Standards On Auditing Charts PDF

Chapter 1 “Quality Control and Engagement Standards”
SQC – 1 “Quality Control for Firms that Perform Audits & Reviews of Historical Financial Information, and Other
Assurance & Related Services Engagements”
All firms to have system of quality control that provides reasonable assurance that: (a) Firm & personnel comply with professional standards,
regulatory & legal requirements, and (b) Reports issued by firm or partners are appropriate in the circumstances.
Leadership Ethical Independence Client Human Resources Engagement Monitoring

Acceptance/Continuance Performance
Responsibilities for Q. C. requirements
(a) Promote internal Establish policies Policies & procedures should Establish policies/ Establish policies Establish policies / Establish
culture w.r.t.: & procedures to enable: procedures to Policies &
procedures to / procedures to
 Communication of reasonable assure
 essential of quality reasonable assure reasonable assure w.r.t.: procedures to
independence requirements reasonable assure that
in engagements. that Firm & to personnel & others. that:  Compliance with reasonable
clients are accepted/
 Identification of professional
 Compliance with personnel comply  Firm has assure that QC
circumstances threatening continued only where: standards.
professional with relevant sufficient  Compliance with policies/
independence.  Client integrity has
standards, ethical laws/ regulations. procedures are:
 Take appropriate action for personnel with
requirements of elimination of threats /
been considered.  Engagement
regulatory / legal capabilities,  Relevant.
partner issues
1. Integrity. withdrawal from  Firm is competent
requirements. competence & reports that are  Adequate.
engagement.
 Issue of reports 2. Objectivity. to perform appropriate in the  Operating
 Resolution of breaches of commitment to circumstances.
appropriate in 3. Professional independence. engagement w.r.t. effectively.
ethical Important aspects
circumstances. competence & Maintenance of independence capability, time & of engagement  Complied
of personnel principles
(b) Require CEO/ due care. performance
resources. & with in
 Engagement partners to  Supervision.
managing partner to 4. Confidentiality. provide firm with relevant  firm can comply practice.
 Responsibility  Review.
assume ultimate 5. Professional information about client.  Consultation.
 Prompt notification of
with ethical of engagement
responsibility for QC. behaviour.  Differences of
threats to independence. requirements. partner clearly opinion.
(c) Recognise & reward  Accumulation & defined &  Engagement Q. C.
high quality work. communication of relevant review.
information to appropriate communicated
 Engagement
personnel. to him/ her. documentation.
Compiled by: CA. Pankaj Garg Page 1

SA 200 (Revised) “Overall Objectives of the Independent Auditor & Conduct of audit in accordance with SAs
(a) To obtain reasonable assurance about whether the F. S. as a whole are free from material misstatement, whether due to fraud or error, thereby enabling the
auditor to express an opinion on whether the F.S. are prepared, in all material respects, in accordance with an applicable FRF.
(b) To report on the F.S. and communicate as required by the SAs, in accordance with the auditor’s findings.
Aspects to be considered by Auditor while performing Audit

Ethical Professional Professional Judgement Sufficient Appropriate Conduct of Audit in Other Explanation
Requirements Skepticism audit Evidence accordance with SAs
 Comprise Code of Attitude that includes a  The application of  Sufficiency refers to  The auditor shall Scope of Audit
Ethics issued by questioning mind, relevant training, quantum and comply with All SAs  to examine whether the F.S. are
ICAI including being alert to knowledge and Appropriateness relevant to the audit. prepared in accordance with FRF.
independence. conditions which may experience, refers to quality.  Compliance with SA  The auditor’s opinion does not assure,
 The fundamental indicate possible  within the context  Purpose: to reduce is to be specified in the future viability of the entity nor
principles are: misstatement due to provided by auditing, audit risk to an Audit report only in the efficiency or effectiveness with
1. Integrity error or fraud, and a accounting and ethical acceptably low level case of actual
which mngt. has conducted the affairs.
2. Objectivity critical assessment of standards, and thereby enable compliance.
Preparation of F.S.
3. Professional audit evidence.  in making informed the auditor to draw  To achieve overall
 is the duty of Mngt./TCWG.
competence & decisions about the reasonable objectives of audit,
Alertness is required courses of action use the objective  Duty of management also includes to
due care conclusions on which make accounting estimates and
w.r.t.  that are appropriate in stated in Individual
4. Confidentiality, to base the auditor’s selection and application of
1. Contradictory audit the circumstances of the SAs.
& opinion. appropriate accounting policies.
evidence. audit engagement.  In case Entire SA is
5. Professional  Audit Risk: Risk that
2. Reliability of It is required w.r.t.: not relevant due to Inherent Limitations for an audit
behavior the auditor expresses
documents.  Materiality & audit risk. non existence of (a) Nature of Financial reporting:
 Independence an inappropriate audit
3. Conditions  NTE of audit procedures. prescribed involves judgment by Mngt. based
comprises both opinion when the F.S.
indicating possible  Evaluating sufficiency & conditions, comply on facts and circumstances.
independence of are materially with relevant
frauds. appropriateness of audit (b) Nature of audit Procedures:
mind and misstated. requirements.
4. Circumstances procedures. directed towards obtaining
independence of  Audit Risk is a  In case of failure to
requiring audit  Evaluating mngt reasonable assurance.
appearance. function of the RMM achieve an objective
procedures in judgment in applying (c) Balance between benefit and
applicable FRF. and detection risk. determine the need
addition to those cost: user expectation to get AR
suggested in SAs.  Drawing conclusions of modified opinion
within a reasonable period and at
based on audit evidence. or withdrawal.
reasonable cost.

SA – 210 (Revised) – “Agreeing the Terms of Engagement”
Objective of Auditor: To accept or continue an audit engagement only when the basis upon which it is to be performed has been agreed with the client.
Agreeing the terms of audit Engagement
At the Beginning of Audit During the Course of Audit
Initial audit Engagement Recurring Audit Mngt. request for changes in terms
Limitations Imposed by mngt. No Limitations Imposed by Mngt. Determine its effect on Level of
Determine requirements w.r.t.:
Assurance & reasonable
(a) Revision of terms of Engagement; &
Do not accept unless required Ascertain existence of Justification
by law Preconditions* (b) Remind the entity of existing terms
Preconditions for an audit Exist Not Exist Required Not Required Auditor Satisfied Not Satisfied
1. Determine whether the FRF is
acceptable.
2. Obtain agreement of mngt that it Accept Audit Discuss matter Send New No Further Duty Record New Do not
with mngt. Engagement Letter Terms in accept the
understands its responsibilities for:
Engagement changes
(a) Preparation of F.S. Letter
(b) Exercising necessary Internal
Controls to enable the Do not accept audit in case of: CIRCUMSTANCES REQUIRING REVISION IN TERMS Mngt. not
preparation of F.S. that are free  Indications that the entity misunderstands the objective and permit the
(a) Unacceptable FRF
from material misstatements. scope of the audit. auditor to
or  Revised or special terms of engagement.
(c) To provide the auditor: continue
 Access to all relevant info. (b) Mngt. does not agree with  Recent change of senior management.
 Additional info that auditor  Significant change in ownership. Withdraw &
responsibilities
 Significant change in nature or size of the entity’s business. Report to
requests from mngt.
 Change in legal or regulatory requirements. appropriate
 Unrestricted access to persons Compiled by: CA. Pankaj Garg  Change in FRF adopted in the preparation of the F.S. authority
within the entity.
 A change in other reporting requirements.

SA – 220 (revised) “Quality Control for an audit of F.S.”
Objective: Implement QC Policies that provide Reasonable Assurance that audit complies with professional standards and audit report issued is appropriate
Leadership Ethical Independence Acceptance / Continuance Assignment of Engagement Performance Monitoring

Responsibilities
Requirements of Client relationship Engagement
Team
EP should EP to remain alert  Be satisfied that EP to be satisfied 1. Direction, Supervision and Obtain
that ET & performance: reasonable
emphasize the for evidence of Form a conclusion on appropriate procedures  EP shall take the responsibility for assurance that
compliance with Auditor’s Expert
ET the following: non-compliance regarding client acceptance directions, supervision & performance
applicable independence not part of ET firm’s policies /
of audit engagement in compliance
 Compliance with relevant ethical
requirements
/ continuance have been procedures
have appropriate with standards & regulatory
with requirements by ET followed. requirements, &. relating to QC are
Obtain relevant competence &
through:  Determine whether  to make an appropriate AR. relevant,
professional capabilities to:
information from Firm 2. Reviews: adequate, and
Standards and  Inquiry. conclusions reached are  Perform audit EP shall take the following
operating
appropriate. engagement in responsibilities:
legal  Observation. Identify & Evaluate effectively.
a. Reviews are being performed in
requirements. circumstances & accordance accordance with policies / procedures.
If there is an with b. Be Satisfied that SAAE has been Consider:
 Compliance
Relationship that threatens If EP obtains information
indications of independence that would have caused firm professional obtained to support the conclusions  Results of
with firm’s reached and AR to be issued through
noncompliance with to withdraw the engagement, standards and firm’s
 Review of Audit Documentation.
Q.C. Policies. Evaluate information on communicate information regulatory or
relevant ethical  Discussion with ET monitoring
 Issuance of identified breaches. promptly to firm legal 3. Consultation:
requirements, EP process.
requirements, EP shall undertake consultation
appropriate
should:  wherever required.  Whether
audit report. Determine if these Examples of Information and
 Ensure its implementation
 Consult others in threaten independence 1. Integrity of Principal  Enable an AR 4. Engagement Quality Control Review: deficiencies
 Ability to raise
the firm. Owners, Mngt & TCWG that is required in case of listed entities. noted may
concerns Take appropriate action
 Determine 2. Competency of ET to appropriate in Matters to be evaluated by EQCR affect the
without fear. to eliminate such threats  Discussion of significant matters with
appropriate perform engagement. the audit
ET.
 Quality is or
3. Availability of necessary circumstances.
action.  Review of FS & proposed audit report. engagement.
essential & capabilities, including time  Review of selected audit
Promptly report & resources. documentation
indispensable
inability to take 4. Compliance with relevant  Evaluation of conclusions reached.
in engagement appropriate action to  Considering whether proposed audit
ethical requirements.
report is appropriate.
performance. 5. Significant matters that
5. Differences of Opinion: follow the
Compiled by: CA. Pankaj Garg arises during the current or
firm’s policies & procedures for dealing
previous audit engagement. with and resolving differences of
opinion.

