Audit Quick Reference

Referencer for Quick
Revision
Final Course Paper-3:
Advanced Auditing and
Professional Ethics
A compendium of subject-wise capsules published in the
monthly journal “The Chartered Accountant Student”
Board of Studies
(Academic)
ICAI
INDEX
Page Edition of Students’
Topics
No. Journal
1 June 2021 Engagement & Quality Control Standards
SA 200-299: General Principles and
2-9 June 2021
Responsibilities
SA 300-499: Risk Assessment and Response to
10-15 January 2021
Assessed Risks
January 2021, March
16-23 SA 500-599: Audit Evidence
2019
March 2019, January
24-27 SA 600-699: Using Work of Others
2021
28-31 June 2021 SA 700-799: Audit Conclusions and Reporting
32-43 October 2022 Professional Ethics
Advanced Auditing and Professional Ethics
CA FINAL - PAPER 3 - ADVANCED AUDITING AND PROFESSIONAL ETHICS
It has always been the endeavour of Board of Studies to provide quality academic inputs to the students of Chartered Accountancy
Course. Keeping in mind this objective, BoS has decided to come out with a Crisp & Concise Capsule of each subject to facilitate
students in quick revision before examination.
This series of capsules is on Paper 3: Advanced Auditing & Professional Ethics of Final Course. In this capsule we are covering
Engagement and Quality Control Standards i.e. SQC 1, SA 200 and 700 Series (for remaining Standards on Auditing i.e. SA 300,
500 and 600 series refer January 2021 edition). It may be mentioned that this capsule is a tool for quick revision of some significant
areas of Auditing subject, this should not be taken as a substitute for the detailed study of the subject. Students are advised to refer
to the relevant Study Material, Auditing Pronouncements and RTP for comprehensive study & revision.
Engagement & Quality Control Standards
SQC
SQC 1 " Quality Control for Firms that Perform Audits & Reviews of
Historical Financial Information, & Other Assurance & Related Service Engagements"
Introduction Leadership Ethical Acceptance & Continuance Human Engagement Monitoring

responsibilities for Requirements of client relationships & Resources performance
quality within the firm specific engagements
1. The purpose Firm's policies & procedures should: 1. Firm's policies & 1. Firm's policies & procedures should
of this SQC 1. Provide it with reasonable procedures should provide it with reasonable assurance that:
is to establish assurance that the firm & its provide it with reason- a) it has sufficient personnel with the
standards & personnel comply with ethical able assurance that capabilities, competence, commitment
requirements of: it will undertake or to ethical principles.
provide guidance
i) Integrity; continue relationships & b) enable the firm to issue appropriate
regarding a firm's reports.
responsibility ii) Objectivity; engagements only when it:
iii) Professional competence & a) has considered 2. Firm's performance evaluation, com-
for its system of pensation & promotion procedures give due
due care; the integrity of the
quality control for recognition & reward to the development &
iv) Confidentiality; client. maintenance of competence & commitment
audits & reviews v) Professional behaviour. b) is competent & has
of historical to ethical principles.
2. Emphasise the fundamental capabilities, time & 3. The firm should assign responsibility for
f i n a n c i a l principles which are reinforced in resources. each engagement to an engagement partner.
information & for particular by the leadership of firm, c) can comply 4. The firm should also assign appropriate
other assurance education & training, monitoring with ethical staff with capabilities, competence & time to
& related service & process for dealing with non requirements. perform engagements.
engagements. compliance. 2. When the firm obtains
3. Provide it with reasonable information that would 1. Firm's policies & procedures should
2. The firm should assurance that the firm, its have caused it to decline provide it with reasonable assurance that:
establish a system personnel, experts, network firms an engagement if that a) engagements are performed in
of quality control maintain independence to: information had been accordance with professional standards,
to provide it i) Communicate its available earlier, the firms legal & regulatory requirements.
requirements to management. policies & procedures b) that the firm issue appropriate report.
with reasonable
ii) Identify & evaluate should consider: 2. Firm should establish policies &
assurance that circumstances & relationships a) the professional & procedures w.r.t.:
the firm & its that create threats to legal responsibilities a) consultation
personnel comply independence & take b) the possibility of b) resolving differences of Opinion.
with professional appropriate action. withdrawing from c) engagement quality control review &
standards & 4. Provide it with reasonable the engagement & its documentation.
regulatory & legal assurance that it is notified client relationship. d) confidentiality, safe custody, accessi-
requirements & of breaches of independence 3. Policies & procedures bility & retrieval, retention, ownership
that the report of engagement documentation.
requirement & to enable it to take for withdrawal include:
issued by the appropriate action. a) discussing with
firm/ engagement appropriate level for 1. Firm's policies & procedures should provide
appropriate action it with reasonable assurance that:
partner(s) are a) the policies & procedures relating to the
appropriate in the 1. Firm should promote internal & the reasons for system of quality control are relevant,
circumstances. culture recognising quality as withdrawal. adequate, operating effectively.
essential in performing engagement. b) c o n s i d e r i n g b) it includes an ongoing consideration &
2. Firm's CEO (or equivalent) or professional, legal evaluation of firm's system of quality
3. The firm's or regulatory
firm's managing partner to assume control, including a periodic inspection
system of quality requirements.
ultimate responsibility for firms of a selection of completed engagements.
control should system of quality control. c) d o c u m e n t i n g 2. Firm should evaluate the deficiencies
include policies 3. If some other person(s) is assigned significant issues, noted as a result of monitoring process &
& procedures such operational responsibility, he consultations, con- should communicate to relevant engagement
addressing each of should have sufficient & appropriate clusions & the basis partners & other appropriate personnel.
the six elements experience, ability & authority to for conclusion. 3. Firm should also design policies &
of such system. assume that responsibility. procedures to appropriately address the
complaints & allegations.
06 June 2021 The Chartered Accountant Student
1
SA 200 - 299 General Principles and Responsibilities
SA 200
"Overall Objectives of the Independent Auditor and the

Conduct of an Audit in Accordance with Standards in Auditing"
Scope of Objective of Requirements Conduct of an Audit in Failure to achieve

the SA the Auditor of the SA accordance with SAs an objective
This SA establishes the The auditor shall: A) The auditor shall:

independent auditor's 1. comply with ethical require- 1. comply with all SAs relevant to the
overall responsibilities ments including independence. audit.
when conducting 2. have an understanding of the entire
an audit of financial text of SA, including its application &
statements in accordance other explanatory material.
with SAs. It sets out the 2. plan & perform an audit with 3. not represent compliance with SAs
overall objectives of the professional skepticism. unless the auditor has complied with
independent auditor, the requirements of this SA & all
nature and scope of an other SAs relevant to the audit.
audit.
3. exercise professional judgment
in planning & performing an
audit.
B) To achieve the overall objectives, the
auditor shall use the objectives stated
in the relevant SAs in planning &
4. obtain sufficient appropriate performing an audit.
audit evidence to reduce audit
risk to acceptably low level.
C) The auditor shall comply with each

requirement of an SA unless the entire
a) To obtain reasonable assurance SA is not relevant or the condition
about whether the financial mentioned in the SA does not exist.
statements as a whole are free
from material misstatement,
whether due to fraud or error.
D) In exceptional circumstances, the
auditor may judge it necessary to depart
from a relevant requirement in a SA. In
such circumstances, the auditor shall
b) To report on the financial perform alternative audit procedures to
statements & communicate as achieve the aim of that requirement.
required by the SAs, in accordance
with the auditor's findings.
In case reasonable assurance cannot

be obtained & qualified opinion is
insufficient - Disclaimer of opinion/ If an objective in a relevant SA cannot be
withdraw from the engagement. achieved, the auditor shall evaluate whether this
prevents the auditor from achieving the overall
objectives of the auditor and thereby require the
auditor to modify the opinion or withdraw from
the engagement.
The Chartered Accountant Student June 2021 07

2
SA 210
"Agreeing the Terms of Audit Engagements"
Scope of the SA Preconditions Requirements Acceptance of a Change in Additional

& Objective of for an Audit of the SA the audit engagement terms Considerations in
the auditor Engagement Acceptance
Scope 1. If management/ TCWG impose limitation 1. If, prior to completing the audit
This SA deals with the on the scope of auditor's work, such that the engagement, the auditor is
auditor's responsibilities limitation will result the auditor in disclaiming requested to change the audit
in agreeing the terms of the opinion, the auditor shall not accept such a engagement that conveys a
the audit engagement limited engagement. lower level of assurance, the
with management/ auditor shall determine whether
TCWG. there is reasonable justification
2. If the preconditions of audit are not present, for doing so.
the auditor shall discuss the matter with
management. The auditor shall not accept the
Objective proposed engagement if FRF is not acceptable or
if engagement agreement has not been obtained. 2. If terms of audit engagement
To accept or continue are changed, the auditor &
an audit engagement management shall agree on the
only when the basis new terms of engagement.
3. Audit Engagement Terms shall include:
upon which it is to be
i) Objective & scope of audit.
performed has been
ii) Responsibilities of the auditor.
agreed, through:
iii) Responsibilities of management. 3. If the auditor is unable to
a) Establishing whether
iv) Identification of applicable FRF. agree to the changed terms &
the preconditions
v) Reference to expected content & form of management doesn't permit the
for an audit are
report. auditor to continue the original
present.
If law/ regulation prescribes terms, no need for a audit engagement, the auditor
b) Confirming that
separate written agreement, except for the fact that shall withdraw & report to
there is a common
such law/ regulation applies & the management TCWG.
understanding
acknowledges the same.
between the auditor
& management/
TCWG of the
terms of the audit 4. Recurring Audits: Auditor shall assess whether 1. The auditor shall determine whether there
engagement. to revise/ remind the terms. is conflict between the financial reporting
standards & the additional requirements.
In order to establish whether the preconditions

for an audit are present, the auditor shall: 2. If such conflict exists, auditor shall discuss
with the management as to whether:
i) additional requirements can be met
1. Determine whether the FRF to be applied in through additional disclosures.
the preparation of the financial statements is ii) a description of applicable FRF in the
acceptable and financial statements can be amended.
2. Obtain the agreement of management 3. If the above is not possible, auditor shall
that it acknowledges and understands its modify the audit report.
responsibilities:
i) For preparation of financial statement as
per FRF. 4. (i) If law prescribes the audit report
ii) For internal control such that financial format that is significantly different
statements are free from material from the requirements of the SA,
misstatements. auditor should give additional
iii) To provide the auditor with access to all explanation in the audit report.
the information, additional information, (ii) If that is not possible, auditor shall not
& unrestricted access to persons within accept the audit engagement.
the entity.
3
SA 220
"Quality Control for an Audit of Financial Statements"
Scope of the SA Some requirements Acceptance & Engagement Engagement Other important
& Objective of of the SA w.r.t Continuance Performance Quality Control points to be
the auditor engagement partner of Client Review considered
Relationships
Scope
This SA deals with the specific
1. If there is difference of opinion
responsibilities of the auditor The engagement partner shall within the engagement team, or with
regarding quality control take responsibility for: consultant or reviewer, the audit
procedures for an audit of financial 1. the direction, supervision team shall follow the firm's policies &
statements. It also addresses the & performance of procedures for resolving the same.
responsibilities of the engagement audit engagement & the 2. The engagement partner shall
quality control reviewer. appropriateness of auditor consider the results of firm's
report. monitoring process and the
Objective deficiencies noted.
To implement quality control 3. The auditor shall document:
2. the reviews being performed i) issues identified w.r.t. compliance
procedures at the engagement
in accordance with the firm's of ethical requirements including
level that provide a reasonable
review policies & Procedures. independence.
assurance that:
i) the audit complies with ii) conclusions regarding acceptance
professional standards & continuance of client
3. the engagement team taking relationships.
& regulatory & legal
appropriate consultation iii) nature, scope & conclusions of
requirements.
on difficult & contentious consultations.
ii) the auditor's report issued matters.
is appropriate in the 4. The engagement quality control
circumstances. reviewer shall document that:
i) the procedures required for review
that have been performed.
ii) review has been completed on or
before the audit report date.
The engagement partner shall: iii) there are no unresolved matters.
1. take leadership responsibilities for the
overall quality of audit.
2. remain alert for evidence of non compliance
with relevant ethical requirements by the The engagement partner shall:
engagement team members and in case a) Determine that the quality control reviewer
of non compliance shall take appropriate has been appointed.
action. b) Discuss significant matters arising during
3. shall form a conclusion on compliance with the audit & review with the reviewer.
independence requirements that apply to c) Not date auditor's report before the
the audit engagement. completion of review.
The quality control reviewer shall:
a) Discuss significant matters with the
1. If engagement partner obtains information that would Engagement partner.
have caused the firm to decline the audit engagement, the b) Review the financial statements & auditor's
engagement partner & the firm shall take necessary action. report.
c) Review selected audit documentation.
d) Evaluate the conclusions reached.
In case of listed entities, the reviewer shall
2. The engagement partner shall ensure that the audit team consider:
& auditor's expert have the appropriate competence & the a) Evaluation of firm's independence.
capabilities. b) Whether appropriate consultation has been
taken.
c) Audit documentation w.r.t. significant
judgments.

