External auditor communications with the audit committee include each of the following except:

External auditor communications with the audit committee include each of the following except:

• A. Matters related to why certain accounting policies are considered critical.
• B. Shareholder returns
• C. Significant estimates made by management.
• D. Significant unusual transactions

Answer: (B)

The main idea is what auditors discuss with the audit committee to oversee financial reporting. External auditors focus on issues that can affect the numbers in the financial statements: why certain accounting policies are treated as critical and require careful judgment, significant estimates made by management, and significant unusual transactions, as well as the overall audit plan and timing and any important internal-control findings. Shareholder returns, by contrast, relate to dividend policy and capital allocation decisions, not to the audit process or the content of financial statements. So they aren’t part of the usual communications between the external auditor and the audit committee. The other items directly involve auditing judgments, estimates, or unusual transactions that could impact reported figures.

The main idea is what auditors discuss with the audit committee to oversee financial reporting. External auditors focus on issues that can affect the numbers in the financial statements: why certain accounting policies are treated as critical and require careful judgment, significant estimates made by management, and significant unusual transactions, as well as the overall audit plan and timing and any important internal-control findings. Shareholder returns, by contrast, relate to dividend policy and capital allocation decisions, not to the audit process or the content of financial statements. So they aren’t part of the usual communications between the external auditor and the audit committee. The other items directly involve auditing judgments, estimates, or unusual transactions that could impact reported figures.