SA 200: Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Standards on Auditing
Objective of audit to obtain Reasonable Assurance about Financial Statements are free from Material Misstatements and express opinion in form of Audit Report.
Auditor should fulfill Ethical Requirements in Relation to Audit of Financial Statements.
Auditor should have an attitude of Professional Scepticism.
Auditor should excerise Professional Judgement.
Auditor should obtain sufficient and Appropriate Audit Evidence to Express opinion on Financial Statements.
Auditor should follow all Standards on Auditing.
Inherent Limitations of Audit:-
Audit is based on Persuasive Evidence rather than Conclusive Evidence.
Nature of Financial Statements
Nature of Audit Procedures.
Audit to be completed in reasonable time/period and at a Reasonable Cost.
Audit Risk means Existence of Risk that Auditor may express an inappropriate Audit opinion in case where financial Statements are materially misstated.
Inherent Risk means susceptibility of and assertion about a class of Transaction, account balance or disclosure to a Misstatement that could be material either Individually or when aggregated with other Misstatement before consideration of any related controls.
Control risk means Risk that a Misstatement that could be occur in an assertion about class of Transaction, Account balance or disclosure and that could be material individually or when aggregated with other Misstatement will not to prevented or detected on a timely basis by entity's Internal control.
Deduction Risk means Risk that procedure performed by Auditor to reduce Audit Risk to an acceptably low level will detect a Misstatement that exists and that could be material either Individually or when aggregated with other Misstatements.
Key Technical Terms to be used in SA 200: - Reasonable Assurance, Free from Material Misstatement, Professional Scepticism, Professional Judgement, Sufficient and Appropriate Audit Evidence, Vigilant Attitude, Inherent Limitations, Persuasive, Audit Risk, Inherent Risk, Control Risk, Detection Risk etc.
SA 210, Agreeing the Terms of Audit Engagements
Auditor should ensure that whether precondition for an Audit are present before accepting Audit Engagement.
There should be common understanding between Auditor and Management or those charge with Governance about the terms of Audit Engagement.
Responsibility of management to prepare financial statements as going concern and select and apply appropriate Accounting Policies consistently.
Responsibility of Management to maintain adequate records and Maintain Adequate Internal Control for Safeguarding of assets of company.
Unrestricted Access to Auditor to books of Accounts, Record or Documents or any other Information Required in Connection with Audit of Financial Statements.
Management's Responsibility of making judgement to estimate reasonable and prudential to give true and fair view of State of Affairs (Financial Statements) of the entity.
Division of Terms of Audit Engagement: -
Conduct of Management indicates that Management misunderstood the objective and scope of Audit.
Any aggrement made between Management and Auditor on Revision of Terms of Engagement.
Due to change in Ownership or Management.
Significant changes in size and nature of Business.
Revision of Terms Of Engagement is required by Law for time in being in force
Due to Changes in Financial Reporting Framework.
Key Technical Terms used in SA 210 : - Engagement Letter, Financial Reporting Framework, Adequate Accounting Records etc.
SA 220: - Quality Control for an Audit of Financial Statements
Auditor should be Adherence to Principle of Independence, Integrity, Objectivity, confidentiality etc.
Audit should be done by competent personal who possess Required skills and competence.
Audit done be Assistant or Audit Staff should be continuously Directed, Supervision and Audit work should be reviewed at all levels.
During Audit if Auditor feels that it Certain matters to be consulted with expert, can discussed with Expert.
Continuously monitoring of Quality Control Procedure and Police's should be done.
Key Technical Terms used in SA 220: - Skills and Competence, Delegation, Direction, Monitoring, Review, Supervision, Quality Control Procedure, Quality Control Policies etc.
SA 230: - Audit Documentation
Audit Documentation means record of Audit Procedure Performed by Auditor, Audit Evidence obtained during Audit of Financial Statements and Conclusion arrived based Evidence obtained.
Benefis of Audit Documentation: -
Well Planned Audit is more effective than Audit without Plan. In well Planned and Documented Audit Procedure no Important area left remain unaudited.
Audit Documentation helps auditor in Direction to Audit Team and Supervision of work done by Audit Team.
Accountability of Members of Team can decided with help of Proper Documentation.
Matters to be Documented in Audit Documentation: -
Nature, Timing and Extent of Audit Procedure to e performed during Audit.