4
SA 230
"Audit Documentation"
Scope of the SA Definitions Form, content & Departure from Assembly

& Objective of extent of Audit relevant requirement & of Final
the Auditor Documentation matters arising after the Audit File
date of auditor's report
Scope Audit Documentation: 1. The auditor shall prepare If, in exceptional

Deals with auditor's The record of audit audit documentation on circumstances:
responsibility procedures performed, timely basis. 1. The auditor judges it
to prepare audit relevant audit evidence 2. The auditor shall prepare necessary to depart from
documentation for obtained and conclusions audit documentation that a relevant requirement
an audit of financial the auditor reached. is sufficient to enable an in SA, the auditor shall
statements. experienced auditor, having document the alternative
no previous connection with audit procedures
the audit, to understand: performed and the reasons
Audit File:
a) nature, timing and extent for such departure.
One or more folders or
Objective of the audit procedures 2. The auditor performs
other storage media, in
To prepare audit performed. new/ additional
physical or electronic
documentation that procedures or draws new
form, containing the b) results of the audit
provides: conclusions after the date
records that comprise the procedures performed
a) s u f f i c i e n t of the auditor's report, the
audit documentation for a and the audit evidence
appropriate auditor shall document:
specific engagement. obtained.
record of i) the circumstances
c) significant matters, the
the basis for encountered.
conclusions reached and
auditor's report. significant professional ii) the new/ additional
b) evidence that Experienced Auditor: procedures performed
judgments.
the audit was An individual who and their effect on
planned & has practical audit 3. In documenting the nature, auditor's report.
performed in experience & a reasonable timing and extent of audit
iii) when & by whom the
accordance with understanding of audit procedures performed, the
resulting changes to
SAs & legal processes, SAs & legal & auditor shall record:
audit documentation
& regulatory regulatory requirements, a) identifying chara- were made & reviewed.
requirements. business environment, cteristics of the specific
auditing & financial items.
reporting issues. b) who performed the audit
work and the date such
work was completed; and.
c) who reviewed the audit
work performed and the
date and extent of such
review.
1. The auditor shall complete the assembly of the final

audit file within a period not more than 60 days after
the date of the auditor's report.
2. After the assembly of final audit file is completed,
the auditor shall not delete or discard audit
documentation before the end of its retention period
(which is not shorter than 7 years from the date of
auditor's report).
3. If auditor find it necessary to modify existing audit
documentation or add new audit documentation, the
auditor shall document:
a) specific reasons for such changes.
b) when by whom they were made & reviewed.
5
SA 240
"The Auditor's Responsibilities Relating to Fraud In an

Audit of Financial Statements"
Scope of the SA Requirements of Application of SA Evaluation of Evidence and Other important

& Objective of the SA 315 & SA 330 Unable to Continue points to be
the Auditor considered
Scope 1. The auditor shall maintain Identification & Assessment of Evaluation of Evidence:
Deals with professional skepticism ROMM due to fraud: i) If auditor identifies
a u d i t o r ' s throughout the audit. 1. The auditor shall identify & assess the misstatements, consider
re s p o ns ib i l i ti e s ROMM due to fraud at the financial whether it is fraud.
relating to fraud statement level & the assertion level.
2. The auditor shall evaluate ii) If it is fraud, then
in an audit
which types of revenue, revenue consider the reliability
of financial 2. As per SA 315, there
transactions give rise to such risk. of management repre-
statements. It should be discussion
3. Assessed ROMM due to fraud sentation & reevaluate
expands on how about various matters the assessment of ROMM
SA 315 & SA 330 related to the audit should be treated as significant
risk & the auditor shall obtain an due to fraud & the
are to be applied in engagement within the implications for audit.
engagement team. understanding of the entity's related
relation to ROMM
controls, relevant to such risks.
due to fraud.
Unable to Continue:
Responses to the assessed ROMM If as a result of misstatement
3. While performing due to fraud: resulting from fraud, auditor
Objective procedures as per SA 315, 1. The auditor shall determine overall
is unable to continue, he shall:
a) To identify the auditor shall identify responses to address the assessed
i) determine professional
& assess the the ROMM due to fraud. ROMM due to fraud.
& legal responsibilities.
ROMM in 2. The auditor shall:
ii) consider withdrawing
i) Assign & supervise personnel.
the financial from the engagement &
ii) Evaluate the selection &
statements due If the auditor withdraws,
application of accounting policies.
to fraud. 4. The auditor shall make the auditor shall:
iii) Incorporate element of unpredi-
b) To obtain audit inquiries of management, i) discuss reasons of
ctability in selecting audit
evidence about TCWG, others in the procedures. withdrawal with
the assessed entity & the internal audit 3. At the assertion level, auditor shall management/ TCWG.
ROMM due to team of the entity. perform audit procedures responsive ii) determine whether
fraud, through to assessed ROMM due to fraud at there is other
designing & such level. professional/ legal
implementing requirements to report.
appropriate 5. The auditor shall consider
responses. whether the unusual
c) To respond relationships & other
appropriately information identified Management override of Controls:
to identified indicate ROMM due to The auditor shall design & perform the audit procedures to:
& suspected fraud. i) test the appropriateness of journal entries & other adjustments.
fraud. ii) review accounting estimates for biases.
iii)evaluate the rationale of unusual significant transactions.
Management Representation w.r.t.:
6. The auditor shall evaluate
i) management's responsibility.
the fraud risk factors as
ii) management's assessment of risk as a result of fraud.
to whether they indicate
iii)disclosure of knowledge of fraud/ suspected fraud to auditor.
existence of fraud.
Communication to :
If auditor has identified fraud or indicator of fraud, he shall communicate to
Management/ TCWG or in some circumstances to the regulatory authorities.
Documentation shall include:
i) as required by SA 315 & SA 330.
ii) auditor's communication about fraud made to management/ TCWG.
iii)auditor's reasons for his conclusions.

6
SA 250
"Consideration of Laws and Regulations

in an Audit of Financial Statements"
Scope of the SA Definitions Auditor's Consideration Audit procedures Reporting of

& Objective of of Compliance with when non Identified/
the Auditor Laws & Regulations compliance is suspected non
Identified/ Suspected compliance
Scope Non Compliance: The auditor shall: 1. Obtain an understanding of

Deals with auditor's Acts of omission/ 1. Obtain a general understanding the nature of the act & the
responsibility to commission by the of applicable legal & regulatory circumstances.
consider laws & entity, either intentional framework & entities'
regulations when or unintentional, compliance with the same.
performing an which are contrary to 2. Evaluate possible effect on
audit of financial the prevailing laws or the financial statements.
statements. regulations. 2. Obtain sufficient appropriate
audit evidence about the
compliance with laws & 3. If auditor suspects non
regulations that have material compliance, discuss with
Such acts include management/ TCWG or
transactions entered effect on financial statements.
else consider the need to
Objective into by, or in the obtain legal advice.
a) To obtain name of, the entity, 3. Perform audit procedures to
sufficient or on its behalf, by identify instances of such non
appropriate TCWG, management compliance. 4. If unable to obtain sufficient
audit evidence or employees. Non information, evaluate the
regarding compliance does effect on auditor's opinion.
not include personal 4. The auditor shall remain alert to
compliance the instances of non compliance
with laws & misconduct (unrelated
to the business activities or suspected non compliance. 5. Evaluate the implications on
regulations.
of the entity) by TCWG, auditor's risk assessment,
b) To perform
management or 5. Obtain representation from reliability of management
specified audit
employees of the entity. management/ TCWG about representation & take
procedures
known non compliance. appropriate action.
to identify
instances of
non compliance
having material
effect. Reporting to TCWG:
c) To respond i) Auditor to communicate matters of non compliance to TCWG.
appropriately ii) If non compliance is intentional/ material, communicate immediately.
to identified iii) If management/ TCWG involved in non compliance, communicate to next
non-compliance/ higher level eg. audit committee/ supervisory board.
suspected non
compliance.
Reporting in Auditor's Report:
i) If non compliance has material effect & has not been adequately reflected in
financial statements- Qualified/ Adverse opinion.
ii) If unable to conclude the effect of non compliance, due to limitation imposed
by management - Qualified/ Disclaimer of opinion.
Reporting to Regulatory/ Enforcement authorities:

Report if required by law.
Documentation shall include:

i) identified & suspected non compliance.
ii) discussion with management/ TCWG/ parties outside the entity.
7
SA 260
"Communication with Those Charged with Governance"
Scope of the SA & Definitions Matters to be Auditor's Other Important points

Objective of the Auditor Communicated Independence to be considered
Scope 1. Those charged The auditor shall In case of listed entities, the auditor shall
Deals with auditor's with governance: communicate to TCWG: communicate with TCWG:
responsibility to communi- a person(s) or 1. The responsibilities of the a) A statement that the engagement team
cate with TCWG in an audit organization(s) auditor in relation to the & others in the firm (network firms also)
of financial statements. with responsibility financial audit. have complied with relevant ethical
for overseeing the 2. The planned scope & requirements regarding independence &
Objective strategic direction timing of audit including b) the related safeguards that have been
a) To communicate of the entity & significant risks identified applied to eliminate identified threats
clearly with TCWG the obligations related by the auditor. to independence or reduce them to an
responsibilities of the to the accountability 3. The auditor's view about acceptable level.
auditor & overview of of the entity. This significant qualitative
planned scope & timing includes overseeing aspects of the entity's
of audit. the financial reporting accounting practices. The communication process:
b) To obtain from TCWG process. 4. Significant difficulties The auditor shall communicate with TCWG:
information relevant to 2. Management: encountered during the 1. the form, timing & expected general
the audit. The person(s) audit. content of communications.
c) To provide TCWG with with executive 5. Written representation the 2. in writing significant findings from the
timely observations that responsibility for the auditor is requesting. audit & regarding auditor independence.
are significant & relevant conduct of the entity's 6. Circumstances that affect 3. on timely basis.
to their responsibility operations. For some the form & content of The auditor shall evaluate the adequacy of the
to oversee the financial entities, management auditor's report. communication process with TCWG. If not
reporting process. includes some or all of 7. Any other significant found adequate, auditor shall evaluate the effect
d) To promote effective TCWG, for example, matter arising during & take appropriate action.
two way communication executive members of the audit relevant to the Documentation:
between auditor & a governance board, oversight of financial The auditor shall include the matters
TCWG. or an owner-manager. reporting process. communicated to TCWG (whether orally or in
writing) in audit documentation.
SA 265
"Communicating Deficiencies in Internal Control to

Those Charged With Governance and Management"
Scope of the SA Objective of the Definitions Requirements of

& Objective of Auditor the SA
the auditor
To communicate Deficiency in Internal Control: 1. The auditor shall determine, whether he has
Scope appropriately This exists when: identified one or more deficiencies in the
Deals with to TCWG and i) A control is designed, implemented internal control.
a u d i t o r ' s management or operated in such a way that 2. If Yes, the auditor shall determine whether,
responsibility to deficiencies in it is unable to prevent, or detect individually or in combination, they constitute
communicate internal control and correct, misstatements in the significant deficiencies.
appropriately that the auditor financial statements on a timely 3. The auditor shall communicate in writing
to TCWG and has identified basis. significant deficiencies identified to TCWG on
management during the audit timely basis.
ii) A control necessary to prevent, or
deficiencies in and that, in
detect and correct, misstatements 4. The auditor shall also communicate to
internal control the auditor's
in the financial statements on a management at an appropriate level of
that the auditor professional
timely basis is missing. responsibility on a timely basis, in writing about
has identified in an judgment, are
Significant deficiency in Internal significant deficiencies and other deficiencies.
audit of financial of sufficient
importance Control: 5. The written communication shall include:
statements.
to merit their A deficiency or combination of i) A description of the deficiencies and
respective deficiencies in internal control explanation of their possible effects.
attentions. that, in the auditor's professional ii) Sufficient information to enable TCWG/
judgment, is of sufficient importance management to understand the context of
to merit the attention of TCWG. the communication.

8
SA 299
"Joint Audit of Financial Statements"
Scope of the SA Definitions Audit planning, Responsibility & Audit Conclusion Communication
& Objective of Risk assessment & Coordination among & Reporting with TCWG
the auditor Allocation of work joint auditors
Scope Individual Responsibility for: 1. Joint auditors to issue a

Deals with special considerations in In respect of work divided, each common audit report.
carrying out audit by joint auditors. joint auditor shall be responsible 2. In case of disagreement, they
This SA lays down the principles for only for the work allocated to such shall express their opinion in
effective conduct of joint audit to joint auditor including proper separate audit report.
achieve the overall objectives of the execution of the audit procedures. 3. A joint auditor is not bound by
auditor laid down in SA 200. the views of the majority.
4. The audit report issued by joint
Objective Jointly & Severally Responsible auditor should refer to the
for: separate audit reports issued
a) To lay down broad principles for
the joint auditors in conducting 1. Audit work not divided and by other joint auditors.
the joint audit. carried out by all joint auditors. 5. Such reference shall be made
b) To provide a uniform approach to 2. Decisions taken by all joint in Other Matter paragraph.
the process of joint audit. auditors in respect of common 6. Each joint auditor to assume
audit areas. that:
c) To identify the distinct areas of
work & coverage thereof by each 3. Matters brought to the notice of i) The other joint auditors
joint auditor. joint auditors by any one of them carried out their work as
& on which all of them agree. per SA. There is no need
d) To identify individual responsi-
bility & joint responsibility of the 4. Examining compliance of to review the work done by
joint auditors in relation to audit. financial statements with other auditors.
relevant statutes. ii) Other joint auditors have
5. Presentation & disclosure of informed the said joint
financial statements as per auditor about any departure
Joint Audit: applicable FRF. from applicable FRF.
A joint audit is an audit of financial statements 6. Ensuring compliance with 7. Before finalising their audit
of an entity by two or more auditors appointed relevant statute, applicable SA & report, the joint auditors shall
with the objective of issuing the audit report. other relevant pronouncements. discuss & communicate with
Such auditors are described as joint auditors. each other their respective
conclusions that will form
1. Engagement partner & other key members from each of the content of the audit report.
joint auditors be involved in planning the audit.
2. The joint auditors shall establish the overall audit strategy.
When the joint auditors expect

3. The joint auditors shall discuss & develop a joint audit plan. to modify the opinion or include
EOM/ OM paragraph, they shall
4. ROMM is to be considered and assessed by each Joint communicate with TCWG regarding
Auditor and shall be communicated to other joint auditors the circumstances and the proposed
and documented, whether pertaining to the overall financial wordings of the report.
statements level or to the area of allocation among the other
joint auditors.
5. The joint auditors shall discuss & document the NTE of audit
procedures and the same shall be communicated to TCWG.
6. The joint auditors shall obtain common engagement letter &

common management representation letter.
7. The work allocation document shall be signed by all joint

auditors & communicated to TCWG.
9
ADVANCED AUDITING AND PROFESSIONAL ETHICS
CA FINAL - PAPER 3 - ADVANCED AUDITING AND PROFESSIONAL ETHICS
It has always been the endeavour of Board of Studies to provide quality academic inputs to the students of Chartered Accountancy
Course. Keeping in mind this objective, BoS has decided to come out with a crisp & concise Capsule of each subject to facilitate
students in quick revision before examination.
This series of capsules is on Paper 3: Advanced Auditing & Professional Ethics of Final Course. In this capsule we are covering
Engagement and Quality Control Standards i.e. SA 300, 500 and 600 series (refer March 2019 edition for SA 540 and SA 600). It
may be mentioned that this capsule is a tool for quick revision of some significant areas of Auditing subject, but this should not
be taken as a substitute for the detailed study of the subject. Students are advised to refer to the relevant Study Material, Auditing
Pronouncements and RTP for comprehensive study & revision.
SA 300 - 499: Risk Assessment and Response to Assessed Risks
SA 300
" Planning an Audit of

Financial Statements"
Scope of Objective of Involvement of Preliminary Other Important

Planning
the SA the Auditor Key Engagement Engagement points to be
Activities
Team Members Activities considered
This SA deals The engagement The auditor shall undertake Documentation:

with the auditor’s partner & other the following activities at the The auditor shall
responsibility to key members of the beginning of the current audit document:
plan an audit engagement team engagement: 1. The overall audit
of financial shall be involved in 1. Performing procedures strategy.
statements. This planning the audit, required by SA 220. 2. The audit plan and
SA is framed in including planning 2. Evaluating compliance 3. Any significant changes
& participating made to the strategy
the context of with ethical requirements,
or the audit plan along
recurring audits. in the discussion including independence, as with the reasons.
among engagement required by SA 220.
team members. 3. Establishing an understanding
of the terms of engagement, as
required by SA 210. Additional
Considerations in Initial
Audit Engagements:
The objective of the Prior to starting an audit,
auditor is to plan the 1. The auditor shall establish an overall audit strategy that sets the auditor shall:
audit so that it will the scope, timing and direction of the audit and that guides the 1. Perform procedures
be performed in an development of the audit plan. required by SA
2. In establishing the overall audit strategy, the auditor shall: 220 regarding the
effective manner. acceptance of the
a) Identify characteristics of the engagement that defines its
client relationship
scope.
and the specific audit
b) Ascertain the reporting objectives. engagement.
c) Conisder the factors significant in directing engagement team's 2. Communicate with the
efforts. predecessor auditor.
d) Consider the results of preliminary engagement activities.
e) Ascertain the resources necessary to perform the engagement.
3. The auditor shall develop an audit plan including description of:
a) The planned risk assessment procedures, as per SA 315.
b) The planned further audit procedures at the assertion level as
per SA 330.
c) Other planned audit procedures.
4. The auditor shall update/ change overall audit startegy or plan as
necessary.
5. The auditor shall direct & supervise the engagement team and
review their work.
06 January 2021 The Chartered Accountant Student
10
SA 315
" Identifying and Assessing the Risk of

