refresher : standards on...
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1 MPVijayKumarFCA
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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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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S.No Reference Titleofthestandard Effectivedate
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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S.No Reference Titleofthestandard Effectivedate
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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S.No Reference Titleofthestandard Effectivedate
31 SA700(R) ForminganOpinionandReportingonFinancialStatements 1stApril2017
32 SA701 CommunicatingKeyAuditMattersintheIndependentAuditor’sReport 1stApril2017
33 SA705(R) ModificationstotheOpinionintheIndependentAuditor'sReport 1stApril2017
34 SA706(R) EmphasisofMatterParagraphsandOtherMatterParagraphsintheIndependentAuditor'sReport 1stApril2017
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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S.No Reference Titleofthestandard Effectivedate
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• 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
• SA300(Revised),“PlanninganAuditofFinancialStatements”•
• SA315,“IdentifyingandAssessingtheRisksofMaterialMisstatementthroughUnderstandingtheEntityandItsEnvironment”
• SA320(Revised),“MaterialityinPlanningandPerforminganAudit”
• SA330“TheAuditor’sResponsestoAssessedRisks”
• SA402(Revised)“AuditConsiderationsRelatingtoanEntityUsingaServiceOrganisation”
• SA450,“EvaluationofMisstatementsIdentifiedDuringtheAudit”
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500-599AuditEvidence
• 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• SA600(AAS10),“UsingtheWorkofAnotherAuditor”
• SA610(Revised)“UsingTheWorkofInternalAuditors”
• SA610(Revised),UsingtheWorkofInternalAuditors
• SA620(Revised)“UsingtheWorkofanAuditor’sExpert”
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700-799:AuditConclusionsandReporting• SA700(Revised),ForminganOpinionandReportingonFinancialStatements
• SA705,ModificationstotheOpinionintheIndependentAuditor’sReport
• SA706“EmphasisofMatterParagraphsandOtherMatterParagraphsintheIndependentAuditor’sReport”
• SA710(Revised)“ComparativeInformation—CorrespondingFiguresandComparativeFinancialStatements”
• SA720“TheAuditor’sResponsibilityinRelationtoOtherInformationinDocumentsContainingAuditedFinancialStatements”
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800-899:Specialpurpose
• SA800“AuditsofFinancialStatementsPreparedinAccordancewithSpecialPurposeFrameworks”
• SA805“SpecialConsiderations—AuditsofSingleFinancialStatementsandSpecificElements,AccountsorItemsofaFinancialStatement”
• SA810“EngagementstoReportonSummaryFinancialStatements”
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2000-2699:StandardsonReviewEngagements
• SRE2400(Revised),EngagementstoReviewHistoricalFinancialStatements
• SRE2410“ReviewofInterimFinancialInformationPerformedbytheIndependentAuditoroftheEntity”
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3000:36909:StandardsonAssuranceEngagements• 3000-3399ApplicabletoAllAssuranceEngagements• 3400-3699SubjectSpecificStandards
• SAE3400(AAS35),“TheExaminationofProspectiveFinancialInformation”
• SAE3402,“AssuranceReportsonControlsataServiceOrganisation”
• SAE3420,AssuranceEngagementstoReportontheCompilationofProformaFinancialInformationIncludedinaProspectus
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4000-4699:StandardsonRelatedServices• SRS4400(AAS32),“EngagementstoPerformAgreed-uponProceduresRegardingFinancialInformation”
• SRS4410(Revised),CompilationEngagements
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SQC
• SQC1,“QualityControlforFirmsthatPerformAuditandReviewsofHistoricalFinancialInformation,andotherAssuranceandRelatedServicesEngagements”
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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
EffectiveforAuditsoffinancialstatementsforperiodsbeginningonorafterApril1,2010
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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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35 MPVijayKumarFCA
AcceptanceofChangeinTermsDonotagreetochangeifnoreasonablejustificationforit.
• IfToAE arechanged:• AuditorandMGTshallagreeonnewterms,and• recordnewtermsinengagementletterorothersuitableformofwrittenagreement.
• IfunabletoagreewithchangedToAE ANDnotpermittedbyMGTtocontinue:
• WithdrawifpermittedunderL&R;and• DetermineneedtoreporttootherpartiessuchasTCWG/regulators/owners
![Page 36: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/36.jpg)
36 MPVijayKumarFCA
SA220QualityControlFor
AnAuditofFinancialStatements
EffectiveforAuditsoffinancialstatementsforperiodsbeginningonorafterApril1,2010
![Page 37: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/37.jpg)
37 MPVijayKumarFCA
OverviewofSA220• Introduction
• Scope• Effectivedate
• Objective• Definitions• Requirements&Application
• Leadershipresponsibilitiesforqualityonaudits• Relevantethicalrequirements• Acceptance&continuanceofclientrelationship&auditengagements
• Assignmentofengagementteams• Engagementperformance• Monitoring• Documentation
![Page 38: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/38.jpg)
38 MPVijayKumarFCA
Scope
• Dealswith:• SpecificresponsibilitiesoftheauditorregardingQualityControl(QC)proceduresforanauditofFS
• ResponsibilitiesofengagementQCreviewer
• Shouldbereadinconjunctionwithrelevantethicalrequirements
• PresumesthatfirmissubjecttoSQC1
![Page 39: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/39.jpg)
39 MPVijayKumarFCA
QCSystem&RoleofEngagementTeam
• ResponsibilityofAuditFirm• ImplementQCsystemthatprovidesreasonableassurance:
• Firm&itspersonnelcomplywithprofessionalstandards®ulatory&legalrequirements
• Reportsissuedbyfirm/engagementpartnersareappropriateinthecircumstances
• ResponsibilityofEngagementTeam• ImplementapplicableQCprocedures
• Providefirmwithrelevantinfowrt QCsystemrelatingtoIndependence
![Page 40: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/40.jpg)
40 MPVijayKumarFCA
RelyonFirmQC
EngagementTeamentitledtorelyonfirm’sQCunlessinformationprovidedbyfirmorotherpartiessuggestsotherwise:
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41 MPVijayKumarFCA
Auditor’sObjectiveImplementQCprocedures
AtEngagementLevel
ThatprovideReasonableAssurance
Auditcomplieswithprofessionalstandards&legalrequirements
Auditreportissuedisappropriateinthecircumstances&
![Page 42: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/42.jpg)
42 MPVijayKumarFCA
SA230AuditDocumentation
EffectiveforauditsoffinancialstatementsforperiodsbeginningonorafterApril1,2009
![Page 43: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/43.jpg)
43 MPVijayKumarFCA
OverviewofSA230• Introduction
• Scope• EffectiveDate
• Objective
• Definitions
• Requirements• TimelyPreparationofAuditDocumentation• DocumentationoftheAuditProceduresPerformedandAuditEvidenceObtained
• AssemblyoftheFinalAuditFile
• ApplicationandOtherExplanatoryMaterial
![Page 44: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/44.jpg)
44 MPVijayKumarFCA
Scope
Scope
Tobeadaptedtoauditsofotherhistoricalfininfo
DealswithAuditor’sresponsibilitytoprepareauditdoxforanauditofFS
SpecificdoxrequirementsofotherSAsdonotlimitapplicationofthisSA
L&Rmayestablishadditionalrequirements
![Page 45: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/45.jpg)
45 MPVijayKumarFCA
Objective
Sufficient&Appropriaterecordofbasisforauditor’sreport
Evidencethatauditwasplannedandperformed
inaccordancewithSAs&L&R
Preparedocumentationthatprovides
![Page 46: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/46.jpg)
46 MPVijayKumarFCA
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
![Page 47: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/47.jpg)
47 MPVijayKumarFCA
• Nodeletion/discardingpermittedafterfinalassemblyexceptforexampletoclarifyexistingdoxarisingfrominternal/externalinspections
• Documentspecificreasonsformakingthem
• When&bywhommade/reviewed
• Retentionperiod–7yearsfromdateofauditreport
![Page 48: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/48.jpg)
48 MPVijayKumarFCA
OwnershipofDocumentation• UnlessotherwisespecifiedbyLorR,auditdocumentationisthepropertyoftheAuditor.
• Mayathisdiscretion,makeportionsof,orextractsfrom,auditdocumentationavailabletoclients,provided:
• suchdisclosuredoesnotunderminethevalidityoftheworkperformed,or,
• inthecaseofassuranceengagements,doesnotunderminetheindependenceofauditor/hispersonnel.
![Page 49: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/49.jpg)
49 MPVijayKumarFCA
SA240TheAuditor’sResponsibilityRelatingtoFraud
inanAuditofFinancialStatements
Effectiveforauditsoffinancialstatementsforperiodsbeginningonorafter1stApril,2009
![Page 50: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/50.jpg)
50 MPVijayKumarFCA
OverviewofSA240• Introduction
• Scope• EffectiveDate
• Objectives• Definitions• Requirements
• Professionalskepticism• DiscussionamongtheEngagementTeam• Riskassessmentproceduresandrelatedactivities• IdentificationandAssessmentofRisksofmaterialmisstatementduetofraud• ResponsestotheAssessedRisksofmaterialmisstatementduetofraud• Evaluationofauditevidence• Auditorunabletocontinuetheengagement• ManagementRepresentations• Communicationwiththosechargedwithgovernanceandmanagement• CommunicationstoRegulatoryandEnforcementauthorities• Documentation
• ApplicationandOtherExplanatoryMaterialontheseaspects• Appendices
![Page 51: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/51.jpg)
51 MPVijayKumarFCA
Scope
• Dealswithauditor’sresponsibilitiesrelatingtofraudinauditoffinancialstatements
• ExpandsonhowSA315andSA330,aretobeappliedinrelationtorisksofmaterialmisstatementduetofraud.
![Page 52: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/52.jpg)
52 MPVijayKumarFCA
ResponsibilityforFraudPrevention&Detection
1. Thosechargedwithgovernance• Oversightofmanagementpolicies• Considerpotentialformanagementoverrideofcontrols• Considerpotentialformanagement’sinappropriateinfluenceonfinancialreporting
2. Management• Establishproperpolicies• Emphasisonethicsandhonesty
![Page 53: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/53.jpg)
53 MPVijayKumarFCA
ResponsibilityofAuditor
• Obtainreasonableassurancethatfinancialstatementsarefreeofmaterialmisstatements.
• Subjectto:• Inherentlimitationsofaudit
• Fraud– deliberatelyconcealed,sodifficulttodetect
• ButexerciseProfessionalSkepticism.
