Communications You Should Expect From Your Auditor
U.S. generally accepted auditing standards require your auditor to communicate with you at various stages throughout your plan's audit. Being prepared to receive these communications and understanding their content will help to minimize confusion and unexpected audit delays.
- Engagement letter - the engagement letter should be provided to you by your auditor in the planning stage of the audit prior to the performance of any significant audit procedures. The engagement letter documents the scope of the services the auditor will perform and identifies the responsibilities of the auditor and plan management. This letter should be signed by a plan fiduciary and returned to the auditor prior to the auditor performing significant audit work.
- Management representation letter - At the conclusion of the engagement, your auditor will ask plan management for certain written representations. Depending on the type of plan audit and the scope of services being performed, the representations requested will include items related to the recognition of your responsibilities with respect to the audit, completeness of information provided to auditors, compliance with contracts and agreements, measurement and disclosure and existence of subsequent events. This letter will need to be signed by the plan fiduciary with responsibility for the plan's financial reporting.
- Communication to "those charged with governance" - "Those charged with governance" are the person(s) with accountability for the strategic direction of the plan as well as the obligations related to the plan. Communications by the auditors to those charged with governance can be written or verbal and should occur at the beginning, during and near completion of the audit.
- At the beginning of the audit the auditor will communicate their responsibilities under generally accepted auditing standards and the planned scope and timing of the audit. This is quite often done within the engagement letter.
- During the audit, communication of any significant audit findings or issues as well as any difficulties encountered in performing the audit should be made.
- Near completion of the audit, your auditors will communicate the qualitative aspects of accounting practices, any corrected and uncorrected misstatements identified, and any significant audit findings or difficulties encountered not previously communicated.
- At the beginning of the audit the auditor will communicate their responsibilities under generally accepted auditing standards and the planned scope and timing of the audit. This is quite often done within the engagement letter.
- Written communication of Internal Control related matters identified during an audit - Your plan's internal control process should be designed to provide reasonable assurance that material misstatements to the plan's financial statements will not go undetected. In performance of the audit, the plan's auditors are required to obtain an understanding of the plan and its environment, including internal control and may identify deficiencies in your internal control of the following types:
- Deficiency - the design or operation of a control that does not allow management or employees in the normal course of performing their duties to prevent, or detect and correct misstatements on a timely basis
- Significant deficiency - a deficiency, or combination of deficiencies, in internal control less severe than a material weakness yet important enough to merit attention by those charged with governance
- Material weakness - a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the plan's financial statements will not be prevented, or detected and corrected on a timely basis
- Deficiency - the design or operation of a control that does not allow management or employees in the normal course of performing their duties to prevent, or detect and correct misstatements on a timely basis
Any material weaknesses or significant deficiencies identified by your auditor are required to be reported to plan fiduciaries in writing. Deficiencies that are not significant deficiencies or material weaknesses can be verbally communicated.
Call us if you would like further details or examples of these communications or need additional assistance from us.Sincerely,
Kathy Musial, Audit Manager
BIK & CO, LLP
Phone (847) 281-3199
kmusial@bikcpa.com
www.bikcpa.com