SA – 230 (Revised) – Audit Documentation
General concepts Form, Content & Extent of Specific Documentation Retention Ownership
Documentation Period
 Documentation is the
Meaning: Record of: Auditor shall prepare audit documentation property of the
 Audit procedures performed that is sufficient to enable an experienced 7 Years from Auditor.
 Relevant audit evidence auditor to understand: date of Audit  May at his discretion
obtained, & Compiled by: CA.
(a) NTE of the audit procedures; Report make portions of or
 Conclusions reached Pankaj Garg extracts from
(b) Results of audit procedures performed,
Purpose: includes the following: documentation
& audit evidence obtained;
 Assist in Planning and available to client.
(c) Significant matters arising during the
performance of Audit. Documentation of Documentation of Documentation of
audit and the conclusions reached
 Direction, supervision & Discussion Departure from a matters arising after the
Review of work. thereon, significant professional
relevant requirement Date of Auditor’s Report
 To fix accountability. judgments made in the reaching those
 Record for future reference. conclusions.
 Significant  Reasons for the  Circumstance
 Quality control review and Factors affecting form, content & extent
Matters departure. encountered.
inspections 1. The size and complexity of the entity. Discussed with  Alternative  New or additional
 Conduct of external
2. The nature of the audit procedures to be Mngt. And procedures procedures
inspections.
performed. TCWG. performed. performed, audit
Nature documentation must 3. Identified RMM.  When and with evidence obtained,
provide for: 4. Significance of audit evidence obtained. whom the conclusions reached,
 Sufficient and appropriate 5. Nature & extent of exceptions identified. discussion took and their effect on the
record of the basis for 6. Need to document a conclusion or the place. auditor’s report.
auditor’s report. basis for a conclusion not readily  How the auditor  When and by whom
determinable from the documentation of addresses the the changes to audit
 Evidence that the audit was
inconsistency (if documentation were
planned and performed in the work performed or audit evidence
any detected made and reviewed.
accordance with SAs & other obtained.
during
regulatory requirements. 7. The audit methodology and tools used.
discussion)

SA 240 (Revised) – The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements
Fraud Risk Factors / Management Duties Auditor’s Responsibilities

Meaning and Nature of Fraud
Characteristics of Fraud
Meaning: Intentional Act involving use of deception to  Incentive or pressure to Commit Fraud: Primary responsibility To obtain reasonable assurance
that F.S. as a whole are free from
obtain an unjust or illegal advantage. Arises when mngt is under pressure to for prevention &
material Misstatements.
achieve an unrealistic target. detection of fraud rests
Auditor is concerned with Fraud that causes  Perceived opportunity to do so: with Mngt and TCWG
Arises when an individual believes that Maintain an attitude of
Material Misstatement.
internal control can be overridden. To ensure prevention of Professional Skepticism
Misstatement may result from:  Rationalization to do so: fraud Mngt. must have a
A Fraudulent Financial Reporting Arises when an individual possess an commitment to create an Circumstances indicate existence
1. Recording fictitious journal entries to attitude or character that allows them of material Misstatement
culture of honesty and
manipulate operating results. knowingly and intentionally to commit a
2. Inappropriate assumptions. Ethical behavior.
dishonest act.
3. Changing judgements to estimate account Consider whether such a
balances. Risk associated for non detection of material misstatements misstatement is an indication
4. Omitting, advancing or delaying recognition of of Fraud. If Fraud identified
 Due to Inherent limitations there is always an unavoidable risk of material
events and transactions occurred during the
misstatement in F.S. due to Fraud.
year.
5. Concealing facts that affect the amount  Risk of non detecting a material misstatement resulting from fraud is Communicate to Mngt.
recorded in F.S. higher than the risk of non detecting one resulting from error. &TCWG (also to Regulatory &
6. Engaging in Complex Transactions that are  Risk of Material Misstatements due to Management Fraud is higher than Enforcement authorities, if
structured to misrepresent the financial due to Employee Fraud. required by Law
position or financial performance.
7. Altering records relating to significant Conditions or events which increases risk of fraud or error Auditor unable to complete
transactions. 1. Discrepancies in Accounting Records: arises due to improper recording, the engagement.
B Misappropriation of Assets unauthorised transactions, last minute adjustments.
1. Embezzling receipts. 2. Conflicting or missing evidences: missing documents, altered Consider the Possibility of
2. Stealing physical assets. documents, non availability of original documents, unexplained items etc. withdrawing.
3. Causing an entity to pay for goods and services 3. Unusual relationship between auditor & mngt: undue time pressure,
not received. unusual delay in providing info, unwillingness to address weaknesses in IC. If withdraw:
4. Using entity assets for personal use. 4. Others: Mngt not allowing auditor to meet with TCWG, varied accounting  Discuss with Mngt & TCWG, &
policies, frequent changes in accounting estimates.  Report to appropriate persons

SA 250 (Revised) “Consideration of Laws and Regulations in an Audit of F.S.”
Management Responsibilities Auditor’s Responsibilities
Basic Responsibilities Specific Auditor Indicators considered by

Reporting responsibilities
Responsibilities w.r.t. Auditor
Procedure in
Obtain general
case any Non-
understanding of L& R having Other L& R that do not To TCWG Auditor Report Regularity &
direct effect on affect amount and
Compliance is Enforcement Authorities
 Legal & Regulatory
Framework applicable determination disclosures in F.S. but identified /
 Compliance by Entity of material compliance with which Suspected Material Unable to If required by Law
with that Framework. amount and may be fundamental to Effect on Conclude
due to  Investigations by regulatory
disclosures in operating aspects. F.S.
Limitation bodies.
Compliance of L & R is duty of F.S.
Mngt & TCWG and may be imposed by  Payment of fines or penalties.
performed through:  Payments for unspecified
Q/A services to consultants,
1. Monitoring legal requirements  Obtain
& ensuring that operating related parties etc.
procedures are designed to obtain SAAE Perform limited understanding of  Excessive Sales commissions
procedures: Mngt. Circumstances
meet these requirements. the Act. or agent’s fees.
2. Instituting & operating  Inquiring of Mngt; &  Circumstances in  Purchasing at prices
appropriate systems of IC.  Inspecting Q/D Consider the significantly above or below
which it is
3. Developing, publicising and Correspondence with Effect market price.
following a code of conduct. to ensure relevant Licensing / occurred.  Unusual payments in cash.
4. Ensuring employees are compliance  Evaluate possible  Unusual payments towards
Regulatory authority
properly trained & understand legal and retainership fees.
effects on F.S.
the code of conduct.  Matters involving non-  Payments without proper
5. Monitoring compliance with  Discuss with exchange control
to identify instances of compliance.
code of conduct & take actions Mngt. & TCWG documentation.
to discipline employees who noncompliance.  If TCWG is involved,
 Obtain legal  Existence of an information
fail to comply with it. communicate to Higher Level,
system which fails, to provide
6. Engaging legal advisors to advice wherever if any an adequate audit trail or
assist in monitoring legal required  Otherwise, obtain Legal Advice sufficient evidence.
Obtain Written Representation that all
requirements.
 Unauthorised transactions or
7. Maintaining a register of instances of non-compliance or
improperly recorded
significant L & R with which the suspected non-compliance have been Compiled by: CA. Pankaj Garg transactions.
entity has to comply. disclosed to auditor.  Adverse media comment.

SA 260 (Revised) – “Communication with TCWG”
Meaning of Auditor’s Responsibilities Communication Process Factors affecting Mode of

Management & Communication
TCWG
TCWG: Persons with Determine the Matters to be communicated  Communication may be  Size, operating structure,
responsibility for appropriate Oral /written control environment, & legal
overseeing the (a) Auditor’s responsibility in relate to F.S. Audit. Detail/Summarised structure of entity.
person to whom
(b) Planned scope & timing of audit Structured /Unstructured  In the case of an audit of
strategic directions & communication
(c) Significant findings from audit w.r.t.  Should be in writing special purpose F.S., whether
obligations related to is to be made.
 Accounting Policies the auditor also audits the
Accountability. when oral
 Accounting Estimates entity’s general purpose F. S.
Management : Person communication is not
 F. S. Disclosures  Requirements of respective
with executive  Significant difficulties encountered adequate. law specifying written
responsibility for during the audit.  Communication should communication with TCWG in
conduct of entity’s Examples of Significant difficulties be on timely basis a prescribed form.
1. Significant delay in providing info  Expectations of TCWG,

operation
2. Unnecessarily brief time to complete including arrangements made
the audit. Evaluate adequacy of for periodic meetings or
3. Extensive unexpected effort to obtain communication for the communications with the
SAAE. purpose of the audit. auditor.
 Determine the need to communicate with
4. Unavailability of Expected  The amount of ongoing
Governing body, if communicates with information. contact and dialogue the
subgroup. 5. Restriction imposed by management. If not adequate, evaluate
auditor has with TCWG.
 If all of TCWG are involved in managing the 6. Scope limitation imposed by its effect, on the auditor’s
 Significant changes in the
management assessment of the risks of
entity, and the matter has been membership of a governing
communicated with persons having  Material weakness in I.C. material misstatement. body.
managerial responsibility, the matters need  Matters discuss with Mngt.
not be communicated again to the same  Other significant Matters.
Compiled by: CA. Pankaj Garg
(d) Statement w.r.t. compliance of ethical
persons in their governing role.
requirements regarding independence.

SA-265 “Communicating Deficiencies in Internal Control to TCWG & Management
Meaning of deficiency Auditor’s Responsibilities

in internal control
(a) Inability of I.C to prevent Identification of deficiencies in Communication of deficiencies in Internal Control
detect & correct misstatement ; Internal Control
or
Mode of communication Content of communication
(b) Absence of control necessary
Determine whether on the basis of
to prevent, detect & correct
work done any deficiency in In writing
misstatements internal control is identified
Determine whether individually or To TCWG To Mngt. (a) Description of deficiencies

in combination they constitute (b) Explanation of their potential
significant deficiencies effect
(c) Sufficient information to explain
Indicators of Significant Deficiencies Significant Significant  that purpose of the audit is to
deficiencies deficiencies express an opinion
1. Evidence of ineffective aspects of control environment.
and other  I. C. is evaluated to design
2. Entity’s Risk assessment process – Absent/ineffective. deficiencies further audit procedures
3. Ineffective response to identified significant Risks.
4. Correction of prior period misstatements arising due to fraud/error.
5. Management inability to oversee F.S. Preparation.
6. Misstatements detected by the auditor’s procedures were not
prevented, or detected and corrected by the entity I.C.

