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Standards on Auditing i(ii) 5.

Audit Planning
a. acquiring knowledge of the client’s
accounting system, policies and internal
control procedures
200 Basic Principals’ Governing Audit of b. establishing the expected degree of
Financial Statements ........................................................1 reliance to be placed on internal control;
200A Objective and Scope of Financial Statement1 c. determining and programming the nature,
210 Terms of Audit Engagement...........................1 timing, and extent of the audit procedures
220 Quality Control for Audit work.....................2 to be performed; and
230 Audit Documentation.......................................2 d. coordinating the work to be performed.
240 The Auditors responsibility relating to fraud 6. Audit Evidence
and error in an audit of financial statement.................2 Compliance procedures are tests designed to obtain
250 Consideration of Laws and Regulation in an reasonable assurance that those internal controls on
Audit of Financial Statement ..........................................3 which audit reliance is to be placed are in effect.
260 Communication with Those Charged With a. Existence
Governance ........................................................................3 b. Effectiveness
265 Communicating Deficiencies in Internal c. Continuity
Control to Those Charged With Governance and Substantive procedures are designed to obtain evidence
Management ......................................................................4 as to the completeness, accuracy and validity of the data
299 Responsibility of Joint Auditors.....................4 produced by the accounting system.
300 Planning an Audit of Financial Statement ...4 They are of two types:
315 Identifying and Assessing Risk of Material a. tests of details of transactions and
Misstatement through Understanding Entity and Its balances;
Environment ......................................................................4 b. Analysis of significant ratios and trends
320 Audit Materiality..............................................5 including the resulting enquiry of unusual
330 Auditors Response to Assessed Risk..............5 fluctuations and items.
402 Audit Consideration Relation Entity Using 7. Work performed by others
Service Organisation ........................................................5 8. Accounting system and Internal Control
500 Audit Evidence..................................................5 9. Audit report and conclusion
501 Audit Evidence – Additional Consideration a. the financial information has been
for Specific Items...............................................................6 prepared using acceptable accounting
505 External Confirmation ....................................6 policies, which have been consistently
510 Initial Engagement – Opening Balance ........6 applied;
520 Analytical Procedures......................................6 b. the financial information complies with
530 Audit Sampling .................................................6 relevant regulations and statutory
540 Auditing Accounting Estimates, Including requirements; and
Fair Value Accounting Estimate and Related c. there is adequate disclosure of all material
Disclosure ...........................................................................7 matters
550 Related Parties ..................................................7
560 Subsequent Events............................................7 200A Objective and Scope of Financial Statement
570 Going Concern ..................................................8 1. Objective of Audit
580 Written Representation ...................................8 - Audit doesn’t give assurance as to future
600 Using the Work of another Auditor ..............8 viability of the enterprise or its or efficiency or
610 Relying Upon the Work of Internal Auditor8 effectiveness with which its management has
620 Using the Work of an Expert..........................8 conducted the affairs of the enterprise.
700 The Audit Report On Financial Statement ..9 2. Responsibility of financial statement
710 Comparatives ....................................................9 3. Scope of Audit
2400 Engagement to Review Financial Statement9 a. The Terms of Engagement
3400 Examination of Prospective Financial b. The requirement of relevant regulation
Information ..................................................................... 10 c. Pronouncement of the Institute
4400 Engagements to Perform Agreed Upon d. Judgments of various law
Procedures Regarding Financial ................................ 10 4. Organising of an Audit
4410 Engagements to Perform Agreed Upon 5. Inherent limitation of Audit
Procedures Regarding Financial ................................ 11
210 Terms of Audit Engagement
200 Basic Principals’ Governing Audit of 1. The purpose of this Standard on Auditing (SA) is to
Financial Statements establish standards on:
1. Integrity, Objectivity and Independence a. agreeing the terms of the engagement with
2. Confidentiality the client; and
3. Skill and competence b. the auditor’s response to a request by a
4. Documentation client to change the terms of an

____________________________________________________________________ 1
Literature on Standards on Auditing (SA), Standards on Review Engagement (SRE),
Standard on Assurance Engagement (SAE) and Standard on Related Services (SRS)
Prepared by Jigar Shah

6. Documentation are work paper prepared or obtained e. Terms of Audit engagement a. Management’s responsibility for the audit programme financial statements. 9. Sometimes. Direction to Audit assistant 3. Matters to be reviewed on timely basis 4. Analyze audit evidence obtained from c. Changes to be made to audit plan and b. Essential factors for incorporating quality control governance or third parties a. the date of group auditor report g. before completion of the engagement. to respond appropriately to identified or and make a final decision. Arrangements to be made with the memorandum. from the client by the auditor and retained by him in documentation and other information connection with the performance of his duties requested in connection with the audit. d. To identify and assess the risks of material j. Professional requirement 3. Acceptance and retention of Clients be recorded in an audit engagement letter or other g. 2. Any restriction of the auditor’s liability for 7 years from the date of audit report or if later when such possibility exists. Retention of audit documentation/working papers f. Contents of Documentation c. he through designing and implementing should consider the appropriateness of doing so and appropriate responses. assurance. Consultation of the engagement. The objective of the audit of financial b. Fraud refers to intentional misrepresentation of financial information by one or more individuals 220 Quality Control for Audit work among employees. Unrestricted access to whatever records. and should agree on the new terms. The scope of Audit. In case of recurring audit. The auditor and the client should agree on the terms e. Management’s responsibility for substantive and compliance procedures preparation of the financial statements on e. Standards on Review Engagement (SRE). PAF file contents of other auditors and experts