STANDARDS ON AUDITING - taxguru.in

STANDARDS ON AUDITING COMPILATION OF IMPORTANT SAs CA DURGESH KABRA Website :www.dmkhca.in Email Id: [email protected] C-9, Sanjay Apartment,S.V.P .Road,Near GokulHotel,Borivali (West)Mumbai-400092 Tel No: 28916494 / 95 Why Auditing Standards are Important?? Auditing Standards are mandatory to be by followed by practitioners under the direction issued by the council of ICAI If not complied with Auditing Standards in performing Assurance Engagement CA shall be held guilty of Professional misconduct under Schedule-II of CA-Act, 1949 As per the Section 143(9) of Companies Act2013, Every auditor shall comply with the auditing standards

Brief Historical Background of Auditing Standards Research Committee constituted by ICAI for developing 1955 Accounting & Auditing Practice Research Committee of ICAI issued Statements on Auditing 1964 Practice (SAP) IAPC constituted by IFAC & issued International Auditing Guidelines (IAG) later known as ISA - International Auditing 1977 Standards Auditing Practice Committee (APC) constituted by ICAI for 1982 to spearhead the Framework of SAPs & GNs APC renamed as AASB (Auditing & Assurance Standards Board) SAP renamed as AAS (Auditing & Assurance 2002 Standards) Nomenclature of AASs known as Engagement & Quality 2008 Control Standards (SAs/SREs/SAEs/SRSs/SQC) Audit Report Procedure SA Description Reference

SA 300 Preliminary Engagement Activities Client continuance (SA 220) Ethical requirement (SA 200 and SA 220) Terms of Engagement etc (SA 210) Planning Activities SA 315 Risk Assessment Procedures SA 330 Performing Test of controls Performing Test of details Substantive Procedures SA 450 Evaluation of Misstatement, if identified

SA 700 Forming an opinion based on audit evidence obtained Modifications to the Opinion in the Independent Auditors Report" Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditors Report SA 705 SA 706 Audit Strategy Scope, Timing & Direction Audit Plan N.T.E. of audit procedures Understanding of Entity, its Environment & Internal Control for Existence, Effectiveness & Continuity Completeness, Validity, Measurement, Valuation

Accuracy, SA 200: Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Standards on Auditing This Standard establishes the independent auditors overall responsibilities when conducting an audit of financial statements in accordance with SAs Ethical Requirements Relating to an Audit of Financial Statements The auditor should apply the following fundamental principles of professional ethics relevant when conducting an audit of financial statements; (a) Integrity; (b) Objectivity; (c) Professional competence and due care; (d) Confidentiality; and (e) Professional behavior Professional Skepticism Professional skepticism includes being alert to, for example; (a) Audit evidence that contradicts other audit evidence obtained; (b) Information that brings into question the reliability of documents and responses

to inquiries to be used as audit evidence; (c) Conditions that may indicate possible fraud; (d) Circumstances that suggest the need for audit procedures in addition to those required by the SAs Professional Judgment Professional judgment is necessary in particular regarding decisions about: (a) Materiality and audit risk; (b) The nature, timing, and extent of audit procedures used to meet the requirements of the SAs and gather audit evidence; (c) Evaluating whether sufficient appropriate audit evidence has been obtained, and whether more needs to be done to achieve the objectives of the SAs and thereby, the overall objectives of the auditor; (d) The evaluation of managements judgments in applying the entitys applicable financial reporting framework; (e) The drawing of conclusions based on the audit evidence obtained, for example, assessing the reasonableness of the estimates made by management in preparing the financial statements Sufficient Appropriate Audit Evidence and Audit Risk To obtain reasonable assurance, the auditor shall obtain sufficient appropriate audit evidence to reduce audit risk to an acceptably low level and thereby enable the auditor to draw SA 200: Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Standards on Auditing Sufficiency and Appropriateness of Audit Evidence Audit

evidence is necessary to support the auditors opinion and report. It is cumulative in nature and is primarily obtained from audit procedures performed during the course of the audit. Sufficiency is the measure of quantity of audit evidence whereas appropriateness is the measure of quality of audit evidence Audit Risk Audit risk is a function of the risks of material misstatement and detection risk. The risks of material misstatement may exist at two levels: (a) The overall financial statement level; and (b) The assertion level for classes of transactions, account balances, and disclosures. For a given level of audit risk, the acceptable level of detection risk bears an inverse relationship to the assessed risks of material misstatement at the assertion level Conduct of an Audit in Accordance with SAs The auditor shall comply with all SAs relevant to the audit. An SA is relevant to the audit when the SA is in effect and the circumstances addressed by the SA exist. The auditor shall have an understanding of the entire text of an SA, including its application

and other explanatory material, to understand its objectives and SA 210: Agreeing the Terms of Audit Engagements Auditor and client should agree on terms of engagement. Agreed terms would need to be recorded in an audit engagement letter or other suitable form of contract The form and content of audit engagement letter may vary for each client, but would generally include reference to (a) objective and scope of the audit of financial statements; (b) responsibilities of the auditor; (c) responsibilities of management; (d) Identification of applicable financial reporting framework for the preparation of financial statements; and (e) Reference to the expected form and content of any reports to be issued by the auditor and a statement that there may be circumstances in which a report may differ from its expected form and content. Other matters as per the circumstances should also be included In case of recurring audits, auditor should consider whether circumstances require the terms of engagement to be revised Where the terms of engagement are changed, auditor and client should agree on the new terms. If auditor is unable to agree to a change of engagement and is not permitted to continue the original engagement, the auditor should consider withdrawing

from the engagement and determine whether there is any SA 220: Quality Control for an Audit of Financial Statements Quality control policies and procedures should be implemented at both level of audit firm and on individual audits To implement quality control policies and procedures designed to ensure that all audits are conducted in accordance with Standards of Auditing Objectives of quality control policies to be adopted will incorporate Professional Requirements, Skills and Competence, Assignment, Delegation, Consultation, Acceptance and Retention of Clients, Monitoring To be communicated to its personnel in a manner that provides reasonable assurance that the policies and procedures are understood and implemented To implement those quality control procedures which are, in the context of policies and procedures of the firm, appropriate to individual audit. To consider professional competence of assistants performing work delegated to them when deciding extent of direction, supervision and review appropriate for each assistant. Assistants to whom work is delegated need appropriate direction, supervision and review of audit work performed by them

SA 230: Audit Documentation Audit documentation that meets the requirements of this SA and the specific documentation requirements of other relevant SAs provides (a) evidence of auditors basis for a conclusion about the achievement of overall objective of audit; and (b) evidence that the audit was planned and performed in accordance with SAs and applicable legal and regulatory requirements Audit Documentation refers to the record of audit procedures performed, relevant audit evidence obtained, and conclusions the auditor reached. Preparing sufficient and appropriate audit documentation on a timely basis helps to enhance the quality of audit and facilitates effective review and evaluation of audit evidence obtained and conclusions reached before finalizing auditors report To document discussions of significant matters with management, those charged with governance, and others, including the nature of significant matters discussed and when and with whom the discussions took place Auditor may consider preparing and retaining a summary (Completion Memorandum) that describes significant matters identified during the audit and how they were addressed. SA 220 requires auditor to review audit work performed through review of audit documentation. Standards on Quality Control (SQC) 1 require firms to establish policies and procedures for timely completion of assembly of audit files. An appropriate time limit within which to complete the assembly of final audit file is ordinarily not more than 60 days after the date of auditors report.

