SARANSH Last Mile Referencer for

AUDITING
[Covering all Engagement & Quality Control Standards]

The Institute of Chartered

Accountants of India
(Setup by an Act of Parliament)

Board of Studies (Academic)

www.icai.org | www.boslive.icai.org
Saransh - Last Mile Referencer for Auditing
While due care has been taken in preparing this booklet, if any errors or omissions are noticed, the
same may be brought to the notice of the oint Director, BoS(A). The Council of the Institute is
not responsible in any way for the correctness or otherwise of the matter published herein.

© 202 . The Institute of Chartered Accountants of India (Also referred to as ICAI)

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or
transmitted, in any form, or by any means, electronic, mechanical, photocopying, recording, or
otherwise, without prior permission, in writing, from the publisher.

Published ˜ˡ ebruary ʥʣʥ by:

Board of Studiesʛʴ˖˔˗˘ˠ˜˖ʜ
The Institute of Chartered Accountants of India
‘ICAI Bhawan” A-29, Sector-62,
Noida 201 309
 Board of Studies (Academic), the student wing of the Institute, does not leave any
stone unturned in providing best-in-class services to its students. It imparts quality
academic education through its value-added study materials, wherein concepts are
explained in lucid language. Illustrations and Test Your Knowledge Questions
contained therein facilitate enhanced understanding and application of concepts
learnt. Multiple-Choice Questions (MCQ) Paper Practice Assessment Portal
contain a rich bank of MCQs and Case Scenarios to hone the analytical skills of
students, by applying the concepts learnt in problem solving. This portal helps the
students to assess their level of understanding chapter-wise. Revision Test Papers
contain updates and Q & A to help students update themselves with the latest
PREFACE

developments before each examination and revise the concepts and provisions by
solving questions contained therein. Suggested Answers containing the ideal
manner of answering questions set at examination also helps students revise for the
forthcoming examination. Mock Test Papers help students assess their level of
preparedness before each examination. BoS (Academic) also conducts live virtual
classes through eminent faculty for its students across the length and breadth of the
country.

To reach out to its students, the BoS (Academic) has also been publishing subject-
specific capsules in its monthly Students’ Journal “The Chartered
Accountant Student” for facilitating effective revision of concepts dealt with in
different topics of each subject at the Foundation, Intermediate and Final levels
of the chartered accountancy course. Each issue of the journal includes a capsule
relating to specific topic(s) in one subject at each of the three levels. In these
capsules, the concepts and provisions are presented in attractive colours in the
form of tables, diagrams and flow charts for facilitating easy retention and quick
revision of topics.

The BoS (Academic) is now coming out with the revised edition of the
booklet ‘Saransh - Last Mile Referencer for Auditing’, covering all Engagement and
Quality Control Standards, thereby helping students in effective revision and
recap before examinations. In Auditing, the significant features of the
Engagement and Quality Control Standards included within the scope of syllabi
at intermediate and final levels are presented. The important concepts of
Standards on Quality Control (SQC), Standards on Auditing (SAs), Standards on
Review Engagement (SREs), Standards on Assurance Engagements (SAEs), and
Standards on Related Services (SRSs) covered in syllabi have been explained
precisely. Students would be able to grasp these significant concepts quickly with
the help of this booklet.

Happy Reading!

© ICAI BOS(A)
SARANSH Auditing

© ICAI BOS(A)
SARANSH Auditing

Message of Key ICAI Office Bearers

CA. Aniket Sunil Talati
President, ICAI

At ICAI, we believe that continuously enhancing our educational materials is essential for
the continued success of our students. In our ongoing commitment to update the
educational content, we are pleased to announce the revised edition of Saransh — Last
Mile Referencer on Auditing. This invaluable resource now incorporates all Engagement
and Quality Control Standards in a concise and precise format. Our mission is to
empower CA students by providing them with a updated material of these standards,
enabling them to revise, recap and excel in their examinations.

CA. Ranjeet Kumar Agarwal

Vice President, ICAI

ICAI consistently strives to keep its students well-informed about the dynamic
landscape of accounting and auditing. In pursuit of this commitment, the Board of
Studies (Academic) introduces an updated version of ‘Saransh–Last Mile Referencer
on Auditing’. The latest version of Saransh now incorporates all Engagement and
Quality Control Standards in a concise and precise form. This updated Saransh
edition aims to further support students in their academic journey, equipping them
with the knowledge necessary in the ever-evolving field of auditing and enabling
them to perform well in examinations.

CA. Vishal Doshi

Chairman, Board of Studies (Academic)

In our commitment to provide the most relevant and up-to-date content, the Board is
happy to announce that the Saransh on Auditing now encompasses all Engagement and
Quality Control Standards in a concise and precise form. By capturing key points in an
easily accessible format, Saransh facilitates effective revision of concepts, offering
students an overview of the standards. The content is thoughtfully presented using
attractive colours, tables, diagrams, and flow charts, enhancing the visual appeal and
aiding in quick comprehension and retention.

CA. Dayaniwas Sharma

Vice-Chairman, Board of Studies (Academic)

The Board of Studies (Academic) is excited to introduce an updated version of Saransh —

Last Mile Referencer on Auditing. Saransh represents our dedication to provide students
with a concise and precise resource for quick understanding and revision of critical
concepts. The inclusion of all Engagement and Quality Control Standards in the Auditing
referencer ensures that students can grasp the essence of the subject more effectively,
fostering a deeper comprehension. These capsules, thoughtfully designed to facilitate
effective revision, play a pivotal role in elevating students' preparedness for examinations.

© ICAI BOS(A)
SARANSH Auditing

© ICAI BOS(A)
SARANSH

The Institute of Chartered

Accountants of India
(Setup by an Act of Parliament)
Board of Studies (Academic)

INDEX
Topic Pg No.

AUDITING

Engagement & Quality Control Standards 1

SQC 1 3

Standards on Auditing (SA 100 - 999)

SA 200-299: General Principles and Responsibilities 4

SA 300-499: Risk Assessment and Response to Assessed Risks 14

SA 500-599: Audit Evidence 20

SA 600-699: Using Work of Others 28

SA 700-799: Audit Conclusions and Reporting 32

SA 800-899: Specialised Areas 36

SRE 2000-2699: Standards on Review Engagements 39

SAE 3000-3699: Standards on Assurance Engagements 41

SRS 4000-4699: Standards on Related Services 44

© ICAI BOS(A)
SARANSH Auditing

AUDITING

Engagement & Quality Control Standards

International Auditing and Assurance Standards Board
(IAASB):
• The IFAC Board has established the IAASB to develop and
issue, in the public interest and under its own authority, high
quality auditing standards for use around the world.
• The IAASB functions as an independent standard setting body
under the auspices of IFAC.
Auditing and Assurance Standards Board (AASB):
• ICAI is a member of the IFAC and is committed to work
towards the implementation of the guidelines issued by the
IFAC.
• ICAI constituted the AASB to review the existing auditing
practices in India and to develop Engagement and Quality
Control Standards so that these may be issued by the
Council of the Institute.

Diagrammatic Representation of the Structure of Standards Under the New Preface

AUDITING STANDARDS  AN OVERVIEW

Auditing and Assurance STRUCTURE OF

Standard Board - (AASB)- PRONOUNCEMENTS
Scope / Objective ISSUED BY AASB

FRAMEWORK FOR AUDIT & ASSURANCE &

OTHER SERVICES ENGAGEMENTS
Scope/ Objective/ Definitions/ Requirements

Standards Standards on Auditing (SA 100 - 999) Standards Standards on Standards on

for Quality SA 100 - 199 Introductory Matters on Review Assurance Related Services
Control SA 200 - 299 General Principles and Responsibilities Engagements Engagements (SRS 4000 - 4699)
(SQC 01 - 99) SA 300 - 499 Risk Assessment and Response to Assessed Risk (SRE 2000 - 2699) SAE (3000 - 3699)
SA 500 - 599 Audit Evidence
SA 600 - 699 Using Work of Others
SA 700 - 799 Audit Conclusions and Reporting
SA 00 - 99 Specialised Areas

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SARANSH Auditing

Procedure for issuing SAs

2. In the preparation of SAs, the AASB is assisted
by Study Groups constituted to consider
1. The AASB determines the specific subjects. In the formation of Study
broad areas in which the Groups, provision is made for participation of
SAs need to be formulated a cross-section of members of the Institute.
and the priority in regard
to the selection thereof.
4. After taking into consideration
3. On the basis of the work of the
the comments received, the
Study Groups, an exposure draft of
draft of the proposed SA is
the proposed SA is prepared by the
finalised by the AASB and
Committee and issued for comments by
submitted to the Council of the
members of the Institute.
Institute.

5. The Council of the Institute considers the final draft of the proposed
SA, and, if necessary, modifies the same in consultation with the
AASB. The SA is then issued under the authority of the Council.

Structure of SAs

Application and
Introduction Objective Definitions Requirements Other Explanatory
Material

It includes the It includes the For higher Every objective It explains more exactly what
purpose, scope, and objective of the understanding is shored up by is meant by a requirement or is
subject matter as well auditor in the audit of the SAs, clearly stated intended to cover, or includes
as the responsibilities area addressed by pertinent terms are requirements. examples of procedures that
of the auditor and that particular SA. delineated in each can be appropriate under
others in that context. SA. certain circumstances.

Requirements are always

expressed by the phrase “the
auditor shall.”

Compliance with the SAs:

While discharging their attest function, it is the duty of the members of the Institute to ensure that the SAs are followed in the audit of
financial information covered by their audit reports.
If for any reason a member has not been able to perform an audit in accordance with the SAs, his report should draw attention to the
material departures therefrom. Auditors are expected to follow SAs in the audits commencing on or after the date specified in the Standard.
Further, compliance of SAs are mandatory requirement as per the Companies Act, 2013.
Linkage between SAs and Disciplinary Proceedings: The SAs (as well as other statements on auditing) represent the generally accepted
procedure(s) of audit. As such, a member who does not perform his audit in accordance with these statements and fails to disclose the
material departures there from, becomes liable to the disciplinary proceedings of the Institute. Chartered Accountants Act, 1949 states that
a Chartered Accountant in practice shall be deemed to be guilty of professional misconduct, if:
he fails to disclose a material fact known he does not exercise due diligence, or is grossly he fails to invite attention to any material
to him which is not disclosed in a financial negligent in the conduct of his professional departure from the generally accepted
statement, but disclosure of which is necessary duties. procedure of audit applicable to the
in making such financial statement where he circumstances.
is concerned with that financial statement in Clause 7 of Part I of the Second Schedule
a professional capacity. Clause 9 of Part I of the Second Schedule

Clause 5 of Part I of the Second Schedule

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Engagement & Quality Control Standards

SQC

SQC 1 " Quality Control for Firms that Perform Audits & Reviews of
Historical Financial Information, & Other Assurance & Related Service Engagements"

Introduction Leadership Ethical Acceptance & Continuance Human Engagement Monitoring

responsibilities for Requirements of client relationships & Resources performance
quality within the firm specific engagements

1. The purpose Firm's policies & procedures should: 1. Firm's policies & 1. Firm's policies & procedures should
of this SQC 1. Provide it with reasonable procedures should provide it with reasonable assurance that:
is to establish assurance that the firm & its provide it with reason- a) it has sufficient personnel with the
standards & personnel comply with ethical able assurance that capabilities, competence, commitment
provide guidance requirements of: it will undertake or to ethical principles.
i) Integrity; continue relationships & b) enable the firm to issue appropriate
regarding a firm's reports.
responsibility ii) Objectivity; engagements only when it:
iii) Professional competence & a) has considered 2. Firm's performance evaluation, com-
for its system of pensation & promotion procedures give due
due care; the integrity of the
quality control for recognition & reward to the development &
iv) Confidentiality; client. maintenance of competence & commitment
audits & reviews v) Professional behaviour. b) is competent & has
of historical to ethical principles.
2. Emphasise the fundamental capabilities, time & 3. The firm should assign responsibility for
f i n a n c i a l principles which are reinforced in resources. each engagement to an engagement partner.
information & for particular by the leadership of firm, c) can comply 4. The firm should also assign appropriate
other assurance education & training, monitoring with ethical staff with capabilities, competence & time to
& related service & process for dealing with non requirements. perform engagements.
engagements. compliance. 2. When the firm obtains
3. Provide it with reasonable information that would 1. Firm's policies & procedures should
2. The firm should assurance that the firm, its have caused it to decline provide it with reasonable assurance that:
establish a system personnel, experts, network firms an engagement if that a) engagements are performed in
of quality control maintain independence to: information had been accordance with professional standards,
to provide it i) Communicate its available earlier, the firms legal & regulatory requirements.
requirements to management. policies & procedures b) that the firm issue appropriate report.
with reasonable
ii) Identify & evaluate should consider: 2. Firm should establish policies &
assurance that circumstances & relationships a) the professional & procedures w.r.t.:
the firm & its that create threats to legal responsibilities a) consultation
personnel comply independence & take b) the possibility of b) resolving differences of Opinion.
with professional appropriate action. withdrawing from c) engagement quality control review &
standards & 4. Provide it with reasonable the engagement & its documentation.
regulatory & legal assurance that it is notified client relationship. d) confidentiality, safe custody, accessi-
requirements & of breaches of independence 3. Policies & procedures bility & retrieval, retention, ownership
that the report of engagement documentation.
requirement & to enable it to take for withdrawal include:
issued by the appropriate action. a) discussing with
firm/ engagement appropriate level for 1. Firm's policies & procedures should provide
appropriate action it with reasonable assurance that:
partner(s) are a) the policies & procedures relating to the
appropriate in the 1. Firm should promote internal & the reasons for system of quality control are relevant,
circumstances. culture recognising quality as withdrawal. adequate, operating effectively.
essential in performing engagement. b) c o n s i d e r i n g b) it includes an ongoing consideration &
2. Firm's CEO (or equivalent) or professional, legal evaluation of firm's system of quality
3. The firm's or regulatory
firm's managing partner to assume control, including a periodic inspection
system of quality requirements.
ultimate responsibility for firms of a selection of completed engagements.
control should system of quality control. c) d o c u m e n t i n g 2. Firm should evaluate the deficiencies
include policies 3. If some other person(s) is assigned significant issues, noted as a result of monitoring process &
& procedures such operational responsibility, he consultations, con- should communicate to relevant engagement
addressing each of should have sufficient & appropriate clusions & the basis partners & other appropriate personnel.
the six elements experience, ability & authority to for conclusion. 3. Firm should also design policies &
of such system. assume that responsibility. procedures to appropriately address the
complaints & allegations.

Documentation Firm should establish policies and procedures requiring appropriate documentation to provide evidence of the
operation of each element of its system of quality control.
Factors to consider when determining the form and content of documentation for the same are:
• The size of the firm and the number of offices.
• The degree of authority both personnel and offices have.
• The n ture and complexity of the firm’s practice and organization.
The firm retains this documentation for a period of time sufficient to permit those performing monitoring
procedures to evaluate the firm’s compliance with its system of quality control, or for a longer period if required by
law or regulation.

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SA 00 G R

This SA establishes the independent auditor's overall responsibilities when conducting an

Scope of the
audit of financial statements in accordance with SAs. It sets out the overall objectives of the
SA
independent auditor, and explains the nature and scope of an audit.
SA 200- "Overall Objectives of the Independent Auditor and the Conduct of an Audit

In conducting an audit of financial statements, the overall objectives of the auditor are:
Overall (a) To obtain reasonable assurance about whether the financial statements as a whole are free
objectives from material misstatement, whether due to fraud or error, thereby enabling the auditor to
of the express an opinion on whether the financial statements are prepared, in all material respects, in
Auditor accordance with an applicable financial reporting framework; and
(b) To report on the financial statements, and communicate as required by the SAs, in
accordance with the auditor’s findings.
in Accordance with Standards on Auditing"

Ethical
requirements, The auditor shall:
professional 1. comply with ethical requirements including independence.
skepticism, 2. plan & perform an audit with professional skepticism.
professional 3. exercise professional judgement in planning & performing an audit of financial statements.
judgement and
SAAE & audit 4. obtain sufficient appropriate audit evidence (SAAE) to reduce audit risk to an acceptably low
risk level.

