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

Brenton & Co is auditing Seld Co. The audit team found a deficiency in controls over journal entries. It is not a significant deficiency, but management has not been told of it, and the auditor believes it is of sufficient importance to merit management's attention. Which statement is correct under ISA 265?

The auditor should communicate the deficiency to management on a timely basis, orally or in writing, because it merits management's attention. Written communication is only mandatory for significant deficiencies reported to those charged with governance. Not communicating it, or waiting a year, would not comply with ISA 265.

  1. AThe auditor must communicate it to management on a timely basis, either orally or in writing, unless it would be inappropriate to do soCorrect
  2. BThe auditor must communicate it in writing to those charged with governance, because all deficiencies must be reported to them
  3. CThe auditor need not communicate it, since only significant deficiencies are communicated
  4. DThe auditor must wait until the next year's audit to see whether the deficiency persists before communicating it

Explanation

ISA 265 requires other deficiencies that merit management's attention to be communicated to management on a timely basis, and this may be oral or written. Written communication to those charged with governance is mandatory only for significant deficiencies. The auditor does not delay to see whether the deficiency persists.

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