An auditor is auditing the financial statements of a nonissuer. The auditor identifies a material weakness in internal control. The auditor's report on the financial statements is unmodified. Which of the following is TRUE regarding the communication of the material weakness?

Answer options:

The auditor must disclose the material weakness in the audit report.

The auditor must issue an adverse opinion on the financial statements.

The auditor must communicate the material weakness in writing to management and those charged with governance.

The auditor need not communicate it if the financial statements are correct.

How to approach this question

Nonissuer Audit: Material Weakness = Private Letter to Governance. (Issuer Integrated Audit = Public Report).

Full Answer

C.The auditor must communicate the material weakness in writing to management and those charged with governance.✓ Correct

In a financial statement audit of a nonissuer, material weaknesses are communicated in writing to management and those charged with governance. They are NOT disclosed in the auditor's report on the financial statements (unless it's an integrated audit).

Common mistakes

Confusing Issuer (Public Report) and Nonissuer (Private Communication) requirements.

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