A) The auditor shall:

1. comply with all SAs relevant to the audit.
2. have an understanding of the entire text of SA, including its application & other
explanatory material.
3. not represent compliance with SAs in the auditor's report unless the auditor has
complied with the requirements of this SA & all other SAs relevant to the audit.
B) To achieve the overall objectives, the auditor shall use the objectives stated in the
relevant SAs in planning & performing the audit.
Conduct of
an Audit in C) The auditor shall comply with each requirement of an SA unless, in the circumstances
accordance of the audit:
with SAs (a) The entire SA is not relevant; or
(b) The requirement is not relevant because it is conditional and the condition does not
exist.
In exceptional circumstances, the auditor may judge it necessary to depart from a relevant
requirement in an SA. In such circumstances, the auditor shall perform alternative audit
procedures to achieve the aim of that requirement.
D) If an objective in a relevant SA cannot be achieved, the auditor shall evaluate whether
this prevents the auditor from achieving the overall objectives of the auditor and thereby
require the auditor to modify the opinion or withdraw from the engagement.

“The more that you read, the more things you will know, the more that you learn,
the more places you’ll go.” —Dr. Seuss

© ICAI BOS(A) 4
SARANSH Auditing

SA 210

"Agreeing the Terms of Audit Engagements"

Scope of the SA Preconditions Requirements Acceptance of a Change in Additional

& Objective of for an Audit of the SA the audit engagement terms Considerations in
the auditor Engagement Acceptance

Scope
This SA deals with the
auditor's responsibilities
in agreeing the terms of
the audit engagement
with management/
TCWG.
Objective
To accept or continue
an audit engagement
only when the basis
upon which it is to be
performed has been
agreed, through:
a) Establishing whether
the preconditions
for an audit are
present.
b) Confirming that
there is a common
understanding
between the auditor
& management/
TCWG of the
terms of the audit
engagement.
1. If management/ TCWG impose limitation
on the scope of auditor's work, such that the
limitation will result the auditor in disclaiming
the opinion, the auditor shall not accept such a
limited engagement.
2. If the preconditions of audit are not present,
the auditor shall discuss the matter with
management. The auditor shall not accept the
proposed engagement if FRF is not acceptable or
if engagement agreement has not been obtained.
3. Audit Engagement Terms shall include:
i) Objective & scope of audit.
ii) Responsibilities of the auditor.
iii) Responsibilities of management.
iv) Identification of applicable FRF.
v) Reference to expected content & form of
report.
If law/ regulation prescribes terms, no need for a
separate written agreement, except for the fact that
such law/ regulation applies & the management
acknowledges the same.
4. Recurring Audits: Auditor shall assess whether
to revise/ remind the terms.
1. If, prior to completing the audit
engagement, the auditor is
requested to change the audit
engagement that conveys a
lower level of assurance, the
auditor shall determine whether
there is reasonable justification
for doing so.
2. If terms of audit engagement
are changed, the auditor &
management shall agree on the
new terms of engagement.
3. If the auditor is unable to
agree to the changed terms &
management doesn't permit the
auditor to continue the original
audit engagement, the auditor
shall withdraw & report to
TCWG.
1. The auditor shall determine whether there
is conflict between the financial reporting
standards & the additional requirements.

In order to establish whether the preconditions

for an audit are present, the auditor shall: 2. If such conflict exists, auditor shall discuss
with the management as to whether:
i) additional requirements can be met
1. Determine whether the FRF to be applied in through additional disclosures.
the preparation of the financial statements is ii) a description of applicable FRF in the
acceptable and financial statements can be amended.

2. Obtain the agreement of management 3. If the above is not possible, auditor shall
that it acknowledges and understands its modify the audit report.
responsibilities:
i) For preparation of financial statement as
per FRF. 4. (i) If law prescribes the audit report
ii) For internal control such that financial format that is significantly different
statements are free from material from the requirements of the SA,
misstatements. auditor should give additional
iii) To provide the auditor with access to all explanation in the audit report.
the information, additional information, (ii) If that is not possible, auditor shall not
& unrestricted access to persons within accept the audit engagement.
the entity.

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SARANSH Auditing

SA 220

"Quality Control for an Audit of Financial Statements"

Scope of the SA Some requirements Acceptance & Engagement Engagement Other important
& Objective of of the SA w.r.t Continuance Performance Quality Control points to be
the auditor engagement partner of Client Review considered
Relationships

Scope
This SA deals with the specific
1. If there is difference of opinion
responsibilities of the auditor The engagement partner shall within the engagement team, or with
regarding quality control take responsibility for: consultant or reviewer, the audit
procedures for an audit of financial 1. the direction, supervision team shall follow the firm's policies &
statements. It also addresses the & performance of procedures for resolving the same.
responsibilities of the engagement audit engagement & the 2. The engagement partner shall
quality control reviewer. appropriateness of auditor consider the results of firm's
report. monitoring process and the
Objective deficiencies noted.
To implement quality control 3. The auditor shall document:
2. the reviews being performed i) issues identified w.r.t. compliance
procedures at the engagement
in accordance with the firm's of ethical requirements including
level that provide a reasonable
review policies & Procedures. independence.
assurance that:
i) the audit complies with ii) conclusions regarding acceptance
professional standards & continuance of client
3. the engagement team taking relationships.
& regulatory & legal
appropriate consultation iii) nature, scope & conclusions of
requirements.
on difficult & contentious consultations.
ii) the auditor's report issued matters.
is appropriate in the 4. The engagement quality control
circumstances. reviewer shall document that:
i) the procedures required for review
that have been performed.
ii) review has been completed on or
before the audit report date.
The engagement partner shall: iii) there are no unresolved matters.
1. take leadership responsibilities for the
overall quality of audit.
2. remain alert for evidence of non compliance
with relevant ethical requirements by the The engagement partner shall:
engagement team members and in case a) Determine that the quality control reviewer
of non compliance shall take appropriate has been appointed.
action. b) Discuss significant matters arising during
3. shall form a conclusion on compliance with the audit & review with the reviewer.
independence requirements that apply to c) Not date auditor's report before the
the audit engagement. completion of review.
The quality control reviewer shall:
a) Discuss significant matters with the
1. If engagement partner obtains information that would Engagement partner.
have caused the firm to decline the audit engagement, the b) Review the financial statements & auditor's
engagement partner & the firm shall take necessary action. report.
c) Review selected audit documentation.
d) Evaluate the conclusions reached.
In case of listed entities, the reviewer shall
2. The engagement partner shall ensure that the audit team consider:
& auditor's expert have the appropriate competence & the a) Evaluation of firm's independence.
capabilities. b) Whether appropriate consultation has been
taken.
c) Audit documentation w.r.t. significant
judgments.

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SARANSH Auditing

Scope
This SA deals with auditor's responsibility to prepare audit documentation for an audit of
Scope of financial statements.
the SA & Objective
Objective of The objective of the auditor is to prepare documentation that provides:
the Auditor a) sufficient appropriate record of the basis for auditor's report.
b) evidence that the audit was planned & performed in accordance with SAs & legal &
regulatory requirements.

Audit Documentation: The record of audit procedures performed, relevant audit evidence
obtained and conclusions the auditor reached.
Audit File:
One or more folders or other storage media, in physical or electronic form, containing the
records that comprise the audit documentation for a specific engagement.
Experienced Auditor:
Definitions An individual (whether internal or external to the firm) who has practical audit experience, and a
reasonable understanding of:
(i) Audit processes;
(ii) SAs and applicable legal and regulatory requirements;
(iii) The business environment in which the entity operates; and
(iv) Auditing and financial reporting issues relevant to the entity’s industry.

Audit documentation that meets the requirements of this SA and the specific documentation
requirements of other relevant SAs provides:
(a) Evidence of the auditor’s basis for a conclusion about the achievement of the overall
SA 230- "Audit Documentation"

objectives of the auditor; and

(b) Evidence that the audit was planned and performed in accordance with SAs and applicable
legal and regulatory requirements.
Nature and Audit documentation serves a number of additional purposes, including the following:
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or other requirements.

The auditor shall prepare audit documentation on a timely basis. Preparing sufficient and
Timely appropriate audit documentation on a timely basis helps to enhance the quality of the audit and
Preparation facilitates the effective review and evaluation of the audit evidence obtained and conclusions
of Audit reached before the auditor’s report is finalised. Documentation prepared after the audit work
Documentation has been performed is likely to be less accurate than documentation prepared at the time such
work is performed.

1. The auditor shall prepare audit documentation that is sufficient to enable an experienced
auditor, having no previous connection with the audit, to understand:
a) The nature, timing and extent of the audit procedures performed to comply with the SAs
and applicable legal and regulatory requirements;
b) The results of the audit procedures performed, and the audit evidence obtained; and
c) Significant matters arising during the audit, the conclusions reached thereon, and significant
professional judgements made in reaching those conclusions.
Form, content 2. In documenting the nature, timing and extent of audit procedures performed, the auditor
& extent shall record:
of Audit a) The identifying characteristics of the specific items or matters tested;
Documentation b) Who performed the audit work and the date such work was completed; and
c) Who reviewed the audit work performed and the date and extent of such review.
3. The auditor shall document discussions of significant matters with management, those
charged with governance, and others, including the nature of the significant matters discussed
and when and with whom the discussions took place.
4. If the auditor identified information that is inconsistent with the auditor’s final conclusion
regarding a significant matter, the auditor shall document how the auditor addressed the
inconsistency.

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SARANSH Auditing

If, in exceptional circumstances, the auditor performs new or additional audit procedures or
SA 230- "Audit Documentation" contd...

draws new conclusions after the date of the auditor’s report, the auditor shall document:
Matters Arising
after the Date (a) The circumstances encountered;
of the Auditor’s (b) The new or additional audit procedures performed, audit evidence obtained, and
Report conclusions reached, and their effect on the auditor’s report; and
(c) When and by whom the resulting changes to audit documentation were made and
reviewed.

1. The auditor shall assemble the audit documentation in an audit file and complete the
administrative process of assembling the final audit file on a timely basis after the date of the
auditor’s report.
Assembly of 2. After the assembly of the final audit file has been completed, the auditor shall not delete or
Final Audit discard audit documentation of any nature before the end of its retention period.
File 3. Where the auditor finds it necessary to modify existing audit documentation or add new audit
documentation after the assembly of the final audit file has been completed, the auditor shall,
regardless of the nature of the modifications or additions, document:
(a) The specific reasons for making them; and
(b) When and by whom they were made and reviewed.

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Scope
This SA deals with auditor's responsibilities relating to fraud in an audit of financial statements.
It expands on how SA 315 & SA 330 are to be applied in relation to ROMM due to fraud.
The objectives of the auditor are:
Scope of the SA
(a) To identify and assess the risks of material misstatement in the financial statements due
& Objective of
to fraud;
the Auditor
(b) To obtain sufficient appropriate audit evidence about the assessed risks of material
misstatement due to fraud, through designing and implementing appropriate responses;
and
(c) To respond appropriately to identified or suspected fraud.
SA 240- " The Auditor's Responsibilities Relating to Fraud in an Audit of Financial Statements"

1. Misstatements in the financial statements can arise from either fraud or error.
2. The distinguishing factor between fraud and error is whether the underlying action that
results in the misstatement of the financial statements is intentional or unintentional.
3. Although fraud is a broad legal concept, for the purposes of the SAs, the auditor is concerned
Characteristics with fraud that causes a material misstatement in the financial statements.
of Fraud 4. Two types of intentional misstatements are relevant to the auditor–misstatements resulting
from fraudulent financial reporting and misstatements resulting from misappropriation of
assets.
5. Although the auditor may suspect or, in rare cases, identify the occurrence of fraud, the
auditor does not make legal determinations of whether fraud has actually occurred.

In accordance with SA 200, the auditor shall maintain professional skepticism throughout the
audit, recognizing the possibility that a material misstatement due to fraud could exist.
Professional Unless the auditor has reason to believe the contrary, the auditor may accept records and
Skepticism documents as genuine.
Where responses to inquiries of management or those charged with governance are inconsistent,
the auditor shall investigate the inconsistencies.

SA 315 requires a discussion among the engagement team members and a determination by
the engagement partner of matters which are to be communicated to those team members not
Discussion involved in the discussion.
Among the This discussion shall place particular emphasis on how and where the entity’s financial
Engagement statements may be susceptible to material misstatement due to fraud, including how fraud
Team might occur.
The discussion shall occur notwithstanding the engagement team members’ beliefs that
management and those charged with governance are honest and have integrity.

Risk
Assessment When performing risk assessment procedures and related activities to obtain an understanding
Procedures of the entity and its environment, including the entity’s internal control, required by SA 315,
and Related the auditor shall perform the specified procedures to obtain information for use in identifying
Activities the risks of material misstatement due to fraud.

In accordance with SA 315, the auditor shall identify and assess the risks of material
Identification misstatement due to fraud at the financial statement level, and at the assertion level for
and classes of transactions, account balances and disclosures.
Assessment
When identifying and assessing the risks of material misstatement due to fraud, the
of the Risks
auditor shall, based on a presumption that there are risks of fraud in revenue recognition,
of Material
evaluate which types of revenue, revenue transactions or assertions give rise to such risks.
Misstatement
Due to Fraud The auditor shall treat those assessed risks of material misstatement due to fraud as
significant risks.

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In accordance with SA 330, the auditor shall determine overall responses to address the
assessed risks of material misstatement due to fraud at the financial statement level.
In determining overall responses to address the assessed risks of material misstatement due to
Responses to fraud at the financial statement level, the auditor shall:
the Assessed
Risks of (a) Assign and supervise personnel taking account of the knowledge, skill and ability of
Material the individuals to be given significant engagement responsibilities and the auditor’s
Misstatement assessment of the risks of material misstatement due to fraud for the engagement;
SA 240- " The Auditor's Responsibilities Relating to Fraud in an Audit of Financial Statements" contd...

Due to Fraud- (b) Evaluate whether the selection and application of accounting policies by the entity,
Overall particularly those related to subjective measurements and complex transactions, may
Responses be indicative of fraudulent financial reporting resulting from management’s effort to
manage earnings; and
(c) Incorporate an element of unpredictability in the selection of the nature, timing and
extent of audit procedures.

Audit
Procedures
Responsive to
Assessed Risks In accordance with SA 330, the auditor shall design and perform further audit procedures
of Material whose nature, timing and extent are responsive to the assessed risks of material misstatement
Misstatement due to fraud at the assertion level.
Due to Fraud at
the Assertion
Level

The auditor shall evaluate whether analytical procedures that are performed when forming
an overall conclusion as to whether the financial statements as a whole are consistent with the
auditor’s understanding of the entity and its environment indicate a previously unrecognized
risk of material misstatement due to fraud.
When the auditor identifies a misstatement, the auditor shall evaluate whether such a
misstatement is indicative of fraud.
If there is such an indication, the auditor shall evaluate the implications of the misstatement in
Evaluation of relation to other aspects of the audit.
Audit Evidence If the auditor identifies a misstatement and the auditor has reason to believe that it is or may
be the result of fraud and that management (in particular, senior management) is involved,
the auditor shall re-evaluate the assessment of the risks of material misstatement due to fraud.
The auditor shall also consider whether circumstances or conditions indicate possible
collusion involving employees, management or third parties when reconsidering the reliability
of evidence previously obtained.
When the auditor confirms that, or is unable to conclude whether, the financial statements are
materially misstated as a result of fraud, the auditor shall evaluate the implications for the audit.

If, as a result of a misstatement resulting from fraud or suspected fraud, the auditor encounters
exceptional circumstances that bring into question the auditor’s ability to continue performing
the audit, the auditor shall:
(a) Determine the professional and legal responsibilities applicable in the circumstances.
Auditor Unable (b) Consider whether it is appropriate to withdraw from the engagement, where withdrawal
to Continue the from the engagement is legally permitted; and
Engagement (c) If the auditor withdraws:
(i) Discuss with the appropriate level of management and those charged with governance,
the auditor’s withdrawal from the engagement and the reasons for the withdrawal; and
(ii) Determine whether there is a professional or legal requirement to report to the person
or persons who made the audit appointment.

