Why do auditors communicate with those charged with governance?


Those charged with governance are the persons or organizations with responsibility for controlling the strategic direction of the company and obligations related to the accountability of the company. They also oversee the financial reporting process. The board of directors of a private or public sector company or owner-managers of private company relate to   those charged with governance of company.

Management are the persons with executive responsibility for the conduct of the company’s operations.

The communication of auditors with those charged with governance is very important in audit process and   helps achieve the following purposes:

•  Clearly communicating the responsibilities of the auditor in relation to the financial statement audit, and an overview of the planned scope and timing of the audit

•  Obtaining from those charged with governance information relevant to the audit.

•  Communicating significant findings in audit.

Matters to Be Communicated

Auditors communicate the following matters to those charged with governance:

1. The Auditor’s Responsibilities in Relation to the Financial Statement Audit.

2. Auditor Independence (in the case of listed  companies).

3. Planned Scope and Timing of the Audit.

4. Significant Findings from the Audit.

Significant findings in audit which auditors communicate to those charge with governance may include such matters as:

(a)  The auditor’s views about significant qualitative aspects of the company’s accounting policies, accounting estimates and financial statement disclosures.

(b)   Significant difficulties, if any, arisen during the audit

(c)  Significant matters arising during the audit that were discussed, or corresponded to the management if those charged with governance are not involved in managing the company

(d)   Circumstances that influence the form and content of the auditor’s report, if any;

Significant findings in audit are communicated to those charged with governance in written form if, in the auditor’s professional judgment, oral communication would not be appropriate. Effective communication may involve structured presentations and written reports.

The process of communication with those charged with governance is documented by an auditor. Where matters to be communicated are communicated orally, the auditor includes them in the audit documentation, and when and to whom they were communicated. Where matters have been communicated in writing, the auditor retains a copy of the communication as part of the audit documentation. 

ISA 260 about communication with those charged with governance

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