The correct answer is: None of the statements are correct.

Statement 1 is incorrect. Although the report to management is normally addressed to the Board of Directors, where the company has an Audit Committee it may, with the approval of the directors, be addressed to the Committee. By agreement with the client, it may be sensible to prepare separate reports for different levels of management.

Statement 2 is incorrect. A report to management is not necessary for every audit, since it is not required where there are no significant matters to be brought to the management's attention. As a matter of courtesy, the auditor should in such a case inform the management that no report will be forthcoming.

Statement 3 is incorrect. It is important that when the points in the report are drafted they should be cleared for factual accuracy with the client's staff concerned.