Area I: Ethics & General Principles — CPA Practice Question 07

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Distinguish between 'deficiency', 'significant deficiency', and 'material weakness' and their communication requirements under AU-C 265.

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B.The auditor must communicate the significant deficiency in writing to those charged with governance and management.✓ Correct

AU-C 265 requires the auditor to communicate in writing to those charged with governance and management significant deficiencies and material weaknesses identified during the audit. Simple deficiencies that are not significant need only be communicated to management (can be oral or written), but significant ones mandate writing to governance.

Common mistakes

Thinking only material weaknesses require written communication.

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Practice the full CPA AUD Practice Exam 5

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