## Communication with Those Charged with Governance (SA-260)

### Who Are TCWG?

Those Charged with Governance (TCWG) are persons with responsibility for overseeing the strategic direction of the entity and its accountability obligations — typically the Board of Directors or Audit Committee.

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### Objectives of SA-260

1. Communicate to TCWG: auditor's responsibilities and planned scope & timing of audit

2. Obtain from TCWG: information relevant to the audit

3. Provide TCWG: timely observations significant to oversight of the FR process

4. Promote two-way communication between auditor and TCWG

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### Content of Communication — ALL Companies

Memory Aid: WAR-S3

Code	Item
W	Written representations requested from management (when TCWG is not managing)
A	Auditor's responsibilities in relation to the FS audit
R	Reporting circumstances affecting form and content of audit report
S	Significant findings during audit (qualitative aspects, accounting estimates)
S	Significant difficulties encountered
S	Significant matters for oversight of FR process
3	Planned scope & timing of audit (including significant risks — but must not compromise audit effectiveness)

Auditor's Responsibilities includes stating:

The auditor expresses an opinion on FS prepared by management
The audit does NOT relieve management/TCWG of their own responsibilities

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### Additional Content — LISTED Companies Only

#	Additional Item
1	Statement that ET, firm, and network firm complied with ethical requirements regarding independence
2	Disclosure of all relationships affecting independence: fees (audit + non-audit), to entity/component, by firm/network firm
3	Safeguards applied to eliminate or reduce threats to independence to an acceptably low level

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### How to Communicate

Method	When Required
Written	Significant findings (oral is NOT adequate); Independence matters (listed companies)
Oral	All other matters
Timing	On a timely basis

Documentation:

Oral communication → document when and to whom it was communicated
Written communication → retain a copy

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### Two-Way Communication

Direction	Content
Auditor → TCWG	Required matters listed above
TCWG → Auditor	All information relevant to the audit

If two-way communication is inadequate, the auditor must evaluate its effect on:

Risk Assessment Procedures (RAP)
Ability to obtain Sufficient & Appropriate (S&A) evidence

Worked example

### Example 1

During the audit of a listed company, the firm charges ₹15 lakhs for audit services and ₹8 lakhs for management consultancy to the same entity. Per SA-260, the auditor must communicate to TCWG: (a) an independence compliance statement for the ET, firm, and network firm; (b) both fee amounts disclosed separately (audit vs. non-audit); and (c) the specific safeguards applied to ensure the non-audit work does not impair audit independence.

### Example 2

The auditor encounters significant difficulty obtaining management's written representation on a related party transaction. This 'significant difficulty' must be communicated IN WRITING to TCWG — oral communication is not adequate here. Skipping this or communicating it only verbally would be a violation of SA-260.

⚠️ Common exam mistakes

Thinking all SA-260 communications can be made orally — 'significant findings' MUST be communicated in writing; oral is not adequate.
Forgetting the additional independence communication requirements for listed companies — these are specific to listed entities and include total fee disclosure broken down by audit/non-audit and by entity/component.
Confusing planned scope communication with disclosing audit-sensitive strategy — the auditor communicates scope and timing but must ensure it does NOT compromise audit effectiveness (e.g., does not reveal where fraud testing will focus).
Treating two-way communication as a formality — if TCWG fails to communicate relevant information to the auditor, it directly impacts the auditor's RAP and ability to gather sufficient evidence, which the auditor must evaluate and document.

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

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