![Page 54: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/54.jpg)
54 MPVijayKumarFCA
Auditor’sObjectives
1. Identifyandassessriskofmaterialmisstatementsduetofraud
2. ObtainSAAEaboutassessedrisks
3. Respondappropriatelytoidentified/suspectedfraud
![Page 55: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/55.jpg)
55 MPVijayKumarFCA
ProfessionalSkepticism• Requiresongoingquestioningof:
• Whetherinfo.&auditevidenceobtainedsuggestpossibilityofmaterialmisstatementduetofraud.
• Donottakeclientintegrityandhonestyforgranted
• Documentsmaybeacceptedasgenuineifnocontraryindications,butwhenindoubt,may:
• Confirmdirectlywith3rdparty
• Engageexperttoassessauthenticity
• Investigate-responsetoinquiriesisinconsistent
![Page 56: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/56.jpg)
56 MPVijayKumarFCA
SA250ConsiderationofLawsandRegulationsinanAuditofFinancialStatements
EffectiveforauditsoffinancialstatementsforperiodsbeginningonorafterApril1,2009
![Page 57: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/57.jpg)
57 MPVijayKumarFCA
OverviewofSA250• Introduction
• Scope• Effectivedate
• Objectives• Definition• Requirements
• TheAuditor’sconsiderationofcompliancewithLawandRegulation(L&R)
• Auditprocedureswhennon-complianceisidentifiedorsuspected• Reportingofidentifiedorsuspectednoncompliance• Documentation
• ApplicationandOtherExplanatoryMaterial
![Page 58: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/58.jpg)
58 MPVijayKumarFCA
Scope• Dealswithauditor’sresponsibility:
• toconsiderL&RwhenperformingauditofFS.
• Doesnotapplyto:• assuranceengagementswheretesting&reportingoncompliancewithL&Risthespecificobjective.
![Page 59: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/59.jpg)
59 MPVijayKumarFCA
WhatisNonCompliance?
• Actsofomissionorcommission
• eitherintentionalorunintentional• whicharecontrarytotheprevailingLorR
• Doesnotincludepersonalmisconduct(unrelatedtobusinessactivitiesofentity)byTCWG,Mgt.,employeesoftheentity.
![Page 60: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/60.jpg)
60 MPVijayKumarFCA
MGT.ResponsibilityforCompliancewithL&R• MGTresponsible
• UnderoversightofTCWG
• PoliciesandProcedures:• Monitorlegalrequirements• Ensureeffectivenessofoperatingprocedures• Instituting/OperatingappropriatesystemsofInternalcontrols• Developing/publicising/following/monitoringofCodeofconduct• Employeetraining• Engagelegaladvisors• MaintainregisterofsignificantL&R&recordofcomplaints
![Page 61: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/61.jpg)
61 MPVijayKumarFCA
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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62 MPVijayKumarFCA
Responsibilityw.r.t.differenttypesofL&R
TypesofL&R
ObtainSAAEregcompliance
Undertakespecifiedprocedurestohelp
identifynon-compliancethatmayimpactFS
Exerciseprofessionalskepticism
A BDirecteffectonmaterialamounts&disclosuresinFS
Fundamentalimpactonoperations&GoingConcern
![Page 63: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/63.jpg)
63 MPVijayKumarFCA
SA260CommunicationwithThoseChargedwith
Governance
EffectiveforauditsoffinancialstatementsforperiodsbeginningonorafterApril1,2009
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64 MPVijayKumarFCA
OverviewofSA260• Introduction
• Scope• Effective Date
• Objectives• Definitions• Requirements
• Those Charged with Governance• Matters to be Communicated• The Communication Process• Documentation
• Application and Other Explanatory Material
![Page 65: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/65.jpg)
65 MPVijayKumarFCA
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
![Page 66: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/66.jpg)
66 MPVijayKumarFCA
CommunicateclearlywithTCWGresponsibilitiesofauditorandplannedscopeandtimingofaudit
ProvideTCWGwithtimelyobservations–significantandrelevantinoverseeingfinalreportingprocess
ObtainfromTCWGinformationrelevanttoaudit
Promoteeffectivetwo-waycommunicationbetweenauditorandTCWG
Auditor’s Objectives
![Page 67: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/67.jpg)
67 MPVijayKumarFCA
MatterstobeCommunicated
Auditor’sresp inrelationtoFSaudit
PlannedScopeandtimingof
audit
Significantfindings
fromtheaudit
![Page 68: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/68.jpg)
68 MPVijayKumarFCA
Documentation• Matterscommunicatedorally:
• Documentmatters;and
• alsowhenandtowhommatterwerecommunicated.
• MattersCommunicatedinwriting–• retainacopyofthecommunication.
![Page 69: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/69.jpg)
69 MPVijayKumarFCA
SA265CommunicatingDeficienciesinInternalControltoThoseChargedwithGovernance&Management
EffectiveforAuditsoffinancialstatementsforperiodsbeginningonorafterApril1,2010
![Page 70: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/70.jpg)
70 MPVijayKumarFCA
OverviewofSA265• Introduction
• Scope• EffectiveDate
• 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
![Page 71: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/71.jpg)
71 MPVijayKumarFCA
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.
![Page 72: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/72.jpg)
72 MPVijayKumarFCA
Auditor’sObjective
• CommunicateappropriatelytoTCWG&Mgt:
• DeficienciesinICidentifiedduringaudit,and
• Thatinhisprofessionaljudgmentaresufficientlyimportanttomerittheirattentions.
![Page 73: Refresher : Standards on Auditingmadurai-icai.org/wp-content/uploads/2017/05/Audit-Standards-MDU.pdf · §4000–4699: StandardsonRelatedServices(SRSs) 5 M P Vijay Kumar FCA S.No](https://reader030.vdocument.in/reader030/viewer/2022040913/5e894709adf4d738786b9c52/html5/thumbnails/73.jpg)
73 MPVijayKumarFCA
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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74 MPVijayKumarFCA
MainRequirements• Determinewhetherdeficiency(s)inICidentified.
• IfdeficienciesinICidentified,determine:• whetherindividually/incombinationtheyconstitutesignificantdeficiencies.
• communicateinwritingsignificantdeficienciesinICidentifiedtoTCWGonatimelybasis.
• communicatetoMGTatappropriatelevelonatimelybasis:
• Inwriting,significantdeficienciesinIC.• OtherdeficienciesinIC.
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75 MPVijayKumarFCA
SA299ResponsibilityofJointAuditors
EffectiveforallauditsrelatingtoaccountingperiodsbeginningonorafterApril1,1996
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76 MPVijayKumarFCA
ScopeoDealswithauditor’sprofessionalresponsibilitiesasjointauditors.
oDoesnotcoversituationscoveredunderSA600.
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77 MPVijayKumarFCA
DivisionofWork• Bymutualdiscussion:
• Usuallyintermsofauditofidentifiableunits/specifiedareas.
• Wheresuchdivisionnotpossible– intermsofassets/liabilities/income/expenditure,etc.
• Criticalareascoveredbyallauditors.
• Documentthedivision&communicatetoclient.
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78 MPVijayKumarFCA
RelationshipamongJointAuditors• EachJointAuditorresponsibleonlyforworkallocated,whetherornotseparatereportthereforismade.
• EachJointAuditorjointlyandseverallyresponsiblefor:• undividedwork.
• nature,timing,extentofauditprocedures.
• compliancewithdisclosurerequirements.
• auditreportcompliancewithstatuterequirements.
• matterbroughttonoticeofallbyanyoneofthem,andonwhichthereisanagreement.
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79 MPVijayKumarFCA
Reporting• Normally,jointauditorsareabletoarriveatanagreedreport.
• Ifdisagreement,then:• eachoneofthemshouldexpresshisopinionthroughaseparatereport.
• ajointauditorisnot boundbymajorityviewregardingmatterstobecoveredinthereportandshouldexpresshisopinioninaseparatereport.
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80 MPVijayKumarFCA
SA300PlanninganAuditofFinancialStatements
EffectiveforauditsoffinancialstatementsforperiodsbeginningonorafterApril1,2008
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81 MPVijayKumarFCA
OverviewofSA300• Introduction
• Scope• Effective Date
• 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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82 MPVijayKumarFCA
Scope&ObjectiveSCOPE• DealswithAuditor’sresponsibilitytoplanauditofFS.• Itisframedinthecontextofrecurringaudits.• Additionalconsiderationsidentifiedforinitialauditengagements.
Auditor’sObjectivePlananauditsothatengagementisperformedinaneffectivemanner.
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83 MPVijayKumarFCA
Requirements1. InvolveKeyEngagementTeamMembersinplanning
2. PreliminaryEngagementActivities• PerformproceduresrequiredbySA220reg.Clientacceptance,etc.
• Evaluatecompliancewithethicalrequirementsincludingindependence.
• EstablishunderstandingoftermsofengagementasperSA210
3. PlanningActivities• Establishoverallauditstrategy
• Developanauditplan
• Updateandchangeoverallauditstrategyandauditplanasnecessary
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84 MPVijayKumarFCA
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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85 MPVijayKumarFCA
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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86 MPVijayKumarFCA
SA315IdentifyingandAssessingtheRiskofMaterial
MisstatementsthroughUnderstandingtheEntity&ItsEnvironment
EffectiveforauditsoffinancialstatementsforperiodsbeginningonorafterApril1,2008
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87 MPVijayKumarFCA
OverviewofSA315• Introduction
• Scope• Effective Date
• Objective• Definitions• Requirements
• 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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88 MPVijayKumarFCA
Scope• Auditor’sresponsibilitytoidentify&assessrisksofmaterialmisstatementsinfinancialstatements.
• Throughunderstanding:• theentity.
• itsenvironment.
• itsinternalcontrols.
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89 MPVijayKumarFCA
Objective– oftheAuditor
Identify&assessriskofmaterialmisstatements
Understandtheentity
Financialstatement&Assertionlevel
Design&implementresponsestoassessedrisk
Entity’senvironment
Entity’sinternalcontrols
Fraud Error
Reducerisktoacceptablylowlevel
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90 MPVijayKumarFCA
RiskAssessmentProcedures(RAP)– Need
RAPEstablishframeworkofreferencefor:• AssessingriskofmaterialmisstatementsinFS.• Establishingandassessingcontinuedrelevanceofestablishedmaterialitylevels.
• Evaluatingappropriatenessofaccountingpolicies-selection&application,disclosures.
• Identifyingareasneedingspecialauditconsideration.• Developingexpectationswrt AnalyticalProcedures.• Respondingtoassessedriskofmaterialmisstatements.• Evaluatingsufficiency&appropriatenessofauditevidence.
