The Public Company Accounting Oversight Board’s staff has issued a publication in the Audit Focus series highlighting auditor responsibilities related to audit committee communications, describing common deficiencies in auditor/audit committee communications, and discussing good practices in this area. Audit Focus is a publication that provides information and guidance to auditors of smaller public companies. Audit committees may find Audit Focus: Audit Committee Communications a useful summary of the kinds of communications they should receive from their auditor and of communication breakdowns that may occur, especially in the smaller public company context.
The PCAOB staff describes communications deficiencies it has observed in inspections of smaller public company audits. These deficiencies involve failures to communicate to the audit committee the following six types of information:
Management representation letters or evidence that management provided the management representation letters to the audit committee.
The overall audit strategy, including the names, locations, and planned responsibilities of other independent public accounting firms or other persons not employed by the firm, that performed audit procedures.
Significant deficiencies and material weaknesses identified during the audit.
The schedule of corrected misstatements identified during the audit.
The company’s critical accounting policies and practices, including the reasons certain policies and practices are considered critical, and how future events might affect whether policies and practices are critical.
The auditor’s evaluation of the company’s identification, accounting, and disclosure with respect to relationships and transactions with related parties.
Audit Focus also includes audit committee communications reminders for auditors, such as –
The PCAOB’s standards require the engagement team to disclose to the audit committee the names, locations, and planned responsibilities of other independent public accounting firms or other persons, not employed by the auditor, that perform audit procedures.
The auditor should communicate an overview of the overall audit strategy and timing and discuss with the audit committee the significant risks identified by the auditor’s risk assessment procedures. The auditor should also inform the committee of any significant changes to the audit strategy during the audit.
The Board’s rules require the auditor at least annually to describe to the audit committee in writing all relationships between the audit firm and the audit client (or persons in financial reporting oversight roles at the audit client) that may reasonably be viewed as bearing on the auditor’s independence.
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