Page 91 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori
CNO MRI.600 INTERNATIONAL INTERNAL CONTROL FRAMEWORKS
CNO MRI.620 IFC VS IFCR
These concepts are given at the end of the Chapter.

SA 265

COMMUNICATING DEFICIENCIES IN INTERNAL CONTROL TO THOSE CHARGED WITH GOVERNANCE AND
MANAGEMENT

(CNO-SA265.020) Definition of internal control deficiency
A control necessary to prevent, or detect and correct (PDC), misstatements in the FST on a timely basis is.
• missing.
• Not designed, implemented or operated properly

(CNO-SA265.040) what is responsibility of auditor if he identifies internal control deficiency?
Step 1 Identify Deficiency:
• Determine on the basis of work performed one or more deficiencies in Internal Control.
Step 2 Is it Significant Deficiency or Other Deficiency:
• Whether, individually or in combination, they constitute significant deficiencies.
Step 3 Communicate to TCWG:
• Communicate to TCWG on timely basis All Significant Deficiencies (In Writing)
Step 4 Communicate to Management:
• Significant Deficiencies (In Writing) Unless inappropriate to communicate directly to Mgt
• Other Deficiency Unless communicate to Mgt. By other parties

(CNO-SA265.060) What Should Be Contents Of Letter Explain Internal Control Deficiency? (MGT
Letter/Letter of weakness)
Contents Of Communication of ICD (Mgt Letter/Letter of Weakness)
written communication of significant deficiencies in internal control:
(Deficiency details)
• A description of the deficiencies
• An explanation of their potential effects; and
• Sufficient Information to get understanding of issue & context
Explain purpose of Audit & related matters:
• The purpose of the audit is to express an opinion on the financial statements.
• It includes evaluating Internal controls related to financial reporting.
• But not for the purpose of expressing opinion.
• Matters reported are limited to important deficiencies identified during audit.
Usefulness
• Mgt - Valuable for revising system & insisting strict compliance.
• Auditor- Minimises auditor's liability in event of major defalcation or loss due to ICD

(CNO-SA265.080) Factors Considered While Deciding Whether Deficiency Is Significant Deficiency?
Whether ICD is SD depends on
1. Not only on whether misstatement has actually occurred.
2A. So SD can exist even if there is no MST
2B. But also, an likelihood that misstatement (MST) could occur.

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