in some 5. Supervision should be sent preferable before the start of the 3. Fraud of two types –Fraudulent financial reporting b. Additional Points performed in accordance with SAs and a. mgmt. (He should assess c. i. change/revise terms of engagement or not b. Monitoring suitable form of contract. Arrangements concerning the involvement . if any a going concern basis. in the case of 7. Objective: f. Assessment of inherent and control risk statements. Summary of significant matter that were of internal auditors and other staff of the identified during audit and how they were client. a. when the financial the date of audit report statements for the preceding period were 8. auditor has to misstatement in the financial statements use his professional knowledge in order to due to fraud. Assignment level of assurance d. 1949. Delegation 2. Overall audit plan and audit programme a. before making further suspected fraud. Involvement of auditors and experts h. engagement to one that provides a lower c. Objective: between the auditor and the client. Terms of audit engagement should be in writing and 2. Incase an auditor is requested to change in evidence about the assessed risks of engagement to the one that offers lower level of material misstatement due to fraud. rules and regulation 1. c. Ownership and custody of audit report audited by another auditor. A sufficient and appropriate record for the subjected to a peer review under the basis for the audit report and. Audit completion assembly file with 60 days from an initial audit. including reference to 230 Audit Documentation the law. if any. changes) 2. To obtain sufficient appropriate audit 6. Planning an Audit applicable legal and regulatory b. it is known as completion e. Chartered Accountants Act. Current File contents aspects of the audit. predecessor auditor. Skills and competence and misappropriation of assets ____________________________________________________________________ 2 Literature on Standards on Auditing (SA). connection with audit 3. b. Involvement of internal audit and other 240 The Auditors responsibility relating to fraud staff of the enterprise and error in an audit of financial statement i. Any other changes. addressed. Audit completion memorandum d. Standard on Assurance Engagement (SAE) and Standard on Related Services (SRS) Prepared by Jigar Shah . The fact that the audit process may be a. A reference to any further agreements 1. Written confirmation with management in requirements. Arrangements concerning the involvement 4.. Evidence that the audit was planned and 5. d.e. those charged with 1. Review assignment in order to avoid any misunderstanding 4. 1. The agreed terms would need to f.

d. Obtain Management Representation Letter d. Non-compliance refers to act of omission or adverse comments on the report. Assignment of personnel government departments or payment of c. if auditor 250 Consideration of Laws and Regulation in an is of the view that the non-compliance has material Audit of Financial Statement impact on the financial then he may qualify or make 1. and an and regulation to the employees overview of the planned scope and timing of the b. Professional Skepticism a. Communication with regulatory or legal authorities. compliance and non-compliance 2. in case if the non- 2. Payment without proper exchange control 8. Management’s responsibility to ensure compliance 260 Communication with Those Charged With with laws and regulation and it should design proper Governance and sound internal control to prevent non. which is contrary to evidence then he make issue disclaimer of opinion. Penalty. compliance of specific rules and regulation 3. Possible effect on going concern e. Indication of non-compliance (several Indicators) a. Maintaining records relating to audit. Withdrawal from the engagement. Meaning of those charged with governance: the committee person or organisation with responsibility to 4. consider matter of governance interest that arise b. Documentation for the same 8. Inquire mgmt whether the entity has obligation relation to accountability of the entity complied with concerned laws and 6. Adverse media comment an auditor of the entity 7. Obtain written representation from mgmt unintentional misrepresentation of information or that all known or possible non-compliance misapplication of accounting policies has been disclosed to the auditor 5. Promote effective two-way communication between auditor (track record) the auditor and those charged with governance f. Standards on Review Engagement (SRE). or any threat c. The SA doesn’t apply to other engagements where compliance is so adverse. Establishment of legal department information relevant to the audit. Investigations by regulatory authority and b. Audit Risk (Inherent Risk. 1. Control b. Errors refers to mathematical misstatement or c. governance the responsibilities of the auditor in a. Communication with those charged with c. Audit matters to be communicated ____________________________________________________________________ 3 Literature on Standards on Auditing (SA). Documentation retainership fees 10. Unauthorized transaction or improper 11. Effect of non-compliance on the financial statement: a. loans to related parties or such transaction if required which are permitted. Control Risk and d. prevailing laws and regulation 9. Accounting principals and procedures fines or penalties d. Professional Skepticism a. Discussion with audit team arises due to non-compliance d. Communicate clearly with those charged with compliance viz. 13. Inspect correspondence with relevant from the audit of financial statement and licensing and regulatory authority communicate them with those charged with governance 7. remedy. If the auditor is commission by entity being audited either prevented by the entity from getting sufficient audit intentional or unintentional. Audit Procedure: overseeing the strategic direction of the entity and a. Standard on Assurance Engagement (SAE) and Standard on Related Services (SRS) Prepared by Jigar Shah . Auditors responsibility states that auditor should regulation. Maintaining register of significant laws 3. Reporting to users of financial statement.4. fines. Proper training and understanding of laws relation to the financial statement audit. litigation. that forces auditor to seek the auditor is specifically engaged to report on non. Inquiry with mgmt b. Whether potential effect has a bearing on Detection Risk) true and fair view of the financial 7. Response to assessed risk of material misstatement statement due to fraud 6. Payments for unspecified services like 12. Reporting of non-compliance to audit 5. Obtain from those charged with governance c. Responsibilities of auditor 6 points 5. Unusual payments towards legal and 9. Auditor needs to decide whether he can continue as f. Inherent limitation of audit (Auditors responsibility to assess) b. Provide those charged with governance with timely with which entity has to comply observations arising from the audit that are (checklist) significant and relevant e. The effect of fraud and error in FS and further its’ documentation impact on Auditor’s Report c. Whether potential effect requires governance disclosure 6. Communication with mgmt or those charged with recorded transaction governance e. Reporting of non-compliance by internal 4.

