Communication with Management
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CPA Auditing and Attestation (AUD) › Communication with Management
An auditor's communication of internal control related matters noted in an audit usually should be addressed to:
Management and those charged with governance
The director of internal auditing
The chief accounting officer
The chief financial officer
Explanation
An auditor's communication of internal control related matters noted in an audit usually should be addressed to management and those charged with governance.
During the course of the audit, the auditor uncovers a serious misappropriation of cash attributed to the senior accountant. This is required to be communicated to
management
police
IRS
audit committee
Explanation
The audit committee is the appropriate group as it is a representative of governance. Governance communication is established in AU section 380.
An auditor should communicate a deficiency to a non-issuer client's management only either orally or in writing when there is a:
Control deficiency
Significant deficiency
Material weakness
None of the answer choices are correct
Explanation
Communication of deficiencies in internal control varies on reporting to management. Significant deficiencies and material weaknesses for example need to be communicated in writing.
“Significant Difficulties” encountered through an audit that should be communicated to governance include:
Significant delays in management providing information
The unavailability of expected information
Restrictions imposed on the auditor
All of the answer choices are correct.
Explanation
AU Section 380 identifies specific instances of communication. The instances included for communication to the government are significant delays, unavailability of information, and restrictions placed on auditors.
An auditor's communication with those charged with governance is required to include the:
Basis for the auditor's preliminary judgement about materiality
Justification for the auditor's selection of sampling methods
Discussion of disagreements with management about matters that significantly impact the financial statements
Assessment of the quality of the entity's earnings as compared to the previous year
Explanation
The auditor should discuss with those charged with governance any significant disagreements with management, whether or not satisfactorily resolved, about matters that are significant to the financial statements or to the auditor's report.
According to AU 380, the auditor must communicate to those charged with governance all items related to the audit except those that:
The auditor's judgment deems them immaterial
Are restricted by law
Both A and B
Neither A and B
Explanation
Auditors must communicate all items to governance except those that the auditors in their professional judgment deem immaterial. Auditors may also be restricted by law in their communication with governance.