SQC 1 Quality Control for Firms that Perform Audits & Reviews of Historical Financial Information,

and Other Assurance & Related Services Engagements

All firms to have system of quality control that provides reasonable assurance that: (a) Firm & personnel comply with professional standards,
regulatory & legal requirements, and (b) Reports issued by firm or partners are appropriate in the circumstances.
Leadership
Responsibilities for Q. C.
(a) Promote internal culture
w.r.t.:
essential of quality in
engagements.
Compliance
with
professional
standards, regulatory/
legal requirements.
Issue
of
reports
appropriate
in
circumstances.
(b) Require
CEO/
managing partner to
assume
ultimate
responsibility for QC.
(c) Recognise & reward
high quality work.

Ethical
requirements

Independence

Client
Acceptance/Continuance

Human
Resources

policies/ Establish
Establish policies & Policies & procedures should Establish
procedures
to enable:
procedures
to policies/
of
reasonable assure that Communication
reasonable
assure
that
procedures
to
independence requirements to
Firm & personnel
clients
are
accepted/
personnel & others.
reasonable
comply with relevant
ethical requirements of Identification of circumstances continued only
assure that:
threatening independence.
where:
Integrity.
Take appropriate action for
Firm
has
Objectivity.
elimination of threats / Client integrity has
sufficient
Professional
withdrawal from engagement.
been considered.
competence & due Resolution of breaches of
personnel with

Firm
is competent
care.
independence.
capabilities,
to
perform
Confidentiality.
Maintenance of independence of
competence &
personnel
engagement w.r.t.
Professional
commitment
Engagement partners to provide
behaviour.
capability, time &
firm with relevant information
to
ethical
resources.
about client.
principles; &
Prompt notification of threats to firm can comply
with
ethical Responsibility
independence.
Accumulation & communication
requirements.
of engagement
of relevant information to If any issue raised,
partner clearly
appropriate personnel.
document
how
it
Other Points:
defined
&
Firm should obtain Annual resolved.
communicated
written confirmation as to Establish
Policies
to him/ her.
compliance with independence w.r.t. withdrawal from
requirements.
and
Create policies to reduce engagement
Familiarity threat: e.g. rotation communication
of engagement partner atleast requirements,
if
every seven years in case of
circumstances warrant.
audit of listed entities.

Engagement
Performance

Monitoring

Establish policies/
procedures
to
reasonable
assure
w.r.t.:
Compliance with
professional
standards.
Compliance with
laws/ regulations.
Engagement
partner
issues
reports
appropriate in the
circumstances.
Important aspects of
engagement
performance:
Supervision.
Review.
Consultation.
Differences
of
opinion.
Engagement Q. C.
review.
Engagement
documentation.

Establish
Policies
&
procedures
to
reasonable
assure that QC
policies/
procedures are:
Relevant.
Adequate.
Operating
effectively.
Complied
with
in
practice.
It also includes
on
going
consideration &
evaluation of QC
system, periodic
inspection
of
completed
Assignments.

SA 210 (Revised) Agreeing the Terms of Engagement

Beginning of Audit

During the Course of Audit

Initial audit Engagement

Limitations Imposed by

Mngt. request for changes in terms

Recurring Audit

No Limitations Imposed
Determine requirements w.r.t.:

mngt.

(a) Revision of terms of Engagement; &

Ascertain existence of
Preconditions

(b) Remind the entity of existing terms

Determine its effect on Level of

Assurance

&

reasonable

Justification

Do not accept unless

required by law
Exist

Accept
Audit

Not Exist

Discuss matter
with mngt.

Do not accept audit in case of:

(a) Unacceptable F.R. Framework; or
(b) Mngt. does not agree with responsibilities

Required

Send New
Engagement
Letter

Not Required

No Further
Duty

Auditor Satisfied

Record New Terms

in
Engagement
Letter

Not Satisfied

Do not
Accept the
changes

Mngt. not permit the auditor to continue

Withdraw & Report to appropriate authority

SA 230 (Revised) Audit Documentation

General concepts

Specific Documentation

Meaning: Record of:

Audit procedures performed
Relevant audit evidence obtained, &

Documentation of

Documentation of

Documentation of

Discussion

Departure from a relevant

matters arising after the Date

requirement

of Auditors Report

Conclusions reached
Purpose: includes the following:
Assist in Planning and performance of Audit.
Direction, supervision & Review of work.

Significant

Matters

To fix accountability.

