ISA 260 (Revised) DEALS with the auditor’s responsibility to COMMUNICATE with those charged with governance in an ‘audit‘ of Financial Statements.
Table of Contents
- ISA 260 (Revised) – Introduction
- ISA 260 – Objectives
- ISA 260 – Definitions
- ISA 260 – Requirements
- 1. Those Charged with Governance
- 2. Matters to be Communicated
- 3. The Communication Process
- 4. Documentation
ISA 260 (Revised) – Introduction
1. Scope of this ISA
It does NOT establish requirements regarding the auditor’s communication with an entity’s management or owners unless they are also charged with a governance role.
2. Effective Date
This ISA is EFFECTIVE for audits of financial statements for periods ending on or after December 15, 2016.
ISA 260 – Objectives
The objectives of the auditor are:
- To communicate clearly the responsibilities of the auditor and an overview of the planned scope and timing of the audit;
- To obtain information relevant to the audit;
- To provide with timely observations arising from the audit that are significant and relevant; AND
- To promote effective two-way communication between the auditor and those charged with governance.
ISA 260 – Definitions
1. Those Charged with Governance
The person(s) or organization(s) with responsibility for overseeing the strategic direction of the entity and obligations related to the accountability of the entity.
The person(s) with executive responsibility for the conduct of the entity’s operations.
ISA 260 – Requirements
1. Those Charged with Governance
The auditor shall DETERMINE the appropriate person(s) within the entity’s governance structure with whom to communicate.
1.1 Communication with a Subgroup of Those Charged with Governance
The auditor shall DETERMINE the need to communicate to governing body alongside subgroup for example, an audit committee, or an individual.
1.2 When All of Those Charged with Governance Are Involved in Managing the Entity
The auditor shall nonetheless be SATISFIED that communication with person(s) with management responsibilities adequately informs all of those with whom the auditor would otherwise communicate in their governance capacity.
2. Matters to be Communicated
2.1 The Auditor’s Responsibilities in Relation to the Financial Statement Audit
The auditor shall COMMUNICATE that:
- The auditor is responsible for forming and expressing an opinion on the financial statements; AND
- The audit does not relieve management or those charged with governance of their responsibilities.
2.2 Planned Scope and Timing of the Audit
The auditor shall COMMUNICATE an ‘overview‘ of the planned scope and timing of the audit which includes significant risks.
2.3 Significant Findings from the Audit
The auditor shall COMMUNICATE:
|(a) The auditor’s views about significant qualitative aspects of the entity’s Accounting Practices, including Accounting Policies, Accounting Estimates and financial statement Disclosures.|
|(b) Significant difficulties, if any encountered during the audit.|
|(c) Unless all those charged with governance are involved in managing the entity:|
– Significant matters that were discussed or subject to correspondence with management; AND
– Written representations that the auditor is requesting.
|(d) Circumstances that affect the form and content of the auditor’s report.|
|(e) Any other significant matters relevant to the oversight of the financial reporting process.|
2.4 Auditor Independence
In the case of ‘Listed Entities’, the auditor shall COMMUNICATE:
- All relationships and other matters between the firm, network firms may reasonably be thought to bear on independence; AND
- The related safeguards applied to eliminate identified threats to independence or reduce them to an acceptable level.
3. The Communication Process
3.1 Establishing the Communication Process
The auditor shall COMMUNICATE the form, timing and expected general content of communications.
3.2 Forms of Communication
The auditor shall COMMUNICATE in writing regarding significant findings from the audit if oral communication would not be adequate.
The auditor shall COMMUNICATE in writing regarding auditor independence.
3.3 Timing of Communications
The auditor shall COMMUNICATE on a timely basis.
3.4 Adequacy of the Communication Process
The auditor shall EVALUATE whether the two-way communication has been adequate for the purposes of the audit.
When matters required by ISA 260 are communicated ‘Orally’, the auditor shall INCLUDE them in the audit documentation.
Where matters have been communicated in ‘Writing’, the auditor shall RETAIN a copy of the communication as part of the audit documentation.
The International Standard on Auditing ISA 260 ‘Communication with Those Charged with Governance‘ DEALS with the auditor’s responsibility to communicate with those charged with governance in an ‘audit‘ of Financial Statements.
[200-299] General Principles and Responsibilities → Articles @ EntreprenurialHub by Jhanzayb
Chartered Accountant (Institute of Chartered Accountants of Pakistan)
Bachelor of Accounting Honours (Asia e University, Malaysia)