Material Misstatement through understanding
the Entity and its Environment"
Scope of Objective of Risk Assessment Understanding Identifying & Other important

the SA the Auditor procedures and the Entity and its Assessing the points to be
related activities Environment including ROMM considered
Internal Control
This SA deals A) Risk Assessment Significant Risks:

with the auditor’s Procedures include the The auditor shall obtain an
Entity & its Environment: understanding of the entity's
responsibility following: The auditor shall obtain an
1. Inquiries of management control and control activities
to identify and understanding of: relevant to the significant risk.
assess the risks and of others within the
entity.
a) Relevant industry, regulatory
of material & other external factors.
2. Analytical procedures.
misstatement 3. Observation and b) The nature of the entity.
(ROMM) in c) The accounting policies Risks for which Substantive
Inspection.
the financial including reasons for changes. Procedures alone do
statements, not provide sufficient
d) Entity's Objectives & appropriate audit evidence:
t h r o u g h Strategies. In such case the auditor shall
understanding B) The auditor shall e) Measurement & review of obtain an understanding of
the entity and consider whether the entity's financial performance. entity's controls over such
its environment, information obtained from risks.
including the auditor's client acceptance
entity's internal or continuance process or
control. Entity's Internal Control: The
information from other
auditor shall evaluate the design Revision of Risk Assessment:
engagement or previous
of the controls to determine The auditor's assessment of
audits is relevant in
whether they have been ROMM at the assertion level
identifying the ROMM. may change during the course
implemented.
of audit as additional audit
The auditor shall obtain evidence is obtained. In such
understanding of : case, the auditor shall revise
C) The audit team to 1. the control environment. and the assessment and modify
discuss the susceptibility entity's risk assessment process. the further planned audit
of the entity's financial 2. the information system and procedures accordingly.
statements to material entiy's communication process.
misstatement and the 3. the control activities relevant to
the audit and the major activities
application of the
used by entity to monitor internal Documentation:
applicable FRF to control over financial reporting. Auditor shall document:
the entity's facts and 4. the internal audit function and 1. The discussion among the
circumstances. sources of information used in engagement team.
entity's monitoring activities. 2. Key elements of the
understanding obtained.
To identify and assess 3. Identified & Assessed
the ROMM, whether due ROMM.
to fraud or error at the 4. The risks identified and the
financial statement and related controls.
assertion levels, through The auditor shall identify and assess ROMM at:
understanding the entity & • financial statement level &
its environment, including • assertion level for classes of transactions and account balances.
the entity's internal control,
The auditor shall:
therby providing a basis for 1. Identify risks throughout the process of obtaining understanding of
designing and implementing the entity.
the responses to the assessed 2. Assess the identified risk and evaluate whether they have pervasive
ROMM. effect.
3. Relate the identified assertions to what can go wrong at the
assertion level.
4. Consider the likelihood of the misstatement and its magnitude.
The Chartered Accountant Student January 2021 07

11
SA 320
"Materiality in Planning and Performing an Audit"
Scope of the SA Determining Materiality & Use of Benchmarks Other important

& Objective of Performance Materiality points
the Auditor
Scope 1. Determining materiality

1. The auditor shall determine the materiality for the
This SA deals involves exercise of
financial statements as a whole.
with the auditor's professional judgement.
responsibility to
apply the concept
of materiality
in planning & 2. If there is one or more particular classes of 2. A percentage is often applied
performing an transactions, account balances or disclosures for to a chosen benchmark as a
audit of financial which misstatements of lesser amounts than the starting point in determining
statements. materiality for the financial statements as a whole materiality for the financial
could reasonably be expected to influence the statements as a whole.
economic decisions of users taken on the basis of the
financial statements, the auditor shall also determine
Objective the materiality level or levels to be applied to those
particular classes of transactions, account balances 3. Examples of benchmarks:
To apply the a) Profit before tax
concept of or disclosures.
b) total revenue
materiality c) gross profit
appropriately d) total expenses etc.
in planning and
performing an 3. The auditor shall determine performance materiality
audit. for purposes of assessing the ROMM and
dertermining the nature, timimg & extent of further
audit procedures.
Revision as the Audit progresses:

1. Materiality for the financial statements as a whole
may need to be revised as a result of a change in
circumstances that occurred during the audit, new
information, or a change in the auditor’s understanding
of the entity and its operations as a result of performing
further audit procedures.
Definition
2. If the auditor concludes that a lower materiality for
Performance materiality means the the financial statements as a whole than that initially
amount or amounts set by the auditor determined is appropriate, the auditor shall determine
at less than materailty for the financial whether it is necessary to revise performance
statements as a whole to reduce to an materiality, and whether the nature, timing and extent
appropriately low level the probability of the further audit procedures remain appropriate.
that the aggregate of uncorrected and
undetected misstatements exceeds
materiality for the financial statements
as a whole. Documentation of:
1. Materiality for the financial statements as a whole.
2. The materiality level or levels for particular classes of
transactions, account balances or disclosures.
3. Performance materiality.
4. Any revision as the audit progressed.
12
SA 330
"The Auditor's Responses to Assessed Risks"
Scope of the SA Requirements Test of Substantive Other important

& Objective of of SA controls procedures points
the Auditor
Scope Overall Responses: The A) The auditor shall design 1. Irrespective of the assessed
This SA deals auditor shall design & & perform test of controls ROMM, auditor shall
with the auditor’s implement overall responses when: perform substantive
responsibility to address the assessed 1. the auditor expects that procedures.
to design and ROMM at the financial the controls are operating 2. Auditor shall consider
implement statement level. effectively or whether external
responses to 2. Substantive procedures confirmation are to be
ROMM identified alone cannot provide performed as Substantive
& assessed by sufficient appropriate audit audit procedures.
the auditor in Audit Procedures for evidence at the assertion 3. Auditor shall perform
accordance Assessed ROMM at level. substantive procedures
with SA 315 Assertion Level: related to financial
B) The auditor shall perform
in a financial The auditor shall design statement closing process
other audit procedures along
statement audit. & perform further audit and those responsive to
with inquiry & determine
procedures whose nature, significant risks.
whether the controls to be
timing & extent are based 4. When substantive
tested depend upon indirect
on & are responsive to the procedures are performed
controls.
Objective assessed ROMM at the at an interim date, the
assertion level. C) The auditor shall test auditor shall cover the
To obtain
controls for a particular time remianing period also.
sufficient &
or throughout the period. 5. If misstatements that the
appropriate audit
evidence about D) The auditor may use audit auditor did not expect
In designing Further Audit
the assessed evidence obtained in previous when assessing ROMM
Procedures, the auditor
ROMM, through audits after considering are detected at an interim
shall:
designing & continuing relevance. date, the auditor shall
a) Consider the reasons
implementing for the assessment given E) The auditor shall test the evaluate whether the
appropriate to the ROMM at the controls for significant risk in related assessment of risk
responses to assertion level for each current period. & planned substantive
those risks. class of transactions, procedures covering the
F) When deviations from
account balance and remaining period need to be
controls are detected, the
disclosure. modified.
auditor shall make specific
b) Obtain more persuasive inquires to understand these
audit evidence because matters & their potential
of a higher assessment of consequences.
risk.
Definition
Substantive Procedure: 1. The auditor shall perform audit procedures to evaluate
An audit procedure designed to detect material the adequacy of presentation & disclosures made in the
misstatements at the assertion level. It comprises of: financial statements.
1. Test of details (of classes of transactions, account 2. The auditor shall evaluate the sufficiency &
balances, & disclosures), & appropriateness of audit evidence.
2. Substantive analytical procedures. 3. The auditor shall document:
a) the overall responses and the nature , timing, extent
of further audit procedures performed.
Test of Controls:
b) the linkage of those procedures with assessed risks
An audit procedure designed to evaluate operating at the assertion level.
effectiveness of controls in preventing, or detecting and c) the results of audit procedures.
correcting, material misstatements at the assertion level.

13
SA 402
"Audit Considerations Relating to an Entity Using a Service Organisation"
Scope of Objective of the Types of Reports & their Requirements Reporting by the
the SA Auditor use by user auditor of the SA user auditor
This SA deals The objective of the user A) Type 1 Report The auditor shall obtain
with the auditor’s auditor, when the user entity Report on the description & an understandng of the
responsibility to uses the services of service design of controls at a service services provided by a
obtain sufficient organisation are: organisation. service organisation,
appropriate audit including internal control
evidence when a B) Type 2 Report that relate to the services
user entity uses Report on the description, provided by the service
the services of one To obtain an understanding design & operating orgainsation.
or more service of the nature & significance effectiveness of controls at a
organisations. of the service provided by the service organisation.
service organisation & their C) In determining the
effect on the user entity's sufficiency & appropriateness If the auditor is unable
internal control, sufficient of audit evidence provided by to obatin sufficient
to identify & assess the Type 1 & Type 2 report, the understanding from the user
ROMM. user auditor shall be satisfied entity, the user auditor shall
as to: obtain that understanding
(i) The service auditor's by:
professional competence. a) Obtaining Type1 or
To design & perform audit (ii) The adequacy of standards Type 2 report.
procedures responsive to under which the Type 1 or b) Contacting service
those risks. Type 2 report was issued. organisation through
D) When the user auditor user entity.
plans to use Type 2 report c) Visiting the service
as audit evidence, the user organisation &
auditor shall determine performing procedures.
whether the service auditor's d) Using another auditor to
report provides sufficient & perform the procedures.
appropriate audit evidence
about the effectiveness of the
Definition controls to support theuser
auditor's risk assessment.
Service auditor: An auditor who, at
the request of the service organisation,
provides an assurance report on the
controls of a service organisation.
Service Organisation: A third party
1. If the user auditor is unable to obtain sufficient
organisation that provides services
appropriate audit evidence regarding the services
to user entities that are part of those
provided by the service organisation, the user auditor
entities' information system relevant
shall modify his audit opinion.
to financial reporting.
2. The user auditor shall not refer to the work of the
User Auditor: An auditor who audits service auditor in the user's auditor report containing
& reports on the financial statements unmodified opinion.
of a user entity. 3. If user auditor makes reference of the work of the
User Entity: An entity that uses service auditor in user auditor's report with modified
a service organisation and whose opinion, the user's auditor report shall also indicate
financial statements are being that such reference does not diminish the user auditor's
audited. responsibility for that opinion.
14
SA 450
"Evaluation of Misstatements Identified during the Audit"
Scope of Objective of the Requirements Evaluating the effect of Other important

the SA Auditor of the SA Uncorrected misstatements points to be
considered
This SA deals The objective of the Auditor 1. The auditor shall accumulate The auditor shall first
with the auditor’s is to evaluate: misstatements identified during reassess the materiality
responsibility audit other than those clearly determined in accordance
to evaluate the trivial. with SA 320.
effect of identified 2. The auditor shall determine
misstatements whether the overall audit
on the audit and 1. The effect of identified strategy or audit plan need to
of uncorrected The auditor shall
misstatements on audit be revised.
misstatement s , determine whether
and 3. If at auditor's request,
if any, on u n c o r r e c t e d
the financial management has examined misstatements are
statements. or corrected any misstatement material, individually or in
that was detected, the auditor aggregate by considering:
2. The effect of uncorrected shall perform additional
misstatement, if any, on a) The size & nature of
audit procedure to determine misstatements.
the financial statements. whether misstatement remains.
b) The effect of
4. The auditor shall communicate u n c o r r e c t e d
all accumulated misstatements misstatements of prior
on timely basis at appropriate periods.
level of management with a
request to correct them.
5. If management refuses to
correct them, auditor shall
consider managment's
reasons for refusal and shall
evaluate whether the financial
statements as a whole are free
from material misstatement.
Definition
Misstatement: A difference
Communication with TCWG:
between the amounts,
The auditor shall communicate with TCWG
classification, presentation or
a) uncorrected misstatements & their effects and request that
disclosure of a reported financial
uncorrected misstatements be corrected.
statement item and the amount,
b) the effect of uncorrected misstatements related to prior periods.
classification, presentation or
disclosure that is required for the
item to be in accordance with the
applicable FRF. Written Representation:
The auditor shall request a written representation from managment/
Misstatements can arise from
TCWG whether they believe the effects of uncorrected misstatements
error or fraud.
are immaterial, individually or in aggregate, to the financial statements
as a whole.
Uncorrected Misstatements:
Misstatements that the auditor has
accumulated during the audit and
Documentation:
that have not been corrected.
1. The amount below which misstatements would be regarded as
clearly trivial.
2. All misstatements accumulated during the audit & whether they
have been corrected.
3. The auditor's conclusion as to whether the uncorrected
misstatements are material and the basis of that conclusion.

