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

The auditor of Rao Logistics Ltd identifies deficiencies in internal control during the audit: a missing bank reconciliation review for two quarters, which the auditor considers a significant deficiency. Under SA 265, what is the auditor's required communication?

The auditor must communicate significant deficiencies in writing to those charged with governance on a timely basis, as SA 265 requires. This applies even when no misstatement has yet resulted, and oral or delayed communication does not meet the requirement.

  1. ACommunicate in writing to those charged with governance on a timely basisCorrect
  2. BCommunicate orally to a junior accountant only
  3. CCommunicate only if the deficiency causes an actual misstatement
  4. DWait until the next year's audit to communicate

Explanation

SA 265 requires the auditor to communicate significant deficiencies in internal control in writing to those charged with governance on a timely basis. Communication does not depend on an actual misstatement being found, and oral-only or delayed communication does not satisfy the standard.

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