National Financial Reporting Authority has observed recurring non-compliances relating to communication between statutory auditors and Those Charged with Governance (TCWG), including Audit Committees. These deficiencies have been identified during investigations and monitoring activities and are inconsistent with the requirements of the Companies Act, 2013 and the Standards on Auditing. The circular reiterates mandatory obligations to strengthen audit governance and oversight.

1. Identification of Those Charged with Governance (TCWG): Statutory auditors are required to formally determine and document, at the beginning of the audit, who constitutes TCWG within the governance structure of the company. Board of Directors qualifies as TCWG, and in appropriate cases, a sub-group such as the Audit Committee may also be treated as TCWG. Identification of only management executives or executive directors as TCWG is not compliant with SA 260 (Revised). Where a sub-group is identified, auditors must assess and document whether communication with the full Board is also necessary.
2. Mandatory two-way communication and documentation: Auditors and TCWG, including the Board of Directors and Audit Committee, are required to maintain a robust two-way communication process throughout the audit. Engagement letters, presentations, or informal exchanges do not constitute adequate compliance. All significant communications, including those conducted orally, must be documented in writing and form part of the audit working papers and the agenda and minutes of meetings of the Board or Audit Committee.
3. Timeliness and frequency of communication: Communication between auditors and TCWG is required to be regular and timely. Interactions confined to the stage immediately preceding approval of financial statements do not meet the intent of the Standards on Auditing. It is expected that auditors and TCWG meet at least once prior to commencement of the audit and again sufficiently in advance of approval of the financial statements.
4. Matters required to be communicated: Auditors are required to communicate, inter alia, the audit strategy, planned scope and timing of the audit, materiality, assessment of risks of material misstatement, significant accounting estimates and judgments, going concern considerations, significant unusual transactions, compliance with laws and regulations, related party transaction issues, and matters relating to auditor independence and safeguards applied.
5. Communication of internal control deficiencies: In accordance with SA 265, deficiencies in internal controls identified during the audit must be evaluated and, where significant, communicated in writing to TCWG and management in a timely manner. Such communication must explain the nature of the deficiencies and their potential impact on financial reporting.
6. Collective responsibility of governance and audit function: The responsibility to establish and maintain effective communication is shared among the Board of Directors, Audit Committee, management, and statutory auditors. Non-compliance with these requirements affects the effectiveness of the governance framework and the reliability of financial reporting.
7. Role of Company Secretaries and dissemination: Company Secretaries of the covered companies are required to place the circular before the Board of Directors and the Audit Committee to ensure awareness and implementation of the reiterated requirements.