15
SA 500 - 599: Audit Evidence
SA 500 - "Audit Evidence"
Scope of Objective of Information to be used Audit procedures to Inconsistency in or

the SA the auditor as audit evidence obtain audit evidence doubts over reliability
of audit evidence
This SA deals with the To design and The auditor shall consider the relevance Audit evidence to
auditor's responsibility perform audit and reliability of the information to be draw reasonable The auditor shall
to design and perform procedures in used as audit evidence. conclusions on determine what
audit procedures to obtain such a way as to which to base the modifications
sufficient and appropriate enable the auditor When information from management auditor's opinion or additions to
audit evidence to be to obtain sufficient expert is used, the auditor shall is obtained by audit procedures
able to draw reasonable appropriate audit evaluate the competence, objectivity performing: are necessary
conclusions on which to evidence to be able of the expert, appropriateness of the 1. R i s k to resolve the
expert's work. Assessment matter and
base the auditor's opinion. to draw reasonable
conclusions on procedures shall consider
This SA is applicable to When using information produced by
which to base 2. Further audit the effect of the
all the audit evidence the entity, the auditor shall evaluate
auditor's opinion. procedures matter, if any, on
obtained during the the reliability, completeness, accuracy
comprising of : other aspects of
course of audit. of the information.
Test of the audit.
controls and
Definition Substantive
procedures
Audit Evidence: Information used by the auditor in arriving at the conclusions on which
the auditor's opinion is based. It includes both information contained in the accounting
records underlying the financial statements and other information.
Appropriateness: It is the measure of quality of audit evidence.
Sufficieny: It is the measure of quantity of audit evidence.
SA 501 - "Audit Evidence- Specific Considerations for Selected Items"
Scope of Objective of Inventory Litigations & Segment

the SA the auditor Claims Information
This SA deals with specific a) If inventory is material, obtain evidence a) Auditor to perform audit Auditor to obtain
considerations by the for existence and condition of inventory procedures to identify audit evidence
auditor in obtaining by: litigation and claims by: reg ard i ng
sufficient appropriate audit 1.Attendance at physical inventory 1.Inquiry of management. presentation
evidence with respect counting. 2.Reviewing minutes of and disclosure
to inventory, litigation 2.Performing audit procedures over the meetings. of segment
and claims and segment entity's final inventory records. information in
3.Reviewing legal expense
information in an audit of b) If inventory counting conducted at date accordance with
accounts.
other than the date of financial statements, applicable FRF
financial statements.
perform additional procedures with b) If auditor assesses risk of
by:
respect to inventory between count date material misstatement, seek
and date of financial statements. direct communication with 1. Understanding
c) If auditor is unable to attend the physical entity's external legal counsel. the methods
To obtain sufficient and
inventory counting due to unforeseen used by the
appropriate audit evidence c) If auditor is unable to
circumstances, auditor to make/ observe management
regarding: communicate with the
some physical count on alternate date and in determining
1. Existence and condition external legal counsel, modify s e g m e n t
perform audit procedures on intervening
of inventory transactions. the opinion as per SA 705. information
2. Completness of litigation d) If attendance at inventory count is d) Obtain Written 2. P e r f o r m i n g
and claims involving the impracticable, auditor to perform Representation that all analytical
entity. alternate procedures. If it is not possible known actual or possible procedures.
3. Presentation and to do so, modify the opinion. litigation and claims have
disclosure of segment e) When inventory is under custody of third been disclosed to the auditor
information in accordance party, request confirmation from third and appropriately accounted
with applicable FRF. party and perform inspection and other for as per applicable FRF.
procedures.
16
SA 505 - "External Confirmations" Refer page 17 for definition
Management's refusal to Results of the External

Scope of the SA External Confirmation procedures
allow the auditor to send
& Objective of Confirmation
a confirmation request
the auditor Procedures
A) Reliability of responses to confirmation requests:
If auditor has doubt about reliability of response,
Scope 1. D e t e r m i n i n g 1. Inquire as to management’s
auditor to obtain further audit evidence. If auditor
This SA deals the information reasons for the refusal, and determines response is not reliable, auditor to evaluate
with auditor's to be seek audit evidence as to their the implications on the assessment of risk of material
use of external confirmed/ validity and reasonableness misstatement.
confirmation requested. 2. Evaluate the implications B) Non Response: Auditor shall perform alternative
procedures to 2. Selecting the of management’s refusal on audit procedures.
obtain audit appropriate the auditor’s assessment of C) When a response to positive confirmation is
evidence. confirming the relevant risks of material necessary and the same is not received: Determine
party. misstatement, including the implications on the audit and the auditors opinion.
the risk of fraud, and on the D) Exception: Auditor shall investigate exceptions
3. Designing the
Objective nature, timing and extent of to determine whether or not they are indicative of
conf ir mation
To design other audit procedures; and misstatement.
requests.
and perform 3. Perform alternative audit E) Negative Confirmation: Auditor to use negative
4. Sending the
e x t e r n a l procedures designed to confirmation as sole substantive audit procedure when:
requests,
confirmation obtain relevant and reliable 1. Assessed Risk of Material misstatement is low and
including
procedures to audit evidence. relevant controls are effective.
follow-up
obtain relevant 2. The population comprise of large number of small,
requests. If management's refusal
and reliable homogeneous transactions.
audit evidence. is unreasonable, then
communicate with TCWG and 3. A very low exception rate is expected.
consider the implications on 4.The auditor is not aware of circumstances that would
audit and auditor's opinion. cause recipients of negative confirmation requests to
disregard such requests.
SA 510 - "Initial Audit Engagements- Opening Balances" Refer page 18 for definition
Scope of the SA Audit Procedures Audit Conclusion

This SA deals with and reporting
auditor's responsibilities
relating to opening
balances when Opening Balances: Consistency Relevant Opening Balances:
conducting an initial The auditor shall: of Accounting Information
1. If auditor is unable to obtain
audit engagement. 1. Read the most recent Policies: in the
audit evidence regarding opening
financial statements Obtain audit Predecessor's
balances- Qualified/ disclaimer of
and predecessor's evidence as to Auditor's
Objective of the opinion.
auditor's report. whether the Report :
auditor 2.If auditor concludes opening
2. Determine whether accounting I f
To obtain sufficient balances contain misstatement,
prior period's policies are modification
appropriate audit not properly presented/ disclosed-
evidence about: closing balance consistently in predecessor
Qualified/ Adverse Opinion.
has been correctly applied and auditor's
1. Whether opening
brought forward. in case of r e p o r t ,
balances contain Consistency of Accounting
misstatements 3. Determine whether any changes, evaluate the
the opening balances w h e t h e r effect of the Policies:
that materially
affect the current reflect appropriate p r o p e r l y matter giving If auditor concludes that accounting
period's financial accounting policies. accounted for, rise to such policies are not consistently applied
statements. 4. Perform audit presented and modification in relation to opening balances or
2. W h e t h e r procedures on disclosed. with respect changes are not properly accounted
appropriate opening balances. to current for- Qualified/ Adverse Opinion.
accounting 5. If current period period's
policies are financial statements financial Modification to the opinion in the
consistently are misstated due statements. predecessor's auditor's report:
applied and any to misstatement in
opening balances, If the modification is relevant and
change thereto
communicate with material to the current period's
has been properly
management or financial statements, auditor shall
accounted for,
presented and TCWG. modify the current period audit
disclosed. report.

17
SA 520
"Analytical Procedures"
Scope of the SA & Substantive Analytical procedures that Investigating results of

Objective of the auditor Analytical Procedures assist when forming an analytical procedures
overall conclusion
Scope While designing and If auditor finds fluctuations
This SA deals with auditor's use of performing substantive The auditor shall design or relationship that are
analytical procedures as substantive analytical procedures, and perform analytical inconsistent with other
procedures and as procedures near the auditor shall: procedures near the end relevant information
the end of audit that assist the auditor 1. Determine suitability of of the audit that assist the auditor shall investigate
when forming an overall conclusion analytical procedure for auditor when forming such differences by:
on the financial statements. given assertions. an overall conclusion as 1. Inquiring of management
2. Evaluate reliability of to whether the financial and obtaining appropriate
Data. statements are consistent audit evidence relevant to
Objective with the auditor's management's responses
3. Develop an expectation
1. To obtain relevant & reliable audit of recorded amounts. understanding of the entity. and
evidence when using substantive 2. Performing other audit
4. Determine the amount
analytical procedures. procedures as necessary
of acceptable difference.
2. To design and perform analytical in the circumstances.
procedures near the end of audit.
Definition
Analytical Procedures means evaluations of financial information through
analysis of plausible relationships among both financial and non-financial data.
Analytical procedures also encompass such investigation as is necessary of
identified fluctuations or relationships that are inconsistent with other relevant
information or that differ from expected values by a significant amount.
SA 530
"Audit Sampling"
Scope of the SA & Sample design, size and Performing Other points of
Objective of the auditor selection of items for testing Audit Procedures consideration
Scope 1. While designing audit 1. The auditor shall perform 1. The auditor shall investigate
This SA applies when the sample, the auditor shall appropriate audit the nature and cause of
auditor has decided to use consider the purpose of procedure on each item deviation or misstatement
audit sampling in performing the audit procedure and selected. identified and evaluate its
audit procedures. It deals the characteristics of the 2. If audit procedure is not possible effect.
with auditor's use of statistical population. applicable on the selelcted 2. When a deviation/
and non statistical sampling. 2. The auditor shall determine item, apply the procedure misstatement is considered
sample size sufficient to on a replacement item. as anomaly, the auditor shall
reduce sampling risk to an 3. If the auditor is unable to perform audit procedures to
Objective acceptably low level. apply the designed audit obtain high degree of certainty
To provide a reasonable 3. The auditor shall select procedure to a selected that it is not representative of
basis for the auditor to items for the sample such item, treat that item as the population.
draw conclusions about the that each sampling unit in a deviation from the 3. For test of details, the auditor
population from which the the population has a chance prescribed control, in case shall project misstatements
sample is selected. of selection. of tests of controls, or a found in the sample to the
misstatement, in the case population.
of tests of details. 4. The auditor shall evaluate
Definition the results of the sample
Audit Sampling: and whether the use
of audit sampling has
The application of audit procedures to less than 100% of provided a reasonable basis
items within a population of audit relevance such that all for conclusion about the
the sampling units have a chance of selection in order to population tested.
provide the auditor with a reasonable basis on which to
draw conclusions about the entire population.
18
SA 540-Auditing Accounting Estimates, Including Fair Value

Accounting Estimates and Related Disclosures
Scope : Auditor's Responsibility regarding use

of accounting estimates by management
Management's Auditor's Responsibility/ Audit Reporting

Responsibility- Audit Procedure
Follow an unbiased Perform risk assessment

Adequate disclosure of If significant
approach in preparing for procedure and related
material matter, such as risk exist even
accounting estimates activites
after adequate
Responsibility- disclosure the
auditor may
conclude that
the assumptions and the disclosure
Identify and assess the risk
method of estimates used of estimation
To make appropriate of material misstatements
disclosure in FS about the uncertainty
assertion and estimates is inadequate
made. in light of the
basis of selection of
circumstances and
Response to the estimates
facts involved.
assessed risk of material
misstatements
any change in the method

of estimates as compared
Evaluate the to prior period
reasonableness of
accounting estimates
the source and implication

of estimation uncertainty
The Chartered Accountant Student March 2019 15

19
SA 550
"Related Parties"
Scope of Objectives of Requirements Identification of Identified significant Other

the SA the auditor of the SA previously unidentified related party transactions important
or undisclosed related outside the entity's normal points
part transactions. course of business
This SA deals with the auditor's
responsibilities regarding
related party relationships and
transactions. It expands on how
SA 315, SA 330, SA 240 are to be 1. Auditor shall determine The auditor shall obtain Written
applied in relation to related party whether the underlying Representation that:
relationships and transactions. circumstances confirm the a) all the related parties and related party
existence of such transactions. transactions have been disclosed to
2. Communicate within the the auditor and
team. b) all such transactions have been
A. To obtain an understanding of the
related party transactions to: 3. Request managment to properly accounted for and disclosed.
identify all transactions with
1. recognize fraud risk factors arising from
such transactions. newly identified related Communication with TCWG
parties. The auditor shall communicate with
2. conclude whether financial statements, in so
4. Perform more substantive TCWG significant matters arising
far as they are affected by such transactions
procedures. during the audit in connection with the
a) achieve a true and fair presentation. entity's related parties.
5. Reconsider risks with respect
b) are not misleading.
to other related parties.
Documentation:
6. If non disclosure by the
B. To obtain audit evidence as to whether The auditor shall include in audit
management appears
the related party transactions are documentation names of the related
intentional, evaluate the
properly identified, accounted for, and parties and the nature of the related
implications for the audit.
disclosed in the financial statements. party transactions.
1. Risk Assessment procedures and related activities. 1. Inspect the underlying contracts and
2. Understanding the Entity's related party relationships and evaluate:
transactions. a) the business rationale of the transactions.
3. Maintaining alertness for related party information when b) whether the terms of transactions are
reviewing records or documents. consistent with managment's explanations.
4. Sharing related party information with the Engagement team. c) whether such transactions have been
5. Identification and assessment of the risk of material properly accounted for.
misstatement associated with related party transactions and 2. Obtain audit evidence that the transactions
relationships.
have been appropriately authorised and
6. Responses to the Risks of Material Misstatement associated approved.
with related party relationships and transactions.
Definition
Related party- A party that is either:
i) a related party as defined in applicable FRF.
ii) where applicable FRF establishes minimal or no related party requirements:
a) A person or other entity that has control or significant influence, directly or
indirectly through one or more intermediaries, over the reporting entity,
b) Another entity over which the reporting entity has control or significant
influence, directly or indirectly through one or more intermediaries; or
c) Another entity that is under common control with the reporting entity
through having:
• common controlling ownership,
• owners who are close family members, or
• common key management.

20
SA 560
"Subsequent Events"
Scope of Objectives of Events occuring Facts which become Facts that

the SA the auditor between the date known to the auditor after become known
of the Financial the date of the auditor's to the auditor
Statements and date report but before the date after the financial
of the auditor's report the financial statements statements have
are issued been issued
This SA deals Obtain sufficient appropriate 1. The auditor shall 1. Discuss the matter with
with auditor's audit evidence about whether perform audit management or TCWG.
responsibilities events occuring between the procedures to ensure 2. Determine whether the financial
relating to date of the financial statements that all such events statements need amendment.
subsequent and the date of the auditor's have been identified. 3. Inquire how management intends
events in report that require adjustment
an audit of to address the matter in the
of, or disclosure in, the financial financial statements.
financial statements are appropriately
statements. reflected in those financial
statements. 2. The auditor shall
consider the auditor's If manangement amends the
risk assessment in financial statements, auditor
determining the nature should extend the audit
and extent of such procedures and
Respond appropriately to the
procedures. 1. Either amend the audit report
facts that become known to
the auditor after the date of the to include an additional date
auditor's report, that, had they restricted to the amendment .
been known to the auditor at 2. Or provide a new/ amended
that date, may have caused the 3. If such event is report including a statement in
auditor to amend the auditor's identified, determine EOM/ OM para.
report. whether such event is
appropriately reflected
in financial statements.
If managment doesn't amend the
financial statements :
1. If audit report not yet provided
to the managment, modify the
4. Obtain Written
Definition opinion.
Representation that all
such events have been 2. If audit report has already been
Subsequent Events: provided to the management,
adjusted or disclosed.
Events occuring between the date of notify TCWG not to issue it to
the financial statements and the date third parties. If still issued then
of the auditor's report, and facts that take appropriate action to prevent
become known to the auditor after the reliance on the auditor's report.
date of the auditor's report.
1. Discuss the matter with management or TCWG.

2. Determine whether the financial statements need amendment.
3. Inquire how management intends to address the matter in the
Review if management has taken steps to inform about the

situation to everyone in receipt of the previously issued
1. If steps taken, issue new / amended report with EOM/ OM
para.
2. If steps not taken, then take appropriate steps to prevent
reliance on the auditor's report.
21
SA 570
"Going Concern"
Scope of Responsibilities Responsibilities When conditions Implications Other Important

the SA of the of the auditor or events are on the auditor's Points to be
management identified report considered
This SA deals 1. To obtain sufficient and Use of Going The auditor shall
with the auditor's appropriate audit evidence Concern Basis communicate with
responsibilities and conclude on the of Accounting is TCWG, events
in the audit appropriateness of the inappropriate The or conditions
of financial management's use of going auditor shall express identified that may
statements concern. an adverse opinion. cast significant
relating to going 2. To assess whether a material doubt on the entity's
concern and the uncertainty exists about the ability to continue
implications on the entity's ability to continue as a as a going concern.
auditor's report. going concern. Use of Going Concern
3. However, auditor cannot be basis of accounting
expected to guarantee the is appropriate but a If there is delay
entity's ability to continue as a material uncertainty in the approval
going concern. exists and: of the financial
Adequate disclosure statements and the
1. To make specific of material auditor believes that
assessment of the 1. Requesting managment to make its uncertanity is made such delay can be
entity's ability to asessment relating to entity's ability to in the financial related to events or
continue as a going continue as a going concern. s t a t e m e n t s - conditions relating
concern. 2. Evaluating management's plan of future Unmodified Opinion to going concern
actions. and a separate section assessment, the
3. Analysing the cash flow forecast of the "Material Uncertainty auditor shall
2. To make appropriate entity. related to going perform additional
disclosures in 4. Considering the additional facts or concern". procedures as well
connection with information available. as consider the
going concern in the 5. Requesting Written Representation from effect on auditor's
financial statements. management regarding the plans of future conclusion.
actions and the feasibility of these plans. Use of Going Concern
basis of accounting
is appropriate but a
material uncertainty
exists and:
Definition - SA 505 - "External Confirmations" Adequate disclosure
External Confirmation: Audit evidence obtained as a direct written of material
response to the auditor from a third party (the confirming party), in paper uncertanity is
form, or by electronic or other medium. not made in the
Positive confirmation request – A request that the confirming party financial statements-
respond directly to the auditor indicating whether the confirming party Qualified/ adverse
agrees or disagrees with the information in the request, or providing the opinion and mention
requested information. in the basis of opinion
paragraph.
Negative confirmation request – A request that the confirming party
respond directly to the auditor only if the confirming party disagrees with
the information provided in the request.
Non-response – A failure of the confirming party to respond, or fully
Management unwilling
respond, to a positive confirmation request, or a confirmation request
to make or extend its
returned undelivered.
assessment- Auditor
Exception – A response that indicates a difference between information shall consider the
requested to be confirmed, or contained in the entity’s records, and implications for the
information provided by the confirming party. auditor's report.

