ISA 265 require that communication of deficiencies on internal control to management must be in written form by the way of latter. It is this latter that is referred to as management latter. In management letter auditor provide the management with result of his understanding of entity internal control so that management can take action on observed weaknesses so as to improve entity internal control.
The following are content of management latter:
- The list of weaknesses in the structure of accounting system and internal controls, for example, there may be no serial numbering of sales invoice so that it is possible for invoices to be lost and not be entered in the records.
- A list of deficiencies in operation of records or controls
- Unsuitable accounting policies and practices.
- Non compliance with accounting standards or legislation
- Explanation of the risk arising from each weaknesses
- Comment on inefficiencies as well as weaknesses
- Recommendation for improvement.