SA 260 : COMMUNICATION

WITH THOSE CHARGED WITH

GOVRNANCE (TCWG)
STANDARDS OF AUDITING
MEANINGS

• Those Charged with Governance • Management :-

(TCWG) :- The person(s) with executive
The person(s) or organization(s) with responsibility for the conduct of entities
responsibility for overseeing the strategic operations.
direction of entity and obligations related to
For some entities, management may
accountability of the entity.
include some or all of TCWG.
For e.g.
(i) In case of Company - Board of Directors
(ii) In case of Firm - Partners
SCOPE OF SA 260

• Auditor’s responsibility to communicate with TCWG in an audit of financial

statements.
• It does not establish requirements regarding the auditors communication with
entity’s management or owners unless are also TCWG.
• Nothing in this SA can preclude the auditor from communicating any other
matters to TCWG.
AUDITOR’S OBJECTIVE
• To communicate clearly with TCWG, responsibilities of auditor and planned scope and
timing of Audit
• To obtain information from TCWG, information relevant to TCWG.
• To provide TCWG with timely observations.
• To promote effective two way communication between auditor and TCWG.
Recognizing above importance, this SA provides a framework of auditor’s communication
and identifies specific matters to be communicated.
[Points to consider]
(i) Communication by Auditor does not relieve management of it’s responsibility.
(ii) Similarly communication by management does not the relieve the auditor’s responsibility
however affect the form and timing of communicating.
REQUIREMENTS OF SA 260
• Auditor to determine appropriate persons among entity’s governance to
communicate.
• When auditor communicate with subgroup of TCWG, auditor shall determine
whether he needs to communicate with governing body.
(Subgroup : The group of persons or Individual person ascertained by
TCWG on its behalf)
• Where TCWG of entity is involve in managing the entity (generally in small
entities), if matters required by this SA is communicated to management they
need not be communicated again with those same person(s) in their governance
role.
MATTERS TO COMMUNICATED TO TCWG
1. Auditor’s Responsibilities in relation to Audit :
a. Responsibility for forming and expressing an opinion on the financial statements
b. The audit does not relieve management or TCWG of their responsibilities.

2. Planned Scope and Timing of Audit :

The auditor shall communicate with TCWG an overview of planned scope and timing of audit.

3. Auditor’s Independence :
In case of listed entities the auditor shall communicate that the engagement team has complied with
requirements regarding independence and safeguard to eliminate threats.

4. Significant findings from Audit :

a. His views about significant qualitative aspects of entity’s accounting practices, including accounting
policies, estimates and disclosures.
Where applicable he shall explain why he considers a practice, that is as per applicable reporting framework,
not to be appropriate for entity. (e.g. If there are large variation in price of stocks then FIFO is appropriate but
not Weighted Average)
MATTERS TO COMMUNICATED TO TCWG (CONTINUED)
b. Significant difficulties if any:
- Delay in providing required information
- Unavailability of Information
- Restrictions imposed on auditor by managaement
- Unrealistic deadlines to complete the audit
- Unexpected efforts are required to obtain audit evidences
- Management’s unwillingness to make or extend it’s going concern assumption
c. Unless all of TCWG is involved in management (i.e. TCWG ≠ Management):
- Material weakness in the design, implementation or operating effectiveness of Internal controls have
been communicated to management
- Significant matters arising from audit that were discussed with management
- Written Representation where required was requested.
d. Circumstances affecting the form and content of auditor’s report, if any
e. Any other significant matters in his professional judgement are significant to oversight of
reporting process.
COMMUNICATION PROCESS
• Form of Communication
- Oral -Detail - Structured
- Written - Summarized - Unstructured
a. Auditor shall communicate in writing with TCWG regarding significant findings where he adjudges, oral
communication would not be adequate.
b. The auditor shall communicate in writing regarding auditor’s independence

• The appropriate timing for communication will vary with significance and nature of matter.
a. Planning Matters may be communicated early in engagement.
b. Significant difficulties encountered during audit as soon as practicable.

• Auditor shall evaluate whether two way communication has been adequate. If not he shall
evaluate the risk of material mis-statement.
• Forwritten communications the auditor shall retain a copy of communication as audit
documentation. For oral communication he shall document matters communicated, when and to
whom they were communicated.
FACTORS AFFECTING MODES OF
COMMUNICATION

1. Whether matters previously communicated has been satisfactorily resolved.

2. Legal Requirements, i.e. any prescribed format if required by law.
3. Whether here have significant changes in membership of TCWG.
4. The amount of ongoing contact dialogue the auditor has with TCWG.
5. The size, operating structure, control environment and legal structure of entity.
6. Whether a discussion of matter will be included in auditor’s report. e.g. Key Audit
Matters