Integrated Audit Reporting Simulator
A Guide to Communication and Reporting on Internal Control
Step 1: Select an Audit Scenario
The auditor's communication and reporting depend entirely on the findings. Select a scenario below to see how it impacts the required communications and the final audit report on internal control.
Scenario A: No Material Weaknesses
The audit of internal control over financial reporting (ICFR) did not identify any material weaknesses. Some minor control deficiencies were noted.
Scenario B: Material Weakness Found
The audit identified a material weakness related to the company's process for accounting for complex derivatives.
Scenario C: Scope Limitation
Management prevented the auditor from performing necessary procedures over a significant component's internal controls.
Step 2: Determine Required Communications
Based on the selected scenario, the auditor has specific communication responsibilities to management and those charged with governance (e.g., the Audit Committee). The table below shows the requirements for an Issuer (public company).
| Deficiency Type | Communicate to Management? | Communicate to Audit Committee? | Timing |
|---|
Note for Nonissuers: The timing differs slightly. Significant deficiencies and material weaknesses must be communicated by the report release date, while other deficiencies must be communicated within 60 days of the report release date.
Step 3: Generate the Audit Report on Internal Control
The audit findings directly determine the opinion expressed in the auditor's report on ICFR. The report below will update based on your selected scenario.
Report of Independent Registered Public Accounting Firm
To the shareholders and the board of directors of ABC Company
Opinion on Internal Control Over Financial Reporting
Basis for Opinion
The Company's management is responsible for maintaining effective internal control over financial reporting... Our responsibility is to express an opinion on the Company's internal control... We conducted our audit in accordance with the standards of the PCAOB...
Definition and Limitations of Internal Control Over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance... Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements...
