Introduction Historical Retrospect Auditing and Assurance Standards Board-Scope and Functions Setting up of AASB Scope and Functions of AASB Scope of SAs Procedure for Issuing SAs Compliance with the SAs Linkage between SAs and Disciplinary Proceedings Framework of Standards and Guidance Notes on Related Services Quality Control and Engagement Standards Structure of SAs Guidance Notes Guidance Note on Independence of Auditors Guidance Note on Audit Reports and Certificates for Special Purposes Guidance Note on Tax Audit under Section 44AB of the Income-Tax Act Guidance Note on Audit of Inventories Guidance Note on Audit of Debtors, Loans and Advances Guidance Note on Audit of Investments Guidance Note on Audit of Cash and Bank Balances Guidance Note on Audit of Liabilities Guidance Note on Audit of Revenue Guidance Note on Audit of Expenses Guidance Note on Computer Assisted Audit Techniques (CAATs) Guidance Note on Audit of Capital and Reserves Guidance Note on Reporting under section 143(3)(f) and (h) of the Companies Act, 2013 Guidance Note on Audit of Consolidated Financial Statements (CFS) Guidance Note on CARO Guidance Note on Audit of Internal Financial Controls over Financial Reporting Guidance Note on Reporting on Fraud under Section (12) of the Companies Act, 2013 Guidance Note(s) on Related Services Authority Attached to the Documents issued by the institute/MCA Statements Guidance Notes Accounting Standards and Standards on Auditing Accounting Standards Ind AS SQC 1- Quality Control for Firms That Perform Audit And Reviews of Financial Statement and Other Assurance and Related Services Engagements SA/SRE/SAE/SRS-Brief overview SA 200: Overall Objectives of the Independent Auditor and the Conduct of an Audit in accordance with Standards on Auditing SA 210: Agreeing the Terms of Audit Engagements SA 220: Quality Control for an Audit of Financial Statements SA 230: Audit Documentation SA 240: The Auditor’s Responsibility Relating to Fraud in an Audit of Financial Statements SA 250: Consideration of Laws and Regulations in an Audit of Financial Statements SA 260: Communication with Those Charged with Governance SA 265: Communicating Deficiencies in Internal Control to Those Charged with Governance and Management SA 299: Responsibility of Joint Auditors SA 300: Planning an Audit of Financial Statements SA 315: Identifying and Assessing the Risks of Material Misstatement Through Understanding the Entity and Its Environment SA 320: Materiality in Planning and Performing an Audit SA 330: The Auditor’s Responses to Assessed Risks SA 402: Audit Considerations Relating to an Entity Using a Service Organisation SA 450: Evaluation of Misstatements Identified During the Audit SA 500: Audit Evidence SA 501: Audit Evidence—Specific Considerations for Selected Items SA 505: External Confirmations SA 510: Initial Audit Engagements- Opening Balances SA 520: Analytical Procedures SA 530: Audit Sampling SA 540: Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures SA 550: Related Parties SA 560: Subsequent Events SA 570 Going Concern SA 580: Written Representations SA 600: Using the Work of Another Auditor SA 610: Using the work of Internal Auditors SA 620: Using the Work of an Auditor’s Expert SA 700: Forming an Opinion and Reporting on Financial Statements SA 701: Communicating Key Audit Matters in the Independent Auditor’s Report SA 705: Modifications to the Opinion in the Independent Auditor’s Report SA 706: Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s Report SA 710: Comparative Information—Corresponding Figures and Comparative Financial Statements SA 720: The Auditor’s Responsibility in Relation to Other Information in Documents Containing Audited Financial Statements SA 800: Special Considerations—Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks SA 805: Special Considerations—Audits of Single Financial Statements and Specific Elements, Accounts or Items of a Financial Statement SA 810: Engagements to Report on Summary Financial Statements SRE 2400: Engagements to Review Historical Financial Statements SRE 2410: Review of Interim Financial Information Performed by the Independent Auditor of the Entity SAE 3400: The Examination of Prospective Financial Information SAE 3402- Assurance Reports on Controls at a Service Organisation SAE 3420 -Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus SRS 4400: Engagements to Perform Agreed-upon SRS 4410: Compilation Engagements CHAPTER-2: AUDIT PLANNING, STRAEGY & EXECUTION Commencing an Audit Benefits/Advantages of Planning in an Audit of Financial Statements Nature and Extent of Planning Planning – A Continuous Process Overall Audit Strategy and Audit Plan – Responsibility of the Auditor Acceptance and Continuance of Client Relationships and Audit engagements Contents of an Audit Plan Changes to Planning Decisions Overall Audit Strategy Factors while establishing Overall Audit Strategy Benefits of Overall Audit Strategy Considerations in Establishing the Overall Audit Strategy Documenting