Microsoft Word Audit Quality-Framework Final vs 20140214
Interactions between Management and Those Charged with Governance
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| Interactions between Management and Those Charged with Governance 69. A strong commitment to honesty and integrity within an entity has a positive bearing on the quality and reliability of its financial reporting process. Such a culture, which is established and nurtured by those charged with governance working in conjunction with senior members of management, promotes the development and maintenance of appropriate accounting policies and processes as well as the open sharing of information that is necessary for high-quality financial reporting. 70. To achieve this, those charged with governance depend on a transparent and constructive relationship with management in assisting them to discharge their responsibility for oversight of the financial reporting process. This requires a willingness by management to come forward to discuss with those charged with governance matters such as: Identified, and potentially significant, issues relating to financial reporting and regulation. Assumptions behind significant accounting judgments involved in the financial reporting process. Areas where the financial reporting process may be strengthened. 71. If the auditor has concerns about the relationship between management and those charged with governance, the auditor is especially alert for significant deficiencies in internal control, errors in the financial reporting process and fraud risks. It will also be important for the auditor to seek to understand the reasons behind weaknesses in the relationship as the nature of any audit responses will depend on the circumstances. For example, an audit response where those charged with governance doubt management’s integrity will differ from one where management harbors reservations about the competence of those charged with governance. 72. In extreme cases, where the auditor has serious concerns about the relationship between management and those charged with governance, the auditor considers whether an effective and efficient audit can be conducted, and therefore whether to continue the client relationship. 4.6 Download 1.81 Mb. Share with your friends:
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