or timing. Auditor should assess when to communicate this extent of his audit procedure matter with those charged with governance 6. and and correct. and extent of the audit procedures b. reliance to be placed on internal control. or detect and correct. Each joint auditor is required is rely on the work 9. circumstances. Additional consideration to be undertaken in initial deficiencies factors are: engagement: Performing procedures required by: a. policies and internal a. Auditor shall communicate in writing with those strategy or the audit plan. 7. Documentation for the same performed by other joint auditor and it is not 10. Audit strategy or audit programme/plan control that. is of sufficient importance to merit the attention of b. in the auditor’s professional judgment. or detect to be performed. Significant deficiency in internal control – A 3. and. misstatements in the financial statements c. acquiring knowledge of the client’s 1. b. Audit Planning: It refers to planning by an auditor to 265 Communicating Deficiencies in Internal enable him to conduct an effective in an efficient Control to Those Charged With Governance and and timely manner. A control is designed. 2. say. Significant audit adjustment 3. implemented or control procedures. Preliminary engagement activity to be undertaken 2. Division of work: Region wise/ branch. There are certain regulation which requires auditors necessary to review work performed by other to communicate the same with statutory body per auditors. then a. Business risk – A risk resulting from significant 299 Responsibility of Joint Auditors conditions. for such changes 4. determining and programming the nature. events. Significant accounting policies – changes Assetwise/Liabilitywise. There are certain areas where responsibility of joint audit auditors are jointly and severally g. It consists of: Management a. a. Expected modification in auditor’s report 5. pertaining to the above. f. LFAR under Bank audit to be presented to the joint auditors should express his own opinion RBI through a separate report. susceptibility to loss or fraud of the related a) SA 220 regarding the acceptance of the client asset or liability relationship and the specific audit engagement. Material uncertainties casting doubt as to should be in writing. financial statement amounts exposed to and the deficiencies b) Communicating with the predecessor auditor. etc 300 Planning an Audit of Financial Statement 1. auditor will give opinion which is not appropriate. Deficiency in internal control – This exists when: accounting system. 1956 ability to achieve its objectives and execute its ____________________________________________________________________ 4 Literature on Standards on Auditing (SA). Disclosure of a material misstatement due to error or fraud as prior period items in 315 Identifying and Assessing Risk of Material the current year’s Statement of Profit and Misstatement through Understanding Entity and Its Loss Environment e. where there has been a change of auditors. Each joint auditor is responsible for drafting his own audit programme and decide on nature. Income and Expenditure and their selection wise or Plant wise c. and the reasons charged with governance. Where the joint auditors are in disagreement. agreed by all the auditors and going concern the division of work may also be communicated to e. Absence of a risk assessment process compliance with relevant ethical requirements within the entity where 6. A control necessary to prevent. coordinating the work to be performed. Audit risk is a risk that monetary error is greater oversee the preparation of the financial than tolerable limit will remain undetected and the statements. establishing the expected degree of prevent. 2. operated in such a way that it is unable to b. timing and 8. Evidence of management’s inability to 1. Any significant changes made during the those charged with governance audit engagement to the overall audit 3. in c. Report in case of NBFC to RBI for compliance for prudential norms. Documentation: deficiency or combination of deficiencies in internal a. Disagreements with management the mgmt. misstatements in the financial d. Development of an overall audit plan d. Standard on Assurance Engagement (SAE) and Standard on Related Services (SRS) Prepared by Jigar Shah . The overall scope of the audit 2. actions or 1. What constitutes significant internal control 4. b. statements on a timely basis is missing. Standards on Review Engagement (SRE). b. on a timely basis. Difficulties encountered in conducting 4. The statement doesn’t deal with branch auditors inactions that could adversely affect an entity’s under section 228 of companies act. Documentation of division of work amongst auditor d. etc.

