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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?
As you say there is not choice – it’s only a suggested answer point and not one I would have made.
ISA 265 is concerned only with deficiencies in ICs – see page 46 of the notes.
ISA 260 is everything else – responsibilities, audit timetable, significant findings/difficulties, key audit matters – KAMs are particularly important. (See page 111, those reported in the auditor’s report MUST have been communicated to TCWG.)Sir, ISA 265 and ISA 260 items are ALL communicated through Management Letter?
Thanks,
NO – the “management letter” is the letter for “weaknesses” (ISA 265).
See the AAA article here – ISA 260 communications may be oral https://www.accaglobal.com/lk/en/student/exam-support-resources/professional-exams-study-resources/p7/technical-articles/auditors-reports-governance.html
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