It is the responsibility of the auditor to make the life company aware, as soon as practicable, of any identified material misstatements in life company annual returns, material deficiencies in internal controls and instances of material noncompliance arising from the prudential reporting engagement.

Such communications are made as soon as practicable, either orally or in writing. The auditor’s decision whether to communicate orally or in writing ordinarily is affected by factors such as the nature, sensitivity and significance of the matter to be communicated and the timing of the communications. If the information is communicated orally, the auditor documents the communication.

When, in the auditor’s judgement, those charged with governance do not respond appropriately within a reasonable period of time, the auditor considers whether to modify the auditor’s annual prudential assurance report.

It is important that the auditor understands the additional statutory responsibilities to report certain matters to APRA under the Life Act. Failure to notify APRA as required represents a criminal offence, which attracts criminal penalties (refer paragraphs 132-136).

Material findings (misstatements, control deficiencies and noncompliance) are reported to APRA and the life company’s Board (or Board Audit Committee) as modifications to the auditor’s assurance report (refer paragraph 125).

Under Auditing Standard ASA 260 Communication with Those Charged With Governance (ASA 260), ASA 265 Communicating Deficiencies in Internal Control to Those Charged with Governance and Management (ASA 265) and ASAE 3000, the auditor communicates relevant matters of governance interest arising from the engagement to those charged with governance on a timely basis. Examples of such matters may include:

• The general approach and overall scope of the engagement, or any additional requirements.
• Fraud or information that indicates that fraud may exist.
• Significant deficiencies in internal controls identified during the engagement. A significant deficiency in internal control means a deficiency or combination of deficiencies in internal control that, in the auditor’s professional judgement is of sufficient importance to merit the attention of those charged with governance.
• Disagreements with management about matters that, individually or in aggregate, could be significant to the engagement.
• Expected modifications to the auditor’s prudential assurance report.

The auditor informs those charged with governance of the life company of those uncorrected misstatements, other than clearly trivial amounts, aggregated by the auditor during and pertaining to the engagement that were considered to be immaterial, both individually and in the aggregate, to the assurance engagement.

Under LPS 310, if requested by APRA, the auditor submits directly to APRA all assessments and other material associated with the auditor’s report, such as management letters issued by the auditor to the life company which contain material findings relating to the auditor’s prudential assurance report.