Auditing and Attestation- Certified Public Accountant (CPA) Practice Exam -

When must an auditor communicate a significant deficiency to management in a nonissuer financial statement audit?

1. In writing, by the report release date.

2. Orally, by the report release date.

3. In writing, within 60 days of the report release date.

4. Orally, within 60 days of the report release date.

The correct answer is: In writing, within 60 days of the report release date.

In the context of a nonissuer financial statement audit, an auditor is required to communicate any significant deficiencies in internal control to management within a specific time frame after the audit has been completed. The standard procedure is to provide this communication in writing within 60 days of the report release date. This requirement is rooted in the auditor's responsibility to ensure that management is aware of any significant deficiencies that could adversely affect the organization’s financial reporting. By communicating in writing, the auditor provides a formal record that can help management prioritize addressing those deficiencies. The significance of the 60-day window is to allow adequate time for the auditor to assess the findings and ensure that the communication is thorough and comprehensive, while still being timely enough for management to take appropriate corrective action. Thus, this approach balances the need for clarity and urgency in financial reporting and internal controls.