22
SA 580
"Written
Representations"
Scope of Objectives of Written Representation Date & Periods covered by Important points
the SA the auditor as Audit Evidence Written Representation to be considered
Doubts as to reliability of
This SA deals 1. To obtain written Although Written Written Representations:
with the auditor's representation from the Representations If written representations
responsibility to management or TCWG that provide necessary are inconsistent with other
obtain written they believe that they have audit evidence, audit evidence, auditor shall
representation from fulfilled their responsibility they do not provide perform audit procedures
management and, for the preparation of the sufficient appropriate to resolve the matter.
where appropriate, financial statements and audit evidence on If the auditor concludes that
those charged with for the completness of the their own. the written representation
governance. information provided to the are not reliable, the auditor
auditor. shall take appropriate
action in accordance with
The date of Written SA 705.
Representation shall be
as near as practicable to,
2. To support other audit but not after, the date of Requested Written
evidence relevant to the the auditor's report on Representation not
financial statements or the financial statements. provided:
specific assertions in the
Written Representation Auditor shall discuss
financial statements by means
shall be for all financial with the management,
of written representations.
statements and periods re-evaluate the integrity
referred to in the auditor's of management, take
report. appropriate actions
including the impact on
3. To respond appropriately audit report as per SA 705.
to written representation
provided by managment/
TCWG.
Definition - SA 510 - "Initial Audit Engagements-
Opening Balances"
Initial Audit Engagement:

An engagement in which either:
Definition
1. The financial statements for the prior period were not
Written Representation: audited, or
A written statement by management 2. The financial statements for the prior period were
provided to the auditor to confirm certain audited by a predecessor auditor.
matters or to support other audit evidence.
Do not include financial statements, the Predecessor Auditor:
assertions therein, or supporting books or The auditor from a different audit firm, who audited the
records. financial statements of an entity in the prior period and
who has been replaced by the current auditor.
23
SA 600 - USING THE WORK OF ANOTHER AUDITOR

"Principal Auditor" (P.A.) Principal auditor to review – written summary of other
auditor’s procedures
The Nature, timing Nature, This

responsible for when that financial information principal and extent of timing and knowledge
reporting on the includes the financial auditor procedures extent of may have
financial information information of one or more may also depend on procedures been
of an entity components audited by another wish to circumstances depend on enhanced
auditor. visit the of engagement principal from the
other & Materiality auditor's review of
auditor. aspect knowledge the previous
"Other auditor" of the audit work
professional of the other
competence auditor.
of the other
responsible for which is included in the auditor.
reporting on the financial information
financial information of audited by the principal
auditor.
The principal auditor should consider the significant
a component findings of the other auditor.
principal auditor
When the uses the work to determine how The principal auditor He may also decide
principal of another the work of the may consider it as to application of
auditor auditor, other auditor will appropriate to discuss supplementary that
affect the audit. with the other auditor supplemental tests
and the management of the records or the
of the component, the financial statements of
I. Consideration by an auditor before acceptance as audit findings or other the component are if
Principal Auditor: matters affecting the necessary. Such tests
financial information may, depending upon
(a) the materiality of the portion of the financial of the components. the circumstances,
information be performed by the
principal auditor or
(b) degree of knowledge regarding the business of the the other auditor.
components;
(c) the risk of material misstatements in the financial

information of the components audited by the other auditor;
and Where the other auditor’s report is other than unmodified, the
principal auditor should also document how he has dealt with
(d) the performance of additional procedures as set out the qualifications or adverse remarks contained in the other
in this SA regarding the components audited by other auditor’s report in framing his own report.
auditor resulting in the principal auditor having significant
participation in such audit. III. Co-ordination Between Auditors
II. Procedures to be followed by P.A.

Sufficient liaison The other auditor
Procedures to be performed by PA while using the work between the principal should co-ordinate
of other auditor auditor and the other with the principal
auditor. auditor.
(a) advise the other auditor (b) advise the other
regarding use of his (other auditor of the significant
auditor) work and report and accounting, auditing and the principal auditor
reporting requirements and
The principal auditor
make sufficient arrangements
obtain representation as to may require the other should advise the other
for co-ordination at the planning
stage of the audit. compliance with them. auditor to answer a auditor of any matters
detailed questionnaire having an important
bearing on the other
auditor’s work.
The principal areas requiring procedures for the
auditor would special identification of
inform the consideration, inter-component The other auditor
other auditor transactions should respond to
of matters such that may require such questionnaire on
as : disclosure and a timely basis.
the time-table for

completion of audit;
14 March 2019 The Chartered Accountant Student
24
IV Reporting Considerations
1. Principal auditor to express a qualified opinion or 2. If the other auditor issues a Modified Report
disclaimer of opinion in case of a limitation on the scope
of audit.
When the principal auditor concludes, based on his procedures, In all circumstances, if the other auditor issues, or intends to
that the work of the other auditor cannot be used and the issue, a modified auditor's report, the principal auditor should
principal auditor has not been able to perform sufficient consider whether the subject of the modification is of such
additional procedures regarding the financial information nature and significance, in relation to the financial information
of the component audited by the other auditor, the principal of the entity on which the principal auditor is reporting that it
auditor should express a qualified opinion or disclaimer of requires a modification of the principal auditor's report.
opinion because there is a limitation on the scope of audit.
V. Division of Responsibility
When the principal auditor has to base his opinion on the financial information of the entity as a whole relying upon the statements
and reports of the other auditors, his report should state clearly the division of responsibility for the financial information of the
entity by indicating the extent to which the financial information of components audited by the other auditors have been included
in the financial information of the entity, e.g., the number of divisions/branches/subsidiaries or other components audited by other
auditors. However, if the Principal Auditor notices any material discrepancies the same has to be brought to the knowledge of other
Auditor. This should be incorporated in the Audit Report.
The Chartered Accountant Student March 2019 15

25
SA 600 - 699: Using Work of Others
SA 610
"Using the Work of Internal Auditors"
Scope of External auditor's Objectives of Using the work of Using Internal When using the
responsibility for the External the Internal Audit Auditors to provide work or direct
the SA the Audit Auditor Function direct assistance assistance
This SA deals with external External auditor shall determine

auditor's responsibilities if whether the work of the Internal Using the work of Internal Audit
using the work of internal Audit function can be used for the Function
auditors. This includes: audit by evaluating:
a) using the work of internal audit The External Auditor shall:
a) the objectivity of the Internal
function in obtaining audit a) discuss the planned use of the Internal
auditors.
evidence. Audit function.
b) level of competence of the internal
b) using the internal auditors to b) read the report of the Internal Audit
audit function.
provide direct assistance under function.
the direction, supervision and c) approach of Internal Audit function
c) perform sufficient audit procedures to
review of external auditor. including quality control.
evaluate the internal audit function.
External auditor shall determine
the nature and extent of work of
Internal Audit function that can be
used by:
The External Auditor has the a) considering the nature and scope
sole responsibility for the audit of work of Internal Audit function Using the Internal Auditors to provide
opinion expressed, and that and its relevance to the external Direct Assistance:
responsibility is not reduced by the auditor's overall audit strategy and The External Auditor shall:
external auditor's use of the work plan. a) obtain written agreement from the
of the internal audit function or entity.
b) making all significant judgements
internal auditors to provide direct
and preventing undue use of the b) obtain written agreement from the
assistance on the engagement.
internal audit function. internal auditors.
c) being sufficiently involved in the c) direct, supervise and review the work
audit. performed by the Internal Auditors.
d) communicating to TCWG, as to
how they have planned to use the
work of the internal audit function.
1. To determine whether the work of the
internal audit function or direct assistance The external auditor shall document
from internal auditors can be used, and if the above.
so, in which areas and to what extent; and
having made that determination:
External auditor shall determine whether Internal Auditors
can be used to provide Direct Assistance by evaluating:
a) the existence and significance of threats to objectivity and
2. If using the work of the internal audit b) the level of competence of the internal auditors.
function, to determine whether that work is
External auditors shall determine the nature and extent of work
adequate for the purposes of audit; and
that can be assigned to Internal Auditors providing Direct
Assistance by considering:
a) the amount of judgement involved.
3. If using internal auditors to provide direct b) the assessed risk of material misstatements.
assistance, to appropriately direct, supervise c) the evaluation as mentioned above.
and review their work. The external auditor shall be sufficiently involved in the audit
and shall communicate to TCWG, the nature and extent of the
planned use of internal auditors to provide direct assistance.
The external auditor shall document the above.

26
SA 620
"Using the Work of an Auditor's Expert"
Scope of The auditor's Reference to the

Objectives of Requirements
responsibility for Auditor's Expert in
the SA the auditor of the SA
the audit opinion the Auditor's Report
This SA deals with auditor's 1. To determine whether to use the

responsibilities regarding work of an auditor's expert; and The auditor shall not refer to the work
the use of an individual or
of an auditor's expert in the auditor's
organisation's work in a
report containing an unmodified
field of expertise other than
2. If using the work of an auditor's opinion unless required by law or
accounting or auditing,
expert, to determine whether that regulation to do so.
when that work is used
to assist the auditor in work is adequate for the auditor's If the auditor makes a reference
obtaining sufficient and purposes. in the auditor's report for better
appropriate audit evidence. understanding of a modification to the
auditor's opinion, he shall indicate that
such reference does not reduce auditor's
responsibility for that opinion.
The auditor has sole responsibility for the audit

opinion expressed, and that responsibility is
not reduced by the auditor's use of the work of
an auditor's expert. 1. Determining the need for an auditor's expert.
If the auditor concludes that the work of
auditor's expert is adequate for his purposes,
he may accept the expert's findings or
conclusions in the expert's field as appropriate 2. Determining nature, timing and extent of
audit evidence. audit procedures.
3. Evaluating the competence, capabilities and

objectivity of the Auditor's expert
Definition
Auditor's Expert:
An individual or organisation possessing 4. Obtaining an Understanding of the field of
expertise in a filed other than accounting expertise of the Auditor's expert
or auditing, whose work in that field is
used by the auditor to assist the auditor in
obtaining sufficient and appropriate audit
evidence. 5. Agreeing with the Auditor's expert in
writing.
Management's Expert:
An individual or organisation possessing
expertise in the field other than accounting 6. Evaluating the adequacy of the Auditor's
or auditing, whose work in that field is Expert work.
used by the entity to assist the entity in
preparing the financial statements.
27
SA 700 - 799 Audit Conclusions and Reporting

SA 700
"Forming an Opinion and Reporting on Financial Statements"
Scope of Objectives of Unmodified Auditor's Supplementary

the SA the Auditor Opinion Report Information
Deals with To form Opinion • Title Whether supplementary information is

auditor's an opinion expressed by • Addressee integral part of financial statements.
responsibility on the the auditor • Auditor's Opinion
to form an financial when he • Basis for Opinion
opinion on statements. If yes, then If no, then auditor will evaluate
concludes • Going Concern supplementary whether supplementary
the financial that the • Key Audit Matters
statements. information will information is presented in
financial Responsibilities for the be covered by the way that differentiates it from
To express statements Financial Statements
clearly that auditor’s opinion. financial statements.
Deals with are prepared • Auditor's Responsibilities
opinion in all material • Location of Description of
the form through If not differentiated, then ask the management
and content respects in Auditor's Responsibility
a written a cco r d a n ce • Other Reporting to change the way of presentation.
of auditor's report.
report. with the Responsibilities
applicable • Signature
If management If management refuses, auditor will
FRF. • Place of Signature
changes then explain in the auditor’s report that such
• Date of Auditor's Report
OK. information has not been audited.
SA 701
"Communicating Key Audit Matters in

the Independent Auditor's Report"
Scope of the Purpose of Objectives of Determining Communicating Other important

SA Communicating the Auditor Key Audit Key Audit points to be
Key Audit Matters Matters Matters considered
Deals with To enhance the To determine Auditor The auditor Communicating key audit matters in
the auditor’s communicative key audit shall take in shall describe the auditor’s report is not:
responsibility value of the m a t t e r s account: each key
to communi- auditor’s report and, having audit matter,
cate key audit by providing formed an using an (a) A substitute for disclosures
matters in g r e a t e r opinion on 1. Areas appropriate in the financial statements that
the auditor’s transparenc y the financial of higher subheading , the applicable financial reporting
report. about the st atement s , assessed in a separate framework requires manage-ment to
audit that was communicate risks of section of make, or that are otherwise necessary
performed. those matters material mis- the auditor’s to achieve fair presentation;
Intended to by describing statement. report under
address both them in the the heading
the auditor’s To assist au d i to r ’s “Key Audit
judgment as the users in report. Matters”. (b) A substitute for the auditor
2. Significant expressing a modified opinion when
to what to understanding auditor's
communicate those matters required by the circumstances
judgment. of a specific audit engagement in
in the that, in the
au d i to r ’s auditor ’s accordance with SA 705 (Revised);
report and professional
the form judgment, 3. The effect
and content were of most on the audit (c) A substitute for reporting in
of such significance of significant accordance with SA 570 when a
communi- in the audit of events or material uncertainty exists relating
cation. the financial transactions to events or conditions that may cast
statements of during the significant doubt on an entity’s ability
the current period. to continue as a going concern; or
period.
(d) A separate opinion on individual

matters.