SA 299 “Responsibility of Joint Auditors”
Division of work Co-ordination Responsibilities of Joint Auditors Reporting
By Mutual discussion If one auditor comes  Generally – a Single Report

Separate Joint & several
to know a matter
 If joint auditors disagree -
relevant for other, he
On basis of identifiable units should communicate Separate Report
or specified areas it immediately in  No one is bound by
writing to other joint For work  for work not divided Majority.
auditor before allocated  for joint decision w.r.t. N,
If not possible – with submission of report. T, E of audit procedure.
respect to followings:  for matters brought to
 Assets/Liabilities; or knowledge of all by any
 Income/Expense; or one of them and on which
 Period they all agree.
Compiled by:
 Disclosure requirements
CA. Pankaj in F.S.
Work should not be
divided for Imp. areas  Compliance of audit
Garg report with statutory
requirement
Work so divided should be
documented and
communicated to the
entity.

SA 300 (Revised) – Planning in an audit of Financial Statements
Importance of Planning Preliminary Engagement Activities Planning Activities
1. To devote appropriate attention to (a) Procedures required by SA -220 w.r.t. Establishment of Audit Strategy Development of
important areas. continuous of Client relationship. Audit Plan.
2. Identify and Resolve potential (b) Evaluate compliance with Ethical so as to set the scope, timing &
problems on timely basis. direction of the audit
Requirements (SA-220)  NTE of RAP (SA-
3. Properly organized & managed Audit. Factors to be considered
(c) Understanding of terms of 315)
4. Assists selection of ET members with  Characteristics of Engagement.
Engagement (SA-210)  Reporting Objectives.  NTE of furthers
requisite capabilities and competence.
5. Co-ordination of work done by  Significant factors to direct ET Audit Procedures
efforts.
auditors of components and experts. Planning – A Continuous Process (SA-330)
 Result of Preliminary
6. Facilitating direction and supervision  Other Planned
Engagement Activities.
of Engagement team. Audit Procedure.
 NTE of Procedures to be
performed.
Planning is not a discrete phase of an audit but rather a continuous process. It begins shortly
CHANGES TO PLANNING DECISIONS
after completion of previous audit & continues until completion of current audit engagement.
 Auditor shall update & change overall audit strategy and audit
It includes consideration of timing of certain activities & audit procedures that need to be
plan as necessary during the course of the audit.
completed prior to performance of further audit procedures. E.g., planning includes the need to  Audit Strategy and Audit Plan may need to be modified as a result
consider, prior to the auditor’s identification and assessment of the RMM, such matters as: of unexpected events, changes in conditions, or the audit evidence
1. The analytical procedures to be applied as risk assessment procedures. obtained from the results of audit procedures.
 Based on the revised consideration of assessed risks, auditor
2. Obtaining a general understanding of the legal and regulatory framework.
need to modify the NTE of further audit procedures. This may be
3. The determination of materiality.
Compiled by: the case when information comes to the auditor’s attention that
4. The involvement of experts. CA. Pankaj Garg differs significantly from the information available when the
5. The performance of other risk assessment procedures. auditor planned the audit procedures.

SA 315 (Revised) – Identifying and Assessing the Risk of Material Misstatements through understanding the Entity and Its Environment .
Risk Assessment Understanding of Entity & its Environment Risk in CIS Environment
Procedures
Risk imposed by IT/CIS Areas to be examined
Auditor shall obtain understanding of:
 Procedures to obtain an  Reliance on programs that process  Program Development &
1. Relevant Industry, Regulatory & other External
Maintenance.
understanding of entity Factors including FRF. inaccurate data or do inaccurate
 System Software Support.
& its environment 2. Nature of Entity including. processing.
 Operations Including processing
including I.C.  Its Operations  Unauthorized access to data that of data.
 Ownership & Governance structure may result in destruction of data.
 To Identify and assess  Physical CIS security.
 Types of investments
the RMM at F.S. and  Unauthorized changes to data in  Control over access to
 The way Entity is structured & how it is financed
Assertion Level. Master files. specialized CIS utility programs.
3. Selection & Application of Accounting Policies &
reasons for changes thereto.  Unauthorized changes to systems.
1. Components
Control Environment
of Internal Control
It Includes 4. Entity objectives & Strategies & those business  Failure to make necessary changes.  Communication of Ethical values.
a. Inquiry of mngt.& others risks that may result in increase RMM. 2. Risk Assessment Process
 Potential loss of data
b. Analytical Procedures 5. Measurement & review of Financial Performance.  Identify Business Risk
 Inability to access data as required.  Estimating significant Risks
c. Observation & Inspection 6. Internal control relevant to audit.
 Assessing Likelihood of occurrence.
 Deciding response
Identification and Assessment of RMM 3. Information System relevant to FR:
 Classes of transactions
a) F.S. Level: RMM that Assertions evaluated  Accounting procedures
Steps in Risk Risk require special
relate pervasively to Transaction  Occurrence  Accounting records
Assessment consideration  Financial Reporting Process.
the F.S. as a whole and occurred  Completeness
potentially affect many Process: 1. Risk of fraud  Controls over journal entries
during the  Accuracy
assertions. year  Cut-Off  Identify risks 2. Risk related to recent 4. Control Activities relevant to Audit
b) Assertion level for  Classification  Assess & Evaluate significant Economic,  Information processes
classes of Account  Existence Accounting & other  Segregation of duties.
Rights & Obligations the identified risks.
Transaction, Account balances at 
Developments.  Physical controls
Balances & period end  Completeness  Relate identified  Performance Reviews
disclosures: It helps  Valuation & risk to what go 3. Complexity of Transactions.
5. Monitoring of Controls
in determining the NTE Disclosure 4. Transactions with Related  Assess effectiveness of I.C. Performance.
wrong at assertion
of further audit Presentation  Occurrence Parties
&  Completeness level.
procedures necessary 5. Significant Unusual
to obtain SAAE. Disclosures  Classification  Likelihood of Compiled by: CA. Pankaj Garg
 Accuracy & Valuation Transaction
misstatement.

SA 320 (Revised) “Materiality in Planning and Performing an Audit”
Concept of Materiality Performance Materiality Auditor’s Duties
Materiality is a subject of  The amount set by auditor at (a) Upon establishing the overall audit strategy, the auditor shall
professional judgment and  less than materiality for F.S as a whole determine the materiality for the F. S. as a whole.
discussion presented in FRF (b) Determine the materiality level for specific transactions for
 to reduce to an appropriately low level
which misstatements of lower amount be expected to influence
provides a reference to the auditor in  the probability that the aggregate of the
the economic decisions of users.
determining materiality. uncorrected & undetected misstatement (c) Determine performance materiality for purpose of assessing
If FRF does not include a discussion,  exceeds materiality for F. S. as a whole the RMM and determining the NTE of further audit procedures.
following can be referred:
(a) Misstatements including
omissions expected to influence Revision of Materiality Use of benchmark in determining Materiality
the economic decision of users.

(b) Size or nature of misstatement &  In event of becoming aware of information A %age is often applied to a chosen benchmark as a starting
the surrounding circumstances. that would have caused auditor to have point in determining materiality for the F.S. as a whole.
(c) Common financial information determined a different amount initially, Factors affecting identification of appropriate benchmark
auditor shall revise materiality for the F.S. as a 1. The elements of the financial statements;
needs of the users as a group.
whole & if required, for particular classes of
2. Items on which the attention of the users of the particular
transactions, account balances or disclosures.
entity’s financial statements tends to be focused;
Compiled by: CA. Pankaj Garg  If the auditor concludes that a lower
3. The nature of the entity, where the entity is at in its life
materiality than that initially determined is
Judgment of materiality provides a cycle, and the industry and economic environment in
appropriate, the auditor shall determine
basis for: which the entity operates;
whether it is necessary to revise performance
(a) Determination of NTE of RAP 4. The entity’s ownership structure and the way it is
materiality, and whether the NTE of the
(b) Identifying and assessing RMM. financed; and
further audit procedures remain appropriate.
(c) NTE of further audit procedures. 5. The relative volatility of the benchmark.

SA – 330 “Responses to Assessed Risks”
Objective: To obtain Sufficient and Appropriate Audit Evidence about Assessed Risk of Material Misstatement through design and implementing Appropriate Responses
Tests of Controls Substantive Procedures
Procedures designed to evaluate the operating effectiveness of controls in preventing, Procedures designed to detect material misstatements at assertion level.
detecting or correcting material misstatements at assertion level. It comprises of:
a) Test of details (of classes of transactions, Account Balances and
Obtain audit evidences w.r.t. (a) Application of controls (b) Consistency of application Disclosures); &
(c) By whom & by what means they applied Compiled by: CA. Pankaj Garg
b) Substantive Analytical Procedures
Evaluate the audit evidences

External Auditor shall consider whether EC procedures are to be
Material weaknesses identified Confirmation performed as substantive audit procedures.
(EC) Factors that may assist the auditor are:
Communicate to Mngt. & TCWG – on timely basis
procedures 1. Confirming party knowledge of Subject Matter.
Special Considerations as 2. Ability or Willingness of intended confirming part to

Factors warranting re-test of
Using Audit Evidence obtained in Interim Period: controls substantive respond.
 Obtain audit Evidence for significant changes 1. Deficient control environment. procedures 3. Objectivity of Intending Party.
subsequent to Interim Period. 2. Deficient monitoring of
controls. Closing  Reconciling F.S. with underlying A/cing Records
 Determine the additional Evidence to be obtain for
3. Significant manual element to Process  Examine Material Journal Entries & other adjustments
remaning period.
relevant controls.
Using Audit Evidence obtained during previous made during the course of preparing the F.S.
4. Personnel changes that
audits: Establish Continuing relevance of that evidence significantly affect the Significant Procedures that are specifically responsive to that risk
by determining significant changes subsequent to application of control. Risks needs to be applied
previous audit 5. Changing circumstances that
 Changes occurs: Test the controls in current audit indicate the need for changes
 No Change Occurs: Test the controls once in three in the control.
Timing: When Substantive procedures are applied for interim period, the
audits 6. Deficient general IT-controls.
auditor shall cover remaining period by appropriate procedures

