Group 10: Communication with Management & TCWG

Governance is a role, not the most familiar contact The auditor usually talks to the finance manager. A trustee oversees strategic direction and financial-reporting accountability, while the manager runs daily operations. The team assumes the manager is the only governance recipient. Required: Explain governance, management and recipient determination. (3 marks)

An audit committee is not automatically the whole board A subgroup receives significant audit findings. Some full-board members have separate oversight duties and the auditor does not know whether the subgroup reports to them. The trainee says any committee meeting satisfies every governance communication objective. Required: Explain appropriate persons, subgroup assessment, information coverage, timing/form and the evidence limit. (5 marks)

One owner can hold both roles A single owner manages the entity and is the only person with governance responsibility. Required audit matters are clearly communicated to that owner in the management role. The junior proposes repeating the same matters solely to change the role label. Required: Explain overlap, no-repeat condition and coverage limit. (3 marks)

Management's briefing does not discharge the auditor's duty Management says it already told governance about the audit scope and significant findings, so the auditor must communicate nothing. Governance also says the audit transfers statement-preparation responsibility to the auditor. Required: Explain auditor opinion responsibility, retained entity duties, management briefing, scope/timing and two-way purpose. (5 marks)

Significant findings need meaningful communication Governance members do not manage the entity. The audit identifies a significant policy acceptable under the framework but not most appropriate for the entity, difficult access to records, significant disputes discussed with management, requested written representations and circumstances affecting the report. The proposed governance message says only "audit nearly finished" and is to be sent at an unspecified later time. Required: (a) Explain five significant-finding matters with applied content. (5 marks) (b) Explain form, process, timing and adequacy. (4 marks) (c) State the documentation boundary. (1 mark)

Listed-entity independence communication is specific For a listed entity, the draft says only "independent". It omits relevant network relationships, audit/non-audit fee categories and safeguards, and the auditor plans to communicate it orally only. Required: Explain compliance statement, relationships, fee information, safeguards and form. (5 marks)

Poor two-way communication can affect audit work Governance repeatedly withholds relevant information and receives only vague findings. The trainee says delivery receipts prove communication adequate and no further assessment is needed. Required: Explain adequacy, risk/evidence effects and appropriate action. (3 marks)

A missing control can matter before an error is found No control exists over a significant year-end adjustment process. No misstatement has yet been identified. The team refuses to classify a deficiency unless a current loss is quantified. Required: Explain missing-control definition, work basis, significance individually, combination and the no-error limit. (5 marks)

Different deficiencies can have different audiences and forms A significant deficiency is identified and merits governance attention. A separate other deficiency merits management attention and has not been communicated by anyone. Management is familiar with the area and able to remedy it; no inappropriate-direct-communication circumstance exists. The auditor proposes informal oral notice to one junior employee for both. Required: Explain governance communication, significant-management communication, other-management communication, appropriate level and scope limit. (5 marks)

A deficiency letter needs context, not all-controls assurance In this case the engagement is only a financial-statement audit, with no separate statutory/control-effectiveness reporting engagement supplied. Identified significant deficiencies involve ineffective period-end checks and missing monitoring. The proposed letter merely says "controls poor" and claims every deficiency in the entity was found. Management asks the auditor to label it an opinion on internal-control effectiveness. Required: (a) Explain deficiency description and potential effects. (2 marks) (b) Explain three required audit-context statements. (3 marks) (c) Explain three audience/form/timing points. (3 marks) (d) Explain two scope/evidence limits. (2 marks)

Only some directors manage Two executive directors run operations; three other directors oversee reporting without managing. The auditor told only the executives about significant accounting disagreements and requested representations. The team invokes the all-owner overlap exception. Required: Apply the role condition, required matters, recipient coverage and documentation. (5 marks)

Acceptable estimate, poor fit A significant estimate uses a framework-permitted method, but entity-specific volatility makes it less appropriate than another acceptable method. Disclosures obscure estimation uncertainty. Governance asks only whether the method is forbidden. Required: Explain five parts of useful qualitative communication without calculating or inventing an accounting adjustment. (5 marks)

A compressed timetable and missing personnel Management gives an unreasonably short deadline, key personnel are unavailable and unexpected effort is needed to obtain evidence. Governance can help secure access, but the auditor plans to mention the problem only at the final meeting. Required: Classify the difficulties, apply timing and distinguish communication from an opinion decision. (5 marks)

A claimed legal restriction Management says confidentiality bans every communication of a suspected illegal act to governance. No applicable prohibition has been established, while an investigation may be affected by disclosure. Required: Explain the legal boundary and a grounded communication approach. Do not determine an opinion or a statutory reporting deadline. (5 marks)