Discussed with Mngt.

Record for future reference.

And TCWG.

Quality control review and inspections

Conduct of external inspections.

Nature: documentation must provide for:
Sufficient and appropriate record of the basis
for auditors report.
Evidence that the audit was planned and
performed in accordance with SAs & other
regulatory requirements.

discussion

took

Reasons

for

the

departure.

When and with whom

the

Circumstance encountered.
New

or

additional

Alternative procedures

procedures

performed,

performed.

audit evidence obtained,

conclusions reached, and

place.

their effect on the auditors

How the auditor address

report.

the inconsistency (if any

detected
discussion)

during

When and by whom the

changes

to

audit

documentation were made

and reviewed.

SA 240 (Revised) The Auditors Responsibilities Relating to Fraud in an Audit of Financial Statements
Meaning and Nature of Fraud

Management Duties

Auditors Responsibilities

Meaning:

To Prevent
Detect Fraud

To

Intentional

Act

involving use of deception to

and

obtain an unjust or illegal

Mngt. must have an

advantage.

commitment

obtain

reasonable

assurance that F.S. as a

whole are free from
material Misstatements.

to

Auditor is concerned with Fraud

create an culture of

Maintain an attitude of

that

honesty and Ethical

Professional Skepticism

causes

Material

Risk assessment Procedures & responses to Assessed Risks

(a) Enquiries Mngt & Others: w.r.t.:

Assessment of risk of material misstatement.
Procedure to identify Fraud.
Communication to TCWG and Employees.
(b) Enquiring TCWG: w.r.t.
Undertaking of their supervisions process.
Their knowledge of fraud.

Misstatement.

behavior.

Misstatement may result from:

Circumstances
Misstatement

(c) Evaluation of identified unusual and unexpected

Fraudulent

Financial

indicate

existence

of

material

(d) Evaluate whether information obtained indicates fraud

Reporting.
Misappropriation of Assets

relationships.

Consider whether such a misstatement is an indication

risk factor.

of Fraud. If Fraud identifiedDue to Inherent limitations there

is always an unavoidable risk of
material misstatement in F.S.
due to Fraud.

Determine responses to address assessed Risk of material

Communicate
Mngt.

to

&TCWG

Auditor unable to complete

the engagement.

(and to Regulatory
.

Risk of Material Misstatements

and

due to Management Fraud is

authorities,

higher than due to Employee

required by Law)

Fraud.s

Enforcement
if

Consider the Possibility of

withdrawing.
If withdraw: Discuss with
Mngt & TCWG.

Misstatement due to fraud at:

F.S. level and

at assertion Level.

SA 250 (REVISED) CONSIDERATION OF LAWS AND REGULATION IN AN AUDIT OF F.S.

Auditors Responsibilities

Specific
Responsibilities w.r.t.

Basic
Responsibilities

Regulation

Regulations

Legal
&
Regulatory

having a direct

not affect amount and

identified

effect

disclosures in F.S. but

Suspected

Framework
applicable

determination of

by
Entity
with
that
Framework.

Laws

which

and

fundamental

disclosures

in F.S.

To

that do

compliance

material amount

&

may

Sufficient

&

Appropriate
audit Evidence
To
ensure
compliance

Compliance

be
to

To perform Limited
Procedures:
Inquiring of Mngt; &
Inspecting
Correspondance with
relevant Licensing /
Regulatory authority

Material

F.S.
Obtain
understanding of

Circumstances
in which it is
occurred.

auditor.

Mngt.
Q/D

Evaluate

Circumstances

Consider
the Effect

possible effects
on F.S.
with

Mngt. & TCWG

legal

advice wherever

compliance or suspected non-compliance have been disclosed to

Q/A

Unable to
Conclude
due to
Limitation
imposed
by

the Act.

Obtain

Obtain Written Representation that all instances of non-

Auditor Report

required

Indicators considered by
Auditor
Regularity &
Enforcement Authorities

/
Effect on

Discuss
To identify instances
of non compliance.

