auditors must convey audit concerns of governance interest to persons charged with governance. It is critical that individuals in charge of governance are aware of all serious issues that have surfaced as a result of the audit process. The board of directors (executive and non-executive) of a firm, as well as members of an audit committee if one exists, are all entrusted with governance in the United Kingdom. It frequently comprises similar persons such as partners, proprietors, management committees, or trustees for various sorts of entities. Communication with individuals charged with governance should be considered as a critical audit reporting 'output.' It permits management to be aware of serious issues raised throughout the audit process, as well as the opportunity to reply to the auditor and take action to enhance the entity's accounting and financial reporting functions.

 

Matters to be communicated

§  Responsibilities of the Auditor in Relation to the Financial Statement Audit

§  Scope and timing of the audit as are planned

§  The Audit's Most Important Findings

§  Matter of Auditor’s independence in case of audit of a listed company

§  Other Supplementary Matters

 

Timing of Communication

A healthy two-way interaction between those responsible for governance and the auditor is aided by timely communication during the audit. However, depending on the conditions of the engagement, the best time to communicate would differ. The importance and nature of the issue, as well as the expected action by those in charge of governance, are all relevant circumstances. For example, communications about planning issues are frequently made early in the audit engagement and, in the case of an initial engagement, as part of agreeing on the engagement conditions. However, the auditor may communicate results from the audit, including his or her thoughts on the qualitative aspects of the entity's accounting practices as part of the final conversation.

 

Practice:

The many modes of communication that should be used are discussed in ISA 260. In most circumstances, communication will be in writing, which is a requirement of the standard in the UK and Ireland. Even if the auditor has no issues to bring to the notice of those charged with governance, a letter should be sent out noting that there are no important findings from the audit that need to be shared. In the case of oral communication, minutes provided by the entity may be included in the audit documentation as part of the oral communication documentation.

 

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