Advanced Audit and Assurance (International) · Reports to those charged with governance and management

ISA 260 Communication with Those Charged with Governance

Updated 11 October 2026

ISA 260 requires the auditor to communicate with those charged with governance (TCWG) about the auditor's responsibilities, the planned scope and timing of the audit, and significant findings. It aims for two-way communication, timely and documented. In the exam, name the matter, explain why it matters, and recommend action.

Understand Communicating with Those Charged with Governance (ISA 260)

Those charged with governance (TCWG) are the people or bodies responsible for overseeing the entity's strategic direction and its accountability. This is usually the board of directors, the supervisory board or the audit committee. Management runs the business. TCWG oversee management. The auditor must know who is who, because the right people must receive the right messages.

Why does ISA 260 exist? TCWG need to understand the audit to oversee financial reporting well. The auditor needs information from TCWG, such as their views on risks, fraud and related parties. So communication must run both ways. It also helps the auditor and TCWG build a working relationship based on independence and openness.

ISA 260 has three broad groups of matters. First, the auditor's responsibilities in relation to the financial statement audit, including the opinion, and that the audit does not relieve management or TCWG of their duties. Second, the planned scope and timing of the audit, including significant risks identified. Third, significant findings from the audit, such as views on the quality of accounting practices, significant difficulties, misstatements, and matters needing written representations.

For listed entities, the auditor also communicates about independence. This covers the firm's compliance with relevant ethical requirements, and relationships and other matters that may reasonably bear on independence, together with safeguards applied. The auditor also communicates key audit matters in line with ISA 701 and other matters in line with other ISAs.

Where TCWG include management, for example a small owner-managed company, the auditor must be careful. The exemption from repeating a matter applies only where all TCWG are involved in managing the entity and the matter was adequately communicated to them in that management capacity. If only some TCWG are involved in management, the exemption does not apply. The auditor must still make sure the matters are communicated and cannot simply assume they are already known. Significant findings such as uncorrected misstatements and difficulties in the audit should be communicated or confirmed to them.

Communication can be oral or written. Written communication is required for significant findings where oral communication would not be adequate. Independence matters for listed entities are also communicated. ISA 260 does not set the form for these, although putting them in writing is good practice. The auditor documents oral matters and the responses received, and evaluates whether the two-way process was adequate.

Key rules to remember

Three groups of matters: Responsibilities + Planned scope and timing + Significant findings; Use as a skeleton for any ISA 260 answer. Add independence for listed entities.
Significant findings content: Accounting practices + Significant difficulties + Significant matters discussed with management + Written representations + Other matters; Also include uncorrected misstatements, circumstances affecting the report and modifications, as relevant.
Form of communication: Written for significant findings if oral is inadequate; independence (listed entities) is communicated, with the form not specified by ISA 260; Oral communication must still be documented. Writing independence matters down is good practice, not an ISA 260 requirement.
Timing: Communicate on a timely basis; Planning matters early; significant findings in time for TCWG to act before the financial statements are approved.
Adequacy evaluation: Evaluate whether two-way communication has been adequate; If not, assess the effect on the risk assessment and the ability to obtain evidence, and take appropriate action.

How to solve Communicating with Those Charged with Governance (ISA 260) questions

Use this method for any question on communicating with TCWG, whether it asks for matters, a report outline or a response to a scenario.

1Read the requirement and note whether it asks for matters to communicate, the form, the timing, or a draft communication.
2Identify who the TCWG are in the scenario: board, audit committee, or owners who also manage. Say so in your answer.
3Sort the facts into the three groups: responsibilities, planned scope and timing, and significant findings. Add independence if the entity is listed.
4For each matter, state what you would communicate and why TCWG need it, linking to the scenario facts.
5Recommend action or request input from TCWG, for example on fraud risk, going concern or an uncorrected misstatement.
6State the form and timing: oral or written, and before the financial statements are approved.
7Show professional skills: be clear, factual, and tactful about disagreements with management. Conclude with the next step.

Quickest way: Scope, findings, independence check

When to use it: When time is short and the question asks you to list or explain matters to communicate.

Write three headings: responsibilities, scope and timing, significant findings.
Under each, list two or three scenario-specific points, not generic ones.
Add independence if the entity is listed.
Finish with form, timing and the response you need from TCWG.

