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CA Intermediate · Auditing and Ethics · Risk Assessment and Internal Control

During the audit of Bharat Agro Ltd, CA Rohit identifies a significant deficiency in internal control over inventory counting. Under SA 265, to whom must he communicate significant deficiencies in writing, and when?

Under SA 265, significant deficiencies in internal control must be communicated in writing to those charged with governance on a timely basis. Reporting only orally to staff, or to the Registrar or ICAI, does not meet the standard's requirement for communicating such deficiencies.

  1. AThose charged with governance, in writing, on a timely basisCorrect
  2. BOnly to the Registrar of Companies, within 30 days
  3. COnly to the entity's staff who operate the control, orally
  4. DOnly to the ICAI, at the end of the year

Explanation

SA 265 requires the auditor to communicate significant deficiencies in internal control in writing to those charged with governance on a timely basis. The auditor does not report them to the Registrar or ICAI as a routine step, and oral communication to operating staff does not satisfy the requirement.

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