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SA 250

"Consideration of Laws and Regulations

in an Audit of Financial Statements"

Scope of the SA Definitions Auditor's Consideration Audit procedures Reporting of

& Objective of of Compliance with when non Identified/
the Auditor Laws & Regulations compliance is suspected non
Identified/ Suspected compliance

Scope Non Compliance: The auditor shall: 1. Obtain an understanding of

Deals with auditor's Acts of omission/ 1. Obtain a general understanding the nature of the act & the
responsibility to commission by the of applicable legal & regulatory circumstances.
consider laws & entity, either intentional framework & entities'
regulations when or unintentional, compliance with the same.
performing an which are contrary to 2. Evaluate possible effect on
audit of financial the prevailing laws or the financial statements.
statements. regulations. 2. Obtain sufficient appropriate
audit evidence about the
compliance with laws & 3. If auditor suspects non
regulations that have material compliance, discuss with
Such acts include management/ TCWG or
transactions entered effect on financial statements.
else consider the need to
Objective into by, or in the obtain legal advice.
a) To obtain name of, the entity, 3. Perform audit procedures to
sufficient or on its behalf, by identify instances of such non
appropriate TCWG, management compliance. 4. If unable to obtain sufficient
audit evidence or employees. Non information, evaluate the
regarding compliance does effect on auditor's opinion.
not include personal 4. The auditor shall remain alert to
compliance the instances of non compliance
with laws & misconduct (unrelated
to the business activities or suspected non compliance. 5. Evaluate the implications on
regulations.
of the entity) by TCWG, auditor's risk assessment,
b) To perform
management or 5. Obtain representation from reliability of management
specified audit
employees of the entity. management/ TCWG about representation & take
procedures
known non compliance. appropriate action.
to identify
instances of
non compliance
having material
effect. Reporting to TCWG:
c) To respond i) Auditor to communicate matters of non compliance to TCWG.
appropriately ii) If non compliance is intentional/ material, communicate immediately.
to identified iii) If management/ TCWG involved in non compliance, communicate to next
non-compliance/ higher level eg. audit committee/ supervisory board.
suspected non
compliance.
Reporting in Auditor's Report:
i) If non compliance has material effect & has not been adequately reflected in
financial statements- Qualified/ Adverse opinion.
ii) If unable to conclude the effect of non compliance, due to limitation imposed
by management - Qualified/ Disclaimer of opinion.

Reporting to Regulatory/ Enforcement authorities:

Report if required by law.

Documentation shall include:

i) identified & suspected non compliance.
ii) discussion with management/ TCWG/ parties outside the entity.

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SA 260

"Communication with Those Charged with Governance"

Scope of the SA & Definitions Matters to be Auditor's Other Important points

Objective of the Auditor Communicated Independence to be considered

Scope 1. Those charged The auditor shall In case of listed entities, the auditor shall
Deals with auditor's with governance: communicate to TCWG: communicate with TCWG:
responsibility to communi- a person(s) or 1. The responsibilities of the a) A statement that the engagement team
cate with TCWG in an audit organization(s) auditor in relation to the & others in the firm (network firms also)
of financial statements. with responsibility financial audit. have complied with relevant ethical
for overseeing the 2. The planned scope & requirements regarding independence &
Objective strategic direction timing of audit including b) the related safeguards that have been
a) To communicate of the entity & significant risks identified applied to eliminate identified threats
clearly with TCWG the obligations related by the auditor. to independence or reduce them to an
responsibilities of the to the accountability 3. The auditor's view about acceptable level.
auditor & overview of of the entity. This significant qualitative
planned scope & timing includes overseeing aspects of the entity's
of audit. the financial reporting accounting practices. The communication process:
b) To obtain from TCWG process. 4. Significant difficulties The auditor shall communicate with TCWG:
information relevant to 2. Management: encountered during the 1. the form, timing & expected general
the audit. The person(s) audit. content of communications.
c) To provide TCWG with with executive 5. Written representation the 2. in writing significant findings from the
timely observations that responsibility for the auditor is requesting. audit & regarding auditor independence.
are significant & relevant conduct of the entity's 6. Circumstances that affect 3. on timely basis.
to their responsibility operations. For some the form & content of The auditor shall evaluate the adequacy of the
to oversee the financial entities, management auditor's report. communication process with TCWG. If not
reporting process. includes some or all of 7. Any other significant found adequate, auditor shall evaluate the effect
d) To promote effective TCWG, for example, matter arising during & take appropriate action.
two way communication executive members of the audit relevant to the Documentation:
between auditor & a governance board, oversight of financial The auditor shall include the matters
TCWG. or an owner-manager. reporting process. communicated to TCWG (whether orally or in
writing) in audit documentation.

SA 265

"Communicating Deficiencies in Internal Control to

Those Charged With Governance and Management"

Scope of the SA Objective of the Definitions Requirements of

& Objective of Auditor the SA
the auditor
To communicate Deficiency in Internal Control: 1. The auditor shall determine, whether he has
Scope appropriately This exists when: identified one or more deficiencies in the
Deals with to TCWG and i) A control is designed, implemented internal control.
a u d i t o r ' s management or operated in such a way that 2. If Yes, the auditor shall determine whether,
responsibility to deficiencies in it is unable to prevent, or detect individually or in combination, they constitute
communicate internal control and correct, misstatements in the significant deficiencies.
appropriately that the auditor financial statements on a timely 3. The auditor shall communicate in writing
to TCWG and has identified basis. significant deficiencies identified to TCWG on
management during the audit timely basis.
ii) A control necessary to prevent, or
deficiencies in and that, in
detect and correct, misstatements 4. The auditor shall also communicate to
internal control the auditor's
in the financial statements on a management at an appropriate level of
that the auditor professional
timely basis is missing. responsibility on a timely basis, in writing about
has identified in an judgment, are
Significant deficiency in Internal significant deficiencies and other deficiencies.
audit of financial of sufficient
importance Control: 5. The written communication shall include:
statements.
to merit their A deficiency or combination of i) A description of the deficiencies and
respective deficiencies in internal control explanation of their possible effects.
attentions. that, in the auditor's professional ii) Sufficient information to enable TCWG/
judgment, is of sufficient importance management to understand the context of
to merit the attention of TCWG. the communication.

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SA 299

"Joint Audit of Financial Statements"

Scope of the SA Definitions Audit planning, Responsibility & Audit Conclusion Communication
& Objective of Risk assessment & Coordination among & Reporting with TCWG
the auditor Allocation of work joint auditors

Scope Individual Responsibility for: 1. Joint auditors to issue a

Deals with special considerations in In respect of work divided, each
carrying out audit by joint auditors. joint auditor shall be responsible
This SA lays down the principles for only for the work allocated to such
effective conduct of joint audit to joint auditor including proper
achieve the overall objectives of the execution of the audit procedures.
auditor laid down in SA 200.
Objective Jointly & Severally Responsible
for:
a) To lay down broad principles for
the joint auditors in conducting 1. Audit work not divided and
the joint audit. carried out by all joint auditors.
b) To provide a uniform approach to 2. Decisions taken by all joint
the process of joint audit. auditors in respect of common
audit areas.
c) To identify the distinct areas of
work & coverage thereof by each 3. Matters brought to the notice of
joint auditor. joint auditors by any one of them
& on which all of them agree.
d) To identify individual responsi-
bility & joint responsibility of the 4. Examining compliance of
joint auditors in relation to audit. financial statements with
relevant statutes.
5. Presentation & disclosure of
financial statements as per
Joint Audit: applicable FRF.
A joint audit is an audit of financial statements 6. Ensuring compliance with
of an entity by two or more auditors appointed relevant statute, applicable SA &
with the objective of issuing the audit report. other relevant pronouncements.
Such auditors are described as joint auditors.
1. Engagement partner & other key members from each of the
joint auditors be involved in planning the audit.
common audit report.
2. In case of disagreement, they
shall express their opinion in
separate audit report.
3. A joint auditor is not bound by
the views of the majority.
4. The audit report issued by joint
auditor should refer to the
separate audit reports issued
by other joint auditors.
5. Such reference shall be made
in Other Matter paragraph.
6. Each joint auditor to assume
that:
i) The other joint auditors
carried out their work as
per SA. There is no need
to review the work done by
other auditors.
ii) Other joint auditors have
informed the said joint
auditor about any departure
from applicable FRF.
7. Before finalising their audit
report, the joint auditors shall
discuss & communicate with
each other their respective
conclusions that will form
content of the audit report.

2. The joint auditors shall establish the overall audit strategy.

When the joint auditors expect

3. The joint auditors shall discuss & develop a joint audit plan. to modify the opinion or include
EOM/ OM paragraph, they shall
4. ROMM is to be considered and assessed by each Joint communicate with TCWG regarding
Auditor and shall be communicated to other joint auditors the circumstances and the proposed
and documented, whether pertaining to the overall financial wordings of the report.
statements level or to the area of allocation among the other
joint auditors.

5. The joint auditors shall discuss & document the NTE of audit
procedures and the same shall be communicated to TCWG.

6. The joint auditors shall obtain common engagement letter &

common management representation letter.

7. The work allocation document shall be signed by all joint

auditors & communicated to TCWG.

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SA 300 - 499: Risk Assessment and Response to Assessed Risks

SA 300

" Planning an Audit of

Financial Statements"

Scope of Objective of Involvement of Preliminary Other Important

Planning
the SA the Auditor Key Engagement Engagement points to be
Activities
Team Members Activities considered

This SA deals The engagement The auditor shall undertake Documentation:

with the auditor’s partner & other the following activities at the The auditor shall
responsibility to key members of the beginning of the current audit document:
plan an audit engagement team engagement: 1. The overall audit
of financial shall be involved in 1. Performing procedures strategy.
statements. This planning the audit, required by SA 220. 2. The audit plan and
SA is framed in including planning 2. Evaluating compliance 3. Any significant changes
& participating made to the strategy
the context of with ethical requirements,
or the audit plan along
recurring audits. in the discussion including independence, as with the reasons.
among engagement required by SA 220.
team members. 3. Establishing an understanding
of the terms of engagement, as
required by SA 210. Additional
Considerations in Initial
Audit Engagements:
The objective of the Prior to starting an audit,
auditor is to plan the 1. The auditor shall establish an overall audit strategy that sets the auditor shall:
audit so that it will the scope, timing and direction of the audit and that guides the 1. Perform procedures
be performed in an development of the audit plan. required by SA
2. In establishing the overall audit strategy, the auditor shall: 220 regarding the
effective manner. acceptance of the
a) Identify characteristics of the engagement that defines its
client relationship
scope.
and the specific audit
Ascertain the reporting objectives. engagement.
Cons der the factors significant in directing engagement team's 2. Communicate with the
efforts. predecessor auditor.
Consider the results of preliminary engagement activities.
e Ascertain the resources necessary to perform the engagement.
. The auditor shall develop an audit plan including description of:
The planned risk assessment procedures, as per SA 315.
The planned further audit procedures at the assertion level as
per SA 330.
Other planned audit procedures.
. The auditor shall update/ change overall audit str tegy or plan as
necessary.
. The auditor shall direct & supervise the engagement team and
review their work.

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SA 315

" Identifying and Assessing the Risk of

Material Misstatement through understanding
the Entity and its Environment"

Scope of Objective of Risk Assessment Understanding Identifying & Other important

the SA the Auditor procedures and the Entity and its Assessing the points to be
related activities Environment including ROMM considered
Internal Control

This SA deals A) Risk Assessment Significant Risks:

with the auditor’s Procedures include the The auditor shall obtain an
Entity & its Environment: understanding of the entity's
responsibility following: The auditor shall obtain an
1. Inquiries of management control and control activities
to identify and understanding of: relevant to the significant risk.
assess the risks and of others within the a) Relevant industry, regulatory
of material entity.
2. Analytical procedures. & other external factors.
misstatement 3. Observation b) The nature of the entity.
and Risks for which Substantive
(ROMM) in c) The accounting policies
Inspection. Procedures alone do
the financial including reasons for changes.
statements, not provide sufficient
d) Entity's Objectives & appropriate audit evidence:
t h r o u g h Strategies. In such case the auditor shall
understanding B) The auditor shall e) Measurement & review of obtain an understanding of
the entity and consider whether the entity's financial performance. entity's controls over such
its environment, information obtained from risks.
including the auditor s client acceptance
entity's internal or continuance process
control. Entity's Internal Control: The
or information from other auditor shall evaluate the design Revision of Risk Assessment:
engagement or previous of the controls to determine The auditor's assessment of
audits is relevant in whether they have been ROMM at the assertion level
identifying the ROMM. implemented. may change during the course
of audit as additional audit
The auditor shall obtain evidence is obtained. In such
understanding of : case, the auditor shall revise
C) The audit team to 1. the control environment and the assessment and modify
discuss the susceptibility of entity's risk assessment process. the further planned audit
the entity s financial 2. the information system and procedures accordingly.
statements to material entiy's communication process.
misstatements and the 3. the control activities relevant to
application of the the audit and the major activities
used by entity to monitor internal Documentation:
applicable FRF to the
control over financial reporting. Auditor shall document:
entity s fact and 4. the internal audit function and 1. The discussion among the
circumstances. sources of information used in engagement team.
entity's monitoring activities. 2. Key elements of the
understanding obtained.
To identify and assess 3. Identified & Assessed
the ROMM, whether due ROMM.
to fraud or error at the 4. The risks identified and the
financial s tatement a nd related controls.
assertion levels, through The auditor shall identify and assess ROMM at:
understanding the entity & • financial statement level &
its environment, including • assertion level for classes of transactions and account balances.
the entity's internal
The auditor shall:
control, thereby providing 1. Identify risks throughout the process of obtaining understanding of
a basis for designing and the entity.
implementing the responses 2. Assess the identified risk and evaluate whether they have pervasive
to the assessed ROMM. effect.
3. Relate the identified assertions to what can go wrong at the
assertion level.
4. Consider the likelihood of the misstatement and its magnitude.

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SA 320

"Materiality in Planning and Performing an Audit"

Scope of the SA Determining Materiality & Use of Benchmarks Other important

& Objective of Performance Materiality points
the Auditor

Scope 1. Determining materiality

1. The auditor shall determine the materiality for the
This SA deals involves exercise of
financial statements as a whole.
with the auditor's professional judgement.
responsibility to
apply the concept
of materiality
in planning & 2. If there is one or more particular classes of 2. A percentage is often applied
performing an transactions, account balances or disclosures for to a chosen benchmark as a
audit of financial which misstatements of lesser amounts than the starting point in determining
statements. materiality for the financial statements as a whole materiality for the financial
could reasonably be expected to influence the statements as a whole.
economic decisions of users taken on the basis of the
financial statements, the auditor shall also determine
Objective the materiality level or levels to be applied to those
particular classes of transactions, account balances 3. Examples of benchmarks:
To apply the a) Profit before tax
or disclosures.
concept of b) total revenue
materiality c) gross profit
appropriately d) total expenses etc.
in planning and
performing an . The auditor shall determine performance materiality
audit. for purposes of assessing the ROMM and
dertermining the nature, timi g & extent of further
audit procedures.

Revision as the Audit progresses:

1. Materiality for the financial statements as a whole
may need to be revised as a result of a change in
circumstances that occurred during the audit, new
information, or a change in the auditor’s understanding
of the entity and its operations as a result of performing
further audit procedures.
Definition
2. If the auditor concludes that a lower materiality for
Performance materiality means the the financial statements as a whole than that initially
amount or amounts set by the determined is appropriate, the auditor shall determine
auditor at less than materiality for the whether it is necessary to revise performance
financial statements as a whole to materiality, and whether the nature, timing and extent
reduce to an appropriately low level of the further audit procedures remain appropriate.
the probability that the aggregate of
uncorrected and undetected
misstatements exceeds materiality
for the financial statements as a whole. Documentation of:
1. Materiality for the financial statements as a whole.
2. The materiality level or levels for particular classes of
transactions, account balances or disclosures.
3. Performance materiality.
4. Any revision as the audit progressed.