However,RAPbythemselves,donotprovideSAAEonwhichtobasetheauditopinion
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91 MPVijayKumarFCA
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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92 MPVijayKumarFCA
5ComponentsofInternalControl1. ControlEnvironment
2. Entity’sRiskAssessmentProcess
3. InformationSystemandCommunication
4. ControlActivitiesrelevanttoAudit
5. MonitoringofControls
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93 MPVijayKumarFCA
SA320MaterialityinPlanning&PerforminganAudit
EffectiveforAuditsoffinancialstatementsforperiodsbeginningonorafterApril1,2010
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94 MPVijayKumarFCA
OverviewofSA320• Introduction
• Scope• MaterialityintheContextofanAudit• EffectiveDate
• Objective• Definition• Requirements
• DeterminingMaterialityandPerformanceMaterialitywhenPlanningtheAudit
• RevisionastheAuditProgresses• Documentation
• ApplicationandOtherExplanatoryMaterialontheseaspects
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95 MPVijayKumarFCA
SCOPE
ThisSADealswith
SA450Explains
Auditor’sresponsibility
ToApplytheconceptofmateriality
Inplanning&performingauditofFS
Applicationofmateriality
Identifiedmisstatements
onaudit
Evaluatingeffectof
Uncorrectedmisstatements
onFS
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96 MPVijayKumarFCA
MaterialityintheContextofanAudit
• FinancialReportingFrameworksoftendiscuss“materiality”incontextofpreparation&presentationofFSe.g.
• Misstatementsarematerialifinaggregate/individuallymayinfluenceeconomicdecisionsofusers.
• Auditor’sdeterminationofmaterialityisamatterofprofessionaljudgement
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97 MPVijayKumarFCA
Auditor’sObjective
• Conceptofmaterialityisappliedbytheauditorin:
• planningandperformingaudit,• evaluatingeffectofidentifiedmisstatementsonauditandofuncorrectedmisstatements,ifany,onFSand
• formingtheopinionintheauditor’sreport.
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98 MPVijayKumarFCA
DocumentationDocumentationRequirements
• MaterialityfortheFSasawhole.
• Ifapplicable,thematerialitylevelorlevelsforparticularclassesoftransactions,accountbalancesordisclosures
• Performancemateriality.
• Anyrevisionofaboveduringaudit
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99 MPVijayKumarFCA
SA330TheAuditor’sResponsestoAssessedRisks
EffectiveforauditsoffinancialstatementsforperiodsbeginningonorafterApril1,2008
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100 MPVijayKumarFCA
OverviewofSA330• Introduction
• Scope• Effective Date
• Objective• Definitions• Requirements
• 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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101 MPVijayKumarFCA
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.
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102 MPVijayKumarFCA
Definitions• SubstantiveProcedures
• AuditProceduresdesignedtodetectmaterialmisstatementsatassertionlevel.Theseinclude:
• Testsofdetails– classesoftransactions/accountbalances/disclosures
• Substantiveanalyticalprocedures
• TestsofControls• AuditProcedureforevaluatingoperatingeffectivenessofcontrolsinpreventing/detecting&correctingmaterialmisstatementatassertionlevel
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103 MPVijayKumarFCA
OverallResponses• Auditorrequiredtodesign&implementoverallresponses toaddressriskofmaterialmisstatementatFinancialStatementlevel.
• Theseinclude:• Emphasizingonprofessionalskepticism• Assigningmoreexperienced/skilledstafforexperts• Moresupervision• Incorporateunpredictabilityinauditprocedures• Generalchangestonature,timing&extentofauditprocedures
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104 MPVijayKumarFCA
SA402AuditConsiderationsRelatingtoanEntityUsinga
ServiceOrganisation
EffectiveforAuditsoffinancialstatementsforperiodsbeginningonorafterApril1,2010
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105 MPVijayKumarFCA
OverviewofSA402• Introduction
• Scope• Effectivedate
• 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
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106 MPVijayKumarFCA
Scope• DealswithAuditor’sResponsibilitytoobtainSAAE
• whenclientusesservicesofoneormoreServiceOrganizations(SO).
• ItexpandsonhowtoapplySA315&SA330insuchsituations
• Natureandextentofworktobeperformedbyuserauditordependson:
• nature&significanceofthoseservicestouserentityand• relevanceofthoseservicestotheaudit.
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107 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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108 MPVijayKumarFCA
ReportingbyUserAuditor• Modifiedopinionif:
• UnabletoobtainSAAEregardingservicesofSOrelevanttoauditofuserentity’sFS
• DonotrefertoworkofserviceauditorinunmodifiedauditorreportunlessrequiredbyL&R
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109 MPVijayKumarFCA
SA450EvaluationofMisstatementsIdentified
DuringtheAudit
EffectiveforAuditsoffinancialstatementsforperiodsbeginningonorafterApril1,2010
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110 MPVijayKumarFCA
OverviewofSA450• Introduction
• Scope• EffectiveDate
• Objective• Definitions• Requirements
• AccumulationofIdentifiedMisstatements• ConsiderationofIdentifiedMisstatementsastheAuditProgresses• Communication&CorrectionofMisstatements• EvaluatingtheEffectofUncorrectedMisstatements• WrittenRepresentation• Documentation
• ApplicationandOtherExplanatoryMaterialontheseaspects
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111 MPVijayKumarFCA
Scope• Dealswithauditor’sresponsibilitytoevaluateeffectof:
• Identifiedmisstatementsonauditand
• Uncorrectedmisstatement(ifany)onFS
• Auditor’sopinionasperSA700influencedby:• evaluationofimpactofuncorrectedmisstatementsonFSasperSA320.
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112 MPVijayKumarFCA
Auditor’sObjective
Evaluate:
• Effectofidentifiedmisstatementsonaudit AND
• Effectofuncorrectedmisstatements(ifany)onFS
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113 MPVijayKumarFCA
DefinitionsMisstatementDifferencebetweenamount,classification,presentation,disclosuresofreportedFSitemvis-à-vis:
• requirementsofFRF• includesadjustmentsasarenecessary,inauditor’sjudgment,toprovideTrue&Fairview
• canarisefromfraud/error
UncorrectedMisstatements• Misstatementsaccumulatedbyauditorduringtheauditand• thathavenotbeencorrected.
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114 MPVijayKumarFCA
MainRequirements• AccumulationofIdentifiedMisstatements
• auditorneedtoaccumulatemisstatementsidentifiedduringtheaudit,otherthanthosethatareclearlytrivial
• CommunicationandCorrectionofMisstatements• auditorneedtocommunicateonatimelybasisallmisstatementsaccumulatedduringauditwithappropriatelevelofmgt.unlessprohibitedbylaworregulation.
• auditorshallrequestmgt.tocorrectthosemisstatements
• EvaluatingeffectofUncorrectedMisstatements• auditorshalldeterminewhetheruncorrectedmisstatementsarematerial,individuallyorinaggregate.
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115 MPVijayKumarFCA
SA500AuditEvidence
EffectiveforauditsoffinancialstatementsforperiodsbeginningonorafterApril1,2009
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116 MPVijayKumarFCA
OverviewofSA500• Introduction
• Scope• Effectivedate
• Objective• Definitions• Requirements
• 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
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117 MPVijayKumarFCA
Scope
Explainswhatis Dealswith
AuditEvidencewrt auditofFS
Auditor’sResponsibility
ToDesign&PerformauditprocedurestoobtainSAAE
Drawreasonableconclusionstobaseauditopinion
SA500isapplicabletoallAuditEvidence
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118 MPVijayKumarFCA
ObjectiveoftheAuditor
• Design&performauditprocedures:• insuchawaythat• enablehimtoobtainSAAE
• tobeabletodrawreasonableconclusions• onwhichtobasetheauditor’sopinion
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119 MPVijayKumarFCA
ProceduresforObtainingAuditEvidenceInspection
Observation
Confirmation
Re-calculationRe-performance
AnalyticalProcedures
Inquiry
Inquiry alone, ordinarily, does not provide SAAE
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120 MPVijayKumarFCA
Inconsistency/Doubts
• Ifauditevidenceobtainedfromonesourceisinconsistentwiththatobtainedfromanother;
OR
• auditorhasdoubtsoverreliabilityofinformationtobeusedasauditevidence
Then• auditorshalldeterminewhatmodified/additionalauditproceduresarenecessarytoresolvethematter
AND
• shallconsidereffectofthematter,ifany,onotheraspectsoftheaudit.
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121 MPVijayKumarFCA
SA501AuditEvidence– SpecificConsiderations
forSelectedItems
EffectiveforAuditsoffinancialstatementsforperiodsbeginningonorafterApril1,2010
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122 MPVijayKumarFCA
OverviewofSA501• Introduction
• ScopeofthisSA
• EffectiveDate
• Objective
• Requirements&Application• Inventory
• Litigation&Claims
• SegmentInformation
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123 MPVijayKumarFCA
Scope
• DealswithspecificconsiderationsbyauditorinobtainingSAAEw.r.t.certainaspectsof:
• Inventory• Litigation&claims• Segmentinformation
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124 MPVijayKumarFCA
Auditor’sObjectives
Inventory Litigation&Claims
SegmentInfo
Existence&
ConditionCompleteness
Presentation&disclosureinaccordancewithFRF
ObtainSAAE
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125 MPVijayKumarFCA
Inventory
Auditor’sProcedures
Attendanceatphysicalinventorycounting
Auditinventoryrecords
Evaluatemgtinstructions&proceduresforrecording
&controllingresults
Observeperformanceofmgtprocedures
InspectinventoryPerformtestcounts
Recordsaccuratelyreflectactualinventorycountresults
AND
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126 MPVijayKumarFCA
Litigation&Claims
• Inquiry– ofmanagement&otherswithintheentity
• Review– minutesofmeetingsofTCWG,communicationbetweenentity&externallegalcounsel
• Review– legalexpensesaccount
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127 MPVijayKumarFCA
SegmentinformationObtainSAAErepresentation&disclosureofsegmentinfoinaccordancewithapplicableFRF:• Obtainunderstandingofmethodsusedbymgt indeterminingsegmentinfo
• EvaluatingwhethersuchmethodsarelikelytoresultindisclosureinaccordancewithapplicableFRF;and
• Whereappropriate,testingapplicationofsuchmethods
• Performinganalyticalproceduresorotherauditproceduresappropriateinthecircumstances
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128 MPVijayKumarFCA
SA505ExternalConfirmations
EffectiveforAuditsoffinancialstatementsforperiodsbeginningonorafterApril1,2010
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129 MPVijayKumarFCA
OverviewofSA505• Introduction
• 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
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130 MPVijayKumarFCA
Scope• Dealswithauditor’suseofexternalconfirmationprocedures(ECP)toobtainAuditEvidenceinaccordancewithSA330&SA500
• Doesnotcoverinquirieswrt litigations&claims.
