Exam AUD topic 1 question 965 discussion

Actual exam question from AICPA's AUD

Question #: 965
Topic #: 1

Which of the following statements is correct concerning an auditor's required communication with those charged with governance?

A. This communication is required to occur before the auditor's report on the financial statements is issued.
B. This communication should include management changes in the application of significant accounting policies.
C. Any significant matter communicated to those charged with governance also should be communicated to management.
D. Significant audit adjustments proposed by the auditor and recorded by management need not be communicated to those charged with governance.

Show Suggested Answer

Suggested Answer: B 🗳️
Choice "B" is correct. The auditor should determine that those charged with governance are informed about the initial selection of and changes in significant accounting policies or their application.
Choice "A" is incorrect. The communication is incidental to the audit; accordingly, it is not required to occur before the issuance of the auditor's report as long as the communication occurs on a timely basis. (Note, however, that for audits of issuers, the communication must be made before the auditor's report is filed with the SEC.)
Choice "C" is incorrect. Communication with management is not required.
Choice "D" is incorrect. Unless all those charged with governance are also involved with managing the entity, the auditor should inform those charged with governance about adjustments that could, either individually or in the aggregate, have a significant effect on the entity's financial reporting process, regardless of whether the adjustment was recorded.

by gemazyni at April 5, 2025, 5:22 p.m.

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