The auditor considers how a service organisation element or account affects clients accounting and internal control c. implemented and maintained by those charged with 2. Misstatement can result from errors or frauds and evidence is purely an auditor’s judgment. The auditor of service organisation may provide e. And whether the reliance for the same can be placed. Financial Statement level operating effectiveness b. The audit objective of this standard is to reduce objectives and strategies audit risk to an acceptably low level by obtaining 3. Audit procedures: What is Nature. Detection 5. validity of the data produced by the accounting system. he should consider: a. Analytical procedures organisation to provide him information on specified c. required to be disclosed 2. Discussion with the engagement team 4. Documentation for the same. 330 Auditors Response to Assessed Risk 6. while forming his opinion the auditor c. safeguarding and service organisation auditor asset accountability 5. Inquires with mgmt and others within organisation entity 3. Evaluating sufficiency and appropriate audit 5. In the end. Substantive procedures are designed to obtain uncorrected misstatement on financial information is evidence as to the completeness. Compliance procedures are tests designed to obtain business and complexities etc reasonable assurance that those internal controls on 4. Standards on Review Engagement (SRE). Report on suitability on design misstatement at: b.e whether it is obtained from internal or external sources. Entity’s internal control components: service organisation. effectiveness and efficiency of performed at relevant assertion level and includes operations. Audit evidence is obtained from compliance and statements substantive procedures. The omission of material information system. Audit Evidence means sufficient and appropriate 320 Audit Materiality audit evidence 1. Materiality depends upon entities size. or from the setting of inappropriate 1. timing which audit reliance is to be placed is in existence and extent of audit procedures and the control is operating effective and the control 5. Risk assessment b. While planning the auditor should assess the 6. Existence and audit risk b. What are Risk assessment procedures: significance of activities performed by service a. Monitoring report on: 8. Relevant assertion level 9. Materiality is done at while deciding nature. ____________________________________________________________________ 5 Literature on Standards on Auditing (SA). Control environment a. It is . Control activities: authorization. safeguarding of assets. Scope and work performed by the segregation of duties. 3. when the auditor of the client uses the report of the 7. a. Timing and governance. Documentation for the same 500 Audit Evidence 1. balance and disclosure and substantive analytical 4. Any item in the FS is said to be material if it refers to the relevance and reliability influences the mind of the reader of those financial 3. Report on suitability of design and a. Continuity should consider whether the aggregate of 5.Qualitative and Quantitative 2. Sufficient refers to the quantum whereas appropriate 2. The professional competence of the c. There is a direct relationship between materiality a. Effectiveness 7. c. Control and procedures. Internal control – The process designed. An inaccuracy in gathering or processing data from which financial statements are 402 Audit Consideration Relation Entity Using prepared Service Organisation b. Information system and communication auditor d. Identifying and assessing the risk of material a. Types of Audit Risk: Inherent. Standard on Assurance Engagement (SAE) and Standard on Related Services (SRS) Prepared by Jigar Shah . d. There is inverse relationship between audit has so operated through the period of intended materiality and degree of audit risk reliance 6. management and other personnel to Extent of Audit procedures provide reasonable assurance about the achievement 3. The auditor can request the auditor of service b. Test of Controls (to test operating effectiveness) of an entity’s objectives with regard to reliability of 4. Check reliability of audit evidence i. strategies. Substantive procedures: Substantive procedures are financial reporting. and compliance test of details or class of transaction and account with applicable laws and regulations. sufficient appropriate audit evidence. Nature and content of the report b. accuracy and material. may consist of the following: 6. nature of 4. The omission of financial statement 1. Observation and Inspection areas.

to the management’s request 4. All of the above require mgmt representation so as c. Anticipated results of the entity. Accounts payable balances. Determining whether the opening balances 8. reperformance. Should document the reasons for acceding subjected to the same audit procedure. such as an estimation of mgmt. Standard on Assurance Engagement (SAE) and Standard on Related Services (SRS) Prepared by Jigar Shah . Comparable information for prior periods. 4. Accounts receivable balances. Bank balances and other information from in the final review stage of the audit bankers. such as Representation and Audit conclusion and Reporting budgets or forecasts. At three stages: management a. depreciation charge for the year. Part A: Attendance regarding physical inventory it’s impact on FS and auditors report. confirmation/evidence 2. procedures d. population of audit relevance such that all sampling h. Loans from lenders. accounting policies. d. Predictive estimates prepared by the to completeness of information provided by the auditor. internal) and means of collection (inspection. Selecting items for audit evidence: a. inquiry and external confirmation) 3. internal-external. Sampling risk – The risk that the auditor’s management. Property title deeds held by third parties. Apply alternative procedures to obtain reaches an erroneous conclusion for any reason not appropriate evidence related to sampling risk. external. Long outstanding share application money units have a chance of selection in order to provide 4. As a means of substantiating the financial necessary. Accounting policies are followed observation.7. a particular item affecting assertions made by the 3. statement for preceding financial year 6. Types: 5. Audit sampling (sampling) – The application of f. c. by the auditor assertion relating to business transaction 3. Similar industry information. Management b. each of which is a group of 1. Audit procedures (prepared for first time): the auditor in respect of which the auditor seeks to obtain an appropriate level of assurance that the ____________________________________________________________________ 6 Literature on Standards on Auditing (SA). counting 2. audit might accept or reject such plea made by the. Stocks held by third parties. Part B: Inquiry regarding claims and litigation 520 Analytical Procedures 3. 