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

During the audit of Delta Retail, a non-listed company, the auditor identifies a significant deficiency in internal control over inventory counting. Management has not corrected it. Under ISA 265, what should the auditor do?

The auditor must communicate significant deficiencies in internal control in writing to those charged with governance on a timely basis. A control weakness alone does not lead to a modified opinion, and oral-only or delayed communication does not satisfy ISA 265.

  1. ACommunicate it in writing to TCWG on a timely basisCorrect
  2. BMention it orally to the finance director only, since written communication is never required
  3. CModify the audit opinion because of the control weakness alone
  4. DWait to communicate it until the following year's planning meeting

Explanation

ISA 265 requires significant deficiencies in internal control to be communicated in writing to TCWG on a timely basis. A control deficiency does not by itself require a modified opinion, which depends on whether the financial statements are materially misstated. Delaying until next year's planning is not timely.

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