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Communication of Audit
Matters with Those Charged
with Governance
SLAuS 260
Presenter:Harsha Rajan
Director,KPMGSriLanka.
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Communication of Audit Matters with Those Charged with Governance
Introduction
Matterstobecommunicated
Thecommunicationprocess
Othermatters
Agenda.
Communication of Audit Matters with Those Charged with Governance
Introduction
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Introduction
ThepurposeofthisSriLankaAuditingStandard(SLAuS)istoestablishstandardsand
provideguidanceoncommunicationofauditmattersarisingfromtheauditof
financialstatementsbetweentheauditorandthosechargedwithgovernanceofan
entity.
ThisSLAuS doesnotprovideguidanceoncommunicationsbytheauditortoparties
outsidetheentity,forexample,externalregulatoryorsupervisoryagencies.
Thisstandardfocusesonaeffectivetwowaycommunicationasabasisforthe
establishmentofaconstructiveworkingrelationshipwiththeauditorandthose
chargedwithgovernancewhilemaintainingtheauditorsindependenceand
objectivity.
.
Theauditorshouldcommunicateauditmattersofgovernance
interestarisingfromtheauditoffinancialstatementswiththose
chargedwithgovernanceofanentity
Introduction
Governance
governanceisthetermusedtodescribetheroleofpersonsentrustedwiththe
supervision,controlanddirectionofanentity.Thosechargedwithgovernance
ordinarilyareaccountableforensuringthattheentityachievesitsobjectives,with
regardtoreliabilityoffinancialreporting,effectivenessandefficiencyofoperations,
compliancewithapplicablelaws,andreportingtointerestedparties.Thosecharged
withgovernanceincludemanagementonlywhenitperformssuchfunctions .
.
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Introduction
AuditMattersofGovernanceInterest
Arethosemattersthatarisefromtheauditoffinancialstatementsand,intheopinionof
theauditor,arebothimportantandrelevanttothosechargedwithgovernancein
overseeingthefinancialreportinganddisclosureprocess.
Auditmattersofgovernanceinterestincludeonlythosemattersthathavecometothe
attentionoftheauditorasaresultoftheperformanceoftheaudit.
.
Theauditorisnotrequired,inanauditinaccordancewithSLAuSs,todesign
auditproceduresforthespecificpurposeofidentifyingmattersof
governanceinterest
Introduction
RelevantPersons
Theauditorshoulddeterminetherelevantpersonswhoarechargedwithgovernance
andwithwhomauditmattersofgovernanceinterestarecommunicated.
Culture
Legal
.
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Introduction
WhichofthefollowingisnottheobjectivesofSLAuS 260?
.
TocommunicateclearlywithTCWGtheresponsibilitiesoftheauditorin
relationtofinancialstatement auditandanoverviewoftheplannedscope
andtimingoftheaudit.
To obtaininformationrelevanttotheauditfromTCWG
ToprovideTCWGwithtimelyobservations arisingfromtheauditthatare
significantandrelevanttotheirresponsibilitytooverseethefinancial
reportingprocess.
Topromoteeffectivetwowaycommunicationbetweentheauditorandthe
management.
Communication of Audit Matters with Those Charged with Governance
Matters to be
Communicated
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Matters to be Communicated
.
Theauditorshouldconsiderauditmattersofgovernanceinterestthatarise
fromtheauditofthefinancialstatementsandcommunicatethemwith
thosechargedwithgovernance
Thegeneralapproachandoverallscopeoftheaudit.
Theselectionof,orchangesin,significantaccountingpoliciesandpracticesthathave,orcould
have,amaterialeffectontheentitysfinancialstatements.
Thepotentialeffectonthefinancialstatementsofanymaterialrisksandexposures,suchas
pendinglitigationorclaims
Auditadjustments,thathave,orcouldhave,amaterialeffectontheentitysfinancialstatements.
Materialuncertaintiesrelatedtoeventsandconditionsthatmaycastsignificantdoubtonthe
entitysabilitytocontinueasagoingconcern.
Disagreementswithmanagement
Expectedmodificationstotheauditorsreport.