SQC 1 requires firms to establish policies and procedures for retention of engagement documentation Retention period for audit engagements ordinarily is no shorter than ten years from the date of auditors report, or, if later, the date of group auditors report SA 240: The Auditors Responsibilities Relating to Fraud in an Audit of Financial Statements Auditor is concerned with fraud that causes a material misstatement in financial statements Two types of intentional misstatements are relevant misstatements resulting from fraudulent financial reporting and misstatements resulting from misappropriation of assets Primary responsibility of prevention and detection of frauds is of the management as well as those charged with governance. It is important

that management, with oversight of those charged with governance; place a strong emphasis on fraud prevention which may reduce opportunities for fraud to take place and act as a deterrent Auditor is responsible for obtaining reasonable assurance that financial statement taken as a whole are free from material misstatement, whether caused by fraud or error. While auditor may be able to identify potential opportunities for fraud to be perpetrated, it is difficult for him to determine whether misstatements in judgment areas such as accounting estimates are caused by fraud or error Risk of auditor not detecting a material misstatement resulting from management fraud is greater than for employee fraud, because management is frequently in a position to directly or indirectly manipulate accounting records, present fraudulent financial information or override control procedures designed to prevent similar frauds by other employees. Auditor is responsible for maintaining an attitude of professional skepticism throughout the audit, considering the potential for management override of controls and recognizing the fact that audit SA 240: The Auditors Responsibilities Relating to Fraud in an Audit of Financial Statements Auditor shall identify and assess risks of material misstatement due to fraud at financial statement level, and at assertion level for

classes of transactions, account balances and disclosures. Auditor must make appropriate inquiries of the management. Auditor must discuss with those charged with governance as they have oversight responsibility for systems for accounting risk, financial control and compliance with the law When auditor identifies a misstatement, s/he should consider whether such a misstatement may be indicative of fraud and if there is such an indication, s/he should consider the implications of misstatement in relation to other aspects of the audit, particularly the reliability of management representations When the auditor identifies a misstatement resulting from fraud, or a suspected fraud, s/he should consider auditors responsibility to communicate that information to management, those charged with governance and, in some circumstances, when so required by laws and regulations, to regulatory and enforcement authorities also To obtain written representations from management To document the understanding of entity and its environment and SA 250: Consideration of Laws and Regulations in an Audit of Financial Statements To recognise that noncompliance by entity with laws and regulations

may materially affect financial statements. It is managements responsibility to ensure that entitys operations are conducted in accordance with laws and regulations Auditor is not responsible for preventing noncompliance. The auditor is responsible for obtaining reasonable assurance that the financial statements, taken as a whole, are free from material misstatement, whether caused by fraud or error Risk of non detection of material misstatements is higher with regard to material misstatements resulting from noncompliance with laws and regulations due to various factors. To obtain a general understanding of legal and regulatory framework applicable to the entity and how it is complying with that framework After obtaining general understanding, auditor should perform procedures to identify instances of noncompliance with these laws and regulations where noncompliance should be considered when preparing financial statements. Further, auditor should obtain sufficient appropriate audit evidence about compliance with those laws and regulations generally recognised by Auditor to have an effect on determination of material amounts and disclosures in SA 250: Consideration of Laws and Regulations in an Audit of Financial Statements To obtain written representations that management has disclosed all

known actual or possible noncompliance with laws and regulations whose effects should be considered when preparing financial statements. This SA does not apply to other assurance engagements in which auditor is specifically engaged to test and report separately on compliance with specific laws and regulations. Whether an act constitutes a noncompliance can be determined only by a court of law The Standard envisages engaging a legal advisor to assist in monitoring legal requirements instead of establishing a legal department as one of the policies to ensure compliance with laws and regulations. The Standard, in larger entities, also envisages existence of a separate compliance function in addition to internal audit function and audit committee to supplement policies and procedures for ensuring compliance with laws and regulations SA 260: Communication with those Charged with Governance To communicate with those charged with governance, auditors responsibilities in relation to financial statements audit, an overview of planned scope and timing of audit and significant findings from the audit Such matters include: Overall scope of audit; selection of/ changes in

significant accounting policies; potential effect on financial statements of any significant risks and exposures, such as pending litigation; adjustments to financial statements arising out of audit that have a significant effect on entitys financial statements; material uncertainties related to events and conditions that may cast significant doubt on entitys ability to continue as a going concern, disagreements with management about matters that could be significant to entitys financial statements or auditors report; expected modifications to auditors report. Auditors should communicate matters of governance interest on timely basis Auditors communication may be made orally or in writing. In case of oral communication, auditor should document their oral communications and response thereof SA 265: Communicating Deficiencies in Internal Control to those Charged with Governance and Management The objective of the auditor is to communicate appropriately to those

charged with governance and management deficiencies in internal control that the auditor has identified during the audit and that, in the auditors professional judgment, are of sufficient importance to merit their respective attentions The auditor shall determine whether, on the basis of the audit work performed, the auditor has identified one or more deficiencies in internal control. If the auditor has identified one or more deficiencies in internal control, the auditor shall determine, on the basis of the audit work performed, whether, individually or in combination, they constitute significant deficiencies. SA 299 (AAS 12): Responsibility of Joint Auditors Joint auditors should, by mutual discussion, divide audit work. Division of work would usually be in terms of audit of identifiable units or specified areas. Division of work may be with reference to items of assets or liabilities or income or expenditure or with reference to periods of time If a Joint auditor comes across matters which are relevant to areas of responsibility of other joint auditors and which deserve their attention, or which require disclosure or discussion with, or application of judgment by, other joint auditors, he should

communicate the same to all other joint auditors in writing prior to finalization of audit Certain areas of work, owing to their importance or owing to the nature of work involved, would often not be divided and would have to be covered by all joint auditors Each joint auditor is responsible only for the work allocated to them, whether or not s/he has prepared a separate report on work performed by them SA 299 (AAS 12): Responsibility of Joint Auditors All joint auditors are jointly and severally responsible in respect of the audit work which is not divided amongst them, for the appropriateness of decisions taken by them concerning the nature, timing or extent of the audit procedures to be performed by any of the joint auditors, for examining that the financial statements of the entity comply with disclosure requirements of relevant statute, for ensuring that audit report complies with the requirements of relevant statute and in respect of matters which are brought to the notice of joint auditors by any one of them and on which there is an agreement among joint auditors Each joint auditor is entitled to assume that other joint auditors have carried out their part of audit work in accordance with generally