SA 402 (Revised) – Audit Considerations relating to an Entity Using a Service Organisation
Auditor’s Objective Obtaining understanding of services Auditor’s considerations

provided by service Organisation (S.O.)
 Obtain an The user auditor shall obtain an  User auditor shall evaluate the design and implementation of relevant controls of
understanding of understanding of how user entity uses the user entity that relate to the services provided by service organization.
nature & significance  User auditor shall determine whether a sufficient understanding of nature and
services of a service organization in the user
of service provided by significance of services provided by service organization and their effect on the
entity operation, including:
the S.O. and their user entity internal control relevant to the audit has been obtained.
(a) Nature of service provided by the S.O. and  If user auditor is unable to obtain a sufficient understanding from the user entity,
effect on the user’s
entity internal control significance of services to user entity. user auditor shall obtain that understanding from the following procedures:
(b) Nature and materiality of the transactions (a) Obtaining a Type 1 or Type 2 Report, if available.
relevant to the audit,
(b) Contacting the service organization, through the user entity.
sufficient to identify processed or financial reporting processes
(c) Visiting the service organization.
and assess the RMM. affected by service organizations.
(d) Using another auditor to perform procedures that will provide the
 To design and (c) Degree of interaction between activities of necessary information about the relevant controls at the S.O.
perform audit
S.O. and those of the user entity.  If a S.O. uses subservice organisation, the service auditor’s report may either
procedures
(d) The nature of relationship between user include or exclude the subservice organisation’s relevant control objectives
responsive to those
& related controls in the service organisation’s description of its system & in
risks. entity and the service organization.
the scope of service auditor’s engagement. These two methods of reporting
are known as the inclusive method and the carve-out method, respectively.
User Auditor: An auditor who audits and Reports on the financial  If Type 1 or Type 2 report excludes the controls at a subservice
statements of a user entity. organisation, and the services provided by the subservice organisation are
User Entity: An Entity that uses a service organization and whose financial relevant to the audit of the user entity’s financial statements, the user
statements are being audited. auditor is required to apply the requirements of this SA in respect of the
subservice organisation.
Type 1 Report: Report on the description and design of internal controls at
 Nature and extent of work to be performed by the user auditor regarding
a service organization for a specified date. the services provided by a subservice organisation depend on the nature
Type 2 Report: Report on the description, design and operating and significance of those services to the user entity and the relevance of
effectiveness of controls at a service organsation for a specified period. those services to the audit.

SA 450 “Evaluation of Misstatements Identified during the Audit
Meaning and Causes of Auditor’s Procedures if Misstatements identified

Misstatements
Difference between Accumulate the misstatements other than those that clearly trivial
amounts, classification, presentation

or disclosure of a reported financial Communicate to management & request them to correct. Determine whether any
statement item, revision required in Audit
and Strategy/Plan.
amount, classification, presentation or Management corrects Management refuses
disclosure that is required for the item

Perform Additional Understand the reason for not making
to be in accordance of FRF. Audit Strategy and Audit
Procedures to corrections
Causes of Misstatement Plan require revision if
(a) Inaccuracy in gathering or determine whether
Re-assess the materiality
processing data from which the misstatements Nature of identified
F.S. are prepared; remain. misstatements and the
(b) Omission of an amount or circumstances of their
If material, communicate uncorrected
disclosure; occurrence indicate that
misstatement and their effect on his opinion to
(c) Incorrect accounting estimate
other misstatements may
TCWG with a request that uncorrected
arising from overlooking, or clear
exist that, could be material;
misstatements be corrected.
misinterpretation of, facts; and
or
(d) Unreasonable judgments of Compiled by:
Not corrected Aggregate of misstatements
management concerning CA. PANKAJ GARG accumulated during the
accounting estimates.
Obtain a written representation from audit approaches materiality
(e) Inappropriate selection &
management/TCWG w.r.t their believing that determined in accordance
application of accounting policies
effect of uncorrected misstatements are with SA 320 (Revised).
immaterial.
SA 500 “Audit Evidence”
Meaning and Nature of Auditor’s duties when an information to be used as audit evidence Audit Procedures & Methods
Audit Evidence (A.E.) for obtaining audit evidence
Meaning of A.E. Information prepared using Information Procedures to obtain A.E. Methods to obtain A.E.
Information used by auditor (a) RAP 1. Inspection
work of Management Expert Produced by entity
(b) FAP (Responses): 2. Observation.
In arriving at the conclusion 3. External Confirmations

1 Evaluate Competence, Capability and Obtain A.E. about the  Tests of Control (ToC),
4. Recalculation
Objectivity of the Expert  Substantive
5. Re-performance
On which auditor’s opinion is Source of Information for evaluation: 1. Tests of Details (ToD)
 Personal Experience with previous work.
Accuracy and 6. Analytical procedures
based. 2. Substantive Analytical
 Discussion with that expert. Completeness of info. 7. Inquiry (Oral/Written)
Nature of A.E. Procedures (SAP)
 Discussion with others. Evaluate whether info
A.E. needs to be  Knowledge of expert’s qualification,
memberships, other forms of recognitions.
is
 Published books or papers.
Reliability of Audit Evidence
Sufficient Appropriate  Auditor’s expert. sufficiently precise
Measure of Measure of 2 Obtain an understating of expert work
and detailed for
 Area of Specialty
quantity quality auditor’s purposes.
 Applicable professional standards.
Affected by Relevance &  Legal & Regulatory Requirements.
 RMM & reliability in  Assumptions and Methods used. (a) External Evidences are considered more reliable than internal evidences.
providing  Nature of Source Data used. (b) The reliability of internal evidence is increased when the related controls,
 Quality of
3 Evaluate the appropriateness of Expert work imposed by entity are effective.
Audit support for
 Finding & Conclusion – Relevance,
(c) Audit evidence obtained directly by the auditor is more reliable than audit
evidences conclusion. Reasonableness & Consistency with other
A.E. evidence obtained indirectly.
 Assumptions and Methods – Relevance (d) Audit evidence in documentary form, is more reliable than evidence obtained
Compiled by: and Reasonableness. orally.
 Source Data – Relevance, Completeness
CA. PANKAJ GARG (e) Audit evidence provided by original documents is more reliable than audit
and accuracy.
evidence provided by photocopies.
SA 501 “Audit Evidence – Specific Considerations for Selected Items”
Inventory – Litigation & Claims – Completeness

Existence & Condition
Auditor is required to identify litigation and claims
by following procedures:
 Inquiry: of Mngt. & others within entity,
General Procedures Special Procedures including in house legal counsel.
 Review – minutes of meetings of TCWG,
When inventory is material to the F.S. 1 Inventory counting conducted at date other than communication between entity & external legal
B/S date counsel.
the auditor shall obtain SAAE Perform audit procedures to obtain audit evidence  Review – legal expenses account.
about whether changes in inventory between the count If management refuses to permit auditor to
regarding existence & condition by communicate with legal counsel / external legal
date and the date of the F.S. are properly recorded.
counsel refuses / auditor unable to collect SAAE
2 Auditor unable to attend Inventory Count by performing alternate procedures
(a) Attendance at physical inventory Make or observe some physical counts on an alternative
counting, unless impracticable, to: date, Modify Opinion in accordance with SA 705
 Evaluate mngt. instructions &

and perform audit procedures on intervening
procedures for recording & Segment Reporting –
transactions
controlling the results of the entity’s
3 Attendance at inventory count is impracticable
Presentation & Disclosures
physical inventory counting; Perform alternative audit procedures to obtain S.A.A.E.
 Observe the performance of regarding existence and condition of inventory. Obtain SAAE regarding presentation & disclosure of segment
management’s count procedures; information in accordance with the applicable FRF by:
(a) Obtaining an understanding of the methods used by
 Inspect the inventory; If it is not possible to do so, modify the opinion in the
management in determining segment information, and
auditor’s report in accordance with SA 705.
 Perform test counts;  Evaluate whether such methods are likely to result in
4 Inventory under custody and control of Third Party disclosure in accordance with the applicable FRF; and
(b) Performing audit procedures over the
Obtain S.A.A.E by performing the following:  Where appropriate, testing the application of such
entity’s final inventory records to (a) Request confirmation from third party. methods; and
determine whether they accurately (b) Perform Inspection/other audit procedure. (b) Performing analytical procedures or other audit
reflect actual inventory count results. procedures appropriate in the circumstances.
SA – 505 “External Confirmation”
The objective of the auditor, when using external confirmation procedures, is to design and perform such procedures to obtain relevant and reliable audit
evidence.
Meaning & Type of E.C. External Confirmation Audit Procedures in Special Circumstances Limited use of –ve
Procedures Request
Mngt. refuses to allow the auditor to send request
Audit Evidence obtained as a direct written As it provides less
Determining the information to
response to auditor from 3rd Party in  Inquire the reasons persuasive evidence
be confirmed.
Paper/Electronic/Other form.  Evaluate the implications on RMM than the positive
Selecting the Appropriate Third  Perform Alternative Audit procedure. Confirmation request.
2 Types Party.  Refusal appears to  Communicate to
be unreasonable TCWG.
+ ve Request - ve request Designing the confirmation Circumstances in
request.  Unable to collect  Determine its affect
Request that 3rd Party Request that 3rd Party
which negative
respond directly to respond directly to audit evidence on Opinion
Sending the request including request may be used
auditor auditor
follow up. Responses to E.C. request as sole substantive
indicating whether it only if it disagrees
agrees or disagrees  Creates Doubt Obtain Further procedure:
With the info in request with the information in Factors to be considered while Evidences
 Low RMM.
or the request designing E.C. request:  Not Reliable Consider its affect on
providing requested  Population consists
 Assertions being addressed. NTE of other procedures
info. of large no. of small,
 Specific identified RMM.  No Response Perform Alternative
homogenous
Areas where External Confirmation may be obtained:  Layout and presentation of procedure
(a) Bank balance & Other confirmation from account balances.
request.
bankers  Unable to collect Determine its affect on
 Expectation of low
 Prior Experience of audit.
(b) Account Receivable/Account Payable Balances evidence Opinion
 Method of Communication. exception rate.
(c) Stock Lying with Third Parties
 Exception occurs Investigate to determine  Auditor not aware
(d) Property Title Deed held by third parties  Management Authorization.
(e) Investments Purchased but delivery not taken. misstatement of circumstances
 Ability of confirming party to
(f) Loan from Lenders that 3rd party
provide the requested
(g) Terms of agreement or Transaction with Third Compiled by: CA. Pankaj Garg
information disregard request.
Parties