the Audit Plan Relationship between the Overall Audit Strategy and the Audit Plan Audit Programme Formulating an Audit Programme Drawing up the Audit Programme Audit Execution Execution Planning Risk and Control Evaluation Testing Reporting Other Important Considerations CHAPTER-3: RISK ASSESSMENT AND INTERNAL CONTROL Introduction Internal Control System – Nature, Scope, Objectives and Structure Nature of Internal Control Scope of Internal Controls Objectives of Internal Control System Structure of Internal Control Component of Internal Controls Control Environment Entity’s Risk Assessment Process Control Activities Information System, including the Related Business Processes,Relevant to Financial Reporting, and Communication Monitoring of Controls Review of the system of Internal Controls Methods of Recording Questionnaire Check List Flow Chart Internal Control and Risk Assessment Preliminary Assessment of Control Risk Relationship between the Assessments of Inherent and Control Risk Detection Risk Internal Control assessment & Evaluation Reporting to clients on Internal Control Weaknesses Risk Based Audit Audit Risk Analysis General Steps in the Conduct of RBA Framework of Internal Control International Internal Control Framework CHAPTER 4: SPECIAL ASPECTS OF AUDITING IN AN AUTOMATED ENVIRONMENT Key Features of an Automated Environment Key concepts of Auditing in Real-Time Environment such as E-Commerce, ERP, Core Banking, etc Understanding and Documents Automated Environment Consideration of Automated Environment at each phase of Audit Cycle Enterprise Risk Management Overview Assessing IT-related Risks and Controls Evaluating Risks and Controls at Entity Level and Process Level Using relevant Analytical Procedures and Tests using Data Analytics Standards, Guidelines and Procedures-using Relevant CHAPTER-5: COMPANY AUDIT Appointment of Auditor Appointment of First Auditor Appointment of Subsequent Auditor/Re-appointment of Auditor Eligibility, Qualifications and Disqualifications of an Auditor Rotation of Auditor Applicability of section 139(2) Rotation of Auditor Manner of Rotation of Auditors by the Companies on Expiry of their Term Provisions relating to Audit Committee Applicability of section 177 ie Constitution of Audit Committee Manner and procedure of selection and appointment of auditors Auditor’s Remuneration Removal of Auditors Removal of Auditor before Expiry of Term Appointment of Auditor other than retiring Auditor: Ceiling on Number of Audits Powers/Rights of Auditors Powers / Rights of Comptroller and Auditor-General of India Duties of Auditors Joint Audit Audit of Branch Office Accounts Cost Audit Punishment for non-compliance Final Accounts Preparation and Presentation Financial Statements Consolidated Financial Statement Penalty for contravention Constitution of National Financial Reporting Authority Form of the Balance Sheet Significance of True and Fair Divisible Profits, Dividends and Reserves Concept of profit Valuation of assets Depreciation under Section 123 of the Companies Act, 2013 read with Schedule II to the Companies Act, 2013 Law relating to dividends Interim Dividend Payment of dividend and the Income tax Act Should all fictitious assets be written off before distribution of dividends Audit procedure for “Payment of Dividend”: Reserves Deferred Taxation Non-provision of Tax in the Accounts Depreciation Salient features of Limited Liability Partnerships (LLP) Audit Audit Report Reporting Under CARO, 2016 CHAPTER-6: AUDIT REPORTS Introduction The Auditor’s Report on Financial Statements SA-700, “Forming an Opinion and Reporting on the Financial Statements” Purpose Basic Elements of the Auditor’s Report Auditor’s Report Prescribed by Law or Regulation SA 701, “Communicating Key Audit matters in the Independent Auditor’s Report” Purpose Scope Determining Key Audit matters Communicating Key Audit matters: SA 705, “Modifications to the opinion in the Independent Auditor’s Report” Types of modified opinions Objective Circumstances when a Modification to the Auditor’s Opinion is required Determining the type of Modification to the Auditor’s Opinion Form and Content of the Auditor’s Report when the opinion is modified Communication with those charged with Governance SA 706, “Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s Report” Objective When to give Emphasis of Matter Paragraphs in the Auditor’s Report? When the auditor includes an Emphasis of Matter Paragraph in the Auditor’s Report Distinction between Notes on Accounts and Qualifications Distinction between Audit Report and Certificate Communication to Management and those charged with Governance When all of those charged with Governance are involved in managing the entity Matters to be communicated Planned Scope and Timing of the Audit Significant findings from the Audit Self Review Threats Meaning- Self Review Threats Safeguards that may eliminate or reduce such threats to an acceptable level all into two board categories Reporting Requirements in case