SA260-Communication-with-those-charged-with-governance

SBS Hyderabad 1st June 2019 SA 260 – Communication with those charged with governance by B.SUMA 2nd year Intern M/s SBS and Company LLP [email protected] 1 [email protected] www.sbsandco.com

Company Auditor TCWG Management 2 [email protected] www.sbsandco.com

Index ∞ Meaning ∞ Scope of SA ∞ Role of communication between TCWG and Auditor ∞ Applicability ∞ Auditor’s responsibilities ∞ Matters to be communicated to TCWG ∞ Objectives ∞ Factors affecting forms of communication ∞ Documentation 3 [email protected] www.sbsandco.com

Meaning Those charged with governance Management Those who supervises, directs and checks the entity. Responsible for day to day functioning of the entity Super vision group Implementation group 4 [email protected] www.sbsandco.com

Scope of SA ∞ Auditor’s responsibility to communicate with those charged with governance in an Audit of financial statements. ∞ Recognising the importance of two way communication in an Audit of financial statements. ∞5 ∞ [email protected] www.sbsandco.com

Role of communication between TCWG and Auditor Effective two way communication is important in assisting: ∞ The Auditor and those charged with governance in understanding matters related to the Audit in context. ∞ The Auditor in obtaining from those charged with governance information relevant to the Audit. ∞ Those charged with governance in fulfilling their responsibility to oversee the financial reporting process. ∞ Law or regulation may restrict the Auditor’s communication of certain matters with TCWG. 6 [email protected] www.sbsandco.com

Applicability ∞ Applicable to irrespective of an entity’s governance size or structure. ∞ This SA is effective for Audits of financial statements for periods beginning on or after April 1, 2017. 7 [email protected] www.sbsandco.com

Auditor’s responsibilities ∞ Determine the appropriate person to whom communication can be made. ∞ Need to communicate with governing body, if communication is sub group. ∞ If Auditor is not satisfied with the response of sub group or he feels it is appropriate, he may communicate to governing body also. ∞ If all the TCWG are involved in managing the entity, the matter need not be communicated again. 8 [email protected] www.sbsandco.com

Matters to be communicated ∞ Auditor’s responsibility in relation to financial statement Audit. ∞ Planned scope and timing of Audit. ∞ Significant findings in Audit with respect to: Significant quality aspects. Accounting estimates and accounting policies. Material weakness in internal controls Significant difficulties, if any, encountered during the Audit. Other significant matters. ∞ Statement with respect to compliance of ethical requirements regarding independence in case of listed companies. ∞ Circumstances that effect the form and content of the Auditor’s report if any. 9 [email protected] www.sbsandco.com

Objectives ∞ Promote two way communication between the Auditor an TCWG. ∞ Communicate clearly with TCWG the responsibilities and planning of the Audit. ∞ Obtain information from TCWG relevant to Audit. ∞ Provide TCWG timely observations arising from the Audit that are significant and relevant to their responsibility to oversee the financial reporting process. 10 [email protected] www.sbsandco.com

Factors affecting Communication process ∞ In writing when oral communication is not adequate. ∞ On timely basis. ∞ Expectations of TCWG including arrangements made for periodic meetings or communications with the Auditor. ∞ Size, operating structure, control environment and legal structure of the entity. ∞ In case of an Audit of special purpose financial statements, whether Auditor also Audits the general purpose financial statements. ∞ Evaluate adequacy of communication for the purpose of the Audit. If not adequate, evaluate its effect on the Auditor’s assessment of risks of material misstatement. 11 [email protected] www.sbsandco.com

Documentation Following are to be documented by the Auditor: ∞ When and to whom they were communicated. ∞ Matters communicated in writing. 12 [email protected] www.sbsandco.com

At Thank you!!! Venue: B.SUMA SBS and company LLP, 2nd year Intern M/s SBS and Company LLP Hyderabad. [email protected] Our Presence: Hyderabad, Kurnool, Nellore, TADA, Vizag & Bengaluru: [email protected]; 040-40183366 Disclaimer: Please logon to: http://www.sbsandco.com/disclaimer/ Read our monthly SBS e-Journals 13 [email protected] www.sbsandco.com/wiki www.sbsandco.com www.sbsandco.com/digest