Here we are covering your 100 marks for group IICA-IPCC exams.

For competing with ICAI you need to go throughICAI mind. Yes, the MODULES and TESTPAPERS

And also don’t forget the Writing practices.Solve the papers instead of just going throughthem.

Here we are covering your 100 marks for group IICA-IPCC exams.

For competing with ICAI you need to go throughICAI mind. Yes, the MODULES and TESTPAPERS

And also don’t forget the Writing practices.Solve the papers instead of just going throughthem.

2CA KANIKA KHETAN

We are going to cover various aspects ofAudit in next few of our sessions.

We can divide the entire subjects into twobroad categories like

SA’s will be covered with other concepts andwe can take up the remaining ones in end.

SA- Standards on Auditing

We are going to cover various aspects ofAudit in next few of our sessions.

We can divide the entire subjects into twobroad categories like

SA’s will be covered with other concepts andwe can take up the remaining ones in end.

Other Concepts

3CA KANIKA KHETAN

Meaning

Objective

ScopeQualitycontrols

Relationshipwith otherdisciplines

ChapterOverview

Audit

Aspects

Advantage

Limitation

Types ofAudit

EthicalRequirement

Qualitycontrols

4CA KANIKA KHETAN

Audit is an Independent examination of Financialinformation

Of any entity – Profit oriented or Non-profit oriented To express an opinion

Ensure that financial statements are not misleading:

By ensuring that the entries are made by following the accountingprinciples,

with proper supporting documents, are clear and unambiguous, And present a true and fair view picture of the organisation.

Audit is an Independent examination of Financialinformation

Of any entity – Profit oriented or Non-profit oriented To express an opinion

Ensure that financial statements are not misleading:

By ensuring that the entries are made by following the accountingprinciples,

with proper supporting documents, are clear and unambiguous, And present a true and fair view picture of the organisation.

5CA KANIKA KHETAN

SA-200 : ‘Overall objectives of Independent auditor’

Objectives of an auditor are set forward in SA-200. Itstates:

To obtain reasonable assurance Free from Material Misstatement To report the findings. To communicate

`

SA-200 : ‘Overall objectives of Independent auditor’

Objectives of an auditor are set forward in SA-200. Itstates:

To obtain reasonable assurance Free from Material Misstatement To report the findings. To communicate

`6CA KANIKA KHETAN

Adequately cover all relevant aspects

Information is reliable and sufficient by evaluatingthe systems and internal controls and

various other tests

Properly disclosed subject to statutoryrequirements

BUT we are not expected to check outside ourscope of competence

And all these facts should be disclosed in ourreport.

Adequately cover all relevant aspects

Information is reliable and sufficient by evaluatingthe systems and internal controls and

various other tests

Properly disclosed subject to statutoryrequirements

BUT we are not expected to check outside ourscope of competence

And all these facts should be disclosed in ourreport.

7CA KANIKA KHETAN

Examination of system of accounting and internalcontrol

Reviewing the system & procedures

Verification of the authenticity and validity oftransaction

Comparison of items of FS with underlying records

Checking of arithmetical accuracy and the fact thatfinancials are as per norms prescribed.

Verification of title, existence and value of assets

Verification of liabilities

Checking the result shown by P&l

Reporting

Examination of system of accounting and internalcontrol

Reviewing the system & procedures

Verification of the authenticity and validity oftransaction

Comparison of items of FS with underlying records

Checking of arithmetical accuracy and the fact thatfinancials are as per norms prescribed.

Verification of title, existence and value of assets

Verification of liabilities

Checking the result shown by P&l

Reporting8CA KANIKA KHETAN

Audit required by Law

Voluntary Audit

Special Audit

• Trust

• NPO etc

Audit required by Law

Voluntary Audit

Special Audit

• Trust

• NPO etc

9CA KANIKA KHETAN

Safeguards the interest of persons not associated with the

management.

Acts as moral check on employees

Helpful in settling liability for taxes and other liabilities that

arise due to change in organizational structure.

Useful for settling trade disputes

Help in the detection of wastages and losses

Government may require audited and certified statement.

Safeguards the interest of persons not associated with the

management.

Acts as moral check on employees

Helpful in settling liability for taxes and other liabilities that

arise due to change in organizational structure.

Useful for settling trade disputes

Help in the detection of wastages and losses

Government may require audited and certified statement.

10CA KANIKA KHETAN

SA 200 states these limitations as:

The nature of Financial Reporting

The nature of Audit Procedures: Tampering with evidences like non availability,

colluded frauds etc No legal powers

Timeliness of Financial Reporting and the Balancebetween benefit and cost.

Others

SA 200 states these limitations as:

The nature of Financial Reporting

The nature of Audit Procedures: Tampering with evidences like non availability,

colluded frauds etc No legal powers

Timeliness of Financial Reporting and the Balancebetween benefit and cost.