• ImportanceofECPasauditevidencerecognizedinotherSAse.g.SA330,SA240,SA500
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131 MPVijayKumarFCA
Auditor’sObjective
• WhenusingECPs,
• Istodesign&performsuchprocedurestoobtainrelevant&reliableauditevidence
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132 MPVijayKumarFCA
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
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133 MPVijayKumarFCA
SA510InitialAuditEngagements-OpeningBalances
EffectiveforAuditsoffinancialstatementsforperiodsbeginningonorafterApril1,2010
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134 MPVijayKumarFCA
OverviewofSA510• Introduction
• Scope• Effectivedate
• Objective• Definitions• Requirements
• AuditProcedures• AuditConclusionsandReporting
• ApplicationandOtherExplanatoryMaterialontheseaspects
• Appendix:IllustrationsofAuditors’Report
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135 MPVijayKumarFCA
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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136 MPVijayKumarFCA
Definitions• InitialAuditEngagement– AnengagementinwhichPriorPeriodFS
• Notaudited;or• Auditedbyapredecessorauditor.
• OpeningBalances– AccountingBalancesexistingatthebeginning
• Closingbalancesofpriorperiod– Reflecttheeffectofpriorperiodtransactionsandevents,andaccountingpoliciesapplied
• Disclosureofaccountsi.e.,contingencyandcommitments
• Predecessorauditor– Theauditorfromdifferentauditfirm
• AuditedFSinthepriorperiod• Replacedbycurrentauditor.
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137 MPVijayKumarFCA
AuditConclusionsandReportingQualifiedorDisclaimer
• UnabletoobtainSAAEwrt OB.
QualifiedorAdverse
• OBcontainmisstatements:• ThatmateriallyaffectcurrentFS,and
• Effectnotproperlyaccountedforordisclosed.
• Accountingpoliciesnotconsistentlyapplied.
• Accountingpolicieschanges notproperlyaccountedordisclosed.
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138 MPVijayKumarFCA
SA520ANALYTICALPROCEDURES
EffectiveforAuditsoffinancialstatementsforperiodsbeginningonorafterApril1,2010
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139 MPVijayKumarFCA
OverviewofSA520• Introduction
• Scope• Effectivedate
• Objectives• Definition• Requirements&Application
• Substantiveanalyticalprocedures• Analyticalproceduresthatassistwhenforminganoverallconclusion
• Investigatingresultsofanalyticalprocedures
• Appendix
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140 MPVijayKumarFCA
Scope• Dealswithauditor’suseofanalyticalprocedures(AP)as:
• substantiveanalyticalprocedures(SAPs)AND
• proceduresneartheendofaudittohelpinforminganoverallconclusiononFS
• SA315dealswithuseofAPsasriskassessmentprocedures
• SA330includesrequirements&guidancewrt nature,timing,extentofauditprocedures(includingAP)inresponsetoassessedrisks
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141 MPVijayKumarFCA
Auditor’sObjectives
OBTAIN DESIGN&PERFORM
Relevant&reliableauditevidencewhenusingSAPs
APsneartheendofauditwhenformingoverallconclusionwhetherFSareconsistentwithauditor’sunderstandingoftheentity
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142 MPVijayKumarFCA
MAINREQUIREMENTSSubstantiveAnalyticalProcedures• WhendesigningandperformingSAPs,auditorshall:
• DeterminesuitabilityofparticularSAPs• Evaluatereliabilityofdata• Developexpectationofrecordedamounts/ratios• Determineamountofanydifferenceofrecordedamountsvsexpectedvalues
APsthatAssistWhenForminganOverallConclusion• auditorshalldesignandperformAPsnearendofauditthatassisttheauditorwhenforminganoverallconclusionasto
• whethertheFSareconsistentwithauditor’sunderstandingofentity.
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143 MPVijayKumarFCA
SA530AUDITSAMPLING
EffectiveforauditsoffinancialstatementsforperiodsbeginningonorafterApril1,2009
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144 MPVijayKumarFCA
OverviewofSA530• Introduction
• Scope• EffectiveDate
• Objective• Definitions• Requirements
• SampleDesign,SizeandSelectionofItemsforTesting• PerformingAuditProcedures• NatureandCauseofDeviationsandMisstatements• ProjectingMisstatements• EvaluatingResultsofAuditSampling
• ApplicationandOtherExplanatoryMaterial• Appendices
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145 MPVijayKumarFCA
Scope• SAApplieswhenauditorhasdecidedtouseauditsamplinginperformingauditprocedures
• SAdealswithauditor’suseofstatisticalandnon-statisticalsamplingwhen-
• SA530complementsSA500
Designingandselectingauditsample
Performingtestsofcontrolsandtestsofdetails
Evaluatingresultsfromsample
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146 MPVijayKumarFCA
Objective
• ObjectiveofAuditorwhenusingAuditSamplingis:
• Toprovideareasonablebasistodrawconclusionsaboutpopulationfromwhichsampleisselected
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147 MPVijayKumarFCA
SampleDesign,SizeandSelectionofItemsSampleDesignoWhendesigningauditsample,Consider
• Purposeofauditprocedure• Characteristicsofpopulation
SampleSize• Shouldbesufficienttoreducesamplingrisktoacceptablylowlevel
SelectionofItems• Insuchawaythateachunithaschanceofselection
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148 MPVijayKumarFCA
Performingauditprocedures
• Performauditprocedures,appropriatetothepurpose,oneachitemselected.
• Ifauditprocedurenotapplicabletoselecteditem,performprocedureonreplacementitem
• Ifunabletoapplyauditprocedures/alternativeprocedures,toselecteditem,treatthatitemas
• adeviationfromtheprescribedcontrol,inthecaseoftestsofcontrols,or
• amisstatement,inthecaseoftestsofdetails
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149 MPVijayKumarFCA
SA540AuditingAccountingEstimates,IncludingFairValueAccountingEstimates,andRelatedDisclosures
EffectiveforauditsoffinancialstatementsforperiodsbeginningonorafterApril1,2009
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150 MPVijayKumarFCA
OverviewofSA540o Introduction
• Scope• Effectivedate
o Objectiveso Definitions
• Requirements• RiskAssessmentProceduresandRelatedActivities• IdentifyingandAssessingtheRisksofMaterialMisstatement• ResponsestotheAssessedRisksofMaterialMisstatement• FurtherSubstantiveProcedurestoRespondtoSignificantRisk• EvaluatingtheReasonablenessoftheAccountingEstimates(AE),andDetermining
Misstatements• DisclosuresRelatedtoAccountingEstimates• IndicatorsofPossibleManagementBias• WrittenRepresentations• Documentation
o ApplicationandOtherExplanatoryMaterialo Appendix
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151 MPVijayKumarFCA
Scope
Scope
ExpandsonapplicationofSA315SA330andotherrelevantSAs
inrelationtoAE
Dealswithauditor’sresponsibility
wrt AE,fairvalueAEAndrelateddisclosures
IncludesrequirementandguidanceonmisstatementsofindividualAE,
andindicatorsofpossiblemanagementbias
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152 MPVijayKumarFCA
SomeExamples§ AccountingEstimates
• Allowancefordoubtfulaccounts• Inventoryobsolescence• Warrantyobligations• Depreciationmethodorassetusefullife• Provisionagainstthecarryingamountofaninvestment• Outcomeoflongtermcontracts• FinancialObligations/Costsarisingfromlitigationsettlementsandjudgments
§ FairValueAccountingEstimates• Complexfinancialinstruments,whicharenottradedinanactiveandopen
market• Share-basedpayments• Propertyorequipmentheldfordisposal• Certainassetsorliabilitiesacquiredinabusinesscombination,includinggoodwill
andintangibleassets• Transactionsinvolvingtheexchangepartieswithoutmonetaryconsideration
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153 MPVijayKumarFCA
Objective
• ObtainSAAEincontextofapplicableFRFthat:• AEincludingfairvalueAEintheFSarereasonable
AND
• relateddisclosuresintheFSareadequate
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154 MPVijayKumarFCA
RiskAssessmentProceduresandRelatedActivities
Auditortoobtainunderstandingof:
RequirementsofapplicableFRFrelevanttoAE,includingrelated
disclosures
Howmgt identifiestransaction,eventsandconditionsgivingrisetotheneedforAEtobedisclosedintheFS
Howmgt makesAEandunderstandingofthedataonwhichtheyarebased
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155 MPVijayKumarFCA
SA550RelatedParties(RP)
EffectiveforAuditsoffinancialstatementsforperiodsbeginningonorafterApril1,2010
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156 MPVijayKumarFCA
OverviewofSA550Ø Introduction
• Scope• EffectiveDate
ØObjectivesØDefinitionsØRequirements
• RiskAssessmentProceduresandRelatedActivities• IdentificationandAssessmentoftheRisksofMaterialMisstatementAssociated
withRelatedPartyRelationshipsandTransactions• ResponsestotheRisksofMaterialMisstatementAssociatedwithRelatedParty
RelationshipsandTransactions• EvaluationoftheAccountingforandDisclosureofIdentifiedRelatedParty
RelationshipsandTransactions• WrittenRepresentations• CommunicationwithThoseChargedwithGovernance• Documentation
ØApplication&OtherExplanatoryMaterialontheseaspects
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157 MPVijayKumarFCA
Scope
• DealswithAuditor’sresponsibilities:• regardingRPrelationshipsandtransactionswhenperformingauditofFS.
• ExpandsonapplicationofSAs315,330,240wrt:• risksofmaterialmisstatementsassociatedwithRPrelationshipsandtransactions.
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158 MPVijayKumarFCA
ResponsibilitiesofAuditorPerformprocedurestoidentify,assessandrespondtoriskofmaterialmisstatementonaccountoffailuretoaccountfor/discloseRPrelationship,transactionandbalancesaslaiddownbyFRF.o EvaluatepresenceoffraudriskfactorsasperSA240.o EvenIfFRFestablishesminimalornorequirements–
• concludewhetherFSachieveatrue&fairview;and
• arenotmisleading
oAuditor’sinabilitytodetectmaterialmisstatementsisgreaterincaseofRPrelationship/Transactions.
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159 MPVijayKumarFCA
Auditor’sObjectives• ObtainanunderstandingofRPrelationships&transactions(irrespectiveofwhetherFRFestablishesRPrequirements)sufficienttobeableto:oRecognizefraudriskfactors.oConcludewhetherFS:
§ achieveatrueandfairpresentationand§ arenotmisleading.
• WhereFRFestablishesRPrequirements:oObtainSAAEaboutwhether:
§ RPrelationships&transactionsappropriatelyidentified,accountedfor&disclosedinFSinaccordancewithFRF.
