Understanding

AUDIT
&
Standards On AUDIT

Presented by:
Rajat Kasera :336
Vinay Gupta :328

So What is an Audit?

An audit is defined as a systematic process of objectively

obtaining and evaluating evidence regarding statements about
economic events to determine agreement between the
statements and established criteria and communicating those
results to users.

Did that clarify it?

Simply put:

An audit is a process, of independently verifying the financial statements

of an organization, in accordance with generally accepted accounting
standards. The process is governed by professional standards called
generally accepted auditing standards.

Regulation

Understanding
Standard

Mandatory to
comply
Companies Act,
Income Tax Act

Standard
Mandatory or
Recommendatory
ISO Standards, AS, SA

Framework
Recommendatory
COBIT, COSO

INTRODUCTION

1.Auditing Standards issued by ICAI

to its members and students
2.There are 37 Auditing Standards
issued
3.Initially they were called as AAS
i.e. Auditing and Assurance
Standards
4.Revised in the year 2010 under
the Clarity Project
5.Mandatory to be followed as per
circumstance for every member of
ICAI

Standards of Auditing
Commonly Used

SA

Name

Application

20
0

Principles of Audit

21
o

Terms of
Engagement

Client procurement

22
0

Quality of service

Every audit and work

23
0

Audit
Documentation

Workpapers

25
0

Regulation
understanding

Regulation applicable
to client

30
0

Audit Planning

Planning

32
0

Sampling

Test Check Basis

50
0

Audit Evidence

Audit Evidence

50
1

Audit Evidence
Specifics

Inventories, Litigations,
Valuation of
Investments, Segment
Reporting

SA 200
Overall Objectives of
Auditor and conduct of an audit

Ethical Requirements
Professional Skepticism
Professional Judgement
Sufficient Audit Evidence
Sufficient Audit Risk

SA 230
AUDIT DOCUMENTATION
Preparation and Preservation of Audit
Working Papers
Minimum period
Property and Ownership
Importance of Working Papers
Disclosure of Working Papers

SA 300
Planning An Audit

Commencement
Developing Strategy and a Plan
Knowledge of Clients Business
Involvement of key members of
Engagement Team
Final Documentation

SA 500
AUDIT EVIDENCE

Obtaining Audit Evidence

Evidence Selection
Compliance Procedures
Reasonable Assurance
Testing the Reliability

SA 580
WRITTEN REPRESENTATION
Assertions, statements, facts and
claims made by the management
during the course of audit
Types of Management
Representation:
i) Unsolicited ii) Response to
Specific Queries
One of the many audit evidences
An auditor should always ask for
written representation

SA 600: USING THE WORK OF

ANOTHER AUDITOR
Determination of the effect of the work of
other auditor.
Professional competence of other auditor in
the context of specific assignment if the
other auditor is not a Chartered Accountant.
Proper coordination and communication
between the two auditors
Limitation on the scope of audit
Responsibility of the principal auditor in
respect of work entrusted to other auditors

SA 610: USING THE WORK OF

INTERNAL AUDITORS
It deals with the external auditors
responsibility while using the work of
internal auditors.
Determination of the extent to which the
work of internal auditors should be used.
Determination of the adequacy of the
work.
Documentation of conclusions regarding
the evaluation and audit procedures
performed on that work.

SA 620: USING THE WORK OF AN

AUDITORS EXPERT
Use of an individual or organizations work
in a field of expertise other than accounting
or auditing.
Sole responsibility for the audit opinion
expressed
Adequacy, relevance and reasonableness
of the auditors experts work
Inquiry regarding interests and
relationships that may create a threat to
that experts objectivity

PRACTICAL QUESTIONS
Q1) Y Ltd. engaged an actuary to ascertain its
employee cost, gratuity and leave encashment
liabilities. As the auditor of Y Ltd., you would like
to use the report of the actuary as an audit
evidence. How do you evaluate the work of the
actuary ?
Q2) In the course of audit of ABC Ltd. its
management refuses to provide written
representations. As an auditor what is your
duty ?

Thank You
For Your Patience