ACCA Strategic Professional · Advanced Audit and Assurance (International) · Reports to those charged with governance and management
While auditing Tidewater Shipping, the auditor identifies a significant deficiency in internal control over cash receipts. Under ISA 265, what should the auditor do?
The auditor must communicate significant deficiencies in internal control in writing to TCWG on a timely basis. Other deficiencies go to management at an appropriate level. The auditor does not redesign controls, which would threaten independence, and cannot defer reporting just because the financial statements are unaffected.
- ACommunicate in writing to TCWG on a timely basis significant deficiencies identified during the auditCorrect
- BCommunicate orally to a junior member of management only
- CCorrect the deficiency personally by redesigning the controls
- DWait to report it until the following year's audit if the financial statements are unaffected
Explanation
ISA 265 requires the auditor to communicate in writing to TCWG on a timely basis significant deficiencies in internal control identified during the audit, and to communicate other deficiencies to management where appropriate. The auditor does not redesign controls, as that would threaten independence, and the matter should not be deferred merely because the statements are unaffected.
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