# SA 260: Communication with Those Charged with Governance (TCWG)
## Who Are TCWG?
Those Charged with Governance (TCWG) are person(s) or organisation(s) responsible for:
- Overseeing the strategic direction of the entity
- Obligations related to the accountability of the entity
- Overseeing the financial reporting process
| Governance Structure | Example |
|---|---|
| Separate supervisory + executive boards | Large corporates |
| Single combined board | Mid-size companies |
| Governance embedded in legal structure | Company directors |
| One person (owner-manager or sole trustee) | Small/sole-proprietor entities |
| Governance not formally defined | Family-owned entities, some NPOs |
> In cases where appropriate persons are not clearly identifiable, the auditor must discuss and agree with the engaging party who to communicate with.
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## Objectives of the Auditor Under SA 260
1. Communicate the auditor's responsibilities and an overview of the planned scope and timing of the audit
2. Obtain information relevant to the audit from TCWG
3. Provide timely observations significant to TCWG's oversight of the financial reporting process
4. Promote effective two-way communication between auditor and TCWG
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## Why Two-Way Communication Matters
Effective two-way communication assists:
| Beneficiary | How It Helps |
|---|---|
| Both auditor + TCWG | Understand audit matters in context; develop constructive working relationship (without compromising independence) |
| Auditor | Obtains audit-relevant information — entity context, evidence sources, specific transactions/events |
| TCWG | Fulfils oversight responsibility → reduces Risk of Material Misstatement (ROMM) |
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## Matters the Auditor Must Communicate
### 1. Auditor's Responsibilities
- Auditor forms and expresses an opinion on the FS prepared by management under TCWG oversight
- The audit does not relieve management or TCWG of their own responsibilities
### 2. Planned Scope and Timing
- Overview of planned scope and timing, including significant risks identified
### 3. Significant Findings
- Views on significant qualitative aspects: accounting policies, estimates, disclosures
- Significant difficulties encountered during the audit
- (Unless all TCWG are involved in managing the entity):
- Significant matters discussed with, or subject to correspondence with, management
- Written representations the auditor is requesting
- Circumstances affecting the form and content of the auditor's report
- Any other significant matters in the auditor's professional judgment
### 4. Independence — Listed Entities Only
- A statement that the engagement team, the firm, and (if applicable) network firms have complied with relevant ethical requirements on independence
- All relationships/matters between the firm, network firms, and the entity that may bear on independence — including total fees for audit and non-audit services
- Related safeguards applied to eliminate or reduce threats to independence
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## The Communication Process
| Aspect | Requirement |
|---|---|
| Form, timing, content | Auditor shall communicate these expectations to TCWG upfront |
| Significant findings | In writing if oral communication would not be adequate |
| Written communications | Need NOT include all audit matters — only significant ones |
| Independence (listed entities) | Must always be in writing |
| Timeliness | All communications must be timely |
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## Evaluating the Adequacy of Communication
- Auditor must evaluate whether two-way communication was adequate for audit purposes
- If inadequate → evaluate effect on ROMM assessment and ability to obtain sufficient appropriate evidence → take appropriate action
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## Documentation
| Mode of Communication | Documentation Requirement |
|---|---|
| Oral | Record in audit documentation: what was communicated, when, and to whom |
| Written | Retain a copy of the written communication in audit documentation |