Others

11CA KANIKA KHETAN

Economics

BehavioralScience

Stats &Maths

DataProcessing

AuditAccounting

Law FinancialManagement

Production

13CA KANIKA KHETAN

Leadershipresponsibility

To ensurequality of theengagement

Shouldemphasize on

The importance to audit quality of:•Work complying with professional standards andregulatory requirements•Complying with firm’s quality control policies.•Issuing appropriate audit report•Raising concerns without any fear.

The importance to audit quality of:•Work complying with professional standards andregulatory requirements•Complying with firm’s quality control policies.•Issuing appropriate audit report•Raising concerns without any fear.

14CA KANIKA KHETAN

Qualities of an Auditor and audit firm

The Auditor should be independent, tact, firm, conceptually sound,

should maintain integrity, objective and independence.

They should take care that following qualities are there in there firm

and should maintain quality control:

Leadership responsibility,

Ethical requirements,

Acceptance and continuance of client relationships,

Human resources,

engagement performance and

monitoring.

Qualities of an Auditor and audit firm

The Auditor should be independent, tact, firm, conceptually sound,

should maintain integrity, objective and independence.

They should take care that following qualities are there in there firm

and should maintain quality control:

Leadership responsibility,

Ethical requirements,

Acceptance and continuance of client relationships,

Human resources,

engagement performance and

monitoring.

15CA KANIKA KHETAN

SA-220: Quality Control for an Auditor:It requires that quality standards of the firm should bemaintained and complied with to have an appropriateaudit report

Code of Ethics for Professional Accountants (IESBA code)States the following fundamental principles of professional

ethics: Integrity and Independence Objectivity Professional Competence and due care Confidentiality Professional behavior

SA-220: Quality Control for an Auditor:It requires that quality standards of the firm should bemaintained and complied with to have an appropriateaudit report

Code of Ethics for Professional Accountants (IESBA code)States the following fundamental principles of professional

ethics: Integrity and Independence Objectivity Professional Competence and due care Confidentiality Professional behavior

16CA KANIKA KHETAN

Meaning: Independence implies that the judgmentof a person is not subordinate to the wishes ordirection of another person. In simple wordsdecision of the auditor is not influenced by wishesor directions of any other person.

Independence can be of two types: Independence of mind: Opinion is free from bias. Independence of appearance: The avoidance of

facts and circumstances that are so significantthat a third party can significantly conclude thatauditors integrity had been compromised

Meaning: Independence implies that the judgmentof a person is not subordinate to the wishes ordirection of another person. In simple wordsdecision of the auditor is not influenced by wishesor directions of any other person.

Independence can be of two types: Independence of mind: Opinion is free from bias. Independence of appearance: The avoidance of

facts and circumstances that are so significantthat a third party can significantly conclude thatauditors integrity had been compromised

17CA KANIKA KHETAN

Independence of Auditors can have various threatslike:

Self Interest threats- like financial interest or otherengagements

Self- review threats- like contradicting one’s ownstatement

Advocacy threats- like dealing in shares andsecurities

Familiarity threats – like former partner or a relativeof director

Intimidation threats – like fear of loss of revenue

Independence of Auditors can have various threatslike:

Self Interest threats- like financial interest or otherengagements

Self- review threats- like contradicting one’s ownstatement

Advocacy threats- like dealing in shares andsecurities

Familiarity threats – like former partner or a relativeof director

Intimidation threats – like fear of loss of revenue

18CA KANIKA KHETAN

A Chartered Accountant has a responsibility to remainindependent while performing audits. Following guidingprinciples can be considered for it:

The auditor should always be AND appear to beindependent.

Key fundamental principles like integrity, objectivityand professional skepticism should be maintained

Consider whether there are threats before taking upwork.

If such risk arises, auditor should desist from the taskand put in safeguards.

If the risk still persists then auditor must not accept thework

A Chartered Accountant has a responsibility to remainindependent while performing audits. Following guidingprinciples can be considered for it:

The auditor should always be AND appear to beindependent.

Key fundamental principles like integrity, objectivityand professional skepticism should be maintained

Consider whether there are threats before taking upwork.

If such risk arises, auditor should desist from the taskand put in safeguards.

If the risk still persists then auditor must not accept thework

19CA KANIKA KHETAN

It means – Questioning and alert mind and criticalassessment of evidences.

It is the duty of an auditor to question anycontradicting evidences and other circumstancesthat may indicate fraud.

The auditor is not to doubt all the evidences butshould not disregard past experiences with thosecharged with governance.

We should take decisions on the evidences basedon the circumstances and should not overlookunusual circumstances.

It means – Questioning and alert mind and criticalassessment of evidences.

It is the duty of an auditor to question anycontradicting evidences and other circumstancesthat may indicate fraud.

The auditor is not to doubt all the evidences butshould not disregard past experiences with thosecharged with governance.

We should take decisions on the evidences basedon the circumstances and should not overlookunusual circumstances.

20CA KANIKA KHETAN

Following factors should be considered beforeaccepting any audit engagement: The integrity of the management The competency, time and resources of audit

teamWhether the team can comply with ethical

requirementsAny complications in previous or current

audit complications, if any.

