Summary of 600 series of Auditing Standards issued by ICAI

1. Standards onAuditing
600,610,620
Presented by – BhaveshTrilokani

2. What are
Standards on
Auditing?
 Auditing Standards provide minimum guidance for the auditor
that helps determine the extent of audit steps and procedures
that should be applied to fulfill the audit objective.They are
criteria or yardsticks against which the quality of the audit results
are evaluated.

3. Using the Work of Another Auditor
Applicable since :- April 1, 2002
SA 600

4. Scope of this
SA
The purpose of this Standard onAuditing (SA) is to establish
standards to be applied in situations where an Principal auditor,
reporting on the financial information of an entity, uses the work of
another auditor with respect to the financial information of one or
more components included in the financial information of the
entity.This Standard also discusses the principal auditor’s
responsibility in relation to his use of the work of the other auditor.
In this Standard, the term 'financial information' encompasses
'financial statements'.

5. Important
Terms
oPrincipal auditor means the auditor with
responsibility for reporting on the financial
information of an entity when that financial
information includes the financial information of one
or more components audited by another auditor.
oOther auditor means an auditor, other than the
principal auditor, with responsibility for reporting on
the financial information of a component which is
included in the financial information audited by the
principal auditor.
oComponent means a division, branch, subsidiary,
joint venture, associated enterprises or other entity
whose financial information is included in the
financial information audited by the principal auditor.

6. Acceptance as
a Principal
Auditor-
Auditor to decide whether the auditor’s own
participation is sufficient to be able to act as the
principal auditor with the following consideration:
i.The materiality of the portion of the financial
information
ii.The degree of knowledge regarding the business of
the components
iii. Risk of material misstatements of the components to
be audited by the other auditor
iv. Performance of audit procedures per this SA
regarding the components audited by the other auditor
in which the principal auditor has significant
participation.

7. Principal
Auditor’s
Procedures
 Consider the professional competence of the other auditor who is
a not a member of ICAI in the context of the specific assignment
 Visit the Component and examine the Books ofAccounts and
Financial Statements, if essential.
 To advise the other auditor of matters such as areas requiring
special consideration, areas requiring significant accounting,
auditing and reporting requirements as to compliance with them.
 To discuss the other auditor’s procedures applied in the course of
audit which may be in a form of questionnaire and check-list.
 The principal auditor should consider the significant findings of
the other auditor.
 The principal auditor working paper should mention about the
financial statements components audited by the other auditor
(with the name) and its significance.

8. Co-ordination
between the
Auditors.
 There should be sufficient liaison between the principal auditor
and the other auditor. For this purpose, the principal auditor may
find it necessary to issue written communication(s) to the other
auditor.
 Both Auditors should bring immediate attention to other auditor
on significant matters to be dealt with at respective levels.
 The other auditor, knowing the context in which his work is to be
used by the principal auditor, should co-ordinate with the principal
auditor.
 The principal auditor may require the other auditor to answer
detailed questionnaire required for discharging duties and the
other auditor should reply the same on timely basis.

9. Reporting
Considerations
 If the principal auditor is of the opinion that the work of the other
auditor cannot be used and the principal auditor is not able to
perform sufficient additional procedures for that component, then
a qualified opinion or disclaimer of opinion has to be given.
 If the other auditor issues or intends to issue a modified auditor’s
report, then the principal auditor should consider if it requires
modification to the principal auditor’s report based on the nature
& significance of the subject of modification.

10. Division of
Responsibility
 Principal auditor is not responsible for other auditor’s work except
that in case of any suspicion arises about the reliability of the
other auditor’s work.
 The principal auditor should clearly state the division of
responsibility by indicating the extent, to which the information
audited by the other auditor has been relied upon in forming an
opinion on the entity’s financial statement as a whole.

11. SA 610
Using the work of Internal Auditors.
Applicablity since :- April 1, 2016

12. Scope of this
SA
The objectives of the external auditor, where the entity has an
internal audit function and the external auditor expects to use the
work of the function to modify the nature or timing, or reduce the
extent, of audit procedures to be performed directly by the external
auditor, or to use internal auditors to provide direct assistance, are:
a) To determine whether the work of the internal audit function or
direct assistance from internal auditors can be used, and if so, in
which areas and to what extent; and having made that
determination:
b) If using the work of the internal audit function, to determine
whether that work is adequate for purposes of the audit; and
c) If using internal auditors to provide direct assistance, to
appropriately direct, supervise and review their work.

13. Important
Terms
a) Internal audit function – A function of an entity that performs
assurance and consulting activities designed to evaluate and
improve the effectiveness of the entity’s governance, risk
management and internal control processes.
b) Direct assistance –The use of internal auditors to perform
audit procedures under the direction, supervision and review of
the external auditor.