28
SA 705
"Modifications to the Opinion in the

Independent Auditor's Report"
Scope of the Types of Modified Objective of Circumstances when Management Other important
SA Opinions the auditor a modification to imposed points to be
the auditor's opinion limitation considered
is required
Deals with Qualified To express The auditor Request the management 1. The auditor
how the Opinion: clearly an concludes to remove the limitation. shall use the
form and The auditor, appropriately that, based heading "Qualified
content of h a v i n g modified on the audit Opinion", "Adverse
the auditor’s obtained opinion on evidence Opinion", "Disclai-
report is sufficient and the financial obtained, If management refuses mer of Opinion"
affected when appropriate statements. the financial to remove the limitation, for the Opinion
audit evidence, statements communicate with TCWG section.
the auditor
expresses concludes that as a whole and perform alternate
a modified misstatements are not free procedures.
opinion. are material, from material 2. The auditor
but not misstatement. shall amend the
pervasive. heading "Basis for
Deals with Still unable to obtain opinion" to "Basis
the auditor’s The auditor sufficient and appropriate for Qualified/
is unable audit evidence. Adverse/ Disclai-
responsibility A d v e r s e
to obtain mer of Opinion".
to issue an Opinion:
appropriate The auditor, sufficient and
report in h a v i n g appropriate
circumstances obtained audit evidence Possible Possible
when, in sufficient and to conclude effects effects both
forming an appropriate that the material but material and
opinion in audit evidence, financial not pervasive. pervasive.
accordance concludes that statements
with SA 700, misstatements, as a whole
the auditor individually or are free from
concludes that in aggregate are material Qualified Withdraw from
a modification both material misstatement. Opinion. the engagement
to the auditor’s and pervasive. or disclaimer of
opinion on opinion.
the financial
statements is Disclaimer of
necessary. opinion:
When the
a u d i t o r
is unable
to obtain
sufficient and
appropriate
audit evidence
and he
concludes that
the possible
effects on
the financial
statements of
undetected
misstatements
could be both
material and
pervasive.
29
SA 706
Emphasis of Matter Paragraphs and Other Matter

Paragraphs in the Independent Auditor’s Report
Scope Objectives Definitions

Requirements
This SA deals The objective E m p h a s i s Emphasis of Matter Other Matter Communication

with additional of the auditor, of Matter Paragraphs in the Paragraphs in with Those
communication having formed paragraph : Auditor’s Report the Auditor’s Charged with
in the auditor’s an opinion on A paragraph Report Governance
report when the financial included in the
the auditor statements, is auditor’s report
to draw users’ that refers
considers it
attention, when to a matter
necessary to If the auditor When the If the auditor The auditor
in the auditor’s appropriately
draw users’ presented or considers it auditor includes considers it shall
judgment it is
attention to disclosed in necessary to an Emphasis necessary to include the
necessary to do
a matter or so, by way of the financial draw users’ of Matter communicate paragraph
matters. clear additional statements that, attention paragraph in the a matter other within a
communication in the auditor’s to a matter auditor’s report, than those that separate
in the auditor’s judgment, presented or the auditor shall: are presented section with
report, to: is of such disclosed in or disclosed in the heading
(a)presented importance that the financial the financial “Other
or disclosed in it is fundamental statements that, (a) Include the statements that, Matter,”
the financial to users in the auditor’s paragraph within in the auditor’s or other
A matter, understanding judgment, a separate section judgment, is appropriate
statements
a l t h o u g h of the financial is of such of the auditor’s relevant to users’ heading.
that are of such
appropriately statements. importance report with an understanding
importance that it is appropriate of the audit,
that they are presented or
disclosed in fundamental heading that the auditor’s
fundamental to users’ includes the term responsibilities
the financial Other Matter
to users’ understanding “Emphasis of or the auditor’s If the auditor
statements, paragraph:
understanding that is of such of the financial Matter”; report, the expects to
of the financial A paragraph include an
importance that included in the statements, auditor shall
statements; or it is fundamental the auditor include an Emphasis of
auditor’s report (b) Include in Matter or an
to users’ that refers to shall include Other Matter
understanding an Emphasis the paragraph a paragraph in the Other Matter
a matter other clear reference to paragraph in
of the financial than those of Matter auditor’s report,
(b) other than statements; or paragraph in the matter being provided: the auditor’s
presented or emphasized and report, the
those presented disclosed in the auditor’s
or disclosed in the financial report provided: to where relevant auditor shall
disclosures that (a)This is not communicate
the financial As appropriate, statements that, fully describe prohibited with those
statements that any other in the auditor’s The auditor the matter can by law or charged with
are relevant matter that is judgment, is would not be be found in governance
to users’ relevant to users’ relevant to users’ required to regulation; and
the financial regarding this
understanding understanding understanding modify the statements. expectation and
of the audit, of the audit, of the audit, opinion in The paragraph the wording of
the auditor’s the auditor’s accordance with (b)When SA
the auditor’s shall refer only 701 applies, the this paragraph.
responsibilities responsibilities responsibilities SA 705 (Revised) to information
or the auditor’s or the auditor’s as a result of the matter has not
or the auditor’s presented or been determined
report. report. report. matter; and disclosed in to be a key audit
the financial matter to be
When SA 701 statements; and communicated
applies, the in the auditor’s
matter has not report.
(c) Indicate that
been determined
the auditor’s
to be a key audit
opinion is
matter to be
not modified
communicated
in respect of
in the auditor’s
the matter
report.
emphasized.

30
SA 710
"Comparative Information—Corresponding Figures & Comparative Financial Statements"
Scope of the Objectives of the Definitions Audit Reporting Audit Audit Reporting
SA Auditor differences between Procedure
the Approaches are:
Deals with To obtain Comparative information: The For Assess the 1. With 2. With
auditor's sufficient amounts and disclosures included correspon- consistency Reference to Reference to
responsibilities appropriate in the financial statements in ding figures, of accounting corresponding comparative
regarding audit evidence respect of one or more prior the auditor’s policies used. figures, figures
comparative about periods in accordance with the opinion on auditor
applicable financial reporting a) the auditor's
information whether the the financial opinion opinion shall
in an audit comparative framework. statements Check should refer refer to each
of financial information refers to Comparative in his opinion period for which
statements. included in Corresponding figures: the current figures with only when FS are presented
the financial Comparative information where period only; amount and a) if previous and on which
statements amounts and other disclosures whereas disclosure in AR is audit opinion is
has been for the prior period are included prior period. other than expressed.
When the presented, in as an integral part of the current For compa-
financial unqualified. b) difference
all material period financial statements, and rative
statements respects, in are intended to be read only in financial Determine that b) Prior period in opinion on
of the prior accordance relation to the amounts and other statements, FS Contains misstatement previously issued
period with the disclosures relating to the current the auditor’s appropraitely not addressed. FS.
have been requirements period (referred to as “current opinion refers classified c) if prior c) if previous FS
audited by a for period figures”). The level of detail to each period comparative period FS audited by some
predecessor comparative presented in the corresponding for which information. unaudited. other auditor,
auditor or information in amounts and disclosures is financial mention the
were not the applicable dictated primarily by its relevance statements are same in AR.
audited, the financial to the current period figures. presented. Evaluate
requirements d) If prior period
reporting the impact FS unaudited,
and guidance framework; of possible
in SA 510 Comparative financial statements: mention the
and Comparative information where amounts misstatement same in the AR.
regarding in comparative
opening and other disclosures for the prior period are
To report in included for comparison with the financial information
balances also accordance on FS.
apply. statements of the current period but, if audited,
with the are referred to in the auditor’s opinion. The level
auditor’s of information included in those comparative
reporting financial statements is comparable with that of Obtain Written
responsibilities. the financial statements of the current period. representation.
SA 720
"The Auditor's Responsibilities Relating to Other Information"
Scope of the SA Objective of the Auditor Definitions Requirements of the SA
Deals with • To consider whether there Other Information: Financial or non 1. Obtaining the Other Information.
auditor's is material inconsistency Financial information (other than financial
r e s p o n - between other information statements and the auditor's report 2. Reading and considering the other
sibilities and financial statements. thereon) included in an entity's annual information.
relating • To consider whether there report.
to other is material inconsistency 3. Responding when a material
information, between other information Inconsistency appears to exist or
Annual Report: A document, or other information appears to be
whether and auditor's knowledge combination of documents, prepared materially misstated.
financial or obtained in the audit. typically on an annual basis by management
non financial,
• To respond appropriately or those charged with governance in
included 4. Responding when the auditor
when auditor identifies accordance with law, regulation or custom,
in entity's concludes that a material
material inconsistencies or the purpose of which is to provide owners
a n n u a l misstatement of the other
other information appears (or similar stakeholders) with information
report. information exists.
to be materially misstated. on the entity’s operations and the entity’s
financial results and financial position
as set out in the financial statements. An 5. Responding when a material
This SA does misstatement in the financial
To report in accordance annual report contains or accompanies the
not apply to : statements exists or auditor's
with this SA. financial statements and the auditor’s report
thereon and usually includes information understanding of the entity and its
about the entity’s developments, its future environment needs to be updated.
Preliminary Securities offering
announcements documents , outlook and risks and uncertainties, a
statement by the entity’s governing body, 6. Reporting and
of financial i n c l u d i n g
and reports covering governance matters. Documentation.
information or prospectuses.
31
CA Final - Paper 3 - Advanced Auditing and Professional Ethics
This Capsule on Paper 3: Advanced Auditing & Professional Ethics at Final Level covers selected Topics of Chapter 18 on
Professional Ethics and this should not be taken as a substitute for the detailed study of the Chapter. Students are advised to
refer to the relevant Study Material, MCQs & Case Scenarios Booklet and RTP for comprehensive study & revision.
Ethics Professional Ethics The Code contains sections which address specific topics. Some
sections contain subsections dealing with specific aspects of
those topics. Each section of the Code is structured, where
means moral principles consist of personal,
appropriate, as follows:
which govern a organisational and
person’s behaviour or corporate standards of Introduction Application material
Requirements
the conducting of an behaviour expected for
activity. professionals. Sets out the Establish general Provides context,
subject matter and specific explanations,
addressed within obligations with suggestions for
the section and respect to the actions or matters
A distinguishing feature of the accountancy introduces the subject matter to consider
profession is its acceptance of the responsibility requirements addressed. illustrations and
to act in the public interest. and application other guidance
Code of
Ethics Code of Ethics seeks to protect the interests of material in the to assist in
the profession as a whole. context of the complying with the
conceptual requirements.
It is a shield that enables us to command respect. framework.
OVERVIEW OF THE CODE OF ETHICS

Introductory material contains information, including an
explanation of terms used, which is important to the understanding
Complying with
the Code and application of each Part and its sections.
Fundamental A professional accountant shall comply with the Code. There

Part 1 Principles might be circumstances where laws or regulations preclude an
accountant from complying with certain parts of the Code. In
such circumstances, those laws and regulations prevail, and the
Conceptual accountant shall comply with all other parts of the Code.
Framework
Fundamental Principles: In order to achieve the objectives of the

Professional
Part 2 Accountants in accountancy profession, professional accountants have to observe
Service a number of prerequisites or fundamental principles.
Professional
Part 3 Accountants in Integrity
Overview Public Practice
of the
Code of Objectivity
Ethics Independence
for Audit Professional
Part 4A and Review
Engagements Competence and Due
Independence Care
Standards
Part 4B Independence
for Assurance Confidentiality
Engagements
Other than
Audit and Professional
Review Behaviour
Defined & Engagements
Glossary described terms
The Chartered Accountant Student October 2022 07

32
I. Integrity – Subsection 111: A profession- When a professional accountant becomes aware of having been
al accountant shall associated with information described above, the accountant shall
take steps to be disassociated from that information.
Comply with the principle of integrity, which requires an

II. Objectivity- Subsection 112: A professional
accountant to be straightforward and honest in all professional accountant shall
and business relationships;
comply with the not undertake a
principle of objectivity, professional activity
not knowingly be associated with reports, returns, which requires an if a circumstance
communications or other information where the accountant accountant not to or relationship
believes that the information: compromise professional unduly influences
or business judgment the accountant’s
because of bias, conflict professional judgment
of interest or undue regarding that
influence of activity.
others.
contains a materially false or
misleading statement;
III. Professional Competence and Due Care –
Subsection 113: A professional accountant shall
contains statements or information comply with the principle of professional competence and due
provided negligently; or care, which requires an accountant to:
omits or obscures required information where such omission

or obscurity would be misleading. Attain and maintain professional
knowledge and skill at the level act diligently in
required to ensure that a client or accordance with
employing organisation receives applicable technical
competent professional service, and professional
if the professional accountant, provides a modified report, based on current technical and standards.
it will not be considered to be in breach of matters mentioned professional standards and relevant
above. legislation; and
IV. Confidentiality- Subsection 114 : A professional accountant shall

comply with the principle of confidentiality, which requires an accountant to respect the confidentiality of information
acquired as a result of professional and employment relationships.
An accountant shall:
Not disclose
confidential Not use
Take
information confidential Not use or
Be alert to the reasonable
acquired as information disclose any
possibility of steps to ensure
a result of acquired as
inadvertent confidential that personnel
professional a result of
disclosure, Maintain and information, under the
professional either
including Maintain confidentiality employment accountant’s
and acquired or
in a social confidentiality of information relationships control, and
employment received as
environment, of information disclosed by outside the firm individuals
or employing relationships a result of a
and within the firm a prospective from whom
organisation for the professional or
particularly to or employing client or advice and
without proper personal employment
a close business organisation; employing assistance
and specific advantage relationship,
associate or an organisation; are obtained,
authority, of the
immediate or after that respect the
unless there accountant
a close family is a legal or relationship accountant’s
or for the has ended; and
member; professional duty of
advantage of a
duty or right to confidentiality.
third party;
disclose;
08 October 2022 The Chartered Accountant Student
33
A professional accountant shall continue to comply with the principle
of confidentiality even after the end of the relationship between the
Circumstances where professional accountants are or might be required to disclose confidential information or
accountant and a client or employing organisation.

(a) D isclosure
is required (i) T
o comply V. Professional Behaviour Subsection 115:
by law, with the
requirements A professional accountant shall
of Peer Review
or Quality comply with the principle of professional behaviour, which
Review of the requires an accountant to comply with relevant laws and
Institute; regulations and avoid any conduct that accountant knows or
should know might discredit the profession.
(b) Disclosure is
permitted by
when such disclosure might be appropriate
law and is (ii) To respond to Exaggerated claims for the

authorized by an inquiry or services they are able to offer, the
the client or investigation qualifications they possess, or
the employing by a experience they have gained; or
organisation; professional
or regulatory
body;
A professional
(c)
There is a accountant Disparaging references or
professional shall be honest unsubstantiated comparisons to the
duty or right and truthful work of others.
(iii) To protect the and should
to disclose, professional
when not not make:
interests of a
prohibited by professional
law: accountant Any direct or indirect measures to
in legal advertise any professional/other
pro ce e dings ; facts which are in violation of
or Advertisement Guidelines issued
by the Council of the Institute from
time to time.
(iv) To comply with
technical and
professional A professional accountant shall comply with each of the
standards, fundamental principles.
including ethics
requirements.
The fundamental principles of ethics establish the standard of
behaviour expected of a professional accountant.
Whether to disclose confidential information, professional

The conceptual framework establishes the approach which an
accountants should consider:
accountant is required to apply to assist in complying with those
fundamental principles.
(a) W
hether the interests (b)
Whether all the
of any party, including relevant information A professional accountant might face a situation in which
third parties whose is known and complying with one fundamental principle conflicts with
interests might substantiated, to the complying with one or more other fundamental principles. In
be affected, could extent it is practicable; such a situation, the accountant might consider consulting, with:
be harmed if the and
client or employing l Others
organisation consents within the
to the disclosure l Those l The l Legal
firm or
of information by charged with Institute counsel
employing
the professional governance
organisation
accountant;
However, such consultation does not relieve the accountant from

the responsibility to exercise professional judgment to resolve the
conflict or, if necessary, and unless prohibited by law or regulation,
(c)
The proposed type (d) Whether the disassociate from the matter creating the conflict.
of communication, parties to whom
and to whom it is the communication The professional accountant is encouraged to document the
addressed; is addressed substance of the issue, the details of any discussions, the decisions
are appropriate made and the rationale for those decisions.
recipients.

