Compliance Management, Audit and Due Diligence · Forming an Opinion and Reporting

Auditor's Other Reporting Responsibilities and Communication

Updated 11 October 2026 · Fact-checked

Besides the opinion on the financial statements, an auditor must report on internal financial controls, report fraud as the law requires, and communicate with those charged with governance on scope, findings, independence and any expected modification. A secretarial auditor separately reports compliance in Form MR-3. Answer by stating the duty, the facts and the conclusion.

Understand Other Reporting Responsibilities and Communication

An auditor's report is not only an opinion on the numbers. The law and the standards add other duties. You must know who the auditor reports to, what is reported and when.

Internal financial controls (IFC). SA 700 (Revised) says the auditor obtains an understanding of internal control to design appropriate audit procedures, but not to express an opinion on its effectiveness. In India there is an exception. Under section 143(3)(i) of the Companies Act, 2013, the auditor is also responsible for expressing an opinion on whether the company has an adequate internal financial controls system in place and the operating effectiveness of such controls. When the auditor has this responsibility, the standard says to omit the phrase that internal control consideration is not for expressing an opinion on effectiveness.

Communication with those charged with governance (TCWG). TCWG are the people responsible for overseeing the entity, such as the board and the audit committee. SA 700 requires the auditor's report to state that the auditor communicates with them on the planned scope and timing of the audit and significant audit findings, including significant deficiencies in internal control. The auditor also gives them a statement that relevant ethical requirements on independence are complied with, and communicates all relationships and other matters that may reasonably bear on independence, and related safeguards. From these matters the auditor determines the key audit matters, which are described in the report, unless law or regulation precludes public disclosure or, in extremely rare cases, the harm would outweigh the public interest benefit.

Modified opinions. Under SA 705 (Revised), when the auditor expects to modify the opinion, the auditor communicates to TCWG the circumstances and the wording of the modification. This lets the auditor give notice, seek agreement on the facts or confirm disagreement with management, and lets TCWG give further information.

Fraud and secretarial audit. Fraud reporting under section 143(12) of the Companies Act, 2013 and the secretarial audit report in Form MR-3 under section 204 are also part of this topic. Study the detailed procedure for these in the related pages. Here, remember that fraud reporting goes beyond the audit report, and that the secretarial auditor reports on compliance with laws, not on the financial statements.

Key rules to remember

IFC opinion duty: Section 143(3)(i): auditor opines on (i) adequacy of the IFC system and (ii) operating effectiveness of such controls; This is a statutory duty in India. It sits alongside, and differs from, the general SA 700 statement that internal control is understood only to design procedures.
Communication with TCWG (SA 700, para 40): Planned scope and timing + significant audit findings (including significant deficiencies in internal control) + independence statement and relationships + key audit matters; The report must state that these communications are made.
Modification communication (SA 705, para 30): Expected modification → tell TCWG the circumstances and the wording; Purposes under A27: give notice, seek concurrence or confirm disagreement, allow TCWG to give more information.
Key audit matters: KAMs = matters of most significance among those communicated with TCWG; Not described if law or regulation precludes public disclosure, or in extremely rare cases where adverse consequences outweigh public interest benefit.
Fraud risk in auditing: Risk of not detecting fraud-related material misstatement > risk for error; Because fraud may involve collusion, forgery, intentional omissions, misrepresentations or override of internal control.

How to solve Other Reporting Responsibilities and Communication questions

Use this method for any written question on reporting responsibilities and communication.

1Identify the duty being tested: IFC reporting, fraud, TCWG communication, modification, or secretarial audit.
2Name the source: the section of the Companies Act, 2013 or the SA paragraph, only where you are sure of it.
3State the rule in plain words with its exact conditions.
4Apply it to the facts: who is the auditor, what has been found, who must be told.
5Decide the report effect: unmodified, modified, KAM, or a separate report.
6Add the practical step: documentation, written communication, board or audit committee involvement.
7Conclude in one clear line that answers the question asked.

Quickest way: Duty, Recipient, Timing, Effect

When to use it: Use when time is short and the question gives a short fact situation.

Duty: what must the auditor report or communicate?
Recipient: TCWG, the audit report users, or a regulator or Central Government as the law provides.
Timing: before the report is signed for modifications and findings.
Effect: does it change the opinion, add a KAM, or create a separate report?
Write a three-line answer: rule, application, conclusion.