To TCWG

is

with

operating aspects.

obtain

in

case any Non-

Law

on

Other

Procedure

Obtain general
understanding of

Compliance

&

Reporting responsibilities

Auditor

Matters
involving
noncompliance.
If TCWG is involved,
communicate
to
Higher
Level, if any
Otherwise,
obtain
Legal
Advice

If required by Law
Investigations by regulatory bodies.
Payment of fines or penalties.
Payments for unspecified services to
consultants, related parties etc.
Excessive Sales commissions or
agents fees.
Purchasing at prices significantly
above or below market price.
Unusual payments in cash.
Unusual payments towards legal and
retainership fees.
Payments without proper exchange
control documentation.
Existence of an information system
which fails, to provide an adequate
audit trail or sufficient evidence.
Unauthorised
transactions
or
improperly recorded transactions.
Adverse media comment.

SA 260 (Revised) Communication with TCWG

Meaning
Management
TCWG

TCWG:

of
&

Persons

with responsibility
for overseeing the
strategic directions
&

obligations

related

to

Accountability.

Auditors Responsibilities

Determine

the

appropriate person to
(a) Auditors

made.

in relate to F.S. Audit

(b) Planned scope & timing

Need

of audit
(c) Significant findings from

to

communicate

with

Governing body, if

Person

:
with

executive
for

conduct of entitys

in

managing the entity,

the matters need not
be

communicated

again.

responsibility

audit w.r.t.

in writing when oral

Size,

adequate.

Accounting Policies
Accounting Estimates
I.C.

on timely basis

Evaluate adequacy of

environment, & legal structure of entity.

If not adequate, evaluate

its

effect,

on

Requirements

of

respective

law

specifying written communication with

TCWG in a prescribed form.

purpose of the audit.

the

Other

misstatement.

to compliance of ethical
requirements regarding

control

audits the entitys general purpose F. S.

auditors assessment of

Matters.
(d) Statement with respect

structure,

purpose F.S., whether the auditor also

Matters discuss with

Mngt.
significant

operating

In the case of an audit of special

communication for the

Material weakness in

If all of TCWG are

involved

responsibility

operation

subgroup.

Factors affecting Mode of Communication

communication is not

whom communicate is

communicates with
Management

Matters to be communicated

Communication Process

the risks of material

Expectations
arrangements

of

TCWG,

made

for

including
periodic

meetings or communications with the

auditor.
The amount of ongoing contact and
dialogue the auditor has with TCWG.
Significant changes in the membership
of a governing body.

independence.

Important Question: Write short note on: Factors Governing mode of communication of auditor with TCWG. (4/5 Marks)

SA-265 Communicating Deficiencies in Internal Control to TCWG & Management

Meaning of deficiency in
internal control

(a) Inability of I.C to prevent

detect

&

Auditors Responsibilities

Communication of deficiencies in Internal Control

Identification of deficiencies in Internal Control

correct

misstatement ;
or
(b) Absence

of

control

Determine whether individually or in

combination they constitute significant
deficiencies

Mode of
communication

Content of
communication

necessary to Prevent,
detect

&

correct

In writing

misstatements

(a) Description of deficiencies

(b) Explanation

of

their

potential effect
To TCWG

To Mngt.

(c) Sufficient information to

explain
that

Significant
deficiencies

Significant
deficiencies
and other
deficiencies

purpose

is

to

express an opinion
I. C. is evaluated to
design further audit
procedures

SA 299 Responsibility of Joint Auditors

Division of work

By Mutual discussion
On basis of identifiable
units or specified areas

If not possible with

respect to followings:
Assets/Liabilities; or
Income/Expense; or
Period

Co-ordination

If one auditor
comes to know a
matter relevant for
other, he should
communicate
it
immediately
in
writing to other
joint
auditor
before submission
of report.

Responsibilities of Joint Auditors

Separate

Joint & several

Generally a Single
Report

For
work
allocated

for work not divided

for

joint

decision

w.r.t. N, T, E of audit
procedure.
for matters brought
to knowledge of all
by any one of them
and on which they all

Work should not be

divided for Imp. areas

agree.
Disclosure
requirements in F.S.

Proper documentation
of work divided

Reporting

Compliance of audit
report with statutory
requirement

If

disagree

Separate Report
No one is bound by
Majority.

SA 300 (Revised) Planning in an audit of Financial Statements

Preliminary Engagement Activities

(a) Procedures required by SA -

Planning

Establishment of Audit Strategy.

Documentation

Development of Audit Plan.

Audit Plan.

220 w.r.t. continuous of Client

Changes

relationship.
(b) Evaluate

Audit Strategy.

compliance

with

Ethical Requirements (SA-220)

(c) Understanding

of terms

Engagement (SA-210)

Identify the Characteristics

of Engagement.

of

Ascertain

Reporting

Objectives.

