Reporting to Those Charged with Governance

The main forms of formal communication between the auditors and management are: the engagement letter; and another written communication, usually sent at the end of the audit, which is often referred to as 'the management letter.'

Objectives

The objectives of these communications are:

• To communicate the responsibilities of the auditor and an overview of the scope and timing of the audit;
• To obtain, from those charged with governance, information relevant to the audit;
• To provide timely observations arising from the audit that are significant to the responsibilities of those charged with governance; and
• To promote effective two-way communication between the auditor and those charged with governance.

Whilst a formal communication is usually sent at the conclusion of the audit there may be a need to communicate particular matters at other times to help meet the third objective, for example; if a fraud is discovered.

Matters to be communicated

Audit matters of governance interest include:

• Auditor independence;
• Effects of significant accounting policies and changes to them;
• Potential financial effect of risks/uncertainties;
• Material audit adjustments;
• Disagreements with management concerning the financial statements;
• Significant difficulties encountered during the audit;
• Expected modifications to the audit report; and
• Significant internal control deficiencies, including fraud.

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Tags:	those charged with governance;deficiencies in control