accepted audit procedures. Normally, joint auditors are able to arrive at an agreed report. However, where the joint auditors are in disagreement with regard to any matters to be covered by the report, each one of them should express his own opinion through a separate report SA 300: Planning an Audit of Financial Statements Planning an audit involves establishing the overall audit strategy for the engagement and developing an audit plan. The objective of auditor is to plan the audit so that it will be performed in an effective manner Once the overall audit strategy has been established, an audit plan can be developed to address various matters identified in the overall audit strategy, considering the need to achieve the audit objectives through efficient use of auditors resources To consider various matters in developing the overall plan like: terms of engagement; nature and timing of reports; applicable legal or statutory requirements; accounting policies adopted by the client; identification of significant audit areas; setting of materiality levels, etc. To obtain a level of knowledge of clients business that will enable them to identify events, transactions and practices that, in their

judgment, may have a significant effect on financial information. Audit plan is more detailed than overall audit strategy that includes the nature, timing and extent of audit procedures to be performed by engagement team members SA 300: Planning an Audit of Financial Statements Engagement partner and other key members of engagement team shall be involved in planning the audit, including planning and participating in the discussion among engagement team members so as to enhance effectiveness and efficiency of planning process To plan the nature, timing and extent of direction and supervision of engagement team members and review of their work. Auditor shall document overall audit strategy, audit plan and any significant changes made during audit engagement to the overall audit strategy or audit plan, and reasons for such changes Audit planning ideally commences at the conclusion of previous years audit, and along with related programme, it should be reconsidered for modification as the audit of their compliance and substantive procedures progress. For an initial audit, auditor may need to expand the planning activities because the auditor does not ordinarily have previous experience with the entity that is considered when planning recurring engagements

SA 315: Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and its Environment To provide a basis for identification and assessment of risks of material misstatement at the financial statement and assertion levels, the auditor shall perform risk assessment procedures. Thus procedures shall include: Inquiries with management; Analytical Procedures; Observation and Inspection Where Auditor has performed other engagements with the entity, auditor shall consider whether information obtained is relevant for identifying the risk of material misstatement. If Auditor intends to use his/her previous experiences with the entity, he shall determine whether changes have occurred since previous audit that may affect its relevance on current audit To obtain an understanding of the following: Industry, regulatory and other external factors; Nature of entity; Selection and application of accounting policies; Objectives and strategies and related business risks; Measurement and review of entitys financial performance; Internal control SA 315 sets out five components of Internal control: Control environment; Entitys risk assessment process; the information

SA 315: Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and its Environment Usually, those controls which pertain to entitys objective of preparing financial statements are subject to risk assessment procedures Obtaining an understanding of entity and its environment including entitys internal control is a continuous, dynamic process of gathering, updating and analyzing information throughout the audit To identify and assess risks of material misstatement at financial statement level, and at assertion level for classes of transactions, account balances and disclosures Auditors are required to: Relate identified risks to what can go wrong at assertion level; Consider potential magnitude of risks in the context of financial statements; Consider the likelihood that risks could result in a material misstatement of financial statements Documentation should cover: Discussion among engagement team; Key elements of understanding obtained; Sources of information; Risk assessment process; the identified and assessed risks; Significant risks evaluated; Risks evaluated for which substantive

procedures done SA 320: Materiality in Planning and Performing an Audit SA 320 deals with the auditors responsibility to apply the concept of materiality in planning and performing an audit of financial statements In planning the audit, the auditor makes judgments about the size of misstatements that will be considered material These judgments provide a basis for: Determining the nature, timing and extent of risk assessment procedures; Identifying and assessing the risks of material misstatement; and Determining the nature, timing and extent of further audit procedures For purposes of the SAs, performance materiality means the amount or amounts set by the auditor at less than materiality for the financial statements as a whole to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole. If applicable, performance materiality also refers to the amount or amounts set by the auditor at less than the materiality

level or levels for particular classes of transactions, account balances or disclosures SA 320: Materiality in Planning and Performing an Audit The auditor shall revise materiality for the financial statements as a whole (and, if applicable, the materiality level or levels for particular classes of transactions, account balances or disclosures) in the event of becoming aware of information during the audit that would have caused the auditor to have determined a different amount (or amounts) initially The audit documentation shall include the following amounts and the factors considered in their determination: Materiality for the financial statements as a whole If applicable, the materiality level or levels for particular classes of transactions, account balances or disclosures Performance materiality and Any revision of above as the audit progressed SA 330: The Auditors Responses to Assessed Risks The objective is to obtain sufficient appropriate audit evidence about assessed risks of material misstatement, through designing and

implementing appropriate responses to those risks Auditor shall design and implement overall responses to address assessed risks of material misstatement at financial statement level. To design and perform further audit procedures whose nature, timing and extent are based on and are responsive to assessed risks of material misstatement at assertion level In designing further audit procedures to be performed, the auditor shall: a) Consider reasons for the assessment given to risk of material misstatement at the assertion level for each class of transactions, account balance, and disclosure b) Obtain more persuasive audit evidence the higher the auditors assessment of risk When the auditor obtains audit evidence about operating effectiveness of controls during an interim period, the auditor shall: SA 330: The Auditors Responses to Assessed Risks a) Obtain audit evidence about significant changes to those controls subsequent to the interim period; and b) Determine additional audit evidence to be obtained for the remaining period Based on the audit procedures performed and audit evidence

obtained, auditor shall evaluate before conclusion of audit whether assessments of risks of material misstatement at assertion level remain appropriate Auditor shall conclude whether sufficient appropriate audit evidence has been obtained. In forming an opinion, auditor shall consider all relevant audit evidence, regardless of whether it appears to corroborate or contradict assertions in financial statements If the auditor has not obtained sufficient appropriate audit evidence as to a material financial statement assertion, the auditor shall attempt to obtain further audit evidence. If the auditor is unable to obtain sufficient appropriate audit evidence, auditor shall express a qualified opinion or a disclaimer of opinion If Auditor plans to use audit evidence about operating effectiveness of controls obtained in previous audits, auditor shall document conclusion reached about relying on such controls that were tested in SA 402: Audit Considerations Relating to an Entity Using a Service Organization This SA specifically expands on how the user auditor applies SA 315 and SA 330 The objectives of the auditor are (a) To obtain an understanding of the nature and significance of services provided by the service organisation

and their effect on the user entitys internal control relevant to the audit, sufficient to identify and assess the risks of material misstatement; and (b) To design and perform audit procedures responsive to those risks The user auditor should obtain an understanding of the services provided by a service organization, including internal control The user auditor shall modify the opinion in the user auditors report in accordance with SA 705 if the user auditor is unable to obtain sufficient appropriate audit evidence regarding the services provided by the service organization relevant to the audit of the user entitys financial statements The user auditor shall not refer to the work of a service auditor in the user auditors report containing an unmodified opinion unless required by law or regulation to do so. If such reference is required by law or regulation, the user auditors report shall indicate that the reference does not diminish the user auditors responsibility for the audit opinion If reference to the work of a service auditor is relevant to an SA 450: Evaluation of Misstatements Identified during the Audit The objective of the auditor is to evaluate the effect of identified misstatements on the audit and the effect of uncorrected misstatements, if any, on the financial statements

