ISA (UK) 260 requires the auditor to communicate with those charged with governance, which in a UK company means the directors and any audit committee. The auditor must explain its responsibilities and the planned scope and timing of the audit, including significant risks, and report significant findings, with extra independence and reporting duties for listed and public interest entities. Findings are ordinarily communicated before the directors approve the accounts.
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Who are “those charged with governance” in a UK audit?
ISA (UK) 260 paragraph 10(a) defines those charged with governance as the people with responsibility for overseeing the strategic direction and accountability of the entity, including the financial reporting process. A UK addition says this includes the executive and non executive directors of a company and the members of any audit committee, and for other entities partners, proprietors, committees of management or trustees. Management, by contrast, will not normally include non executive directors.
Paragraph 11 requires the auditor to decide whom to communicate with. If the auditor deals with a subgroup such as an audit committee, paragraph 12 requires a judgment about whether the full board also needs to hear. In an owner managed company where every director manages the business, paragraph 13 allows the auditor not to repeat to the directors in their governance role what has already been said to them as managers, but the auditor must be satisfied that everyone has been adequately informed. Paragraph A8 gives the example of a marketing director who may know nothing of what was discussed with the finance director.
What must be communicated at the planning stage?
Paragraph 14 requires the auditor to explain that it is responsible for forming and expressing an opinion on accounts prepared by management with the oversight of those charged with governance, and that the audit does not relieve them of their own responsibilities. A UK footnote notes that in the UK those charged with governance are responsible for preparing the accounts. Paragraph 15 requires an overview of the planned scope and timing, including the significant risks the auditor has identified. Where ISA (UK) 701 applies to the auditor’s report, the auditor must also cover the risks that most affected the audit strategy, resources and the team’s effort.
Paragraph 18 requires the auditor to set out the form, timing and expected general content of its communications. Paragraph A49 suggests planning points are often raised early and, on a first year audit, may form part of agreeing the engagement terms. Communication is two way: paragraph 4(b) stresses obtaining information from the directors, and a footnote refers to Companies Act 2006 sections 499 and 500 on the auditor’s legal right to information.
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What significant findings must be reported?
Paragraph 16 requires the auditor to communicate:
- its views on significant qualitative aspects of the accounting practices, including policies, estimates and disclosures, and why an acceptable practice may not be the most appropriate one for the entity;
- significant difficulties encountered during the audit;
- unless all those charged with governance manage the entity, significant issues discussed with management and the written representations being requested;
- circumstances that affect the form and content of the auditor’s report; and
- any other significant issues relevant to overseeing financial reporting.
Paragraph A21 gives examples of significant difficulties: significant delays by management, unavailability of staff, unwillingness to provide information, an unreasonably short timetable, extensive unexpected effort, restrictions imposed by management, and refusal to make or extend a going concern assessment.
What do other auditing standards add to the list?
Appendix 1 to ISA (UK) 260 lists other standards that require specific communications. The ones met most often are:
| Topic | Standard and paragraph | What is required |
|---|---|---|
| Internal control | ISA (UK) 265 paragraph 9 | Significant deficiencies in writing, on a timely basis |
| Uncorrected misstatements | ISA (UK) 450 paragraphs 12 and 13 | Communicate them and their effect on the opinion, identify material ones individually, request correction, and cover prior period items |
| Related parties | ISA (UK) 550 paragraph 27 | Significant related party issues, unless all those charged with governance manage the entity |
| Going concern | ISA (UK) 570 paragraph 25 | Events or conditions casting significant doubt |
| Fraud, laws and regulations | ISA (UK) 240 and ISA (UK) 250 Section A | Identified or suspected fraud and non compliance |
| Audit report | ISA (UK) 705 and ISA (UK) 706 | Expected modifications, emphasis of matter or other matter paragraphs |
Deficiency reporting is covered in our page on management letters, related party points in auditing related parties, and going concern in going concern and the auditor.
What extra applies to listed and public interest entities?
For listed entities, paragraph 17 requires a statement that the team and firm have complied with independence requirements, disclosure of relationships that may bear on independence, including total audit and non audit fees by category, and the safeguards applied. Paragraph 20 requires this in writing. The detailed rules sit in the FRC Ethical Standard.
Where an entity reports on how it has applied the UK Corporate Governance Code, whether required to or voluntarily, paragraph 16-1 requires the auditor to give the audit committee its views on business risks and materiality, significant accounting policies, management’s valuations of material assets and liabilities, internal control (without giving an opinion on it), the board’s assessment of principal and emerging risks, and the going concern and prospects statements.
For public interest entities, paragraph 16-2 requires an additional report to the audit committee. It must include, among other things, a declaration of independence, the key audit partners, the methodology, quantitative materiality, going concern judgments, significant deficiencies and whether they have been resolved, valuation methods and whether all requested explanations and documents were provided. Paragraph 20-1 requires it to be in writing, signed and dated by the engagement partner, and paragraph 21-1 requires it no later than the date the auditor’s report is submitted.
Must it be in writing, and when must it happen?
Paragraph 19 requires significant findings to be in writing if, in the auditor’s judgment, oral communication would not be adequate; written communications need not cover everything that arose. Paragraph 21 requires communication on a timely basis. Paragraph A49 suggests raising significant difficulties as soon as practicable if the directors could help resolve them or a modified opinion is likely, and paragraph A50-1 says findings are ordinarily communicated before the directors approve the accounts, which links to approving and signing company accounts.
Paragraph 23 requires oral communications to be recorded on the audit file, with when and to whom they were made, and written ones to be retained. Paragraph 7 recognises that law may restrict what the auditor can say, for example where alerting the entity could prejudice an investigation under anti money laundering legislation.
Illustration: a three director private company
Illustration only. A company has three directors, responsible for operations, finance and sales, and no audit committee. All three manage the business.
- Planning. The auditor sends all three a letter explaining its responsibilities, the timetable and the significant risks identified: revenue cut off and stock valuation.
- Fieldwork. Stock records arrive three weeks late. The auditor raises this promptly as a significant difficulty because it threatens the timetable.
- Completion. Before the board approves the accounts, the auditor meets all three directors. It reports in writing a significant deficiency over payroll authorisation, lists an uncorrected stock cut off error of £18,000 and asks for it to be corrected, and explains the written representations it needs.
Most of this was discussed with the finance director during fieldwork, but paragraph 13 means the auditor must be satisfied the other two directors are properly informed.
What if communication with the directors breaks down?
Paragraph 22 requires the auditor to evaluate whether two way communication has been adequate. If not, it must consider the effect on its risk assessment and its ability to obtain sufficient evidence, and take appropriate action. Paragraph A52 notes that poor communication may indicate an unsatisfactory control environment. Paragraph A53 suggests possible actions, including modifying the opinion on the basis of a scope limitation and obtaining legal advice.
Common mistakes are assuming that a conversation with the finance director informs the whole board, leaving findings until after the accounts are approved, failing to record oral discussions, and omitting the list of uncorrected misstatements.
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Related Accountapedia entries
- Management representation letters
- The auditor and non compliance with laws
- The auditor and other information: ISA (UK) 720
- Internal audit vs external audit
- The statement of directors’ responsibilities
Sources
- Financial Reporting Council: ISA UK 260 Revised November 2019 Updated September 2025
- legislation.gov.uk: Act 2006 c. 46, section 499
- Financial Reporting Council: ISA UK 265 Updated September 2025
- Financial Reporting Council: ISA UK 450 Revised June 2016 Updated September 2025
- Financial Reporting Council: ISA UK 550 Updated September 2025
Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.