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Audit and AssuranceSection ASyllabus Area EReportingISA 260

ACCA · Question 05 · Audit and Assurance

CASE 1: AQUAPURE UTILITIES CO

AquaPure Utilities Co is a listed water treatment company. Your firm, Stream & Co, has been the auditor for 6 years. The audit engagement partner, Sarah Jenkins, has been in place for the entire 6 years. AquaPure has requested Stream & Co to provide internal audit services regarding their new environmental compliance system. The Finance Director of AquaPure recently offered the audit team a weekend stay at a luxury spa resort owned by the company. AquaPure's audit committee consists of three executive directors and two independent non-executive directors.

QUESTION:
According to ISA 260 Communication with Those Charged with Governance, which of the following matters MUST Stream & Co communicate to AquaPure's audit committee?

Answer options:

A.

A detailed list of all trivial misstatements identified during the audit.

B.

The specific audit procedures and sample sizes planned for every financial statement assertion.

C.

Significant difficulties encountered during the audit and written representations the auditor is requesting.

D.

The performance appraisals of the client's internal audit staff.

How to approach this question

Review the requirements of ISA 260. Focus on high-level, significant matters that affect the financial statements or the audit process, rather than trivial details or audit methodology secrets.

Full Answer

C.Significant difficulties encountered during the audit and written representations the auditor is requesting.✓ Correct
ISA 260 requires auditors to communicate with those charged with governance regarding the auditor's responsibilities, the planned scope and timing of the audit, and significant findings. Significant findings include significant difficulties encountered during the audit, significant matters arising, and written representations requested.

Common mistakes

Selecting option B, thinking the audit committee needs to approve the detailed audit plan. This would destroy the element of surprise in the audit.
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