Significant factors to direct.

Consideration of result of
Preliminary

Engagement

Activities.

NTE of Procedures to be
performed.

N,T,E
of
Risk
Assessment Procedures
(SA-315)
N,T,E of furthers Audit
Procedures (SA-330)
Other Planned Audit
Procedure.

in

Audit

Strategy and Audit

Plan and the Reasons
for the change

SA 315 (Revised) Identifying and Assessing the Risk of Material Misstatements

through understanding the Entity and Its Environment.
Risk Assessment Procedures

Understanding of Entity & its Environment

Identification and Assessment of Risk

Documentation

of Material Misstatement.

Auditor shall obtain understanding of:

understanding of entity &

a) Relevant Industry, Regulatory and

To Identify and asses the

risk

of

material

misstatement.

a. Inquiry of mngt.& others

b. Analytical Procedures
c. Observation & Inspection

understanding
c) Identified & Assessed
risks of Material

For the purpose auditor shall:

The way Entity is structured & how

it is financed
Application

b) Key elements of

Misstatement

Ownership & Governance structure

and

classes of

disclosures.

Its Operations

c) Selection

for

Transaction, Account Balances &

b) Nature of Entity including.

Types of investments
It Includes

a) Financial statement Level

b) Assertion level

other External Factors

its environment

a) Discussion

Procedures to obtain an

of

Accounting Policies & reasons for

changes thereto.

(a) Identify risks

(b) Assess & Evaluate the identified
risks.
(c) Relate identified risk to what go
wrong at assertion level.
(d) Likelihood of misstatement.

d) Entity objectives & Strategies & those

business risks that may result in
increase risk of material misstatements.
e) Measurement & review of Financial
Performance.
f) Internal control relevant to audit.

Risk require special consideration

(a) Risk of fraud
(b) Risk related to recent significant Economic,
Accounting & other Developments.
(c) Complexity of Transactions.
(d) Transactions with Related Parties
(e) Significant Unusual Transaction

SA 320 (Revised) Materiality in Planning and Performing an Audit

Concept of Materiality

Subject of auditor Judgement; and

subject to discussion present in F. R.
Framework
If F. R. Framework does not include a
discussion, following can be referred:
(a) Misstatements including omissions
expected to influence the economic
decision of users.
(b) Size or nature of misstatement &
the surrounding circumstances.
(c) Common financial information
needs of the users as a group.
Judgement of materiality provides a
basis for:
(a) Determination of NTE of R. A. P.
(b) Identifying and assessing risk of
material misstatements.
(c) NTE of further audit procedures.

Performance Materiality

Auditors Duties

the amount set by auditor

at

(a) Upon establishing the overall

less than materiality for

F.S as a whole
to

reduce

to

an

appropriately low level

the probability that the
aggregate
of
the
uncorrected
and
undetected misstatement
exceeds materiality for
the F. S. as a whole

audit strategy, the auditor shall

determine the materiality for the
F. S. as a whole.
(b) Determine the materiality level
for specific transactions for which
misstatements of lower amount be
expected
to
influence
the
economic decisions of users.
(c) Determine
the
performance
materiality for purpose of
assessing the risk of material
misstatements.
(d) Revise
materiality
and
performance materiality wherever
required as audit progresses.

SA 330 Responses to assessed Risks

Tests of Controls

Substantive Procedures

Sufficiency & Appropriate of Audit

Evidence

Procedures designed to

Procedures designed to detect material

evaluate the operating

misstatements at assertion level. It

effectiveness of controls

comprises of:

(e.g. Inquiry)

a) Test of details ( of classes of

transactions, Account Balances and

Obtain audit evidences

Disclosures); and

Not obtained

Draw

Obtain further

conclusions

audit evidence

& report

b) Substantive Analytical Procedures

w.r.t.

Obtained

accordingly
Not able to

Application of controls

Substantive Procedures.

collect

Consistency of
application
By whom & by what
means they applied

Closing Process

the

audit

evidences
Material

weaknesses

identified
Communicate to Mngt. &
TCWG on timely basis

Qualified
opinion or

Reconciling
F.S.

Evaluate

Significant Risks
the

Procedures that

Disclaimer of

with

are specifically

Opinion

underlying

responsive to

Accounting

that risk needs

Records

to be applied

Examine Material
Journal Entries &
other adjustments
made during the
course

of

preparing the F.S.

