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