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160 MPVijayKumarFCA
RiskAssessmentProcedures(RAPs)&RelatedActivities
RiskAssessmentProcedures&
RelatedActivities(SA315&SA240)
UnderstandingtheEntity’sRP
Relationships&Transactions
MaintainingAlertnessforRPInformationwhenreviewing
Records/Documents
SharingRPInformationwithEngagement
Team
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161 MPVijayKumarFCA
SA560SubsequentEvents(SE)
EffectiveforauditsoffinancialstatementsforperiodsbeginningonorafterApril1,2009
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162 MPVijayKumarFCA
Overview• Introduction
§ Scope§ Effectivedate
• Objectives• Definitions• Requirements
§ EventsoccurringbetweenthedateoftheFinancialStatementsandthedateoftheAuditor’sReport
§ FactsWhichBecomeKnowntotheAuditorAftertheDateoftheAuditor’sReportbutBeforetheDatetheFinancialStatementsareIssued
§ FactsWhichBecomeKnowntotheAuditorAftertheFinancialStatementshavebeenIssued
• ApplicationandOtherExplanatoryMaterial
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163 MPVijayKumarFCA
Scope
• DealswithAuditor’sresponsibilitiesrelatingtoSEinauditofFS.
• TwotypesofSE:• TYPE1:provideevidenceofconditionsthatexistedatdateofFS
• TYPE2:provideevidenceofconditionsthataroseafterdateofFS.
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164 MPVijayKumarFCA
Objectives
DateofFS
DateofAuditreport
DotheseSErequireadjustmentof/disclosureinFS
ObtainSAAE
FactsthatwouldhaveledtoamendedARifknownatdateofAR
Respondappropriately
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165 MPVijayKumarFCA
Definitions• DateofFS
• DateofendoflatestperiodcoveredbyFS
• DateofApprovalofFSDateonwhich• CompletesetofFSincludingtherelatednotesprepared;and• AppropriatepersonsassertresponsibilityforabovecompletesetofFS.
• DateofAuditor’sReport• DateofARonFSinaccordancewithSA700• CannotbebeforeSAAEobtainedtoformopinion• CannotbeearlierthanthedateofapprovalofFS
• DateofIssuanceofFS• WhenAR&auditedFSmadeavailableto3rdparties
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166 MPVijayKumarFCA
Definition– SubsequentEvents
(1)Eventsoccurringbetween:• ThedateofFS;andthedateofAR
AND(2)FactsthatbecomeknowntoauditorafterdateofAR.
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167 MPVijayKumarFCA
SA570GoingConcern(GC)
EffectiveforauditsoffinancialstatementsforperiodsbeginningonorafterApril1,2009
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168 MPVijayKumarFCA
OverviewofSA570§ Introduction
• Scope• EffectiveDate
§ Objectives
§ Requirements• RiskAssessmentProceduresandRelatedActivities• EvaluatingManagement’sAssessment• PeriodBeyondManagement’sAssessment• AdditionalAuditProcedureswhenEventsorConditionsareIdentified• AuditConclusionsandReporting• UseofGoingConcernAssumptionAppropriatebutaMaterialUncertaintyExists
• UseofGoingConcernAssumptionInappropriate• ManagementUnwillingtoMakeorExtendItsAssessment• CommunicationwithThoseChargedwithGovernance• SignificantDelayintheApprovaloftheFinancialStatements
§ Application&OtherExplanatoryMaterialontheseAspects
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169 MPVijayKumarFCA
Scope
DealswithAuditor’sresponsibilityinAuditofFS
Wrt management’suseofGCAssumption
InthePreparation&PresentationofFS
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170 MPVijayKumarFCA
ResponsibilitiesofManagement• GC- afundamentalprincipleinpreparationofFinancialStatements
• ManagementtomakeaspecificassessmentofGCAssumption
• Judgmentaboutinherentlyuncertainfutureoutcomeofevents/conditions
• Period- atleast12monthsfromdateofFS• Basedon– Informationavailableatparticularpointoftime• Affectedby– Size&Complexityofentity,Nature&Conditionofbusiness
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171 MPVijayKumarFCA
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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172 MPVijayKumarFCA
Auditor’sObjective
§ ObtainSAAE:• aboutappropriatenessofuseofGCAssumptioninpreparation&presentationofFS.
§ Conclude,basedonauditevidence:• whetheramaterialuncertaintyexiststhatmaycastsignificantdoubtonentity’sabilitytocontinueasGC.
§ Determine• implicationsfortheauditor’sreport.
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173 MPVijayKumarFCA
SA580WrittenRepresentations
EffectiveforauditsoffinancialstatementsforperiodsbeginningonorafterApril1,2009
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174 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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175 MPVijayKumarFCA
Scope
DealswithAuditor’sResponsibilitytoobtainWRfrom
Management TCWG(whereappropriate)
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176 MPVijayKumarFCA
WRasAuditEvidence
• WRarenecessaryauditevidence:• butdonotprovideSAAE.
• WRdonotdiluteauditor’sresponsibilitytoobtainotherauditevidenceformatterscoveredbyWR.
• IfMgt.modifiesordoesnotproviderequestedWR-
• possibilityofexistenceofoneormoresignificantissues.
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177 MPVijayKumarFCA
Auditor’sObjectives
Supportotherauditevidence
ObtainWRthatMgt/TCWGhavefulfilledtheirresponsibilitiesreg:
PreparationoftheFSandCompletenessofinfo.providedtoauditor
Respondappropriatelyto:WRprovided,or
Mgt/TCWGrefusaltoprovideWR
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178 MPVijayKumarFCA
WRrequiredaboutManagement’sResponsibilities§ PreparationoftheFS:
§ CompliancewithapplicableFRF.
§ InformationProvided&completenessoftransactions:§ HasprovidedallrelevantinformationandaccessasagreedintermsofAuditEngagement.
§ Alltransactionsrecorded&reflectedinFS.
§ Descriptionofmanagement’sresponsibilitiesinWR§ Management’sresponsibilitiesshallbedescribedinWRinthemannerinwhichtheseresponsibilitiesdescribedintermsofauditengagement
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179 MPVijayKumarFCA
SA600UsingtheWorkofAnotherAuditor
EffectiveforallauditsrelatingtoaccountingperiodsbeginningonorafterApril1,2002
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180 MPVijayKumarFCA
Introduction
• Establishesstandardsforapplicationinsituationswhereauditorusestheworkofanotherauditor.
• Doesnotcover:• Jointaudits.• Relationshipwithpredecessorauditor.
• Considerhowotherauditor’sworkaffectstheaudit.
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181 MPVijayKumarFCA
DefinitionsPrincipalAuditor(PA):• Auditorresponsibleforfinancialinformation(FI)ofanentitywhenitincludesFIofoneormorecomponentsauditedbyanotherauditor.
OtherAuditor(OA):• Auditor,otherthanPA,whoisresponsibleforreportingonFIofacomponentwhichisincludedinFIauditedbythePA.
Component:• Division,branch,subsidiary,jointventure,associatedenterpriseoranyotherentitywhoseFIisincludedinFIauditedbyPA.
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182 MPVijayKumarFCA
PA’sProcedures• ConsidertheprofessionalcompetenceofOA,ifOAisnotamemberofICAI.
• Visitcomponentandexaminebooksofaccount,ifessential.
• Obtainsufficientappropriateevidence,thatworkofOAisadequateforPA'spurposes.
• DiscussauditproceduresappliedbyOA.
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183 MPVijayKumarFCA
PA’sProcedures• ReviewawrittensummaryofOA’sproceduresandfindingsthroughquestionnaires/checklist.
• ConsidersignificantfindingsofOA:• discussauditfindingswithOAandMgt.ofcomponent.• performsupplementaltestsifnecessary.
• IncaseOAisnotaprofessionallyqualifiedauditor- forinstance,whereacomponentissituatedinforeigncountry:
• Proceduresmentionedaboveassumeaddedimportance.
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184 MPVijayKumarFCA
DocumentationComponentswhoseFSareauditedbyOAandtheirsignificancetothefinancialinformationoftheentityasawhole.
• Namesoftheotherauditors.• Anyconclusionsreachedthatindividualcomponentsarenotmaterial.
• Proceduresperformedregardingcomponents.• Conclusionsreached.• MannerofdealingwithModifiedReportofOAwhilefinalising PA’sReport.
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185 MPVijayKumarFCA
Co-ordinationBetweenAuditors
• Sufficientliaison/co-ordinationbetweenPAandOA.• PAmayrequireOAtoansweradetailedquestionnaire.
• OAshouldcoordinatewithPA:• adheringtotime-table.• bringingtotheattentionofPAanysignificantfinding.• compliancewithrelevantstatutoryrequirements.• respondtodetailedquestionnaire.
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186 MPVijayKumarFCA
ReportingConsiderations
• Expressaqualified/disclaimerofopinionbecauseofscopelimitation:
• ifPAconcludesthathecannotusetheworkofOAand• PAunabletoperformsufficientadditionalproceduresregardingFIofthecomponentauditedbyOA.
• ReportshouldstateclearlydivisionofresponsibilitybetweenPAandOA.
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187 MPVijayKumarFCA
SA610UsingtheWorkofInternalAuditors
EffectiveforAuditsoffinancialstatementsforperiodsbeginningonorafterApril1,2010
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188 MPVijayKumarFCA
OverviewofSA610Introduction
• Scope• EffectiveDate
§ Objectives§ Definitions§ Requirements
• DeterminingWhetherandtoWhatextenttousetheworkoftheInternalAuditors
• UsingSpecificWorkoftheInternalAuditors• Documentation
§ ApplicationandOtherExplanatoryMaterial
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189 MPVijayKumarFCA
Scope
1. DealswithExternalAuditor’sresponsibility:a) Regardingtheworkofinternalauditorsb) Whenexternalauditorhasdeterminedin
accordancewithSA315that• internalauditfunctionislikelytoberelevanttoaudit
2. Doesnotdealwith caseswhereinternalauditorsprovidedirectassistancetoexternalauditorsincarryingoutauditprocedures
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190 MPVijayKumarFCA
RelationshipbetweenInternalAuditFunction&ExternalAuditor
§ Role&objectivesofinternalauditfunctiondeterminedbyMgt/TCWG.
§ IrrespectiveofDegreeofautonomy/objectivity,internalauditfunctionisnot independentofentity.
§ externalauditorhassoleresponsibilityforauditopinion,and
• thatresponsibilitynotreducedbyuseofworkofinternalauditors.
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191 MPVijayKumarFCA
Auditor’sobjectives
Ifexternalauditordeterminesinternalauditfunctionlikelytoberelevanttoaudit,heneedstodetermine:
• whether&towhatextenttousespecificworkofinternalauditors;and
• Ifso,whethersuchworkisadequateforexternalauditpurpose.
