In the UK- What is an Auditor's letter?

Question

1. What triggers one being written?

2. Are they always requested or will they be provided by an auditor if they have concerns?

3. What sort of areas might one cover?

Answer 1

Are you referring to the matters arising from the audit?

The auditor should consider audit matters of governance interest that arise from the audit of the financial statements and communicate them with those charged with governance. Ordinarily such matters include the following:

• The general approach and overall scope of the audit, including any expected limitations thereon, or any additional requirements.

• The selection of, or changes in, significant accounting policies and practices that have, or could have, a material effect on the entity’s financial statements.

• The potential effect on the financial statements of any material risks and exposures, such as pending litigation, that are required to be disclosed in the financial statements.

• Audit adjustments, whether or not recorded by the entity that have, or could have, a material effect on the entity’s financial statements.

• Material uncertainties related to events and conditions that may cast significant doubt on the entity’s ability to continue as a going concern.

• Disagreements with management about matters that, individually or in aggregate, could be significant to the entity’s financial statements or the auditor’s report. These communications include consideration of whether the matter has, or has not, been resolved and the significance of the matter.

• Expected modifications to the auditor’s report.

• Other matters warranting attention by those charged with governance, such as material weaknesses in internal control, questions regarding management integrity, and fraud involving management.

• Any other matters agreed upon in the terms of the audit engagement.

The auditor should inform those charged with governance of those uncorrected misstatements aggregated by the auditor during the audit that were determined by management to be immaterial, both individually and in the aggregate, to the financial statements taken as a whole.