5. external. assess the investigation of unusual items b. Stratification – The process of dividing a population 510 Initial Engagement – Opening Balance into sub-populations. Finally. or evidence through direct communication from third with other entities of comparable size in party in response to a request for information about the same industry. such as a 505 External Confirmation comparison of the entity's ratio of sales to 1. Assessment whether external confirmation is b. Selecting 100% items closing balances have been correctly b. Specific testing brought forward to the current period c. Standards on Review Engagement (SRE). broad parameters viz Procedure. Investments purchased but delivery not 530 Audit Sampling taken. Audit sampling b. If the auditor is unable to obtain sufficient 501 Audit Evidence – Additional Consideration appropriate audit evidence concerning opening for Specific Items balance then he shall make a relevant assessment on 1. and extent of reliance to be placed on the Analytical c. It is the process of obtaining and evaluating trade debtors with industry averages. Overall review of the financial statements a. conclusion based on a sample may be different from 7. If the auditor agrees then: the conclusion if the entire population were a. Determining whether the prior period’s a. on some valid grounds. Each of the above factors are classified into three a. analytical consistently procedures. 3. Auditor should check the reliability of external conclusions about the entire population. in such case the wishes to draw conclusions. Part C: Valuation and disclosure of long term 1. Part D: segment information 2. Sometimes the Mgmt might request for not sending sample is selected and about which the auditor request. The Analytical review procedures include both investment inter-firm and intra firm comparisons 4. Process of external confirmation the auditor with a reasonable basis on which to draw 5. audit procedures to less than 100% of items within a g. 6. Situation where external confirmation arise: c. Tolerable misstatement – A monetary amount set by 2. At planning stage 2. e. Non-sampling risk – The risk that the auditor b. Evidence are of two types: source of evidence reflect the application of appropriate (internal. Population – The entire set of data from which a 6. recalculation. 1. When financial statement are prepared for the first sampling units which have similar characteristics time or when another auditor audited financial (often monetary value).

e he can report to include an additional date check prior year’s estimates. coverage etc controlling the reporting enterprises f. Formulating the conclusion c. monetary amount set by the auditor is not exceeded 4. evidence with respect to conditions that did not existed at the b/s date and arise subsequent to b/s 540 Auditing Accounting Estimates. Evaluating any changes to sample procedures inorder to detect RPT k. the auditor has no obligation to perform any audit procedures regarding such financial statements. in fact it is not material misstated. Inquire management their internal control j. Haphazard sampling) committee minutes inorder to find any 10. Selection the method of sampling person e. in case at a reasonable estimate. Determining the sample size 3. purchase of business. Systematic. Including date like amalgamation. f. the actual compliance rate would support during the year such an assessment. Type II (disclosure): those events which provides misstated. After the financial statements have been issued. Review working papers years and auditors h. Steps in Audit sampling party to a transaction a. Related party is mgmt. Individual directly or indirectly precision level. Holding & Subsidiary companies b. Accounting estimates are the responsibility of the a. Specifying the sampling unit d. Key mgmt personnel and relative of such d. Disclosures risk. 4. Type I (where it requires adjustment): those events amount balance or class of transactions is materially which provide evidence with respect to condition misstated. sale Fair Value Accounting Estimate and Related of share and debentures etc Disclosure 3. although preparation of financial statement like debtors the sample result supports the conclusion that a recorded insolvent. Standard on Assurance Engagement (SAE) and Standard on Related Services (SRS) Prepared by Jigar Shah . Related party audit procedures g. although the SEBI sample result does not support the auditor’s assessment e. Auditor should follow risk assessment procedures in by the actual misstatement in the population. Review various records like shareholder 9. in fact it is materially misstated. Types of Sampling (Random. operating policies of either the reporting or other 8. Specifying the audit objective to which it 2. The auditor needs to amend auditors has made proper accounting estimates i. order to evaluate any material changes which might 7. 6. Substantive Procedures: (i) Risk of Incorrect Rejection: The risk that. Joint ventures population items c. present at balance sheet date and estimation made in (ii) Risk of Incorrect Acceptance: The risk that. the actual compliance rate would not support such 5. although the560 Subsequent Events sample result supports the conclusion that a recorded 1. Tolerable rate of deviation – A rate of deviation effect FS and in turn Auditors Report from prescribed internal control procedures set by the auditor in respect of which the auditor seeks to 550 Related Parties obtain an appropriate level of assurance that the rate 1. Carry out audit procedures in relation to mgmt amendment 3. Provide new audit report. Evaluating the sample b. Choosing a sample selecting technique a. Tests of Control: d. Review major investment transaction of control risk. Specifying sample parameters like e. Auditor’s responsibility is to check whether mgmt b. review board minutes. Review income-tax return and assessment (ii) Risk of Over Reliance: The risk that. Sampling risk: RPT a. Review the papers or prospectus filed with (i) Risk of Under Reliance: The risk that. owner or any person or entity of deviation set by the auditor is not exceeded by the in a position to influence significantly mgmt or actual rate of deviation in the population. or audit Unit sampling. Mgmt Representation an assessment. Standards on Review Engagement (SRE). Monetary records. Types: relates a. became solvent after B/s date amount balance or class of transactions is no materially 2. Reporting on audit conclusion b. ____________________________________________________________________ 7 Literature on Standards on Auditing (SA). his experience and if restricted to amendment and should mgmt has estimates on certain formula he needs to indicate that the auditors report is review the formula and decide whether estimates are restricted solely to the amendment of the correct in his opinion. If the estimates are complex f/s described in the relevant note he may take the help of an expert in order to arrive c. Defining the population and number of b. Auditors responsibility when the events arise after 1. The risk of material misstatement is greater when auditors report but before financial statements are accounting estimates are involved issued 2. although the proceeding sample result supports the auditor’s assessment to control 4. Drawing a sample report i. Associate companies c.

