# SA 260 — Communication with Those Charged With Governance (TCWG)

## Who are TCWG?

Persons / organisations with responsibility for overseeing the strategic direction and accountability of the entity. Examples:

Executive members of a governance board.
An owner-manager (in a small entity).
Directors of a company.

Notes on structure:

Some entities have a separate supervisory board (separate from the executive board); others have a single board for both.
In some structures TCWG are part of the legal structure (e.g., company directors).
TCWG may or may not be involved in management. In smaller entities, one person may be charged with governance (e.g., owner-manager).

> Because of this diversity, SA 260 cannot prescribe one fixed list of persons with whom auditors must communicate. The auditor must identify the appropriate person(s) on each engagement.

## Why two-way communication matters

Helps TCWG understand audit matters and helps build a constructive working relationship.
Helps the auditor obtain information relevant to the audit from TCWG.
Helps TCWG fulfil their responsibility to oversee FR, thereby reducing ROMM.

## What must the Auditor Communicate to TCWG?

### 1. Planned scope and timing of the audit

### 2. Auditor's responsibilities

Forming and expressing an opinion on the FS.
The audit does not relieve management or TCWG of their responsibilities.

### 3. Significant findings from the audit

Auditor's views on significant qualitative aspects of the entity's accounting practices.
Significant difficulties encountered during the audit.
Unless ALL of TCWG are involved in management:
Significant matters discussed with management.
Written Representations (WR) the auditor is requesting.
Circumstances affecting the form and content of the auditor's report.
Other significant matters relevant to oversight of FR.

## Independence Communication — Listed Entities

For listed entities, the auditor must communicate to TCWG that:

The engagement team and network firms have complied with independence requirements.
All relationships that may be thought to bear on independence.
Total fees charged for audit and non-audit services, by the firm and network firms, to the entity and its components — allocated to categories so TCWG can assess effect on independence.
Safeguards applied to eliminate / reduce threats.
Communicate in writing about SIGNIFICANT findings — oral is NOT adequate. (Note: in writing for significant findings, not necessarily ALL findings.)

## Documentation

If matters are communicated orally — include in audit documentation: when and to whom.
If matters are communicated in writing — retain a copy of the communication.

Worked example

### Example 1

Example 1 — Identifying TCWG: In a private limited company with a sole owner-manager, TCWG is the owner-manager himself. Communicating significant audit matters to him personally satisfies SA 260.

### Example 2

Example 2 — Listed entity independence communication: While auditing a listed company, the firm also provided permitted consulting services to a subsidiary. Total audit fees were Rs. 50 lakh and total non-audit fees Rs. 30 lakh. Under SA 260, the auditor must report these allocated to categories in writing to TCWG, with safeguards applied.

### Example 3

Example 3 — Documenting oral communication: During the audit, the partner orally informs the Audit Committee chair that there is a significant difficulty in obtaining external confirmations. The auditor must document the substance, the date, and to whom this was communicated.

### Example 4

Example 4 — TCWG fully involved in management: In a small entity where all TCWG are also in management, the auditor need NOT separately communicate 'significant matters discussed with management' to them — they already know.

⚠️ Common exam mistakes

Trying to apply a single fixed list of 'who is TCWG' — SA 260 cannot specify it; it depends on the entity's governance structure.
Claiming oral communication of significant findings is sufficient for listed entities — it is NOT; writing is required.
Forgetting to document oral communications (when and to whom).
Believing the audit relieves management/TCWG of their responsibilities — it does NOT, and this must be communicated.
For listed entities, forgetting to allocate non-audit fees to CATEGORIES so TCWG can evaluate independence threats.
Confusing 'communicate ALL findings in writing' vs the actual rule of 'communicate SIGNIFICANT findings in writing' for listed entities.

Reference: — SA 260 - Communication with Those Charged with Governance (ICAI)

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SA 260 - Communication with Those Charged With Governance (TCWG)

Worked example

⚠️ Common exam mistakes