## SA 260: Communication with Those Charged with Governance (TCWG)

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### Why SA 260 Exists

SA 260 governs the auditor's responsibility to communicate with Those Charged with Governance (TCWG) in an audit of financial statements.

TCWG are the persons (or organisations) with responsibility for overseeing the strategic direction of the entity and obligations related to accountability — typically the Board of Directors or Audit Committee.

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### Objectives of the Auditor under SA 260

The auditor has four interconnected objectives:

Objective	Description
1. Communicate responsibilities	Clearly communicate the auditor's responsibilities in relation to the FS audit, and provide an overview of the planned scope and timing of the audit
2. Obtain information	Obtain information relevant to the audit from TCWG
3. Timely observations	Provide TCWG with timely observations from the audit that are significant and relevant to their responsibility to oversee the financial reporting process
4. Two-way communication	Promote effective two-way communication between the auditor and TCWG

> The purpose is not just reporting to TCWG — it is an active dialogue. The auditor learns from TCWG (about risks, fraud, judgements) and TCWG learns from the auditor (about findings, concerns, and the audit process).

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### Structure of SA 260

SA 260 covers six areas:

1. Why SA 260 — rationale and scope

2. Objectives of the auditor

3. Matters to be communicated by the auditor

4. Communication process (form, timing, who to communicate with)

5. Adequacy of two-way communication

6. Documentation of communications

Worked example

### Example 1

Two-Way Communication in Practice:

Before fieldwork begins, the auditor meets with the Audit Committee (TCWG) and shares the audit plan — planned scope, key risk areas, timing of interim and final visits. During this meeting, the Audit Committee reveals that management is under pressure to meet earnings targets this quarter. This information obtained from TCWG now informs the auditor's risk assessment — a direct benefit of the two-way communication objective.

### Example 2

Scope and Timing Communication:

The auditor sends a written communication to the Audit Committee before the audit begins, summarising: (a) the auditor's responsibilities under the Companies Act and SAs, (b) that the audit is not designed to detect all fraud, (c) the planned materiality level, and (d) key audit areas (revenue recognition, inventory valuation). This fulfils the 'planned scope and timing' communication objective.

⚠️ Common exam mistakes

Treating SA 260 communication as a one-way reporting exercise (auditor tells TCWG things) — the standard emphasises two-way communication where the auditor also receives information from TCWG.
Confusing TCWG with management — management runs the entity; TCWG oversees it. In many companies, the Board or Audit Committee is TCWG, not the CFO or CEO.
Thinking SA 260 only applies at the end of the audit when sharing findings — the communication of planned scope and timing happens before fieldwork begins.
Overlooking that some communications under SA 260 are prohibited from being omitted unless specifically restricted by law or regulation (e.g., uncorrected misstatements).

Bare-Act text Para 1 (Scope) & Para 9 (Objectives) · SA 260 — Communication with Those Charged with Governance (ICAI) · click to expand

SA 260 deals with the auditor's responsibility to communicate with Those Charged with Governance in an audit of Financial Statements. The objectives of the auditor are: (a) To communicate clearly with TCWG the responsibilities of the auditor in relation to the FS audit and an overview of the planned scope and timing of the audit; (b) To obtain information relevant to the audit from TCWG; (c) To provide TCWG with timely observations from the audit that are significant and relevant to their responsibility to oversee the financial reporting process; and (d) To promote effective two-way communication.

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Why SA 260, Objectives of the Auditor, and Scope of Communication

Worked example

⚠️ Common exam mistakes