Page 280 - COSO Guidance Book

Specified parties
AU-C section 265 provides a restricted-use paragraph in the example communication letter as follows:
“This communication is intended solely for the information and use of management, [identify the body or
individuals charged with governance], others within the organization, and [identify any governmental
authorities to which the auditor is required to report] and is not intended to be, and should not be, used by
anyone other than these specified parties.”

AU-C section 265 notes, with regard to governmental entities, that a written communication indicating
that no material weaknesses were identified during the audit may be required to be furnished to
governmental authorities. The auditor’s written communication may identify the governmental authority
as a specified party in the restricted-use paragraph. The auditor is not permitted to add other parties as
specified parties.

Knowledge check

2. Which of these terms is defined as a deficiency (or a combination of deficiencies) in internal control,
such that there is a reasonable possibility that a material misstatement of the entity’s financial
statements will not be prevented, or detected and corrected, on a timely basis?

a. Significant deficiency.
b. Material weakness.
c. Internal control deficiency.
d. Major deficiency.

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