Reporting to those charged with governance

Reporting to Those Charged with Governance

ISAs, in particular ISA 260 Communication with Those Charged with Governance and ISA 265 Communicating Deficiencies in Internal Control to Those Charged with Governance and Management, require the external auditors to engage in communications with management.

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.'


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.
Created at 10/4/2012 12:35 PM  by System Account  (GMT) Greenwich Mean Time : Dublin, Edinburgh, Lisbon, London
Last modified at 6/16/2016 9:28 AM  by System Account  (GMT) Greenwich Mean Time : Dublin, Edinburgh, Lisbon, London

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