To accumulate misstatements identified during the audit, other than those that are clearly trivial To determine whether the overall audit strategy and audit plan need to be revised if the nature of identified misstatements and the circumstances of their occurrence indicate that other misstatements may exist that, when aggregated with misstatements accumulated during the audit, could be material or the aggregate of misstatements accumulated during the audit approaches materiality determined in accordance with SA 320 (Revised) To communicate on a timely basis all misstatements accumulated during the audit with the appropriate level of management, unless prohibited by law or regulations. To request management to correct those misstatements Prior to evaluating the effect of uncorrected misstatements, the auditor shall reassess materiality determined in accordance with SA 320, to confirm whether it remains appropriate in the context of the entitys actual financial results SA 450: Evaluation of Misstatements Identified during the Audit To communicate with those charged with governance uncorrected

misstatements and the effect that they, individually or in aggregate, may have on the opinion in auditors report, unless prohibited by law or regulation. Auditors communication shall identify material uncorrected misstatements individually. Auditor shall request correction of uncorrected misstatements. Auditor shall also communicate with those charged with governance the effect of uncorrected misstatements related to prior periods on the relevant classes of transactions, account balances or disclosures, and the financial statements as a whole To request a written representation from management and, where appropriate, those charged with governance whether they believe the effects of uncorrected misstatements are immaterial, individually and in aggregate, to the financial statements as a whole. A summary of such items shall be included in or attached to the written representation The audit documentation shall include the amount below which misstatements would be regarded as clearly trivial, all misstatements accumulated during the audit and whether they have been corrected and the auditors conclusion as to whether uncorrected misstatements are material, individually or in SA 500: Audit Evidence Auditor is required to obtain sufficient appropriate audit evidence

to enable them to draw reasonable conclusions on which they can base their opinion on financial information Auditor normally relies on evidence that is persuasive rather than conclusive in nature. Auditor may obtain evidence on a selective basis by way of either judgmental or statistical sampling procedures. Evidence is obtained through performance of compliance and substantive procedures Compliance procedures are tests designed to obtain reasonable assurance that internal controls on which audit reliance is placed are in effect. Substantive procedures are designed to obtain evidence as to completeness, accuracy and validity of data produced by accounting system Obtaining audit evidence from compliance procedures is intended to reasonably assure the auditor in respect of assertions of existence, effectiveness and continuity. Obtaining audit evidence from substantive procedures is intended to reasonably assure the auditor in respect of assertions of existence, rights and obligations, occurrence, completeness, valuation, measurement, presentation and disclosure SA 500: Audit Evidence To test the reliability, few generalizations are useful such as

external evidence is more reliable than internal evidence, written evidence is more reliable than oral evidence and self obtained evidence is more reliable than obtained through the entity Auditor gains increased assurance when audit evidence obtained from different sources is consistent. Various methods for obtaining audit evidence include inspection, observation, inquiry and confirmation, computation and analytical review Emphasis is to be laid on considering relevance and reliability of audit evidence obtained during the course of audit, and focus is to be laid on designing and performing audit procedures to obtain relevant and reliable audit evidence SA 501: Audit Evidence Specific Considerations for Selected Items This Standard on Auditing (SA) deals with specific considerations by the auditor in obtaining sufficient appropriate audit evidence in accordance with SA 330, SA 500 (Revised) and other relevant SAs, with respect to certain aspects of inventory, litigation and claims involving the entity, and segment information in an audit of financial statements Inventories: Management ordinarily establishes procedures

under which inventory is physically counted at least once in a year to serve as a basis for preparation of financial statements or to ascertain reliability of perpetual inventory system. When inventory is material to financial statements, auditor should obtain sufficient appropriate audit evidence regarding its existence and condition by attendance at physical inventory counting unless impracticable. If unable to attend physical inventory count on the date planned due to unforeseen circumstances, auditor should take or observe some physical counts on an alternative date and where necessary, perform alternative audit procedures to assess whether changes in inventory between date of physical count and period end date are correctly recorded Litigation and Claims: The auditor shall design and perform audit procedures in order to identify litigation and claims SA 501: Audit Evidence Specific Considerations for Selected Items a) Inquiry of management and, where applicable, others within the entity, including inhouse legal counsel; b) Reviewing minutes of meetings of those charged with governance and correspondence between the entity and its external legal counsel;

c) Reviewing legal expense accounts Segment Information: Auditor considers segment information in relation to financial statements taken as a whole, and is not required to apply auditing procedures that would be necessary to express an opinion on segment information standing alone. Audit procedures regarding segment information ordinarily consist of obtaining an understanding of the methods used by management in determining segment information and performing analytical procedures and other audit tests appropriate in the circumstances SA 505: External Confirmations External confirmation is the process of obtaining and evaluating audit

evidence through a direct communication from a third party in response to a request for information about a particular item Before making use of external confirmations, auditor should consider materiality, the assessed level of inherent and control risk, and how the evidence from other planned audit procedures will reduce audit risk to an acceptably low level To employ external confirmation procedures in consultation with the management. External confirmations are mostly sought for account balances and their components but they are not to be restricted to these items only The use of confirmation procedures may be effective in providing sufficient appropriate audit evidence when auditor determines higher level of assessed inherent and control risk The request for confirmations is to be made either at the date of financial statements or at a date close to it. Requests are to be designed to specific audit objectives Auditors understanding of clients arrangements and transactions with third parties is important in determining the information to be confirmed. Auditor may use positive or negative external confirmation requests or a combination of both

