STANDARDS ON AUDITING

THERE ARE SO MANY STANDARDS OF AUDITING, HERE IN THIS PDF, I HAVE EXPLAINED ANY 10 STANDARDS ON AUDITING WITH FLOWCHARTS, PICTURES FOR BETTER REFERENCE OF THE TOPIC

1. STANDARDS
ON
AUDITING
BY: ANMOL GULATI
2013360

2. INTRODUCTION
To ensure that information provided in the financial statements are of high quality and are
acceptable worldwide the Auditing and Assurance Standards board under the council
ICAI have formulated few Standards. These are in line with the International Standards
issued by the International Auditing and Assurance Board (IAASB).
Standards issued by the
AASB include
Standards of Quality
Control (SQCs)
Standards on Auditing
(SAs)

4. 1. SA-200

5. Effective Date
This SA-200 is effective for
audits of financial statements
for periods beginning on or
after April 1, 2010.

6. AUDITOR RESPONSIBILITY (OVERALL OBJECTIVE OF INDEPENDENT
AUDIT)
●ToobtainreasonableassurancethatfinancialstatementsarefreefromMaterial
MismanagementresultingfromeitherduetofraudorerrorenablingAuditorto
expressanopiniononwhetherfinancialstatementsarepreparedinallmaterial
respectsasperapplicableFinancialreportingframework.
●Theobjectiveofindependentauditistoreportu/s143(2)toMembersof
CompanyonAccountexaminedbyhim&FinancialStatementtobelaidinAGM.
●ToensurethathisopiniononFinancialStatementisreflectingtheTrue&Fair
view.
●TheobjectiveofindependentaudittoStateinhisReportu/s143(2)whetherA/c
examinedbyhim&FinancialStatementgiveTrue&Fairview.
●AuditevidencetoreduceAuditRisktoAcceptablelowlevel&considerSA500as
perSA200.

7. SCOPE OF AUDIT
Area of work for Auditor determined by following factors: –
●Requirements of legislation.
●SA & other guidance by ICAI
●Terms of engagement of Auditor:
Terms of engagement can’t override Scope decided by Legislation or SAs.”
(i.e. management cannot Restrict Scope of auditor’s audit function)
●If Scope restricted or threat to Independence, in this case auditors duty is to
communicate to Those charged with governance as per SA 260

8. REQUIREMENTS OF SA 200
●ProfessionalSkepticism
●Itsauditor’sstatesofmindforAlertnesstoforanyindicationtopossiblemisstatementduetoerrororfraud
●Acriticalassessmentofauditevidence
●MaintainitthroughoutAudittoidentifyfraudriskfactors&evaluateRelatedPartytransactions
●Attituderequiring:–
○AlertnesstowardsInfoprovidedtohimbyclient
○AQuestionablemindbeingalert
●ReducesRisksof:–
○Overlookingunusualcircumstances.
○Overgeneralizingwhendrawingconclusionsfromauditobservations.
○UsinginappropriateassumptionsindeterminingNature,Time&ExtentofAuditProcedures&evaluating
results
●Beingalertto:–
○Infoprovidedbytheauditeetobringingindoubtthetrustworthinessofrecords&responsestoauditevidence.
○Conditionsandsituationscreatingdoubtforfraudorandauditor’scompetencetoassesstheneedtocarryout
additionalAuditProcedures.

10. 2. SA 210 (REVISED)
Agreeing The Terms of
Audit Engagement

11. SA 210 (REVISED) Agreeing The Terms
of Audit Engagement
SA 210 deals with the key considerations that
Independent Auditor needs to keep in mindon
the terms of the Audit engagement with
Management or ‘Those charged with
Governance’.

12. INTRODUCTION & SCOPE
ThisRevisedStandardonAuditing(SA210)dealswiththe
auditor’sresponsibilitiesinagreeingtothetermsofthe
auditengagementwithmanagement.SA210establishes
thepreconditionsforanaudit,termsofanaudit
engagementandchangesthereof,segregatesthe
responsibilityofthemanagementandauditorsetc.