Audit Evidence obtained during Audit.
Matters arising during Audit.
Audit documentation Depends on: -
Size of Entity
Complexity in Business of Entity
Risk of Material Misstatement Indentified during Audit.
Audit Evidence obtained during Audit.
Key Technical Terms used in SA 230: - Audit Procedure, Risk of Material Misstatement, Audit Procedure, Conclusion etc.
SA 240: - The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements
As Per SA 240 Fraud refers to Intensional Act involving use of deception by Persons among Management, Employees, Those Charged with Governence and any third party to obtain illegal or unjustified advantages.
There may be fraudulent financial Reporting and Misappropriation of assets due to fraud.
Primary responsibility of prevention and detection of fraud is of management and those charge with Governence.
Responsibility of Auditor regarding Fraud - when Auditor during course found that there certain misstatements in financial statements due to fraud then auditor should communicate the findings to Management or to Those Charged with Governence and to Regulatory or Enforcement Authority. As per sec 143(12) of Companies Act 2013 if amount involved in fraud individually Exceeding Rs. 1 Crore then auditor have to report Central Government, if amount involved in fraud individually less than Rs. 1 Crore then Auditor have to report to Audit Committee formed under Sec 177 of companies Act 2013.
Auditor seems it si better to withdraw from Engagement then he or she can do whenever legally permissible.
Key Technical Terms used in SA 240: - Intentional Mistake, Use if Deception, Fraudulent Financial Reporting, Misappropriation of Assets, Emezzing Receipts, Fictitious etc.
SA 250: - Consideration of Laws and Regulations in an Audit of Financial Statements
Auditor should obtain sufficient and Appropriate Audit Evidence regarding compliance with legal provisions those have direct effect on material amounts in financial statements and disclosure in financial statements. To obtain Sufficient and Appropriate Audit Evidence regarding compliance of Law and Regulations Auditor have to understand entities environment and legal Framework Applicable to the Entity.
Audit should perform specified audit procedure to identify non - compliance of law and regulations those may have material effect on Financial Statements.
Auditor should respond appropriately to non - compliance identified during Audit.
Key Technical Terms used in SA 240: - Legal and Regulatory Framework, Law and Regulations, Compliance etc.
SA 260: - Communication with Those Charged with Governance
Auditor should communicate with those charge with Governence an Overview of scope of Audit and Timing of Auditor and Responsibility of Auditor in Relation to Audit of Financial Audit.
Auditor should provide significant observations arising from Audit of Financial Statements to those charge with Governence on timely basis.
Audit should obtain Relevant Information to Audit from Those charge with Governence.
Audit should ensure two way communication between Auditor and Those charge with Governence.
Auditor should communicate with Those charge with Governence any Material Weakness found in Internal Control..
Key Technical Terms used in SA 260: - Strategic Direction, Material Weakness in Internal Control, Oral Communication, written Communication, Those Charge with Governence etc.
SA 265: - Communicating Deficiencies in Internal Control to Those Charged with Governance and Management
During course of Audit if Auditor identify one more deficiencies in Internal Control and audit conclude that such deficiencies either Individually or combined with other deficiencies constitue significant deficiencies then Auditor should communicate with those charge with Governence.
When Internal Control is designed or implemented in such a way that it fails to detect, prevent or correct Misstatement in Financial Statements on Timely basis.
Key Technical Terms used in SA 265: - Deficiencies in Internal Control, Prevent, Detect, etc.
SA 299: - Responsibility of Joint Auditors
Each Auditor is Responsible to determine audit procedure to be applied to work allocated to him or her.
Each Auditor is responsible for Appropriateness of Test Check or Smapling applied in Work allocated to him or her.
Each Auditor should Responsible to evaluate the Internal Control Relating to Work allocated to him or her.
Each Auditor should be responsible to review Audit report a and Returns of Divisions or branches allocated to him. Audit should excerise Professional Judgement regarding necessity of visiting divisions or branch allocated to him or her.
All auditors are jointly and severally responsible for Undivided Audit work to be carried out by all joint Auditor.
All Auditors are jointly and severally Responsible for Examining the Compliance of Law and Regulations.
Key Technical Terms used in SA: - Severally Response, Responsibility of Joint Auditor, Prevailing ect.