In the audit of a nonissuer, the auditor identifies a material weakness in internal control. The auditor's report on the financial statements is unmodified. The auditor is NOT engaged to audit internal control. The auditor must:

Answer options:

Issue an adverse opinion on the financial statements.

Communicate the material weakness in writing to management and those charged with governance.

Disclose the material weakness in the audit report.

Withdraw from the engagement.

How to approach this question

Distinguish Integrated Audit (Public Report on IC) vs FS Only Audit (Private Communication of IC issues).

Full Answer

B.Communicate the material weakness in writing to management and those charged with governance.✓ Correct

Communicate the material weakness in writing to management and those charged with governance.

In a financial statement audit of a nonissuer (where no integrated audit is performed), material weaknesses are communicated privately to management and governance (AU-C 265). They are NOT disclosed in the auditor's report on the financial statements, as that might confuse users regarding the scope of the audit.

Common mistakes

Thinking material weaknesses always go in the audit report (only true for Integrated Audits).

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