SA 402 (Revised) Audit Considerations relating to an Entity Using a Service Organisation

Auditors Objective

Auditors considerations

Obtaining understanding of services provided by

service Organisation

To

obtain

The

an

understanding of nature

The user auditor shall obtain an understanding of

and

of

how user entity uses the services of a service

service provided by the

organization in the user entity operation,

service

including:

significance

organization

(a) Nature of service provided by the service

users entity internal

organization and the significance of those

control relevant to the

services to the user entity.

sufficient

to

(b) The

nature

and

materiality

of

the

transactions processed or financial reporting

risk

processes affected by service organizations.

material

misstatement.

(c) The degree of interaction between activities

To design and perform

audit

procedures

responsive

to

risks.

those

shall

evaluate

the

design

and

implementation of relevant controls of user entity that relate

to the services provided by service organization.
The user auditor shall determine whether a sufficient
provided by service organization and their effect on the user
entity internal control relevant to the audit has been obtained.
If user auditor is unable to obtain a sufficient understanding

identify and assess the

of

auditor

understanding of nature and significance of services

and their effect on the

audit,

user

of service organizations and those of the user

entity.
(d) The nature of relationship between user

from the user entity, the user auditor shall obtain that
understanding from one or more of following procedures:
(a) Obtaining a Type 1 or Type 2 Report, if available.
(b) Contacting the service organization, through the user
entity, to obtain the sufficient information.
(c) Visiting the service organization.
(d) Using another auditor to perform procedures that will

entity and the service organization.

provide the necessary information about the relevant

controls at the service organsition.

User Auditor: An auditor who audits and Reports on the financial statements of a user entity.
User Entity: An Entity that uses a service organization and whose financial statements are being audited.
Type 1 Report: Report on the description and design of internal controls at a service organization.
Type 2 Report: Report on the description, design and operating effectiveness of controls at a service organsation.

SA 450 Evaluation of Misstatements Identified during the Audit

Identification/Accumulation of Misstatements

Meaning of Misstatements
Difference between:
(a) the amounts, classification, presentation or

Communicate to management

Determine whether any revision

& request them to correct.

required in Audit Strategy/Plan.

disclosure of a reported financial statement

item, and
(b) the amount, classification, presentation or
disclosure that is required for the item to be in
accordance of financial reporting framework.

Management corrects

Management refuses

Perform

Understand the reason for

Additional

Procedures
Uncorrected

misstatement:

Misstatements

accumulated by auditor but not corrected.

determine

to
whether

not making the corrections

Determine the materiality

misstatements
remain.

If

material,

communicate

uncorrected

misstatement and their effect on his opinion to

TCWG

with

request

that

uncorrected

misstatements be corrected.
Not corrected
Obtain

written

representation

from

management/TCWG w.r.t their believing that effect

of uncorrected misstatements are immaterial.

SA 510 (Revised) INITIAL AUDIT ENGAGEMENTS Opening Balances

Meaning of Initial Audit Engagement: An Engagement in which F. S. for prior period are not audited or were audited by predecessor auditor.
Meaning of Opening balance A/c balance that exist at beginning of period & also includes disclosures exists at beginning of period.

Audit Procedures

Audit Conclusion & Reporting

Opening Balance
Consistency of
Read most recent F.S. and
auditor report thereon.

Accounting
Policies

Modification in
Predecessor
Auditors
Report

Obtain S.A. audit evidence

w.r.t. existence of any
material misstatement by
Determining correct b/f
of prior period closing
balance.
Determining application

their effect on current

Period financial statements.
If misstatement exists in
Current
Period
F.S.
communicate to Mngt &
TCWG.

Unable

sufficient &
appropriate

properly
accounted

effect of

Audit

disclosed

in

modification

Evidence

current year F. S.

Policies
Inconsistency

Modification

exists

relevant & material for

Changes

Qualified /

w.r.t.

In assessing risk

consistent

of material

application

misstatement in

or

Current period

Properly

F.S.

accounted
disclosed

Qualified / Adverse Report

remains

Current Period F.S.

or
not

properly

Disclaimer

for changes.