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192 MPVijayKumarFCA
UsingSpecificWorkofIAEvaluatetheworktodetermineitsadequacywhether:
• WorkwasperformedbyIAhavingadequatetechnicaltraining&proficiency.
• Workwasproperlysupervised,reviewed&documented.
• AdequateauditevidenceobtainedbyIA.• Conclusionsreachedareappropriate&IAreportsareconsistentwithresultsofwork.
• Exceptions/unusualmattersdisclosedbyIAareproperlyresolved.
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193 MPVijayKumarFCA
SA620UsingtheWorkofAnAuditor’sExpert
EffectiveforAuditsoffinancialstatementsforperiodsbeginningonorafterApril1,2010
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194 MPVijayKumarFCA
OverviewofSA620• Introduction
• 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
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195 MPVijayKumarFCA
ScopeofSA
Auditor’sresponsibilities
Individualororganisation’s work
AuditorusesthisworkinobtainingSAAE
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196 MPVijayKumarFCA
ResponsibilityforAuditOpinion
• Auditopinionissoleresponsibilityofauditor
• Thatresponsibilitynotreducedbyuseofworkofauditor’sexpert
• Nonetheless,IfrequirementsofthisSAarefollowed&auditorconcludesexpert’sworkisadequate,hemayacceptthatworkasSAAE.
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197 MPVijayKumarFCA
Auditor’sObjectives
Determine
Whethertouseworkof
auditor’sexpert
Ifyes,whetherthatworkisadequate
forauditor’spurposes
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198 MPVijayKumarFCA
Competence,Capabilities&ObjectivityofAuditor’sExpert• Evaluatecompetence,capability&objectivityofexpert
• IfExternalexpert- inquireintointerestsandrelationshipsthatthreatenobjectivity
• Competence• nature&levelofexpertise
• Capability• abilitytoexercisecompetenceincircumstancesofengagement
• Objectivity• possibleeffectsthatbias/conflictofinterest/influenceofothersmayhaveonprofessional/businessjudgment
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199 MPVijayKumarFCA
SA700ForminganOpinion&ReportingonFinancial
Statements
EffectiveforAuditsoffinancialstatementsforperiodsbeginningonorafterApril1,2012
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200 MPVijayKumarFCA
OverviewofSA700§ Introduction
• Scope• EffectiveDate
§ Objectives§ Definitions§ Requirements
• ForminganopiniononFS• Formofopinion• Auditor’sreport• SupplementaryinformationpresentedwithFS
• ApplicationandOtherExplanatoryMaterial• Appendix- IllustrativeFormatsofAuditorReport
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201 MPVijayKumarFCA
Scope• Dealswithauditor’sresponsibilitytoformanopinionontheFS
• Alsodealswithform&contentofauditor’sreportissuedasaresultofanauditofFS
• Modifiedopinion,EMP,OMPdealtwithbySA705&706• SA700writtenincontextofgeneralpurposeFS
• FSunderspecialpurposeframeworkdealtbySA800&SA805
• Itpromotesconsistencyinauditreports
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202 MPVijayKumarFCA
Auditor’sObjectives
• FormanopiniononFSbasedonevaluationofconclusionsdrawnfromauditevidence
AND• Express clearlythatopinionthroughawrittenreportthatalsodescribesthebasisforopinion
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203 MPVijayKumarFCA
ForminganOpiniononFS
• WhetherFSarepreparedinallmaterialrespectsinaccordancewithapplicableFRF
• Toformthisopinion,auditorneedstoconcludewhetherhehasobtainedreasonableassurancethatFSasawholearefreeofmaterialmisstatements(fraud/error)
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204 MPVijayKumarFCA
FormofOpinion
• UNMODIFIEDOPINION:• AuditorconcludesFSarepreparedinallmaterialrespectsasperapplicableFRF
• MODIFIEDOPINION(dealtbySA705):• Basedonauditevidence,auditorconcludesFSasawholenotfreefrommaterialmisstatements OR
• AuditorunabletoobtainSAAEthatFSasawholearefreefrommaterialmisstatements
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205 MPVijayKumarFCA
Auditor’sReport
• Shallbeinwriting• Writtenreportencompassesreportsissued:• inhardcopyformatAND• usingelectronicmedium
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206 MPVijayKumarFCA
TitleAddresseeIntroductoryParaMgt ResponsibilityforFSParaAuditor’sResponsibilityParaAuditor’sOpinionOtherReportingResponsibilities
SignatureoftheAuditor
DateoftheAuditor’sReport
PlaceofSignature
AuditReportforAudits
ConductedinAccordancewithSAs
ELEMENTS
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207 MPVijayKumarFCA
SA705ModificationstotheOpinioninthe
IndependentAuditor’sReport
EffectiveforAuditsoffinancialstatementsforperiodsbeginningonorafterApril1,2012
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208 MPVijayKumarFCA
OverviewofSA705• Introduction
• Scope• EffectiveDate
• Objective• Definitions• Requirements&applications
• Circumstanceswhenmodificationofauditor’sopinionisrequired
• Determiningtypeofmodificationtoauditopinion• Form&contentofauditreportwithmodifiedopinion
• CommunicationwithTCWG
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209 MPVijayKumarFCA
Scope
• DealswithAuditor’sresponsibilitytoIssueanappropriatereportincircumstanceswhen:§ InforminganopinionasperSA700,Auditorconcludesthatamodificationtoauditor’sopinionisnecessary
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210 MPVijayKumarFCA
TypesofModifiedOpinions
Qualified Adverse Disclaimer
Natureofmattergivingrisetomodification
Auditor’sjudgmentrepervasivenessofeffects/possibleeffectsofmatteronFS
WhetherFSaremateriallymisstated
InabilitytoobtainSAAEleadingtopossiblematerialmisstatementinFS
AffectingFactors
AND
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211 MPVijayKumarFCA
Auditor’sObjective
• Expressclearlyanappropriatelymodifiedopinionthatisnecessarywhenauditor:
• CONCLUDES (basedonauditevidenceobtained)thatFSareasawholenotfreefrommaterialmisstatements
OR• UNABLE toobtainSAAEtoconcludethatFSasawholearefreeofmaterialmisstatements
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212 MPVijayKumarFCA
DeterminingtheTypeofModificationtoAuditor’sOpinion
NatureofMatterGivingRiseto
theModification
Auditor’sJudgmentaboutthePervasivenessoftheEffectsor
PossibleEffectsontheFSMaterialbutNot
PervasiveMaterialand
PervasiveFSarematerially
misstatedQualifiedopinion
Adverseopinion
InabilitytoobtainSAAE
Qualifiedopinion
Disclaimerofopinion
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213 MPVijayKumarFCA
SA706EmphasisofMatterParagraphsandOtherMatterParagraphsintheIndependentAuditor’sReport
EffectiveforAuditsoffinancialstatementsforperiodsbeginningonorafterApril1,2012
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214 MPVijayKumarFCA
OverviewofSA706• Introduction
• Scope• Effectivedate
• Objective• Definitions• Requirements&Application
• Emphasisofmatterparagraphs• Othermatterparagraphs• CommunicationwithTCWG
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215 MPVijayKumarFCA
Scope&Auditor’sObjectives
• DealswithAdditionalcommunicationinauditreport(AR)
• Whenauditorconsidersitnecessarytodrawusers’attentionto:
• Matter/spresentedordisclosedinFSthatareofsuchimportancethattheyarefundamentaltousers’understandingofFS
OR• Matter/sotherthanthosepresented/disclosedinFSthatarerelevanttousers’understandingofaudit/auditor’sresponsibilities/AR
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216 MPVijayKumarFCA
EMPinAuditReport
• MattersfundamentaltounderstandingofFS• AuditorshouldhaveobtainedSAAEthatmatterisnotmateriallymisstatedinFS
• EMPtoreferonlytoinfopresented/disclosedinFS
• WidespreaduseofEMPreduceseffectivenessofauditor’scommunicationofsuchmatters
• MoreinfoinEMPthanFSmayimplymatternotadequatelypresenteddisclosedinFS
• Thus,EMPlimitedtomatterpresented/disclosedinFS
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217 MPVijayKumarFCA
OMPinAuditReport
• IncludeifnotprohibitedbyL&R• Useheading“OtherMatter”/otherappropriateheading
• Placement:• immediatelyafterOpinionpara&EMPor• elsewhereifOMPisrelevanttoOtherReportingResponsibilitiessection
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218 MPVijayKumarFCA
SA710ComparativeInformation– CorrespondingFigures
andComparativeFinancialStatements
EffectiveforAuditsoffinancialstatementsforperiodsbeginningonorafterApril1,2011
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219 MPVijayKumarFCA
Overview§ Introduction
• Scope• Effectivedate
§Objectives§Definitions§ Requirements&Application
• Auditprocedures• Auditreporting
§ Appendix:Illustrativeauditor’sreports
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220 MPVijayKumarFCA
Definition- ComparativeInformation
Amountsanddisclosures
IncludedinFS
Inrespectofoneormorepriorperiods
InaccordancewithapplicableFRF
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221 MPVijayKumarFCA
Scope• Dealswithauditor’sresponsibilitiesrelatingtocomparativeinfoinauditofFS
• WhenpriorperiodFSwereauditedbyanotherauditororwerenotaudited:
• RequirementsofSA510wrt openingbalancesalsoapply
• NatureofComparativeInfo:• DependsuponapplicableFRF.• Twoapproaches:
• Correspondingfigures• ComparativeFS
• ApproachoftenspecifiedbyL&R• Mayalsobespecifiedbytermsofengagement
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222 MPVijayKumarFCA
CorrespondingFiguresvisavisComparativeFS– Auditreportingdifferences
CorrespondingFigures ComparativeFSAuditor’s opinion on FSrefers to current periodonly
Auditor’s opinion refers toeach period for which FSare presented
SA710separatelycoversauditreportingforbothtypesofapproaches
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223 MPVijayKumarFCA
Auditor’sObjectivesOBTAIN REPORT
SAAE
Whethercomparativeinfo(CI)includedinFShasbeenpresented
inallmaterialrespectsinaccordancewithrequirementsofapplicableFRF
Inaccordancewithauditor’sreportingresponsibilities
and
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224 MPVijayKumarFCA
SA720TheAuditor’sResponsibilitiesinRelationtoOtherInformationinDocumentsContaining
AuditedFinancialStatements
EffectiveforAuditsoffinancialstatementsforperiodsbeginningonorafterApril1,2010
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225 MPVijayKumarFCA
OverviewofSA720• Introduction
• Scope• Effectivedate
• Objective• Definitions• Requirements
• ReadingOtherInformation(OI)• MaterialInconsistencies• MaterialMisstatementofFact
• Application&OtherExplanatoryMaterialontheseaspects
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226 MPVijayKumarFCA
Scope• Dealswithauditor’sresponsibilitywrt otherinformation(OI)indocumentscontaining:
• auditedFSandauditor’sopinionthereon.