Common mistakes in Other Reporting Responsibilities and Communication

Saying the auditor never opines on internal control effectiveness.
The SA 700 wording says the understanding is not for expressing an opinion, and students stop there.
Fix: Add that section 143(3)(i) gives the Indian auditor a duty to opine on adequacy of the IFC system and operating effectiveness.
Treating TCWG as only the audit committee.
Listed company practice dominates examples.
Fix: Define TCWG as the persons or organisations responsible for overseeing the entity. It may be the board or the audit committee depending on the structure.
Communicating a modification only after signing the report.
Students think communication is a formality.
Fix: SA 705 requires communicating the circumstances and the wording when the modification is expected, so do it before issuing the report.
Describing every KAM as disclosable without exception.
Students remember KAMs are described, not the exceptions.
Fix: State both exceptions: law or regulation precludes disclosure, or in extremely rare cases harm outweighs public interest benefit.
Mixing the secretarial audit report with the statutory audit report.
Both are called audit reports.
Fix: Remember that the secretarial auditor reports compliance with applicable laws in Form MR-3, while the statutory auditor reports on the financial statements.

Worked examples

Example 1

During the audit of Sundaram Textiles Ltd, the auditor concludes that a material misstatement in inventory requires a qualified opinion. Management disagrees on the facts. What must the auditor do before signing the report?

Show the solution

The rule is SA 705 (Revised), paragraph 30: when a modification is expected, the auditor communicates with those charged with governance the circumstances and the wording of the modification.
Apply it: the auditor tells the board or audit committee about the inventory issue and shares the proposed qualified opinion wording.
The purpose, per A27, is to give notice, seek concurrence on the facts or confirm the disagreement with management, and allow TCWG to supply further information.
If TCWG give new information that resolves the matter, the auditor reassesses the need for modification. Otherwise the opinion is modified.

Answer: The auditor must communicate the circumstances and exact wording of the expected qualification to TCWG before issuing the report, seek agreement or record the disagreement, consider any further information, then issue the modified report if the matter remains.

Example 2

Explain what the auditor of a company states in the report about communication with TCWG and the internal financial controls opinion under Indian law.

Show the solution

Under SA 700 (Revised) para 40, the report states that the auditor communicates with TCWG on planned scope and timing and significant findings, including significant deficiencies in internal control.
It also states that the auditor gives TCWG a statement of compliance with ethical requirements on independence and communicates relationships that may bear on independence, with safeguards.
It states that from these matters the auditor determines the key audit matters and describes them, subject to the two exceptions.
On IFC, section 143(3)(i) makes the auditor responsible for expressing an opinion on whether the company has an adequate IFC system and its operating effectiveness.

Answer: The report states the communications on scope, timing, findings, independence and KAMs, and, because of section 143(3)(i), also gives an opinion on the adequacy and operating effectiveness of the company's internal financial controls.

Exam tips

Write the rule first, then apply it. Case-based questions reward this order.
Quote the paragraph or section only when sure. Otherwise describe the rule in words.
For modification questions, always mention communication to TCWG before the report.
Keep Indian IFC duty separate from the general SA statement on internal control.
For secretarial audit, link the answer to compliance with laws and Form MR-3, not financial statements.

Practice questions from Forming an Opinion and Reporting

Other Reporting Responsibilities and Communication in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Other Reporting Responsibilities and Communication: frequently asked questions

Does the auditor give an opinion on internal financial controls?

Yes, in India. Section 143(3)(i) of the Companies Act, 2013 makes the auditor responsible for expressing an opinion on whether the company has an adequate internal financial controls system and on its operating effectiveness.

Who are those charged with governance?

They are the persons or organisations responsible for overseeing the entity. Structures differ, so it may be the board, or a committee such as the audit committee.

When must the auditor tell TCWG about a modified opinion?

When the auditor expects to modify the opinion. SA 705 requires communicating the circumstances and the wording of the modification so TCWG can respond before the report is issued.

Are key audit matters always described in the report?

No. They are described unless law or regulation precludes public disclosure, or in extremely rare circumstances the adverse consequences would reasonably be expected to outweigh the public interest benefits.