of Comparative Information Audit Procedures for Comparative Information CHAPTER-7: AUDIT REPORTS AND CERTIFICATES FOR SPECIAL PURPOSE ENGAGEMENT Introduction Guidance Note on Reports or Certificates for Special Purposes Reasonable Assurance and Limited Assurance Procedures required to be performed by practitioner as Laid down in Guidance Note Preconditions for the Assurance engagement Limitation on the scope Prior to acceptance of the engagement Agreeing on the Terms of Engagement Professional Skepticism, Professional Judgement, and Assurance Skills and Techniques Understanding the Underlying Subject matter and Other Engagement Circumstances Forming the Assurance Opinion/Conclusion Assurance Report Content Documentation Assurance Report prescribed by Law or Regulation Illustrative formats of Reports/ Certificates (issued frequently) SA 800: Special Considerations-Auditors of Financial Statements Prepared in Accordance with Special Purpose Framework Objective Procedures required to be performed as per SA Considerations When Planning and Performing the Audit Forming an Opinion and Reporting Considerations Description of the Applicable Financial Reporting Framework Illustrations of Auditors’ Reports on Special Purpose Financial Stateme nts SA 805: Special Considerations-Audits of Single Financial Statements and Specific Elements, Accounts or Items of Financial Statements Objective Planning the Engagement Considerations When Planning and Performing the Audit Forming an Opinion and Reporting Considerations Illustrations of Auditors’ Reports on a Single Financial Statement and on a Specific Element of a Financial Statement SA 810- Engagements to Report on Summary Financial Statements Objective Engagement Acceptance and Other Planning Activities Procedures required to be Performed at the Executive Stage Form of opinion Auditor’s report on Financial Statements Restriction on Distribution or Use or Alerting Readers to the Basis of Accounting Comparatives Unaudited Supplementary Information Presented with Summary Financial Statements Illustrations of Reports on Summary Financial Statements Standard on Related Services 4400-Engagements to Perform Agreed Upon Procedures regarding Financial Information Agreed upon procedures may also be required to be performed in situations Procedures to be followed by auditor while performing agreed upon procedures engagement as per SRS Report on agreed upon procedure Standard on Related Services 4410-Compilation Engagements Objective The Practitioner’s Report ilustrative report SRE 2400-Engagements to Review Historical Financial Statements Objective Practitioner’s Report SRE 2410 review of Interim Financial Information performed by the independent auditor of the entity Objective Finalising the report Report format Examples of Review Reports on Interim Financial Information’s Key Difference between SRE and SRE CHAPTER-8: AUDIT COMMITTEE AND CORPORATE GOVERNANCE Introduction Corporate Governance The Legal Framework Issues of corporate governance Applicability of LODR Regulations Audit Committee under LODR Regulations Qualified and Independent Audit Committee [Regulation 18(1)] Meeting of Audit Committee [Regulation 18(2)] Powers of Audit Committee [Regulations 18(2)] Role of Audit Committee [Part C (A) of Schedule II] Audit Committee under section 177 of the Companies Act, 2013 Functions of the Audit Committee Review of Information by Audit Committee Role of Auditor in Audit Committee and Certification of Compliance of Conditions of Corporate Governance Auditor’s Responsibility General Principles of Audit Documentation Management Representations Verification regarding Composition of Board [Regulations 17] Remuneration of directors [Part C of Schedule V] Approval of Remuneration of Directors [Regulation 17(6)] Obligations of Director and Senior Management Regulations 17(2) to 17(4), 25(5) to 25(6), (26(1) to (26(2) (26(4) To 26(5) Section 173(1) of the Companies Act, 2013 Compliance of SA 250, ‘Consideration of Laws and Regulations in an Audit of Financial Statement Code of Conduct [Regulations 17(5), 26(3), 46(2) and Part D of Schedule V] Vigil Mechanism [Regulations 22 and 46 and Part C of Schedule V] Subsidiary of Listed Entity [regulations 16(c), 24 and 46 and Part C of Schedule Statement of Deviations or Variations (s) [Regulation 32 and Part C of Schedule II] Disclosures-Management Discussion and Analysis [Schedule] Information to Shareholders [Regulation 36] Stakeholders Relationship Committee [Regulations 20 and Part D of schedule II] Transfer or Transmission or Transposition of Securities [Regulation 40] Compliance certificate [Part B of Schedule II] Disclosures Disclosure and Transparency [Regulation 4] Related Party Disclosure [Regulations 27, 46 and Schedule V] Disclosure of Accounting Treatment [Schedule V] Risk Management Committee [Regulation 21] Nomination and Remuneration committee [Regulation 19 and Part D of Schedule II] Report on Corporate Governance [Regulation 27 of Schedule II] Auditors’ Certificate