Common mistakes in Communicating with Those Charged with Governance (ISA 260)

Confusing TCWG with management
Both are described as responsible for the financial statements, so they seem the same.
Fix: Management run the entity; TCWG oversee. Identify the audit committee or board explicitly in your answer.
Listing generic matters without using the scenario
Students memorise the ISA 260 list and reproduce it.
Fix: Tie each matter to a scenario fact, such as a significant estimate, an uncorrected misstatement or a difficulty in getting evidence.
Treating communication as one-way
Focus is on what the auditor tells TCWG.
Fix: Mention that the auditor also seeks TCWG's views on risks, fraud, related parties and management's integrity.
Omitting independence communication for listed entities
Independence is studied under ethics and seems separate.
Fix: State that for listed entities the auditor communicates compliance with ethical requirements and safeguards applied. ISA 260 does not set the form, so you may add that writing it down is good practice.
Confusing ISA 260 with ISA 265 or a management letter
All involve reporting to the client.
Fix: ISA 260 covers the broad audit communication. ISA 265 covers significant deficiencies in internal control. Link them but do not merge them.
Forgetting timing and documentation
Answers focus on content only.
Fix: Say communication must be timely, and that oral matters are documented along with the responses.

Worked examples

Example 1

Mellor plc is a listed company with an audit committee. You are the audit manager planning the audit. Explain what matters you would communicate to the audit committee at the planning stage. (6 marks)

Show the solution

Identify the TCWG: the audit committee, as the body overseeing financial reporting, so it is the right recipient.
Responsibilities: explain the auditor's responsibility to form and express an opinion on financial statements prepared by management with TCWG oversight, and that the audit does not relieve them of their responsibilities.
Scope and timing: outline the audit approach, significant risks identified, materiality approach, planned use of experts or component auditors, and the timetable.
Independence: as a listed entity, confirm that the firm complies with ethical requirements and describe any threats and safeguards.
Two-way input: ask the committee for its views on risks, fraud, related parties and any changes in the business or regulation.
Form and timing: communicate before fieldwork starts, ideally in writing, and document discussions.

Answer: At planning, tell the audit committee about the auditor's responsibilities, the planned scope and timing including significant risks, and independence, and ask for its views on risks and fraud. Do this in good time, preferably in writing, and document the response.

Example 2

During the audit of Harbor Ltd, you find an uncorrected misstatement in inventory valuation that management refuses to adjust, and a significant delay by management in providing information. The directors are the only TCWG and are also management. Explain how you would communicate these matters. (5 marks)

Show the solution

Identify TCWG: here all TCWG are involved in managing the entity, so matters already adequately communicated to them in their management capacity need not be repeated. You cannot assume that is the case for these findings, so make sure they are communicated or confirmed to the directors.
Uncorrected misstatement: communicate the matter, its amount and nature to the directors on a timely basis, and request that it be corrected. Explain the effect on the financial statements and on the audit opinion if material.
Significant difficulty: communicate the delay in information, as it is a significant difficulty in the audit that could limit evidence or the timetable.
If management still refuses to correct the misstatement, discuss and document management's reasons. Then assess whether the uncorrected misstatement, alone or with others, is material. If it is material, a representation that it is immaterial cannot be relied on, and you must modify the opinion under ISA 705. If you conclude the uncorrected misstatements are immaterial, request a written representation that management believes their effects are immaterial, individually and in aggregate (ISA 450 and ISA 580).
Form: communicate or confirm the findings to the directors in writing. Writing is required if oral communication would not be adequate. Document all discussions.
Professional skills: keep the tone factual and professional, and explain the consequences for the auditor's report if the matter is not resolved.

Answer: Communicate or confirm the uncorrected inventory misstatement and the delays to the directors in writing, and request correction. The directors are all involved in management, but you must still make sure these findings are communicated. If the misstatement stays uncorrected, assess its materiality. If it is material, modify the opinion under ISA 705, because a representation of immateriality cannot be relied on. If you conclude the uncorrected misstatements are immaterial, obtain a written representation to that effect (ISA 450, ISA 580). Document the discussion and responses.

Exam tips

Always identify who the TCWG are in the scenario before listing matters.
Link each matter to scenario facts. Generic lists score poorly on professional skills marks.
Mention two-way communication and the form (oral or written) and timing in at least one point.
For a listed entity, always add independence communication and KAMs where relevant.
If asked to draft a communication, use a clear format with headings and a professional tone, and state the action required.

Practice questions from Reports to those charged with governance and management

Communicating with Those Charged with Governance (ISA 260): frequently asked questions

Who are those charged with governance?

They are the people or organisations with responsibility for overseeing the entity's strategic direction and accountability, including financial reporting. Usually this is the board or the audit committee. In small entities, the owner-manager may be both management and TCWG.

What must the auditor communicate under ISA 260?

The auditor communicates the auditor's responsibilities, the planned scope and timing of the audit, and significant findings. For listed entities, independence matters are added. The communication is also meant to gather information from TCWG.

Does ISA 260 communication have to be in writing?

Not always. Written communication is required for significant findings where oral communication would not be adequate. Independence matters for listed entities must also be communicated, but ISA 260 does not set the form, though writing them down is good practice. Oral communication must still be documented.

How is ISA 260 different from ISA 265?

ISA 260 covers general communication about the audit to TCWG. ISA 265 covers communicating significant deficiencies in internal control to TCWG and management. A written report may cover both.