Final answer:
The audit team should communicate difficulties encountered during an audit to the audit committee, which is responsible for the company's financial oversight. While management will eventually be informed, the audit committee serves as the independent governance body that needs to be aware of the issues first.
Step-by-step explanation:
When an audit team encounters difficulties in performing an audit, the matters should be communicated primarily to the audit committee of the company being audited. The audit committee is responsible for overseeing the financial reporting and disclosure process. Communicating these difficulties to the audit committee ensures that the governance body responsible for supervisory oversight is informed. Management may also be informed, especially if the issues encountered are within their control to address or if they relate to information that management has provided. However, the audit team would usually report first to the audit committee as they provide an independent oversight function separate from management.
If the difficulties have broader implications, such as systemic issues with auditing standards or practices, it may eventually also be relevant to communicate with bodies like the Securities and Exchange Commission (SEC) or the Public Company Accounting Oversight Board (PCAOB), but the first point of contact in the instance of an issue would be the audit committee.