To consider whether there is any indication that external confirmations received may not be reliable. To evaluate the conformity between results of external confirmation process together with results from any other SA 510: Initial Audit Engagements Opening Balances In conducting an initial audit engagement, the auditor should obtain sufficient appropriate audit evidence that closing balances of preceding period have been correctly brought forward to current period or when appropriate, any adjustments have been disclosed as prior period items in the current years Statement of Profit and Loss, the opening balances do not contain misstatements that materially affect financial statements for the current period and appropriate accounting policies are consistently applied To consider whether accounting policies followed in preceding period, based on which opening balances have been arrived at, were appropriate and that those policies are consistently applied. If the auditor concludes that the accounting policies have not been consistently applied or properly accounted for, the auditor has to express either a qualified or adverse opinion, as may be appropriate Ordinarily, current auditor can place reliance on closing balances contained in financial statements for preceding period, except when during performance of audit procedures for current period the

possibility of misstatements in opening balances is indicated When financial statements of preceding period were not audited, auditor must adopt other procedures such as for current assets and liabilities. Some audit evidence can ordinarily be obtained as part of audit procedures performed during the current period and for noncurrent assets and liabilities such as fixed assets, investments and longterm SA 510: Initial Audit Engagements Opening Balances To evaluate matters giving rise to modifications in prior periods financial statements for assessing the risk of material misstatement. If the prior periods financial statements were audited by a predecessor auditor and there was a modification to the opinion, the auditor shall evaluate the effect of the matter giving rise to the modification in assessing the risks of material misstatement in the current periods financial statements in accordance with SA 315 SA 520: Analytical Procedures The objectives of the auditor are: (a) To obtain relevant and reliable audit evidence when using substantive analytical procedures; and (b) To design and perform analytical procedures

near the end of audit that assist the auditor when forming an overall conclusion as to whether the financial statements are consistent with auditors understanding of the entity Auditor should apply analytical procedures at overall review stages of audit as well as while applying substantive procedures Application of analytical procedures is based on the expectation that relationships among data exist and continue in absence of known conditions to the contrary. Presence of these relationships provides audit evidence as to completeness, accuracy and validity of data produced by the accounting system. However, reliance on results of analytical procedures will depend on auditors assessment of the risk that analytical procedures may identify relationships as expected when, in fact, a material misstatement exists When analytical procedures identify significant fluctuations or relationships that are inconsistent with other relevant information or that deviate from predicted amounts, the auditor should investigate and obtain adequate explanations and appropriate SA 530: Audit Sampling The auditor should design and select an audit sample, perform audit procedures thereon, and evaluate sample results so as to

provide sufficient appropriate audit evidence The objective of the auditor when using audit sampling is to provide a reasonable basis to draw conclusions about the population from which the sample is selected When designing an audit sample, auditor should consider the objectives of the audit procedure and characteristics of the population when designing an audit sample. To assist in efficient and effective design of sample, stratification may be appropriate. Stratification is the process of dividing a population into sub populations When determining sample size, auditor should consider sampling risk, tolerable error, and expected error. Tolerable error is the maximum error in population that the auditor would be willing to accept and still conclude that the result from sample has achieved audit objective If Auditor expects error to be present in the population, a larger sample needs to be examined to conclude that actual error in the population is not greater than planned tolerable error. Auditor should select sample items in such a way that the sample can be SA 530: Audit Sampling This requires that all items in the population have an opportunity

of being selected. After having carried out those audit procedures on each sample item that are appropriate to particular audit objective, auditor should analyse any errors detected in the sample, project the errors found in the sample to the population and reassess sampling risk Auditor should investigate the nature and cause of any deviations or misstatements identified, and their possible effect on the objective of the particular audit procedure or other areas of audit. In order to conclude that a misstatement or deviation is an anomaly, the auditor is required to obtain a high degree of certainty that the misstatement or deviation is not representative of the population SA 540: Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures Auditor should obtain sufficient appropriate audit evidence regarding reasonableness of accounting estimates including fair value accounting estimate and related disclosure in financial statements are adequate Accounting estimate means an approximation of a monetary

amount in absence of a precise means of measurement. Determination of an accounting estimate may be simple or complex, depending upon the nature of item. Auditor should adopt one or a combination of following approaches in the audit of an accounting estimate: a) review and test process used by management to develop the estimate; b) use an independent estimate for comparison with that prepared by management; or c) review subsequent events which confirm the estimate made Auditor should make a final assessment of reasonableness of estimate based on auditors knowledge of the business and whether the estimate is consistent with other audit evidence obtained during audit. When there is a difference between auditors estimate of the amount best supported by available audit evidence and the estimated amount included in financial SA 540: Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures Auditor should adopt a riskbased approach to the responsibilities regarding accounting estimates, including fair value accounting

estimates and related disclosures. A difference between the outcome of an accounting estimate and amount originally recognized or disclosed in financial statements does not necessarily represent a misstatement of financial statements Auditor should review the outcome of accounting estimates included in prior period financial statements. Auditor should obtain written representations from management whether management believes significant assumptions used by it in making accounting estimates are reasonable Audit documentation should include the basis for auditors conclusions about reasonableness of accounting estimates and their disclosure that give rise to significant risks; and Indicators of possible management bias, if any SA 550: Related Parties This Standard on Auditing (SA) deals with the auditors responsibilities regarding related party relationships and transactions when performing an audit of financial statements Auditor has a responsibility to perform audit procedures to identify, assess and respond to the risks of material misstatement arising from the entitys failure to appropriately

account for or disclose related party relationships, transactions or balances in accordance with the framework To perform procedures to obtain information relevant to identifying the risks of material misstatement associated with related party relationships and transactions The auditor shall inquire of management regarding: (a) The identity of entitys related parties, including changes from prior period (b) The nature of relationships between the entity and these related parties; and (c) Whether the entity entered into any transactions with these related parties during the period and, if so, the type and purpose of the transactions To maintain alertness for related party information when reviewing records or documents SA 550: Related Parties To respond to the risks of material misstatement associated with related party relationships and transactions To Identify significant related party transactions outside the Entitys normal course of business To evaluate that related party transactions were conducted on terms equivalent to those prevailing in an Arms Length Transaction

To ensure that the accounting and disclosure of identified related party relationships and transactions are correct To obtain written representation from management for related party transactions Auditor shall communicate with those charged with governance significant matters arising during the audit in connection with the entitys related parties Auditor shall include in the audit documentation, names of identified related parties and nature of related party relationships SA 560: Subsequent Events Subsequent events are significant events occurring between balance sheet date and the date of auditors report. Auditor should consider effect of subsequent events on financial statements and on auditors report. Auditor should perform procedures designed to obtain sufficient appropriate audit evidence that all events up to the date of auditors report that may require adjustment of, or disclosure in financial statements have been identified Procedures to identify events that may require adjustment of, or disclosure in financial statements would be performed as near as practicable to the date of auditors report

