Definitions PSA 260
Governance - term used to describe the role of
persons entrusted with the supervision, control
and direction of an entity.
Audit matters of governance interest - are
those that arise from the audit of financial
statements and, in the opinion of the auditor, are
both important and relevant to those charged
with governance in overseeing the financial
reporting and disclosure process.
The Auditor should consider audit matters of
governance interest that arise from the audit of the
financial statements and communicate them with
those charged with governance.
Timing of Communications
The auditor should communicate audit matters of
governance interest on a timely basis.
Forms of Communications
The auditor’s communications with those charged
with governance may be made orally or in writing.
When audit matters of governance interest are
communicated orally, the auditor documents in
the working papers the matters communicated
and any response to those matters.
Auditor initially discusses audit matters of
governance interest with management, except
where those matters relate to questions of
management competence or integrity.
Relevant Persons The auditor should communicate audit matters
COMMUNICATIONS OF AUDIT of governance interest arising from the audit of
MATTERS WITH THOSE financial statements with those charged with
CHARGED WITH GOVERNANCE governance of an entity.
The auditor should communicate Who are TCWG?
audit matters of governance interest An audit engagement letter
arising from the audit of financial may; a.) For corporations
statements with those charged with covered by the SEC
a.) explain that the auditor will Code of Corporate
governance of an entity.
communicate only those Governance = BOD’s
Audit Matters to be Communicated matters of governance interest
that comes to attention as a b.) For other entities=
auditor uses judgment
result of the performance of an
1.) The general approach and overall scope of to determine those
audit.
the audit, including any expected limitations persons.
thereon. b.) Describe the form in which
c.) When the entity’s
2.) The selection of significant accounting any communications on audit governance structure
policies and practices that have a material matters of governance interest is not well defined=
effect on the entity’s financial statements. will be made auditor comes to an
3.) The potential effect on the financial agreement with the
c.) Identify the relevant
statements of any significant risks and entity to whom to
exposures that are required to be disclosed in persons with whom such communicate.
the financial statements. communications will be made.
4.) Audit adjustments, whether or not recorded d.) Identify any specific audit
by the entity that has a significant effect on the matters of governance interest
entity’s financial statements. which it has been agreed are
5.) Material uncertainties related to events and to be communicated.
conditions that may cast significant doubt on the
entity’s ability to continue as a going concern.
6.) Expected modifications to the auditor’s The auditor considers whether audit
report. matters of governance interest previously
7.) Any other matters agreed upon in the terms communicated may have an effect on the
of the audit engagement. current year’s financial statements.
Confidentiality
If the auditor considers that a
Other Matters The Code of Ethics for Certified Public
modification of the auditor’s report on
Accountants promulgated by the Board of
the financial statements is required,
Accountancy imposes obligations of confidentiality
communications between the auditor
that restrict the auditor’s communications of audit
and those charged with governance
matters of governance interest.
cannot be regarded as a substitute.