SA 265: Communicating Internal Control Deficiencies#
Objective#
To communicate appropriately to those charged with governance and management, deficiencies in internal control identified during audit.
Definitions#
Deficiency in Internal Control
- A control is designed or operated improperly
- Or control is missing
- Unable to prevent or detect misstatement on timely basis
Significant Deficiency
- Deficiency less than material weakness
- Important enough to merit attention
Material Weakness
- Deficiency resulting in reasonable possibility of material misstatement
Communication Requirements#
To Management
- Significant deficiencies
- Other deficiencies
- Written communication
To Those Charged with Governance
- Material weaknesses
- Significant deficiencies
- Also communicate in writing
Timing#
- Communicate on timely basis
- Before issuing auditor's report
- Written communication recommended
Content of Communication#
- Description of deficiency
- Sufficient detail for understanding
- Nature and cause of deficiency
- Potential effect
- Management's response
Documentation#
- Document all deficiencies identified
- Evaluate severity
- Communication records
Considerations#
- Materiality not considered when communicating deficiencies
- All significant deficiencies to be communicated
- Not responsible for identifying all deficiencies