When Auditor becomes aware of events which materially affect financial statements, the auditor should consider whether such events are properly accounted for in financial statements When the management does not account for such events that auditor believes should be accounted for, auditor should express a qualified opinion or an adverse opinion, as appropriate SA 570: Going Concern Going concern assumption is a fundamental principle in the preparation of financial statements. Management should assess entitys ability to continue as a going concern even if the applicable financial reporting framework does not include an explicit requirement Auditor should evaluate appropriateness of managements use of going concern assumption in preparation of financial statements and conclude whether there is a material uncertainty about entitys ability to continue as a going concern that need to be disclosed in financial statements When planning and performing audit procedures and in evaluating the results thereof, auditor should perform further audit procedures when events or conditions are identified that cast significant doubt on the entitys ability to continue as a going

concern. Indications of risk that continuance as a going concern may be questionable could come from financial statements, operational activities or from other sources These may be financial indicators, operating indicators or other indicators. If, on the presence of such indication, a question arises regarding appropriateness of going concern assumption, auditor should gather sufficient appropriate audit evidence to attempt to SA 570: Going Concern After procedures considered necessary have been carried out, all information required has been obtained, and effect of any plans of management and other mitigating factors have been considered, auditor should decide whether the question raised regarding going concern assumption has been satisfactorily resolved Auditor, on the basis of his/her judgment and audit evidence will report, as deemed appropriate. In case where use of going concern assumption is appropriate but a material uncertainty exists, then (i) if adequate disclosure is made in financial statements, auditor should express an unmodified opinion but include an Emphasis of Matter paragraph in the auditors report; (ii) if adequate disclosure is not made in financial statements, auditor should express a qualified or adverse opinion, as

appropriate. In case where entity will not be able to continue as a going concern, auditor should express an adverse opinion if financial statements have been prepared on a going concern basis Auditor should communicate with those charged with governance when there are identified events or conditions that may cast significant doubt on the entitys ability to continue as a going concern SA 580: Written Representations Written representations are written statements used to corroborate the validity of the premises, relating to managements responsibilities, on which an audit is conducted; and other audit evidence obtained with regard to specific assertions in financial statements Written representations in this context do not include financial statements, the assertions therein, or supporting books and records To request written representations from management with appropriate responsibilities for financial statements and knowledge of matters concerned To request management to provide a written representation that it has fulfilled its responsibility for the preparation and presentation of financial statements as set out in the terms of the audit engagement;

and in accordance with applicable financial reporting framework; designing, implementing and maintaining of adequate internal control system; and completeness of information made available to the auditor To determine relevant parties from whom general and specific written representations are to be requested To evaluate the reliability of written representations and in case of doubt, should reconsider the reliability of other written SA 580: Written Representations A management representation letter should ordinarily be signed by members of management who have primary responsibility for the entity and its financial aspects, e.g., Managing Director, Finance Director. Auditor should disclaim an opinion on financial statements when the requested general written representations are not provided or are unreliable, and the auditor is unable to obtain sufficient appropriate audit evidence SA 600 (AAS 10): Using the work of Another Auditor (Revised SA 600 on Special considerations Audits of Group Financial Statements (Including the Work of Component Auditors) is under consideration of the Board)

When the principal auditor uses the work of another auditor, the principal auditor should determine how the work of other auditor will affect the audit Auditor should consider professional competence of other auditor in the context of specific assignment if the other auditor is not a Chartered Accountant. Auditor should inform other auditor of matters such as areas requiring special consideration, procedures for identification of intercomponent transactions and significant accounting, auditing and reporting requirements Auditor should consider significant findings of other auditor. There should be proper coordination and communication between the two auditors When the principal auditor concludes that work of other auditor cannot be used and s/he has not been able to perform sufficient additional procedures regarding financial information of the component audited by other auditor, s/he should express a qualified opinion or disclaimer of opinion because there is a limitation on the scope of audit SA 610: Using the work of Internal Auditors This SA deals with the external auditors responsibilities regarding the work of internal auditors when the external auditor has

determined, in accordance with SA 315, that the internal audit function is likely to be relevant to the audit The objectives of the external auditor, where the entity has an internal audit function that the external auditor has determined is likely to be relevant to the audit, are to determine whether, and to what extent, to use specific work of the internal auditors and if so, whether such work is adequate for the purposes of the audit External auditor should determine whether and to what extent to use the work of the internal auditors. In determining whether the work of the internal auditors is likely to be adequate for purposes of the audit, the external auditor shall evaluate the objectivity of the internal audit function, the technical competence of the internal auditors, whether the work of the internal auditors is likely to be carried out with due professional care and whether there is likely to be effective communication between the internal auditors and the external auditor In order for the external auditor to use specific work of the internal auditors, the external auditor shall evaluate and perform SA 610: Using the work of Internal Auditors To determine the adequacy of specific work performed by the

internal auditors for the external auditors purposes, the external auditor shall evaluate whether the work was performed by internal auditors having adequate technical training and proficiency, the work was properly supervised, reviewed and documented, adequate audit evidence has been obtained to enable the internal auditors to draw reasonable conclusions, conclusions reached are appropriate in the circumstances and any reports prepared by the internal auditors are consistent with the results of the work performed and any exceptions or unusual matters disclosed by the internal auditors are properly resolved When the external auditor uses specific work of the internal auditors, the external auditor shall document conclusions regarding the evaluation of the adequacy of the work of the internal auditors, and the audit procedures performed by the external auditor on that work SA 610: Using the work of Internal Auditors To determine the adequacy of specific work performed by the internal auditors for the external auditors purposes, the external auditor shall evaluate whether the work was performed by internal auditors having adequate technical training and proficiency, the work was properly supervised, reviewed and

documented, adequate audit evidence has been obtained to enable the internal auditors to draw reasonable conclusions, conclusions reached are appropriate in the circumstances and any reports prepared by the internal auditors are consistent with the results of the work performed and any exceptions or unusual matters disclosed by the internal auditors are properly resolved When the external auditor uses specific work of the internal auditors, the external auditor shall document conclusions regarding the evaluation of the adequacy of the work of the internal auditors, and the audit procedures performed by the external auditor on that work SA 620: Using the Work of an Auditors Expert This SA deals with the auditors responsibilities regarding the use of an individual or organizations work in a field of expertise other than accounting or auditing, when that work is used to assist the auditor in obtaining sufficient appropriate audit evidence The auditor has sole responsibility for the audit opinion expressed, and that responsibility is not reduced by the auditors use of the work of an auditors expert The objectives of the auditor are to determine whether to use the work of an auditors expert and if using the work of an auditors expert, to

determine whether that work are adequate for the auditors purposes If expertise in a field other than accounting or auditing is necessary to obtain sufficient appropriate audit evidence, the auditor shall determine whether to use the work of an auditors expert The nature, timing and extent of the auditors procedures with respect to the requirement of this SA will vary depending on the circumstances. In determining the nature, timing and extent of those procedures, the auditor shall consider matters including the nature of the matter to which that experts work relates, the risks of material misstatement in the matter to which that experts work relates, the significance of that experts work in the context of the audit, the auditors knowledge of and experience with previous work performed SA 620: Using the Work of an Auditors Expert The auditor shall evaluate whether the auditors expert has the necessary competence, capabilities and objectivity for the auditors purposes. In the case of an auditors external expert, the evaluation of objectivity shall include inquiry regarding interests and relationships that may create a threat to that experts objectivity The auditor shall agree, in writing when appropriate, on the following matters with the auditors expert: The nature, scope and objectives of that experts work;