&

Appropriate

Evidence

disclosure

Contain material

Modification
in
Predecessor Auditors
Report

misstatements not

obtain

Audit

accounting &

to

Evaluate the

of
appropriate
accounting policies.
If
any
misstatement
detected perform additional
procedures to determine

Accounting

Sufficient
Obtain

Consistency of

Opening Balance

Modify Current Year

or

Audit Report
accordingly

SA 530 (Revised) AUDIT SAMPLING

Meaning of Audit Sampling

Sampling risk

Sample Selection Methods

Auditors Duties

Duties
Application

of

audit

Risk that auditors conclusion based on a

Sample design, size and selection of

Random Selection

procedures to < 100 % of

sample may be different from the conclusion

items

Systematic Selection

items within a population

if the entire population were subjected to

Monetary Unit
Perform audit procedures

same audit procedure.

Sampling
Haphazard Selection

Evaluation of results of audit

Test of controls

Controls

are

more

effective

than

they

actually are

Tests of details

Material

misstatements

does not exist when in fact

Affects audit effectiveness and is more likely to

lead to an inappropriate audit opinion.

it does.

Controls

are

less

Material

effective

than

they

exists when in fact it does

actually are

Block Selection

sampling

not

misstatement

Affects audit efficiency as it would lead to

additional

work

to

establish

conclusions were incorrect.

that

initial

SA 550 (Revised) Related Parties

Meaning of
Party (RP)

A RP as defined in
applicable FRF (AS 18).
OR
Where applicable FRF
establishes minimal or no
RP requirements:
a. A person/entity having
control /
influence,

significant
over

reporting entity;
b. Entity over which
reporting entity has
control / significant
influence, and
c. Entity under common
control with reporting
entity, through:
Common controlling
ownership
Owners

Auditors Procedures

Related

who

are

close
family
members
Common key Mngt.

General Duties
Obtain

Relation

Auditors Procedures in case of

FRF establishes accounting &

identification of unidentified / undisclosed

Disclosure for RP

RP or RP transaction

a. Promptly communicate relevant info to

a. To

Identify, Assess & Respond to

recognize

Fraud Risk factors

Risk of Material Misstatement.

other members of engagement team.

b. Where FRF establishes RP requirements:
Request mgt to identify all transactions

conclude

whether F.S. in so
far as they are
affected by those
relations

and

transactions

with newly identified RP for further

relationships

Transactions

have

and

Inquire reason for failure of entitys

controls

been

disclosed as per FRF.

to

identify/disclose

RP

relationships & transactions.

appropriately accounted for and

c. Perform

appropriate

substantive

audit

procedures relating to newly identified RP

achieve
true

evaluation.

Evaluate Whether the Identified

RP

and

fair

Obtain WR from Mngt./TCWG

presentation

w.r.t.

and

Disclosure to auditor the

not misleading.

identity of RP of which they

are aware; and
Appropriate accounting &
disclosure as per FRF.

identified RP.

relationship

Relationship & Transactions.

Perform audit procedures to

or significant RP transactions.
d. Re - consider risk that other RP or
significant RP transactions may exist that
mgt

has

not

previously

identified/

disclosed.
e. If

non-disclosure

by

mgt

of

Nature of RP

and

Transactions:

b. To

Name

Specific procedures in case

an

understanding of RP

Documentation

appears

intentional, evaluate implications for audit.

Risk assessment Procedures and Responses to assessed Risk w.r..t Related party
RAP & Related Activities (as per SA 315 & SA 240)

Understanding the Entitys

relationship and Transactions

RP

a. SA 315 & SA 240(R) require

Engagement Team discussion.
b. Auditor to inquire management
regarding:
Identity of entitys RP, changes
from prior period.
Nature of relationships between
entity and RP.
Type & purpose of transactions
with RP during the period.
c. Perform appropriate RAPs to obtain
understanding
whether
managements
has
established
controls to:
Identify, account for & disclose
RP relationships & transactions.
Authorise & approve significant
transactions/arrangements with
RP.
Authorise & approve significant
transactions/arrangements outside
normal course of business.

Maintaining Alertness for RP

Information when Reviewing
Records/Documents

Responses to Assessed Risks

Design and Perform further audit

procedures to obtain SAAE about
assessed Risk of material Misstatements

Identifying Fraud risk

factors
Domination of mgmt by a single

a. Auditor to remain alert when

inspecting
records
/
documents:
Wrt
arrangements
/
information
indicating
existence
of
RP
relationships
or
transactions.
Not previously identified
or disclosed to auditor.
b. If
auditor
identifies
significant
transactions
outside entitys normal
course of business:
Inquire of management
about:
Nature
of
these
transactions, and
Whether RP could be
involved.

person or small group of persons

without compensating controls is

of

dominant

has

vetoed

significant

business decisions taken by

Significant
to

transactions
RP

for

are
final

approval.

significant

RP

Transactions outside Entitys Normal

or TCWG regarding business

proposal initiated by RP.
Transactions involving the RP
rarely

Assertions that RP Transactions were

conducted on terms equivalent to
Transaction.
Arm Length Transaction:
Transaction conducted on such terms
& conditions;

No/ little debate among mgmt

are

those prevailing in an arm Length

mgmt or TCWG.

referred

unidentified

course of Business.

influence:
RP

of

undisclosed RP or RP transaction.
Identified

a fraud risk factor.