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SA 330

"The Auditor's Responses to Assessed Risks"

Scope of the SA Requirements Test of Substantive Other important

& Objective of of SA controls procedures points
the Auditor

Scope Overall Responses: The A) The auditor shall design 1. Irrespective of the assessed
This SA deals auditor shall design & & perform test of controls ROMM, auditor shall
with the auditor’s implement overall responses when: perform substantive
responsibility to address the assessed 1. the auditor expects that procedures.
to design and ROMM at the financial the controls are operating 2. Auditor shall consider
implement statement level. effectively or whether external
responses to 2. Substantive procedures confirmation are to be
ROMM identified alone cannot provide performed as Substantive
& assessed by sufficient appropriate audit audit procedures.
the auditor in Audit Procedures for evidence at the assertion 3. Auditor shall perform
accordance Assessed ROMM at level. substantive procedures
with SA 315 Assertion Level: related to financial
B) The auditor shall perform
in a financial The auditor shall design statement closing process
other audit procedures along
statement audit. & perform further audit and those responsive to
with inquiry & determine
procedures whose nature, significant risks.
whether the controls to be
timing & extent are based 4. When substantive
tested depend upon indirect
on & are responsive to the procedures are performed
controls.
Objective assessed ROMM at the at an interim date, the
assertion level. C) The auditor shall test
To obtain auditor shall cover the
controls for a particular time
sufficient & remaining period also.
or throughout the period. 5. If misstatements that the
appropriate audit
evidence about D) The auditor may use audit auditor did not expect
In designing Further Audit
the assessed evidence obtained in previous when assessing ROMM
Procedures, the auditor
ROMM, through audits after considering are detected at an interim
shall:
designing & continuing relevance. date, the auditor shall
a) Consider the reasons
implementing E) The auditor shall test the evaluate whether the
for the assessment given
appropriate to the ROMM at the controls for significant risk in related assessment of risk
responses to current period. & planned substantive
assertion level for each
those risks. class of transactions, procedures covering the
F) When deviations from
remaining period need to be
account balance and controls are detected, the
disclosure. modified.
auditor shall make specific
b) Obtain more persuasive inquires to understand these
audit evidence because matters & their potential
of a higher assessment of consequences.
risk.

Definition
Substantive Procedure: 1. The auditor shall perform audit procedures to evaluate
An audit procedure designed to detect material the adequacy of presentation & disclosures made in the
misstatements at the assertion level. It comprises of: financial statements.
1. Test of details (of classes of transactions, account 2. The auditor shall evaluate the sufficiency &
balances, & disclosures), & appropriateness of audit evidence.
2. Substantive analytical procedures. 3. The auditor shall document:
a) the overall responses and the nature , timing, extent
of further audit procedures performed.
Test of Controls:
b) the linkage of those procedures with assessed risks
An audit procedure designed to evaluate operating at the assertion level.
effectiveness of controls in preventing, or detecting and c) the results of audit procedures.
correcting, material misstatements at the assertion level.

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SA 402

"Audit Considerations Relating to an Entity Using a Service Organisation"

Scope of Objective of the Types of Reports & their Requirements Reporting by the
the SA Auditor use by user auditor of the SA user auditor

This SA deals The objective of the user A) Type 1 Report The auditor shall obtain
with the auditor’s auditor, when the user entity Report on the description & an understanding of the
responsibility to uses the services of service design of controls at a service services provided by a
obtain sufficient organisation are: organisation. service organisation,
appropriate audit including internal control
evidence when a B) Type 2 Report that relate to the services
user entity uses Report on the description, provided by the service
the services of one To obtain an understanding design & operating organisation.
or more service of the nature & significance effectiveness of controls at a
organisations. of the service provided by the service organisation.
service organisation & their C) In determining the
effect on the user entity's sufficiency & appropriateness If the auditor is unable
internal control, sufficient of audit evidence provided by to obatin sufficient
to identify & assess the Type 1 & Type 2 report, the understanding from the user
ROMM. user auditor shall be satisfied entity, the user auditor shall
as to: obtain that understanding
(i) The service auditor's by:
professional competence. a) Obtaining Type 1
To design & perform audit (ii) The adequacy of standards or Type 2 report.
procedures responsive to under which the Type 1 or b) Contacting service
those risks. Type 2 report was issued. organisation through
D) When the user auditor user entity.
plans to use Type 2 report c) Visiting the service
as audit evidence, the user organisation &
auditor shall determine performing procedures.
whether the service auditor's d) Using another auditor to
report provides sufficient & perform the procedures.
appropriate audit evidence
about the effectiveness of the
Definition controls to support the user
auditor's risk assessment.
Service auditor: An auditor who, at
the request of the service organisation,
provides an assurance report on the
controls of a service organisation.
Service Organisation: A third party
1. If the user auditor is unable to obtain sufficient
organisation that provides services
appropriate audit evidence regarding the services
to user entities that are part of those
provided by the service organisation, the user auditor
entities' information system relevant
shall modify his audit opinion.
to financial reporting.
2. The user auditor shall not refer to the work of the
User Auditor: An auditor who audits service auditor in the user's auditor report containing
& reports on the financial statements unmodified opinion.
of a user entity. 3. If user auditor makes reference of the work of the
User Entity: An entity that uses service auditor in user auditor's report with modified
a service organisation and whose opinion, the user's auditor report shall also indicate
financial statements are being that such reference does not diminish the user auditor's
audited. responsibility for that opinion.

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SA 450

"Evaluation of Misstatements Identified during the Audit"

Scope of Objective of the Requirements Evaluating the effect of Other important

the SA Auditor of the SA Uncorrected misstatements points to be
considered

This SA deals The objective of the Auditor 1. The auditor shall accumulate The auditor shall first
with the auditor’s is to evaluate: misstatements identified during reassess the materiality
responsibility audit other than those clearly determined in accordance
to evaluate the trivial. with SA 320.
effect of identified 2. The auditor shall determine
misstatements whether the overall audit
on the audit and 1. The effect of identified strategy or audit plan need to
of uncorrected The auditor shall
misstatements on audit be revised.
misstatement s , determine whether
and 3. If at auditor's request,
if any, on u n c o r r e c t e d
the financial management has examined misstatements are
statements. or corrected any misstatement material, individually or in
that was detected, the auditor aggregate by considering:
2. The effect of uncorrected shall perform additional
misstatement, if any, on a) The size & nature of
audit procedure to determine misstatements.
the financial statements. whether misstatement remains.
b) The effect of
4. The auditor shall communicate u n c o r r e c t e d
all accumulated misstatements
misstatements of prior
on timely basis at appropriate
periods.
level of management with a
request to correct them.
5. If management refuses to
correct them, auditor shall
consider
management's reasons
for refusal and shall
evaluate whether the financial
statements as a whole are free
from material misstatement.
Definition
Misstatement: A difference
Communication with TCWG:
between the amounts,
The auditor shall communicate with TCWG
classification, presentation or
a) uncorrected misstatements & their effects and request that
disclosure of a reported financial
uncorrected misstatements be corrected.
statement item and the amount,
b) the effect of uncorrected misstatements related to prior periods.
classification, presentation or
disclosure that is required for the
item to be in accordance with the
applicable FRF. Written Representation:
Misstatements can arise from Te auditor shall request a written representation from management/
TCWG whether they believe the effects of uncorrected misstatements
error or fraud.
are immaterial, individually or in aggregate, to the financial statements
as a whole.
Uncorrected Misstatements:
Misstatements that the auditor has
accumulated during the audit and
Documentation:
that have not been corrected.
1. The amount below which misstatements would be regarded as
clearly trivial.
2. All misstatements accumulated during the audit & whether they
have been corrected.
3. The auditor's conclusion as to whether the uncorrected
misstatements are material and the basis of that conclusion.

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SA 500 - 599: Audit Evidence

SA 500 - "Audit Evidence"

Scope of Objective of Information to be used Audit procedures to Inconsistency in or

the SA the auditor as audit evidence obtain audit evidence doubts over reliability
of audit evidence

This SA deals with the To design and The auditor shall consider the relevance Audit evidence to
auditor's responsibility perform audit and reliability of the information to be draw reasonable The auditor shall
to design and perform procedures in used as audit evidence. conclusions on determine what
audit procedures to obtain such a way as to which to base the modifications
sufficient and appropriate enable the auditor When information from management auditor's opinion or additions to
audit evidence to be to obtain sufficient expert is used, the auditor shall is obtained by audit procedures
able to draw reasonable appropriate audit evaluate the competence, objectivity performing: are necessary
conclusions on which to evidence to be able of the expert, appropriateness of the 1. R i s k to resolve the
expert's work. Assessment matter and
base the auditor's opinion. to draw reasonable
conclusions on procedures shall consider
This SA is applicable to When using information produced by
which to base 2. Further audit the effect of the
all the audit evidence the entity, the auditor shall evaluate
auditor's opinion. procedures matter, if any, on
obtained during the the reliability, completeness, accuracy
comprising of : other aspects of
course of audit. of the information.
Test of the audit.
controls and
Definition Substantive
procedures
Audit Evidence: Information used by the auditor in arriving at the conclusions on which
the auditor's opinion is based. It includes both information contained in the accounting
records underlying the financial statements and other information.
Appropriateness: It is the measure of quality of audit evidence.
Sufficieny: It is the measure of quantity of audit evidence.

SA 501 - "Audit Evidence- Specific Considerations for Selected Items"

Scope of Objective of Inventory Litigations & Segment

the SA the auditor Claims Information

This SA deals with specific a) If inventory is material, obtain evidence a) Auditor to perform audit Auditor to obtain
considerations by the for existence and condition of inventory procedures to identify audit evidence
auditor in obtaining by: litigations and claims by: reg ard i ng
sufficient appropriate audit 1.Attendance at physical inventory 1.Inquiry of management. presentation
evidence with respect counting. and disclosure
2.Reviewing minutes of
to inventory, litigation 2.Performing audit procedures over the of segment
meetings.
and claims and segment entity's final inventory records. information in
b) If inventory counting conducted at date 3.Reviewing legal expense
information in an audit of accounts. accordance with
other than the date of financial statements, applicable FRF
financial statements.
perform additional procedures with b) If auditor assesses risk of
by:
respect to inventory between count date material misstatement, seek
and date of financial statements. direct communication with 1. Understanding
c) If auditor is unable to attend the physical entity s external legal counsel. the methods
To obtain sufficient and
inventory counting due to unforeseen used by the
appropriate audit evidence c) If auditor is unable to
circumstances, auditor to make/ observe management
regarding: communicate with the
some physical count on alternate date and in determining
1. Existence and condition external legal counsel, modify
perform audit procedures on intervening s e g m e n t
of inventory the opinion as per SA 705.
transactions. information
2. Completeness of d) If attendance at inventory count is d) Obtain Written 2. P e r f o r m i n g
litigation and claims impracticable, auditor to perform Representation that all analytical
involving the entity. alternate procedures. If it is not possible known actual or possible
litigations and claims procedures.
3. Presentation and to do so, modify the opinion.
e) When inventory is under custody of third have been disclosed to the
disclosure of segment auditor and appropriately
information in accordance party, request confirmation from third accounted for as per
with applicable FRF. party and perform inspection and other applicable FRF.
procedures.

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SA 505 - "External Confirmations"

Management's refusal to Results of the External

Scope of the SA External Confirmation procedures
allow the auditor to send
& Objective of Confirmation
a confirmation request
the auditor Procedures
A) Reliability of responses to confirmation requests:
If auditor has doubt about reliability of response,
Scope 1. D e t e r m i n i n g 1. Inquire as to management’s
auditor to obtain further audit evidence. If auditor
This SA deals the information reasons for the refusal, and determines response is not reliable, auditor to evaluate
with auditor's to be seek audit evidence as to their the implications on the assessment of risk of material
use of external confirmed/ validity and reasonableness misstatement.
confirmation requested. 2. Evaluate the implications B) Non Response: Auditor shall perform alternative
procedures to 2. Selecting the of management’s refusal on audit procedures.
obtain audit appropriate the auditor’s assessment of C) When a response to positive confirmation is
evidence. confirming the relevant risks of material necessary and the same is not received: Determine
party. misstatement, including the implications on the audit and the auditors opinion.
the risk of fraud, and on the D) Exception: Auditor shall investigate exceptions
3. Designing the
Objective nature, timing and extent of to determine whether or not they are indicative of
conf ir mation
To design other audit procedures; and misstatement.
requests.
and perform 3. Perform alternative audit E) Negative Confirmation: Auditor to use negative
4. Sending the
e x t e r n a l procedures designed to confirmation as sole substantive audit procedure when:
requests,
confirmation obtain relevant and reliable 1. Assessed Risk of Material misstatement is low and
including
procedures to audit evidence. relevant controls are effective.
follow-up
obtain relevant 2. The population comprise of large number of small,
requests. If management's refusal
and reliable homogeneous transactions.
audit evidence. is unreasonable, then
communicate with TCWG and 3. A very low exception rate is expected.
consider the implications on 4.The auditor is not aware of circumstances that would
audit and auditor's opinion. cause recipients of negative confirmation requests to
disregard such requests.

SA 510 - "Initial Audit Engagements- Opening Balances"

Scope of the SA Audit Procedures Audit Conclusion

This SA deals with and reporting
auditor's responsibilities
relating to opening
balances when Opening Balances: Consistency Relevant Opening Balances:
conducting an initial The auditor shall: of Accounting Information
1. If auditor is unable to obtain
audit engagement. 1. Read the most recent Policies: in the
audit evidence regarding opening
financial statements Obtain audit Predecessor's
balances- Qualified/ disclaimer of
and predecessor's evidence as to Auditor's
Objective of the opinion.
auditor's report. whether the Report :
auditor 2.If auditor concludes opening
2. Determine whether accounting I f
To obtain sufficient balances contain misstatement,
prior period's policies are modification
appropriate audit not properly presented/ disclosed-
evidence about: closing balance consistently in predecessor
Qualified/ Adverse Opinion.
has been correctly applied and auditor's
1. Whether opening
brought forward. in case of r e p o r t ,
balances contain Consistency of Accounting
misstatements 3. Determine whether any changes, evaluate the
the opening balances w h e t h e r effect of the Policies:
that materially
affect the current reflect appropriate p r o p e r l y matter giving If auditor concludes that accounting
period's financial accounting policies. accounted for, rise to such policies are not consistently applied
statements. 4. Perform audit presented and modification in relation to opening balances or
2. W h e t h e r procedures on disclosed. with respect changes are not properly accounted
appropriate opening balances. to current for- Qualified/ Adverse Opinion.
accounting 5. If current period period's
policies are financial statements financial Modification to the opinion in the
consistently are misstated due statements. predecessor's auditor's report:
applied and any to misstatement in
opening balances, If the modification is relevant and
change thereto
communicate with material to the current period's
has been properly
management or financial statements, auditor shall
accounted for,
presented and TCWG. modify the current period audit
disclosed. report.

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SA 520

"Analytical Procedures"

Scope of the SA & Substantive Analytical procedures that Investigating results of

Objective of the auditor
Scope
This SA deals with auditor's use of
analytical procedures as substantive
procedures and as procedures near
the end of audit that assist the auditor
when forming an overall conclusion
on the financial statements.
Objective
1. To obtain relevant & reliable audit
evidence when using substantive
analytical procedures.
2. To design and perform analytical
procedures near the end of audit.
Analytical Procedures
While designing and
performing substantive
analytical procedures,
the auditor shall:
1. Determine suitability of
analytical procedure for
given assertions.
2. Evaluate reliability of
Data.
3. Develop an expectation
of recorded amounts.
4. Determine the amount
of acceptable difference.
assist when forming an
overall conclusion
The auditor shall design
and perform analytical
procedures near the end
of the audit that assist the
auditor when forming
an overall conclusion as
to whether the financial
statements are consistent
with the auditor's
understanding of the entity.
analytical procedures
If auditor finds fluctuations
or relationship that are
inconsistent with other
relevant information
auditor shall investigate
such differences by:
1. Inquiring of management
and obtaining appropriate
audit evidence relevant to
management's responses
and
2. Performing other audit
procedures as necessary
in the circumstances.

Definition
Analytical Procedures means evaluations of financial information through
analysis of plausible relationships among both financial and non-financial data.
Analytical procedures also encompass such investigation as is necessary of
identified fluctuations or relationships that are inconsistent with other relevant
information or that differ from expected values by a significant amount.