• Unlessanyspecificrequirementinanengagement:• Auditor’sopiniondoesnotcoverOI.• AuditorhasnospecificresponsibilitytodeterminewhetherOIisproperlystated.
• BUT,needtoreadtheOI since:• inconsistenciesofOIvis-a-visauditedFSunderminesthecredibilityoftheauditedFS.
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227 MPVijayKumarFCA
Auditor’sObjective
• Respondappropriately:§wheresuchotherinformationcouldunderminecredibilityofauditedFSandAuditReport.
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228 MPVijayKumarFCA
DefinitionsOtherInformation(OI)§ Financial&non-financialinformation,Includedbylaw/regulation/custom,indocumentscontainingauditedFSandAuditReport.Examples:
• Reportbymanagement/TCWG.• Financialsummaries/highlights.• Financialratios.• Selectedquarterlydata.
• Doesnotinclude:• Pressrelease/transmittalmemorandumaccompanyingthedocumentscontainingauditedFS.
• Informationcontainedinanalystbriefings.• Informationonentity’swebsite.
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229 MPVijayKumarFCA
DefinitionsInconsistency• OIthatcontradictsinformationcontainedinauditedFS.
• Mayraisedoubtabout:• auditconclusionsdrawnfromauditevidenceobtainedearlier.
• basisofauditopiniononFS.
MisstatementofFact• OIthatis:
• unrelatedtoauditedFSand• incorrectlystated/presented.
• MayunderminecredibilityofauditedFS.
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230 MPVijayKumarFCA
MainRequirementsReadingOI• ReadOItoidentifymaterialinconsistenciesvis-a-visauditedFS.
• Makeappropriatearrangementswithmgt/TCWGtogetOIbeforedateofAuditReport:§ Helpstimelyresolutionofpossiblematerialinconsistency/misstatementoffacts.
§ AgreementwithmanagementastotimeofavailabilityofOI.§ Ifnotpossiblebefore,thengetOI,assoonaspracticable.
MaterialInconsistencies• Itmaterialinconsistenciesidentified:
§ DeterminewhetherauditedFSorOIneedsrevision
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231 MPVijayKumarFCA
StandardonQualityControl(SQC)1QualityControlforFirmsthatPerformAudits&ReviewsofHistoricalFinancialInformation,andOtherAssurance&
RelatedServicesEngagements
EffectiveforallEngagementsrelatingtoaccountingperiodbeginningonorafterApril1,2009
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232 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.
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233 MPVijayKumarFCA
Parameters
SQC1istobereadinconjunctionwith
• TheCharteredAccountantsAct,1949• CodeofEthics• OtherrelevantpronouncementsofICAI
Collectivelyknownas“theCODE”.
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234 MPVijayKumarFCA
SystemofQualityControl
Allfirmsshouldestablishasystemofqualitycontrolthatprovidesreasonableassurancethat:
• Firm&itspersonnelcomplywithprofessionalstandards,regulatory&legalrequirements.
• Reportsissuedbyfirmorpartnersareappropriateinthecircumstances.
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235 MPVijayKumarFCA
Definitions
• Engagementdocumentation• Engagementpartner• Engagementquality
controlreview• Engagementqualitycontrol
reviewer• Engagementteam• Firm• Inspection• Listedentity
•Monitoring• Networkfirm• Network• Partner• Personnel• Professionalstandards• Reasonableassurance• Staff• Suitablyqualified
externalperson
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236 MPVijayKumarFCA
ElementsofSystemofQualityControl
1. Leadershipresponsibilitiesforquality
2. Ethicalrequirements
3. Clientacceptance/continuance
4. Humanresources
5. Engagementperformance
6. Monitoring
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237 MPVijayKumarFCA
Documentation
§ DocumentQCpolicies&procedures
§ Communicatetoallfirmpersonnel:• descriptionofQCpolicies• objectivestobeachievedtherefrom• allresponsibleforquality• allexpectedtocomply
§ ObtainfeedbackonQCsystemfrompersonnel
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238 MPVijayKumarFCA
SA800SpecialConsiderations– AuditofFinancialStatements
PreparedinAccordancewithSpecialPurposeFrameworks
EffectiveforAuditsoffinancialstatementsforperiodsbeginningonorafterApril1,2011
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239 MPVijayKumarFCA
OverviewofSA800§ Introduction
• Scope
• Effectivedate
§ Objective
§ Definitions
§ Requirements&Applications• considerationswhenacceptingtheengagement• considerationswhenplanning&performingtheaudit• forminganopinion&reportingconsiderations
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240 MPVijayKumarFCA
ScopeofSA800• DealswithspecialconsiderationsintheapplicationofotherSAs:
• ToauditofFSpreparedinaccordancewithaspecialpurposeframework(SPF)
• WritteninthecontextofcompletesetofFSpreparedinaccordancewithaSPF
• DoesnotoverriderequirementsofotherSAs;
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241 MPVijayKumarFCA
Auditor’sObjectiveAddressappropriatelyspecialconsiderationsrelevantto:
• Engagementacceptance
• Engagementplanning&performance
• Formingopinion&reportingonFS
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242 MPVijayKumarFCA
EngagementAcceptance- Considerations• Obtainunderstandingof:
• PurposeforwhichFSareprepared• Intendedusers• Stepstakenbymgt todeterminethatapplicableFRFisacceptable
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243 MPVijayKumarFCA
Planning&PerforminganAudit–Considerations• DeterminewhethertheapplicationofSAsrequirespecialconsiderationsincircumstancesoftheengagement
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244 MPVijayKumarFCA
ForminganOpinion&ReportingConsiderationsApplySA700(R)Also:• DescribethepurposeforwhichFSareprepared&intendedusers
• Ifmgt hasachoiceofFRFsinthepreparationofFS:• Explanationofmgt’s responsibilityfortheFSmakereferencetoitsresponsibilityfordeterminingacceptabilityofapplicableFRF.
• EvaluatewhetherFSadequatelydescribetheFRFapplied• IncludeEmphasisofMatterparatoalertusersreapplicationofspecialpurposeFRF
• FSmaynotsuitableforanotherpurpose
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245 MPVijayKumarFCA
SA805SpecialConsiderations– AuditsofSingleFS&SpecificElements,AccountsorItemsofFS
Effectiveforauditsofsinglefinancialstatementsorofspecificelements,accountsoritemsforperiods
beginningonorafterApril1,2011
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246 MPVijayKumarFCA
Overview• Introduction
• Scope• Effectivedate
• Objective
• Definitions
• Requirements&Application• Considerationswhenacceptingtheengagement• Considerationswhenplanning&performingtheaudit• Forminganopinionandreportingconsiderations
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247 MPVijayKumarFCA
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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248 MPVijayKumarFCA
Auditor’sObjective• Addressappropriatelyspecialconsiderationsrelevantto:
• Acceptanceoftheengagement• Planning&performanceofthatengagement• Forminganopinion&reportingonSFS&EFS
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249 MPVijayKumarFCA
ApplicationofSAs• SA200requirescompliancewithallSAsrelevanttoaudit
• ThisappliestoauditofSFSeveniftheauditoralsoauditsthecompleteFS.
• IfauditornotalsoengagedtoauditthecompleteFS,considerthepracticabilityofauditofSFSinaccordancewithSAs.
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250 MPVijayKumarFCA
AcceptabilityofFRF§ AuditortodetermineacceptabilityofFRF(SA210)
§ ConsiderwhetherFRFincludesallrequirementsrelevanttopreparationofSFS/EFS
§ ForauditofSFS,determine:• WhetherapplicationofFRFwillresultinpresentationthatprovidesadequatedisclosurestoenableintendeduserstounderstandinfoconveyedinSFSand
• EffectofmaterialtransactionsandeventsoninfoconveyedinSFS
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251 MPVijayKumarFCA
FormofOpinion• ExpectedformofopiniondependsuponapplicableFRF&applicableL&R
• Communicateexpectedformofreport– SA210• Considerwhetherexpectedformofopinionisappropriateinthecircumstances
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252 MPVijayKumarFCA
Planning&PerformanceConsiderations
• AdaptallSAsasnecessaryintheauditofSFS• CarefulconsiderationofrelevanceofeachSAisnecessary
• WhenauditingSFSinconjunctionwithfullFS,auditevidenceobtainedaspartofauditoffullFSmaybeusefulBUTauditorneverthelessneedstoplan&performauditofSFStoobtainSAAE
• SomeitemsfromcompleteFSmaybeinterrelatedwithEFS
• Auditorwouldneedtoperformproceduresonsuchinterrelateditems
• MaterialityofSFS<materialityforfullFS
• AffectsNatureTimingExtentofauditprocedures
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253 MPVijayKumarFCA
FormingOpinion&Reporting-Considerations• ApplySA700,asnecessary.• IfalsoengagedtoreportonfullFS,expressseparateopiniononeachengagement.
• IfauditedSFSpublishedwithentity’sauditedfullFS,presentationofSFSshouldbeclearlydifferentiatedfromfullFS.
• DonotissueauditreportonSFSuntilsatisfiedwiththedifferentiation.
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254 MPVijayKumarFCA
SA810EngagementstoReporton
SummaryFinancialStatements
Effectiveforauditsofsinglefinancialstatementsorofspecificelements,accountsoritemsforperiodsbeginningonorafterApril1,2011
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255 MPVijayKumarFCA
OverviewofSA810• Introduction
• Scope• Effectivedate
• Objectives• Definitions• Requirements&Application
• Engagementacceptance• Natureofprocedures• Formofopinion• Timingofworkandeventssubsequenttothedateofauditor’sreport• Auditreportonsummaryfinancialstatements• Restrictionondistributionoruse• Comparatives• Unauditedsupplementaryinformationpresentedwithsummaryfinancialstatements
• Otherinformationindocumentscontainingsummaryfinancialstatements• Auditorassociation
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256 MPVijayKumarFCA
Scope• Dealswithauditor’sresponsibilities:
• Whenundertakingengagementtoreportonsummaryfinancialstatements(SFS)
• DerivedfromFSauditedinaccordancewithSAbythatsameauditor
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257 MPVijayKumarFCA
Objectives
DETERMINEAPPROPRIATENESS
FORMOPINIONONSFS
EXPRESSTHEOPINIONCLEARLY
OfacceptingtheengagementtoreportonSFS
Basedonevaluationofconclusionsdrawnfromevidenceobtained
Throughwrittenreportthatalsodescribesbasisfor
thatopinion
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258 MPVijayKumarFCA
EngagementAcceptance• AuditorshallOrdinarily accepttheengagementtoreportonSFSonlywhen:
• AlsoengagedtoconductauditinaccordancewithSAsofthoseFSfromwhichtheseSFShavebeenderived.