13. OBJECTIVE
Auditor’s Objective is to accept or continue an audit engagement only when the
basis upon which it is to be performed has been agreed, through
1.
Ensuring if the
Preconditions for
an audit are
present
2.
Confirming if there
is a common
understanding
between auditor
and management

16. 3. SA 220: QUALITY
CONTROL FOR AN
AUDIT OF FINANCIAL
STATEMENTS

17. OVERVIEW

18. ETHICAL REQUIREMENTS AND ENGAGEMENT TEAM

19. DOCUMENTATION IN REGARD TO QUALITY CONTROL

20. MONITORING OF PERFORMANCE

21. 4. SA 300
PLANNING AN AUDIT
OF FINANCIAL
STATEMENTS

22. OVERVIEW
SA300dealswiththeauditor’sresponsibility
towardsplanningforanauditoffinancial
statementsanditscontextisfocusedmoreona
recurringaudit.Thisstandardalsoprescribes
theadditionalconsiderationsrequiredforan
initialauditengagement.

23. OBJECTIVE
Theobjectiveistoplantheauditinaccordance
withthesizeandcomplexityoftheentityto
perform theauditinaneffective
manner.Partnerandkeymembersofthe
engagementteamarerequiredtobeinvolvedin
theauditplanningthroughdiscussionwhichwill
enhancetheauditeffectivenessandefficiency.

25. DOCUMENTATION
i. Overall audit
strategy which
exhibits the key
decision of the
audit planning
ii. Audit Plan
which includes
standard audit
program and
audit completion
checklist
iii. Any significant
changes made
during the audit
engagement to
the above and
the reasons for
the same

26. 5. SA 299 (REVISED):
JOINT AUDIT OF
FINANCIAL
STATEMENTS

28. OBJECTIVES
●To lay down broad principles for the joint auditors in conducting the joint
audit.
●To provide a uniform approach to the process of joint audit.
●To identify the distinct areas of work and coverage thereof by each joint
auditor.
●To identify individual responsibility and joint responsibility of the joint
auditors in relation to audit.

30. 6. SA 315:
IDENTIFYING AND ASSESSING
THE RISK OF MATERIAL
MISSTATEMENT THROUGH
UNDERSTANDING THE ENTITY
AND ITS ENVIRONMENT

31. OVERVIEW
SA315dealswiththeresponsibilityof
auditorinidentifyingandassessingthe
riskofmaterialmisstatementthrough
understandingtheentityandits
environment

32. OBJECTIVE
Theobjectiveoftheauditoristoidentifyand
assesstheriskofmaterialmisstatementin
anentity’sfinancialstatementand
implementappropriateresponses(Refer
SA330)&procedureswhichwillreduce
suchrisktoanacceptablylowlevel.

33. ENTITY’S ENVIRONMENT

34. ENTITY’S INTERNAL CONTROL

35. INFORMATION SYSTEM ACTIVITIES

36. 7. SA 330:
Auditor’s Responses
To Assessed Risk

37. OVERVIEW
SA330dealswiththeauditor’sresponsibility
todesignandimplementresponsestothe
assessedriskofmaterialmisstatement
identifiedinaccordancewithSA315.

38. OBJECTIVE
Toobtainsufficientappropriateaudit
evidenceabouttheassessedriskand
design&implementappropriateresponses
tothoseriskSA330iseffectiveforthe
auditoffinancialstatementsforperiods
beginningonorafter1stApril2008

39. AUDIT PROCEDURES
Nature,timingandtheextentoftheauditproceduresaretobebasedonand
areresponsivetotheassessedriskofmaterialmisstatementattheassertion
level.Considerthereasonfortheassessmentgiventoeachclassof
transaction,accountbalanceanddisclosureincluding:
i.Likelihoodofmaterialmisstatementduetotheparticularcharacteristicsof
relevantinherentrisk
ii.Whethertheriskassessmenttakesintoaccounttherelevantcontrols

40. SUFFICIENCY AND APPROPRIATENESS OF AUDIT EVIDENCE

41. 8. SA 600 :
USING THE WORK
OF ANOTHER
AUDITOR

42. INTRODUCTION

43. ACCEPTANCE AS 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 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