auditor b. a fact becomes known to the auditor g. Inquire how management intends to the work of the other auditor will affect the audit address the matter in the financial 3. 1. When the principal auditor uses the work of another statements need amendment and. 610 Relying Upon the Work of Internal Auditor Operating Indicators and Other indicators. To conclude. General Purpose f/s are prepared with the going other auditor concerned assumption 4. Fraud and Error 3. There should be sufficient liaison between the 3. The other auditor. Contingent Liabilities 4. Investment 2. the principal auditor should express a auditor’s report. An expert is a person who has specialized skill. whether employed the client e. the shall: 600 Using the Work of another Auditor a. value and liabilities at its payment value. may have caused the auditor to amend the auditor’s report. Acknowledgement by mgmt of its responsibility for 3. Objective: principal auditor and the other auditor. comment on whether the existence of proper internal adverse opinion for the same based on the audit system is commensurate with the size and assessment of the going concern assumption. The auditor may ask the other auditor to perform 2. Auditor should check the reliability of the authority 4. Contents of the Management Representation Letter knowledge and experience in a particular field other a. Determine whether the financial 2. c. Special Purpose f/s may or may not be prepared with such audit procedures which e think necessary the going concerned assumption 5. To determine the implications for the c. had it been known to the auditor at the date of h. Auditor’s prerogative to issue unqualified. b. Company law matters that. qualified. if so. when. Skill and competence of an expert d. whether a material uncertainty b. and that responsibility is 3. Discuss the matter with management and. the principal auditor has not been able to exists related to events or conditions that perform sufficient additional procedures may cast significant doubt on the entity’s regarding the financial information of the ability to continue as a going concern. based on the audit evidence the other auditor cannot be used and obtained. that the work of b. Standards on Review Engagement (SRE). Determining the need for the work of an expert c. should management’s use of the going concern co-ordinate with the principal auditor assumption in the preparation and 7. To obtain sufficient appropriate audit 6. The written rep are issued before the date of audit 620 Using the Work of an Expert report 1. CARO (2003) states that the auditor should 6. a. the auditor’s report. However. Professional care the matters with which they deal. Technical competence appropriate audit evidence on their own about any of d. Scope of coverage audit evidence. and component audited by the other auditor. Taxation etc. the principal auditor should determine how c. Scope and objective of internal audit function 2. The auditor should use his professional judgment where appropriate. Mgmt representation cannot be substitute for other not reduced by the external auditor’s use of the work audit evidence of the internal auditors. If the going concerned assumption is not valid then because there is a limitation on the scope the FS shall be prepared as assets on its disposal of audit. General evaluation of internal audit function or else he may chose certain other audit procedures a. nature of the entity business (if entity has paid up capital and reserve above 50 lakhs at the 580 Written Representation commencement of the year or avg annual t/o is over 1. Accounting Policies than accounting and auditing. based on his procedures. He should assess statements a. Objectivity of expert. He should consider significant findings of 1. 1. 4. Fixed Asset been issued. 7. Scope of work of other auditor 570 Going Concern c. 5. Legal matters or related in other manner to the client ____________________________________________________________________ 8 Literature on Standards on Auditing (SA). Written rep are requested from those who are 50 crore during 3 preceding F. When the principal auditor concludes: presentation of the financial statements a. Professional competence of other auditor b. they do not provide sufficient c. auditor. Organisational status 5.Y) responsible for preparation and presentation of f/s 2. Although written representations provide necessary b. 6. those charged with whether he relies on the work done by another governance. after the financial statements have f. Indicators of going concerned: Financial Indicators. qualified opinion or disclaimer of opinion 4. The external auditor has sole responsibility for the preparing FS audit opinion expressed. knowing the context in which his evidence about the appropriateness of work is to be used by the principal auditor. Standard on Assurance Engagement (SAE) and Standard on Related Services (SRS) Prepared by Jigar Shah .

