ISA 265 Communicating deficiencies in internal control with those charged with Governance and Management. Auditors must report deficiencies in internal control with those charged with governance and management.
Required:
Explain clearly what is management letter, indicating the contents of such a letter. (5 marks)
View Solution
ISA 265 requires that communication of deficiencies on internal control to management must be in written form by way of a letter. It is this letter that is referred to as the management letter.
Contents
- The list of weakness in the structure of accounting system and internal controls eg. there may be no serial numbering of sales invoice so that it is possible for a sales invoices to be lost and not be entered in the records.
- A list of deficiencies in operation of the records or controls.
- Unsuitable accounting policies and practices
- Non-compliance with accounting standards or legislations
- Explanations of the risks arising from each weakness.
- Comments on inefficiencies as well as weaknesses.
- Recommendations for improvement