34
Threats, Evaluation of Threats and Safeguards : The conceptual framework specifies an approach for a professional accountant to:
Identify threats to compliance with Address the threats by eliminating or

Evaluate the threats identified reducing them to an acceptable level
the fundamental principles
Threats, Evaluation of
Threats and Safeguards
Threats Evaluation of Threats Addressing Threats in case Safeguards

whether it is- not at Acceptable level
At Acceptable Eliminating the

level circumstances,
Self-interest including interests
threat or relationships,
that are creating the Actions, individually
Reasonable and
threats; or in combination,
informed third party
that the accountant
takes that effectively
Self-review
reduce threats to
threat Applying safeguards, compliance with
where available and the fundamental
capable of being principles to an
applied, to reduce acceptable level.
Advocacy the threats to an
threat acceptable level; or
Familiarity
threat Declining or
ending the specific
professional activity.
Intimidation
threat
SCHEDULES TO THE ACT :

Types of Schedules
First Schedule Second Schedule
Part I: Part II: Part III: Part IV: Other Part I: Part II: Part III: Other
Professional Professional Professional misconduct Professional Professional misconduct in
misconduct misconduct misconduct in relation to misconduct misconduct relation to
in relation in relation to in relation to Members of in relation in relation to Members of
to Chartered Members of Members of the Institute to Chartered Members of the
Accountants the Institute in the Institute generally Accountants the Institute Institute
in practice service generally in practice generally generally
No. of No. of No. of No. of No. of No. of No. of

Clauses: 12 Clauses: 2 Clauses: 3 Clauses: 2 Clauses: 10 Clauses: 4 Clause: 1
35
Flow Chart of Disciplinary Procedure Mechanism
Receipt of (i) Complaint along with prescribed fee, or (ii) Information,

against member of ICAI of alleged misconduct
Disciplinary
Directorate
Prima Facie Opinion
Guilty Not Guilty
Submit all information & complaints

Falling in Falling in to Board of Discipline
First Schedule Second Schedule or Both
Place the matter Place the matter before

before Board of Disciplinary Committee
Discipline
Accepted Rejected
Accepted Rejected
Advice the Director
Accepted Rejected (Discipline) to further
Conduct Close the investigate
enquiry matter
Conduct Close the
enquiry matter
May proceed with the
Found guilty
matter, if it’s allied to
Found guilty the First Schedule
Yes No
Refer the matter
It can, Yes No to the Disciplinary
(i) reprimand the member Committee, if it’s allied
(ii) remove name of the It can,
member upto a period of 3 to the Second Schedule
(i) reprimand the member or Both
months (ii) remove name of the member
(iii) impose fine upto permanently or for any duration, it
` 1,00,000 thinks fit
(iii) impose fine upto
` 5,00,000
Any member or Director (Discipline) aggrieved by order of Board or Disciplinary

Committee can prefer an appeal within 90 days
Appellate Authority
It can,
(i) Confirm, modify or set aside the order.
(ii) Impose, Set aside, Reduce or enhance penalty.
(iii) Remit the case to the Board of Discipline or Disciplinary Committee for reconsideration.
(iv) Pass such order as the Authority thinks fit.

36
Clause (2) Pays or allows or agrees to pay or allow, directly
THE FIRST SCHEDULE: Where the Director (Discipline) or indirectly, any share, commission or brokerage in the fees or
is of the opinion that member is guilty of any professional or profits of his professional business, to any person other than a
other misconduct mentioned in the First Schedule; he shall member of the Institute or a partner or a retired partner or the
place the matter before the Board of Discipline. legal representative of a deceased partner, or a member of any
other professional body or with such other persons having such
qualification as may be prescribed, for the purpose of rendering
PART I - Professional misconduct in relation such professional services from time to time in or outside India.
to Chartered Accountants in practice
A Chartered Accountant in practice is deemed to be guilty of A CA in practice is deemed
professional misconduct if he: to be guilty of Professional
Misconduct if he
Clause (1) Allows any person to practice in his name as a
chartered accountant unless such person is also a chartered
accountant in practice and is in partnership with or employed by
him.
pays or allows or to any person for rendering
Non- Chartered Not agrees to pay or other than a professional
Accountant allowed allow any Share, services from
member of the
Commission or Institute, a partner time to time
Who can
Brokerage in the or a retired
be allowed
Partner Allowed Fees or Profits partner, the legal
to practice
of Professional representative of a
in a CA’s inside India
Business deceased partner,
name?
Chartered a member of any
Accountant in Employee Allowed other professional
practice Directly body or with such outside India.
other persons
Not having prescribed
Others Allowed Indirectly qualification
Clause (3)
A CA in practice is deemed to be guilty of Professional Misconduct if he
accepts or agrees to accept any part of the profits of the of a person who is not a
professional work member of the Institute.
Referral Fees amongst members: It is not prohibited for a member in practice to charge Referral Fees, being the fees
obtained by a member in practice from another member in practice in relation to referring a client to him.
Clause (4) Enters into partnership, in or outside India, with any Clause (5) Secures either through the services of a person
person other than Chartered Accountant in practice or such other who is not an employee of such Chartered Accountant or
person who is a member of any other professional body having who is not his partner or by means which are not open to a
such qualifications as may be prescribed, including a resident who Chartered Accountant, any professional business.
but for his residence abroad would be entitled to be registered as Provided that nothing herein contained shall be construed as
a member under clause (v) of sub-section (1) of section 4 or whose prohibiting any agreement permitted in terms of item (2), (3)
qualifications are recognised by the Central Government or the and (4) of this part.
Council for the purpose of permitting such partnerships.
A Chartered Accountant in practice is not permitted to enter into
It may further be noted that the acts of
partnership with any person other than a Chartered Accountant
partners and employees of the firm towards
in practice or such other persons as may be prescribed by the
securing professional work are subject
Council from time to time. The members may, however, take note
to the provisions of Clauses (6) and (7)
of the fact that they cannot form Multi-Disciplinary partnerships
of Part-I of First Schedule of Chartered
till such time that Regulators of such other professionals also
Accountants Act, 1949.
permit partnership with chartered accountants, and guidelines in
this regard are issued by the Council.
37
Clause (6) Solicits clients or professional work either Application for empanelment for allotment of audit and other
directly or indirectly by circular, advertisement, personal professional work–to make roving enquiries by applying to
communication or interview or by any other means. any such organisation for having his name included in any
Provided that nothing herein contained shall be construed as such panel is prohibited. It is permissible to quote fees on
preventing or prohibiting - enquiries being received from such bodies, which maintain such
(i) Any Chartered Accountant from applying or requesting panel.
for or inviting or securing professional work from another
chartered accountant in practice; or Publication of Books, Articles or Presentation: It is not
(ii) A member from responding to tenders or enquiries issued permissible to mention in a book or an article published by him,
by various users of professional services or organisations or a presentation made by him, any professional attainment(s),
from time to time and securing professional work as a whether of the member or the firm of chartered accountants,
consequence. with which he is associated. However, designation 'Chartered
Further, keeping in view the broad purview of Clause (6) of Part Accountant' as well as the name of the firm may be indicated
I of the First Schedule to the Chartered Accountants Act, 1949, in the same.
an advertisement of Coaching/teaching activities by a member
in practice may amount to indirect solicitation, as well as Issue of Greeting Cards or Invitations: The Council is of the
solicitation by any other means, and may therefore be violative of view that the designation 'Chartered Accountant' as well as the
the provisions of Clause (6) of Part I of the First Schedule to the name of the firm may be used in greeting cards, invitations for
Chartered Accountants Act, 1949. marriages and religious ceremonies and any invitations for
opening or inauguration of office of the members, change in
Some forms of soliciting work which the Council has prohibited office premises and change in telephone numbers, provided that
are discussed below: such greeting cards or invitations etc. are sent only to clients,
relatives and friends of the members concerned.
Member may request
another Chartered Advertisement for Silver, Golden, Platinum or Centenary
Accountant in practice Announcements celebrations is not permitted. However, considering the need of
for professional work. should be limited to
a bare statement of interpersonal socialisation/relationship of the members through
facts & consideration such get-together occasions, the advertisement for Silver, Golden,
Member may advertise given to the Diamond, Platinum or Centenary celebrations of the Chartered
Advertisement and note in the press –
changes in partnerships appropriateness of the

The exceptions to the above rule are:
Accountants Firms may be published in newspaper or newsletter.

or dissolution of a firm, area of distribution
or of any change in of the newspaper/
address of practice and magazine & number of Advertisement of Teaching/Coaching activities by members:
telephone numbers. insertions. The members engaged in teaching /coaching activities, while
advertising such teaching /coaching activities, shall comply with
Provided it only the Regulation 190A of the Chartered Accountants Regulations,
contains the 1988.
accountant’s name,
An advertisement of Coaching/teaching activities by a member
address or telephone
number, fax number, in practice may amount to indirect solicitation, as well as
Member is permitted solicitation by any other means, and may therefore be violative of
to issue a classified e-mail address and
address(es) of social the provisions of Clause (6) of Part I of the First Schedule to the
advertisement in the
journal/newsletter Networking sites of Chartered Accountants Act, 1949.
of the Institute members. However, such members may put, outside their Coaching/
intended to give teaching premises, sign board mentioning the name of Coaching/
information for teaching Institute, contact details and subjects taught therein only.
sharing professional Mere factual position
work on assignment of experience and As regards the size and type of sign board, the Council Guidelines
basis or for seeking area of specialisation, as applicable to Firms of Chartered Accountants would apply.
partnership or relevant to seek
salaried employment response to the Sharing Firm Profile with prospective Client is not permitted
of an accountancy advertisement, are
nature, unless it is in response to a proposed client’s specific query, and
permissible. otherwise not prohibited to be used by the client.
Responding to Tenders, Advertisements and Circulars: The While sharing name of the member or Firm of Chartered
Council has issued Guidelines which stipulate that a member of Accountants for inclusion in Television or Movie Credits, it must
be taken care of that exhibition of name is not made differently as
the Institute in practice shall not respond to any tender issued by
compared to other entries in the credits.
an organisation or user of professional services in areas of services
which are exclusively reserved for Chartered Accountants, such
as audit and attestation services. Soliciting professional work by making roving enquiries is not
permissible.
However, such restriction shall not be applicable where minimum
fee of the assignment is prescribed in the tender document itself The issue of an advertisement or a circular by a Chartered
or where the areas are open to other professionals along with Accountant, seeking work from professional colleagues on any
the Chartered Accountants. The 'minimum fee' for this purpose basis whatsoever except as provided above would be in violation
should be such that it commensurates with size, value, volume, of this clause.
manpower requirement and nature of work.

38
Scope of representation which an auditor is entitled to make A member empanelled as Insolvency Professional or
under Section 225(3) of the Companies Act, 1956 (Section Registered Valuer can mention 'Insolvency Professional' or
140(4) of the Companies Act, 2013). The wording of his 'Registered Valuer' respectively on his visiting card and letter
representation should be such that, apart from the opportunity head.
not being abused to secure needless publicity, it does not
tantamount directly or indirectly to canvassing or soliciting for Date of setting-up practice by a member or the date of
his continuance as an auditor. establishment of the firm on the letter heads and other professional
documents etc. should not be mentioned.
The letter should merely set out in a dignified manner, how he
has been acting independently and conscientiously through the Practice as Advocate: Members of the Institute in practice who
term of office and may, in addition, indicate if he so chooses, are otherwise eligible may practise as advocates subject to the
his willingness to continue as auditor if reappointed by the permission of the Bar Council but in such case, they should not
shareholders. use designation ‘Chartered Accountant’ in respect of the matters
involving the practice as an advocate.
The Council has decided that a member should not accept the
original professional work emanating from a client introduced In respect of other matters they should use the designation
to him by another member. If any professional work of such ‘Chartered Accountant’ but they should not use the designation
client comes to him directly, it should be his duty to ask the ‘Chartered Accountant’ and ‘Advocate’ simultaneously.
client that he should come through the other member dealing
generally with his original work.
Practice as Company Secretary/Cost Management
The members should ensure that giving public interviews, Accountant: Members of the Institute in practice who are
should not result in publicity, highlighting their professional otherwise eligible may also practice as Company Secretaries and/
attainments. or Cost Management Accountants. Such members shall, however,
not use designation/s of the aforesaid Institute/s simultaneously
Members and/or firms who publish advertisements under with the designation 'Chartered Accountan'.
Box numbers: Members/Firms are prohibited from inserting
advertisements for soliciting clients or professional work under
box numbers in the newspapers. This practice is in violation of It is clarified that in the event of the permission being granted
to a member in practice to also hold COP of sister Institute(s)/
this clause.
Bar Council, such a member be treated as a member in full-
time practice.
Educational Videos may be uploaded on the internet by members,
and no reference should be made to the Chartered Accountants
Firm wherein the member is a partner/proprietor. Further, it should
not contain any contact details or website address. Mention of Firm name except on Professional Documents:
It is not proper for a Firm of Chartered Accountants to use the
Clause (7) Advertises his professional attainments or designation ‘Chartered Accountant’ except on professional
services, or uses any designation or expressions other than the documents, visiting cards, letter heads or sign boards and
Chartered Accountant on professional documents, visiting under the circumstances clarified under Clause (6). However, an
individual member may use the prefix “CA” with his name.
cards, letter heads or sign boards unless it be a degree of a
University established by law in India or recognised by the
Central Government or a title indicating membership of the
Notice in the Press relating to the Success in an Examination:
Institute of Chartered Accountants or of any other institution
Notice in the press relating to the success in an examination
that has been recognised by the Central Government or may be of an individual candidate, should not contain any element of
recognized by the Council. undesirable publicity either in relation to the articled/audit
Provided that a member in practice may advertise through a assistant or an employee or the member or the firm with whom
write up, setting out the service provided by him or his firm he was served.
and particulars of his firm subject to such guidelines as may be
issued by the Council.
Other Designation
Members are allowed to appear A member must not Members are permitted to mention
Chartered Accountant in
before the various authorities use the designation a title on their visiting cards to
practice not to state on his indicate membership of a foreign
including Company Law Board, such as ‘Member
professional documents Institute of Accountancy, which
Income Tax Appellate Tribunal, of Parliament’,
that he is an Income- has been recognised by the Council
Sales Tax Tribunal where the ‘Municipal Councilor’
taxw Consultant, e.g. South African Institute of
law has permitted the same, nor any other
Cost Accountant, Chartered Accountants (SAICA),
a Chartered Accountant in functionary in Institute of Certified Public
Company Secretary,
practice is not entitled to use addition to that Accountants (CPA Ireland) and
Cost Consultant or a
the designation 'Corporate of Chartered Institute of Chartered Accountants
Management Consultant.
Lawyer'. Accountant. in England and Wales (ICAEW).
39
Reports and Certificates : The reports and certificates issued by
a Chartered Accountant bring him to the notice of the public in Network Firms and Networking Guidelines : The Council has
a greater or lesser degree. It is therefore incumbent upon him to permitted Network amongst the Firms registered with the
ensure that the extent and manner of publication of certificates are Institute. A member of the Network may advertise to the extent
limited to what is necessary to enable the report or certificate to permitted by the Advertisement Guidelines issued by Institute.
serve its proper purpose.
The members, may, however note that they should use letterhead of Use of Logo: For use of logos by Members on letter heads, visiting
their Firm for issuing reports and certificates. cards, etc. the Council had decided that the logos unconnected
with the first letter of the name of the firm or its partners or
Appearance of Chartered Accountants on Electronic Media proprietors would not be permitted.
(including Internet): Members may appear on television, films The members/firms by themselves or through engineered name
and Internet and agree to broadcast in the Radio or give lectures had been seeking to obtain firm name approval based on the name
at forums and may give their names and describe themselves as of the partner/s selected in the manner that logo of the firm would
Chartered Accountants. be identical to the firm name which would have not otherwise
Special qualifications or specialised knowledge directly relevant to been permissible as firm name under Regulation 190.
the subject matter of the programme may also be given. In order to ensure compliance with the Regulations, the Council
Firm name may also be mentioned, however, any exaggerated decided that the use of logo/monogram of any kind/ form/ style/
claim or any kind of comparison is not permissible. design/ colour etc. whatsoever on any display material or media
e.g. paper stationery, documents, visiting cards, magnetic devices,
What he may say or write must not be promotional of him or his internet, sign board, by the members in practice and/or the firm of
firm but must be an objective professional view of the topic under Chartered Accountants, be prohibited. Use/printing of member/
consideration. firm name in any other manner tantamounting to logo/monogram
However, reference to the professional firm of the member was also prohibited.
should not be given.
Common CA Logo : The logo consists of the letters ‘CA’ with a