Urgent warning is not the final written communication An identified significant deficiency permits unauthorised period-end changes. Governance can act immediately. The auditor gives an oral warning, proposes a written letter after statements are approved, and treats the audit-file assembly period as permission to wait. The entity is listed and its governance members need the letter before approval to meet supplied oversight responsibilities. Management already knows the issue and says a remedy is too costly. Required: Apply urgency, writing, timing, audience, knowledge and cost arguments, and draft the letter boundaries. (10 marks)

Last year is not silence this year A significant deficiency was written to governance and management last year. Nothing has been remedied. Management offers no rational explanation and says the old letter remains in the file, so a new communication is redundant. Required: Explain current communication, use of prior wording, inquiry, failure-to-act assessment and the reporting limit. (5 marks)

Other deficiency: changed management, changed information An operational deficiency judged non-significant was orally communicated last year. Management chose not to remedy it. This year the manager changes and new evidence shows a wider exposure. The trainee says every old issue must be re-lettered or never discussed again. Required: Apply prior communication, reassessment, change, significance and form. (5 marks)

Management is implicated Supported findings indicate management intentionally bypassed a significant control and raise serious integrity concerns. The team proposes delivering the significant-deficiency letter only to the implicated executive for onward forwarding. Separate governance persons exist. Required: Explain the management exception and remaining governance communication, without deciding fraud reporting duties or opinion. (5 marks)

A proposal is not verified remediation Governance receives a significant-deficiency letter. Management proposes a new check, but the auditor has not tested implementation. The letter editor inserts "fixed", invents a rupee loss, and removes the potential-effects explanation because no loss has been quantified. Required: Correct five content/evidence errors. (5 marks)

An independence schedule omits components For a listed entity, the draft governance independence communication includes only the main entity audit fee. Network-firm non-audit services to a controlled component, relevant relationships and safeguards are omitted. Governance asks for meaningful fee categories, not a misleading single total. No independence breach conclusion is supplied. Required: Explain scope, fees, categories, relationships, safeguards, form, timing and the conclusion boundary. (10 marks)

A banker requests the governance letter A banker asks the auditor for a copy of a letter prepared solely for governance. No law requiring the auditor to supply it has been established. The team assumes a bank request makes disclosure lawful and the letter suitable for credit decisions. Required: Explain five disclosure and purpose checks. (5 marks)

An incidental strategic issue During financial-statement work, the auditor notices a significant senior-management strategic decision lacking appropriate authorisation. It is potentially relevant to governance accountability but not necessarily financial-reporting oversight. The proposed note claims a complete governance review. Required: Explain supplementary communication and its scope. (5 marks)

Minutes omit the difficult discussion Entity minutes accurately record the date and attendees but omit an important oral communication. The auditor keeps them as the only record and says an attendance list satisfies documentation. Required: Explain content, audience/time and the use of minutes. (3 marks)

Small entity, informal does not mean oral-only A small entity has a significant deficiency. The auditor proposes a less structured communication because governance is accessible, then deletes the written letter as "large-company paperwork". Required: Explain style, mandatory form and timing. (3 marks)

A regulator already told management A non-significant deficiency meriting management attention was adequately communicated by a regulator. The auditor finds no changed information or management. A second newly identified non-significant deficiency has never been communicated by anyone. The trainee treats both as requiring an identical new written letter to governance. Required: Separate the two matters, form, audience and reassessment. (5 marks)

Two controls fail together An automated receivable check and the compensating manual review have weaknesses affecting the same balance. Each was initially judged below significant-deficiency importance in isolation. The team refuses to consider interaction. Required: Apply combination, significance and communication consequence. (3 marks)

New governance members, old communication format New governance members unfamiliar with the industry receive an unexplained technical slide used for the experienced former board. The team says identical format guarantees understanding. Required: Apply audience, form/detail and adequacy. (3 marks)

Management corrects a factual misunderstanding The auditor initially thinks a required control is missing. Discussion with responsible management reveals evidence of a compensating control and a different cause of exceptions. The trainee either ignores the information or accepts management assurance as final proof. Required: Explain the role and limits of the discussion. (5 marks)

Communication stays one-way despite repeated attempts Governance repeatedly refuses a meeting without management, does not engage with significant matters and will not agree expected content or timing. Earlier important issues remain unanswered. Repeated attempts to improve dialogue fail. The team marks communication complete because emails were sent and proposes automatic withdrawal. Required: Evaluate five observations, two audit implications, and three response boundaries. (10 marks)

A planning meeting becomes a script for management Governance requests an overview of scope, significant risks, materiality and specialist needs. Several governance members also manage the entity. The draft supplies exact surprise-test selections and timing so management can prepare, says governance now designs the audit, and labels preliminary areas of significant attention as final report matters. No SA 701 applicability conclusion is supplied. Required: Draft five useful planning topics and explain five boundaries. (10 marks)