14. The relationship
between Internal
Auditor and
ExternalAuditor

15. Whether and
toWhat
Extent toUse
of Internal
AuditorWork
External auditor should determine:
A. If the internal auditor’s work is adequate for audit purpose and evaluate:
i. Objectivity of internal audit function
ii. Internal auditor’s technical competence
iii. Internal auditor’s work is carried out with professional care
iv. Effective communication between the internal auditor and
the external auditor.
B. Planned effect of internal auditor’s work on the nature, timing or extent of
external auditor’s procedures and consider:
i. Nature and scope of specific work performed or to be
performed
ii. Assessed risk of material misstatement at the assertion level
for a particular class of transaction, account balance and
disclosure
iii.The degree of subjectivity involved in evaluating the audit
evidence to support the relevant assertions

16. Using theWork
of the Internal
Auditor of the
InternalAudit
Function
Functions needed to be performed by the ExternalAuditor to use the work of Internal Auditor :-
1. The external auditor shall read the reports of the internal audit function relating to the work of the
function that the external auditor plans to use to obtain an understanding of the nature and extent of audit
procedures it performed and the related findings.
2. The external auditor shall perform sufficient audit procedures on the work of the internal audit function as
a whole that the external auditor plans to use to determine its adequacy for purposes of the audit,
including evaluating whether:
a.The work of the function had been properly planned, performed, supervised, reviewed and
documented;
b. Sufficient appropriate evidence had been obtained to enable the function to draw reasonable
conclusions; and
c. Conclusions reached are appropriate in the circumstances and the reports prepared by the
function are consistent with the results of the work performed.
3. The nature and extent of the external auditor’s audit procedures shall be responsive to the external
auditor’s evaluation of:
a.The amount of judgment involved;
b.The assessed risk of material misstatement;
c.The extent to which the internal audit function’s organizational status and relevant policies and
procedures support the objectivity of the internal auditors; and
d.The level of competence of the function;
4. And shall include re-performance of some of the work.
5. The external auditor shall also evaluate whether the internal auditor’s conclusions regarding the internal
audit function and the determination of the nature and extent of use of the work of the function for
purposes of the audit remain appropriate.

17. Using Internal
Auditors to
Provide Direct
Assistance
1. Prior to using internal auditors to provide direct assistance for
purposes of the audit, the external auditor shall:
(a) Obtain written agreement from an authorized representative of
the entity that the internal auditors will be allowed to follow the external
auditor’s instructions, and that the entity will not intervene in the work the
internal auditor performs for the external auditor; and
(b) Obtain written agreement from the internal auditors that they will
keep confidential specific matters as instructed by the external auditor
and inform the external auditor of any threat to their objectivity.
2. The external auditor shall direct, supervise and review the work
performed by internal auditors on the engagement in accordance
with SA 220 (Quality control for an audit of financial statements).
3. The direction, supervision and review by the external auditor of the
work performed by the internal auditors shall be sufficient in order
for the external auditor to be satisfied that the internal auditors
have obtained sufficient appropriate audit evidence to support the
conclusions based on that work.

18. SA 620
SA 620 Using the Work of an Auditor’s Expert
Applicable since :- April 1, 2010

19. Scope of this
SA
1. This Standard on Auditing (SA) deals with the auditor’s
responsibilities regarding the use of an individual or
organization’s work in a field of expertise other than accounting
or auditing, when that work is used to assist the auditor in
obtaining sufficient appropriate audit evidence.
2. This SA does not deal with:
i. Situations where the engagement team includes a member with
expertise in specialized area of accounting or auditing, which is
dealt with in SA 220 ;or
ii. The auditor’s use of the work of an individual or organization
possessing expertise in a field other than accounting or auditing,
whose work in that field is used by the entity to assist the entity
in preparing the financial statements(a management’s expert),
which is dealt with in SA 500.

20. Important
Terms
1. Auditor’s expert – An individual or organisation possessing
expertise in a field other than accounting or auditing, whose
work in that field is used by the auditor to assist the auditor in
obtaining sufficient appropriate audit evidence. An auditor’s
expert may be either an auditor’s internal expert (who is a
partner or staff, including temporary staff, of the auditor’s firm
or a network firm), or an auditor’s external expert.
2. Expertise – Skills, knowledge and experience in a particular
field.
3. Management’s expert – An individual or organization
possessing expertise in a field other than accounting or
auditing, whose work in that field is used by the entity to assist
the entity in preparing the financial statements.

21. Nature,
Timing, and
Extent of
Audit
Procedures
To determine the nature, timing, and extent of audit procedures
related to expert’s work, the following matters are to be considered
by the auditor:
1. Nature of the subject
2. Risk of material misstatement
3. The significance of expert work to the audit
4. Auditor’s knowledge of and experience with the expert’s work
5. If the expert is subject to the auditor’s firm quality control
policies & procedures

22. Some of the
requirements
related to
auditor’s
expert work

23. Reference to
theAuditor’s
Expert in the
Auditor’s
Report
1. Reference to the auditor’s expert work should not be made in
an auditor’s report containing an unmodified opinion unless
required by law or regulation. If such reference is-
1. Required by law or regulation or
2. Relevant to an understanding of a modification to the auditor’s
opinion, then
2. The auditor should indicate in the auditor’s report that the
references do not reduce the auditor’s responsibility for the
audit opinion

24. Example of
Auditor’s
Expert work
1. Valuation of complex financial instruments, land & buildings,
machinery, intangible assets, impaired assets etc
2. Estimation of oil and gas reserves, actuarial calculation of
liabilities etc.
3. Valuation of environmental liabilities, site clean-up cost,
4. Interpretation of law, contracts, and regulation, and etc.

25. ThankYou