SA 530

"Audit Sampling"

Scope of the SA & Sample design, size and Performing Other points of
Objective of the auditor selection of items for testing Audit Procedures consideration

Scope 1. While designing audit 1. The auditor shall perform 1. The auditor shall investigate
This SA applies when the sample, the auditor shall appropriate audit the nature and cause of
auditor has decided to use consider the purpose of procedure on each item deviation or misstatement
audit sampling in performing the audit procedure and selected. identified and evaluate its
audit procedures. It deals the characteristics of the 2. If audit procedure is not possible effect.
with auditor's use of statistical population. applicable on the selected 2. When a deviation/
and non statistical sampling. 2. The auditor shall determine item, apply the procedure misstatement is considered
sample size sufficient to on a replacement item. as anomaly, the auditor shall
reduce sampling risk to an 3. If the auditor is unable to perform audit procedures to
Objective acceptably low level. apply the designed audit obtain high degree of certainty
To provide a reasonable 3. The auditor shall select procedure to a selected that it is not representative of
basis for the auditor to items for the sample such item, treat that item as the population.
draw conclusions about the that each sampling unit in a deviation from the 3. For test of details, the auditor
population from which the the population has a chance prescribed control, in case shall project misstatements
sample is selected. of selection. of tests of controls, or a found in the sample to the
misstatement, in the case population.
of tests of details. 4. The auditor shall evaluate
Definition the results of the sample
Audit Sampling: and whether the use
of audit sampling has
The application of audit procedures to less than 100% of provided a reasonable basis
items within a population of audit relevance such that all for conclusion about the
the sampling units have a chance of selection in order to population tested.
provide the auditor with a reasonable basis on which to
draw conclusions about the entire population.

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SA 540-Auditing Accounting Estimates, Including Fair Value

Accounting Estimates and Related Disclosures

Scope : Auditor's Responsibility regarding use

of accounting estimates by management

Management's Auditor's Responsibility/ Audit Reporting

Responsibility- Audit Procedure

Follow an unbiased Perform risk assessment

Adequate disclosure of If significant
approach in preparing for procedure and related
material matter, such as risk exist even
accounting estimates activities after adequate
disclosure the
auditor may
conclude that
the assumptions and the disclosure
Identify and assess the risk
method of estimates used of estimation
To make appropriate of material misstatements
disclosure in FS about the uncertainty
assertion and estimates is inadequate
made. in light of the
basis of selection of
circumstances and
Response to the estimates
facts involved.
assessed risk of material
misstatements

any change in the method

of estimates as compared
Evaluate the to prior period
reasonableness of
accounting estimates

the source and implication

of estimation uncertainty

Important Definitions:

Accounting estimate – An approximation of a monetary amount in the absence of a precise means of measurement. This term is used
for an amount measured at fair value where there is estimation uncertainty, as well as for other amounts that require estimation. Where
this SA addresses only accounting estimates involving measurement at fair value, the term “fair value accounting estimates” is used.

Auditor’s point estimate or auditor’s range – The amount, or range of amounts, respectively, derived from audit evidence for use in
evaluating management’s point estimate

Management bias – A lack of neutrality by management in the preparation and presentation of information.

Management’s point estimate – The amount selected by management for recognition or disclosure in the financial statements as an
accounting estimate.

Estimation uncertainty – The susceptibility of an accounting estimate and related disclosures to an inherent lack of precision in its
measurement.

Outcome of an accounting estimate –The actual monetary amount which results from the resolution of the underlying transaction(s),
event(s) or condition(s) addressed by the accounting estimate.

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SA 550

"Related Parties"

Scope of Objectives of Requirements Identification of Identified significant Other

the SA the auditor of the SA previously unidentified related party transactions important
or undisclosed related outside the entity's normal points
party transactions. course of business
This SA deals with the auditor's
responsibilities regarding
related party relationships and
transactions. It expands on how
SA 315, SA 330, SA 240 are to be 1. Auditor shall determine The auditor shall obtain Written
applied in relation to related party whether the underlying Representation that:
relationships and transactions. circumstances confirm the a) all the related parties and related party
existence of such transactions. transactions have been disclosed to
2. Communicate within the the auditor and
team. b) all such transactions have been
A. To obtain an understanding of the
related party transactions to: 3. Request management properly accounted for and disclosed.
1. recognize fraud risk factors arising from to identify all transactions
such transactions. with newly identified Communication with TCWG
related parties. The auditor shall communicate with
2. conclude whether financial statements, in so
4. Perform more substantive TCWG significant matters arising
far as they are affected by such transactions
procedures. during the audit in connection with the
a) achieve a true and fair presentation. entity's related parties.
5. Reconsider risks with respect
b) are not misleading.
to other related parties.
Documentation:
6. If non disclosure by the
B. To obtain audit evidence as to whether The auditor shall include in audit
management appears
the related party transactions are documentation names of the related
intentional, evaluate the
properly identified, accounted for, and parties and the nature of the related
implications for the audit.
disclosed in the financial statements. party transactions.

1. Risk Assessment procedures and related activities. 1. Inspect the underlying contracts and
2. Understanding the Entity's related party relationships and evaluate:
transactions. a) the business rationale of the transactions.
3. Maintaining alertness for related party information when b) whether the terms of transactions are
reviewing records or documents. consistent with management's explanations.
4. Sharing related party information with the Engagement team. c) whether such transactions have been
5. Identification and assessment of the risk of material properly accounted for.
misstatement associated with related party transactions and 2. Obtain audit evidence that the transactions
relationships. have been appropriately authorised and
6. Responses to the Risks of Material Misstatement associated approved.
with related party relationships and transactions.

Definition
Related party- A party that is either:
i) a related party as defined in applicable FRF.
ii) where applicable FRF establishes minimal or no related party requirements:
a) A person or other entity that has control or significant influence, directly or
indirectly through one or more intermediaries, over the reporting entity,
b) Another entity over which the reporting entity has control or significant
influence, directly or indirectly through one or more intermediaries; or
c) Another entity that is under common control with the reporting entity
through having:
• common controlling ownership,
• owners who are close family members, or
• common key management.

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SA 560

"Subsequent Events"

Scope of Objectives of Events occuring Facts which become Facts that

the SA the auditor between the date known to the auditor after become known
of the Financial the date of the auditor's to the auditor
Statements and date report but before the date after the financial
of the auditor's report the financial statements statements have
are issued been issued

This SA deals Obtain sufficient appropriate 1. The auditor shall 1. Discuss the matter with
with auditor's audit evidence about whether perform audit management or TCWG.
responsibilities events occuring between the procedures to ensure 2. Determine whether the financial
relating to date of the financial statements that all such events statements need amendment.
subsequent and the date of the auditor's have been identified. 3. Inquire how management intends
events in report that require adjustment
an audit of to address the matter in the
of, or disclosure in, the financial financial statements.
financial statements are appropriately
statements. reflected in those financial
statements. 2. The auditor shall
consider the auditor's If manangement amends the
risk assessment in financial statements, auditor
determining the nature should extend the audit
and extent of such procedures and
Respond appropriately to the
procedures. 1. Either amend the audit report
facts that become known to
the auditor after the date of the to include an additional date
auditor's report, that, had they restricted to the amendment .
been known to the auditor at 2. Or provide a new/ amended
that date, may have caused the 3. If such event is report including a statement in
auditor to amend the auditor's identified, determine EOM/ OM para.
report. whether such event is
appropriately reflected
in financial statements.
If management doesn t amend the
nancial statements :
1. If audit report not yet provided
4. Obtain Written to the management, modify
Definition Representation that all the opinion.
such events have been 2. If audit report has already been
Subsequent Events: provided to the management,
adjusted or disclosed.
Events occuring between the date of notify TCWG not to issue it to
the financial statements and the date third parties. If still issued then
of the auditor's report, and facts that take appropriate action to prevent
become known to the auditor after the reliance on the auditor s report.
date of the auditor's report.

1. Discuss the matter with management or TCWG.

2. Determine whether the financial statements need amendment.
3. Inquire how management intends to address the matter in the
financial statements.

Review if management has taken steps to inform about the

situation to everyone in receipt of the previously issued
financial statements.
1. If steps taken, issue new / amended report with EOM/ OM
para.
2. If steps not taken, then take appropriate steps to prevent
reliance on the auditor's report.

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SA 570

"Going Concern"

Scope of Responsibilities Responsibilities When conditions Implications Other Important

the SA of the of the auditor or events are on the auditor's Points to be
management identified report considered

This SA deals 1. To obtain sufficient and Use of Going The auditor shall
with the auditor's appropriate audit evidence Concern Basis communicate with
responsibilities and conclude on the of Accounting is TCWG, events
in the audit appropriateness of the inappropriate The or conditions
of financial management's use of going auditor shall express identified that may
statements concern. an adverse opinion. cast significant
relating to going 2. To assess whether a material doubt on the entity's
concern and the uncertainty exists about the ability to continue
implications on the entity's ability to continue as a as a going concern.
auditor's report. going concern. Use of Going Concern
3. However, auditor cannot be basis of accounting
expected to guarantee the is appropriate but a If there is delay
entity's ability to continue as a material uncertainty in the approval
going concern. exists and: of the financial
Adequate disclosure statements and the
1. To make specific of material auditor believes that
assessment of the 1. Requesting management to make uncertanity is made such delay can be
entity's ability to its assessment relating to entity s in the financial related to events or
continue as a going ability to continue as a going concern. s t a t e m e n t s - conditions relating
concern. 2. Evaluating management s plan of future Unmodified Opinion to going concern
actions. and a separate section assessment, the
3. Analysing the cash flow forecast of the "Material Uncertainty auditor shall
2. To make appropriate entity. related to going perform additional
disclosures in 4. Considering the additional facts or concern". procedures as well
connection with information available. as consider the
going concern in the 5. Requesting Written Representation from effect on auditor's
financial statements. management regarding the plans of future conclusion.
actions and the feasibility of these plans. Use of Going Concern
basis of accounting
is appropriate but a
material uncertainty
exists and:
Ob ectives Adequate disclosure
he ob ectives of the auditor are of material
uncertanity is
1. To obtain sufficient appropriate audit evidence regarding, and not made in the
conclude on, the appropriateness of management’s use of the going financial statements-
concern basis of accounting in the preparation of the financial Qualified/ adverse
statements; opinion and mention
in the basis of opinion
2. To conclude, based on the audit evidence obtained, whether a paragraph.
material uncertainty exists related to events or conditions that may
cast significant doubt on the entity’s ability to continue as a going
concern; and
3. To report in accordance with this SA. Management unwilling
to make or extend its
assessment- Auditor
shall consider the
implications for the
auditor's report.

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SA 580

"Written
Representations"

Scope of Objectives of Written Representation Date & Periods covered by Important points
the SA the auditor as Audit Evidence Written Representation to be considered

Doubts as to reliability of
This SA deals Although Written Written Representations:
1. To obtain written
with the auditor's representation from the Representations If written representations
responsibility to management or TCWG that provide necessary are inconsistent with other
obtain written they believe that they have audit evidence, audit evidence, auditor shall
representation from fulfilled their responsibility they do not provide perform audit procedures
management and, for the preparation of the sufficient appropriate to resolve the matter.
where appropriate, financial statements and audit evidence on If the auditor concludes that
those charged with for the completeness of their own. the written representation
governance. the information provided to are not reliable, the auditor
the auditor. shall take appropriate
action in accordance with
The date of Written SA 705.
Representation shall be
as near as practicable to,
2. To support other audit but not after, the date of Requested Written
evidence relevant to the the auditor's report on Representation not
financial statements or the financial statements. provided:
specific assertions in the
Written Representation Auditor shall discuss
financial statements by means
shall be for all financial with the management,
of written representations.
statements and periods re-evaluate the integrity
referred to in the auditor's of management, take
report. appropriate actions
including the impact on
3. To respond appropriately audit report as per SA 705.
to written representation
provided by management/
TCWG.

Definition

Written Representation:
A written statement by management
provided to the auditor to confirm certain
matters or to support other audit evidence.
Do not include financial statements, the
assertions therein, or supporting books or
records.

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SA 00 U O
SA 600 - USING THE WORK OF ANOTHER AUDITOR
"Principal Auditor" (P.A.) Principal auditor to review – written summary of other
auditor’s procedures

The Nature, timing Nature, This

responsible for when that financial information principal and extent of timing and knowledge
reporting on the includes the financial auditor procedures extent of may have
financial information information of one or more may also depend on procedures been
of an entity components audited by another wish to circumstances depend on enhanced
auditor. visit the of engagement principal from the
other & Materiality auditor's review of
auditor. aspect knowledge the previous
"Other auditor" of the audit work
professional of the other
competence auditor.
of the other
responsible for which is included in the auditor.
reporting on the financial information
financial information of audited by the principal
auditor.
The principal auditor should consider the significant
a component findings of the other auditor.

principal auditor
When the uses the work to determine how The principal auditor He may also decide
principal of another the work of the may consider it as to application of
auditor auditor, other auditor will appropriate to discuss supplementary that
affect the audit. with the other auditor supplemental tests
and the management of the records or the
of the component, the financial statements of
I. Consideration by an auditor before acceptance as audit findings or other the component are if
Principal Auditor: matters affecting the necessary. Such tests
financial information may, depending upon
(a) the materiality of the portion of the financial of the components. the circumstances,
information be performed by the
principal auditor or
(b) degree of knowledge regarding the business of the the other auditor.
components;

(c) the risk of material misstatements in the financial

information of the components audited by the other auditor;
and
(d) the performance of additional procedures as set out
in this SA regarding the components audited by other
auditor resulting in the principal auditor having significant
participation in such audit.
Where the other auditor’s report is other than unmodified, the
principal auditor should also document how he has dealt with
the qualifications or adverse remarks contained in the other
auditor’s report in framing his own report.
III. Co-ordination Between Auditors

II. Procedures to be followed by P.A.

Sufficient liaison The other auditor
Procedures to be performed by PA while using the work between the principal should co-ordinate
of other auditor auditor and the other with the principal
auditor. auditor.
(a) advise the other auditor (b) advise the other
regarding use of his (other auditor of the significant
auditor) work and report and accounting, auditing and the principal auditor
reporting requirements and
The principal auditor
make sufficient arrangements
obtain representation as to may require the other should advise the other
for co-ordination at the planning
stage of the audit. compliance with them. auditor to answer a auditor of any matters
detailed questionnaire having an important
bearing on the other
auditor’s work.
The principal areas requiring procedures for the
auditor would special identification of
inform the consideration, inter-component The other auditor
other auditor transactions should respond to
of matters such that may require such questionnaire on
as : disclosure and a timely basis.

the time-table for

completion of audit;

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IV Reporting Considerations

1. Principal auditor to express a qualified opinion or 2. If the other auditor issues a Modified Report
disclaimer of opinion in case of a limitation on the scope
of audit.

When the principal auditor concludes, based on his procedures,
that the work of the other auditor cannot be used and the
principal auditor has not been able to perform sufficient
additional procedures regarding the financial information
of the component audited by the other auditor, the principal
auditor should express a qualified opinion or disclaimer of
opinion because there is a limitation on the scope of audit.
In all circumstances, if the other auditor issues, or intends to
issue, a modified auditor's report, the principal auditor should
consider whether the subject of the modification is of such
nature and significance, in relation to the financial information
of the entity on which the principal auditor is reporting that it
requires a modification of the principal auditor's report.

V. Division of Responsibility
When the principal auditor has to base his opinion on the financial information of the entity as a whole relying upon the statements
and reports of the other auditors, his report should state clearly the division of responsibility for the financial information of the
entity by indicating the extent to which the financial information of components audited by the other auditors have been included
in the financial information of the entity, e.g., the number of divisions/branches/subsidiaries or other components audited by other
auditors. However, if the Principal Auditor notices any material discrepancies the same has to be brought to the knowledge of other
Auditor. This should be incorporated in the Audit Report.

