Raven & Co – Sep Dec 2016 – Question 5 additional

Dear sir,

A) There is a comment in suggested answer that:

“In the absence of an audit committee, the auditor will have to communicate directly with the board including the requirement to communicate how the auditor has maintained their independence in line with ISA 260 Communication with TCWG. This may affect the independence of Raven & Co, or at least the perception of their independence.”

Can you please explain how this will affect the independence of external auditors or perception of their independence as it should be fine that external auditor is reporting to audit committee or board of directors? There is no option for auditor if audit committee is missing.

B) Further, there are two auditing standards namely:
1) ISA 260 (Revised) – Comm. with Those Charged with Governance
2) ISA 265 – Communicating Deficiencies in Internal controls to TCWG & Mngt
I think deficiencies in IC is a significant and big area to be considered by auditors and it can be reported to management first and then to TCWG therefore IAASB has separated ISA 265 from ISA 260.

Which items are reported in Management Letter and Which items are discussed in Audit Committee meetings? Audit Committee meeting discussions can be written?