44. CO-ORDINATION BETWEEN THE AUDITORS
A.Thereshouldbesufficientliaison(throughwrittencommunication)
betweentheprincipalauditorandotherauditors
B.Otherauditorsshouldcoordinatewiththeprincipalauditorknowingthe
contextinwhichtheworktobeused
C.Theprincipalauditorshouldadvisetheotherauditorofanyrelevant
mattersthatcomestoprincipalauditor’sattention
D.Theprincipalauditormayrequiretheotherauditortoanswerdetailed
questionnairerequiredfordischargingduties
E.Anotherauditorhastorespondtosuchquestionnairesonatimelybasis

45. 9. SA 450:
Evaluation of
Misstatement Identified
During the Audit

46. SCOPE
SA450EvaluationofMisstatementIdentifiedDuringtheAuditdealswiththe
auditor’sresponsibilitytoevaluatetheeffectofidentifiedmisstatementsand
uncorrectedmisstatements.SA700(Forminganopinionandreportingon
financialstatements)takesintoaccounttheevaluationofuncorrected
misstatementsforauditor’sconclusion
SA450iseffectivefortheauditoffinancialstatementsforperiodsbeginning
onorafter1stApril2010

47. AUDITOR’S COMMUNICATION & CORRECTION OF
MISSTATEMENTS
▪Communicateonatimelybasistotheappropriatelevel
ofmanagement(unlessprohibitedbylaworregulation)
▪Requestmanagementtocorrectthosemisstatements
▪Ifmanagementrefusestocorrectmisstatements,the
auditorshouldunderstandthereasonforthesame
▪Basedontheunderstandingauditorshouldevaluate
whetherthefinancialstatementsasawholearefrom
materialmisstatements.

48. EFFECT OF UNCORRECTED MISSTATEMENTS
Beforeevaluatingtheeffectofuncorrectedmisstatements,theauditorshould
reassessmaterialityperSA320toconfirmwhetheritremainsappropriateto
theentity’sfinancialresultsbytakingintoaccount:
a.SizeandNatureofthemisstatementsbothinrelationtoparticular
classesoftransactionsaccountbalanceordisclosuresetcandcircumstance
oftheiroccurrence
b.Effectofuncorrectedmisstatementsrelatedtopriorperiodsonthe
relevantclassesoftransactions,accountbalanceordisclosure,andthe
financialstatementsasawhole

49. EXAMPLE-MISSTATEMENT
A.Salesincomeofacompanyismateriallyoverstated,thenfinancialstatement
asawholewillbemateriallymisstated
B.Misclassificationbetweenbalancesheetitemsmaynotbeconsideredmaterial
iftheamountofmisclassificationissmallcomparedtootherbalancesheet
itemsanditdoesnotaffecttheP&Lorkeyratios

50. 10. SA 620 :
USING THE WORK
OF AN AUDITOR’S
EXPERT

51. INTRODUCTION

52. DEFINITION
●Auditor’sExpert–“Anindividualororganizationpossessing
expertiseinafieldotherthanaccountingorauditing,whoseworkin
thatfieldisusedbytheauditortoassisttheauditorinobtaining
sufficientappropriateauditevidence.Anauditor’sexpertmaybethe
auditor’sinternalexpertoranexternalexpert.
●ManagementExpert–“Anindividualororganizationpossessing
expertiseinafieldotherthanaccountingorauditing,whoseworkin
thatfieldisusedbytheentitytoassisttheentityinpreparingthe
financialstatements.

53. REFERENCE TO THE AUDITOR’S EXPERT IN THE AUDITOR’S
REPORT
Referencetotheauditor’sexpertworkshouldnotbemadeinanauditor’s
reportcontaininganunmodifiedopinionunlessrequiredbylawor
regulation.Ifsuchreferenceis-
i.Requiredbylaworregulationor
ii.Relevanttoanunderstandingofamodificationtotheauditor’sopinion,then
Theauditorshouldindicateintheauditor’sreportthatthereferencesdonot
reducetheauditor’sresponsibilityfortheauditopinion

54. EXAMPLE
●Valuationofcomplexfinancialinstruments,land&
buildings,machinery,intangibleassets,impairedassets
etc
●II.Estimationofoilandgasreserves,actuarial
calculationofliabilitiesetc
●III.Valuationofenvironmentalliabilities,siteclean-up
cost,
●IV.Interpretationoflaw,contracts,andregulation