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Auditing - Points To Be Noted Before Preparation PDF
Auditing - Points To Be Noted Before Preparation PDF
Nov-2022 Exams
1. Majority of the Auditing Syllabus drafted from Standards on Auditing (SAs) at CA Inter level &
at CA Final Level Other Laws and Professional Ethics Covered extra.
2. First Read & Understand SAs and then Start your Preparation. It will boost your confidence.
3. Entire Auditing Paper will be discussed based on STATUTORY Audit of COMPANIES only.
“So, whenever you read the Subject, Audit means Only “Statutory Audit “and Auditor means
Only Statutory Auditor (Unless specifically mentioned in Material).
4. Always Management held responsibility to maintain Books of accounts and to Prepare Financial
Statements as per [Applicable Financial Reporting Framework].
Applicable Financial Reporting Frame Work (AFRF) means Financial Statements should be
prepared based on; Accounting Standards, as per Companies Act 2013 and as per other laws and
regulations as applicable Ex: CARO 2020.
5. While Preparing Financial Statements, Management makes Implicit / Explicit Claims about the
Items shown in Fin.Statements, is Called “Assertions”, Simply called “Management Judgements”.
6. Always it is Management PRIMARY Responsibility to Prevent and Detect Fraud and Possibility of
fraudulent activities in the Organization.
8. Financial Statements always misted in due to two reasons. i.e., either due to error or fraud.
Note: Always while preparing read this as “Mis-statement due to error or fraud”
9. In Simple words, Materiality means wrong statements in Fin.Stmt, (i.e., major errors/ Frauds)
“having Significant impact in the economic decisions Users of Financial Statements.
10. Concept of Materiality should be seen from Auditor’s perspective, while preparing the subject.
12. Auditor Always gives only “REASONABLE ASSURANCE” by expressing his Opinion in the Form of
Report (Independent Audit Report).
Note: Reasonable Assurance itself is a High Level of Assurance.
13. Auditor will NEVER expect to give ABSOLUTE ASSURANCE (100% Assurance), due to inherent
limitation of audit.
a. Time
b. Financial Reporting
c. Cost vs Benefit
14. In order to give Reasonable assurance, it is the responsibility of Auditor to obtain Sufficient
and Appropriate Audit evidence.
a) Sufficiency
b) Appropriateness
Note 2: If Auditor unable to get sufficient and appropriate evidence during audit then auditor
will not get REASONABLE Assurance, Hence Auditor should also express his Opinion
accordingly.
15. While doing audit (Planning State, Execution State & Reporting State), if auditor takes his own
decision, then it is called “Professional Judgement of Auditor”.
Note: Whenever auditor used his professional judgment (PJ) i.e, taken his own decision, it is
based on;
a) Qualification of Auditor
b) Skill of Auditor
c) Knowledge of Auditor
d) Experience of Auditor
16. Always Auditor use his Professional Judgement to Complete the audit efficiently and effectively
subject to compliance with SA and applicable Laws / Regulations.
Note: Auditor while using his PJ, he can’t violate Standards on Auditing (SA) which is mandatory
as per ICAI.
18. Always Auditor Scope (i.e., what to do & what not to do) will be decided by Law (Statute), If
any other persons influence this scope, then it will be a restriction on scope of auditor. Auditor
should always follow scope conferred (given) by law.
19. Keep the Following key Points in Mind While preparing the Paper
a. Company (All Companies) - Regulated by ROC, SEBI in case Listed
b. Central Govt (i.e., Ministry of Corporate Affairs)
c. Practicing Chartered Accountant (Regulated by ICAI)
d. Management
e. Those Charged with Governance
f. Management Prepare Financial Statements as per Law (ASs)
g. Auditor Audits the Financial Statement as per Law (SAs)
20. Audit of Other than Companies are specially discussed in the Syllabus as per ICAI.