ExpertHard1 markMultiple Choice
CPA · Question 08 · Area 1: Ethics
In an audit of a non-issuer, the auditor discovers a material weakness in internal control. The auditor is not engaged to perform an audit of internal control over financial reporting. Which of the following is the auditor's responsibility regarding communication?
In an audit of a non-issuer, the auditor discovers a material weakness in internal control. The auditor is not engaged to perform an audit of internal control over financial reporting. Which of the following is the auditor's responsibility regarding communication?
Answer options:
A.
Communicate the material weakness orally to management immediately, but no written report is required.
B.
Communicate the material weakness in writing to management and those charged with governance within 60 days of the report release date.
C.
Issue an adverse opinion on the financial statements due to the material weakness.
D.
Resign from the engagement immediately.
How to approach this question
Recall AU-C 265 requirements. Written communication is mandatory for significant deficiencies and material weaknesses.
Full Answer
B.Communicate the material weakness in writing to management and those charged with governance within 60 days of the report release date.✓ Correct
Communicate the material weakness in writing to management and those charged with governance within 60 days of the report release date.
The auditor must communicate in writing to those charged with governance and management significant deficiencies and material weaknesses identified during the audit. This communication is required by the report release date (for issuers) or within 60 days of the report release date (for non-issuers).
Common mistakes
Thinking an adverse opinion on FS is required, or that oral communication is sufficient.
Practice the full CPA AUD Practice Exam
78 questions · hints · full answers · grading
More questions from this exam
Q01A CPA firm is auditing a large public company. The audit partner's spouse has just been promoted ...HardQ02During the acceptance phase of a new audit engagement for a private company, the successor audito...HardQ03A CPA firm is designing its system of quality control. Which of the following policies would most...MediumQ04An auditor is establishing an understanding with a client regarding the services to be performed ...MediumQ05Under the AICPA Code of Professional Conduct, which of the following fee arrangements is prohibit...Medium