Scenario: 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. The client requests that the auditor NOT communicate the material weakness to the audit committee because 'they already know about it'. <br/><br/>What is the auditor's responsibility?

Answer options:

The auditor may omit the communication if the audit committee acknowledges the weakness in the representation letter.

The auditor must communicate the material weakness in writing to the audit committee, regardless of their prior knowledge.

The auditor may communicate it orally.

The auditor need not communicate it if it was communicated in the prior year.

How to approach this question

Communication of Deficiencies = Mandatory + Written. Even if they know, you have to put it on the record.

Full Answer

B.The auditor must communicate the material weakness in writing to the audit committee, regardless of their prior knowledge.✓ Correct

The auditor must communicate in writing significant deficiencies and material weaknesses to those charged with governance. This requirement exists to ensure there is a formal record of the auditor's findings, regardless of management's assertions about prior knowledge.

Common mistakes

Thinking oral communication is enough; thinking prior knowledge waives the requirement.

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