You have completed the audit engagement for ABC Company Ltd and the engagement partner has asked the audit manager to bring the draft communication with those charged with governance for discussion. You were among the audit field staff who performed the audit and prepared the working papers and documented issues for management’s considerations.
Required:
Discuss the main matters that should be included in the communication with those charged with governance. (10 marks)
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ISA 260 communicating with those charged with governance requires the following matters to be included in the communication:
- The auditor’s responsibility in relation to the financial statements:
- The auditor is responsible for forming and expressing an opinion on the financial statements.
- The audit does not relieve management or those charged with governance of their responsibilities
- Planned Scope and timing of the audit includes:
* How the audit proposes to address the significant risks of material misstatement from fraud and error.
* The auditor’s approach to internal control
* Application of materiality
* The extent to which the auditor will use the work of internal audit
* Matters which those charged with governance consider warrant particular attention - Significant findings from the audit including:
* The selection of , or changes in, significant accounting policies
* The potential effect on the financial statements of any significant risks and exposures, for example pending litigation that are required to be disclosed in the accounts
* Significant difficulties, if any encountered during the audit, (e.g. delays in provision of required information, brief time in which to complete audit, unavailability of expected information) - Auditor’s independence. In the case of listed entities matters include:
* A statement that relevant ethical requirements regarding independence have been complied with
* All relationships (including total fees for audit and non-audit services) which may be thought to bear on independence.
* The related safeguards that have been applied to eliminate/reduce identified threats to independence