Organising Training Courses, Seminars etc. for his staff: may tick mark (upside down) inside a rounded rectangle with white
also invite the staff of other Chartered Accountants and clients background. The letters ‘CA’ have been put in blue, the corporate
to attend the same. However, undue prominence should not be colour which not only stands out on any background but also
given to the name of the Chartered Accountant in any booklet denotes creativity, innovativeness, knowledge, integrity, trust,
or document issued in connection therewith. truth, stability and depth. The upside down tick mark, typically
used by the chartered accountants, has been included to symbolise
the wisdom and value of the professional. The green colour in the
Members writing articles or letters to the Press on subjects tick mark signifies growth, prosperity, harmony and freshness.
connected with the profession may give their names and use Members are encouraged to use this logo. The Council has
the description Chartered Accountants. decided that use of CA logo in the stamp is permissible, subject
to CA logo guidelines.
Size of Signboard: With regard to the size of signboard for

his office that a member can put up, it is a matter in which the Clause (8) Accepts a position as auditor previously held by
members should exercise their own discretion and good taste another chartered accountant or a certified auditor who has
while keeping in mind the appropriate visibility and illumination been issued certificate under the Restricted Certificate Rules,
(limited to the sake of visibility). 1932 without first communicating with him in writing.
Important Highlights:
However, use of glow signs or lights on large-sized boards as is
used by traders or shop-keepers is not permissible.
The professional reasons for not accepting an audit would be:
A member can have a name board at the place of his residence
with the designation of a Chartered Accountant, provided it is a
name plate or name board of an individual member and not of Non-compliance of the provisions of Sections 139
the firm and 140 of the Companies Act, 2013 as mentioned
in Clause (9) of the Part - I of First Schedule to The
Chartered Accountants Act, 1949 ; and
Public Announcements with details of Directors: It is advisable
for a member that as soon as he is appointed as a director on the
Board of a Company, he should specifically invite the attention
of the management of the Company to the aforesaid provisions Non-payment of undisputed Audit Fees by auditees
and should request that before any such prospectus or public other than in case of Sick Units for carrying out the
announcements or public communication mentioning the name Statutory Audit under the Companies Act, 2013 or
of the member concerned, is issued, the material pertaining to the various other statutes; and
member concerned should, as far as practicable be got approved
by him. The use of the expression ‘Chartered Accountant’ is
permissible. Issuance of a qualified report.
However, the member must ensure that descriptions about his
expertise, specialisation and knowledge in any particular field or
other appellations or adjectives are not published with his name.
Particulars about directorships held by the member in other
Companies can, however, be given, but the name of the firm of
Chartered Accountants in which the member is a partner, should
not be given.

40
Communication by a letter sent through Clause (9) Accepts an appointment as auditor of a company
Positive evidence of the delivery of the
normal course provide such evidence:

communication to the address in the
'Registered Acknowledgement due', or without first ascertaining from it whether the requirements of
Section 225 of the Companies Act, 1956 (1 of 1956), in respect
of such appointment have been duly complied with;
By hand against a written acknowledgement, or
In other words, Clause (9) of Part I of the First Schedule to
Chartered Accountants Act, 1949 provides that a member in
Acknowledgement of the communication from practice shall be deemed to be guilty of professional misconduct if
retiring auditor’s vide email address registered he accepts an appointment as auditor of a Company without first
with the Institute or his last known official email ascertaining from it whether the requirements of Sections 139 and
address, or 140 of the Companies Act, 2013, in respect of such appointment
have been duly complied with. Under this clause it is obligatory
on the incoming auditor to ascertain from the Company that the
Unique Identification Number (UDIN) generated appropriate procedure in the matter of his appointment has been
on UDIN portal (subject to separate guidelines to duly complied with so that no shareholder or retiring auditor may,
be issued by the Council in this regard) at a later date, challenge the validity of such appointment.
Firm not found at Clause (10) Charges or offers to charge, accepts or offers to
the given Registered accept in respect of any professional employment fees which
address and the address Special Audit are based on a percentage of profits or which are contingent
Premises found of communication is under Income upon the findings, or results of such employment, except as
Locked the same as registered Tax Act, 1961 permitted under any regulations made under this Act.
with the Institute on
the date of dispatch The Council of the Institute has, however, framed Regulation
192 which exempts members from the operation of this clause
The communication It would be a in certain professional services. The said Regulation 192 is
received back The letter will healthy practice reproduced -
by the Incoming be deemed to be if a Tax Auditor
Auditor with 'Office delivered, unless appointed for
found Locked' the retiring auditor conducting special Regulation 192. Restriction on fees - No Chartered Accountant
written on the proves that it was audit as per in practice shall charge or offer to charge, accept or offer to accept,
Acknowledgement not really served Income Tax Act
Due shall be communicates with in respect of any professional work, fees which are based on a
and that he was not
deemed as having responsible for such the member who percentage of profits, or which are contingent upon the findings
been delivered to non-service. has conducted the or results of such work, provided that:
the retiring auditor. Statutory Audit.
Communication required for all kinds of audit such as In the case of In case of an auditor In case of a valuer
Statutory Audit, Tax Audit, Internal Audit, Concurrent Audit or a receiver or of a co-operative for the purposes
any other kind of audit. a liquidator, society, the fees of direct taxes and
the fees may may be based on a duties, the fees
Communication in case of Assignments done by other professionals: be based on a percentage of the may be based on a
percentage of paid up capital or percentage of the
the realisation the working capital value of property
A Communication is or disbursement or the gross or net valued;
mandatorily required for all of the assets; income or profits;
types of Audit/Report where It would also be a healthy
the previous auditor is a practice to communicate in
Chartered Accountant. case of assignments done by
other professionals not being In the case of
Chartered Accountants. certain management In case of
In case of
consultancy services as c e r t a i n
debt recovery
may be decided by the fund raising
services, the
resolution of the Council services, the
fees may be
Lack of time in acceptance of Government Audits: from time to time, the fees may be
based on a
fees may be based on based on a
percentage
percentage basis which p e rce nt a g e
In case of audit of the debt
In case the time schedule given for the assignment may be contingent upon of the fund
of government recovered;
is such that there is no time to wait for the reply the findings, or results of raised;
Companies/ banks from the outgoing auditor, the incoming auditor: such work;
or their branches,
if the appointment May give a conditional acceptance and
is made well in commence the work which needs to be
time to enable the attended to immediately after he has In case of services Any other service or audit as may
obligation cast sent the communication to the previous related to cost be decided by the Council including
under this clause auditor in accordance with this clause. optimisation, the (i) Acting as Insolvency
to be fulfilled, such fees may be based
In his acceptance letter, he should make Professional;
obligation must on a percentage of
be complied with clear to the client that his acceptance of the benefit derived; (ii)
Non-Assurance Services to
before accepting appointment is subject to professional and Non-Audit Clients
the audit. objections, if any, from the previous
auditors and that he will decide about
his final acceptance after taking into
account the information received from the
previous auditor.
41
Regulation 190A. Chartered Accountant in practice not

Clause (11) Engages in any business or occupation other
than the profession of chartered accountant unless permitted to engage in any other business or occupation: “A chartered
by the Council so to engage. accountant in practice not to engage in any other business or
occupation other than the profession of accountancy except with the
Provided that nothing contained herein shall disentitle a permission granted in accordance with a resolution of the Council”.
chartered accountant from being a director of a company
(Not being managing director or a whole time director) Regulation 191. Part-time employment a Chartered
unless he or any of his partners is interested in such company Accountant in practice may accept: “Notwithstanding anything
as an auditor. contained in Regulation 190A but subject to the control of the
Council, a Chartered Accountant in practice may act as a liquidator,
The Council, on a very careful consideration of the matter, has trustee, executor, administrator, arbitrator, receiver, adviser or
formulated Regulation, 190A and 191 which are reproduced representative for costing, financial or taxation matter, or may take
up an appointment that may be made by the Central Government
below, specifying the activities with which a member in practice or a State Government or a court of law or any other legal authority
can associate himself with or without the permission of the or may act as a Secretary in his professional capacity, provided his
Council. employment is not on a salary-cum-full-time basis”.
General Resolution (generally permitted to engage-no Specific Resolution - ( may engage after obtaining the
specific permission from the Council would be necessary) specific and prior approval of the Council )
Employment under Chartered Accountants in practice Full-time or part-time employment in business concerns
or firms of such chartered accountants. provided that the member and/or his relatives do not
hold “substantial interest” in such concerns.
Private tutorship.
Full-time or part-time employment in non-business concern.
Authorship of books and articles.

Office of managing director or a whole-time director of
a body corporate within the meaning of the Companies
Holding of Life Insurance Agency License for the limited
Act, provided that the member and/or any of his relatives
purpose of getting renewal commission.
do not hold substantial interest in such concern.
Attending classes and appearing for any examination. Interest in family business concerns (including such
interest devolving on the members as a result of
inheritance / succession / partition of the family business)
Holding of public elective offices such as M.P., M.L.A. or concerns in which interest has been acquired as a
and M.L.C. result of relationships and in the management of which
no active part is taken.
Honorary office leadership of charitable-educational or
other non-commercial organisations. Interest in an educational institution.
Acting as Notary Public, Justice of the Peace, Special

Executive Magistrate and the like. Part-time or full-time lectureship for courses other than
those relating to the Institute’s examinations conducted
under the auspices of the Institute or the Regional
Part-time tutorship under the coaching organisation of councils or their branches.
the Institute.
Part-time or full-time tutorship under any educational
Valuation of papers, acting as paper-setter, institution other than the coaching organisation of the
head-examiner or a moderator, for any examination. Institute.
Editorship of professional journals.

Editorship of journals other than professional journals.
Acting as Surveyor and Loss Assessor under the

Insurance Act, 1938 provided they are otherwise eligible.
Any other business or occupation for which the
Executive Committee considers that permission may be
Acting as recovery consultant in the banking sector granted.
Owning agricultural land and carrying out agricultural

activity (w.e.f. August 9th, 2008).

42
Clause (12) Allows a person not being a member of the Clause (1) pays or allows or agrees to pay directly or
institute in practice or a member not being his partner to indirectly to any person any share in the emoluments of
sign on his behalf or on behalf of his firm, any balance sheet, the employment undertaken by him.
profit and loss account, report or financial statements.
Clause (2) accepts or agrees to accept any part of fees,
The Council has clarified that the power to sign profits or gains from a lawyer, a chartered accountant or
routine documents on which a professional opinion or broker engaged by such company, firm or person or agent
authentication is not required to be expressed may be or customer of such company, firm or person by way of
delegated in the following instances and such delegation commission or gratification.
will not attract provisions of this clause:
[Note: A member in the foregoing circumstances would be guilty
Asking for Letter forwarding of misconduct regardless of the fact that he was in whole-time or
Issue of audit information draft observations/ part-time employment or that he was holding Certificate of Practice
queries during the or issue of financial
course of audit. along with his employment.]
questionnaire. statements.
PART III - Professional misconduct in relation
Issue of to members of the Institute generally
Initiating and Acknowledging memorandum of
stamping of cash verification A member of the Institute, whether in practice or not, shall be deemed
and carrying
vouchers and on routine and other physical to be guilty of professional misconduct, if he:
of schedules correspondence verification or
prepared for the with clients. recording the results
purpose of audit. thereof in the books Clause (1) not being a fellow of the Institute, acts as a
of the clients. fellow of the Institute.
Attending to
routine matters Clause (2) does not supply the information called for,
Issuing Raising of bills in tax practice, or does not comply with the requirements asked for,
acknowledgements and issuing subject to by the Institute, Council or any of its Committees,
for records acknowledgements provisions of Director (Discipline), Board of Discipline,
produced. for money receipts. Section 288 of Disciplinary Committee, Quality Review Board or
Income Tax the Appellate Authority.
Act.
Clause (3) while inviting professional work from
Any other matter incidental to another chartered accountant or while responding
the office administration and to tenders or enquiries or while advertising through
routine work involved in practice a write up, or anything as provided for in items (6)
of accountancy. and (7) of Part I of this Schedule, gives information
knowing it to be false.
It is also clarified that where the authority to sign documents
given above is delegated by a chartered accountant or by a firm
of chartered accountants the fact that the documents have not
been signed by a chartered accountant is not a defence to him PART IV- Other misconduct in relation to
or to the firm in an enquiry relating to professional misconduct. members of the Institute generally
However, the Council has decided that where a Chartered A member of the Institute, whether in practice or not, shall be
Accountant while signing a report or, a financial statement or any deemed to be guilty of other misconduct, if he:
other document is statutorily required to disclose his name, the
member should disclose his name while appending his signature
on the report or document. Where there is no such statutory Clause (1) - is held guilty by Clause (2)- in the opinion of the
requirement, the member may sign in the name of the firm. any civil or criminal court for Council, brings disrepute to the
It may be noted that the revised SA 700 mandates mentioning of an offence which is punishable profession or the Institute as a
Membership No. and Firm Registration No. Members’ attention with imprisonment for a term result of his action whether or
is also drawn towards UDIN Guidelines of the Institute in 2018. not exceeding six months. not related to his professional
work.
PART II - Professional misconduct in relation Clause (1) & (2) are self explanatory and any of the member of the
to members of the Institute in service Institute is found guilty by any civil or criminal court and prosecuted
for an imprisonment in an offence involving moral turpitude or his acts
A member of the Institute (other than a member in practice) shall bring disrepute to the profession or the Institute, irrespective of the fact
be deemed to be guilty of professional misconduct, if he being an whether such acts are related to profession or not, such member will be
employee of any company, firm or person: deemed to be guilty of other misconduct in Part IV of Schedule I.
The important point to note is that if imprisonment tenure exceeds six
months, this case will be covered in the clause of Part III of Schedule II.
43

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