Planning an Audit

CHAPTER I

INTRODUCTION TO THIS EDITION

Once upon a time, when we were students, we were told that an auditor was expected to
be a watch dog and not a blood hound. In those times, everything was different. We believe this
has changed over the last decade or so! I don’t know whether the CA study material still has
that reference, but the fact is that auditor’s function goes way beyond the analogy of a watch
dog. Auditor is now elevated to a different level of expectation, from a watch dog to at least a
sniffer dog. Our watch dog responsibility is long over and we have to delve much deeper, cover
a wide area, follow massive regulatory requirements and meet numerous active expectations.
The rise in expectations from every stakeholder has amplified the responsibility of the
auditor to a new level. Advent of Companies Act, 2013 has been the singular change since the
2013 Edition of this book. With the application of Companies Act, 2013, Standards on Auditing
(SA) now have legal force under the Companies Act, 2013. This casts a serious onus on the
auditors. The SAs are vast and subjective. Several matters depend on the professional judgment
of the Auditor in a given situation. The Companies Act, 2013 exposes the auditor to consequences
that could depend on the manner on which a law administrator could interpret the SA.
With the business environment becoming more complex, the new legal frameworks are
brought out with greater velocity. Consider the number of regulatory changes and consequent
issuance of pronouncements by ICAI to guide the auditor to deal with them. We have had the
Companies Act, 2013, ICDS, Internal Controls over Financial Reporting, Fraud reporting, CSR,
CARO 2016, LODR & Corporate Governance, FEMA Master Directions, SBN, Ind AS in the last 4
years. Add to this, frequent and sometimes significant tweaking of existing provisions. An auditor
is also required to keep an eye on other aspects of audit to ensure quality control and audit
reporting. These include, peer review, QRB reviews, FRRB reporting practices and ITFG guidance.
All these have cut a heavy task for auditors.
While an auditor is meant to evaluate the risk of his audit client, we feel that an
auditor should evaluate his risk of carrying out audit more frequently than ever before. The
new Companies Act, 2013, is carrying a shadow of the Satyam scam and therefore put the
entire fraternity under a disproportionate regulatory burden. Today the Government and other
stakeholders want to hear about early warning signals/red flags from the Auditors. To cut it short,
an auditor needs to exercise utmost professional scepticism, cutting edge technical competence
and sharp and well equipped team to deal with these challenges.
This Edition strives to arm you with tools to carry out Statutory Audit and Tax Audit
functions in a structured manner. It aims to put requirements in the form of checklists so that
you do ‘watch’ what you are expected to ‘see’.
Each “Checklist” is composed of a set of questions which is conceived as a ‘guide’ and
a “how-to-do-it” kit. This book stands as a reference point before, during and after the Audit
Process. If the checklists are used in spirit, and not in a tick the box manner, it could result in:
a. Better Audit Planning
b. Effective Execution
c. Consistent and Systematic approach
d. Adequate Audit Evidence
e. Audit Assistance to the team
f. Better conclusion and reporting
This edition has been divided into various chapters, which have been arranged to assist
an auditor to review procedures step by step beginning with Acceptance of Audit till issuance

Bombay Chartered Accountants’ Society |1|

Audit Checklist – For Companies

of Audit Report and closure of an Audit File. This Edition contains new as well as amended
Checklists and some useful formats.
1. CARO 2016 – This contains requirements of CARO 2016 and audit procedures for each
clause.
2. Internal Financial Control Reporting – This is now an Annexure to Audit Report. A
Model Approach, Illustrative documentation, Risk Assessment and Control Matrix, Final
Review checklist etc. is included.
3. Checklist for Review of Financial Statements – Contains review points as well as
requirements of Schedule III (Division I) of Companies Act, 2013 with indicative
Documentation.
4. Companies Act, 2013 Compliances – A revamped checklist for select provisions of the
Companies Act, 2013 that are most relevant to Statutory Audit.
5. Checklist for Accounting Standards – MCA has amended seven Accounting Standards
and checklists incorporate those amendments.

Other useful additions/revisions include formats for pre audit meeting with clients, FEMA
checklists on FDI and ECB, TDS checklist, Fraud risk assessment checklist, Notes to Account
checklist, updated tax audit checklist covering ICDS, Peer Review checklist based on updated
peer review manual and formats such as pre-audit meeting with clients. All other checklists in
the book have been updated based on the position applicable for Audit of Financial Year 2016-
2017 to companies where Ind ASs do not apply.
We must point out, not as a qualification but as an emphasis of matter, that:
- Checklists are indicative to cover main aspects of audit;
- Checklists will have to be adapted to a given situation;
- Checklists will not be effective if used superficially for file building.
We wish you great audit season and hope that this revised book would be a useful tool in
your practice. Your suggestions are always welcome at km@bcasonline.org.

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