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

Brightwater Pharma has an audit committee chaired by an independent non-executive. The auditor wants to ensure that communication with TCWG is effective. Which action best reflects ISA 260 requirements?

The auditor should evaluate whether two-way communication with TCWG has been adequate. If it has not, the auditor assesses the effect on the risks of material misstatement and the ability to obtain sufficient appropriate evidence, and takes appropriate action. Meeting frequency or sending items to management alone does not satisfy ISA 260.

  1. AEvaluate whether the two-way communication has been adequate for the audit and, if not, assess the effect on the risks of material misstatement and ability to obtain sufficient evidence, and take appropriate actionCorrect
  2. BAssume communication is adequate if the audit committee meets at least once a year
  3. CDestroy draft communications once the audit report has been signed
  4. DSend communications only to the finance director as the representative of TCWG

Explanation

ISA 260 requires the auditor to evaluate whether two-way communication has been adequate and, if not, evaluate the effect on the assessment of risks of material misstatement and the ability to obtain sufficient appropriate evidence, then take appropriate action. Meeting frequency alone does not show adequacy, and the finance director is management, not TCWG.

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