Indicators

Identification

independently

reviewed / approved.

As between a willing buyer and

willing seller;
Who are unrelated; and
Acting independently and pursuing
their own best interests.

SA 570 (Revised) Going Concern

Mngt. Responsibilities

Auditors Duties.

entitys

To obtain sufficient appropriate audit evidence about the

For this purpose auditor is required to

ability to continue as a

appropriateness of managements use of going concern

a) Cover the same period as that used by management.

going concern.

assumption

b) Consider whether management has considrerd all

Asses

the

relevant information of which auditor is aware.

General purpose F.S.

Identified events that cast significant doubt.

are prepared on a going

concern

basis

Request management to make its assessment of entitys

unless

Perform additional procedures

ability to continue as going concern.

management intends to

Evaluating management plans for future.

liquidate the entity or to

cease operation.

In case F.S. are not

prepared

on

going

concern basis, the fact

would

need

to

be

appropriately disclosed.

Going concern

Going

Mngt.

Consider the reliability of cash flow forecast.

Assumption

Concern

unwilling to

Considering

Appropriate but

Assumption

make its

Material Uncertainty

Inappropriate

assessment

exists

availability

of

additional

facts

or

information since the date of management assessment.

Requesting

written

representations

from

Mngt.

regarding their plans for future action and the

Determine whether

Adverse

Consider the

F.S. Makes relevant

Opinion

implications

disclosure

on Auditors
Report

Yes

No

EOM

Q/A

feasibility of these plans

SA 600 Using the Work of Another Auditor

Applicability: In situation where an auditor (principal auditor - PA), reporting on the financial information of an entity, uses the work of another auditor (other auditor OA) w.r.t. to the financial information of one/more components (Division, Branch subsidiary, J. V. etc.), included in the financial information of the entity.
Non applicability: (a) Joint auditors

(b) Auditors relationship with a predecessor auditor.

Principal Auditors Procedures

1. Consider the professional competence of Other Auditor, if

Other Auditor is not a member of ICAI.
2. Visit component and examine books of account, if
essential.
3. Obtain sufficient appropriate evidence, that work of Other
Auditor is adequate for Principal Auditor's purposes.
4. Discuss audit procedures applied by Other Auditor.
5. Review a written summary of Other Auditors procedures
and findings through questionnaires/checklist.
6. Consider significant findings of Other Auditor:
Discuss audit findings with OA and Mgt. of
component.
Perform supplemental tests if necessary.
7. In case Other Auditor is not a professionally qualified

Documentation

Reporting

liaison/co-

1.Express a qualified /

audited by Other Auditor

ordination between Principal

and their significance to the

and Other auditor.

disclaimer of opinion
because
of
scope

1. Components whose FS are

financial information of the

entity as a whole.

1. Sufficient

2. Principal auditor may require

Other Auditor to answer a

2. Names of the other auditors.

3. Any conclusions reached

detailed questionnaire.
3. Other

Auditor

that individual components

coordinate

are not material.

Auditor:

4. Procedures

performed

regarding components.

with

should
Principal

Adhering to time-table.
Bringing to the attention
of PA any significant

6. Manner of dealing with

finding.

Modified Report of Other

Auditor

while

finalising

foreign country:

Principal Auditors Report.

If Principal Auditor
concludes

that

he

cannot use the work of

Other Auditor;

sufficient

additional

procedures

regarding

FI of the component
audited by OA.
2. Report

Compliance with relevant

statutory requirements.
Respond

limitation:

PA unable to perform

5. Conclusions reached.

auditor - for instance, where a component is situated in

Procedures mentioned above assume added importance.

Coordination

to

questionnaire.

detailed

clearly

should
division

state
of

responsibility between
PA and OA.

