SA265.pdf

7 sa 260revised paragraph 13 8 sa 230 audit document

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7 SA 260(Revised), paragraph 13. 8 SA 230, Audit Document ation”, p aragraph 14. 9 SA 230, paragraph A21.
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SA 265 9 The size and complexity of the entity. For instance, the communication required for a complex entity may be different from that for an entity operating a simple business. The nature of significant deficiencies that the auditor has identified. The entity’s governance composition. For instance , more detail may be needed if those charged with governance include members who do not have significant experience in the entity’s industry or in the affected areas. Legal or regulatory requirements regarding the communication of specific types of deficiency in internal control. A16. Management and those charged with governance may already be aware of significant deficiencies that the auditor has identified during the audit and may have chosen not to remedy them because of cost or other considerations. The responsibility for evaluating the costs and benefits of implementing remedial action rests with management and those charged with governance. Accordingly, the requirement in paragraph 9 applies regardless of cost or other considerations that management and those charged with governance may consider relevant in determining whether to remedy such deficiencies. A17. The fact that the auditor communicated a significant deficiency to those charged with governance and management in a previous audit does not eliminate the need for the auditor to repeat the communication if remedial action has not yet been taken. If a previously communicated significant deficiency remains, the current year’s communication may repeat the description from the previous communication, or simply reference the previous communication. The auditor may ask management or, where appropriate, those charged with governance, why the significant deficiency has not yet been remedied. A failure to act, in the absence of a rational explanation, may in itself represent a significant deficiency. Considerations Specific to Smaller Entities A18. In the case of audits of smaller entities, the auditor may communicate in a less structured manner with those charged with governance than in the case of larger entities. Communication of Deficiencies in Internal Control to Management (Ref: Para. 10) A19. Ordinarily, the appropriate level of management is the one that has responsibility and authority to evaluate the deficiencies in internal control and to take the necessary remedial action. For significant deficiencies, the appropriate level is likely to be the chief executive officer or chief financial officer (or
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SA 265 10 equivalent) as these matters are also required to be communicated to those charged with governance. For other deficiencies in internal control, the appropriate level may be operational management with more direct involvement in the control areas affected and with the authority to take appropriate remedial action.
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