SA – 510 “Initial Audit Engagements – Opening Balances”
Meaning of Initial Audit Engagement: An Engagement in which financial statements for prior period are not audited or were audited by predecessor auditor.
Meaning of Opening balance – A/c balance that exist at beginning of period & also includes disclosures exists at beginning of period.
Audit Procedures Audit Conclusion & Reporting
Opening Balance Consistency of Modification in Opening Balance Consistency of Modification in

Accounting Predecessor Accounting Predecessor Auditor’s
Auditor’s Report
Policies Policies
Report
Balance
 Read most recent F.S. and auditor Obtain SAAE Evaluate the Unable to Contain material Inconsistency Modification remains
report thereon. effect of obtain SAAE misstatements not exists relevant & material for
 Obtain S.A. audit evidence w.r.t. modification properly or Current Period F.S.
existence of any material accounted / Changes not
misstatement by disclosed in properly
 Determining correct b/f of prior current year F. S. accounted or
period closing balance. disclosed
 Determining application of
appropriate accounting policies. w.r.t.
 If any misstatement detected consistent Modify Current Year
Qualified / Audit Report
perform additional procedures to application
Disclaimer Qualified / Adverse Report accordingly
determine their effect on current or
Period financial statements. Proper
 If misstatement exists in Current accounting & in assessing
Period F.S. communicate to Mngt & disclosure for RMM in Current
TCWG. changes. period F.S. Compiled by: CA. Pankaj Garg

SA 520 “Analytical Procedures”
Meaning and Nature of Analytical Procedures Auditor’s Procedures
Evaluation of financial information 1 Determine the suitability of particular substantive analytical procedures (SAP)
Following factors requires consideration:
through analysis of relationships 1. SAPs more suitable to large volumes of transactions tending to be predictable over time.
2. But suitability of AP influenced by:
among both financial and non-financial data.
 Nature of assertion.
AND
 Auditor’s assessment of APs effectiveness to identify material misstatement.
also encompass such investigation as is necessary of
3. In some cases unsophisticated predictive models may be useful.
identified fluctuations or relationships that are
inconsistent with other relevant information or that 4. Different types of APs provide different levels of assurance.
differ from expected values by a significant amount. 5. Particular SAP may be considered suitable when ToD are performed on same assertion.
Analytical Procedures 2 Evaluate the reliability of data
Following factors affects the reliability:
Consideration of Consideration of  Source of the information available.
Comparisons of relationships among
 Comparability of the information available.
Financial Information Compiled by: CA. Pankaj Garg
 Nature and relevance of the information available, and
with comparable Elements of financial
information for prior information  Controls over the preparation of the information
periods. or 3 Develop an expectation of recorded amounts or ratios and evaluate whether the expectation is
or Financial information sufficiently precise to identify material misstatement.
with anticipated results and relevant non- 4 Determine the amount of any difference of recorded amounts from expected values that is
of the entity financial information.
acceptable without further investigation.
or
Auditor’s expectations 5 Investigating Results of Analytical Procedures
or If auditor identified fluctuations or relationships that are inconsistent with other relevant information
Similar industry or differ from expected values by a significant amount, the auditor shall investigate such differences by:
information. (a) Inquiring of management; and
(b) Performing other audit procedures as necessary in the circumstances.

SA – 530 (Revised) “AUDIT SAMPLING”
Meaning & Types of Audit Sampling Sampling risk Auditor’s Duties
Application of audit procedures to < Risk that auditor’s conclusion based on a sample may be different from 1 Sample design, size and selection of items
100 % of items within a population. the conclusion if the entire population were subjected to same audit (i) While designing, consider the purpose of
Types of Sampling procedure. the audit procedure and the
characteristics of the population.
(a) Statistical Sampling: An
(ii) Sample size should be sufficient to
approach to sampling that has the reduce sampling risk to an acceptably
following characteristics: Test of Tests of details Compiled by: low level.
 Random selection of the controls CA. Pankaj Garg (iii) Selection should be in such a way that
sample items; and each sampling unit in the population has
a chance of selection.
 The use of probability
Controls are Material Affects audit 2 Perform audit procedures
theory to evaluate sample
misstatements does effectiveness and is (i) Perform audit procedures, appropriate
results, including more effective
to the purpose, on each item selected.
than they not exist when in more likely to lead to
measurement of sampling (ii) If the audit procedure is not applicable
actually are fact it does. an inappropriate to selected item, perform the procedure
risk.
audit opinion. on a replacement item.
(b) Non Statistical Sampling: A
(iii) If the auditor is unable to apply designed
sampling approach that does not
audit procedures/alternative procedure
have characteristics of random
Controls are Material Affects audit to a selected item, consider that item as
selection and use of probability efficiency as it would a deviation.
less effective misstatement exists
theory is considered non- lead to additional 3 Evaluation of results of audit sampling
than they when in fact it does
statistical sampling. work to establish To determine whether the use of audit
actually are not
that initial sampling has provided a reasonable basis
conclusions were for conclusions about the population that
incorrect. has been tested.

SA – 540 (Revised) “Auditing Accounting Estimates(AE), including Fair Value Accounting Estimates and Related Disclosures”
Objective of Auditor: To obtain SAAE whether (a) AE including Fair Value AE are reasonable; and (b) related disclosures in the F.S. are adequate.
Meaning & Nature of Auditor’s Duties

Compiled by:
Accounting Estimates
CA. Pankaj Garg
 Accounting estimate: Risk Assessment Procedures & Responses to Assessed Risks

“An approximation of a monetary
Related Activities
amount in the absence of a Based on assessed RMM, auditor shall determine:
precise means of measurement”.  Whether management has appropriately applied the applicable FRF.
This term is used for an amount  Whether the methods are appropriate and have been applied consistently.
measured at fair value where 1. Obtain an understating of:
there is estimation uncertainty.  Requirements of applicable FRF
 Estimation Uncertainty:  How management identifies
transactions, events and General Responses to Specific Responses to Significant Estimation
The susceptibility of an
conditions that give rise to need Assessed RMM Uncertainties
accounting estimate & related
for accounting estimates. 1. Determine whether events 1. Evaluate the following:
disclosures to an inherent risk of
 Estimation making process occurring upto date of  How management has considered
precision in its measurement.
adopted by mngt. and data on auditor’s report provide alternative assumptions or outcomes,
 Examples of Accounting Estimates
which they are based. audit evidence regarding  How management has addressed
 Provision for Bad Debt,
Estimation making process AE. estimation uncertainty in making the
 Inventory loss,
 Methods/Model used in making 2. Test how management accounting estimate.
 Warranty Obligations,
Accounting estimates. made the accounting  Whether the significant assumptions
 Depreciation,
 Relevant Controls estimate and the data on used by management are reasonable.
 Provision against carrying
amount of investments, etc.  Use of Management Expert. which it is based.  Management’s intent to carry out
 Examples of Fair Value A.E.  Changes in the methods from 3. Test the operating specific courses of action and its ability
 Share Based Payments, the prior period along with effectiveness of the to do so.
reasons. controls. 2. If in auditor’s judgement, management has
 Assets held for disposal,
 Assessment of effect of 4. Develop a point estimate not adequately addressed the effects of
 Financial Instruments,
estimation uncertainties. or a range to evaluate estimation uncertainty, the auditor shall
 Assets acquired in business
2. Review of outcome of accounting management’s point develop a range with which to evaluate the
combinations
estimates of prior period. estimate. reasonableness of the accounting estimates.

SA 550 “Related Parties” Compiled by: CA. Pankaj Garg
Meaning of Related Party Auditor’s Duties
EITHER Risk Assessment procedures Responses to Assessed Risks

Related party as defined in applicable FRF (AS
18).
OR 1 Understanding the Entity’s RP relationship and Transactions
1 Identification of unidentified /
Where applicable FRF establishes minimal or a. Auditor to inquire management regarding:
undisclosed RP or RP transaction.
no RP requirements: • Identity of entity’s RP, changes from prior period.  Communicate to other members of ET.
a. A person/entity having control/ significant • Nature of relationships between entity and RP.  Request Mngt to identify the
influence, over reporting entity; • Type & purpose of transactions with RP. transactions with the newly identified
b. Entity over which reporting entity has b. Obtain understanding whether mngt has established controls to: RP.
control / significant influence, and
 Identify, account for & disclose RP relationships & transactions.  Inquire reasons for mngt failure to
c. Entity under common control with
 Authorise & approve significant transactions with RP. identify RP or disclose RP relationship
reporting entity, through:
and transactions.
• Common controlling ownership  Authorise & approve significant transactions outside normal course of business.
• Owners who are close family members  Reconsider the risk that other
2 Maintaining Alertness for RP Information when Reviewing unidentified RP or undisclosed RP
• Common key Mngt. Records/Documents transactions may exist.
 Auditor to remain alert when inspecting records w.r.t. info indicating existence of RP  If non disclosure appears intentional,
Auditor’s responsibilities in relation to RP relationships or transactions not previously identified or disclosed. evaluate implications for audit.
 If auditor identifies significant transactions outside entity’s normal course of 2 Identified significant RP Transactions
Obtain an understanding of RP
business, inquire of mngt about (a) Nature of these transactions, and (b) outside Entity’s Normal course of
Relation and Transactions:
Whether RP could be involved. Business.
a. To recognize Fraud Risk factors
General
Possible Sources for identification of RP Information:  Inspect underlying contracts to evaluate

b. To conclude whether F.S. in so far
business rationale.
as they are affected by those 1 Income Tax Returns 7 Shareholder’s Register
 Examine the terms on which
relations and transactions achieve 2 Internal Audit Report 8 Life insurance Polcies transactions takes place.
• true and fair presentation and 3 Contracts with Mngt 9 Statement of conflict of interest  Collect evidences w.r.t. approval and
• not misleading.
4 Contracts outside normal 10 Information supplied to authorisation of transaction.
 Perform audit procedures to  Collect evidences for appropriate
course of business regulatory authorities
Identify, Assess & Respond to RMM. accounting & disclosure in compliance of
5 Contracts re-negotiated 11 Specific Invoices from advisors
Specific (FRF established
accounting & Disclosure
 Evaluate whether Identified RP FRF.

relationships & Transactions have 6 Register of Investments 12
3 Assertions that RP Transactions were
requirements)
been appropriately accounted for & 3 Identifying Fraud risk factors conducted on arm Length price.
disclosed as per FRF.  Collect SAAE w.r.t. mngt assertion of
Domination of mgmt by a single person or small group without compensating
 Obtain WR from Mngt./TCWG w.r.t. Arm’s length transaction.
controls is a fraud risk factor.
 Disclosure to auditor the  Compare transaction prices with the
identity of RP of which they are Indicators of dominant influence:
prices for identical transactions
aware; and  RP has vetoed significant business decisions taken by mgmt or TCWG. prevailing in ordinary course of
 Appropriate accounting &  Significant transactions are referred to RP for final approval. business.
disclosure as per FRF.  No/ little debate among mgmt or TCWG regarding business proposal initiated by RP.  Engage expert to determine market
 Transactions involving the RP are rarely independently reviewed / approved. value.