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Scope of External auditor's
responsibility for
the SA the Audit
This SA deals with external
auditor's responsibilities if
using the work of internal
auditors. This includes:
a) using the work of internal audit
function in obtaining audit
evidence.
b) using the internal auditors to
provide direct assistance under
the direction, supervision and
review of external auditor.
The External Auditor has the
sole responsibility for the audit
opinion expressed, and that
responsibility is not reduced by the
external auditor's use of the work
of the internal audit function or
internal auditors to provide direct
assistance on the engagement.
1. To determine whether the work of the
internal audit function or direct assistance
from internal auditors can be used, and if
so, in which areas and to what extent; and
having made that determination:
2. If using the work of the internal audit
function, to determine whether that work is
adequate for the purposes of audit; and
3. If using internal auditors to provide direct
assistance, to appropriately direct, supervise
and review their work.
© ICAI BOS(A)
Auditing
SA 610
"Using the Work of Internal Auditors"
Objectives of Using the work of Using Internal When using the
the External the Internal Audit Auditors to provide work or direct
Auditor Function direct assistance assistance
External auditor shall determine
whether the work of the Internal Using the work of Internal Audit
Audit function can be used for the Function
audit by evaluating:
The External Auditor shall:
a) the objectivity of the Internal
a) discuss the planned use of the Internal
auditors.
Audit function.
b) level of competence of the internal
b) read the report of the Internal Audit
audit function.
function.
c) approach of Internal Audit function
c) perform sufficient audit procedures to
including quality control.
evaluate the internal audit function.
External auditor shall determine
the nature and extent of work of
Internal Audit function that can be
used by:
a) considering the nature and scope
of work of Internal Audit function Using the Internal Auditors to provide
and its relevance to the external Direct Assistance:
auditor's overall audit strategy and The External Auditor shall:
plan. a) obtain written agreement from the
entity.
b) making all significant judgements
and preventing undue use of the b) obtain written agreement from the
internal audit function. internal auditors.
c) being sufficiently involved in the c) direct, supervise and review the work
audit. performed by the Internal Auditors.
d) communicating to TCWG, as to
how they have planned to use the
work of the internal audit function.
The external auditor shall document
the above.
External auditor shall determine whether Internal Auditors
can be used to provide Direct Assistance by evaluating:
a) the existence and significance of threats to objectivity and
b) the level of competence of the internal auditors.
External auditors shall determine the nature and extent of work
that can be assigned to Internal Auditors providing Direct
Assistance by considering:
a) the amount of judgement involved.
b) the assessed risk of material misstatements.
c) the evaluation as mentioned above.
The external auditor shall be sufficiently involved in the audit
and shall communicate to TCWG, the nature and extent of the
planned use of internal auditors to provide direct assistance.
The external auditor shall document the above.
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SA 620

"Using the Work of an Auditor's Expert"

Scope of The auditor's Reference to the

Objectives of Requirements
responsibility for Auditor's Expert in
the SA the auditor of the SA
the audit opinion the Auditor's Report

This SA deals with auditor's 1. To determine whether to use the

responsibilities regarding work of an auditor's expert; and The auditor shall not refer to the work
the use of an individual or
of an auditor's expert in the auditor's
organisation's work in a
report containing an unmodified
field of expertise other than
2. If using the work of an auditor's opinion unless required by law or
accounting or auditing,
expert, to determine whether that regulation to do so.
when that work is used
to assist the auditor in work is adequate for the auditor's If the auditor makes a reference
obtaining sufficient and purposes. in the auditor's report for better
appropriate audit evidence. understanding of a modification to the
auditor's opinion, he shall indicate that
such reference does not reduce auditor's
responsibility for that opinion.

The auditor has sole responsibility for the audit

opinion expressed, and that responsibility is
not reduced by the auditor's use of the work of
an auditor's expert. 1. Determining the need for an auditor's expert.
If the auditor concludes that the work of
auditor's expert is adequate for his purposes,
he may accept the expert's findings or
conclusions in the expert's field as appropriate 2. Determining nature, timing and extent of
audit evidence. audit procedures.

3. Evaluating the competence, capabilities and

objectivity of the Auditor's expert
Definition

Auditor's Expert:
An individual or organisation possessing 4. Obtaining an Understanding of the field of
expertise in a field other than expertise of the Auditor's expert
accounting or auditing, whose work in
that field is used by the auditor to assist
the auditor in obtaining sufficient and
appropriate audit evidence. 5. Agreeing with the Auditor's expert in
writing.

Management's Expert:
An individual or organisation possessing
expertise in the field other than accounting 6. Evaluating the adequacy of the Auditor's
or auditing, whose work in that field is Expert work.
used by the entity to assist the entity in
preparing the financial statements.

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SA 00 A C R
SA 700

"Forming an Opinion and Reporting on Financial Statements"

Scope of Objectives of Unmodified Auditor's Supplementary

the SA the Auditor Opinion Report Information

Deals with To form Opinion • Title Whether supplementary information is

auditor's an opinion expressed by • Addressee integral part of financial statements.
responsibility on the the auditor • Auditor s Opinion
to form an financial when he • Basis for Opinion
opinion on statements. If yes, then If no, then auditor will evaluate
concludes • Going Concern supplementary whether supplementary
the financial that the • Key Audit Matters
statements. information will information is presented in
financial Responsibilities for the be covered by the way that differentiates it from
To express statements Financial Statements
clearly that auditor’s opinion. financial statements.
Deals with are prepared • Auditor s Responsibilities
opinion in all material • Location of Description of
the form through If not differentiated, then ask the management
and content respects in Auditor's Responsibility
a written a cco r d a n ce • Other Reporting to change the way of presentation.
of auditor's report.
report. with the Responsibilities
applicable • Signature
If management If management refuses, auditor will
FRF. • Place of Signature
changes then explain in the auditor’s report that such
• Date of Auditor s Report
OK. information has not been audited.

SA 701

"Communicating Key Audit Matters in

the Independent Auditor's Report"

Scope of the Purpose of Objectives of Determining Communicating Other important

SA Communicating the Auditor Key Audit Key Audit points to be
Key Audit Matters Matters Matters considered

Deals with To enhance the To determine Auditor The auditor Communicating key audit matters in
the auditor’s communicative key audit shall take in shall describe the auditor’s report is not:
responsibility value of the m a t t e r s account: each key
to communi- auditor’s report and, having audit matter,
cate key audit by providing formed an using an (a) A substitute for disclosures in the
matters in g r e a t e r opinion on 1. Areas appropriate financial statements that the
the auditor’s transparenc y the financial of higher subheading , applicable financial reporting
report. about the st atement s , assessed in a separate framework requires management to
audit that was communicate risks of section of
make, or that are otherwise necessary
performed. those matters material mis- the auditor’s
Intended to by describing report under to achieve fair presentation;
statement.
address both them in the the heading
the auditor’s To assist au d i to r ’s “Key Audit (b) A substitute for the auditor
judgment as the users in report. 2. Significant Matters”.
expressing a modified opinion when
to what to understanding auditor's
communicate those matters required by the circumstances of a
judgment.
in the that, in the specific audit engagement in
au d i to r ’s auditor ’s accordance with SA 705 (Revised);
report and professional
the form judgment, 3. The effect
on the audit (c) A substitute for reporting in
and content were of most
of such s i g n i fi c a n c e of significant accordance with SA 570 when a
communi- in the audit of events or material uncertainty exists relating to
cation. the financial transactions events or conditions that may cast
statements of during the significant doubt on an entity’s ability
the current period. to continue as a going concern; or
period.
(d) A separate opinion on individual
matters.

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SA 705

"Modifications to the Opinion in the

Independent Auditor's Report"

Scope of the Types of Modified Objective of Circumstances when Management Other important
SA Opinions the auditor a modification to imposed points to be
the auditor's opinion limitation considered
is required

Deals with Qualified To express The auditor Request the management 1. The auditor
how the Opinion: clearly an concludes to remove the limitation. shall use the
form and The auditor, appropriately that, based heading "Qualified
content of h a v i n g modified on the audit Opinion", "Adverse
the auditor’s obtained opinion on evidence Opinion", "Disclai-
report is sufficient and the financial obtained, If management refuses mer of Opinion"
affected when appropriate statements. the financial to remove the limitation, for the Opinion
audit evidence, statements communicate with TCWG section.
the auditor
expresses concludes that as a whole and perform alternate
a modified misstatements are not free procedures.
opinion. are material, from material 2. The auditor
but not misstatement. shall amend the
pervasive. heading "Basis for
Deals with Still unable to obtain opinion" to "Basis
the auditor’s The auditor sufficient and appropriate for Qualified/
is unable audit evidence. Adverse/ Disclai-
responsibility A d v e r s e
to obtain mer of Opinion".
to issue an Opinion:
appropriate The auditor, sufficient and
report in h a v i n g appropriate
circumstances obtained audit evidence Possible Possible
when, in sufficient and to conclude effects effects both
forming an appropriate that the material but material and
opinion in audit evidence, financial not pervasive. pervasive.
accordance concludes that statements
with SA 700, misstatements, as a whole
the auditor individually or are free from
concludes that in aggregate are material Qualified Withdraw from
a modification both material misstatement. Opinion. the engagement
to the auditor’s and pervasive. or disclaimer of
opinion on opinion.
the financial
statements is Disclaimer of
necessary. opinion:
When the
a u d i t o r
is unable
to obtain
sufficient and
appropriate
audit evidence
and he
concludes that
the possible
effects on
the financial
statements of
undetected
misstatements
could be both
material and
pervasive.

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SA 706

Emphasis of Matter Paragraphs and Other Matter

Paragraphs in the Independent Auditor’s Report

Scope Objectives Definitions

Requirements

This SA deals The objective E m p h a s i s Emphasis of Matter Other Matter Communication

with additional of the auditor, of Matter Paragraphs in the Paragraphs in with Those
communication having formed paragraph : Auditor’s Report the Auditor’s Charged with
in the auditor’s an opinion on A paragraph Report Governance
report when the financial included in the
the auditor statements, is auditor’s report
to draw users’ that refers
considers it
attention, when to a matter
necessary to If the auditor When the If the auditor The auditor
in the auditor’s appropriately
draw users’ presented or considers it auditor includes considers it shall
judgment it is
attention to disclosed in necessary to an Emphasis necessary to include the
necessary to do
a matter or so, by way of the financial draw users’ of Matter communicate paragraph
matters. clear additional statements that, attention paragraph in the a matter other within a
communication in the auditor’s to a matter auditor’s report, than those that separate
in the auditor’s judgment, presented or the auditor shall: are presented section with
report, to: is of such disclosed in or disclosed in the heading
(a)presented importance that the financial the financial “Other
or disclosed in it is fundamental statements that, (a) Include the statements that, Matter,”
the financial to users in the auditor’s paragraph within in the auditor’s or other
A matter, understanding judgment, a separate section judgment, is appropriate
statements
a l t h o u g h of the financial is of such of the auditor’s relevant to users’ heading.
that are of such
appropriately statements. importance report with an understanding
importance that it is appropriate of the audit,
that they are presented or
disclosed in fundamental heading that the auditor’s
fundamental to users’ includes the term responsibilities
the financial Other Matter
to users’ understanding “Emphasis of or the auditor’s If the auditor
statements, paragraph:
understanding that is of such of the financial Matter”; report, the expects to
of the financial A paragraph include an
importance that included in the statements, auditor shall
statements; or it is fundamental the auditor include an Emphasis of
auditor’s report (b) Include in Matter or an
to users’ that refers to shall include Other Matter
understanding an Emphasis the paragraph a paragraph in the Other Matter
a matter other clear reference to paragraph in
of the financial than those of Matter auditor’s report,
(b) other than statements; or paragraph in the matter being provided: the auditor’s
presented or emphasized and report, the
those presented disclosed in the auditor’s
or disclosed in the financial report provided: to where relevant auditor shall
disclosures that (a)This is not communicate
the financial As appropriate, statements that, fully describe prohibited with those
statements that any other in the auditor’s The auditor the matter can by law or charged with
are relevant matter that is judgment, is would not be be found in governance
to users’ relevant to users’ relevant to users’ required to regulation; and
the financial regarding this
understanding understanding understanding modify the statements. expectation and
of the audit, of the audit, of the audit, opinion in The paragraph the wording of
the auditor’s the auditor’s accordance with (b)When SA
the auditor’s shall refer only 701 applies, the this paragraph.
responsibilities responsibilities responsibilities SA 705 (Revised) to information
or the auditor’s or the auditor’s as a result of the matter has not
or the auditor’s presented or been determined
report. report. report. matter; and disclosed in to be a key audit
the financial matter to be
When SA 701 statements; and communicated
applies, the in the auditor’s
matter has not report.
(c) Indicate that
been determined
the auditor’s
to be a key audit
opinion is
matter to be
not modified
communicated
in respect of
in the auditor’s
the matter
report.
emphasized.

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SA 710

"Comparative Information—Corresponding Figures & Comparative Financial Statements"

Scope of the Objectives of the Definitions Audit Reporting Audit Audit Reporting
SA Auditor differences between Procedure
the Approaches are:

Deals with To obtain Comparative information: The For Assess the 1. With 2. With
auditor's sufficient amounts and disclosures included correspon- consistency Reference to Reference to
responsibilities appropriate in the financial statements in ding figures, of accounting corresponding comparative
regarding audit evidence respect of one or more prior the auditor’s policies used. figures, figures
comparative about periods in accordance with the opinion on auditor
applicable financial reporting a) the auditor's
information whether the the financial opinion opinion shall
in an audit comparative framework. statements Check should refer refer to each
of financial information refers to Comparative in his opinion period for which
statements. included in Corresponding figures: the current figures with only when FS are presented
the financial Comparative information where period only; amount and a) if previous and on which
statements amounts and other disclosures whereas disclosure in AR is audit opinion is
has been for the prior period are included prior period. other than expressed.
When the presented, in as an integral part of the current For compa-
financial unqualified. b) difference
all material period financial statements, and rative
statements respects, in are intended to be read only in financial Determine that b) Prior period in opinion on
of the prior accordance relation to the amounts and other statements, FS Contains misstatement previously issued
period with the disclosures relating to the current the auditor’s appropraitely not addressed. FS.
have been requirements period (referred to as “current opinion refers classified c) if prior c) if previous FS
audited by a for period figures”). The level of detail to each period comparative period FS audited by some
predecessor comparative presented in the corresponding for which information. unaudited. other auditor,
auditor or information in amounts and disclosures is financial mention the
were not the applicable dictated primarily by its relevance statements are same in AR.
audited, the financial to the current period figures. presented. Evaluate
requirements d) If prior period
reporting the impact FS unaudited,
and guidance framework; of possible
in SA 510 Comparative financial statements: mention the
and Comparative information where amounts misstatement same in the AR.
regarding in comparative
opening and other disclosures for the prior period are
To report in included for comparison with the financial information
balances also accordance on FS.
apply. statements of the current period but, if audited,
with the are referred to in the auditor’s opinion. The level
auditor’s of information included in those comparative
reporting financial statements is comparable with that of Obtain Written
responsibilities. the financial statements of the current period. representation.

SA 720

"The Auditor's Responsibilities Relating to Other Information"

Scope of the SA Objective of the Auditor Definitions Requirements of the SA

Deals with • To consider whether there Other Information: Financial or non 1. Obtaining the Other Information.
auditor's is material inconsistency Financial information (other than financial
r e s p o n - between other information statements and the auditor's report 2. Reading and considering the other
sibilities and financial statements. thereon) included in an entity's annual information.
relating • To consider whether there report.
to other is material inconsistency 3. Responding when a material
information, between other information Inconsistency appears to exist or
Annual Report: A document, or other information appears to be
whether and auditor's knowledge combination of documents, prepared materially misstated.
financial or obtained in the audit. typically on an annual basis by management
non financial,
• To respond appropriately or those charged with governance in
included 4. Responding when the auditor
when auditor identifies accordance with law, regulation or custom,
in entity's concludes that a material
material inconsistencies or the purpose of which is to provide owners
a n n u a l misstatement of the other
other information appears (or similar stakeholders) with information
report. information exists.
to be materially misstated. on the entity’s operations and the entity’s
financial results and financial position
as set out in the financial statements. An 5. Responding when a material
This SA does misstatement in the financial
To report in accordance annual report contains or accompanies the
not apply to : statements exists or auditor's
with this SA. financial statements and the auditor’s report
thereon and usually includes information understanding of the entity and its
about the entity’s developments, its future environment needs to be updated.
Preliminary Securities offering
announcements documents , outlook and risks and uncertainties, a
statement by the entity’s governing body, 6. Reporting and
of financial i n c l u d i n g
and reports covering governance matters. Documentation.
information or prospectuses.