should state in the auditor’s report that the • a statement of the responsibility of corresponding figures are unaudited. opinion and adverse opinion) 6. Addressee regarding the corresponding figures. the a. and results in a modification prior consent is obtained by the auditor) of the auditor’s report regarding the current period figures. in all material respects. Place of signature performed by an auditor viz terms of engagement. shall apply. Title auditor’s report should be modified b. through inquiry and analytical procedures e. the results of the expert’s work in the light 5. disclaimer of expression of negative assurance. Addressee 1. Scope paragraph auditor’s opinion is on the current period financial ____________________________________________________________________ 9 Literature on Standards on Auditing (SA). Standards on Review Engagement (SRE). work performed by others. Auditors’ signature planning an audit. not specifically identify comparatives because the d. this is expressed in the form of and negative assurance. Terms of Engagement: The auditor and the client financial statements. When the prior period financial statements • identification of the financial are not audited. Opening paragraph comparatives comply. the auditor’s report 700 The Audit Report On Financial Statement should also be modified regarding the 1. Corresponding previous year figures necessary appropriate. their consistency with the 4. unresolved. Moderate Assurance: A review engagement • a reference to the financial provides a moderate level of assurance that the reporting framework used to information subject to review is free of material prepare the financial statements. Title 710 Comparatives b. b. f. Opinion paragraph 2. b. • an expression of opinion on the 3. deciding the nature a. b. and years figures c. Reporting a. the entity’s management and the responsibility of the auditor. check: statements as a whole. Maintain adequate skill and care before relying the 6. compared with the current period 6. Contents of audit report regarding the current period figures.All such procedures g. Matter that do not affect audit opinion timing and extent of audit procedures. should agree on the terms of the engagement. Opening paragraph c. When the comparatives are presented as the entity’s management and the corresponding figures. conclusions. modification of the auditor’s report 2. Standard on Assurance Engagement (SAE) and Standard on Related Services (SRS) Prepared by Jigar Shah . Reference to expert report in case of qualified 7. 3.5. but does not result in a taken as a whole. Types of report documentation. General Principals of RE • a reference to the auditing a. with • identification of the financial the financial reporting framework relevant to the statements audited. the incoming auditor statements audited. financial statements being audited. h. The auditor’s report should contain a clear written corresponding figures expression of opinion on the financial statements b. Procedures and evidence: . the auditor's report should responsibility of the auditor. The review report should contain a clear written (unqualified opinion. Sch VI in India also requires presenting previous prior period. • a statement of the responsibility of 2.Y are results of his audit procedures. Scope paragraph 1. Evaluating the wok of an expert. unresolved. figures. Auditor should obtain sufficient • a description of the work appropriate audit evidence primarily performed by the auditor. misstatement. the source data used. if 3. including the corresponding a. Three important matter: opinion (he may use the name of expert provided a. audit evidence. c. The standard is only applicable to corresponding work on expert previous year figure and not comparatives 7. Matter that affect audit opinion 5. (unqualified opinion) etc. The auditor should determine whether the c. the assumptions and methods used and. knowledge of the business and of the well as other disclosures of the preceding F. 2400 Engagement to Review Financial Statementiii d. Auditor should follow code of ethics standards generally accepted in issued by ICAI India. Date of the report 4. There is no practice prevalent in India that of the auditor’s overall comparative where amount of the previous year as a.

audit evidence. Addressee. g. The objective is for the auditor to carry out b. the auditor should obtain sufficient j. entity. Signature. on a test basis. been performed. Procedures and evidence: . Statement on negative assurance information. shall apply. information. the appointing c. Date of the report d. Identification of specific financial or non- which prospective FS is affected by mgmt financial information to which the agreed- judgments. knowledge obtained during previous etc. stability of entity’s business. the prospective financial information appropriate audit evidence primarily is prepared on a consistent basis with through inquiry and analytical procedures historical financial statements. Sufficient appropriate audit evidence achievability of the results indicated by 4. The following examination procedures should be documentation. f. management’s acceptance of its responsibility for • a description of the work the prospective financial information. Addressee (ordinarily. Title. Prospective financial information means financial amounts and other disclosures in the information based on assumptions about events that forecast or projection. Auditor should follow code of ethics assumptions are adequately disclosed issued by ICAI and b. of Informationiv evidence supporting the assumptions. adverse opinion or disclaimer report can • A statement that an audit has not be given by the auditor in his report. Standards on Review Engagement (SRE). agreed and to report on factual findings. engagement. Opinion as to whether the prospective 2. of prospective FS. Qualified. that the 9. General Principals of RE is properly presented and all material a. deciding the nature performed: timing and extent of audit procedures. may occur in the future and possible actions by an g. The report shall consists of: procedures undertaken provide less a. • a reference to the auditing prospective financial information. extent to c. a. A statement that the procedures performed business and the industry in which the were those agreed upon with the recipient. The auditor should obtain written representations performed in accordance with the from management regarding the intended use of the Standard on Related Services applicable to agreed-upon procedures engagements. Appropriate caveats concerning the 3. The report shall consists of: b. date the information is prepared. Auditor should obtain sufficient d. In an engagement to examine prospective financial the prospective financial information. the completeness standards generally accepted in of significant management assumptions and India. e. A statement that the engagement was 7. h. ____________________________________________________________________ 10 Literature on Standards on Auditing (SA). a. performed by the auditor. c. the prospective financial information procedures of an audit nature to which the auditor is properly prepared on the basis of and the entity and any appropriate third parties have the assumptions. 6. Title. likehood of material misstatement. Identification of the prospective financial e. Statement that the examination procedures 3400 Examination of Prospective Financial included examination. b. authority ) d. conclusions. 5. Level of assurance (moderate assurance) planning an audit. 4. Statement of negative assurance. entity operates e. assurance than an audit and that an b. Auditors signatures for the prospective financial information. upon procedures have been applied. f. work performed by others. the prospective financial information 2.All such procedures appropriate accounting principles. i. 8. mgmt competence regarding preparation a. 1. engagement team experience with the d. Date of report appropriate evidence as to whether: k. Place of the report e. A forecast means prospective financial information financial information is properly prepared prepared on the basis of assumptions as to future on the basis of the assumptions and is events which management expects to take place and presented in accordance with the relevant the actions management expects to take as of the financial reporting framework. using 3. Standard on Assurance Engagement (SAE) and Standard on Related Services (SRS) Prepared by Jigar Shah . Reference to the SA applicable. 1. performed by an auditor viz terms of engagement. management’s best-estimate assumptions on which the4400 Engagements to Perform Agreed Upon prospective financial information is Procedures Regarding Financial v based are not unreasonable. Statement that management is responsible h. audit opinion is not expressed c.