SA 560 “Subsequent Events”
Meaning – Events occurring between the date of F.S. and the date of Auditor’s Report AND Facts that become known to auditor after the date of Auditor’s report.
Auditor’s Duties Compiled by: CA. Pankaj Garg
Events occurring between the date of F.S. and the date of Auditor’s report Facts that become known to Auditor after date of Auditor’s report
(i) Perform procedures to obtain SAAE that all events which require adjustment / Before issue of F.S. After issue of F.S.
disclosure have been identified. 1. In general Auditor has no obligation. 1. In general Auditor has no
2. However, in case of significant obligation.
(ii) For the purpose of determining nature and timing of procedures, auditor may:
matter 2. However, in case of significant
(a) Obtain the understanding of procedures applied by mngt for identification of matter
 Discuss with Management
significant events.  Discuss with Management
 Determine need to amend F.S.
(b) Inquire the Management as to Occurrence of subsequent events which may  Determine need to amend F.S.
 Inquire how mngt intends to  Inquire how mngt intends to
affect the F.S. address the matter in F.S. address the matter in F.S.
(c) Read the Minutes of Meetings that held after the B/S date. 3. If Mngt. amend the F.S. auditor shall 3. If Mngt. amend the F.S. audior shall
(d) Study the Interim Financial Statements, if any.  Extent procedures to date of new  Carry out procedures on
(iii) If auditor identifies any event which require any adjustment/disclosure, he should report, and amended F.S.
ensure its appropriate treatment in F.S.  provide a new auditor report on  Review the steps taken by mngt
amended F.S. to ensure that recipient of F.S.
(iv) Obtain a WR from the Mngt. that all known events have been appropriately are informed of the situation.
adjusted/disclosed, as the case may be. or
 provide a new auditor report on
 Amend the audit report to amended F.S.
Specific Inquiries to be made from management include an additional date or
1. Whether new commitments, borrowings or guarantees have been entered into. restricted to that amendment  Amend the audit report to
2. Whether sales or acquisitions of assets have occurred or are planned. and include an EOM/OMP. include an additional date
3. Whether there have been increases in capital or issuance of debt instruments. 4. If mngt refuses to amend the F.S. restricted to that amendment
 Modify the report if not yet and include an EOM/OMP.
4. Whether any assets have been appropriated by government or destroyed.
provided to entity. 4. If mngt refuses to amend the F.S.
5. Whether there have been any developments regarding contingencies.
 Notify to mngt and TCWG, that
6. Whether any unusual accounting adjustments have been made.  If report already issued, notify to
the auditor will seek to prevent
7. Whether any events have occurred that will bring into question the appropriateness mngt and TCWG not to issue F.S.
reliance on Auditor’s Report.
of accounting policies used in the F.S.. to third parties.  If mngt/TCWG does not take
8. Whether any events have occurred that are relevant to the measurement of  If mngt still issues F.S., take necessary steps, take
estimates or provisions made in the F.S. appropriate action to prevent appropriate action to prevent
9. Whether any events have occurred that are relevant to the recoverability of assets. reliance on auditor’s report. reliance on auditor’s report.

SA – 570 (Revised) “Going Concern”
Mngt. Responsibilities Auditor’s Duties. Conditions that may cast doubt

about G.C. Assumption
 Asses the entity’s ability To obtain SAAE about the For this purpose auditor is required to A Financial Conditions
to continue as a going appropriateness of mngt use of a) Cover the same period as that used by mngt. 1. Net Liability position.
concern. going concern basis of accounting. 2. Non renewal of borrowings.
b) Consider whether mngt has considered all 3. Withdrawal of Financial
 General purpose F.S. are Support.
relevant information of which auditor is aware.
prepared on a going Determine whether mngt has 4. Adverse Financial Ratios.
concern basis unless already performed a preliminary 5. Inability to pay creditors.
 Request mngt to make its assessment of entity’s
management intends to 6. Substantial Losses.
assessment of entity ability to ability to continue as going concern. 7. Inability to arrange finances.
liquidate the entity or to continue as going concern.
 Evaluate management plans for future. 8. Negative Operating cash flow.
cease operation. 9. Deterioration in value of
 Consider the reliability of cash flow forecast.
 In case F.S. are not Auditor identifies events that cast assets.
prepared on going significant doubt on entity ability  Considering availability of additional facts or 10. Discontinuation of dividend.
concern basis, the fact to continue as going concern. information since the date of mngt assessment. B Operating Conditions
 Requesting WR from Mngt. regarding their plans 1. Management intention to
would need to be
Perform additional procedures liquidate the entity.
appropriately disclosed. for future action and the feasibility of these plans 2. Loss of KMP.
3. Loss of a major market, key
customer, franchise etc.
Use of Going concern Basis of Accounting is Use of Going Concern Mngt. unwilling to make its assessment
4. Labour Difficulties.
appropriate but Material Uncertainty exists
Basis of Accounting is 5. Shortage of Important
Inappropriate Supplies.
Determine whether F.S. makes relevant 6. Emergence of successful
disclosure
competitor.
C Others
Express an Adverse Consider the implications on Auditor’s Report 1. Non compliance of Statutory
Yes No Requirements.
Opinion
2. Pending legal proceedings
Express unmodified opinion & Express
against the entity.
include a separate section Qualified
under heading “Material or 3. Changes in Law or regulation.
Uncertainity Related to Going Adverse Compiled by: CA. Pankaj Garg 4. Uninsured or underinsured
Concern” Opinion assets.

SA 580 “Written Representation”
Meaning and Nature of WR Requirements of SA 580
A written statement by Matters for which WR may be obtained Auditor Responses in different Situations
Management
Management refuses to Reliability of WR is doubtful

provided to auditor
provide WR
(a) Preparation and
presentation of Financial
to confirm certain matters
Statements:  Discuss the matter with  In case of having concerns
Management responsibilities
or
In accordance with applicable management about competence and
to support other audit evidence. FRF.  Re-evaluate the reliability integrity of mngt, determine
 WR recognized as audit evidence (b) Information provided to and integrity of management. their effect in reliability of
as a response to inquiries. 1 Auditor:  Determine possible effect on WR and other audit
 WR do not provide SAAE as agreed in terms of the opinion. evidence in general.
 WR should be in the form of a engagement  Issue disclaimer of opinion.  IF WR inconsistent with
representation letter addressed (c) Description of management other evidences, perform
to Auditor. Responsibilities: additional procedures.
 WR shall be obtained for all In the manner as described in  If conclude that WR is not
Compiled by:
financial statements and terms of engagement reliable, determine possible
period(s) referred in Auditor’s As required by other SA CA. Pankaj Garg
effect on audit opinion.
Report. Or  In case of sufficient doubt
Others
 Date of WR shall be as near as 2 Where auditor determines that it over integrity of

practicable to the date of the is necessary to obtain one or more management, issue a
Auditor’s report. WR. disclaimer of opinion.

SA – 600 “Using the Work of Another Auditor”
Applicability: In situation where an auditor (principal auditor - PA), reporting on the financial information of an entity, uses the work of another auditor (other auditor - OA)
w.r.t. to the financial information of one/more components (Division, Branch subsidiary, J. V. etc.), included in the financial information of the entity.
Non applicability: (a) Joint auditors (b) Auditor’s relationship with a predecessor auditor.
Principal Auditor’s Procedures Documentation Coordination Reporting
1. Consider the professional competence of Other 1. Components whose FS are 1. Sufficient liaison/co- 1. Express a qualified /
Auditor, if Other Auditor is not a member of ICAI. audited by Other Auditor ordination between Principal disclaimer of opinion
2. Visit component and examine books of account, if and Other auditor. because of scope
and their significance to
essential. limitation:
2. Principal auditor may require
the financial information  If Principal Auditor
3. Obtain sufficient appropriate evidence, that work of Other Auditor to answer a
Other Auditor is adequate for Principal Auditor's of the entity as a whole. concludes that he
detailed questionnaire.
purposes. 2. Names of the other cannot use the work of
3. Other Auditor should
4. Discuss audit procedures applied by Other Auditor. auditors. Other Auditor;
coordinate with Principal
5. Review a written summary of Other Auditor’s 3. Any conclusions reached  PA unable to perform
Auditor:
procedures and findings through sufficient additional
that individual  Adhering to time-table.
questionnaires/checklist. procedures regarding
components are not  Bringing to the attention of
6. Consider significant findings of Other Auditor: FI of the component
material. PA any significant finding.
 Discuss audit findings with OA and Mgt. of audited by OA.
4. Procedures performed  Compliance with relevant
component. 2. Report should state
 Perform supplemental tests if necessary. regarding components. statutory requirements.
clearly division of
7. In case Other Auditor is not a professionally qualified 5. Conclusions reached.  Respond to detailed
responsibility
auditor - for instance, where a component is situated in questionnaire.
6. Manner of dealing with between PA and OA.
foreign country:
Modified Report of Other
 Procedures mentioned above assume added
Auditor while finalising Compiled by: CA. Pankaj Garg
importance.
Principal Auditor’s Report.

