Acca aa s21 Notes

7. Reporting on internal control
Control deficiencies related to financial reporting identified in the system of internal control should be 
communicated appropriately to TCWG and management. Such written communications are often 
referred to as "management letters" or "letters of weakness".
A deficiency (weakness) in internal control exists when:
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A control is designed, implemented, or operated in such a way that it is unable to prevent (or 
detect and correct) misstatements on a timely basis; or
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Such a control is missing.
'Significant deficiencies' are those which the auditor considers to be of sufficient importance to merit 
the attention of TCWG and must be communicated in writing, on a timely basis. A deficiency may be 
regarded as significant if, for example:
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It requires prompt corrective action
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It is likely to result in material misstatement
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Assets are susceptible to loss or fraud
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It raises doubts about management's integrity (eg suspicion of fraud) or competence (eg failure 
to take corrective action).
Other deficiencies should be communicated to an appropriate level of management.
A written communication will usually be structured as follows:
(1)
Say what the problem is.
(2)
Say what the implications, potential effects or consequences of those problems might be.
(3)
Recommend how the problem can be fixed.
So the problem might be that supplier invoices are not cancelled when paid; the consequence of that 
could be that supplier invoices are paid more than once; the way to prevent that is that you mark or 
stamp invoices ‘Paid’.
Auditors will normally also say that they may not have found all control weaknesses and that others 
may exist and that is duty of the board of directors, to ensure that there is an adequate system of 
internal control operating within the company.