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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Completion and final review

Halden Group, a listed company, has a final audit review in progress. The audit team identified a deficiency in the group's controls over journal entries. It is a significant deficiency because management could post fraudulent entries without detection. The auditor has not yet reported it. Which course of action best complies with ISA 265 Communicating Deficiencies in Internal Control?

The auditor must communicate the significant deficiency in writing to those charged with governance on a timely basis, and report other deficiencies meriting attention to management. ISA 265 does not allow oral-only reporting, delay until next year, or limiting communication to management, even if the opinion is unaffected.

  1. ACommunicate in writing to TCWG on a timely basis, and communicate to management any other deficiencies not communicated by others that merit their attentionCorrect
  2. BCommunicate orally to TCWG only, because written communication might embarrass management
  3. CWait until the next year's audit planning to report, since the current opinion is unaffected
  4. DReport only to management, since internal control is management's responsibility

Explanation

ISA 265 requires significant deficiencies to be communicated in writing to TCWG on a timely basis. Other deficiencies that merit management's attention are communicated to management. Oral-only communication, delay, or reporting only to management do not meet this requirement, and the effect on the opinion is irrelevant to the duty to communicate.

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