SA 610 (Revised) “Using the Work of Internal Auditors”
Meaning & scope of External Auditor’s Procedures w.r.t. Evaluation of Internal Using Direct Assistance (DA) of Internal Auditors (IA)
Internal Audit Function Audit Function

1 Determining whether IA can be used to provide DA
If not prohibited by law or regulation, external auditor may use an
Meaning internal auditor to provide direct assistance if:
Determine Adequacy of Internal Audit Work for
A function of an entity that (a) There are no significant threats to objectivity of internal auditor; &
External Auditor’s Purpose
(b) Internal auditor is sufficiently competent to perform proposed work.
performs assurance & 2 Determining Nature & Extent of Work that can be assigned to IA
by evaluating the following
consulting activities IA shall not be used to provide DA to perform procedures that:
(a) Involve making significant judgments in the audit;
designed to evaluate and  Objectivity of the internal auditors;
Significant judgments include the following:
 Level of competency;
improve the effectiveness  Assessing the risks of material misstatement;
 Application of Systematic & disciplined approach
 Evaluating the sufficiency of tests performed;
of the entity’s governance,  Evaluating appropriateness of management’s use of going
risk management and If Not Satisfactory If Satisfactory concern assumption;
 Evaluating significant accounting estimates; and
internal control processes.  Evaluating the adequacy of disclosures in the F.S., and other
Do not use the work of Determine the Nature and
extent of work of internal audit matters affecting the auditor’s report
Scope of Internal Audit internal Audit function. (b) Relate to higher assessed risks of material misstatement;
function that can be used.
(c) Relate to work with which internal auditors have been involved; or
1 Activities relating to (d) Relate to decisions, external auditor makes in accordance with this SA
governance. Use the work of internal Audit Function w.r.t. internal audit function & use of its work or direct assistance.
2 Activities relating to Risk 3 Using Direct Assistance of Internal Auditor
1. Discuss the planned use of work of internal Auditor.
Management 1. Prior to using internal auditors to provide direct assistance for
2. Read the reports of the internal audit function relating to
3 Activities relating to purposes of the audit, the external auditor shall:
Internal Control
the work of the function that the external auditor plans to (a) Obtain written agreement from entity that the IA will be allowed
 Evaluation of Internal use to obtain an understanding of the nature and extent to follow the external auditor’s instructions, and that the entity
will not intervene in the work the IA performs; and
Control of audit procedures it performed and the related findings.
(b) Obtain written agreement from the IA that they will keep
 Examination of 3. Perform sufficient audit procedures on work of internal confidential specific matters as instructed by the external auditor
Financial and audit function as a whole that external auditor plans to and inform the external auditor of any threat to their objectivity.
operating information 2. The external auditor shall direct, supervise and review the work
use to determine its adequacy for purposes of the audit.
 Review of Operating performed by IA on the engagement in accordance with SA 220.
4. Evaluate whether external auditor’s conclusions 3. The direction, supervision and review by the external auditor of the
Activities
regarding internal audit function and the determination work performed by the IA shall be sufficient in order for the external
 Review of Compliance
auditor to be satisfied that the IA have obtained sufficient appropriate
with Laws and of the nature and extent of use of the work of the function
audit evidence to support the conclusions based on that work.
Regulations for purposes of the audit remain appropriate.

SA 620 “Using the Work of Auditor’s Expert”
Meaning of Auditor’s Expert Procedures to be followed while using the work of auditor’s expert
 An individual or organisation 1 Determining need for an Auditor’s Expert 4 Agreement with Auditor’s Expert
 possessing expertise in field An auditor’s expert may be needed to assist the auditor for the Need to be in writing and cover the followings:
followings:  Nature, scope and Objectives of Auditor’s Expert
other than accounting/auditing,
 Obtaining an understanding of entity & its environment, including IC. work.
 whose work is used by the  Identifying and assessing the risks of material misstatement.  Respective Role and Responsibilities of Auditor
auditor  Determining & implementing overall responses to assessed risks. and auditor’s Expert.
 to assist the auditor in obtaining  Designing and performing further audit procedures to respond to  NTE of Communication including form of report.
SAAE. assessed risks.  Confidentiality requirements to be observed by
 Evaluating the sufficiency and appropriateness of audit evidence Auditor’s Expert.
obtained.
Areas where work of AE can be
2 Evaluate Competence, Capability and Objectivity of the Expert 5 Evaluate appropriateness of Expert work
used
Source of Information for evaluation:  Finding & Conclusion – Relevance,
 Personal Experience with previous work.
Reasonableness & Consistency with other A.E.
 Valuation of complex financial  Discussion with that expert.
 Discussion with other Auditors.
 Assumptions and Methods – Relevance and
instruments, L & B, P & M, jewelry,
 Knowledge of expert’s qualification, memberships, other forms of Reasonableness.
works of art, antiques, intangible
recognitions.  Source Data – Relevance, Completeness and
assets, assets acquired and
 Published books or papers.
liabilities assumed in business accuracy.
 Auditor’s firm Q. C. Policies and Procedures.
combinations and assets that may 3 Obtain an understating of expert work 6 Expert work not adequate for audit purposes
have been impaired.  To enable the auditor to determine the nature, scope and  If Auditor concludes that work of auditor’s expert is
 Actuarial calculation of liabilities objectives of that expert’s work for auditor’s purposes. not adequate for the auditor’s purposes and
associated with insurance contracts  Evaluate the adequacy of that work for the auditor’s  auditor cannot resolve the matter through the
or employee benefit plans. additional audit procedures,
purposes.
 it may be necessary to express a modified opinion.
 Estimation of oil and gas reserves.
 Valuation of environmental
Reference to the Auditor’s Expert in the Auditor’s Report
liabilities, and site clean-up costs.
Compiled by:  No reference required in case of unmodified Audit Report unless required by L & R.
 Interpretation of contracts, laws
and regulations. CA. PANKAJ GARG  In case of modified reports, it may be appropriate to refer to the auditor’s expert, to
 Analysis of complex or unusual tax explain the nature of the modification. In such case, auditor may need the permission of
compliance issues.
the auditor’s expert before making such a reference.

Sa 720 (Revised) - The Auditor’s Responsibility in relation to Other Information in Documents containing Audited F.S.
Purpose: Auditor is not required to express an opinion on other information in documents containing audited F.S. (Ex. Annual Report), however, auditor reads the other
information because credibility of F.S. may be undermined by Material inconsistencies between the audited financial statements and other information.
Auditor’s Procedures:
Make appropriate arrangements with Mngt & TCWG to obtain the other information prior to the date of auditor report & Read the
information so obtained. If Information is not available prior to date of auditors report, read the other information as soon as practicable.
Mate rial Inco n siste nci es id en tified in Ot her i nfor m ati on Mate rial Misst ate m ent o f F act s fi n d o ut .
Mis st ate men t o f Fac t s : Ot her
infor m ati on t h at is unrel ated to m atter s
ap pe ari ng in a udite d F .S . th at is
Prior to the Date of auditor’s Report Subsequent to the Date of auditor’s Report
corre ctly s tate d /pre sente d.
Rev is ion o f Rev is ion o f Rev is ion o f aud ited Revis ion o f
Discuss the matter with Management
au dit ed F . S. other F.S . b eco m es othe r
beco me s infor m ati on is nec e ssa ry infor matio n
Request management to consult with a qualified
nec e ssa ry b ut nec e ssa ry b ut is n ec essar y
third party and auditor shall consider the advice
Mn gt. ref u ses Mn gt. ref u ses bu t
The received.
ma na geme nt
Aud it or ref us es.
Aud it or sh all c om m uni ca te
shall Aud it or co ncl u des e xiste nce o f m at erial
this m att er to TC W G; an d
follow t he mi sst ate m ent o f f act s, b ut m an ag e m ent
relev ant refus es t o corre ct.
Auditor shall requi rem e

incl u de in the with dra w
modify nts o f S A
audi t or’s from the
opinion in 5 60
repo r t
eng a ge me nt
accordance desc r ibing the
Aud it or s h all n otify his c once rn t o those c har ged with
with relevant inco n sisten cies
gove rna n ce a n d t a k e th e ap pr opri a te ac tion .
SA. or

SA 800 – “Special Considerations – Audit of F.S. prepared in accordance with SPF”
Scope of SA 800: SA 800 deals with Special considerations in application of SAs in audit of F.S. (Complete set) prepared in accordance with SPF.
Objective of Auditor: to address appropriately special considerations w.r.t. (a) Engagement Acceptance (b) Planning & performance (c) Opinion & Reporting.
Meaning & Nature of Compiled by: Auditor’s Considerations

Special Purpose CA. Pankaj Garg
Framework (SPF)
Engagement Acceptance Planning & Performing an Audit Engagement Forming an Opinion
& Reporting
Meaning of SPF 1. Determine acceptability of FRF as per SA 210. 1. Determine whether application of SAs requires special
FRF designed to meet 2. Obtain understanding of: consideration in the circumstances of engagement. For example, in Apply requirements of
financial information  Purpose for which FS are prepared. SA 320, judgments about matters that are material need to be based SA 700 (Revised).
need of specific users.  Intended users on a consideration of financial information needs of intended users. Auditor’s Report to
Nature of SPF  Steps taken by Mngt. to determine 2. Auditor is required to consider the following: include:
acceptability of applicable FRF.  Requirement of SA 200 on applicability of SAs and absence of (a) Purpose for
It may be Fair
3. Consider financial information needs of users in conditions requiring applicability of an SA. which F.S. are
presentation or
determining acceptability of FRF.  Requirement of SA 315 regarding understanding of selection & prepared &
Compliance.
application of accounting policies. In case accounts are prepared Intended users.
Examples of SPF 4. Applicable FRF may encompass financial
on the basis of provisions of a contract, auditor is required to (b) Mngt.
 Cash receipts and reporting standards established by an
obtain understanding of significant interpretations of contract. responsibility
disbursements basis organization that is authorized to promulgate
3. In the case of SPFS prepared in accordance with the requirements of w.r.t. F.S. and
of accounting standards for SPFS.
a contract, mngt. may agree with the intended users on a threshold selection of FRF.
 Financial reporting 5. In case any conflict exists in between financial
below which misstatements identified during the audit will not be (c) EOM Para to alert
provisions established reporting standards and legislative
corrected. The existence of such a threshold does not relieve the users w.r.t.
by a regulator to meet requirements, auditor need to take action as
auditor from the requirement to determine materiality in allocation of
the requirements of prescribed in SA 210.
accordance with SA 320. Special purpose
that regulator. 6. In case FRF encompass financial reporting
4. In the case of SPFS, TCWG may not have a responsibility of F.S. and as such
provisions of a contract, acceptability of FRF is
 Financial reporting overseeing the preparation of F.S. prepared as per requirements of F.S. may not be
determined by considering whether framework
provisions of a SPF. In such cases, requirements of SA 260 may not be relevant to suitable for
exhibits attributes normally exhibited by the audit of the SPFS.
contract. another purpose.
acceptable FRF as described in SA 210.

