Implementation of SAsProgress of an AuditPeer Review Documentation
Standards on Auditing• What are Standards on Auditing? Aspect of Auditing Covered Numerical SeriesIntroductory MattersGeneral Principles and 100 - 199Responsibilities 200 – 299Risk Assessment and Response to 300 - 499Assessed Risk 500 – 599Audit Evidence 600 - 699Using Work of Others 700 – 799Audit Conclusions and Reporting 800 - 899Specialised Areas• SA 200 – Overall Objectives of the Independent Auditor
Overview of the Audit ProcessAppointment Acceptance Engagement /Scope Documentation Audit Planning At Gathering Audit Every Evidence Discussion with Step Management Audit Conclusion
Commencement of AuditAppointment i. Appointment Letter ii. Copy of AGM resolution / other relevant resolution iii. Quoting FRNAcceptance i. Eligibility as per sec 224(1B) of the Companies Act, 1956 ii. NOC from the previous auditor iii.Acceptance letter iv.Form 23B to be filed with ROC in case of company audits as per Sec 224 (1A)Engagement Engagement letter (SA 210 – Agreeing the terms of Audit Engagement)
Audit Planning• Knowledge of business• Consideration of Laws and Regulations (SA 250)• Audit Plan (SA 300)• Audit Programme
Audit Risk & Assessment1. What is audit risk? • Mix of inherent, control & detection risk2. How to assess risk? • Making inquiries of management and others • Analytical procedures • General observation and inspection3. Review of LY’s working papers
• Assessment of entity’s control risk- Internal controls• Discussion with the audit team and setting of materiality and the responses to assessed risk• Fraud detection and responses to fraud
Sampling• Identification of universe• Stratification• Determination of sample size• Types of selection methods: - Random selection - Systematic selection - Haphazard selectionSICOM
Gathering Audit Evidence Opening balance tracing – SA 510- Initial Audit Engagement Vouching-• (Occurrence, measurement ,rights and obligation of the transaction) Leger scrutiny-• Analysis of ledger balances, classification, presentation Contd…
Continued…..SA 520 - Analytical Procedures:• Profitability Ratios• Management Efficiency Ratios• Market RatiosSA 540-Auditing and accounting estimate:• Obtaining an Understanding of How Management Makes the Accounting Estimates• External confirmation procedure• SA 600 – Using the work of another auditor• SA 610 – Using the work of Internal Auditor(s)• SA 620 – Using the work of an Auditor’s Expert
ComparisonSA 550- Related party V/s AS 18-Related Party disclosureSA 560- Subsequent Event V/s AS-4 events occurring after balance sheet dateSA 570- Going concern V/s AS- 1 Disclosure of accounting policies
Discussion with ManagementCommunication by the Auditor Should be in writing Should be communicated on timely basis Audit communication is treated as Audit EvidenceSA 260 (Revised): Communication Withthose Charged With Governance
Audit ConclusionSA 700 - Forming an opinion and reporting on FinancialStatementsThe minimum content that has to be there in the audit reportFirm’s Registration Number (FRN) in audit reportAs per Para. A36 of SA 700 (Revised)Opinions of Auditor – Unmodified / UnqualifiedOpinion, Qualified Opinion, Adverse Opinion, Disclaimer ofOpinionSA 705 deals with Modifications to the opinion in theIndependent Auditor’s Report.SA 706 deals Emphasis of matter paragraphs and othermatter paragraphs in the independent auditor’s report.
Audit Documentation (SA 230) • What does Audit Documentation (Audit File) include? SA 580 (Revised): Written Representations Importance of Audit Documentation What should be the logical sequence of dates in audit documentation?
Peer Review Documentation Meaning:As per the Statement on Peer Review, Peer Review means anexamination and review of the systems and procedures todetermine whether they have been put in place by the practiceunit for ensuring the quality of attestation services asenvisaged and implied / mandated by the TechnicalStandards and whether these were effective or not during theperiod under review. Objective Scope
Documentation: The Statement on Peer Review does not lay down any documentation requirements for the practice unit. However, it suggests that certain minimum records that represent the adequacy of quality control policies and procedures followed by the practice unit must be maintained. Records to be maintained Mandatory Records, i.e., Recommendatory Working Papers as per SA Records 230 on “Documentation”
Permanent File: i.Permanent File contains matters which don’t change very often. ii. This file may be updated during structural changes in the auditee’s information.Current File: i. Current file contains matters relating to audit of a single period. ii. The content of working papers is guided by factors, v.i.z., completeness, accuracy, clarity, under standing, legibility and neatness. iii. Generally, each individual assigned to an audit engagement should prepare working papers in such a manner that a professional not connected with the engagement may later examine such working papers and be able to determine that the work was performed in accordance with the standards on auditing.
Audit Documentation Audit Documentation – The record of audit procedures performed, relevance audit evidence obtained and conclusions the auditor reached. Audit file – One or more folders or other storage media, in physical or electronic form, containing the records that comprise the audit documentation for a specific engagement. Purpose of audit documentation Content of Audit Documentation Assembly of final audit file Ownership of Audit Documentation