The objective of a compilation engagement is for an selecting and applying appropriate accountant to use accounting expertise. A statement that had the auditor be addressed to the appointing authority. Addressee: The report should ordinarily i. during examination. other matters might have also noting that it is based on the come to light that would have been information provided by the management. A listing of the specific procedures be described as “auditors’ fee”. in describing the nature of services involving brief.All such procedures h. assess the reliability and completeness of n. the word ‘audit’ should not be used in The objective for preparation of these standards. is appropriate in the circumstances. i 7. audit evidence. i. procedures to be performed. reported. Accountant’s signature: b. A statement that the report is restricted to accountant is not independent of the those parties that have agreed to the entity. A description of the auditor’s factual document. a statement that the j. as such. b. f. or remuneration in performed. classify and g. 4410 Engagements to Compile Financial f. or d. A statement that the engagement was is noted then the auditor should report the same. Title: The title of the report should be h. Signature. any noncompliance. Procedures and evidence: . verify any matters. accordance with the applicable laws and 4. when considered necessary. shall apply. Place of signature. Standard on Assurance Engagement (SAE) and Standard on Related Services (SRS) Prepared by Jigar Shah . assets of the entity and preventing and planning an audit. the accounts. accuracy of the underlying data and complete disclosure of all material and relevant information to the accountant. to auditing expertise. performed additional procedures. findings including sufficient details of 9. The financial statements or other financial The above standards have been compiled from the information compiled should be approved by the statements issued by the Institute of Chartered client before the compilation report is signed by the Accountants of India (ICAI) and from reference book accountant. and the information provided. d. an audit c. maintaining adequate accounting and Informationvi other records and internal controls and 1. activities of the entity are carried out in etc. compliance with any accepted accounting standard j. work performed by others. Date of report responsible for: completeness and k. performed in accordance with this 5. a. make any inquiries of management to m. if any. A paragraph. When relevant. correspondence or any other g. deciding the nature i.e V. Generally under this statement accountant is not material departures from the identified required to performed: financial reporting framework. 8. preparation and presentation of financial summarise financial information. to collect. e.K Agarwal. financial statements/ other financial information that l. establishing controls for ensuring that the timing and extent of audit procedures. nor the fee for these services ____________________________________________________________________ 11 Literature on Standards on Auditing (SA). The auditor should comply with code of ethics in accordance with the applicable laws and issued by ICAI regulations. conclusions. The accountant should obtain a general knowledge Standard on Related Services . Date of the report. Accordingly. is to help students in understanding these compilation of financial statements or other Standards. The report shall consists of: errors and exceptions found. expressed. of the business and operations of the entity and k. Identification of the financial information or a review. verify any explanations. documentation. financial information. o. statements or other financial information 2. Standards on Review Engagement (SRE). A statement that neither an audit nor a should be familiar with the accounting principles review has been carried out and that and practices of the industry in which the entity accordingly no assurance is expressed on operates and with the form and content of the the financial information. A statement that the procedures performed “Accountant’s Report on Compilation of do not constitute either an audit or a Unaudited Financial Statements” (and not review and. c. as opposed accounting policies. Auditor should assess the accounting estimates regulations and preventing and detecting made by the mgmt and also if there is non. assess internal controls. establishing controls to safeguard the performed by an auditor viz terms of engagement. 3. drawing attention to the disclosure of 6. a. detecting frauds or other irregularities. A statement that the management is l. no assurance is “Auditor’s Report”).

iii The above Standard on Review Engagement effective from 1 April 2005 iv The above Standard on Assurance Engagement effective from 1 April 2007 v The above Standard on Related Services effective from 1 April 2004 vi The above Standard on Related Services effective from 1 April 2004 ____________________________________________________________________ 12 Literature on Standards on Auditing (SA). a final year student. Standards on Review Engagement (SRE). in order to help peers and aspirants. so over reliance on the same is not encouraged. ii The above guidance on Standards on Auditing is prepared by Jigar Shah. These standards are not in detail.These notes will help students to get the brief understanding about the Auditing Standards and this will inturn help them during their exam. Standard on Assurance Engagement (SAE) and Standard on Related Services (SRS) Prepared by Jigar Shah .