SA 805 “Special Considerations – Audits of Single F.S. and Specific Elements, Accounts or Items of a F.S.”
Scope of SA 805: SA 805 deals with Special considerations in application of SAs in audit of Single F.S. or Single Element/Account or Item of F.S.
Objective of Auditor: to address appropriately special considerations w.r.t. (a) Engagement Acceptance (b) Planning & performance (c) Opinion & Reporting.
Compiled by: Auditor’s Considerations

Single Financial
Statement/ Element of CA. Pankaj Garg
Audited F.S.
Engagement Acceptance Planning & Performing an Audit Engagement Forming an Opinion & Reporting
Meaning of Element
Element means an element,
Application of SA (a) Adapt all SAs as necessary in the audit of SFS:  Apply SA 700, as necessary.
account or item of a F.S.
 SA 200 requires compliance with all SAs relevant (b) Careful consideration of relevance of each SA is  If also engaged to report on full
Single financial statement FS, issue separate reports.
to audit. necessary. SAs such as SA 240, SA 550 and SA 570 are,
(for example, a CFS) or a in principle, relevant. This is because the element could  If audited SFS published with
 This applies to audit of Single F.S. even if the audited full FS, presentation of SFS
specific element of a F.S. (for be misstated as a result of fraud, the effect of related
auditor also audits the complete F.S. should be differentiated from full FS.
example, cash and bank party transactions, or the incorrect application of the  Do not issue audit report on SFS
 If auditor not also engaged to audit the complete
balances) includes the FS, consider the practicability of audit of Single going concern assumption under the applicable FRF. until satisfied with
related notes. (c) SAs are written in the context of an audit of F.S.; they differentiation.
F.S./Specific Element in accordance with SAs.
Examples of Elements are to be adapted as necessary in the circumstances Modified Opinion/EMP/OMP
Acceptability of FRF
when applied to the audit of a single F.S. or a specific Para on Full FS
 Accounts receivable, 1. Determine the acceptability of the FRF applied in (a) Determine effect on Single F.S.
the preparation of Single F.S. element. For example, WR from mngt. about the
 Allowance for doubtful (b) If appropriate, modify opinion
complete set of F.S. would be replaced by WR about
accounts receivable, 2. Determine whether application of FRF will result on SFS/include EMP, OMP.
single F.S. or element in accordance with the applicable (c) If necessary to issue adverse/
 Inventory, in presentation that provides adequate
disclosures to enable users to understand FRF. disclaimer opinion on full FS,
 Schedule of externally (d) When auditing Single F.S. in conjunction with Full F.S., unmodified opinion on SFS
information conveyed in Single FS or element.
managed assets audit evidence obtained as part of audit of full F.S. may cannot be expressed.
Form of Opinion
 Schedule of net tangible be useful but auditor needs to plan & perform audit of (d) However for separate audit of
 Expected form of opinion depends upon specific element, an
assets Single F.S. to obtain SAAE.
applicable FRF & applicable L&R. unmodified opinion can be
 Schedule of disbursement (e) Some items from Complete FS may be interrelated with
 SA 210 requires that agreed terms of engagement expressed if:
in relation to a lease element of F.S., auditor need to perform procedures on
include the expected form of report to be issued.  Not prohibited by L& R;
property, interrelated items.  AR on element is not
 Consider whether expected form of opinion is
(f) Materialities determined for a Single F.S. or for a published together with AR
 Schedule of profit appropriate in the circumstances.
specific element may be lower that materiality for full on full FS; &
participation or employee  Auditor’s decision as to the expected form of
F.S., this will affects NTE of audit procedures and the  Element does not constitute
bonuses. opinion is a matter of professional judgment. a major portion of full F.S.
evaluation of uncorrected misstatements.

SA 810 “Engagements to Report on Summary Financial Statements (SFS)”
 Scope of SA 810: deals with auditor’s responsibilities, when engaged to report, on SFS, derived from FS audited in accordance with SA, by that same auditor.
 Objective of Auditor: to determine appropriateness of accepting the engagement & form opinion based on evaluation of Conclusions drawn from evidence obtained.
 Meaning of Summary Financial Statements (SFS): Historical financial info that is derived from FS, but contains less detail than FS, while still providing a structured
representation consistent with that provided by entity’s F.S.
Engagement Acceptance Nature of Procedures Form of Opinion
(a) Accept engagement only when also 1 EVALUATE Unmodified opinion shall be expressed on Summary F.S. if
engaged to audit, those F.S., from which SFS (a) Whether SFS adequately disclose
have been derived. their summarised nature & identify SFS are consistent, in all material respects, with audited FS, in
(b) Before accepting Engagement, auditor audited FS. accordance with applied criteria.
shall: (b) If SFS are not accompanied by Special Considerations
1. Determine acceptability of applied audited FS, whether they clearly Qualified 1. State that audit report on FS contains qualified
criteria. describe from whom or where
2. Obtain agreement of mngt that Opinion/EO opinion/EOM/OM para AND
audited FS are available; M/OM Para 2. Describe:
acknowledges & understands its
(c) Whether SFS adequately disclose in Report on • Basis for qualified opinion on audited FS, and
responsibilities:
the applied criteria. Audited FS that qualified opinion; or EOM/OM para; and
• For preparation of SFS in accordance
(d) Whether SFS are prepared in • Effect thereof on SFS, if any.
with applied criteria;
accordance with applied criteria. Adverse Report on SFS is required to include the following:
• To make audited FS available to
(e) Whether SFS contain necessary Opinion/ 1. Statement that audit report contains
intended users of SFS without undue
difficulty; and info & are appropriately Disclaimer of adverse/disclaimer of opinion;
• To include auditor’s report on SFS in aggregated. Opinion on 2. Description of basis of such opinion; and
any document that contains SFS and (f) Whether audited F.S. are available Audited FS 3. Statement that as a result of adverse/disclaimer of
that indicates that auditor has to intended users without undue opinion it is inappropriate to express an opinion on
reported on them. difficulty. SFS.
(c) Agree with the management the form of 2 COMPARE Modified Express adverse opinion
opinion to be expressed on the SFS. SFS with related information in Opinion on
(d) Do not accept engagement if: audited F.S. to determine whether SFS SFS if SFS are not consistent in all material respects with
• Criteria are not acceptable; or agree with or can be re-calculated or are not a fair summary of audited FS in accordance
• unable to obtain management from related information in audited with applied criteria.
agreement. F.S.

Standards On Auditing Charts PDF

Uploaded by

Copyright:

Available Formats

Standards On Auditing Charts PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Standards On Auditing Charts PDF

Uploaded by

Copyright:

Available Formats

Chapter 1 “Quality Control and Engagement Standards”

Leadership Ethical Independence Client Human Resources Engagement Monitoring

Compiled by: CA. Pankaj Garg Page 1

Aspects to be considered by Auditor while performing Audit

Compiled by: CA. Pankaj Garg Page 2

Agreeing the terms of audit Engagement

At the Beginning of Audit During the Course of Audit

Compiled by: CA. Pankaj Garg Page 3

Leadership Ethical Independence Acceptance / Continuance Assignment of Engagement Performance Monitoring

Compiled by: CA. Pankaj Garg Page 4

Compiled by: CA. Pankaj Garg Page 5

Fraud Risk Factors / Management Duties Auditor’s Responsibilities

Compiled by: CA. Pankaj Garg Page 6

Basic Responsibilities Specific Auditor Indicators considered by

Compiled by: CA. Pankaj Garg Page 7

Meaning of Auditor’s Responsibilities Communication Process Factors affecting Mode of

1. Significant delay in providing info  Expectations of TCWG,

Compiled by: CA. Pankaj Garg Page 8

Meaning of deficiency Auditor’s Responsibilities

Determine whether individually or To TCWG To Mngt. (a) Description of deficiencies

Compiled by: CA. Pankaj Garg Page 9

Division of work Co-ordination Responsibilities of Joint Auditors Reporting

By Mutual discussion If one auditor comes  Generally – a Single Report

Compiled by: CA. Pankaj Garg Page 10

Importance of Planning Preliminary Engagement Activities Planning Activities

Compiled by: CA. Pankaj Garg Page 11

Compiled by: CA. Pankaj Garg Page 12

Concept of Materiality Performance Materiality Auditor’s Duties

the economic decision of users.

Compiled by: CA. Pankaj Garg Page 13

Tests of Controls Substantive Procedures

Evaluate the audit evidences

Special Considerations as 2. Ability or Willingness of intended confirming part to

Compiled by: CA. Pankaj Garg Page 14

Auditor’s Objective Obtaining understanding of services Auditor’s considerations

Compiled by: CA. Pankaj Garg Page 15

Meaning and Causes of Auditor’s Procedures if Misstatements identified

amounts, classification, presentation

disclosure that is required for the item

In arriving at the conclusion 3. External Confirmations

Inventory – Litigation & Claims – Completeness

 Evaluate mngt. instructions &

Compiled by: CA. Pankaj Garg Page 19

Audit Procedures Audit Conclusion & Reporting

Opening Balance Consistency of Modification in Opening Balance Consistency of Modification in

Period F.S. communicate to Mngt & disclosure for RMM in Current

TCWG. changes. period F.S. Compiled by: CA. Pankaj Garg

Compiled by: CA. Pankaj Garg Page 20

Meaning and Nature of Analytical Procedures Auditor’s Procedures

Compiled by: CA. Pankaj Garg Page 21

Meaning & Types of Audit Sampling Sampling risk Auditor’s Duties

Compiled by: CA. Pankaj Garg Page 22

Meaning & Nature of Auditor’s Duties

 Accounting estimate: Risk Assessment Procedures & Responses to Assessed Risks

Compiled by: CA. Pankaj Garg Page 23

Meaning of Related Party Auditor’s Duties

EITHER Risk Assessment procedures Responses to Assessed Risks

Possible Sources for identification of RP Information:  Inspect underlying contracts to evaluate

 Evaluate whether Identified RP FRF.