Following factors should be considered beforeaccepting any audit engagement: The integrity of the management The competency, time and resources of audit

teamWhether the team can comply with ethical

requirementsAny complications in previous or current

audit complications, if any.

21CA KANIKA KHETAN

The work force of an organisation should be

competent, capable and committed for the

organisation. Therefore there is a need to establish

proper procedure and policies for issues like

Recruitment, performance evaluation, career

development, promotion etc.

These policies help the firm to establish integrity

of the employees

The work force of an organisation should be

competent, capable and committed for the

organisation. Therefore there is a need to establish

proper procedure and policies for issues like

Recruitment, performance evaluation, career

development, promotion etc.

These policies help the firm to establish integrity

of the employees

22CA KANIKA KHETAN

The firm should establish policies and procedures toensure that the engagements are performed in accordancewith professional standards and it maintains the qualityof work to be relied on.

The policies should be conveyed through written orelectronic manuals and should be reviewed regularly.

Factors to be covered in policy include:

How the work is briefed to the team

How the work is to be documented

To provide training to audit team

To review the work performed

To keep policies updated

The firm should establish policies and procedures toensure that the engagements are performed in accordancewith professional standards and it maintains the qualityof work to be relied on.

The policies should be conveyed through written orelectronic manuals and should be reviewed regularly.

Factors to be covered in policy include:

How the work is briefed to the team

How the work is to be documented

To provide training to audit team

To review the work performed

To keep policies updated23CA KANIKA KHETAN

To ensure that all policies and procedure arecomplied with we need to regularly monitor them.

Objectives of monitoring can be listed as: Adherence to professional and legal

requirements Ensuring that the quality control system is

appropriately designed and effectivelyimplemented so that reports generated by firm isappropriate according to circumstances.

To ensure that all policies and procedure arecomplied with we need to regularly monitor them.

Objectives of monitoring can be listed as: Adherence to professional and legal

requirements Ensuring that the quality control system is

appropriately designed and effectivelyimplemented so that reports generated by firm isappropriate according to circumstances.

24CA KANIKA KHETAN

Before conducting audit we should ensure the following:

Whether the financial reporting framework is acceptable

An agreement that management acknowledges andunderstand its responsibilities like:

1. To provide the auditor:• Access to all records , documentation and additional

information as the auditor may require• Unrestricted access to any person from the entity if

the auditor considers that the person can providereliable audit evidence.

2. That preparation of financial statements and havingadequate internal control is the duty of the management.

Before conducting audit we should ensure the following:

Whether the financial reporting framework is acceptable

An agreement that management acknowledges andunderstand its responsibilities like:

1. To provide the auditor:• Access to all records , documentation and additional

information as the auditor may require• Unrestricted access to any person from the entity if

the auditor considers that the person can providereliable audit evidence.

2. That preparation of financial statements and havingadequate internal control is the duty of the management.

25CA KANIKA KHETAN

For a better relation between management and auditorICAI issue SA-210 “ Agreeing the Terms of AuditEngagements”. For maintaining a transparency inagreement and to avoid confusions following terms ofaudit should be reduced in writing and agreed uponbetween management and auditor:

The objective and scope of audit

The responsibilities of the auditor and that ofmanagement

Identification of applicable frameworks

Form and content of reports to be issued andpossibilities of deviations.

For a better relation between management and auditorICAI issue SA-210 “ Agreeing the Terms of AuditEngagements”. For maintaining a transparency inagreement and to avoid confusions following terms ofaudit should be reduced in writing and agreed uponbetween management and auditor:

The objective and scope of audit

The responsibilities of the auditor and that ofmanagement

Identification of applicable frameworks

Form and content of reports to be issued andpossibilities of deviations.

26CA KANIKA KHETAN

The auditors can take up assignments that arerecurring in nature. They need not to send a newengagement letter or written agreement at the startof each period but the same should be send in case:

There is a change in management, ownership, ornature or size of the organization.

There is any misunderstanding or change in termsof engagement.

There is any change in reporting framework orregulatory or legal requirements.

The auditors can take up assignments that arerecurring in nature. They need not to send a newengagement letter or written agreement at the startof each period but the same should be send in case:

There is a change in management, ownership, ornature or size of the organization.

There is any misunderstanding or change in termsof engagement.

There is any change in reporting framework orregulatory or legal requirements.

27CA KANIKA KHETAN

In case there is any limitation by the management in

audit terms which can influence the decision making

capacity of the auditor, the auditor should not accept

such a limited engagement.

In case the terms of audit changes after the audit is

accepted and auditor is not agreeing upon the terms

then the auditor can withdraw from it and determine

whether there is any contractual or other obligation

arising from the same.

In case there is any limitation by the management in

audit terms which can influence the decision making

capacity of the auditor, the auditor should not accept

such a limited engagement.

In case the terms of audit changes after the audit is

accepted and auditor is not agreeing upon the terms

then the auditor can withdraw from it and determine

whether there is any contractual or other obligation

arising from the same.

28CA KANIKA KHETAN