Professional Documents
Culture Documents
(SA)
by
CA Ismail B. Sonawalla
Topics to be covered
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Topics to be covered
• SA – 315 Identifying & Assessing the Risks of
Material Misstatements through
Understanding the Entity & its
Environment
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Background
OBJECTIVES OF AASB
• Review existing and emerging auditing practices
worldwide and identify areas in which Standards on
Quality Control, Engagement Standards and Statements
on Auditing need to be developed.
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Background
OBJECTIVES OF AASB
• Review existing Guidance Notes
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Background
• The Latest Standards on Auditing (formerly known as
Auditing Assurance Standards) issued by AASB of ICAI
have been issued under the Clarity Project
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Background
• IAASB has adopted new format for presentation of
International Standards on Auditing (ISAs). The
standards now being issued / revised by AASB are in
line with and also numbered similar to the ISAs.
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Background
• Standards issued by the AASB under the authority of the
ICAI collectively known as
Engagement Standards
– Standards on Auditing (SAs), - applied in the audit of historical
financial information.
– Standards on Review Engagements (SREs), - applied in the
review of historical financial information.
– Standards on Assurance Engagements (SAEs), - applied in
assurance engagements, dealing with subject matters other than
historical financial information.
– Standards on Related Services (SRSs), - applied to engagements
involving application of agreed-upon procedures to information,
compilation engagements, and other related services
engagements.
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Background
• All SAs interlinked - not to be implemented in
isolation, but as a cohesive set of guidelines
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Audits & Reviews of Historical Financial Information
New / Revised Standards (Auditing, Review and Others) issued
under the Clarity Project
S.N. S.A.NO. PARTICULARS
SQC 1 Quality Control for Firms that Perform Audits and Reviews of Historical
Financial Information & Other Assurance Related Services Engagements
Announcement on Amendment to SQC 1 – Retention Period for
Engagement Documentation (Working Papers)
100 – 999 STANDARDS ON AUDITING (SAs)
100 – 199 Introductory Matters
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S.N. S.A.NO. PARTICULARS
Related Services
4000 - 4699 Standards on Related Services (SRSs)
1 4400 Engagements to Perform Agreed-upon Procedures Regarding
Financial Information
4410 Engagements to Compile Financial Information
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• Effective for audits of financial statements
for periods beginning on or after April 1,
2008
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Requirements
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Types of Risk
• Business Risk
• Control Risk
• Audit Risk
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Business Risk
• Management’ s ethics
• Type of business – speculation, forward
trading, volatile commodity (cotton)
• Competition – Overseas / Local - Eagle Flask
• Legal Issues – 2G spectrum
• Quality of Service – Kingfisher
• Inadequacy of capital / overtrading
• Disasters – natural / man made
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Control Risk
• Internal control – systems and its
compliance
• Frauds
• Inadequately trained staff – staff turnover
– leading to errors
• Ethical issues
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Audit Risk
• Test check – detection issues
• Compliance issues
• Quality of work
• Reporting issues
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Requirements
Risk Assessment Procedures & Related
Activities
• Identify the Risk
• Assess its materiality / significance – high,
medium, low
• Determine its frequency – occasional /
regular
• Corrective actions 22
Procedure
Understanding of the Entity & its
Environment
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Entity’s Internal Control
• Internal controls relevant to audit
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Identify & Assess Risks of Material
Misstatements – at TWO levels –
Assertion Level
• Transactions
• Account Balances
• Presentation & Disclosures
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Outcome
Documentation
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SA – 500
Audit Evidence (Revised)
formerly AAS 5 – Audit Evidence
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• Generally on the lines of ISA 500
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• Objective – to design & perform audit
procedures to enable the auditor to
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Requirements of Audit Evidence
Should be -
• Sufficient - quantity
• Appropriate - quality
• Complete
• Reliable
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Inconsistency
• Unreliable sources
• Creates a doubt
• Repeat audit procedures
• Obtain more evidence
• Arrive at conclusion
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SA – 520 (R)
Analytical Procedures(Revised)
formerly AAS 14
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• Effective for audits of financial
statements for periods beginning
on or after April 1, 2010
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Analytical Procedures
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Comparisons with –
Internal -
• Budgets / forecast
• Previous years
External -
• Industry
• Competitors
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Relationships between –
• Gross profit / Net profit and Sales
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Methods
• Simple Ratios
• Complex calculations
• Statistical analysis
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THANK YOU