Document ID: chunk:federal_register_of_legislation:F2023C01128:reg:17:p21
Version: federal_register_of_legislation:F2023C01128
Segment Type: reg
Provision Reference: reg 17 (pt 21/25)
Character Range: 65279–68471

present.

           * The apparent ability of those charged with governance to fully comprehend matters raised by the auditor, for example, the extent to which those charged with governance probe issues, and question recommendations made to them.

           * Difficulty in establishing with those charged with governance a mutual understanding of the form, timing and expected general content of communications.

           * Where all or some of those charged with governance are involved in managing the entity, their apparent awareness of how matters discussed with the auditor affect their broader governance responsibilities, as well as their management responsibilities.

           * Whether the two‑way communication between the auditor and those charged with governance meets applicable legal and regulatory requirements.

A52.         As noted in paragraph 4, effective two‑way communication assists both the auditor and those charged with governance.  Further, ASA 315 identifies participation by those charged with governance, including their interaction with internal audit, if any, and external auditors, as an element of the entity's control environment.[27]  Inadequate two‑way communication may indicate an unsatisfactory control environment and influence the auditor's assessment of the risks of material misstatements.  There is also a risk that the auditor may not have obtained sufficient appropriate audit evidence to form an opinion on the financial report.

A53.         If the two‑way communication between the auditor and those charged with governance is not adequate and the situation cannot be resolved, the auditor may take such actions as:

           * Modifying the auditor's opinion on the basis of a scope limitation.

           * Obtaining legal advice about the consequences of different courses of action.

           * Communicating with third parties (e.g., a regulator), or a higher authority in the governance structure that is outside the entity, such as the owners of a business (e.g., shareholders in a general meeting), or the responsible government minister or parliament in the public sector.

           * Withdrawing from the engagement, where withdrawal is possible under applicable law or regulation.

Documentation (Ref: Para. 23)

A54.         Documentation of oral communication may include a copy of minutes prepared by the entity retained as part of the audit documentation where those minutes are an appropriate record of the communication.

Appendix 1

(Ref: Para. 3)

Specific Requirements in ASQM 1 and Other Australian Auditing Standards that Refer to Communications with Those Charged With Governance

This appendix identifies paragraphs in ASQM 1[28] and other Australian Auditing Standards that require communication of specific matters with those charged with governance.  The list is not a substitute for considering the requirements and related application and other explanatory material in Australian Auditing Standards.

      * ASQM 1 Quality Management for Firms that Perform Audits or Reviews of Financial Reports and Other Financial Information, or Other Assurance or Related Services Engagements ‑ paragraph 34(e)