SA 610 (Revised) Using the Work of Internal Auditors

Meaning

&

scope

of

Internal Audit Function

Relationship between
Internal

Audit

Function & External

Meaning: an

Conclusions regarding the

evaluation & adequacy of

Determine

Auditor

Appraisal activity.

work.

Established/ provided.
As a service to entity.
Also include
examining,
evaluating &
monitoring
adequacy / effectiveness
of Internal Control.

Role & objectives of

internal

audit

Adequacy of Internal Audit

If Adequate, consider

Work for External Auditors

its effect on N, T, E of

Purpose

External

function determined
by Mgt/ TCWG.
Not

withstanding

Degree of autonomy
/objectivity, internal

independent

of

entity.

for

responsibility
audit

opinion,

and
that

Ob j ecti vit y

of

int ernal

Using Specific Work of Internal auditor

t he

Nature of specific

a udit

work performed by

functi on;

Internal Auditor.

T echni cal compet enc y

of i nt er nal audit ors;

whi ch

the

responsibility

not reduced by use

of work of internal

i nt er nal

au dit ors wor ks; an d

communi cati on
b et ween

auditors.

auditors

Procedures.

Professi onal care wit h

External auditor has

sole

Audit
procedures
performed
on
internal
auditor work.

By evaluating the following

audit function is not

Scope of Internal Audit:
Monitoring of I. C.
Examination
of
financial & operating
information.
Review of operating
activities.
Review of compliance
with
laws
&
regulations.
Risk management.
Governance.

Documentation

External Auditors Procedures w.r.t. Evaluation of Internal Audit Function

au dit ors
au dit or.

&

Assessed Risk

of

material

subjectivity

the work to determine its adequacy:

Work was performed by IA having
adequate
technical
training
&
proficiency.
Work

was

properly

supervised,

reviewed & documented.

Misstatement.
Degree

Evaluate & perform audit procedures on

of
in

evaluation of audit
i nt er nal

evidence by internal

ext er nal

auditor.

Adequate audit evidence obtained by

Internal auditor.
Conclusions reached are appropriate &
Internal Auditor reports are consistent
with results of work.
Exceptions/ unusual matters disclosed
by Internal Auditor are properly
resolved.

SA 720 (Revised) - THE AUDITORS RESPONSIBILITY IN RELATION TO OTHER INFORMATION IN DOCUMENTS

CONTAINING AUDITED FINANCIAL STATEMENTS
Purpose: Auditor is not required to express an opinion on other information in documents containing audited F.S. (Ex. Annual Report), however, auditor reads the pother
information because credibility of F.S. may be undermined by Material inconsistencies between the audited financial statements and other information.
Auditors Procedures:

Make appropriate arrangements with Management & TCWG to obtain the other information prior to the date of auditor report & Read the
information so obtained. If Information is not available prior to date of auditors report, read the other information as soon as practicable.

Materi al I n co nsist enci es identi fi ed i n Ot her info rmatio n

Mat eri al Misstat ement of Fa cts fi nd out.

Missta temen t of Facts : Other informa ti on
that is unr elat ed t o matt ers app ea ri ng i n

Prior to the Date of auditors Report

Revisi on

of

a udit ed

F.S .

b ecomes

Subsequent to the Date of auditors Report

Revisi on

of

ot her
in for mati on

nec essar y

b ut

M ngt. refus es

n ec essar y

is

Revisi on of au dit e d

Revisi o n of

fi na nci al stat eme nt s

ot h er

becomes necessa r y

info rmatio n

b ut

is necess ar y

M ngt. refus es

Th e

Au dit or s hall co mmun i cat e

shall

this matt er to T CW G; and

Audit or

s hall

mo di f y

t he

opi ni on

in

Audit or

but

au dit ed

F.S.

that

is

corr ectl y

state d

Discuss the matter with Management

Request management to consult with a
qualified third party and auditor shall
consider the advice received.

mana gement
r efuses.

Audit o r con cl u des exist en ce o f

follo w t he

mat eri al misstat ement of facts,

r el ev ant

but

wit hdraw

r eq uir e me

co rr ect.

aud i t or s rep ort

fr om

nts of S A

d es cri bi n g

enga ge ment

i n cl u de

in

the
the

a ccor dance wit h

i n con si st en ci e s;

r el ev ant SA.

or

t he

5 60

ma na gement

r efu ses

to

Audit o r sh all n oti f y his concern t o those ch ar g ed wit h

go vern an ce an d ta ke t he ap p r opri at e a ctio n.