The term "those charged with governance" refers to those who bear responsibility to oversee the obligations and strategic direction of an entity, including the financial reporting process. This term is broadly interpreted to encompass the terms "board of directors" and "audit committee."
The PCAOB's audit committee communication requirements for issuers include the following additional information related to the planned scope and timing of the audit:
The nature and extent of specialized ski ll or knowledge needed to complete the engagement.
The extent to which the auditor will use the work of the company's internal auditors when performing the financial statement audit.
The extent to which the auditor will use the work of internal auditors, company personnel, and third parties when performing the internal control audit.
The names, locations, and responsibilities of other publ ic accounting firms that will perform audit procedures.
The basis for the determination that the auditor is the principal auditor, if other auditors will perform significant work in the engagement.
An accountant communicates internal control-related matters in the following situations:
Financial Statement Audit (Nonissuers)
Although the purpose of an audit of a non issuer is to express an opinion on the financial statements and not to express an opinion on the effectiveness of interna l control, certain deficiencies related to internal control may be noticed by the auditor during the audit. Such deficiencies create a reporting responsibility for the auditor, which is covered in this section. This situation is governed by Statements on Auditing Standards (SAS).
Integrated Audits (Nonissuers and Issuers)
Audit of Internal Control (Nonissuers)
An auditor may be hired to perform an audit of a non issuer's internal control. If so, the audit of internal control should be integrated with an audit of the entity's financial statements.
This situation is governed by Statements on Auditing Standards (SAS).
Audit of Internal Control (Issuers)
All issuers are required to have an audit of internal control over financial reporting that is integrated with an audit of the financial statements.
This situation is governed by Public Company Accounting Oversight Board (PCAOB) auditing standards.
Which of the following statements is correct about an auditor's required communication with those charged with governance? Assume those charged with governance are not involved in managing the entity.
An auditor's letter issued on significant deficiencies relating to a non issuer's internal control observed during a financial statement audit should: