Refresher : Standards on Auditingicaiclt.org/public/files/15127153832.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 7 M P Vijay Kumar FCA S.No Reference Title of the standard

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Refresher:StandardsonAuditing

MPVijayKumar FCA

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INSURANCE !!

Theviewsexpressedarethoseofthepresenterand,therefore,donotnecessarilyrepresenttheviewsofeithertheCounciloranyCommittee(s)/Board(s)oftheCounciloftheInstituteofCharteredAccountantsofIndia(ICAI).

• Theslidedeckshouldbeunderstoodincontextofthespeakerpresentation

• E&OE

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AuditingStandards

• Standards on Quality Control (SQCs)

• Engagement Standards -• Standards on Auditing (SA)• Standards on Review Engagements (SREs)§ Standards on Assurance Engagements(SAEs)§ Standards on Related Services (SRSs)

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Context

• Now, SA is LAW - notified under Companies Act, 2013

• Rotation of Auditors

• Certification on IFC

• Fraud reporting – direct to Govt

• Disciplinary mechanism increased effectiveness; Code of Ethics ( R)

• Peer Review / FRRB /QRB

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Context

• Audit Opinion –High impact on all stakeholders

• Technology – sample to population

• Applicable to every Audit including Tax audit, bank branch audit

• Changing requirements; SBN reporting, Significant impact onDeferred tax due to ICDS

• Business getting complex; AS becoming too technical andjudgement oriented; lack of adequate staff in auditee

• Unreasonably high expectations from Auditors

• C&AG report (2014) on Tax Audit - ineffectiveness

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AuditingStandards

• Engagement Standards - These are classified into followingcategories

• 100 – 999 Standards on Auditing (SAs)• 100 – 199: Introductory Matters• 200 - 299: General Principles & Responsibilities• 300 – 499: Risk Assessment & Response to Assessed Risks• 500 – 599: Audit Evidence• 600 – 699: Using Work of Others• 700 – 799: Audit Conclusions & Reporting• 800 – 899: Specialised Areas

§ 2000 – 2699: Standards on Review Engagements (SREs)§ 3000 – 3699: Standards on Assurance Engagements(SAEs)§ 4000 – 4699: Standards on Related Services (SRSs)

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S.No Reference Titleofthestandard Effectivedate

1 SQC1QualityControlforFirmsthatperformauditandreviewsofHistoricalFinancialInformation,andotherAssuranceandrelatedServiceEngagements

1stApril2009

2 SA200 OverallObjectivesoftheIndependentAuditorandtheConductofanAuditinAccordancewithStandardsonAuditing 1stApril2010

3 SA210 AgreeingtheTermsofAuditEngagement 1stApril2010

4 SA220 QualityControlforanAuditofFinancialStatements 1stApril2010

5 SA230 AuditDocumentation 1stApril2009

6 SA240 TheAuditor'sResponsibilitiesRelatingtoFraudinanAuditofFinancialStatements 1stApril2009

7 SA250 ConsiderationofLawsandRegulationsinAnAuditofFinancialStatements 1stApril2009

8 SA260(R) CommunicationwithThoseChargedwithGovernance 1stApril2017

9 SA265 CommunicatingDeficienciesinInternalControltoThoseChargedwithGovernanceandManagement 1stApril2010

10 SA299 ResponsibilityofJointAuditors 1stApril1996

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11 SA300 PlanninganAuditofFinancialStatements 1stApril2008

12 SA315IdentifyingandAssessingtheRisksofMaterialMisstatementsthroughUnderstandingtheEntityanditsEnvironment

1stApril2008

13 SA320 MaterialityinPlanningandPerforminganAudit 1stApril2010

14 SA330 TheAuditor'sResponsetoAssessedRisks 1stApril2008

15 SA402 AuditConsiderationsRelatingtoEntitiesUsingServiceOrganisations 1stApril2010

16 SA450 EvaluationofMisstatementsidentifiedDuringtheAudit 1stApril2010

17 SA500 AuditEvidence 1stApril2009

18 SA501 AuditEvidence—SpecificConsiderationsforSelectedItems 1stApril2010

19 SA505 ExternalConfirmations 1stApril2010

20 SA510 InitialAuditEngagements– OpeningBalances 1stApril2010

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21 SA520 AnalyticalProcedures 1stApril2010

22 SA530 AuditSampling 1stApril2009

23 SA540 AuditingAccountingEstimates,IncludingFairValueAccountingEstimatesandRelatedDisclosures 1stApril2009

24 SA550 RelatedParties 1stApril2010

25 SA560 SubsequentEvents 1stApril2009

26 SA570(R) GoingConcern 1stApril2017

27 SA580 WrittenRepresentations 1stApril2009

28 SA600 UsingtheWorkofAnotherAuditor 1stApril2002

29 SA610(R) UsingtheWorkofInternalAuditors 1stApril2016

30 SA620 UsingtheWorkofanAuditor’sExpert 1stApril2010

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31 SA700(R) ForminganOpinionandReportingonFinancialStatements

1stApril2011/18

32 SA701 CommunicatingKeyAuditMattersintheIndependentAuditor’sReport 1stApril2018

33 SA705(R) ModificationstotheOpinionintheIndependentAuditor'sReport

1stApril2011/18

34 SA706(R) EmphasisofMatterParagraphsandOtherMatterParagraphsintheIndependentAuditor'sReport

1stApril2011/18

35 SA710 ComparativeInformation- CorrespondingfiguresandComparativefinancialstatements 1stApril2011

36 SA720TheAuditor’sResponsibilityinRelationtoOtherInformationinDocumentsContainingAuditedFinancialStatements

1stApril2010

37 SA800 SpecialConsiderations-AuditsofFinancialStatementsPreparedinAccordancewithSpecialPurposeFramework 1stApril2011

38 SA805SpecialConsiderations-AuditsofSinglePurposeFinancialStatementsandSpecificElements,AccountsorItemsofaFinancialStatement

1stApril2011

39 SA810 EngagementstoReportonSummaryFinancialStatements 1stApril2011

40 SRE2400(R) EngagementstoReviewHistoricalFinancialStatements 1stApril2016

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39 SA810 EngagementstoReportonSummaryFinancialStatements 1stApril2011

40 SRE2400(R) EngagementstoReviewHistoricalFinancialStatements 1stApril2016

41 SRE2410 ReviewofInterimFinancialInformationPerformedbytheIndependentAuditoroftheEntity 1stApril2010

42 SAE3400 TheExaminationofProspectiveFinancialInformation 1stApril2007

43 SAE3402 AssuranceReportsonControlsAtaServiceOrganization 1stApril2011

44 SA3420 AssuranceEngagementstoReportontheCompilationofProFormaFinancialInformationIncludedinaProspectus 1stApril2016

45 SRS4400 EngagementstoPerformAgreed-uponProceduresRegardingFinancialInformation 1stApril2004

46 SRS4410(R) CompilationsEngagements 1stApril2016

GeneralClarificationsissued

47 GeneralClarifications(GC)- AASB/2/2004onSA210

48 GeneralClarifications(GC)- AASB/1/2004onSA620

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200-299:GeneralPrinciplesandResponsibilities(9)• SA200(Revised)“OverallObjectivesoftheIndependentAuditorandtheConductofanAuditinAccordancewithStandardsonAuditing”

• SA210(Revised),“AgreeingtheTermsofAuditEngagements”

• SA220(Revised),“QualityControlforanAuditofFinancialStatements”

• SA230(Revised)“AuditDocumentation”

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200-299:GeneralPrinciplesandResponsibilities

• SA240(Revised)“TheAuditor’sResponsibilitiesRelatingtoFraudinanAuditofFinancialStatements”

• SA250(Revised)“ConsiderationofLawsandRegulationsinanAuditofFinancialStatements”

• SA260(Revised)“CommunicationwithThoseChargedwithGovernance”

• SA265“CommunicatingDeficienciesinInternalControltoThoseChargedWithGovernanceandManagement”

• SA299(AAS12),“ResponsibilityofJointAuditors”

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300-499:RiskAssessmentandResponsetoAssessedRisks(6)

• SA300(Revised),“PlanninganAuditofFinancialStatements”•

• SA315,“IdentifyingandAssessingtheRisksofMaterialMisstatementthroughUnderstandingtheEntityandItsEnvironment”

• SA320(Revised),“MaterialityinPlanningandPerforminganAudit”

• SA330“TheAuditor’sResponsestoAssessedRisks”

• SA402(Revised)“AuditConsiderationsRelatingtoanEntityUsingaServiceOrganisation”

• SA450,“EvaluationofMisstatementsIdentifiedDuringtheAudit”

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500-599AuditEvidence(11)

• SA500(Revised)“AuditEvidence”

• SA501(Revised)“AuditEvidence—SpecificConsiderationsforSelectedItems”

• SA505(Revised)“ExternalConfirmations”

• SA510(Revised)“InitialAuditEngagements– OpeningBalances”

• SA520(Revised),“AnalyticalProcedures”

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500-599AuditEvidence

• SA530(Revised),“AuditSampling”

• SA540(Revised)“AuditingAccountingEstimates,IncludingFairValueAccountingEstimates,andRelatedDisclosures”

• SA550(Revised)“RelatedParties”

• SA560(Revised)“SubsequentEvents”

• SA570(Revised)“GoingConcern”

• SA580(Revised),”WrittenRepresentations”

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600-699:Usingworkofothers(3)• SA600(AAS10),“UsingtheWorkofAnotherAuditor”

• SA610(Revised)“UsingTheWorkofInternalAuditors”

• SA620(Revised)“UsingtheWorkofanAuditor’sExpert”

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700-799:AuditConclusionsandReporting(6)• SA700(Revised),ForminganOpinionandReportingonFinancialStatements

• SA701, CommunicatingKeyAuditMattersintheIndependentAuditor’sReport

• SA705,ModificationstotheOpinionintheIndependentAuditor’sReport

• SA706“EmphasisofMatterParagraphsandOtherMatterParagraphsintheIndependentAuditor’sReport”

• SA710(Revised)“ComparativeInformation—CorrespondingFiguresandComparativeFinancialStatements”

• SA720“TheAuditor’sResponsibilityinRelationtoOtherInformationinDocumentsContainingAuditedFinancialStatements”

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800-899:Specialpurpose(3)

• SA800“AuditsofFinancialStatementsPreparedinAccordancewithSpecialPurposeFrameworks”

• SA805“SpecialConsiderations—AuditsofSingleFinancialStatementsandSpecificElements,AccountsorItemsofaFinancialStatement”

• SA810“EngagementstoReportonSummaryFinancialStatements”

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2000-2699:StandardsonReviewEngagements(2)

• SRE2400(Revised),EngagementstoReviewHistoricalFinancialStatements

• SRE2410“ReviewofInterimFinancialInformationPerformedbytheIndependentAuditoroftheEntity”

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3000:3699:StandardsonAssuranceEngagements(3)• 3000-3399ApplicabletoAllAssuranceEngagements• 3400-3699SubjectSpecificStandards

• SAE3400(AAS35),“TheExaminationofProspectiveFinancialInformation”

• SAE3402,“AssuranceReportsonControlsataServiceOrganisation”

• SAE3420,AssuranceEngagementstoReportontheCompilationofProformaFinancialInformationIncludedinaProspectus

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4000-4699:StandardsonRelatedServices(2)• SRS4400(AAS32),“EngagementstoPerformAgreed-uponProceduresRegardingFinancialInformation”

• SRS4410(Revised),CompilationEngagements

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SQC(1)

• SQC1,“QualityControlforFirmsthatPerformAuditandReviewsofHistoricalFinancialInformation,andotherAssuranceandRelatedServicesEngagements”

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MAJOR DIFFERECNES INEngagement & Quality Control Standards issued by ICAI and Standards issued by IAASB

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SA- ICAIStandardsvis-à-visISA-IAASBstandards

S.No. Standardissuedby

ICAI

Whetheranydifferencevis avisStandardissuedby

IAASB


ICAI

Whetheranydifferencevis avisStandardissuedby

IAASB


ICAI

WhetheranydifferencevisavisStandardissuedby

IAASB1. SQC1 ü 15. SA450 ü 30. SA705 ü

2. SA200 ü 16. SA500 X 31. SA706 X3. SA210 ü 17. SA501 X 32. SA710 ü

4. SA220 ü 18. SA505 X 33. SA720 ü

5. SA230 ü 19. SA510 ü 34. SA800 ü

6. SA240 ü 20. SA520 X 35. SA805 ü

7. SA250 ü 21. SA530 X 36. SA810 ü

8. SA260 X 22. SA540 ü 37. SRE2400(Revised)

X

9. SA265 ü 23. SA550 ü 38. SRE2410 ü

10. SA300 X 24. SA560 ü 39. SAE3400 ü

11. SA315 ü 25. SA570 ü 40. SAE3402 X12. SA320 ü 26. SA580 ü 41. SAE3420 ü

13. SA330 ü 27. SA610 X 42. SRS4400 X14. SA402 ü 28. SA620 X 43. SRS4410

(Revised)ü

29. SA700 ü44 SA701 ü

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StandardwiseDifferences

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SQC 1 - Material Modifications to ISQC 1

• Definitions in Para 6 modified as per Indian Context.

• In Para 83 period of retention of Engagement Documentation changed to 7 years against5 years in ISQC 1.

• In Para 27, exemption given from mandatory requirement of rotation of engagementpartner in case audit of listed entities is done by sole practitioner as it is not possible toapply the provision in such cases. However, SQC 1 provides for peer review of those firmsin order to mitigate familiarity threat.

SA 200 - Modifications vis-à-vis ISA 200

• Paragraphs in ISA regarding “Considerations Specific to Public Sector Entities” modified.

SA 210 - Material Modifications to ISA 210

• Examples of financial reporting standards changed as per Indian context

• Para A10 of ISA 210 deals with situations where entity operates in a jurisdiction nothaving a standard setting organization or a prescribed financial reporting framework.Since in India, this kind of situation does not exist, para A10 deleted.

• Paragraphs in ISA regarding “Considerations Specific to Public Sector Entities” modified.

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SA 220 - Modifications vis-à-vis ISA 220• Paragraphs in ISA regarding “Considerations Specific to Public Sector Entities”modified.

SA 230 - Material Modifications to ISA 230• Period of retention of Engagement Documentation changed to 7 years against 5years in ISA 230

• An additional para A25 added from SQC 1, giving provisions regarding Ownershipof Audit Documentation.

SA 240 - Material Modifications to ISA 240• Paragraphs in ISA regarding “Considerations Specific to Public Sector Entities”modified.


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SA260- MaterialModificationstoISA260• Nil

SA265- MaterialModificationstoISA265• Para A7 of ISA 265 provides examples of indicators of significant deficiencies ininternal control which may include restatement of previously issued financialstatements. Since in India, AS 5 does not permit the restatement. Hence,requirement of restatement of prior period items replaced by requirement todisclose those items in current year’s Statement of Profit & Loss.

• Paragraph in ISA regarding “Considerations Specific to Public Sector Entities”modified.

SA300- ModificationstoISA300• Nil

SA315- MaterialModificationstoISA315• Paragraphs in ISA regarding “Considerations Specific to Public Sector Entities”modified.

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SA 402 - Material Modifications to ISA 402• In para 13(a) of SA 402, exemption has been given from assessment ofprofessional competence of service auditor where he is ICAI member.


SA 450 - Material Modifications to ISA 450• Paragraph in ISA regarding “Considerations Specific to Public Sector Entities”modified.

SA500- MaterialModificationsvis avis ISA500• Nil

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SA501- Modificationsvis-a-vis ISA501• Nil


SA510- MaterialModificationsvis-a-vis ISA510• In Para 6(a), requirement of restatement of prior period items replaced byrequirement to disclose those items in current year’s Statement of Profit & Loss toalign it with AS 5.

• In Paragraph 6(c)(i), the requirement of reviewing the predecessor auditor’sworking papers replaced by requirement of perusing the copies of the auditedfinancial statements including the other relevant documents relating to the priorperiod financial statements to align it with CA Act.

• Para A2 of ISA 510 dealt with outsourcing of an audit of a public sector entity bythe statutorily appointed auditor to a private sector audit firm. Since in Indiancontext such situation does not exist, para A2 deleted completely.

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SA530- MaterialModificationsvis avis ISA530• Nil

SA540- MaterialModificationsvis avis ISA540• ParagraphinISAregarding“ConsiderationsSpecifictoPublicSectorEntities”modified.

SA550- MaterialModificationsvis avis ISA550• In para A48, point added that a written representation may be obtained byauditor regarding management’s assertion of responsibility that related partytransactions were conducted on terms equivalent to those prevailing in an arm’slength transaction.


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SA560- MaterialModificationstoISA560• ParagraphsinISAregarding“ConsiderationsSpecifictoPublicSectorEntities”modified.

SA570- MaterialModificationstoISA570• InPara3,responsibilitiesofmanagementtomakeanassessmentoftheentity’sabilitytocontinueasagoingconcernhavebeenmademorecountryspecific.

• ParagraphsinISAregarding“ConsiderationsSpecifictoPublicSectorEntities”modified.

SA580- MaterialModificationstoISA580• ParagraphsinISAregarding“ConsiderationsSpecifictoPublicSectorEntities”modified.

RevisedSA610- Modificationsvis-a-vis RevisedISA610• Nil

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SA 620 - Modifications vis-a-vis ISA 620• Nil

SA 700 - Material Modifications vis-a-vis ISA 700• Examples of financial reporting standards changed as per Indian context• Requirement to mention auditor’s address replaced by Place of Signature• Requirement to mention F.R.N. and M.N. added• Para A36 – ‘Signature of the Auditor’ changed as per Indian context

SA 705 - Material Modifications vis-a-vis ISA 705• Para 17 and A18 of ISA 705 requires auditor to include in basis for modificationpara, a description and quantification of financial effect of the misstatement.Since the said paragraph covers only the effect of the individual quantification ofthe misstatement, the paragraph A18 has been changed also to include the effectof the aggregate quantifications of the misstatements on the financialstatements.

SA 706 - Modifications vis-à-vis ISA 706• Nil

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SA 710 - Material Modifications vis-a-vis ISA 710• Paragraphs 9 and 12 of ISA 710 deal with restatement of prior period financialstatements. Since AS 5 does not permit restatement, it has been replaced withrequirement to disclose prior period items in current year’s Statement of P& L.Corresponding changes also made at relevant places of SA 710.

• Para 17 of ISA 710 deals with situation wherein the predecessor auditor reissueshis audit report. Since in India, nomenclature, “Reissue” is not used for re-issuance of the audit report, it replaced with the word, “Revised”.Corresponding changes also made at relevant places SA 710.

SA 720 - Material Modifications vis a vis ISA 720• Option given in Para 10 of ISA 720 to withhold the auditor’s report deleted sincethis practice is not in vogue in India

• Para A2 of ISA 720 provides examples of other information including‘employment data’ and ‘names of officers and directors’. Reference to these twospecific examples deleted so that the auditor can focus on more relevantaspects of other information.

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SA 800 - Modifications vis-a-vis ISA 800• Para A1 of ISA 800 dealing with examples of special purpose frameworks, alsoincludes “a tax basis of accounting for a set of financial statements thataccompany an entity’s tax return”. This example deleted in SA 800.

SA 805 - Modifications vis-a-vis ISA 805• Examples of financial reporting standards changed as per Indian context

SA 810 - Material Modifications vis-a-vis ISA 810• Para 5 of ISA 810 requires auditor to accept an engagement to report on SFSonly when he has been engaged to conduct an audit of the FS from which theSFS are derived. In India, in some cases, the auditor may be required by a law ora regulation governing the entity to report on SFS even for such accountingperiods for which he was not auditor of FS. Accordingly, the word “ordinarily”has been added in Para 5 of SA 810 to cover these situations.

• Requirement to mention auditor’s address replaced by Place of Signature• Requirement to mention F.R.N. and M.N. added

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RevisedSRE2400- MaterialModificationsvis-à-vis RevisedISRE2400• Nil

SRE2410- MaterialModificationsvis-a-vis ISRE2410• Requirement of mentioning “the location in the country orjurisdiction where the auditor practices” replaced by “place ofsignature” in the auditor’s report.

• Procedures in ISRE 2410 also include the review of thepredecessor auditor’s documentation for preceding annualaudit, and for any prior interim periods in the current year thathave been reviewed by the predecessor auditor. In SRE 2410,these replaced by requirement of perusing the copies of theaudited financial statements including the other relevantdocuments relating to the prior period financial statements toalign with CA Act.

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SAE3400- Modificationsvis-à-vis ISAE3400(a) SAE precludes the auditor from expressing positive assurance regarding the assumptions as it

may tantamount to vouching for the accuracy of the forecast/projection/hypotheticalassumptions. Whereas, the ISAE 3400 permits the auditor to express positive assurance when inhis judgment an appropriate level of satisfaction has been obtained.

(b) The sub points in paragraph 17 (corresponding to paragraph 17 of the ISAE 3400) have beenrearranged. Sub point (e) has been elucidated for the sake of better understanding of thereaders. The sub points (f) and (g) have been added in the SAE as additional factors to beconsidered by the auditor.

(c) In paragraph 20 of the SAE, the phrase “although evidence supporting hypothetical assumptionsneed not be obtained” has been deleted since it is felt that such a phrase is inconsistent with thenecessity for the auditor to obtain evidence to support his conclusions.

(d) In paragraph 26 (corresponding to paragraph 26 of the ISAE 3400), the term “professionalstandards” has been changed to “professional pronouncements” since pronouncements wouldinclude standards as well as other relevant documents, such as Guidance Notes,announcement(s), issued by the ICAI.

(e) In line with requirement of SA 700, “The Auditor’s Report on Financial Statements” this SAErequires the auditor to include a scope section in the examination report to explain the natureand extent of the auditor’s work. ISAE 3400 does not contain an equivalent requirement.

(f) SAE specifically provides for the documentation required to be done by the auditor in regard toany engagement of examination of prospective financial information. However, ISAE 3400 doesnot contain such explicit provision.

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SAE 3402 - Modifications vis-à-vis ISAE 3402• Nil

SAE 3420 - Modifications vis-à-vis ISAE 3420• Option given in Para 32 of ISAE 3420 to withhold the report deleted sincethis practice is not in vogue in India

SRS 4400 - Modifications vis-à-vis ISRS 4400• NIL

Revised SRS 4410 - Material Modifications vis-à-vis Revised ISRS 4410• Following bullet point added in para 24(e):

• Design, implementation and maintenance of such internal control as managementdetermines is necessary to enable the preparation of financial statements that arefree from material misstatement, whether due to fraud or error.

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SA200OverallObjectivesoftheIndependentAuditor&ConductofanAuditinAccordancewithSAs

EffectiveforAuditsoffinancialstatementsforperiodsbeginningonorafterApril1,2010

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Overview• Introduction

• Scope• Anauditoffinancialstatements(FS)• Effectivedate

• OverallObjectivesoftheAuditor• Definitions• Requirements&Application

• EthicalrequirementsRelatingtoAuditofFS• Professionalskepticism• Professionaljudgment• SufficientandAppropriateAuditEvidence(SAAE)• ConductofanAuditinAccordancewithSAs

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Scope• Establishesindependentauditor’soverallresponsibilitieswhenconductinganauditofFS

• Overallobjectiveofauditor• Nature&scopeofauditdesignedtomeetthoseobjectives

• ExplainsScope,authority&structureofSAs• SetsoutGeneralresponsibilitiesoftheauditor• ObligationtocomplywithSAs

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AnAuditofFinancialStatements• AuditenhancesdegreeofconfidenceinFS• ExpressionofopiniononpreparationofFSinaccordancewithapplicableFRF

• Doesnotensure:• futureviabilityofentity• efficiency&effectivenessofmanagement

• SAsdonot• imposeresponsibilitiesonmanagement/TCWG• overrideL&R

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ReasonableAssurance• SAsrequireauditortoobtainreasonableassurance.

• ObtainSAAEtoreduceauditrisktoanacceptablylowlevel.

• Absoluteassurancenot possiblebecauseofinherentlimitationsofaudit

• Materialitytobeappliedatplanningaswellasperformance

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OverallObjectiveoftheAuditor

• ObtainreasonableassurancewhetherFSasawholearefreefrommaterialmisstatementwhetherduetofraud/error

• ReportonFSandcommunicateasrequiredbySAs

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ConductofAuditinAccordancewithSAs

• ComplywithallSAsrelevanttoaudit• SAisrelevantwhen

• thatSAisineffect&• circumstancesaddressedbySAexist

• HaveanunderstandingoftheentiretextofSA

• Do not represent compliance with SAs inaudit report unless auditor complies withSA 200 & other SAs relevant to audit

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SA210AgreeingtheTermsofAuditEngagements


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OverviewofSA210• Introduction

• Scope• EffectiveDate

• Objective• Definitions• Requirements

• PreconditionsforanAudit• AgreementonAuditEngagementTerms• RecurringAudits• Acceptance of a Change in the Terms of the Audit Engagement• Additional considerations in Engagement Acceptance

• Application and Other Explanatory Material on these aspects• Appendices

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Scope

• DealswithAuditor’sresponsibilitiesinagreeingthe termsofauditengagement(ToAE) withmgt &TCWG

• Includesestablishingthatpreconditionsforauditarepresent.

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Auditor’sObjectiveAccept/ContinueAuditEngagementonlywhen

Basisonwhichengagementistobeperformedhasbeenagreed

Establish Confirm

Existenceofpreconditionsforaudit

CommonunderstandingofToAEbetweenauditor,

mgt&TCWG

AND

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PreconditionsforAudit

Determine Obtain

AcceptabilityofFRF Mgtagreementthatitunderstandsitsresponsibility

PreparationofFSinaccordancewithapplicableFRF

InternalControlsnecessarytoprepareFSfreeofmaterialmisstatement

Allrelevantinfo&unrestrictedaccesstoauditor

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AgreementonAuditEngagementTerms

• AgreetheToAE withMGT/TCWG.

• AgreedToAE shallinclude:• Objective&scopeofauditofFS.• Auditor’sresponsibilities.• Management’sresponsibilities.• IdentificationofapplicableFRF.• Expectedform&contentofreport.• A statement that these may undergo change due to circumstances.

• If L & R prescribe ToAE in details:• Written Engagement Letter may not be necessary for above.

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AcceptanceofChangeinTermsDonotagreetochangeifnoreasonablejustificationforit.

• IfToAE arechanged:• AuditorandMGTshallagreeonnewterms,and• recordnewtermsinengagementletterorothersuitableformofwrittenagreement.

• IfunabletoagreewithchangedToAE ANDnotpermittedbyMGTtocontinue:

• WithdrawifpermittedunderL&R;and• DetermineneedtoreporttootherpartiessuchasTCWG/regulators/owners

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SA220QualityControlFor

AnAuditofFinancialStatements


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• Scope• Effectivedate

• Objective• Definitions• Requirements&Application

• Leadershipresponsibilitiesforqualityonaudits• Relevantethicalrequirements• Acceptance&continuanceofclientrelationship&auditengagements

• Assignmentofengagementteams• Engagementperformance• Monitoring• Documentation

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Scope

• Dealswith:• SpecificresponsibilitiesoftheauditorregardingQualityControl(QC)proceduresforanauditofFS

• ResponsibilitiesofengagementQCreviewer

• Shouldbereadinconjunctionwithrelevantethicalrequirements

• PresumesthatfirmissubjecttoSQC1

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QCSystem&RoleofEngagementTeam

• ResponsibilityofAuditFirm• ImplementQCsystemthatprovidesreasonableassurance:

• Firm&itspersonnelcomplywithprofessionalstandards&regulatory&legalrequirements

• Reportsissuedbyfirm/engagementpartnersareappropriateinthecircumstances

• ResponsibilityofEngagementTeam• ImplementapplicableQCprocedures

• Providefirmwithrelevantinfowrt QCsystemrelatingtoIndependence

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RelyonFirmQC

EngagementTeamentitledtorelyonfirm’sQCunlessinformationprovidedbyfirmorotherpartiessuggestsotherwise:

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Auditor’sObjectiveImplementQCprocedures

AtEngagementLevel

ThatprovideReasonableAssurance

Auditcomplieswithprofessionalstandards&legalrequirements

Auditreportissuedisappropriateinthecircumstances&

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SA230AuditDocumentation

EffectiveforauditsoffinancialstatementsforperiodsbeginningonorafterApril1,2009

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• Objective

• Definitions

• Requirements• TimelyPreparationofAuditDocumentation• DocumentationoftheAuditProceduresPerformedandAuditEvidenceObtained

• AssemblyoftheFinalAuditFile

• ApplicationandOtherExplanatoryMaterial

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Scope

Scope

Tobeadaptedtoauditsofotherhistoricalfininfo

DealswithAuditor’sresponsibilitytoprepareauditdoxforanauditofFS

SpecificdoxrequirementsofotherSAsdonotlimitapplicationofthisSA

L&Rmayestablishadditionalrequirements

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Objective

Sufficient&

Appropriaterecordofbasisforauditor’sreport

Evidencethatauditwasplannedandperformed

inaccordancewithSAs&L&R

Preparedocumentationthatprovides

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AssemblyofFinalAuditFile• Timely basis after date of audit report

• Set policy in terms of SQC 1• Within 60 days (SQC 1)

• Changes permitted:• Deleting/ discarding superseded dox.• Sorting, collating, cross referencing working papers• Signing off on completion checklists re file assembly• Documentation of discussion with engagement team beforedate of audit report

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• Nodeletion/discardingpermittedafterfinalassemblyexceptforexampletoclarifyexistingdoxarisingfrominternal/externalinspections

• Documentspecificreasonsformakingthem

• When&bywhommade/reviewed

• Retentionperiod–7years fromdateofauditreport

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OwnershipofDocumentation• UnlessotherwisespecifiedbyLorR,auditdocumentationisthepropertyoftheAuditor.

• Mayathisdiscretion,makeportionsof,orextractsfrom,auditdocumentationavailabletoclients,provided:

• suchdisclosuredoesnotunderminethevalidityoftheworkperformed,or,

• inthecaseofassuranceengagements,doesnotunderminetheindependenceofauditor/hispersonnel.

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SA240TheAuditor’sResponsibilityRelatingtoFraud

inanAuditofFinancialStatements

Effectiveforauditsoffinancialstatementsforperiodsbeginningonorafter1stApril,2009

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• Objectives• Definitions• Requirements

• Professionalskepticism• DiscussionamongtheEngagementTeam• Riskassessmentproceduresandrelatedactivities• IdentificationandAssessmentofRisksofmaterialmisstatementduetofraud• ResponsestotheAssessedRisksofmaterialmisstatementduetofraud• Evaluationofauditevidence• Auditorunabletocontinuetheengagement• ManagementRepresentations• Communicationwiththosechargedwithgovernanceandmanagement• CommunicationstoRegulatoryandEnforcementauthorities• Documentation

• ApplicationandOtherExplanatoryMaterialontheseaspects• Appendices

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Scope

• Dealswithauditor’sresponsibilitiesrelatingtofraudinauditoffinancialstatements

• ExpandsonhowSA315andSA330,aretobeappliedinrelationtorisksofmaterialmisstatementduetofraud.

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ResponsibilityforFraudPrevention&Detection

1. Thosechargedwithgovernance• Oversightofmanagementpolicies• Considerpotentialformanagementoverrideofcontrols• Considerpotentialformanagement’sinappropriateinfluenceonfinancialreporting

2. Management• Establishproperpolicies• Emphasisonethicsandhonesty

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ResponsibilityofAuditor

• Obtainreasonableassurancethatfinancialstatementsarefreeofmaterialmisstatements.

• Subjectto:• Inherentlimitationsofaudit

• Fraud– deliberatelyconcealed,sodifficulttodetect

• ButexerciseProfessionalSkepticism.

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Auditor’sObjectives

1. Identifyandassessriskofmaterialmisstatementsduetofraud

2. ObtainSAAEaboutassessedrisks

3. Respondappropriatelytoidentified/suspectedfraud

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ProfessionalSkepticism• Requiresongoingquestioningof:

• Whetherinfo.&auditevidenceobtainedsuggestpossibilityofmaterialmisstatementduetofraud.

• Donottakeclientintegrityandhonestyforgranted

• Documentsmaybeacceptedasgenuineifnocontraryindications,butwhenindoubt,may:

• Confirmdirectlywith3rdparty

• Engageexperttoassessauthenticity

• Investigate-responsetoinquiriesisinconsistent

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SA250ConsiderationofLawsandRegulationsinanAuditofFinancialStatements


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• Objectives• Definition• Requirements

• TheAuditor’sconsiderationofcompliancewithLawandRegulation(L&R)

• Auditprocedureswhennon-complianceisidentifiedorsuspected• Reportingofidentifiedorsuspectednoncompliance• Documentation


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Scope• Dealswithauditor’sresponsibility:

• toconsiderL&RwhenperformingauditofFS.

• Doesnotapplyto:• assuranceengagementswheretesting&reportingoncompliancewithL&Risthespecificobjective.

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WhatisNonCompliance?

• Actsofomissionorcommission

• eitherintentionalorunintentional• whicharecontrarytotheprevailingLorR

• Doesnotincludepersonalmisconduct(unrelatedtobusinessactivitiesofentity)byTCWG,Mgt.,employeesoftheentity.

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MGT.ResponsibilityforCompliancewithL&R• MGTresponsible

• UnderoversightofTCWG

• PoliciesandProcedures:• Monitorlegalrequirements• Ensureeffectivenessofoperatingprocedures• Instituting/OperatingappropriatesystemsofInternalcontrols• Developing/publicising/following/monitoringofCodeofconduct• Employeetraining• Engagelegaladvisors• MaintainregisterofsignificantL&R&recordofcomplaints

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Auditor’sResponsibility• Auditor responsible for obtaining reasonable assurance that FS takenas a whole are free from Material Misstatement, whether by fraudor error

• SA assists auditor in identifying material misstatements in FS due tonon-compliance

• Auditor is not, responsible for preventing non compliance andcannot be expected to detect non- compliance with all L & R

• Factors increasing the risk of not detecting the non- compliance:• Inherent limitations of audit• Some L&R relate to operations, no impact on FS and are not captured by entity’s

information system• Deliberate concealment of non compliance, e.g., collusion, forgery• Non compliance - Ultimate determination is a matter of court of law.`

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Responsibilityw.r.t.differenttypesofL&R

TypesofL&R

ObtainSAAEregcompliance

Undertakespecifiedprocedurestohelp

identifynon-compliancethatmayimpactFS

Exerciseprofessionalskepticism

A BDirecteffectonmaterialamounts&disclosuresinFS

Fundamentalimpactonoperations&GoingConcern

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SA260CommunicationwithThoseChargedwith

Governance


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• Scope• Effective Date


• Those Charged with Governance• Matters to be Communicated• The Communication Process• Documentation

• Application and Other Explanatory Material

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Deals with Auditor’s responsibility to

communicate with TCWG in an audit of FS

Provides a framework

for auditor’s Communication

with TCWG,and identifies some specific

matters to be communicated

may also be applicable to audits of other

historical financial information

This SA does not preclude the auditor fromcommunicating any other matters to TCWG

Scope

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CommunicateclearlywithTCWGresponsibilitiesofauditorandplannedscopeandtimingofaudit

ProvideTCWGwithtimelyobservations–significantandrelevantinoverseeingfinalreportingprocess

ObtainfromTCWGinformationrelevanttoaudit

Promoteeffectivetwo-waycommunicationbetweenauditorandTCWG

Auditor’s Objectives

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MatterstobeCommunicated

Auditor’sresp inrelationtoFSaudit

PlannedScopeandtimingof

audit

Significantfindings

fromtheaudit

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Documentation• Matterscommunicatedorally:

• documentmatters;and

• alsowhenandtowhommatterwerecommunicated.

• MattersCommunicatedinwriting:• retainacopyofthecommunication.

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SA265CommunicatingDeficienciesinInternalControltoThoseChargedwithGovernance&Management


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• Objective• Definitions• Requirements• Application&OtherExplanatoryMaterial

• Determination of whether Deficiencies in Internal Controlhave been identified

• Significant Deficiencies in Internal Control• Communication of Deficiencies in Internal Control

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Scope• Dealswithauditor’sresponsibilityto:

• Communicate appropriately with TCWG/ MGT Deficiencies in ICIdentified by auditor in audit

• Doesnotimposeadditionalresponsibilitywrt:• ObtaininganunderstandingofInternalcontrolsand• Designing & performing Tests of Controls over and above thatrequired by SA 315 & SA 330

• Does not override SA 260.

• Specifies which deficiencies need to be communicated toTCWG/Mgt.

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Auditor’sObjective

• CommunicateappropriatelytoTCWG&Mgt:

• DeficienciesinICidentifiedduringaudit,and

• Thatinhisprofessionaljudgmentaresufficientlyimportanttomerittheirattentions.

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Definitions

Deficiency in IC

Control designed/ implemented/ operated in a way

Fails to prevent/ detect & correct misstatements in FS on timely basis

Control necessary to prevent/ detect & correct misstatement in FS on timely basis

Is missing

OR

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MainRequirements• Determinewhetherdeficiency(s)inICidentified.

• IfdeficienciesinICidentified,determine:• whetherindividually/incombinationtheyconstitutesignificantdeficiencies.

• communicateinwritingsignificantdeficienciesinICidentifiedtoTCWGonatimelybasis.

• communicatetoMGTatappropriatelevelonatimelybasis:

• Inwriting,significantdeficienciesinIC.• OtherdeficienciesinIC.

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SA299ResponsibilityofJointAuditors

EffectiveforallauditsrelatingtoaccountingperiodsbeginningonorafterApril1,1996

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ScopeoDealswithauditor’sprofessionalresponsibilitiesasjointauditors.

oDoesnotcoversituationscoveredunderSA600.

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DivisionofWork• Bymutualdiscussion:

• Usuallyintermsofauditofidentifiableunits/specifiedareas.

• Wheresuchdivisionnotpossible– intermsofassets/liabilities/income/expenditure,etc.

• Criticalareascoveredbyallauditors.

• Documentthedivision&communicatetoclient.

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RelationshipamongJointAuditors• EachJointAuditorresponsibleonlyforworkallocated,whetherornotseparatereportthereforismade.

• EachJointAuditorjointlyandseverallyresponsiblefor:• undividedwork.

• nature,timing,extentofauditprocedures.

• compliancewithdisclosurerequirements.

• auditreportcompliancewithstatuterequirements.

• matterbroughttonoticeofallbyanyoneofthem,andonwhichthereisanagreement.

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Reporting• Normally,jointauditorsareabletoarriveatanagreedreport.

• Ifdisagreement,then:• eachoneofthemshouldexpresshisopinionthroughaseparatereport.

• ajointauditorisnot boundbymajorityviewregardingmatterstobecoveredinthereportandshouldexpresshisopinioninaseparatereport.

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SA300PlanninganAuditofFinancialStatements


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• Objective• Requirements

• Involvement of Key Engagement Team Member• Preliminary Engagement Activities• Planning Activities• Documentation• Additional Considerations in Initial Audit

Engagements• ApplicationandOtherExplanatoryMaterialontheseAspects

• Appendix

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Scope&ObjectiveSCOPE• DealswithAuditor’sresponsibilitytoplanauditofFS.• Itisframedinthecontextofrecurringaudits.• Additionalconsiderationsidentifiedforinitialauditengagements.

Auditor’sObjectivePlananauditsothatengagementisperformedinaneffectivemanner.

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Requirements1. InvolveKeyEngagementTeamMembersinplanning

2. PreliminaryEngagementActivities• PerformproceduresrequiredbySA220reg.Clientacceptance,etc.

• Evaluatecompliancewithethicalrequirementsincludingindependence.

• EstablishunderstandingoftermsofengagementasperSA210

3. PlanningActivities• Establishoverallauditstrategy

• Developanauditplan

• Updateandchangeoverallauditstrategyandauditplanasnecessary

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Documentation• Overallauditstrategy:

• Necessary for proper planning & communicating significant matters to audit team.

• Auditplan:• Record of proper planning & review of audit

procedures for approval before use.

• Significantchangestooverallauditstrategy/auditplanandreasonsforchanges:

• Reflects appropriate response to these changes.

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AdditionalConsiderationsinInitialAuditEngagements

• Before starting initial audit engagement:• Perform procedures required under revised SA 220 – client

acceptance, etc.• Communicating with predecessor auditor.

• Additional matters to consider in Audit Strategy andAudit Plan:

• Any major issues discussed with management.• Audit procedures necessary regarding opening balances.• Other procedures required by firm’s QC system.

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SA315IdentifyingandAssessingtheRiskofMaterial

MisstatementsthroughUnderstandingtheEntity&ItsEnvironment


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• Risk Assessment Procedures and Related Activities• The Required Understanding of the Entity and Its Environment, includingInternal Control

• Identifying and Assessing the Risks of Material Misstatement• Material Weakness in Internal Control• Documentation

• Application and other Explanatory Material on these Aspects• Appendices

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Scope• Auditor’sresponsibilitytoidentify&assessrisksofmaterialmisstatementsinfinancialstatements.

• Throughunderstanding:• theentity.

• itsenvironment.

• itsinternalcontrols.

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Objective– oftheAuditor

Identify&assessriskofmaterialmisstatements

Understandtheentity

Financialstatement&Assertionlevel

Design&implementresponsestoassessedrisk

Entity’senvironment

Entity’sinternalcontrols

Fraud Error

Reducerisktoacceptablylowlevel

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RiskAssessmentProcedures(RAP)– Need

RAPEstablishframeworkofreferencefor:• AssessingriskofmaterialmisstatementsinFS.• Establishingandassessingcontinuedrelevanceofestablishedmaterialitylevels.

• Evaluatingappropriatenessofaccountingpolicies-selection&application,disclosures.

• Identifyingareasneedingspecialauditconsideration.• Developingexpectationswrt AnalyticalProcedures.• Respondingtoassessedriskofmaterialmisstatements.• Evaluatingsufficiency&appropriatenessofauditevidence.

However,RAPbythemselves,donotprovideSAAEonwhichtobasetheauditopinion

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RAPs– Types

Information from discussion among engagement team

Information from previous engagements & other audits

– significant changes that have occurred

Informationfromclientacceptanceorcontinuanceprocess

Informationfromotherengagementsdonefortheentity

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5ComponentsofInternalControl1. ControlEnvironment

2. Entity’sRiskAssessmentProcess

3. InformationSystemandCommunication

4. ControlActivitiesrelevanttoAudit

5. MonitoringofControls

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SA320MaterialityinPlanning&PerforminganAudit


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• Scope• MaterialityintheContextofanAudit• EffectiveDate

• Objective• Definition• Requirements

• DeterminingMaterialityandPerformanceMaterialitywhenPlanningtheAudit

• RevisionastheAuditProgresses• Documentation

• ApplicationandOtherExplanatoryMaterialontheseaspects

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SCOPE

ThisSADealswith

SA450Explains

Auditor’sresponsibility

ToApplytheconceptofmateriality

Inplanning&performingauditofFS

Applicationofmateriality

Identifiedmisstatements

onaudit

Evaluatingeffectof

Uncorrectedmisstatements

onFS

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MaterialityintheContextofanAudit

• FinancialReportingFrameworksoftendiscuss“materiality”incontextofpreparation&presentationofFSe.g.

• Misstatementsarematerialifinaggregate/individuallymayinfluenceeconomicdecisionsofusers.

• Auditor’sdeterminationofmaterialityisamatterofprofessionaljudgement

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• Conceptofmaterialityisappliedbytheauditorin:

• planningandperformingaudit,• evaluatingeffectofidentifiedmisstatementsonauditandofuncorrectedmisstatements,ifany,onFSand

• formingtheopinionintheauditor’sreport.

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DocumentationDocumentationRequirements

• MaterialityfortheFSasawhole.

• Ifapplicable,thematerialitylevelorlevelsforparticularclassesoftransactions,accountbalancesordisclosures

• Performancemateriality.

• Anyrevisionofaboveduringaudit

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SA330TheAuditor’sResponsestoAssessedRisks


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• Overall responses• Audit Procedures Responsive to the Assessed Risk of

material Misstatement at the Assertion level• Adequacy of Presentation & disclosures• Evaluating the sufficiency & appropriateness of audit

evidence• Documentation

• Application&OtherExplanatoryMaterialontheseAspects

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Scope&ObjectiveSCOPE• DealswithAuditor’sresponsibilityto:

• design & implement responses to risk of material misstatements identified & assessed in accordance with SA 315.

AUDITOR’SOBJECTIVE• ObtainSAAEabouttheassessedriskofmaterialmisstatement:

• through designing & implementing appropriate responses to risks.

120 MPVijayKumarFCA

Definitions• SubstantiveProcedures

• AuditProceduresdesignedtodetectmaterialmisstatementsatassertionlevel.Theseinclude:

• Testsofdetails– classesoftransactions/accountbalances/disclosures

• Substantive/analyticalprocedures

• TestsofControls• AuditProcedureforevaluatingoperatingeffectivenessofcontrolsinpreventing/detecting&correctingmaterialmisstatementatassertionlevel

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OverallResponses• Auditorrequiredtodesign&implementoverallresponses toaddressriskofmaterialmisstatementatFinancialStatementlevel.

• Theseinclude:• Emphasizingonprofessionalskepticism• Assigningmoreexperienced/skilledstafforexperts• Moresupervision• Incorporateunpredictabilityinauditprocedures• Generalchangestonature,timing&extentofauditprocedures

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SA402AuditConsiderationsRelatingtoanEntityUsinga

ServiceOrganisation


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• Objectives

• Definitions

• Requirements• Obtaining an Understanding of the Services provided by a ServiceOrganisation, including Internal Control

• Responding to the Assessed Risks of Material Misstatement• Type 1 and Type 2 Reports that Exclude the Services of a Sub-serviceOrganisation

• Fraud, Non-Compliance with Laws and Regulations and UncorrectedMisstatements in Relation to Activities at the Service Organisation

• Reporting by the User Auditor

• Application & Other Explanatory Material on these aspects

124 MPVijayKumarFCA

Scope• DealswithAuditor’sResponsibilitytoobtainSAAE

• whenclientusesservicesofoneormoreServiceOrganizations(SO).

• ItexpandsonhowtoapplySA315&SA330insuchsituations

• Natureandextentofworktobeperformedbyuserauditordependson:

• nature&significanceofthoseservicestouserentityand• relevanceofthoseservicestotheaudit.

125 MPVijayKumarFCA

Auditor’sObjectivesObtain Design & Perform

Understanding of services of SO

Nature &significance

Effect on Internal controls relevant to audit

Risk Responsive Audit procedures

Sufficient to identify & assess

Risk of Material

Misstatements

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ReportingbyUserAuditor• Modifiedopinionif:

• UnabletoobtainSAAEregardingservicesofSOrelevanttoauditofuserentity’sFS

• DonotrefertoworkofserviceauditorinunmodifiedauditorreportunlessrequiredbyL&R

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SA450EvaluationofMisstatementsIdentified

DuringtheAudit


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• AccumulationofIdentifiedMisstatements• ConsiderationofIdentifiedMisstatementsastheAuditProgresses• Communication&CorrectionofMisstatements• EvaluatingtheEffectofUncorrectedMisstatements• WrittenRepresentation• Documentation


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Scope• Dealswithauditor’sresponsibilitytoevaluateeffectof:

• Identifiedmisstatementsonauditand

• Uncorrectedmisstatement(ifany)onFS

• Auditor’sopinionasperSA700influencedby:• evaluationofimpactofuncorrectedmisstatementsonFSasperSA320.

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Evaluate:

• Effectofidentifiedmisstatementsonaudit AND

• Effectofuncorrectedmisstatements(ifany)onFS

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DefinitionsMisstatementDifferencebetweenamount,classification,presentation,disclosuresofreportedFSitemvis-à-vis:

• requirementsofFRF• includesadjustmentsasarenecessary,inauditor’sjudgment,toprovideTrue&Fairview

• canarisefromfraud/error

UncorrectedMisstatements• Misstatementsaccumulatedbyauditorduringtheauditand• thathavenotbeencorrected.

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MainRequirements• AccumulationofIdentifiedMisstatements

• auditorneedtoaccumulatemisstatementsidentifiedduringtheaudit,otherthanthosethatareclearlytrivial

• CommunicationandCorrectionofMisstatements• auditorneedtocommunicateonatimelybasisallmisstatementsaccumulatedduringauditwithappropriatelevelofmgt.unlessprohibitedbylaworregulation.

• auditorshallrequestmgt.tocorrectthosemisstatements

• EvaluatingeffectofUncorrectedMisstatements• auditorshalldeterminewhetheruncorrectedmisstatementsarematerial,individuallyorinaggregate.

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SA500AuditEvidence


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• Sufficient Appropriate Audit Evidence (SAAE)• Information to be used as audit evidence• Selecting items for testing to obtain audit evidence• Inconsistency/doubts over reliability of audit evidence

• Application and Other explanatory Material on theseAspects

135 MPVijayKumarFCA

Scope

Explainswhatis Dealswith

AuditEvidencewrt auditofFS

Auditor’sResponsibility

ToDesign&PerformauditprocedurestoobtainSAAE

Drawreasonableconclusionstobaseauditopinion

SA500isapplicabletoallAuditEvidence

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ObjectiveoftheAuditor

• Design&performauditprocedures:• insuchawaythat• enablehimtoobtainSAAE

• tobeabletodrawreasonableconclusions• onwhichtobasetheauditor’sopinion

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ProceduresforObtainingAuditEvidenceInspection

Observation

Confirmation

Re-calculationRe-performance

AnalyticalProcedures

Inquiry

Inquiry alone, ordinarily, does not provide SAAE

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Inconsistency/Doubts

• Ifauditevidenceobtainedfromonesourceisinconsistentwiththatobtainedfromanother;

OR

• auditorhasdoubtsoverreliabilityofinformationtobeusedasauditevidence

Then• auditorshalldeterminewhatmodified/additionalauditproceduresarenecessarytoresolvethematter

AND

• shallconsidereffectofthematter,ifany,onotheraspectsoftheaudit.

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SA501AuditEvidence– SpecificConsiderations

forSelectedItems


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• ScopeofthisSA

• EffectiveDate

• Objective

• Requirements&Application• Inventory

• Litigation&Claims

• SegmentInformation

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Scope

• DealswithspecificconsiderationsbyauditorinobtainingSAAEw.r.t.certainaspectsof:

• Inventory• Litigation&claims• Segmentinformation

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Inventory Litigation&Claims

SegmentInfo

Existence&

ConditionCompleteness

Presentation&disclosureinaccordancewithFRF

ObtainSAAE

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Inventory

Auditor’sProcedures

Attendanceatphysicalinventorycounting

Auditinventoryrecords

Evaluatemgtinstructions&proceduresforrecording

&controllingresults

Observeperformanceofmgtprocedures

InspectinventoryPerformtestcounts

Recordsaccuratelyreflectactualinventorycountresults

AND

144 MPVijayKumarFCA

Litigation&Claims

• Inquiry– ofmanagement&otherswithintheentity

• Review– minutesofmeetingsofTCWG,communicationbetweenentity&externallegalcounsel

• Review– legalexpensesaccount

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SegmentinformationObtainSAAErepresentation&disclosureofsegmentinfoinaccordancewithapplicableFRF:• Obtainunderstandingofmethodsusedbymgt indeterminingsegmentinfo

• EvaluatingwhethersuchmethodsarelikelytoresultindisclosureinaccordancewithapplicableFRF;and

• Whereappropriate,testingapplicationofsuchmethods

• Performinganalyticalproceduresorotherauditproceduresappropriateinthecircumstances

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SA505ExternalConfirmations


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• Scope• External Confirmation Procedures to Obtain AE

• Objective• Definitions• Requirements & Applications

• External Confirmation Procedures• Mgt refusal to allow auditor to send confirmation request• Results of external confirmation procedures• Negative confirmations• Evaluating audit evidence

148 MPVijayKumarFCA

Scope• Dealswithauditor’suseofexternalconfirmationprocedures(ECP)toobtainAuditEvidenceinaccordancewithSA330&SA500

• Doesnotcoverinquirieswrt litigations&claims.

• ImportanceofECPasauditevidencerecognizedinotherSAse.g.SA330,SA240,SA500

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• WhenusingECPs,

• Istodesign&performsuchprocedurestoobtainrelevant&reliableauditevidence

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ExternalConfirmationProcedures

Maintain control over EC Requests including:

1 Determining info to be requested/ confirmed

2 Selecting appropriateconfirming party

3 Designing confirmation requests

4 Sending requests including follow-up requests to confirming party

151 MPVijayKumarFCA

SA510InitialAuditEngagements-OpeningBalances


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• AuditProcedures• AuditConclusionsandReporting


• Appendix:IllustrationsofAuditors’Report

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Scope&ObjectiveSCOPE• Deals with auditor’s responsibility relating to openingbalances (OB):

• when conducting Initial Audit Engagement

OBJECTIVE§ Obtain SAAE in respect of OB about whether:

- OB contain material misstatements affecting current period FSand

- Appropriate accounting policies have been consistently appliedOR changes have been properly accounted for and adequatelypresented & disclosed in FS.

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Definitions• InitialAuditEngagement– AnengagementinwhichPriorPeriodFS

• Notaudited;or• Auditedbyapredecessorauditor.

• OpeningBalances– AccountingBalancesexistingatthebeginning

• Closingbalancesofpriorperiod– Reflecttheeffectofpriorperiodtransactionsandevents,andaccountingpoliciesapplied

• Disclosureofaccountsi.e.,contingencyandcommitments

• Predecessorauditor– Theauditorfromdifferentauditfirm

• AuditedFSinthepriorperiod• Replacedbycurrentauditor.

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AuditConclusionsandReportingQualifiedorDisclaimer

• UnabletoobtainSAAEwrt OB.

QualifiedorAdverse

• OBcontainmisstatements:• ThatmateriallyaffectcurrentFS,and

• Effectnotproperlyaccountedforordisclosed.

• Accountingpoliciesnotconsistentlyapplied.

• Accountingpolicieschanges notproperlyaccountedordisclosed.

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SA520ANALYTICALPROCEDURES


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• Objectives• Definition• Requirements&Application

• Substantiveanalyticalprocedures• Analyticalproceduresthatassistwhenforminganoverallconclusion

• Investigatingresultsofanalyticalprocedures

• Appendix

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Scope• Dealswithauditor’suseofanalyticalprocedures(AP)as:

• substantiveanalyticalprocedures(SAPs)AND

• proceduresneartheendofaudittohelpinforminganoverallconclusiononFS

• SA315dealswithuseofAPsasriskassessmentprocedures

• SA330includesrequirements&guidancewrt nature,timing,extentofauditprocedures(includingAP)inresponsetoassessedrisks

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OBTAIN DESIGN&PERFORM

Relevant&reliableauditevidencewhenusingSAPs

APsneartheendofauditwhenformingoverallconclusionwhetherFSareconsistentwithauditor’sunderstandingoftheentity

160 MPVijayKumarFCA

MAINREQUIREMENTSSubstantiveAnalyticalProcedures• WhendesigningandperformingSAPs,auditorshall:

• DeterminesuitabilityofparticularSAPs• Evaluatereliabilityofdata• Developexpectationofrecordedamounts/ratios• Determineamountofanydifferenceofrecordedamountsvsexpectedvalues

APsthatAssistWhenForminganOverallConclusion• auditorshalldesignandperformAPsnearendofauditthatassisttheauditorwhenforminganoverallconclusionasto

• whethertheFSareconsistentwithauditor’sunderstandingofentity.

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SA530AUDITSAMPLING


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• SampleDesign,SizeandSelectionofItemsforTesting• PerformingAuditProcedures• NatureandCauseofDeviationsandMisstatements• ProjectingMisstatements• EvaluatingResultsofAuditSampling

• ApplicationandOtherExplanatoryMaterial• Appendices

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Scope• SAApplieswhenauditorhasdecidedtouseauditsamplinginperformingauditprocedures

• SAdealswithauditor’suseofstatisticalandnon-statisticalsamplingwhen-

• SA530complementsSA500

Designingandselectingauditsample

Performingtestsofcontrolsandtestsofdetails

Evaluatingresultsfromsample

164 MPVijayKumarFCA

Objective

• ObjectiveofAuditorwhenusingAuditSamplingis:

• Toprovideareasonablebasistodrawconclusionsaboutpopulationfromwhichsampleisselected

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SampleDesign,SizeandSelectionofItemsSampleDesignoWhendesigningauditsample,onsider

• Purposeofauditprocedure• Characteristicsofpopulation

SampleSize• Shouldbesufficienttoreducesamplingrisktoacceptablylowlevel

SelectionofItems• Insuchawaythateachunithaschanceofselection

166 MPVijayKumarFCA

Performingauditprocedures

• Performauditprocedures,appropriatetothepurpose,oneachitemselected.

• Ifauditprocedurenotapplicabletoselecteditem,performprocedureonreplacementitem

• Ifunabletoapplyauditprocedures/alternativeprocedures,toselecteditem,treatthatitemas

• adeviationfromtheprescribedcontrol,inthecaseoftestsofcontrols,or

• amisstatement,inthecaseoftestsofdetails

167 MPVijayKumarFCA

SA540AuditingAccountingEstimates,IncludingFairValueAccountingEstimates,andRelatedDisclosures


168 MPVijayKumarFCA

OverviewofSA540o Introduction


o Objectiveso Definitions

• Requirements• RiskAssessmentProceduresandRelatedActivities• IdentifyingandAssessingtheRisksofMaterialMisstatement• ResponsestotheAssessedRisksofMaterialMisstatement• FurtherSubstantiveProcedurestoRespondtoSignificantRisk• EvaluatingtheReasonablenessoftheAccountingEstimates(AE),andDetermining

Misstatements• DisclosuresRelatedtoAccountingEstimates• IndicatorsofPossibleManagementBias• WrittenRepresentations• Documentation

o ApplicationandOtherExplanatoryMaterialo Appendix

169 MPVijayKumarFCA

Scope

Scope

ExpandsonapplicationofSA315SA330andotherrelevantSAs

inrelationtoAE

Dealswithauditor’sresponsibility

wrt AE,fairvalueAEAndrelateddisclosures

IncludesrequirementandguidanceonmisstatementsofindividualAE,

andindicatorsofpossiblemanagementbias

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SomeExamples§ AccountingEstimates

• Allowancefordoubtfulaccounts• Inventoryobsolescence• Warrantyobligations• Depreciationmethodorassetusefullife• Provisionagainstthecarryingamountofaninvestment• Outcomeoflongtermcontracts• FinancialObligations/Costsarisingfromlitigationsettlementsandjudgments

§ FairValueAccountingEstimates• Complexfinancialinstruments,whicharenottradedinanactiveandopen

market• Share-basedpayments• Propertyorequipmentheldfordisposal• Certainassetsorliabilitiesacquiredinabusinesscombination,includinggoodwill

andintangibleassets• Transactionsinvolvingtheexchangepartieswithoutmonetaryconsideration

171 MPVijayKumarFCA

Objective

• ObtainSAAEincontextofapplicableFRFthat:• AEincludingfairvalueAEintheFSarereasonable

AND

• relateddisclosuresintheFSareadequate

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RiskAssessmentProceduresandRelatedActivities

Auditortoobtainunderstandingof:

RequirementsofapplicableFRFrelevanttoAE,includingrelated

disclosures

Howmgt identifiestransaction,eventsandconditionsgivingrisetotheneedforAEtobedisclosedintheFS

Howmgt makesAEandunderstandingofthedataonwhichtheyarebased

173 MPVijayKumarFCA

SA550RelatedParties(RP)


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OverviewofSA550Ø Introduction


ØObjectivesØDefinitionsØRequirements

• RiskAssessmentProceduresandRelatedActivities• IdentificationandAssessmentoftheRisksofMaterialMisstatementAssociated

withRelatedPartyRelationshipsandTransactions• ResponsestotheRisksofMaterialMisstatementAssociatedwithRelatedParty

RelationshipsandTransactions• EvaluationoftheAccountingforandDisclosureofIdentifiedRelatedParty

RelationshipsandTransactions• WrittenRepresentations• CommunicationwithThoseChargedwithGovernance• Documentation

ØApplication&OtherExplanatoryMaterialontheseaspects

175 MPVijayKumarFCA

Scope

• DealswithAuditor’sresponsibilities:• regardingRPrelationshipsandtransactionswhenperformingauditofFS.

• ExpandsonapplicationofSAs315,330,240wrt:• risksofmaterialmisstatementsassociatedwithRPrelationshipsandtransactions.

176 MPVijayKumarFCA

ResponsibilitiesofAuditorPerformprocedurestoidentify,assessandrespondtoriskofmaterialmisstatementonaccountoffailuretoaccountfor/discloseRPrelationship,transactionandbalancesaslaiddownbyFRF.o EvaluatepresenceoffraudriskfactorsasperSA240.o EvenIfFRFestablishesminimalornorequirements–

• concludewhetherFSachieveatrue&fairview;and

• arenotmisleading

oAuditor’sinabilitytodetectmaterialmisstatementsisgreaterincaseofRPrelationship/Transactions.

177 MPVijayKumarFCA

Auditor’sObjectives• ObtainanunderstandingofRPrelationships&transactions(irrespectiveofwhetherFRFestablishesRPrequirements)sufficienttobeableto:oRecognizefraudriskfactors.oConcludewhetherFS:

§ achieveatrueandfairpresentationand§ arenotmisleading.

• WhereFRFestablishesRPrequirements:oObtainSAAEaboutwhether:

§ RPrelationships&transactionsappropriatelyidentified,accountedfor&disclosedinFSinaccordancewithFRF.

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RiskAssessmentProcedures(RAPs)&RelatedActivities

RiskAssessmentProcedures&

RelatedActivities(SA315&SA240)

UnderstandingtheEntity’sRP

Relationships&Transactions

MaintainingAlertnessforRPInformationwhenreviewing

Records/Documents

SharingRPInformationwithEngagement

Team

179 MPVijayKumarFCA

SA560SubsequentEvents(SE)


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§ Scope§ Effectivedate


§ EventsoccurringbetweenthedateoftheFinancialStatementsandthedateoftheAuditor’sReport

§ FactsWhichBecomeKnowntotheAuditorAftertheDateoftheAuditor’sReportbutBeforetheDatetheFinancialStatementsareIssued

§ FactsWhichBecomeKnowntotheAuditorAftertheFinancialStatementshavebeenIssued


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Scope

• DealswithAuditor’sresponsibilitiesrelatingtoSEinauditofFS.

• TwotypesofSE:• TYPE1:provideevidenceofconditionsthatexistedatdateofFS

• TYPE2:provideevidenceofconditionsthataroseafterdateofFS.

182 MPVijayKumarFCA

Objectives

DateofFS

DateofAuditreport

DotheseSErequireadjustmentof/disclosureinFS

ObtainSAAE

FactsthatwouldhaveledtoamendedARifknownatdateofAR

Respondappropriately

183 MPVijayKumarFCA

Definitions• DateofFS

• DateofendoflatestperiodcoveredbyFS

• DateofApprovalofFSDateonwhich• CompletesetofFSincludingtherelatednotesprepared;and• AppropriatepersonsassertresponsibilityforabovecompletesetofFS.

• DateofAuditor’sReport• DateofARonFSinaccordancewithSA700• CannotbebeforeSAAEobtainedtoformopinion• CannotbeearlierthanthedateofapprovalofFS

• DateofIssuanceofFS• WhenAR&auditedFSmadeavailableto3rdparties

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Definition– SubsequentEvents

(1)Eventsoccurringbetween:• ThedateofFS;andthedateofAR

AND(2)FactsthatbecomeknowntoauditorafterdateofAR.

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SA570GoingConcern(GC)


186 MPVijayKumarFCA

OverviewofSA570§ Introduction


§ Objectives

§ Requirements• RiskAssessmentProceduresandRelatedActivities• EvaluatingManagement’sAssessment• PeriodBeyondManagement’sAssessment• AdditionalAuditProcedureswhenEventsorConditionsareIdentified• AuditConclusionsandReporting• UseofGoingConcernAssumptionAppropriatebutaMaterialUncertaintyExists

• UseofGoingConcernAssumptionInappropriate• ManagementUnwillingtoMakeorExtendItsAssessment• CommunicationwithThoseChargedwithGovernance• SignificantDelayintheApprovaloftheFinancialStatements

§ Application&OtherExplanatoryMaterialontheseAspects

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Scope

DealswithAuditor’sresponsibilityinAuditofFS

Wrt management’suseofGCAssumption

InthePreparation&PresentationofFS

188 MPVijayKumarFCA

ResponsibilitiesofManagement• GC- afundamentalprincipleinpreparationofFinancialStatements

• ManagementtomakeaspecificassessmentofGCAssumption

• Judgmentaboutinherentlyuncertainfutureoutcomeofevents/conditions

• Period- atleast12monthsfromdateofFS• Basedon– Informationavailableatparticularpointoftime• Affectedby– Size&Complexityofentity,Nature&Conditionofbusiness

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ResponsibilitiesofAuditor

Obtain SAAE about appropriatenessof management’s use of GCassumption AND

Conclude whether there is materialuncertainty about entity’s ability tocontinue as GC

AbsenceofanyreferencetoGCuncertaintyinAuditor’sreport

nottobeviewedasguaranteeastoentity’sabilitytocontinueasGC

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§ ObtainSAAE:• aboutappropriatenessofuseofGCAssumptioninpreparation&presentationofFS.

§ Conclude,basedonauditevidence:• whetheramaterialuncertaintyexiststhatmaycastsignificantdoubtonentity’sabilitytocontinueasGC.

§ Determine• implicationsfortheauditor’sreport.

191 MPVijayKumarFCA

SA580WrittenRepresentations


192 MPVijayKumarFCA

OverviewofSA580o Introduction

• Scope• WrittenRepresentations(WR)asAuditEvidence• EffectiveDate

o Objectiveso Definitionso Requirements

• ManagementfromwhomWRRequested• WRaboutManagement’sResponsibilities• OtherWR• DateofandPeriod(s)CoveredbyWR• FormofWR• DoubtastotheReliabilityofWRandRequestedWRNotProvided

o Application&OtherExplanatoryMaterialontheseAspects

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Scope

DealswithAuditor’sResponsibilitytoobtainWRfrom

Management TCWG(whereappropriate)

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WRasAuditEvidence

• WRarenecessaryauditevidence:• butdonotprovideSAAE.

• WRdonotdiluteauditor’sresponsibilitytoobtainotherauditevidenceformatterscoveredbyWR.

• IfMgt.modifiesordoesnotproviderequestedWR-

• possibilityofexistenceofoneormoresignificantissues.

195 MPVijayKumarFCA


Supportotherauditevidence

ObtainWRthatMgt/TCWGhavefulfilledtheirresponsibilitiesreg:

PreparationoftheFSandCompletenessofinfo.providedtoauditor

Respondappropriatelyto:WRprovided,or

Mgt/TCWGrefusaltoprovideWR

196 MPVijayKumarFCA

WRrequiredaboutManagement’sResponsibilities§ PreparationoftheFS:

§ CompliancewithapplicableFRF.

§ InformationProvided&completenessoftransactions:§ HasprovidedallrelevantinformationandaccessasagreedintermsofAuditEngagement.

§ Alltransactionsrecorded&reflectedinFS.

§ Descriptionofmanagement’sresponsibilitiesinWR§ Management’sresponsibilitiesshallbedescribedinWRinthemannerinwhichtheseresponsibilitiesdescribedintermsofauditengagement

197 MPVijayKumarFCA

SA600UsingtheWorkofAnotherAuditor

EffectiveforallauditsrelatingtoaccountingperiodsbeginningonorafterApril1,2002

198 MPVijayKumarFCA

Introduction

• Establishesstandardsforapplicationinsituationswhereauditorusestheworkofanotherauditor.

• Doesnotcover:• Jointaudits.• Relationshipwithpredecessorauditor.

• Considerhowotherauditor’sworkaffectstheaudit.

199 MPVijayKumarFCA

DefinitionsPrincipalAuditor(PA):• Auditorresponsibleforfinancialinformation(FI)ofanentitywhenitincludesFIofoneormorecomponentsauditedbyanotherauditor.

OtherAuditor(OA):• Auditor,otherthanPA,whoisresponsibleforreportingonFIofacomponentwhichisincludedinFIauditedbythePA.

Component:• Division,branch,subsidiary,jointventure,associatedenterpriseoranyotherentitywhoseFIisincludedinFIauditedbyPA.

200 MPVijayKumarFCA

PA’sProcedures• ConsidertheprofessionalcompetenceofOA,ifOAisnotamemberofICAI.

• Visitcomponentandexaminebooksofaccount,ifessential.

• Obtainsufficientappropriateevidence,thatworkofOAisadequateforPA'spurposes.

• DiscussauditproceduresappliedbyOA.

201 MPVijayKumarFCA

PA’sProcedures• ReviewawrittensummaryofOA’sproceduresandfindingsthroughquestionnaires/checklist.

• ConsidersignificantfindingsofOA:• discussauditfindingswithOAandMgt.ofcomponent.• performsupplementaltestsifnecessary.

• IncaseOAisnotaprofessionallyqualifiedauditor- forinstance,whereacomponentissituatedinforeigncountry:

• Proceduresmentionedaboveassumeaddedimportance.

202 MPVijayKumarFCA

DocumentationComponentswhoseFSareauditedbyOAandtheirsignificancetothefinancialinformationoftheentityasawhole.

• Namesoftheotherauditors.• Anyconclusionsreachedthatindividualcomponentsarenotmaterial.

• Proceduresperformedregardingcomponents.• Conclusionsreached.• MannerofdealingwithModifiedReportofOAwhilefinalising PA’sReport.

203 MPVijayKumarFCA

Co-ordinationBetweenAuditors

• Sufficientliaison/co-ordinationbetweenPAandOA.• PAmayrequireOAtoansweradetailedquestionnaire.

• OAshouldcoordinatewithPA:• adheringtotime-table.• bringingtotheattentionofPAanysignificantfinding.• compliancewithrelevantstatutoryrequirements.• respondtodetailedquestionnaire.

204 MPVijayKumarFCA

ReportingConsiderations

• Expressaqualified/disclaimerofopinionbecauseofscopelimitation:

• ifPAconcludesthathecannotusetheworkofOAand• PAunabletoperformsufficientadditionalproceduresregardingFIofthecomponentauditedbyOA.

• ReportshouldstateclearlydivisionofresponsibilitybetweenPAandOA.

205 MPVijayKumarFCA

SA610UsingtheWorkofInternalAuditors


206 MPVijayKumarFCA

OverviewofSA610Introduction


§ Objectives§ Definitions§ Requirements

• DeterminingWhetherandtoWhatextenttousetheworkoftheInternalAuditors

• UsingSpecificWorkoftheInternalAuditors• Documentation

§ ApplicationandOtherExplanatoryMaterial

207 MPVijayKumarFCA

Scope

1. DealswithExternalAuditor’sresponsibility:a) Regardingtheworkofinternalauditorsb) Whenexternalauditorhasdeterminedin

accordancewithSA315that• internalauditfunctionislikelytoberelevanttoaudit

2. Doesnotdealwith caseswhereinternalauditorsprovidedirectassistancetoexternalauditorsincarryingoutauditprocedures

208 MPVijayKumarFCA

RelationshipbetweenInternalAuditFunction&ExternalAuditor

§ Role&objectivesofinternalauditfunctiondeterminedbyMgt/TCWG.

§ IrrespectiveofDegreeofautonomy/objectivity,internalauditfunctionisnot independentofentity.

§ externalauditorhassoleresponsibilityforauditopinion,and

• thatresponsibilitynotreducedbyuseofworkofinternalauditors.

209 MPVijayKumarFCA

Auditor’sobjectives

Ifexternalauditordeterminesinternalauditfunctionlikelytoberelevanttoaudit,heneedstodetermine:

• whether&towhatextenttousespecificworkofinternalauditors;and

• Ifso,whethersuchworkisadequateforexternalauditpurpose.

210 MPVijayKumarFCA

UsingSpecificWorkofIAEvaluatetheworktodetermineitsadequacywhether:• WorkwasperformedbyIAhavingadequatetechnicaltraining&proficiency.

• Workwasproperlysupervised,reviewed&documented.

• AdequateauditevidenceobtainedbyIA.• Conclusionsreachedareappropriate&IAreportsareconsistentwithresultsofwork.

• Exceptions/unusualmattersdisclosedbyIAareproperlyresolved.

211 MPVijayKumarFCA

SA620UsingtheWorkofAnAuditor’sExpert


212 MPVijayKumarFCA


• Scope• Theauditor’sresponsibilityfortheauditopinion• Effectivedate

• Objectives• Definitions• Requirements&Application

• Determiningtheneedforanauditor’sexpert• Nature,timing&extentofauditprocedures• Competence,capabilities&objectivityoftheauditor’sexpert• Obtaininganunderstandingoffieldofexpertiseofauditor’expert• Agreementwiththeauditor’sexpert• Evaluatingtheadequacyoftheauditor’sexpert’swork• Referencetotheauditor’sexpertinauditreport

213 MPVijayKumarFCA

ScopeofSA

Auditor’sresponsibilities

Individualororganisation’s work

AuditorusesthisworkinobtainingSAAE

214 MPVijayKumarFCA

ResponsibilityforAuditOpinion

• Auditopinionissoleresponsibilityofauditor

• Thatresponsibilitynotreducedbyuseofworkofauditor’sexpert

• Nonetheless,IfrequirementsofthisSAarefollowed&auditorconcludesexpert’sworkisadequate,hemayacceptthatworkasSAAE.

215 MPVijayKumarFCA


Determine

Whethertouseworkof

auditor’sexpert

Ifyes,whetherthatworkisadequate

forauditor’spurposes

216 MPVijayKumarFCA

Competence,Capabilities&ObjectivityofAuditor’sExpert• Evaluatecompetence,capability&objectivityofexpert

• IfExternalexpert- inquireintointerestsandrelationshipsthatthreatenobjectivity

1. Competence• nature&levelofexpertise

2. Capability• abilitytoexercisecompetenceincircumstancesofengagement

3. Objectivity• possibleeffectsthatbias/conflictofinterest/influenceofothersmayhaveonprofessional/businessjudgment

217 MPVijayKumarFCA

SA700ForminganOpinion&ReportingonFinancial

Statements


218 MPVijayKumarFCA



§ Objectives§ Definitions§ Requirements

• ForminganopiniononFS• Formofopinion• Auditor’sreport• SupplementaryinformationpresentedwithFS

• ApplicationandOtherExplanatoryMaterial• Appendix- IllustrativeFormatsofAuditorReport

219 MPVijayKumarFCA

Scope• Dealswithauditor’sresponsibilitytoformanopinionontheFS

• Alsodealswithform&contentofauditor’sreportissuedasaresultofanauditofFS

• Modifiedopinion,EMP,OMPdealtwithbySA705&706• SA700writtenincontextofgeneralpurposeFS

• FSunderspecialpurposeframeworkdealtbySA800&SA805

• Itpromotesconsistencyinauditreports

220 MPVijayKumarFCA


• FormanopiniononFSbasedonevaluationofconclusionsdrawnfromauditevidence

AND• Express clearlythatopinionthroughawrittenreportthatalsodescribesthebasisforopinion

221 MPVijayKumarFCA

ForminganOpiniononFS

• WhetherFSarepreparedinallmaterialrespectsinaccordancewithapplicableFRF

• Toformthisopinion,auditorneedstoconcludewhetherhehasobtainedreasonableassurancethatFSasawholearefreeofmaterialmisstatements(fraud/error)

222 MPVijayKumarFCA

FormofOpinion

• UNMODIFIEDOPINION:• AuditorconcludesFSarepreparedinallmaterialrespectsasperapplicableFRF

• MODIFIEDOPINION(dealtbySA705):• Basedonauditevidence,auditorconcludesFSasawholenotfreefrommaterialmisstatements OR

• AuditorunabletoobtainSAAEthatFSasawholearefreefrommaterialmisstatements

223 MPVijayKumarFCA

Auditor’sReport

• Shallbeinwriting• Writtenreportencompassesreportsissued:• inhardcopyformatAND• usingelectronicmedium

224 MPVijayKumarFCA

TitleAddresseeIntroductoryParaMgt ResponsibilityforFSParaAuditor’sResponsibilityParaAuditor’sOpinionOtherReportingResponsibilities

SignatureoftheAuditor

DateoftheAuditor’sReport

PlaceofSignature

AuditReportforAudits

ConductedinAccordancewithSAs

ELEMENTS

225 MPVijayKumarFCA

SA705ModificationstotheOpinioninthe

IndependentAuditor’sReport


226 MPVijayKumarFCA



• Objective• Definitions• Requirements&applications

• Circumstanceswhenmodificationofauditor’sopinionisrequired

• Determiningtypeofmodificationtoauditopinion• Form&contentofauditreportwithmodifiedopinion

• CommunicationwithTCWG

227 MPVijayKumarFCA

Scope

• DealswithAuditor’sresponsibilitytoIssueanappropriatereportincircumstanceswhen:§ InforminganopinionasperSA700,Auditorconcludesthatamodificationtoauditor’sopinionisnecessary

228 MPVijayKumarFCA

TypesofModifiedOpinions

Qualified Adverse Disclaimer

Natureofmattergivingrisetomodification

Auditor’sjudgmentrepervasivenessofeffects/possibleeffectsofmatteronFS

WhetherFSaremateriallymisstated

InabilitytoobtainSAAEleadingtopossiblematerialmisstatementinFS

AffectingFactors

AND

229 MPVijayKumarFCA


• Expressclearlyanappropriatelymodifiedopinionthatisnecessarywhenauditor:

• CONCLUDES (basedonauditevidenceobtained)thatFSareasawholenotfreefrommaterialmisstatements

OR• UNABLE toobtainSAAEtoconcludethatFSasawholearefreeofmaterialmisstatements

230 MPVijayKumarFCA

DeterminingtheTypeofModificationtoAuditor’sOpinion

NatureofMatterGivingRiseto

theModification

Auditor’sJudgmentaboutthePervasivenessoftheEffectsor

PossibleEffectsontheFSMaterialbutNot

PervasiveMaterialand

PervasiveFSarematerially

misstatedQualifiedopinion

Adverseopinion

InabilitytoobtainSAAE

Qualifiedopinion

Disclaimerofopinion

231 MPVijayKumarFCA

SA706EmphasisofMatterParagraphsandOtherMatterParagraphsintheIndependentAuditor’sReport


232 MPVijayKumarFCA



• Objective• Definitions• Requirements&Application

• Emphasisofmatterparagraphs• Othermatterparagraphs• CommunicationwithTCWG

233 MPVijayKumarFCA

Scope&Auditor’sObjectives

• DealswithAdditionalcommunicationinauditreport(AR)

• Whenauditorconsidersitnecessarytodrawusers’attentionto:

• Matter/spresentedordisclosedinFSthatareofsuchimportancethattheyarefundamentaltousers’understandingofFS

OR• Matter/sotherthanthosepresented/disclosedinFSthatarerelevanttousers’understandingofaudit/auditor’sresponsibilities/AR

234 MPVijayKumarFCA

EMPinAuditReport

• MattersfundamentaltounderstandingofFS• AuditorshouldhaveobtainedSAAEthatmatterisnotmateriallymisstatedinFS

• EMPtoreferonlytoinfopresented/disclosedinFS

• WidespreaduseofEMPreduceseffectivenessofauditor’scommunicationofsuchmatters

• MoreinfoinEMPthanFSmayimplymatternotadequatelypresenteddisclosedinFS

• Thus,EMPlimitedtomatterpresented/disclosedinFS

235 MPVijayKumarFCA

OMPinAuditReport

• IncludeifnotprohibitedbyL&R• Useheading“OtherMatter”/otherappropriateheading

• Placement:• immediatelyafterOpinionpara&EMPor• elsewhereifOMPisrelevanttoOtherReportingResponsibilitiessection

236 MPVijayKumarFCA

SA710ComparativeInformation– CorrespondingFigures

andComparativeFinancialStatements


237 MPVijayKumarFCA

Overview§ Introduction


§Objectives§Definitions§ Requirements&Application

• Auditprocedures• Auditreporting

§ Appendix:Illustrativeauditor’sreports

238 MPVijayKumarFCA

Definition- ComparativeInformation

Amountsanddisclosures

IncludedinFS

Inrespectofoneormorepriorperiods

InaccordancewithapplicableFRF

239 MPVijayKumarFCA

Scope• Dealswithauditor’sresponsibilitiesrelatingtocomparativeinfoinauditofFS

• WhenpriorperiodFSwereauditedbyanotherauditororwerenotaudited:

• RequirementsofSA510wrt openingbalancesalsoapply

• NatureofComparativeInfo:• DependsuponapplicableFRF.• Twoapproaches:

• Correspondingfigures• ComparativeFS

• ApproachoftenspecifiedbyL&R• Mayalsobespecifiedbytermsofengagement

240 MPVijayKumarFCA

CorrespondingFiguresvisavisComparativeFS– Auditreportingdifferences

CorrespondingFigures ComparativeFSAuditor’s opinion on FSrefers to current periodonly

Auditor’s opinion refers toeach period for which FSare presented

SA710separatelycoversauditreportingforbothtypesofapproaches

241 MPVijayKumarFCA

Auditor’sObjectivesOBTAIN REPORT

SAAE

Whethercomparativeinfo(CI)includedinFShasbeenpresented

inallmaterialrespectsinaccordancewithrequirementsofapplicableFRF

Inaccordancewithauditor’sreportingresponsibilities

and

242 MPVijayKumarFCA

SA720TheAuditor’sResponsibilitiesinRelationtoOtherInformationinDocumentsContaining

AuditedFinancialStatements


243 MPVijayKumarFCA




• ReadingOtherInformation(OI)• MaterialInconsistencies• MaterialMisstatementofFact

• Application&OtherExplanatoryMaterialontheseaspects

244 MPVijayKumarFCA

Scope• Dealswithauditor’sresponsibilitywrt otherinformation(OI)indocumentscontaining:

• auditedFSandauditor’sopinionthereon.

• Unlessanyspecificrequirementinanengagement:• Auditor’sopiniondoesnotcoverOI.• AuditorhasnospecificresponsibilitytodeterminewhetherOIisproperlystated.

• BUT,needtoreadtheOI since:• inconsistenciesofOIvis-a-visauditedFSunderminesthecredibilityoftheauditedFS.

245 MPVijayKumarFCA


• Respondappropriately:§wheresuchotherinformationcouldunderminecredibilityofauditedFSandAuditReport.

246 MPVijayKumarFCA

DefinitionsOtherInformation(OI)§ Financial&non-financialinformation,Includedbylaw/regulation/custom,indocumentscontainingauditedFSandAuditReport.Examples:

• Reportbymanagement/TCWG.• Financialsummaries/highlights.• Financialratios.• Selectedquarterlydata.

• Doesnotinclude:• Pressrelease/transmittalmemorandumaccompanyingthedocumentscontainingauditedFS.

• Informationcontainedinanalystbriefings.• Informationonentity’swebsite.

247 MPVijayKumarFCA

DefinitionsInconsistency• OIthatcontradictsinformationcontainedinauditedFS.

• Mayraisedoubtabout:• auditconclusionsdrawnfromauditevidenceobtainedearlier.

• basisofauditopiniononFS.

MisstatementofFact• OIthatis:

• unrelatedtoauditedFSand• incorrectlystated/presented.

• MayunderminecredibilityofauditedFS.

248 MPVijayKumarFCA

MainRequirementsReadingOI• ReadOItoidentifymaterialinconsistenciesvis-a-visauditedFS.

• Makeappropriatearrangementswithmgt/TCWGtogetOIbeforedateofAuditReport:§ Helpstimelyresolutionofpossiblematerialinconsistency/misstatementoffacts.

§ AgreementwithmanagementastotimeofavailabilityofOI.§ Ifnotpossiblebefore,thengetOI,assoonaspracticable.

MaterialInconsistencies• Itmaterialinconsistenciesidentified:

§ DeterminewhetherauditedFSorOIneedsrevision

249 MPVijayKumarFCA

StandardonQualityControl(SQC)1QualityControlforFirmsthatPerformAudits&ReviewsofHistoricalFinancialInformation,andOtherAssurance&

RelatedServicesEngagements

EffectiveforallEngagementsrelatingtoaccountingperiodbeginningonorafterApril1,2009

250 MPVijayKumarFCA

Objective

• Firm’s responsibility for its system of quality control for:• Audits and reviews of historical financial information

• Other assurance and related services engagements

Note:• QualitycontrolresponsibilityoffirmpersonnelforspecificengagementssetoutinotherStandards,

e.g., SA 220.

251 MPVijayKumarFCA

Parameters

SQC1istobereadinconjunctionwith

• TheCharteredAccountantsAct,1949• CodeofEthics• OtherrelevantpronouncementsofICAI

Collectivelyknownas“theCODE”.

252 MPVijayKumarFCA

SystemofQualityControl

Allfirmsshouldestablishasystemofqualitycontrolthatprovidesreasonableassurancethat:

• Firm&itspersonnelcomplywithprofessionalstandards,regulatory&legalrequirements.

• Reportsissuedbyfirmorpartnersareappropriateinthecircumstances.

253 MPVijayKumarFCA

Definitions

• Engagementdocumentation• Engagementpartner• Engagementquality

controlreview• Engagementqualitycontrol

reviewer• Engagementteam• Firm• Inspection• Listedentity

•Monitoring• Networkfirm• Network• Partner• Personnel• Professionalstandards• Reasonableassurance• Staff• Suitablyqualified

externalperson

254 MPVijayKumarFCA

ElementsofSystemofQualityControl

1. Leadershipresponsibilitiesforquality

2. Ethicalrequirements

3. Clientacceptance/continuance

4. Humanresources

5. Engagementperformance

6. Monitoring

255 MPVijayKumarFCA

Documentation

§ DocumentQCpolicies&procedures

§ Communicatetoallfirmpersonnel:• descriptionofQCpolicies• objectivestobeachievedtherefrom• allresponsibleforquality• allexpectedtocomply

§ ObtainfeedbackonQCsystemfrompersonnel

256 MPVijayKumarFCA

SA800SpecialConsiderations– AuditofFinancialStatements

PreparedinAccordancewithSpecialPurposeFrameworks


257 MPVijayKumarFCA


• Scope

• Effectivedate

§ Objective

§ Definitions

§ Requirements&Applications• considerationswhenacceptingtheengagement• considerationswhenplanning&performingtheaudit• forminganopinion&reportingconsiderations

258 MPVijayKumarFCA

ScopeofSA800• DealswithspecialconsiderationsintheapplicationofotherSAs:

• ToauditofFSpreparedinaccordancewithaspecialpurposeframework(SPF)

• WritteninthecontextofcompletesetofFSpreparedinaccordancewithaSPF

• DoesnotoverriderequirementsofotherSAs;

259 MPVijayKumarFCA

Auditor’sObjectiveAddressappropriatelyspecialconsiderationsrelevantto:

• Engagementacceptance

• Engagementplanning&performance

• Formingopinion&reportingonFS

260 MPVijayKumarFCA

EngagementAcceptance- Considerations• Obtainunderstandingof:

• PurposeforwhichFSareprepared• Intendedusers• Stepstakenbymgt todeterminethatapplicableFRFisacceptable

261 MPVijayKumarFCA

Planning&PerforminganAudit–Considerations• DeterminewhethertheapplicationofSAsrequirespecialconsiderationsincircumstancesoftheengagement

262 MPVijayKumarFCA

ForminganOpinion&ReportingConsiderationsApplySA700(R)Also:• DescribethepurposeforwhichFSareprepared&intendedusers

• Ifmgt hasachoiceofFRFsinthepreparationofFS:• Explanationofmgt’s responsibilityfortheFSmakereferencetoitsresponsibilityfordeterminingacceptabilityofapplicableFRF.

• EvaluatewhetherFSadequatelydescribetheFRFapplied• IncludeEmphasisofMatterparatoalertusersreapplicationofspecialpurposeFRF

• FSmaynotsuitableforanotherpurpose

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SA805SpecialConsiderations– AuditsofSingleFS&SpecificElements,AccountsorItemsofFS

Effectiveforauditsofsinglefinancialstatementsorofspecificelements,accountsoritemsforperiods

beginningonorafterApril1,2011

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• Objective

• Definitions

• Requirements&Application• Considerationswhenacceptingtheengagement• Considerationswhenplanning&performingtheaudit• Forminganopinionandreportingconsiderations

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Scope• SA 805 deals with special considerations in applicationof Other SAs to:

• Audit of single financial statements (SFS)• Specific element/account/ item of FS (EFS)

• IT DOES NOT:• Apply to the report of component auditor• Override the requirements of other SAs• Deal with all special considerations that may be relevant inthe circumstances of the engagement

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Auditor’sObjective• Addressappropriatelyspecialconsiderationsrelevantto:

• Acceptanceoftheengagement• Planning&performanceofthatengagement• Forminganopinion&reportingonSFS&EFS

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ApplicationofSAs• SA200requirescompliancewithallSAsrelevanttoaudit

• ThisappliestoauditofSFSeveniftheauditoralsoauditsthecompleteFS.

• IfauditornotalsoengagedtoauditthecompleteFS,considerthepracticabilityofauditofSFSinaccordancewithSAs.

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AcceptabilityofFRF§ AuditortodetermineacceptabilityofFRF(SA210)

§ ConsiderwhetherFRFincludesallrequirementsrelevanttopreparationofSFS/EFS

§ ForauditofSFS,determine:• WhetherapplicationofFRFwillresultinpresentationthatprovidesadequatedisclosurestoenableintendeduserstounderstandinfoconveyedinSFSand

• EffectofmaterialtransactionsandeventsoninfoconveyedinSFS

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FormofOpinion• ExpectedformofopiniondependsuponapplicableFRF&applicableL&R

• Communicateexpectedformofreport– SA210• Considerwhetherexpectedformofopinionisappropriateinthecircumstances

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Planning&PerformanceConsiderations

• AdaptallSAsasnecessaryintheauditofSFS• CarefulconsiderationofrelevanceofeachSAisnecessary

• WhenauditingSFSinconjunctionwithfullFS,auditevidenceobtainedaspartofauditoffullFSmaybeusefulBUTauditorneverthelessneedstoplan&performauditofSFStoobtainSAAE

• SomeitemsfromcompleteFSmaybeinterrelatedwithEFS

• Auditorwouldneedtoperformproceduresonsuchinterrelateditems

• MaterialityofSFS<materialityforfullFS

• AffectsNatureTimingExtentofauditprocedures

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FormingOpinion&Reporting-Considerations• ApplySA700,asnecessary.• IfalsoengagedtoreportonfullFS,expressseparateopiniononeachengagement.

• IfauditedSFSpublishedwithentity’sauditedfullFS,presentationofSFSshouldbeclearlydifferentiatedfromfullFS.

• DonotissueauditreportonSFSuntilsatisfiedwiththedifferentiation.

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SA810EngagementstoReporton

SummaryFinancialStatements

Effectiveforauditsofsinglefinancialstatementsorofspecificelements,accountsoritemsforperiodsbeginningonorafterApril1,2011

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• Objectives• Definitions• Requirements&Application

• Engagementacceptance• Natureofprocedures• Formofopinion• Timingofworkandeventssubsequenttothedateofauditor’sreport• Auditreportonsummaryfinancialstatements• Restrictionondistributionoruse• Comparatives• Unauditedsupplementaryinformationpresentedwithsummaryfinancialstatements

• Otherinformationindocumentscontainingsummaryfinancialstatements• Auditorassociation

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Scope• Dealswithauditor’sresponsibilities:

• Whenundertakingengagementtoreportonsummaryfinancialstatements(SFS)

• DerivedfromFSauditedinaccordancewithSAbythatsameauditor

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Objectives

DETERMINEAPPROPRIATENESS

FORMOPINIONONSFS

EXPRESSTHEOPINIONCLEARLY

OfacceptingtheengagementtoreportonSFS

Basedonevaluationofconclusionsdrawnfromevidenceobtained

Throughwrittenreportthatalsodescribesbasisfor

thatopinion

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EngagementAcceptance• AuditorshallOrdinarily accepttheengagementtoreportonSFSonlywhen:

• AlsoengagedtoconductauditinaccordancewithSAsofthoseFSfromwhichtheseSFShavebeenderived.

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BeforeAcceptingtheEngagement

DETERMINEwhetherappliedcriteriaareacceptable

OBTAINmgt agreementthatitacknowledges&understandsitsresponsibilities

AGREEwithmgt theformofopiniontobeexpressedonSFS

Donotacceptengagementif:• criteriaareunacceptableOR• unabletoobtainmgt agreementunlessrequiredbyL&R

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SRE2400EngagementstoReviewFinancialStatements

EffectiveforreviewsoffinancialstatementsforperiodsbeginningonorafterApril1,2010.

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OverviewofSRE2400• Introduction• Objective of a Review Engagement• General Principles of a Review Engagement• Scope of a Review• Moderate Assurance• Terms of Engagement• Planning• Work Performed by Others• Documentation• Procedures and Evidence• Conclusions and Reporting• Effective Date• Appendices

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PurposeofSRE2400Establishstandards&provideguidance

ReviewofFinancialStatements

Practitioner’sprofessionalresponsibilities

Form&contentofreviewreport

Nottheauditoroftheentity

Ifauditorperformsreviewofinterimfinancialinformation,applySRE2410

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ObjectiveofaReviewEngagementEnablethepractitioner

ToState

OnbasisofProcedures

Attention

BelieveFSarenotprepared

inallmaterialrespectsinaccordancewith

applicableFRF

NEGATIVEASSURANCE

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GeneralPrinciples• ComplywithICAICodeofEthics.• ConductreviewinaccordancewiththisSRE.• Exerciseprofessionalskepticismwhile:

• Planningreview.• Performingreview.

• Obtainsufficientappropriateevidence:• Forexpressingnegativeassurance.• Primarilythroughinquiry&analyticalprocedures.

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ScopeofReview• ReferstoReviewproceduresdeemednecessaryincircumstancestoachieveobjectivesofreview.

• Proceduresshouldbedeterminedhavingregardtorequirementsof:

• ThisSRE.

• Relevantprofessionalbodies.

• Legislation&regulation.

• Termsofengagement.

• Reportingrequirements.

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TermsofEngagement• AgreeToE withtheclient:

• Engagementletter.

• Othersuitableformofcontract.

• Sendtoclientanengagementletterdocumentingkeytermsofappointment:

• Confirmspractitioner’sacceptanceofappointment.

• Avoidsmisunderstandingsreg.objectives&scope.

• Clarifiespractitioner’sresponsibility.

• Assistsinplanningthereview.

• ClarifiesFormofreporttobeissued.

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RevisedSRE2400Engagementsto

ReviewHistorical FinancialStatements

EffectiveforReviewsofFSforperiodsbeginningonorafterApril1,2016

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AttheOutset...• ThereisnoconceptualchangeinrevisedSRE2400• ContinuestoapplytopractitionerswhoareNOT statutoryauditorsofclient,iftheyundertake:

• Reviewoffullhistorical financialstatements• Reviewofinterimfinancialstatements/information

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NeedforRevision....• Makingclearthedistinguishingfeaturesofareviewengagement

• Promoteclarityamongusersaboutthenatureofreview

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EnhancedGuidance/Updations

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LimitedAssurance.....TermintroducedinrevisedSRE2400

• InlinewithconceptsofreasonablevslimitedassuranceinFrameworkforAssuranceEngagements

• Helpsbetterexplainnatureofareviewengagement

§ Applicationoflimitedproceduresvisavisafullfledgedaudit

• Normally,limitedtoinquiriesandanalyticalprocedures

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SufficientAppropriateEvidence(SAE)• Existingconcept

• Reiteratedinvariousparastohighlightthat:

• SAEisimportantforreachingbasisofconclusionandreportasenvisagedbytheStandard

• Evidencegatheringisasmuchanessentialelementofareviewengagement

• Reviewisnota“procedurebased”(or“checkbox”)engagement

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PerformingtheReviewEngagementReiterates:• Considerationandroleofprofessionaljudgmentwrt whatotherprocedurestouse

• Inadditiontoanalyticalprocedures/inquiry,incaseswheresoconsiderednecessarybythepractitioner

• Importanceofcohesionbetweenknowledgeofentity&itsenvironment,FRF&professionaljudgment

• Todesign&performprocedurestofocusonareaswherematerialmisstatementsarelikelytoarise

• Todesign&performotherprocedures,whererequired

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Reporting• ElementsbroughtinlinewithSA700.Includes:

• Introduction• Management’sResponsibility• Practitioner’sResponsibility• Descriptionofreview&itslimitations• Conclusions

• ConceptsbroughtinfromSA705&SA706:• Modificationto“conclusions”• EmphasisofMatter• OtherMatters

• MannerofReporting• Nochange,same“Negative”Reporting

• “Nothinghascometoourattention........”

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OtherRevisions• Expresslyincludednow:

• Donotacceptreviewengagementifnotsatisfiedthatreviewwouldbeappropriateinthecircumstances

• Engagementpartnerto

– possesscompetenceinassuranceskillsandtechniques,&competenceinfinancialreporting,appropriatetothecircumstances

– Takeresponsibilityforengagementteam–collectivelyhavecompetence&capabilities

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ObjectivesofthePractitioner

ObtainLIMITEDAssurance

Report&Communicate

FSarefreeofMaterialMisstatement OnFSasawhole

Inquiry AnalyticalProcedures

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SRE2410ReviewofInterimFinancialInformation

PerformedbytheIndependentAuditoroftheEntity

EffectiveforreviewsofinterimfinancialinformationforperiodsbeginningonorafterApril1,2010

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OverviewofSRE2410• Introduction• General Principles of a Review of IFI• Objective of an Engagement to Review IFI• Agreeing the Terms of the Engagement• Procedures for a Review of IFI• Evaluation of Misstatements• Management Representations• Auditor’s Responsibility for Accompanying Information• Communication• Reporting the Nature, Extent & Results of Review of IFI• Documentation• Effective date• Appendices

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InterimFinancialInformation• Financialinformation:

• Prepared&presentedinaccordancewithapplicablefinancialreportingframework.

• Compriseseitheracompleteorcondensedsetoffinancialstatements.

• Foraperiodthatisshorterthanentity’sFY.

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SREApplicationMatrix

ReviewofFinancialStatements

ReviewofInterimFinInfo

Independentauditor SRE2400 SRE2410Otherpractitioner SRE2400 SRE2400

Why separate SRE 2410 for Independent Auditors?

• For audit engagements, independent auditor would have obtainedunderstanding of entity and its environment including internal control.

• For reviewing IFI he updates this understanding through inquiry &analytical procedures.

• Other practitioner does not ordinarily have the same level of understanding.• Need for different inquiries & procedures

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GeneralPrinciplesofReviewofIFI• ComplywithethicalrequirementsapplicabletoauditofannualFSofentity.

• Implementqualitycontrolproceduresapplicabletoindividualengagement.

• Plan&performengagementwithattitudeofprofessionalskepticism.

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ObjectiveofEngagementtoReviewIFI• Enable auditor to express a conclusion whether

• On the basis of the review

• Anything has come to auditor’s attention

• That causes auditor to believe

• That IFI is not prepared in all material respectsin accordance with applicable FRF.

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AgreeingtheTermsofEngagement• Auditor&clientshouldagreeonToE.

• ToE ordinarilyrecordedinengagementletter.

• Helpsavoidsmisunderstandingswrt:• natureofengagement.• objectiveandscopeofreview.• management’sresponsibilities.• auditor’sresponsibilities.• assuranceobtained.• natureandformofreport.

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SAE3400TheExaminationofProspectiveFinancial

Information(PFI)

Effectiveinrelationtoreportsonprojections/forecastsissuedonorafterApril1,2007

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Introduction- I• Establishesstandardsonengagementstoexamineandreporton:

• PFI• examinationproceduresforbestestimateandhypotheticalassumptions

• PFIcanbeintheformof:• forecastor• projectionor• combinationofboth.

• NotapplicabletoexaminationofPFIexpressedingeneralornarrativeterms.

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Introduction- II• Obtain sufficient appropriate evidence on:

• reasonableness of management’s best-estimateassumptions.

• hypothetical assumptions are consistent withthe purposes of information.

• PFI prepared properly on basis of assumptions.

• properly presented and adequate disclosure ofall material assumptions.

• consistent with historical financial statements.

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AcceptanceofEngagement• Beforeacceptingengagementconsider:

• theintendeduseoftheinformation.

• information- generalorlimiteddistribution.

• thenatureoftheassumptions,i.e.best-estimatesorhypotheticalassumptions.

• theelementstobeincludedininformation.

• theperiodcoveredbyinformation.

• Notacceptorwithdrawfromengagementif:• Assumptionsareclearlyunrealistic.

• BelievesthatPFIwillbeinappropriateforitsintendeduse.

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KnowledgeofBusiness• Obtain sufficient level of knowledge of business toevaluate all significant assumptions:

• internal controls over the system used to prepare PFI.

• documentation supporting management’s assumptions.

• extent to which statistical, mathematical and computer-assisted techniques used.

• methods used to develop and apply assumptions.

• accuracy of PFI prepared in prior periods.

• Consider the extent to which reliance on the entity’shistorical financial information is justified.

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PeriodCovered• ConsidertheperiodoftimecoveredbyPFI:

• moreLength- AssumptionsMoreSpeculative.

• notextendbeyondthetimeforwhichmanagementhasreasonablebasisforassumptions.

• RelevantFactors:

• operatingcycle.

• degreeofreliabilityofassumptions.

• needsofuserslike,preparedinconnectionwithapplicationforloanorforissueofsecurities.

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ExaminationProcedures- IFactorsindeterminationofnature,timing,extentofexaminationprocedures:

• knowledgeobtainedduringpreviousengagements.

• management’scompetence.

• likelihoodofmaterialmisstatement.

• extenttowhichPFIisaffectedbythemanagement’sjudgment.

• sourcesofinformation.

• stabilityofentity’sbusiness.

• engagementteam’sexperience.

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ExaminationProcedures- II• Whenhypotheticalassumptionsused:

• allsignificantassumptionstakenintoconsideration.• consistentwithpurposeandrealistic.

• Focusonareassensitivetovariationandmaterial.

• Ifengagementforindividualcomponent,considerinterrelationshipofothercomponents.

• ObtainwrittenrepresentationsfromMgt.regarding:• intendeduseofPFI.• completenessofsignificantassumptions.• mgt’s acceptanceofresponsibilityforPFI.

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PresentationandDisclosure• Considerrequirementsofstatutes,regulationsandprofessionalpronouncements.

• Alsoconsiderwhether:• presentationisinformativeandnotmisleading.• accountingpoliciesandassumptionsareclearlydisclosedinnotestoPFI.

• dateofpreparationisproperlydisclosed.• basisofestablishingpointsinarangeisclearlyindicated.

• adequacyofdisclosureifanychangeintheaccountingpolicy.

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Documentation• Documentmattersimportantinprovidingevidence:

• TosupporthisreportonexaminationofPFI;and

• thatsuchexaminationwascarriedoutinaccordancewiththisSAE.

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Reporting- I• ThereportoftheAuditorshouldcontainthefollowing:

• titleandAddressee.• identificationoftheprospectivefinancialinformation.• referencetoapplicableStandardsonAuditing.• managementresponsibilities.• whenapplicable,areferencetopurposeand/orrestricteddistribution.

• statementthatexaminationproceduresincludedexamination,onatestbasis.

• statementofnegativeassurance.• opinionwhetherPFIproperlypreparedonbasisofassumptionsandpresentedinaccordancewithrelevantfinancialreportingframework.

• appropriatecaveatsconcerningachievabilityofresults.• dateofreport,PlaceofsignatureandSignature.

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Reporting- II1. Qualified/Adverse opinionorwithdrawfromengagement,if

auditorbelievesthat:

• presentationanddisclosureofthePFIisnotadequate.

2. Adverseopinionorwithdrawfromengagement,ifauditorbelievesthat:

• oneormoresignificantassumptionsdonotprovideareasonablebasisforthePFI

3. Disclaimer ofopinionorwithdrawfromengagement,if:

• examinationisaffectedbyconditionsthatprecludeapplicationofprocedure(s)considerednecessaryincircumstances.

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SAE3402AssuranceReportsonControlsat

AServiceOrganisation

Effectiveforserviceauditors’assurancereportscoveringperiodsbeginningonorafter1stApril,2011

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OverviewofSAE3402• Introduction• Objectives• Definitions• Requirements

• FrameworkforAssuranceEngagements

• Ethicalrequirements

• Management&TCWG

• Acceptance&continuance

• Assessingsuitabilityofcriteria

• Materiality

• ObtainingunderstandingofSO’ssystem

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OverviewofSAE3402(contd.)• Obtainingevidenceredescription

• Obtainingevidenceredesignofcontrols

• Obtainingevidencereoperatingeffectivenessofcontrols

• Workofinternalauditfunction

• Writtenrepresentations

• Otherinformation

• Subsequentevents

• Documentation

• PreparingSA’sassurancereport

• Othercommunicationresponsibilities

• Applicationguidance(onaboveaspects)• Appendices

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Introduction• ReportforusebyUEandUA

• OncontrolsatSO

• ProvidesaservicetoUE

• ThatserviceislikelytoberelevanttoUE’sICFR• Matterofprofessionaljudgment

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SAE3402dealsONLYwith….• Assertion-basedengagements

• Reasonableassurance

• Assuranceconclusionwordeddirectlyintermsofsubjectmatter&criteria

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ApplicabilityofSAE3402

• Appliesonlyifinrespectofsuitabledesignofcontrols,SOis:

• Responsible• Otherwisemakesanassertion

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DoesNotApplyto……….• ReportingonwhethercontrolsatSOoperatedasdescribed

• ReportingonlyoncontrolsatSOotherthanthoserelatedtoaservicerelatedtoUE’sICFR

• ReportingonUE’stransactionbalancesmaintainedbySO

• AUPreportoncontrolsatSO

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SOAuditor’sObjectivesObtainreasonableassurance

DescriptionofsystemasgivenbySO

Report

Controlobjectiveswereachieved

Throughoutspecifiedperiod

Fairlypresentsthesystem

Asdesigned&implemented

Controlsrelatedtocontrolobjectives

Suitablydesigned

Controlsoperatedeffectively

Toprovidereasonableassurance

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SAE3420AssuranceEngagementstoReportontheCompilationofPro

FormaFinancialInformationIncludedinaProspectus

EffectiveforassurancereportsdatedonorafterApril1,2016

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ScopeofSAE3420• Reasonable assurance engagements to report of Proforma financial information (PFI)

• As prepared by a responsible party (Client)

• To be included in a prospectus

• Applies where such reporting is:

• Required by securities laws

• Generally accepted practice

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Whatis“PFI”?

• Financialinformationshowntogetherwithadjustmentstoillustratetheimpactofanevent/transactiononunadjustedfinancialinformation

• Asiftheeventhadoccurredorthetransactionhadbeenundertakenatanearlierdateselectedforpurposesoftheillustration.

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Whatis“ApplicableCriteria”

• CriteriausedbyclientwhencompilingPFI

• Maybeestablishedbylaw/regulation,etc

• Ifnotsoestablished,developedbyclient

• PFItobeaccompaniedbyadequatedisclosuresregardingcriteria

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Whatis“ProFormaAdjustments”?

AdjustmentstoUnadjustedFinancialInfo

Illustratetheimpactofasignificanteventor

transaction

NecessaryforPFItobecompiledonbasisconsistentwithapplicableFRF

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ResponsibilityforPFI

Preparation/Compilation

• Client

Reportingthereon

• Practitioner

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PurposeofPFIincludedinProspectus• Illustrateimpactofsignificantevent/transactiononunadjustedinformation

• PFIdoesnotrepresententity’sactualfinancialposition,financialperformanceorcashflows

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PFICompilationProcessofClient

Presentsproforma infowithaccompanyingdisclosures

Makesproforma adjustments

Extractsunadjustedfinancialinfofromsource

Identifiessourceofunadjustedinfotobeused

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NatureofAssuranceExpressedbyPractitioner

ReasonableAssuranceunderSAE3420

AssesswhethercriteriausedincompilingPFIprovidesreasonablebasisforpresentingsignificanteffectsdirectlyattributabletoevent

Obtainsufficientappropriateevidence:• Relatedproformaadjustmentsgiveappropriateeffecttothosecriteria

• Resultingproformacolumnreflectsproperapplicationofthoseadjustmentstounadjustedfinancialinfo

Practitioner does not:• Update/reissueanyearlierreports/opinionsonanyhistoricalfinancialinfousedincompilingPFI

• Perform an audit or review of the financial info used in compiling PFI

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SRS4400EngagementstoPerformAgreed- uponProcedures

regardingFinancialInformation

EffectiveforallagreeduponproceduresengagementsbeginningonorafterApril1,2004

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Introduction• Establishesstandardsonauditor’sprofessionalresponsibilitieswithregardto:

• performAgreed-uponProcedures(AUP)onFinancialInformation(FI).

• form&ContentofreportofAUPengagements.

• Reportoffactualfindingsbasedon:

• specifiedproceduresperformedonspecifiedsubjectmatterofspecialelements,accountsoritemsofFS.

333 MPVijayKumarFCA

Objectives

• Tocarryoutproceduresofauditnaturetowhichtheauditor,theentityandanyappropriatethirdpartieshaveagreed;and

• Toreportonfactualfindings.

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GeneralPrinciples• ComplywithCodeofEthicsissuedbyICAI.

• Wheretheauditorisnotindependent:• astatementtothateffectshouldbemadeinreportoffactualfindings.

• ConductAUPengagementinaccordancewith:• thisSRS;and• termsofengagement.

335 MPVijayKumarFCA

DefiningTermsofEngagement-I• Ensurethatthereisclearunderstandingofagreedprocedures,conditionsofengagementwith:

• representativesofentity.• otherspecifiedpartieswhowillreceivecopiesofreport.

• Mattersagreedincludes:• natureofengagement.• statedpurposeforengagement.• identificationofFItowhichAUPapplied.• nature,timingandextentofspecificprocedurestobeapplied.

• limitationsondistributionofreport.

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DefiningTermsofEngagement-II

• Sendengagementletter:• listingofprocedurestobeperformed.• restrictionsondistributionofreport.

• IfAUPbetweenregulator/industryrepresentatives,thenauditormaynotbeabletodiscussprocedureswithallpartieswhowillreceivereport.

337 MPVijayKumarFCA

PlanningandDocumentation

• Plantheworksothataneffectiveengagementwillbeperformed.

• Documentmatterswhichareimportantinprovidingevidence:

• tosupportthereportoffactualfindings.

• thatengagementwascarriedoutinaccordancewiththisSRSandtermsofengagement.

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ProceduresandEvidence

• PerformAUPandusetheevidenceobtainedasbasisforreportoffactualfindings.

• Proceduresappliedinclude:• Inquiryandanalysis

• Re-computation,comparisonandotherclericalaccuracychecks

• Observation

• Inspection

• obtainingconfirmations

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Reporting- I

• Describethepurposeandagreed-uponproceduresofengagement.

• Reportoffactualfindingsshouldcontain:• TitleandAddressee.• IdentificationofspecificFI/non-FItowhichAUPhavebeenapplied.

• Statementthatproceduresperformedwerethoseagreeduponwithrecipient.

• StatementthatengagementperformedinaccordancewithStandardsapplicabletoAUPengagements.

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Reporting- II• IdentificationofthepurposeofAUP.• ListingofspecificAUPperformed.• Descriptionoffactualfindingsincludingsufficientdetailsoferrorsandexceptionsfound.

• Statementthatproceduresperformeddonotconstituteeitheranauditorareviewandassuch,noassuranceisexpressed.

• Statementthathadtheauditorperformedadditionalprocedures,auditorreview,othermattersmighthavecometolight.

• Statementthatreportisrestrictedtospecifiedparties.• Statementthatreportdoesnotextendtoentity’sFStakenasawhole.• Dateofreport.• Placeofsignature.• Auditor’ssignature

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REVISEDSRS4410COMPILATIONENGAGEMENTS

EffectiveforcompilationengagementsundertakenafterMarch31,2016

342 MPVijayKumarFCA

OverviewofSRS4410(R)• Introduction• Objective• Definitions• Requirements&Application

• ConductofcompilationengagementasperSRS4410• Ethicalrequirements• Professionaljudgement• Engagementlevelqualitycontrol• Engagementacceptance&continuance• CommunicationwithTCWGandmanagement• Performingtheengagement• Documentation• Practitioner’sreport

343 MPVijayKumarFCA

COMPILATIONENGAGEMENT

REPORTSasrequiredbythisSRS

InaccordancewithanAPPLICABLEfinancialreportingFramework(FRF)

ASSISTmanagementinpreparation&presentationoffinancialinformationoftheentity

PractitionerappliesACCOUNTING&FINANCIALREPORTING Expertise

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BasicPremiseofCompilationEngagements

Notanassuranceengagement• norequirementtoverifyaccuracy&completenessofinfoprovidedbymanagement

• norequirementtogatherevidencetoexpressauditopinion/reviewconclusion

Managementretainsresponsibilityfor• financialinfo• basisonwhichitisprepared&presented

SRS4410doesnot:• imposeresponsibilityonmgt/TCWG

• overrideL&Rwrtresponsibilityofmgt/TCWG

345 MPVijayKumarFCA

ValueofCompilationEngagement

Compilationperformed

inaccordancewithSRS4410

Applicationofexpertise

inaccounting&financialreporting

CompliancewithStandards• includesethicalstandards

Clearcommunicationofnature&extentof

practitioner’sinvolvement

346 MPVijayKumarFCA

ApplyingSRS4410– Conditions

Practitionerengagedtocompile

HISTORICALfinancialinformation

ProvideaREPORTforengagementinaccordancewithSRS

4410

347 MPVijayKumarFCA

Iflaws&RegulationsdonotmandateSRS4410– Considerations

FinancialinformationrequiredbyL&R?• Requiredtobepubliclyfiled?

Externalpartieslikelytoassociatepractitioner’snamewithfinancialinfo?• Riskthatlevelofassociationwillbemisunderstood

348 MPVijayKumarFCA

CompliancewithSQC1• Appliestofirmwrt itscompilationengagements

• BUT,deficiencyinfirm’sQCsystemdoesnotnecessarilymean:

• Engagementnotcarriedoutinaccordancewithprofessionalstandardsandlegal&regulatoryrequirements

OR

• Practitioner’sreportwasnotappropriate

349 MPVijayKumarFCA

Practitioner’sGuidetoAuditof

SmallEntities

PLEASE REFER TO ICAI PUBLICATION

350 MPVijayKumarFCA\

Personal1slide

351 MPVijayKumarFCA

Mytakeonwindsofchange?• Datais connectedfromthesourcetotheledgerviacloud-basedapplications. Accounting

is morphingintowhateconomists call "interactionjobs", wheretechnicalknowledgeis assumedand highervalueisappliedtoaperson'sabilitytointeractwithinternalandexternal clients,identifyproblems,comeupwithalternativesolutions,determinewhichareaffordableatthis pointintime andcommunicateandinfluenceto deliver an outcome.

• Thesuccessfulaccountantsofthefuturewillbestrongcommunicators,possessgreaterITskillscombinedwithstrategicvisionandtheywillbedevotedtoongoingprofessionaldevelopment.Globalisation isthefutureofaccountingasmoreandmorebusinessesrequirereal-timemanufacturingandinformation,mobilemarketingandonlinetools,includingthecloud,toexpandtheircustomerbaseinternationally.Thusaccounting,auditingandfinanceprofessionalswithknowledgeofinternationalstandardsandregulationswillthrive.

• ICAIisgearedtothisrealityand30overseaschaptersofICAIisatestimonyapartfromembracingInternationalaccountingandassurancestandards. IndianCharteredAccountants,thankstotherigoroustrainingandenviableforwardlookingcurriculum,possessrightinsightsandforesight toovercomechallengesandmakethebestuseoftheopportunities.

352 MPVijayKumarFCATheInstituteofCharteredAccountantsofIndia

M P Vijay Kumar [email protected]