SAS No. 39 Communications with Those Charged with Governance  

Status

Issued by Auditing Standards Committee in Taiwan on 15 July, 2003.

Summary

The auditor should communicate audit matters of governance interest arising from the audit of financial statements with those charged with governance of an entity.

Those charged with governance are the person(s) or organization(s) with responsibility for overseeing the strategic direction of the entity and obligations related to the accountability of the entity. This includes overseeing the financial reporting process. For some entities, those charged with governance may include management personnel, for example, executive members of a governance board or an owner-manager.

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. Ordinarily such matters include the following:

  • The general approach and overall scope of the audit, including any expected limitations thereon, or any additional requirements.
  • The selection of, or changes in, significant accounting policies and practices that have, or could have, a material effect on the entity’s financial statements.
  • The potential effect on the financial statements of any material risks and exposures, such as pending litigation, that are required to be disclosed in the financial statements.
  • Audit adjustments, whether or not recorded by the entity that have, or could have, a material effect on the entity’s financial statements.
  • Material uncertainties related to events and conditions that may cast significant doubt on the entity’s
        ability to continue as a going concern.
  • Disagreements with management about matters that, individually or in aggregate, could be significant to the entity’s financial statements or the auditor’s report. These communications include consideration of whether the matter has, or has not, been resolved and the significance of the matter.
  • Expected modifications to the auditor’s report.
  • Other matters warranting attention by those charged with governance, such as material weaknesses in internal control, questions regarding management integrity, and fraud involving management.
  • Any other matters agreed upon in the terms of the audit engagement.

The auditor should communicate audit matters of governance interest on a timely basis.

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 responses to those matters.

Ordinarily, the auditor initially discusses audit matters of governance interest with management, except where those matters relate to questions of management competence or integrity. If management agrees to communicate a matter of governance interest with those charged with governance, the auditor may not need to repeat the communications, provided that the auditor is satisfied that such communications have effectively and appropriately been made.

The auditor considers whether audit matters of governance interest previously communicated may have an effect on the current year’s financial statements. The auditor considers whether the point continues to be a matter of governance interest and whether to communicate the matter again with those charged with governance.

Effective date

This Statement is effective from 30 June, 2004.

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