The respective roles and responsibilities of the auditor and that expert; The nature, timing and extent of communication between the auditor and that expert, including the form of any report to be provided by that expert; and The need for the auditors expert to observe confidentiality requirements The auditor shall evaluate the adequacy of the auditors experts work for the auditors purposes, including: The relevance and reasonableness of that experts findings or conclusions, and their consistency with other audit evidence; SA 620: Using the Work of an Auditors Expert If that experts work involves use of significant assumptions and methods, the relevance and reasonableness of those assumptions and methods in the circumstances; and If that experts work involves the use of source data that is significant to that experts work, the relevance, completeness, and accuracy of that source data The auditor shall not refer to the work of an auditors expert in an auditors report containing an unmodified opinion unless required by law or regulation to do so. If such reference is required by law or regulation, the auditor shall indicate in the auditors report that the

reference does not reduce the auditors responsibility for the audit opinion SA 700 (Revised): Forming an Opinion and Reporting on Financial Statements Auditor should form an opinion on the financial statements based on an evaluation of the conclusions drawn from the audit evidence obtained; and express clearly that opinion through a written report that also describes the basis for the opinion The auditor shall express an unmodified opinion when the auditor concludes that the financial statements are prepared, in all material respects, in accordance with the applicable financial reporting framework If the auditor concludes that, based on the audit evidence obtained, the financial statements as a whole are not free from material misstatement; or is unable to obtain sufficient appropriate audit evidence to conclude that the financial statements as a whole are free from material misstatement, the auditor shall modify the opinion in the auditors report in accordance with SA 705

SA 700 (Revised): Forming an Opinion and Reporting on Financial Statements Auditors report includes basic elements such as Title, Addressee, Opening or introductory paragraph, Managements Responsibility for the Financial Statements, Auditors Responsibility, Auditors Opinion, Other Reporting Responsibilities, Signature of the Auditor, Date of the Auditors Report and Place of Signature. If the auditor is required by any law or regulation to use a specific layout or wording of the auditors report, the auditors report shall refer to SA only if the auditors report includes, at a minimum, each of the elements prescribed in this SA If an auditor is required to conduct an audit in accordance with the SAs issued by the ICAI, but may additionally have complied with the International Standards on Auditing (ISAs) in the conduct of the audit, the auditors report may refer to ISAs in addition to the national auditing standards only if conditions specified in this SA are complied with SA 705 (Issued): Modification to the opinion in the Independent Auditors Report Auditor is responsible to issue an appropriate report in circumstances

when, in forming an opinion in accordance with SA 700 (Revised), the auditor concludes that a modification to the auditors opinion on the financial statements is necessary The objective of the auditor is to express clearly an appropriately modified opinion on the financial statements that is necessary when the auditor concludes, based on the audit evidence obtained, that the financial statements as a whole are not free from material misstatement; or the auditor is unable to obtain sufficient appropriate audit evidence to conclude that the financial statements as a whole are free from material misstatement The auditor shall express a qualified opinion when the auditor, having obtained sufficient appropriate audit evidence, concludes that misstatements, individually or in the aggregate, are material, but not pervasive, to the financial statements; or the auditor is unable to obtain sufficient appropriate audit evidence on which to base the opinion, but the auditor concludes that the possible effects on the financial statements of undetected misstatements, if any, could be material but not pervasive SA 705 (Issued): Modification to the opinion in the Independent Auditors Report The auditor shall express an adverse opinion when the auditor, having

obtained sufficient appropriate audit evidence, concludes that misstatements, individually or in the aggregate, are both material and pervasive to the financial statements The auditor shall disclaim an opinion when the auditor is unable to obtain sufficient appropriate audit evidence on which to base the opinion, and the auditor concludes that the possible effects on the financial statements of undetected misstatements, if any, could be both material and pervasive When the auditor modifies the opinion on the financial statements, the auditor shall, in addition to the specific elements required by SA 700 (Revised), include a paragraph in the auditors report that provides a description of the matter giving rise to the modification When the auditor expects to modify the opinion in the auditors report, the auditor shall communicate with those charged with governance the circumstances that led to the expected modification and the proposed wording of the modification SA 706 (Issued): Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditors Report The objective of the auditor, having formed an opinion on the financial statements, is to draw users attention, when in the auditors judgment it

is necessary to do so, by way of clear additional communication in the auditors report, to a matter, although appropriately presented or disclosed in the financial statements, that is of such importance that it is fundamental to users understanding of the financial statements; or as appropriate, any other matter that is relevant to users understanding of the audit, the auditors responsibilities or the auditors report If the matter refers to information presented or disclosed in the financial statements, the auditor shall include an Emphasis of Matter paragraph (immediately after the Opinion paragraph) in the auditors report provided the auditor has obtained sufficient appropriate audit evidence that the matter is not materially misstated in the financial statements If the auditor considers it necessary to communicate a matter other than those that are presented or disclosed in the financial statements that, in the auditors judgment, is relevant to users understanding of the audit, the auditors responsibilities or the auditors report and this is not prohibited by law or regulation, the auditor shall do so in a paragraph in the auditors report, with the heading Other Matter, or other appropriate heading If the auditor expects to include an Emphasis of Matter or an Other Matter paragraph in the auditors report, the auditor shall communicate SA 710 (Revised): Comparative Information Corresponding Figures and Comparative Financial Statements

The objectives of the auditor are to obtain sufficient appropriate audit evidence about whether the comparative information included in the financial statements has been presented, in all material respects, in accordance with the requirements for comparative information in the applicable financial reporting framework; and to report in accordance with the auditors reporting responsibilities The frameworks and methods of presentation that are referred to in this SA are corresponding figures where amounts and other disclosures for preceding period are included as an integral part of current period financial statements and Comparative Financial Statements where amounts and other disclosures for preceding period are included for comparison with financial statements of current period Auditor should obtain sufficient appropriate audit evidence that the comparative information meet the requirements of relevant financial reporting framework. This involves verifying whether accounting policies used for corresponding figures are consistent with those of current period and whether corresponding figures agree with amounts and other disclosures presented in prior period SA 710 (Revised): Comparative Information Corresponding Figures and Comparative Financial Statements