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259 MPVijayKumarFCA
BeforeAcceptingtheEngagement
DETERMINEwhetherappliedcriteriaareacceptable
OBTAINmgt agreementthatitacknowledges&understandsitsresponsibilities
AGREEwithmgt theformofopiniontobeexpressedonSFS
Donotacceptengagementif:• criteriaareunacceptableOR• unabletoobtainmgt agreementunlessrequiredbyL&R
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260 MPVijayKumarFCA
SRE2400EngagementstoReviewFinancialStatements
EffectiveforreviewsoffinancialstatementsforperiodsbeginningonorafterApril1,2010.
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261 MPVijayKumarFCA
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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262 MPVijayKumarFCA
PurposeofSRE2400Establishstandards&provideguidance
ReviewofFinancialStatements
Practitioner’sprofessionalresponsibilities
Form&contentofreviewreport
Nottheauditoroftheentity
Ifauditorperformsreviewofinterimfinancialinformation,applySRE2410
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263 MPVijayKumarFCA
ObjectiveofaReviewEngagementEnablethepractitioner
ToState
OnbasisofProcedures
Attention
BelieveFSarenotprepared
inallmaterialrespectsinaccordancewith
applicableFRF
NEGATIVEASSURANCE
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264 MPVijayKumarFCA
GeneralPrinciples• ComplywithICAICodeofEthics.• ConductreviewinaccordancewiththisSRE.• Exerciseprofessionalskepticismwhile:
• Planningreview.• Performingreview.
• Obtainsufficientappropriateevidence:• Forexpressingnegativeassurance.• Primarilythroughinquiry&analyticalprocedures.
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265 MPVijayKumarFCA
ScopeofReview• ReferstoReviewproceduresdeemednecessaryincircumstancestoachieveobjectivesofreview.
• Proceduresshouldbedeterminedhavingregardtorequirementsof:
• ThisSRE.
• Relevantprofessionalbodies.
• Legislation®ulation.
• Termsofengagement.
• Reportingrequirements.
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266 MPVijayKumarFCA
TermsofEngagement• AgreeToE withtheclient:
• Engagementletter.
• Othersuitableformofcontract.
• Sendtoclientanengagementletterdocumentingkeytermsofappointment:
• Confirmspractitioner’sacceptanceofappointment.
• Avoidsmisunderstandingsreg.objectives&scope.
• Clarifiespractitioner’sresponsibility.
• Assistsinplanningthereview.
• ClarifiesFormofreporttobeissued.
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267 MPVijayKumarFCA
RevisedSRE2400Engagementsto
ReviewHistorical FinancialStatements
EffectiveforReviewsofFSforperiodsbeginningonorafterApril1,2016
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268 MPVijayKumarFCA
AttheOutset...• ThereisnoconceptualchangeinrevisedSRE2400• ContinuestoapplytopractitionerswhoareNOT statutoryauditorsofclient,iftheyundertake:
• Reviewoffullhistorical financialstatements• Reviewofinterimfinancialstatements/information
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269 MPVijayKumarFCA
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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278 MPVijayKumarFCA
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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279 MPVijayKumarFCA
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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309 MPVijayKumarFCA
ResponsibilityforPFI
Preparation/Compilation
• Client
Reportingthereon
• Practitioner
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310 MPVijayKumarFCA
PurposeofPFIincludedinProspectus• Illustrateimpactofsignificantevent/transactiononunadjustedinformation
• PFIdoesnotrepresententity’sactualfinancialposition,financialperformanceorcashflows
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311 MPVijayKumarFCA
PFICompilationProcessofClient
Presentsproforma infowithaccompanyingdisclosures
Makesproforma adjustments
Extractsunadjustedfinancialinfofromsource
Identifiessourceofunadjustedinfotobeused
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312 MPVijayKumarFCA
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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313 MPVijayKumarFCA
SRS4400EngagementstoPerformAgreed- uponProcedures
regardingFinancialInformation
EffectiveforallagreeduponproceduresengagementsbeginningonorafterApril1,2004
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314 MPVijayKumarFCA
Introduction• Establishesstandardsonauditor’sprofessionalresponsibilitieswithregardto:
• performAgreed-uponProcedures(AUP)onFinancialInformation(FI).
• form&ContentofreportofAUPengagements.
• Reportoffactualfindingsbasedon:
• specifiedproceduresperformedonspecifiedsubjectmatterofspecialelements,accountsoritemsofFS.
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315 MPVijayKumarFCA
Objectives
• Tocarryoutproceduresofauditnaturetowhichtheauditor,theentityandanyappropriatethirdpartieshaveagreed;and
• Toreportonfactualfindings.
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316 MPVijayKumarFCA
GeneralPrinciples• ComplywithCodeofEthicsissuedbyICAI.
• Wheretheauditorisnotindependent:• astatementtothateffectshouldbemadeinreportoffactualfindings.
• ConductAUPengagementinaccordancewith:• thisSRS;and• termsofengagement.
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317 MPVijayKumarFCA
DefiningTermsofEngagement-I• Ensurethatthereisclearunderstandingofagreedprocedures,conditionsofengagementwith:
• representativesofentity.• otherspecifiedpartieswhowillreceivecopiesofreport.
• Mattersagreedincludes:• natureofengagement.• statedpurposeforengagement.• identificationofFItowhichAUPapplied.• nature,timingandextentofspecificprocedurestobeapplied.
• limitationsondistributionofreport.
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318 MPVijayKumarFCA
DefiningTermsofEngagement-II
• Sendengagementletter:• listingofprocedurestobeperformed.• restrictionsondistributionofreport.
• IfAUPbetweenregulator/industryrepresentatives,thenauditormaynotbeabletodiscussprocedureswithallpartieswhowillreceivereport.
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319 MPVijayKumarFCA
PlanningandDocumentation
• Plantheworksothataneffectiveengagementwillbeperformed.
• Documentmatterswhichareimportantinprovidingevidence:
• tosupportthereportoffactualfindings.
• thatengagementwascarriedoutinaccordancewiththisSRSandtermsofengagement.
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320 MPVijayKumarFCA
ProceduresandEvidence
• PerformAUPandusetheevidenceobtainedasbasisforreportoffactualfindings.
• Proceduresappliedinclude:• Inquiryandanalysis
• Re-computation,comparisonandotherclericalaccuracychecks
• Observation
• Inspection
• obtainingconfirmations
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321 MPVijayKumarFCA
Reporting- I
• Describethepurposeandagreed-uponproceduresofengagement.
• Reportoffactualfindingsshouldcontain:• TitleandAddressee.• IdentificationofspecificFI/non-FItowhichAUPhavebeenapplied.
• Statementthatproceduresperformedwerethoseagreeduponwithrecipient.
• StatementthatengagementperformedinaccordancewithStandardsapplicabletoAUPengagements.
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322 MPVijayKumarFCA
Reporting- II• IdentificationofthepurposeofAUP.• ListingofspecificAUPperformed.• Descriptionoffactualfindingsincludingsufficientdetailsoferrorsandexceptionsfound.
• Statementthatproceduresperformeddonotconstituteeitheranauditorareviewandassuch,noassuranceisexpressed.
• Statementthathadtheauditorperformedadditionalprocedures,auditorreview,othermattersmighthavecometolight.
• Statementthatreportisrestrictedtospecifiedparties.• Statementthatreportdoesnotextendtoentity’sFStakenasawhole.• Dateofreport.• Placeofsignature.• Auditor’ssignature
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323 MPVijayKumarFCA
REVISEDSRS4410COMPILATIONENGAGEMENTS
EffectiveforcompilationengagementsundertakenafterMarch31,2016
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324 MPVijayKumarFCA
OverviewofSRS4410(R)• Introduction• Objective• Definitions• Requirements&Application
• ConductofcompilationengagementasperSRS4410• Ethicalrequirements• Professionaljudgement• Engagementlevelqualitycontrol• Engagementacceptance&continuance• CommunicationwithTCWGandmanagement• Performingtheengagement• Documentation• Practitioner’sreport
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325 MPVijayKumarFCA
COMPILATIONENGAGEMENT
REPORTSasrequiredbythisSRS
InaccordancewithanAPPLICABLEfinancialreportingFramework(FRF)
ASSISTmanagementinpreparation&presentationoffinancialinformationoftheentity
PractitionerappliesACCOUNTING&FINANCIALREPORTING Expertise
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326 MPVijayKumarFCA
BasicPremiseofCompilationEngagements
Notanassuranceengagement• norequirementtoverifyaccuracy&completenessofinfoprovidedbymanagement
• norequirementtogatherevidencetoexpressauditopinion/reviewconclusion
Managementretainsresponsibilityfor• financialinfo• basisonwhichitisprepared&presented
SRS4410doesnot:• imposeresponsibilityonmgt/TCWG
• overrideL&Rwrtresponsibilityofmgt/TCWG
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327 MPVijayKumarFCA
ValueofCompilationEngagement
Compilationperformed
inaccordancewithSRS4410
Applicationofexpertise
inaccounting&financialreporting
CompliancewithStandards• includesethicalstandards
Clearcommunicationofnature&extentof
practitioner’sinvolvement
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328 MPVijayKumarFCA
ApplyingSRS4410– Conditions
Practitionerengagedtocompile
HISTORICALfinancialinformation
ProvideaREPORTforengagementinaccordancewithSRS
4410
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329 MPVijayKumarFCA
Iflaws&RegulationsdonotmandateSRS4410– Considerations
FinancialinformationrequiredbyL&R?• Requiredtobepubliclyfiled?
Externalpartieslikelytoassociatepractitioner’snamewithfinancialinfo?• Riskthatlevelofassociationwillbemisunderstood
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330 MPVijayKumarFCA
CompliancewithSQC1• Appliestofirmwrt itscompilationengagements
• BUT,deficiencyinfirm’sQCsystemdoesnotnecessarilymean:
• Engagementnotcarriedoutinaccordancewithprofessionalstandardsandlegal®ulatoryrequirements
OR
• Practitioner’sreportwasnotappropriate
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331 MPVijayKumarFCA
Practitioner’sGuidetoAuditof
SmallEntities
PLEASE REFER TO ICAI PUBLICATION
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332 MPVijayKumarFCA\
Personal1slide
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333 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.