Standards of Auditing – Intro and ApplicationBharath Rao

Outline

Need for Uniformity

Regulation, Standards, Frameworks Benchmarking

Introduction to Standards to Auditing

SA 200, SA 210, SA 220, Sa 230, SA 250, SA 300, SA 320, SA 500, SA 501, SA 505, SA 510, SA 585, SA 700

Structure of a Standard of Audit Document

Why do we need the benchmark uniformity?

Investor Protection and

Fraud DetectionCompliance

Comparability Decision Making

Growth and Development

Increased Standard of

Living

Section 143(2) of the Companies Act 2013

The auditor shall make a report to the members of the company on the accounts examined by him and on every financial statements which are required by or under this Act to be laid before the company in general meeting and the report shall after taking into account the provisions of this Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of this Act or any rules made thereunder or under any order made under sub-section (11) and to the best of his information and knowledge, the said accounts, financial statements give a true and fair view of the state of the company’s affairs as at the end of its financial year and profit or loss and cash flow for the year and such other matters as may be prescribed.

Clause 9 of Professional Ethics

Fails to invite attention to any material departure from the generally accepted procedure of audit applicable to the circumstances

This clause implies that the audit should be performed in accordance with “generally accepted procedure of audit applicable to the circumstances” and if for any reason the auditor has not been able to perform the audit in accordance with such procedure, his report should draw attention to the material departures from such procedures. What constitutes “generally accepted audit procedure” would depend upon the facts and circumstances of each case, but guidance is available in general terms from the various pronouncements of the institute is issued by way of statements and guidance notes and SAs to the members.

Understanding a Standard

Regulation

• Mandatory to comply

• Companies Act, Income Tax Act

Standard

• Mandatory or Recommendatory

• ISO Standards, AS, SA

Framework

• Recommendatory

• COBIT, COSO

Introduction of Standards to Auditing

Auditing Standards issued by ICAI to its members and students

There are 37 Auditing Standards issued

Initially they were called as AAS i.e. Auditing and Assurance Standards

Revised in the year 2010 under the Clarity Project

Mandatory to be followed as per circumstance for every member of ICAI

Standards of Auditing Commonly Used

SA Name Application

200 Principles of Audit

21o Terms of Engagement Client procurement

220 Quality of service Every audit and work

230 Audit Documentation Workpapers

250 Regulation understanding

Regulation applicable to client

300 Audit Planning Planning

320 Sampling Test Check Basis

500 Audit Evidence Audit Evidence

501 Audit Evidence –Specifics

Inventories, Litigations,Valuation of Investments, Segment Reporting

505 External Confirmation Audit Evidence

510 Opening Balances Opening Balances, Policies, Opinion of previous auditor

585 Written Representations Closing Stock etc.

700 Audit report opinion For every audit

Structure of a SA document

Table of Contents

Introduction Scope

Effective Date

Objectives

Definitions

Requirements

Application and other explanatory material Para – Axx

Reference to Above always

Appendix

Thank You