If the financial statements of the prior period were audited by a predecessor auditor and the auditor is permitted by law or regulation to refer to the predecessor auditors report on the corresponding figures and decides to do so, the auditor shall state in an Other Matter paragraph in the auditors report that the financial statements of the prior period were audited by the predecessor auditor; the type of opinion expressed by the predecessor auditor and, if the opinion was modified, the reasons therefore; and the date of that report. When auditors report on prior period, as previously issued, included a qualified opinion or a disclaimer of opinion or an adverse opinion and concerned matter is not resolved, auditors report should also be modified regarding corresponding figures When prior period financial statements are not audited, incoming auditor should state the fact in auditors report in an Other Matter paragraph When comparative financial statements are presented, the auditors opinion shall refer to each period for which financial statements are presented and on which an audit opinion is expressed SA 720: The Auditors Responsibility in Relation to Other Information in Documents containing Audited Financial Statements The objective of the auditor is to respond appropriately when

documents containing audited financial statements and auditors report thereon include other information that could undermine the credibility of those financial statements and auditors report The auditor is not required to give his/ her opinion on other information, not having any responsibility of determining whether or not other information is properly stated, if there is no separate requirement in particular circumstance of the engagement. However, the auditor reads other information because the credibility of audited financial statements may be undermined by material inconsistencies between audited financial statements and other information and if found, to determine whether the audited financial statements or other information needs to be revised To make appropriate arrangements with management or those charged with governance to obtain the other information prior to the date of the auditors report. If material inconsistencies are identified prior to the date of the auditors report, and the revision of audited financial statement is necessary and the management refuses to make the revision, auditor is required to modify his/ her opinion. Further, if revision of other information is necessary, and management refuses to make the revision, auditor is required to communicate the matter to SA 720: The Auditors Responsibility in Relation to Other

Information in Documents containing Audited Financial Statements If material inconsistencies are identified subsequent to the date of the auditors report, and revision of audited financial statement is necessary, the auditor is required to perform the procedures given in SA 560, Subsequent Events. If, on reading other information for the purpose of identifying material inconsistencies, auditor becomes aware of an apparent material misstatement of fact, auditor should discuss the matter with management and if the management refuse to correct it, communicate the same to those charged with governance and take further appropriate actions SA 800: Special Considerations Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks The objective of the auditor, when applying SAs in an audit of financial statements prepared in accordance with a special purpose framework, is to address appropriately the special considerations that are relevant to: (a) The acceptance of the engagement; (b) The planning and performance of that engagement; and (c) Forming an opinion and reporting on the financial statements In an audit of special purpose financial statements, the auditor shall obtain an understanding of: (a) The purpose for which the financial

statements are prepared; (b) The intended users; and (c) The steps taken by management to determine that the applicable financial reporting framework is acceptable in the circumstances The auditor shall determine whether application of other SAs requires special consideration in the circumstances of the engagement. In the case of financial statements prepared in accordance with the provisions of a contract, the auditor shall obtain an understanding of any significant interpretations of the contract that management made in the preparation of those financial statements. An interpretation is significant when adoption of another reasonable interpretation would have produced a material difference in the information presented in the financial statements SA 800: Special Considerations Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks In the case of financial statements prepared in accordance with the provisions of a contract, the auditor shall evaluate whether the financial statements adequately describe any

significant interpretations of the contract on which the financial statements are based The auditors report on special purpose financial statements shall include an Emphasis of Matter paragraph alerting users of the auditors report that the financial statements are prepared in accordance with a special purpose framework and that, as a result, the financial statements may not be suitable for another purpose SA 805: Special Considerations Audits of Single Financial Statements and Specific Elements, Accounts or Items of a Financial Statement The objective of the auditor, when applying SAs in an audit of a single financial statement or of a specific element, account or item of a financial statement, is to address appropriately the special considerations that are relevant to: (a) acceptance of the engagement; (b) planning and performance of that engagement; and (c) Forming an opinion and reporting on the single financial statement or on the specific element, account or item of financial statement SA 200 requires the auditor to comply with all SAs relevant to the audit. If the auditor is not also engaged to audit the entitys

complete set of financial statements, the auditor shall determine whether the audit of a single financial statement or of a specific element of those financial statements in accordance with SAs is practicable SA 210 requires the auditor to determine the acceptability of the financial reporting framework applied in the preparation of the financial statements. This shall include whether application of the financial reporting framework will result in a presentation that provides adequate disclosures to enable the intended users to SA 805: Special Considerations Audits of Single Financial Statements and Specific Elements, Accounts or Items of a Financial Statement The auditor shall consider whether the expected form of opinion is appropriate in the circumstances The auditor shall apply the requirements in SA 700, adapted as necessary in the circumstances of the engagement If the auditor undertakes an engagement to report on a single financial statement or on a specific element of a financial statement in conjunction with an engagement to audit the entitys complete set of financial statements, the auditor shall express a separate opinion for each engagement. If the opinion in the auditors report

on an entitys complete set of financial statements is modified, or that report includes an Emphasis of Matter paragraph or an Other Matter paragraph, the auditor shall determine the effect that this may have on the auditors report on a single financial statement or on a specific element of those financial statements SA 810: Engagements to Report on Summary Financial Statements SA 810 deals with the auditors responsibilities when undertaking an engagement to report on summary financial statements derived from financial statements audited in accordance with SAs by that same auditor The objectives of the auditor are to: (a) Determine whether it is appropriate to accept the engagement to report on summary financial statements; (b) Form an opinion on the summary financial statements based on an evaluation of the conclusions drawn from the evidence obtained; and (c) Express clearly that opinion through a written report that also describes the basis for that opinion The auditor shall, ordinarily, accept an engagement to report on summary financial statements in accordance with this SA only when the auditor has been engaged to conduct an audit in accordance with SAs of the financial statements from which the summary financial statements are derived

Before accepting an engagement to report on summary financial statements, the auditor shall: (a) Determine whether the applied criteria are acceptable; (b) Obtain the agreement of management that it acknowledges and understands its responsibility The auditor shall perform the prescribed procedures, and any other procedures that the auditor may consider necessary, as the basis for SA 810: Engagements to Report on Summary Financial Statements When the auditor has concluded that an unmodified opinion on the summary financial statements is appropriate, the auditors opinion shall, unless otherwise required by law or regulation, use one of the phrases enumerated in this SA The auditors report on the summary financial statements may be dated later than the date of the auditors report on the audited financial statements. In such cases, the auditors report on the summary financial statements shall state that the summary financial statements and audited financial statements do not reflect the effects of events that occurred subsequent to the date of the auditors report on the audited financial statements that may require adjustment of, or disclosure in, the audited financial statements If the summary financial statements are not consistent, in all material respects, with or are not a fair summary of the audited financial

statements, in accordance with the applied criteria, and management does not agree to make the necessary changes, the auditor shall express an adverse opinion on the summary financial statements If the audited financial statements contain comparatives, but the summary financial statements do not, the auditor shall determine whether such omission is reasonable in the circumstances of the engagement If the auditor becomes aware that the entity plans to state that the

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