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SA 800-899 SPECIALIZED AREAS

SA 800

Special Considerations-Audits of Financial Statements Prepared in Accordance with

Special Purpose Frameworks

Scope of SA Objective of the Considerations Considerations Forming an Opinion

Auditor
This SA deals with
special considerations
in the application of
SAs in 100-700 series
to an audit of financial
statements prepared in
accordance with special
purpose framework
When applying SAs in an
audit of financial statements
prepared in accordance with
special Purpose framework
is to address special
considerations relevant to:
• Acceptance of engagement
• Planning and performance
of engagement
• Forming an opinion and
reporting on the financial
statements but not for the
purpose of expressing an
opinion on the effectiveness
of the entity’s internal
control
when Accepting the when Planning and and Reporting
Engagement Performing the Audit Considerations
• Determine whether
application of SAs requires
In an audit of special purpose special considerations in
financial statements, obtain circumstances
understanding of: • Obtain an understanding
• Purpose for which financial of the entity’s selection and
statements are prepared application of accounting
policies used in the
• Intended users
preparation of financial
• Steps taken by management statements prepared in
to determine that applicable accordance with special
financial reporting framework purpose framework
is acceptable in the
circumstances
• When forming an opinion and reporting on special purpose financial statements,
auditor shall apply requirements of SA 700
• Evaluate whether financial statements adequately refer to or describe applicable
financial reporting framework in accordance with SA 700
• Auditor’s report shall describe the purpose for which special purpose financial
statements are prepared. If necessary, intended users shall be stated or reference
to a note in special purpose financial statements that contains such information is
required
• If management has a choice of financial reporting framework in preparation of
such financial statements, the explanation of management’s responsibility for
financial statements shall also make reference to its responsibility for determining
that applicable financial reporting framework is acceptable in circumstances
• Include an emphasis of matter paragraph alerting users of auditor’s report that
the financial statements are prepared in accordance with a special purpose frame
work and such financial statements may not be suitable for another purpose
• Restrict distribution or use of auditor’s report solely for specific users

Definitions
• Special Purpose Financial Statements
Financial statements prepared in accordance with special purpose framework
• Special Purpose Framework
A financial reporting framework designed to meet the financial information needs of
specific users. For example-cash receipts and disbursement basis of accounting for cash
flow information that an entity may be requested to prepare for creditors, financial
reporting provisions of a contract such as a bond indenture, loan agreement or a project
grant

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SA 805

Special Considerations- Audits of Single Financial Statements and Specific Elements, Accounts, or
Items of a Financial Statement

Scope of SA Objective of the Considerations Considerations Forming an Opinion

This SA deals with
special considerations
in the application of
SAs in 100-700 series
to an audit of a single
financial statement or
of a specific element,
account or item of a
financial statement
When applying SAs
in an audit of a single
financial statement or
of a specific element,
account or item of a
financial statement,
is to address special
considerations relevant
to:
• Acceptance of
engagement
• Planning and
performancee of
engagement
• Forming an opinion
and reporting on
the single financial
statement or on the
specific element,
account or item
of a financial
statement but not
for the purpose
of expressing an
opinion on the
effectiveness of the
entity’s internal
control
Auditor when Accepting the when Planning and and Reporting
Engagement Performing Audit Considerations
• If auditor is not also engaged to • Adapt all SAs as necessary in the
audit entity’s complete set of financial circumstances of engagement
statements, determine if such an • For example, materiality
engagement in accordance with SAs is determined for a single
practicable financial statement or for a
• Whether application of financial specific element of a financial
reporting framework will result in statement may be lower than
presentation providing adequate materiality determined for
disclosures for intended users entity’s complete set of financial
• Consider whether expected form statements affecting nature,
of opinion is appropriate in the timing and extent of audit
circumstances procedures and evaluation of
uncorrected misstatements
• Requirements of SA 700 apply adapted as necessary in circumstances of engagement
• If auditor is also auditing entity’s complete set of financial statements, express separate opinion for
each engagement
• If audited single financial statement or an audited specific element of financial statement is
published together with entity’s audited complete set of financial statements, ensure differentiation
• If opinion in auditor’s report on entity’s complete set of financial statements is modified or that
report includes EOM or other matter paragraph, determine its effect on auditor’s report on a single
financial statement or on a specific element of those financial statements
• If auditor has concluded to express an adverse opinion or to disclaim an opinion on entity’s complete
set of financial statements, an unmodified opinion on a single financial statement or on a specific
element that forms part of those financial statement in same auditor’s report is not permissible
• If auditor has concluded to express an adverse opinion or to disclaim an opinion on entity’s complete
set of financial statements, auditor can express unmodified opinion in context of separate audit of a
specific element included in those financial statement in following circumstances:-
 It is not prohibited by law or regulation
 Opinion is expressed in auditor’s report that is not published together with auditor’s report
containing adverse opinion or disclaimer of opinion
 Specific element does not constitute a major portion of entity’s complete set of financial
statements
• Auditor shall not express unmodified opinion on a single financial statement of a complete set of
financial statements if he has expressed adverse opinion or disclaimer of opinion on complete set
of financial statements

Definitions / Examples
Element of a Financial Statement or Element Example of a single financial
It means an “element, account or item of a financial statement.” Statement is a cash flow statement.
Specific element of a financial statement includes the related notes.

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SA 810

Engagements to Report on Summary Financial Statements

Scope of SA Objective of the Engagement Nature of Auditor’s

Auditor Acceptance Procedures Report

This SA deals
with
h uditor’s • Determine whether it • Evaluate whether summary financial statements
responsibilities is appropriate to accept adequately disclose their summarized nature and
when undertaking the engagement to report identify audited financial statements
an engagement on summary financial • If summary financial statements are not accompanied
to report on statements by audited financial statements, evaluate from whom
summary financial • Form an opinion on or where audited financial statements are available
statements derived summary financial • Evaluate whether summary financial statements
from financial statements by evaluating adequately disclose applied criteria
statements audited conclusions drawn from
in accordance with evidence • Compare summary financial statements with related
SAs by that same information in audited financial statements
• Express clearly opinion
auditor through a written report • Evaluate whether summary financial statements are
that also describes basis prepared in accordance with applied criteria
for that opinion • Evaluate whether summary financial statements
contain the information necessary and at appropriate
level of aggregation in view of purpose of financial
statements
• Accept such an engagement • Evaluate whether audited financial statements are
only when auditor has been available to intended users of summary financial
engaged to conduct audit, statements without undue difficulty
in accordance with SAs, of
financial statements from which
summary financial statements
are derived
• Determine if applied criteria are It shall contain following elements:
acceptable
• Title indicating report of independent auditor
• Obtain the agreement of
management for acknowledging • Addressee
and understanding its • Introductory paragraph that-
responsibility for preparation of  Identifies summary financial statements
summary financial statements
 Identifies the audited financial statements
in accordance with applied
criteria, making available such  Refers to auditor’s report on audited financial statements
audited financial statements to  States that summary financial statements and audited financial statements
intended users without undue do not reflect effect of events occurred subsequent to date of auditor’s report
difficulty, to include auditor’s on audited financial statements, in cases, where date of auditor’s report on
report on summary financial summary financial statements is later than date of auditor’s report on audited
statements in any document financial statements
that contains such statements  Contains statement that summary financial statements do not contain all
and that indicates that auditor disclosures required by financial reporting framework applied in the preparation
has reported on them of audited FS
• Agree with management on form • Description of management’s responsibility
of opinion to be expressed on
• Responsibility of auditor to express an opinion based on procedures required by
summary financial statements this SA
• Paragraph clearly expressing an opinion
Refuse engagement in case applied • Auditor’s signature with FRN & Membership No.
criteria are not acceptable or • Date of Auditor’s report
agreement of management is not • Place of signature
obtained on specified matters

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SRE 2000-2699 STANDARDS ON REVIEW ENGAGEMENTS (SRE)

SRE 2400

Engagements to Review Historical Financial Statements

Scope of Objective of Requirements Performing the Forming of Practitioner’s

SRE the Auditor Engagement Conclusion on FS Report

This SRE deals • To obtain limited Express an unmodified conclusion when limited assurance has been obtained
with practitioner’s assurance primarily by to conclude that nothing has come to attention that causes to believe that FS
re sp onsibilitie s inquiry and analytical are not prepared, in all material respects, in accordance with applicable financial
when engaged procedures about reporting framework
to perform whether FS as a whole Express a modified conclusion when it is determined that FS are materially
a review of are free from material misstated or sufficient appropriate evidence cannot be obtained in relation to
historical financial misstatement enabling one or more items in FS that are material in relation to FS as a whole
statements when practitioner to express a • If it is determined that FS are materially misstated express qualified
he is not auditor conclusion when effects of matter giving rise to modification are material but
conclusion
of entity’s FS and not pervasive to FS
• To report on FS • When matters giving rise to modification are both material and pervasive to
form and content
as a whole and FS, express adverse conclusion
of practitioner’s • If a conclusion on FS cannot be formed due to inability to obtain sufficient
communicate as
report on FS appropriate evidence, express qualified conclusion or disclaim conclusion, as
required by this SRE
appropriate
• Withdraw from engagement in case of limitation on scope and inability
to obtain evidence to form conclusion, possible effects are material and
pervasive & it is permissible under law or regulation
• Comply with
relevant ethical
requirements including
those pertaining to • Determine materiality for FS as a whole and apply it in designing procedures and in evaluating results
independence • Obtain an understanding of entity
• Maintain professional • Design and perform inquiry and analytical procedures
skepticism and exercise • Remain alert for existence of related partly relationships or transactions not identified or disclosed by
professional judgement management
• Take responsibility for • In case of indication of fraud or non-compliance with laws or regulations or such suspicion, communicate
engagement level quality to management, request management’s assessment of effects on FS, consider such effect on practitioner’s
control conclusion and determine whether there is a responsibility to report such acts to a party outside the entity
• Consider factors • Consider management’s assessment of entity’s ability to continue as going concern
affecting acceptance and • Obtain evidence that FS agree to entity’s underlying accounting records.
continuance of client • Perform additional procedures in case practitioner becomes aware of matter due to which FS may be
relationships materially misstated
• Determine that • If subsequent events require adjustment or disclosure, request management to make corrections
prior to accepting a • Request management to provide written representations
review engagement, • Evaluate evidence obtained from procedures performed
preconditions for • Evaluate effect on practitioner’s report
accepting such
engagement are met It shall contain following elements: -
• Agree terms of • Title indicating report of an independent practitioner for a review engagement
engagement • Addressee
• Communication with
• Introductory paragraph identifying FS reviewed, reference to summary of significant accounting policies and
TCWG
other explanatory information and statement that FS have been reviewed
• Description of responsibility of management
• In case of special purpose financial statements, description of purpose of FS and in case of a choice of financial
Important reporting framework, management responsibility including reference for determining that applicable financial
reporting framework is acceptable in circumstances
• Description of practitioner’s responsibility to express conclusion on FS including reference to SRE 2400 and,
# Review under SRE
where relevant, applicable law or regulation
2400 is applicable to FS • Description of review of FS and its limitations stating that: -
prepared under general  A review engagement under SRE 2400 is a limited assurance engagement
purpose framework
 Procedures primarily consisting of inquiry of management and others within entity and analytical procedures
and special purpose are performed and obtained evidence is evaluated.
framework containing  Procedures performed in a review are substantially less than those performed in an audit and audit opinion
historical financial is not expressed on FS
information • Paragraph under heading “conclusion” that contains conclusion on FS as a whole and a reference to applicable
# Quality control at financial reporting framework used to prepare FS
level of individual • In case conclusion is modified, a paragraph that contains modified conclusion and that provides description of
review engagements is matter giving rise to the modification
• A reference to comply with ethical requirements
premised on the basis
• Date of practitioner’s report
that firm is subject to • Practitioner’s signature
SQC 1 • Place of signature

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SRE 2410

Review of Interim Financial Information Performed by the Independent Auditor of the Entity

Purpose of Objective of General Agreeing the terms Auditor’s Reporting the Nature,
SRE the Auditor Principles of of the Engagement Responsibility for Extent & Results of Review
a Review of and Procedures for Accompanying of Interim Financial
Interim financial Review Information Information
Purpose of this Information
SRE is to establish
standards and • Read the other information Issue a written report containing
provide guidance on that accompanies the interim following:
• Comply with the ethical
auditor’s professional financial information • An appropriate title
requirements relevant to
responsibilities in an to consider if any such • Addressee
audit of annual financial
engagement to review information is materially • Identification of interim financial
statements of entity
interim financial inconsistent with interim information reviewed
• Implement quality control
information of an audit financial information • If interim financial information
procedures that are
client and on form and • If a matter comes to comprises complete set of general-
applicable to the individual
content of report purpose FS to achieve a fair presentation,
engagement auditor’s attention that
a statement that management is
• Plan and perform the causes him to believe that
responsible for preparation and fair
review with an attitude of other financial information presentation of interim financial
professional skepticism appears to include a material information in accordance with
misstatement of fact, discuss applicable FRF
The objective of an
it with entity’s management • In other circumstances, statement
engagement to review
interim financial of management responsibility for
preparation and presentation of interim
information is to enable
• Agree with client on terms of engagement financial information in accordance with
the auditor to express
• Have an understanding of entity and its environment including its applicable FRF
a conclusion whether, • A statement that auditor is responsible
internal control as it relates to both annual and interim financial
on the basis of review, for expressing a conclusion on interim
information
anything has come to • Select inquiries, analytical and other review procedures financial information based on the
auditors’ attention that • Review ordinarily does not require tests of accounting records review
causes the auditor to through inspection, observation or confirmation. Examples of • Statement that review of interim
believe that interim review procedures include: financial information was conducted in
financial information  Reading minutes of meeting of shareholders, those charged with accordance with SRE 2410 and it consists
is not prepared, in all governance and other appropriate committees of making inquiries, primarily of person
material respects, in  Considering effect of matters giving rise to a modification of responsible for financial and accounting
accordance with an audit or review report, accounting adjustments or unadjusted matters and applying analytical and
applicable FRF misstatements at time of previous audit or reviews other review procedures
 Communicating with other auditors who are performing a • Statement that a review is substantially
review of interim financial information of reporting entity’s less in scope than an audit conducted in
significant components accordance with SAs and does not enable
Important  Inquiries of members of management responsible for financial, auditor to obtain assurance that auditor
accounting and other matters like whether interim financial would become aware of all significant
# Express qualified or information prepared and presented in accordance with matters that might be identified in an
applicable FRF, changes in accounting principles, any known audit and accordingly no audit opinion is
adverse conclusion
uncorrected misstatements in interim financial information, expressed
when a matter has
disclosure of related party transactions etc • If interim financial information
come to auditor’s comprises complete set of general
 Apply analytical procedures to interim financial information
attention that causes purpose financial statements prepared in
to identify relationships and individual items that appear to be
auditor to believe that unusual accordance with FRF designed to achieve
a material adjustment  Reading interim financial information and considering whether a fair presentation, a conclusion as to
should be made to anything has come to auditor’s attention that causes auditor to whether anything has come to auditor’s
interim financial believe that interim financial information is not prepared in all attention causing him to believe that
information for it to material respects in accordance with applicable FRF interim financial information does not
be prepared, in all • Obtain evidence that interim financial information agrees or give a true and fair view or does not
material respects, reconciles with underlying accounting records present fairly in all material respects in
in accordance with • Inquire whether management has identified all events up to date accordance with applicable financial
applicable FRF of review report requiring adjustment or disclosure in interim reporting framework
financial information • In other circumstances, a conclusion
# When auditor is unable as to whether anything has come to
• Inquire whether management has changed its assessment of entity’s
to complete the review auditor’s attention that causes him to
ability to continue as going concern.
due to limitation on • Make additional inquiries or perform other procedures when a believe that interim financial information
scope, communicate in matter comes to auditor’s attention that leads auditor to question is not prepared in all material respects
writing to management whether material adjustment should be made for interim financial in accordance with applicable financial
as to why review information to be prepared, in all material respects, in according reporting framework
cannot be completed with applicable FRF • Date of report
and consider whether • Evaluate individually and in aggregate whether uncorrected • Place of signature
it is appropriate to misstatements are material to interim financial information • Signature and membership no.
issue a report • Obtain written representations from management • FRN

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SAE 3000-3699 STANDARDS ON ASSURANCE ENGAGEMENTS

SAE 3400

The Examination of Prospective Financial Information

Purpose Objective Auditor’s Assurance Acceptance of Examination Presentation Report on

of SAE of the Regarding PFI Engagement and Procedures and Disclosure Examination
Auditor Other Matters of PFI

