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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