Othermatterswarrantingattentionbythosechargedwithgovernance,suchasmaterial
weaknessesininternalcontrol,questionsregardingmanagementintegrity,andfraudinvolving
management.
Anyothermattersagreeduponinthetermsoftheauditengagement
Matters to be Communicated
.
Theauditorshouldinformthosechargedwithgovernanceofthose
uncorrectedmisstatementsaggregatedbytheauditorduringtheauditthat
weredeterminedbymanagementtobeimmaterial,bothindividuallyandin
theaggregate,tothefinancialstatementstakenasawhole
UncorrectedMisstatements
Neednotincludemisstatementbelowadesignatedamount
Thosechargedwithgovernanceareinformedthat:
(a) Theauditorscommunicationsofmattersincludeonlythoseauditmattersof
governanceinterestthathavecometotheattentionoftheauditorasaresultofthe
performanceoftheaudit
(b)Anauditoffinancialstatementsisnotdesignedtoidentifyallmattersthatmaybe
relevanttothosechargedwithgovernance.Accordingly,theauditdoesnotordinarily
Identifyallsuchmatters
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Matters to be Communicated
Whichofthefollowingmaybecommunicatedwhencommunicatingthe
plannedscopeandtimingofanauditengagementtoTCWG?
.
TheAuditorsapproachtointernalcontrolsrelevanttotheaudit.
Theapplicationoftheconceptofmateriality, inthecontextoftheaudit
The extenttowhichtheauditorplanstousetheworkoftheinternalaudit
function.
DiscussionontheviewsofTCWGonmattersincludingareaswarranting
particularattentionduringtheaudit.
Matters to be Communicated
Whichofthefollowingdoyoubelieveisnotspecificallyrequiredtobe
communicatedasperSLAuS 260?
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TheAuditorsresponsibilityinrelationtothefinancialstatements.
Anoverviewoftheplannedscopeandtimingof theaudit
Detailsofsignificantfindingsfromtheaudit.
Thenature andextentofauditprocedurestheauditorintendstoperform.
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Matters to be Communicated
Theauditorispreventedfromcommunicatingwithmanagementonsimilar
matterswhichSLAuS 260requirestobecommunicatedwithTCWG?
.
True
False
Communication of Audit Matters with Those Charged with Governance
The Communication
Process
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The Communication Process
.
Theauditorscommunicationswiththosechargedwithgovernance
maybemadeorallyorinwriting.
TimingofCommunication
Theauditorshouldcommunicateauditmattersofgovernanceinterestonatimelybasis.
Thisenablesthosechargedwithgovernancetotakeappropriateaction
FormsofCommunications
Thesize,operatingstructure,legalstructure,andcommunicationsprocessesoftheentity
Thenature,sensitivityandsignificanceoftheauditmattersofgovernanceinterestto
becommunicated.
Thearrangementsmadewithrespecttoperiodicmeetingsorreportingofauditmatters
ofgovernanceinterest
Theamountofongoingcontactanddialoguetheauditorhaswiththosechargedwith
governance
The Communication Process
.
Inadditiontothesignificanceofthemattertobecommunicated
theformofcommunicationmaybeaffectedbywhichofthefollowing
LegalRequirements
Theexpectationsofthosechargedwithgovernance
TheamountofongoingcontactanddialoguewithTCWG
Whethermanagementhaspreviouslycommunicatedthematter
Whethertherehasbeenasignificantchangeinthegoverningbody.
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The Communication Process
.
OralCommunicationonauditmattersofGovernance
DocumentinworkPapers Minutesetc..
Advisabletoconfirminwriting
The Communication Process
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Exceptmattersofmanagementcompetenceorintegrity
CommunicationonauditmattersofGovernanceinterestwith
Management
Opportunitytoclarifyfactsandissues
Ifmanagementagreestocommunicate,ensureeffectiveandappropriatecommunication.
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Other Matters
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ModificationofAuditreport
Iftheauditorconsidersthatamodificationoftheauditorsreportonthefinancialstatements
isrequired,communicationsbetweentheauditorandthosechargedwithgovernance
cannotberegardedasasubstitute.
Questions?
.
?
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Thank you.