You are about to start a new audit. You have a draft strategy, a preliminary materiality, and a list of risks. Who do you talk to before fieldwork begins, and what do you say?
HIGH-FREQUENCY: AU-C 260 (nonissuers) and AS 1301 (issuers) require the auditor to communicate an overview of the planned scope and timing of the audit to those charged with governance. This is one of the few communications that happens before fieldwork, not after. The exam tests this timing distinction repeatedly.
The communication helps TCWG understand the approach. It is not a request for permission. The auditor sets scope based on professional judgment, but TCWG often holds information about risks, related parties, and management pressures that the auditor does not yet have.
Six categories show up on the exam:
- The materiality framework. How materiality is determined for the financial statements as a whole, performance materiality, and the threshold for accumulating misstatements.
- Significant risks. Areas requiring special audit consideration, such as revenue recognition, related-party transactions, or unusual estimates.
Common mistakes
- Treating scope-and-timing communication as a year-end formality. It is a planning communication. The exam asks "when does the auditor first communicate planned scope?" and the right answer is "before fieldwork." Trap answers say "at the conclusion" or "with the report."
- Disclosing specific materiality dollar amounts to TCWG. AU-C 260 requires the framework, not the number. Disclosing the threshold compromises audit effectiveness. Candidates pick "the auditor must disclose performance materiality" and miss the distinction.
- Confusing two-way communication with TCWG approval. TCWG provides input but does not approve scope. The auditor exercises independent professional judgment. The trap answer says "TCWG must approve the audit plan."
Bottom line
- AU-C 260 requires the auditor to communicate the planned scope and timing of the audit to those charged with governance (TCWG) before fieldwork begins.
- The communication covers the materiality framework, significant risks, business risks, and any preliminary view on going concern.
- It is an overview only; the auditor does not hand over the audit program or disclose specific materiality dollar amounts.
- Two-way communication is required; TCWG input sharpens the auditor's risk assessment but does not constitute approval of scope.
Exam shortcut
Anchor on three rules. First, the timing is before fieldwork. Any answer saying "at the end" or "with the report" is wrong. Second, the content is the framework, not specific numbers. Disclosing exact materiality is a trap. Third, communication is two-way and required, but TCWG does not approve scope. If the stem says "approve" or "authorize," that's the trap.
The full lesson (about 1,889 words, 13 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- I.F1
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