Auditing standards require the auditor to communicate reportable conditions in an organization’s internal controls to the audit committee or its equivalent.

Required:

a. Define the term reportable condition, and give three specific examples of items you would consider to be a reportable condition if found during the conduct of an audit engagement.

b. If the auditor’s preliminary assessment of control risk was low, but during the test of account balances, the auditor discovered several material errors in the accounts, does the discovery of the errors indicate significant deficiencies in the internal controls that the auditor should include in a report to the audit committee? Explain.

c. How would the auditor normally identify reportable conditions during the course of an audit engagement?

d. Should the audit be expected to identify all significant weaknesses in an organization’s control structure? Explain, taking into consideration that the auditor must design the audit report to provide reasonable assurance that all material misstatements will be identified.