The purpose • PFI relates to

of this SAE is events and actions that • Agree on engagement terms
have not yet occurred While assessing presentation and
to establish • Before accepting engagement,
standards and and might not occur. consider things like intended use of disclosure, consider:
provide guidance However, evidence may information, nature of assumptions, • Presentation of PFI is informative
on engagements be available to support elements to be included in and not misleading
to
o xamine the assumptions on which information and period covered • Accounting policies are clearly
and report on PFI is based • Refuse or withdraw when disclosed
prospective • Such evidence is generally assumptions are clearly unrealistic • Assumptions are clearly disclosed
f i n a n c i a l future oriented, and or when auditor believes that PFI in notes
information auditor is not in a position will be inappropriate for intended • Date as of which the PFI was
(PFI) including to express opinion use prepared is disclosed
examination whether results shown in • Obtain sufficient knowledge • Basis of establishing points in a
procedures for PFI will be achieved of business for evaluating all range is clearly indicated
best- estimate • When reporting in significant assumptions required for • Whether there is change in the
and hypothetical accordance with SAE a preparation of such information accounting policy of the entity from
assumptions 3400 on reasonableness • Consider the extent to which that disclosed in the most recent
of management’s reliance on entity’s historical historical financial statements,
assumptions, auditor financial information is justified reason for the change and the effect
provides only a moderate of such change
level of assurance

Consider Matters such as:

To obtain sufficient appropriate evidence
regarding:
• Management’s best-estimate assumptions
are not unreasonable and in case of
hypothetical assumptions such assumptions
are consistent with purpose of information
• Proper preparation of PFI
• Proper presentation of PFI with adequate
disclosure of all material assumptions
• Preparation of PFI on consistent basis
with historical financial statements using
appropriate accounting principles
• Knowledge from any previous engagements
• Management’s competence for preparation of such information
• Likelihood of material misstatement
• Extent to which such information is affected by management’s judgment
• Sources of information considered by management to support assumptions
• Stability of entity’s business
• Engagement team’s experience of relevant business and industry
• Assess source and reliability of evidence supporting management’s best-estimate
assumptions
• Where hypothetical assumptions are used, consider all significant implications.
• Consider areas particularly sensitive to variation
• Obtain written representations

Such report should contain:

Definitions
“Prospective Financial Information” means financial
information based on assumptions about events that may
occur in future and possible action by an entity. It can be
in form of a forecast, a projection, or a combination of
both
“Forecast” means prospective financial information
prepared on basis of assumptions as to future events
which management expects to take place and actions
management expects to take as of the date information
is prepared (best-estimate assumptions)
“Projection” means prospective financial information
prepared on the basis of hypothetical assumptions
about future events and management actions which are
not necessarily expected to take place or a mixture of
best-estimate and hypothetical assumptions
• Title
• Addressee
• Identification of PFI
• Reference to the Standards on Auditing applicable to the
examination of PFI
• Statement that management is responsible for preparing the
PFI including the underlying assumptions
• When applicable, a reference to the purpose and/or restricted
distribution of the such information
• Statement that the examination procedures included
examination, on a test basis, of evidence supporting the
assumptions, amounts and other disclosures in the forecast or
projection
• Statement of negative assurance as to whether assumptions
provide a reasonable basis for such information
• Opinion whether such information is properly prepared on
the basis of the assumptions and is presented in accordance
with the relevant financial reporting framework
• Appropriate caveats concerning the achievability of the results
• Date of report
• Place of signature and
• Signature

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SAE 3402

Assurance Reports on Controls at a Service Organisation

Scope of SAE Objectives of the Requirements Type 1 Report & Service Auditor’s
Service Auditor Type 2 Report Assurance Report

This SAE deals

with assurance To obtain reasonable assurance, whether Type 1 Report: It is a report on description and design
engagements in all material respects, based on suitable of controls at a service organisation. It comprises:
undertaken by criteria: • Service organisation’s description of its system
a professional • Service organisation’s description of • Written assertion by service organisation that in all material
accountant to its system fairly presents the system as respects and based on suitable criteria, description fairly
provide a report designed and implemented throughout presents service organisation’s system at the specific date
for use by user specified Period (or in case of type 1 report and controls related to control objectives stated in service
entities and as at a specified date) organisation’s description of its system were suitably
their auditors • Controls related to control objectives designed as at specific date and
on the controls stated in service organisation’s description • Service auditor’s assurance report that conveys reasonable
at a service of its system were suitably designed assurance about above written assertions
organisation that throughout specified period (or in case of Type 2 Report: It is a report on description, design and
provides a service type 1 report as at a specified date) operating effectiveness of controls at a service organization.
to user entities • Where included in the scope of It comprises:
that is likely to engagement, the controls operated • Service Organisations description of its system
be relevant to effectively to provide reasonable assurance • Written assertion by service organisation that in all material
user entities’ that control objectives stated in service respects and based on suitable criteria, the description
internal control organisation’s description of its system fairly presents service organisation’s system designed and
as it relates were achieved throughout the specified implemented throughout the period, controls related
to financial period and to report on the matters stated to control objectives stated in service organisation’s
reporting above in accordance with service auditor’s description of its system were suitably designed throughout
findings the specified period and such controls operated effectively
throughout the specified period and
• Service auditor’s assurance report that conveys assurance
relating to above written assertions and includes a
• Comply with relevant ethical requirements description of tests of control and results thereof
including those pertaining to independence
• Before agreeing to accept or continue,
determine whether service auditor has Service Auditor’s Report to include following elements: -
capabilities and competence to perform • Title indicating that it is independent service auditor’s assurance report
engagement, criteria to be applied by service • Addressee
organisation to prepare description of its • Identification of service organisation’s description of its system and service organisation’s
system and scope of engagement assertions as stated for type 1 report and type 2 report, identification of those parts of
• Obtain agreement of service organisation service organisation’s description of its system not covered by service auditor’s opinion,
regarding its responsibilities
in case of description referring to need for complementary user entity controls, a
• Assess whether service organisation has used
statement of non-evaluation of design or operating effectiveness of complementary user
suitable criteria in preparing description of
entity controls and related matters, in case of performance of service by sub-service
its system, in evaluating whether controls are
suitably designed and in case of type 2 report organisation, use of inclusive method or carve out method
whether controls are operating effectively • Identification of criteria and party specifying control objectives
• Consider materiality with respect to fair • Statement that report and in case of type 2 report, description of tests of controls are
presentation of description, suitability of intended only for user entities and their auditors
design of controls and in case of type 2 • Statement regarding responsibility of service organisation
report, operating effectiveness of controls • Statement regarding service auditor’s responsibility to express an opinion on matters
• Obtain understanding of service already described
organisation’s system • Statement of performance of engagement in accordance with SAE 3402
• Obtain evidence regarding description of • Summary of service auditor’s procedures
system of service organisation and design of • Statement of limitations of controls & in case of type 2 report, of risk of projecting to
controls future periods, any evaluation of operating effectiveness of controls
• Obtain evidence regarding operating • Service auditor’s opinion expressed in positive form for matters already described in case
effectiveness of controls while providing a of type 1 report and type 2 report
type 2 report • Date of service auditor’s assurance report
• Apply appropriate procedure when using • Practitioner’s Signature
sampling • Place of Signature
• Obtain understanding and relevance of Modified Opinion- If service auditor concludes that:
internal audit function to engagement if • Service organisation’s description does not fairly present in, all material respects, system
service organization has such a function and as designed and implemented
perform procedures • Controls related to control objectives were not suitably designed in all material respects
• Obtain written representations from service • In case of type 2 report, controls tested did not operate effectively in all material respects or
organisation
• Service auditor is unable to obtain sufficient appropriate evidence modify opinion and
• Consider effect of subsequent events on
give reasons for modification
service auditor’s assurance report

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SAE 3420

Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus

Scope of SAE Objective of the Requirements Form of Opinion Assurance Report

Practitioner

This SAE deals with reasonable

assurance engagements undertaken by
• Express an unmodified opinion when it is
• To obtain reasonable
a practitioner to report on responsible assurance about whether
concluded that PFI has been compiled, in all
party’s compilation of pro PFI has been compiled material respects, by the responsible party on the
forma financial information (PFI) in, all material respects, basis of applicable criteria
included in a prospectus. It applies by responsible party • In case relevant law or regulation precludes
where such reporting is required by on basis of applicable publication of prospectus containing a modified
securities law or regulation of criteria opinion about PFI, either withdraw from the
securities exchange in jurisdiction
in which prospectus is to be issued • To report in accordance engagement or consider seeking legal advice, if
or reporting is generally accepted with practitioner’s modified opinion is nevertheless appropriate
practice in such jurisdiction findings • In case relevant law or regulation does not preclude
such a publication containing a modified opinion
with regard to PFI and modification of opinion is
appropriate, apply requirements in framework for
• Before agreeing to accept such an engagement, take necessary steps
like determining capabilities and competence to perform, suitability of
assurance engagements regarding modified opinion
applicable criteria, wording of opinion required by law or regulation, • Include Emphasis of Matter paragraph when it
sources from which unadjusted financial information have been extracted is considered necessary to draw users’ attention
and agreement of responsible party regarding its responsibilities to a matter presented or disclosed in PFI or
• Assess suitability of applicable criteria accompanying explanatory notes
• Consider materiality
• Obtain evidence about calculations within PFI
• Obtain understanding regarding compilation of such information.
• Obtain evidence about appropriateness of pro forma adjustments
• Evaluate presentation of PFI
• Obtain written representations Assurance report to include following basic
• Conclude whether sufficient appropriate evidence about whether elements:
compilation of PFI is free from material omissions or inappropriate use • Title clearly indicating that report is an
or application of pro forma adjustment has been obtained independent assurance report
• Form an opinion on whether PFI has been complied, in all material
• Addressee
respects, by responsible party on the basis of applicable criteria
• Introductory para
• Statement that responsible party is responsible
for compiling PFI on the basis of applicable
Definitions criteria
• Description of practitioner’s responsibilities
Unadjusted Financial Information • Statement that engagement was performed in
Financial information of entity to which pro forma adjustments are applied accordance with SAE 3420
by responsible party • Statements that such an engagement provides a
Applicable Criteria reasonable basis for presenting significant effects
Criteria used by responsible party when compiling pro forma directly attributable to event or transaction
financial information and to obtain sufficient appropriate evidence
Pro forma Adjustments about whether related pro forma adjustments
In relation to unadjusted financial information, these include: give appropriate effect to those criteria and PFI
i) Adjustments to unadjusted financial information that illustrate impact reflects proper application of those adjustments
of a significant event or transaction as if the event had occurred or to unadjusted financial information. Statements
transaction has been undertaken at an earlier date selected for the should also include that procedures selected
purpose of illustration and depend on practitioner’s judgment and
engagement also involves evaluating the overall
ii) Adjustments to unadjusted financial information that are necessary
presentation of PFI
for PFI to be compiled on a basis consistent with applicable financial
• Unless otherwise required by law or regulation,
reporting framework of reporting entity and its accounting policies
under that framework practitioner’s opinion shall use one of the
following phrases:
It also includes relevant financial information of a business that has been  The PFI has been compiled in, all material
or is to be acquired or a business that has been or is to be divested
respects, on basis of applicable criteria or
Pro forma Financial Information (PFI)  The PFI has been properly compiled on the
Financial information shown together with adjustments to illustrate basis stated
impact of event or transaction on unadjusted financial information as if • Practitioner’s signature
event had occurred or transaction had been undertaken at an earlier date • Date of report
selected for purposes of the illustration • Place of signature

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SRS 4000-4699 STANDARDS ON RELATED SERVICES (SRS)

SRS 4400

Engagements to Perform Agreed-upon Procedures regarding Financial Information

Purpose of SRS Objective of the General Principles Planning and Reporting

Auditor
The purpose of this SRS
is to establish standards
and provide guidance on
auditor’s responsibilities
when an engagement to
perform agreed-upon
procedures regarding
financial information is
undertaken and, on the form
and content of the report
that the auditor issues in
connection with such an
engagement
of an Agreed-upon
Procedures Engagement
• Comply with ethical principles
of integrity, objectivity,
professional competence
and due care, confidentiality,
professional conduct and
compliance with technical
standards
• Independence is not a
requirement in such type of
engagement. Give a statement
to this effect in report of
factual findings
• Conduct engagement in
accordance with SRS and
terms of engagements which
should be defined
Performing the
Engagement
• Plan work for effective engagement
performance
• Document matters which are
important in providing evidence to
support report of factual findings,
performance of engagement in
accordance with SRS and terms of
engagement
• Perform procedures including:
 Inquiry and analysis
 Re-computation, comparison and
other clerical accuracy checks
 Observation
 Inspection
 Obtaining confirmations

Report should describe purpose and agreed-upon

procedures of engagement. It should clearly mention that no
The objective of an agreed upon audit or review has been performed. It should contain:
procedures engagement is for the auditor • Title
to carry out procedures of an audit nature • Addressee
to which the auditor and the entity and any • Identification of specific information to which agreed-upon
appropriate third parties have agreed and procedures applied
to report on factual findings • A statement that procedures performed were those agreed-
upon with the recipient
• A statement that the engagement was performed in
accordance with this SRS
• Identification of purpose of performance of agreed-upon
Example procedures
• A listing of the specific procedures performed
• A description of the auditor’s factual findings
• A statement that procedures performed do not constitute
either an audit or a review and no assurance is provided
Agreed upon procedures • A statement that had the auditor performed additional
concerning individual procedures, an audit or a review, other matters might have
Engagement items of financial data like come to light
to perform accounts payable, accounts • A statement that the report is restricted to those parties that
agreed-upon receivable, sales of a have agreed to procedures to be performed
procedures segment of entity • A statement (when applicable) that the report relates only to
may include: the elements, accounts, items or financial and non-financial
A financial statement or
complete set of FS information specified and that it does not extend to the
entity’s financial statements taken as a whole
• Date of Report
• Place of Signature
• Auditor’s signature

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SRS 4410

Compilation Engagements

Scope Objective of the Requirements Performing the Practitioner’s

Practitioner Engagement Report

This SRS deals • Comply with relevant ethical

with practitioner’s The practitioner’s objectives in a requirements
responsibilities compilation engagement under this • Independence does not apply to
when engaged to SRS are to: - compilation engagements
assist management • Apply accounting and financial • Exercise professional judgement
with the preparation reporting expertise to assist in conducting a compilation
and presentation of management in the preparation engagement
historical financial and presentation of financial • Take responsibility for engagement
information information in accordance level quality control. SQC 1 applies
with an applicable financial to compilation engagements
without obtaining
reporting framework (FRF) • Accept engagement after agreeing
any assurance on
based on information provided terms of engagement with
that information, management
and to report on by management and
• Communicate with management
engagement in • Report in accordance with
and those changed with governance
accordance with requirement of this SRS
on a timely basis
this SRS

• Obtain an understanding of entity’s business and operations and applicable FRF

• Compile financial information using records, documents, explanations and other information including significant
judgements provided by management
• Prior to completion, read compiled financial information in light of understanding of entity’s business and of applicable FRF
• In case records, documents, information, explanations, etc. are incomplete, inaccurate or otherwise unsatisfactory, bring
that to the attention of management
• In case of failure by management to provide records, documents, explanation or other information, withdraw from
engagement:
 In case of becoming aware that compiled information does not adequately refer to applicable FRF, amendments are
required for financial information not to be materially misstated or if it is otherwise misleading, amendments shall be
proposed
 If management declines, withdraw from engagement
 If withdrawal not possible, determine professional and legal responsibilities in the circumstances
 Obtain acknowledgment from management of responsibility of final version of compiled financial information
 Include in engagement documentation significant matters, record of how compiled financial information reconciles with
records and acknowledged copy of final compiled financial information and practitioner’s report

Practitioner’s report shall include following elements:

• The report title
• The addressee
• A statement regarding compilation of financial information based on information provided by management
• A description of the responsibilities of management in relation to compilation engagement and in relation to financial
information
• Identification of the applicable FRF
• Identification of the financial information
• A description of practitioner’s responsibilities
• A description of what a compilation engagement entails in accordance with SRS
• Explanations that-
 It is not an assurance engagement, verification of accuracy or completions of information provided by management is not
required
 Audit opinion or review conclusion is not expressed
• In case financial information is prepared using a special purpose reporting framework, an explanatory para that
 Describes the purpose for which financial information is prepared or contains a reference to note in financial statement that
discloses this information and
 Draws attention of readers to the fact that financial information is prepared in accordance with a special purpose framework
and may not be suitable for other purposes
• The date of practitioner’s report
• The practitioner’s signature
• The place of signature

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SARANSH Last Mile Referencer for

AUDITING

The Institute of Chartered

Accountants of India
(Setup by an Act of Parliament)

Board of Studies (Academic)

The Institute of Chartered Accountants of India
ICAI Bhawan, A-29,
Sector-62, Noida 201 309
E-mail: bosnoida@icai.in
Phone: 0120 - 3045930

www.boslive.icai.org
www.icai.org