Solution
The communication plan for the control deficiencies identified during the audit of Smithfield’s
30 June 20X3 financial statements is as follows:
Communication plan for the control deficiencies
Item
Control
deficiency
Required to
communicate?
To whom
Form
Content
1.
Lack of
review of
balance sheet
reconciliations
The auditor’s
professional
judgement
is required to
determine whether
this issue warrants
management’s
attention. It is
not likely to be
a significant
deficiency given
that further
samples tested
show that there
was evidence of
review (ISA 265
para. 10(b))
Management
Given the control
deficiency
has arisen at
the financial
controller level
you would need to
communicate this
to the CFO (ISA 265
para. 10(b))
Oral
communication
would be sufficient;
however, it could
be included
in written
communication
with other
deficiencies
(ISA 265 para. A23)
A small number
of reconciliations
did not indicate
review by the
financial controller,
which might
lead to errors not
being identified or
corrected

Chartered Accountants Program
Audit & Assurance
Unit 14 – Activities and solutions
Page 14-11
ACT
Communication plan for the control deficiencies
Item
Control
deficiency
Required to
communicate?
To whom
Form
Content
2.
Lack of
segregation
of duties in
accounts
payable
Yes – this may
constitute a
significant
deficiency
(particularly
when considered
together with
Item 3, which
lends weight to
the conclusion
that a lack of
management
oversight exists
in the finance
function), as there
is the likelihood
of material
misstatements
arising as a
result, including
a susceptibility
to fraud (ISA 265
paras A6 and A7)
Those charged
with governance
(ISA 265 para. 9)
Also management
(as there is no
reason to suggest
that this would
be inappropriate)
(ISA 265 para. 10(a))
In writing, as
required by ISA 265
paras 9 and 10(a)
There is a lack
of segregation
of duties in the
accounts payable
function which
could expose
Smithfield to errors
or fraud as a result
of inaccurate or
fictitious creditors
being created in
the system
3.
Lack of
approval in
payroll
Yes – it is likely this
would constitute
a significant
deficiency
Misstatements
have already
arisen, there is a
significant volume
of transactions
and there is the
potential for fraud
(ISA 265 paras A6
and A7)
Those charged
with governance
(ISA 265 para. 9)
Also management
(as there is no
reason to suggest
that this would
be inappropriate)
(ISA 265 para. 10(a))
In writing, as
required by ISA 265
paras 9 and 10(a)
There is a lack
of review and
management
oversight
regarding the
payroll function.
As a result, errors
have occurred
in payments to
employees. There is
also the possibility
that this deficiency
exposes Smithfield
to fraud
4.
Weak access
controls in IT
system
Yes – this would
likely constitute
a significant
deficiency
This general IT
control deficiency
has not been
addressed by
Smithfield,
which leaves
the organisation
exposed to loss or
fraud. It would have
been expected
that this control
deficiency had
been addressed
in the prior year
(ISA 265 paras A6
and A7)
Those charged

