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6. Communication with audit committees A. Communication of significant deficiencies and material weaknesses Auditing standards require significant deficiencies and material weaknesses to be communicated to the audit committee. The communication may take place after the audit is concluded or during the audit if timely communication is important. The relative significance of the matters or the urgency of corrective follow-up action may influence the auditor's decision on when to communicate the conditions. B. Communication. about fraud and illegal acts • If we determine there is evidence fraud may exist (even if the matter is inconsequential) auditing standazds require us to report it to the appropriate level of management If the fraud or potential fraud involves senior management or causes the financial statements to be materially misstated, it wilt be reported directly to the audit committee. We aze required to reach an understanding with the audit committee about the nature and extent of communication expected about immaterial fraud not involving senior management (such as misappropriations committed by lower level employees). In the absence of such an agreement, we should report all instances of fraud to both the appropriate level of management and the audit committee. C. Communication of other information Others matters which are required to be communicated to the audit committee will be included in our management report and include the following: • Auditor responsibility The level of responsibility the auditor assumes for an audit performed in accordance with generally accepted auditing standards and the nature of the assurance an audit provides. • Accounting policies The initial selection of and changes in significant policies or their application, methods used to account for significant unusual transactions, and the effect of significant accounting policies in controversial or emerging areas. • Estimates The process management uses to formulate particulazly sensitive accounting estimates and the basis for the auditor's conclusions about the reasonableness of those estimates. • Adjustments The significant adjustments azising from the audit including those that have been reflected in the financial statements and those that were not. In addition, auditors are required to inform the audit committee about uncorrected or misstatements that management has concluded are not material to the financial statements. Other information The auditor's responsibility for unaudited information in documents containing audited financial statements, the procedures performed, and the conclusions reached.