The auditor shall determine the appropriate person(s) within the entity’s governance structure with whom to communicate.  (Ref: Para. A1–A4)

Communication with a Subgroup of Those Charged with Governance

If the auditor communicates with a subgroup of those charged with governance, for example, an audit committee, or an individual, the auditor shall determine whether the auditor also needs to communicate with the governing body.  (Ref: Para. A5–A7)

When All of Those Charged with Governance Are Involved in Managing the Entity

In some cases, all of those charged with governance are involved in managing the entity, for example, a small business where a single owner manages the entity and no one else has a governance role.  In these cases, if matters required by this Auditing Standard are communicated with person(s) with management responsibilities, and those person(s) also have governance responsibilities, the matters need not be communicated again with those same person(s) in their governance role.  These matters are noted in paragraph 16(c) of this Auditing Standard.  The auditor shall nonetheless be satisfied that communication with person(s) with management responsibilities adequately informs all of those with whom the auditor would otherwise communicate in their governance capacity.  (Ref: Para. A8)

The Auditor’s Responsibilities in Relation to the Financial Report Audit

The auditor shall communicate with those charged with governance the responsibilities of the auditor in relation to the financial report audit, including that:

1. The auditor is responsible for forming and expressing an opinion on the financial report that has been prepared by management with the oversight of those charged with governance; and
2. The audit of the financial report does not relieve management or those charged with governance of their responsibilities.  (Ref: Para. A9–A10)

Planned Scope and Timing of the Audit

The auditor shall communicate with those charged with governance an overview of the planned scope and timing of the audit, which includes communicating about the significant risks identified by the auditor.  (Ref: Para. A11–A16)

Significant Findings from the Audit

The auditor shall communicate with those charged with governance: (Ref: Para. A17–A18) 

• The auditor’s views about significant qualitative aspects of the entity’s accounting practices, including accounting policies, accounting estimates and financial reporting disclosures.  When applicable, the auditor shall explain to those charged with governance why the auditor considers a significant accounting practice, that is acceptable under the applicable financial reporting framework, not to be most appropriate to the particular circumstances of the entity; (Ref: Para. A19–A20) 
• Significant difficulties, if any, encountered during the audit; (Ref: Para. A21) 
• Unless all of those charged with governance are involved in managing the entity: 
  • Significant matters arising during the audit that were discussed, or subject to correspondence, with management; and (Ref: Para. A22) 
  • Written representations the auditor is requesting; 
• Circumstances that affect the form and content of the auditor’s report, if any; and (Ref: Para. A23–A25) 
• Any other significant matters arising during the audit that, in the auditor’s professional judgement, are relevant to the oversight of the financial reporting process.  (Ref: Para. A26–A28)

Auditor Independence

In the case of listed entities, the auditor shall communicate with those charged with governance:

• A statement that the engagement team and others in the firm as appropriate, the firm and, when applicable, network firms have complied with relevant ethical requirements regarding independence; and 
  • All relationships and other matters between the firm, network firms, and the entity that, in the auditor’s professional judgement, may reasonably be thought to bear on independence.  This shall include total fees charged during the period covered by the financial report for audit and non‑audit services provided by the firm and network firms to the entity and components controlled by the entity.  These fees shall be allocated to categories that are appropriate to assist those charged with governance in assessing the effect of services on the independence of the auditor; and 
  • In respect of threats to independence that are not at an acceptable level, the actions taken to address the threats, including actions that were taken to eliminate the circumstances that create the threats, or applying safeguards to reduce the threats to an acceptable level.  (Ref: Para. A29–A32)

In the case of entities audited in accordance with the Corporations Act 2001, the auditor shall communicate with those charged with governance through a statement that the engagement team and others in the firm as appropriate, the firm, and, when applicable network firms, have complied with the independence requirements of section 307C of the Corporations Act 2001.

Establishing the Communication Process

The auditor shall communicate with those charged with those charged with governance the form, timing and expected general content of communications.  (Ref: Para. A37–A45)

Forms of Communication

The auditor shall communicate in writing with those charged with governance regarding significant findings from the audit if, in the auditor’s professional judgement, oral communication would not be adequate.  Written communications need not include all matters that arose during the course of the audit.  (Ref: Para. A46–A48)

The auditor shall communicate in writing with those charged with governance regarding auditor independence when required by paragraph 17 of this Auditing Standard. 

Timing of Communications

The auditor shall communicate with those charged with governance on a timely basis.  (Ref: Para. A49–A50)

Adequacy of the Communication Process

The auditor shall evaluate whether the two‑way communication between the auditor and those charged with governance has been adequate for the purpose of the audit.  If it has not, the auditor shall evaluate the effect, if any, on the auditor’s assessment of the risks of material misstatement and ability to obtain sufficient appropriate audit evidence, and shall take appropriate action.  (Ref: Para. A51–A53)

Where matters required by this Auditing Standard to be communicated are communicated orally, the auditor shall include them in the audit documentation, and when and to whom they were communicated.  Where matters have been communicated in writing, the auditor shall retain a copy of the communication as part of the audit documentation.^[2] (Ref: Para. A54)