Here we are covering your 100 marks for group II MODULES TEST
Transcript of Here we are covering your 100 marks for group II MODULES TEST
Here we are covering your 100 marks for group IICA-IPCC exams.
For competing with ICAI you need to go throughICAI mind. Yes, the MODULES and TESTPAPERS
And also don’t forget the Writing practices.Solve the papers instead of just going throughthem.
Here we are covering your 100 marks for group IICA-IPCC exams.
For competing with ICAI you need to go throughICAI mind. Yes, the MODULES and TESTPAPERS
And also don’t forget the Writing practices.Solve the papers instead of just going throughthem.
2CA KANIKA KHETAN
We are going to cover various aspects ofAudit in next few of our sessions.
We can divide the entire subjects into twobroad categories like
SA’s will be covered with other concepts andwe can take up the remaining ones in end.
SA- Standards on Auditing
We are going to cover various aspects ofAudit in next few of our sessions.
We can divide the entire subjects into twobroad categories like
SA’s will be covered with other concepts andwe can take up the remaining ones in end.
Other Concepts
3CA KANIKA KHETAN
Meaning
Objective
ScopeQualitycontrols
Relationshipwith otherdisciplines
ChapterOverview
Audit
Aspects
Advantage
Limitation
Types ofAudit
EthicalRequirement
Qualitycontrols
4CA KANIKA KHETAN
Audit is an Independent examination of Financialinformation
Of any entity – Profit oriented or Non-profit oriented To express an opinion
Ensure that financial statements are not misleading:
By ensuring that the entries are made by following the accountingprinciples,
with proper supporting documents, are clear and unambiguous, And present a true and fair view picture of the organisation.
Audit is an Independent examination of Financialinformation
Of any entity – Profit oriented or Non-profit oriented To express an opinion
Ensure that financial statements are not misleading:
By ensuring that the entries are made by following the accountingprinciples,
with proper supporting documents, are clear and unambiguous, And present a true and fair view picture of the organisation.
5CA KANIKA KHETAN
SA-200 : ‘Overall objectives of Independent auditor’
Objectives of an auditor are set forward in SA-200. Itstates:
To obtain reasonable assurance Free from Material Misstatement To report the findings. To communicate
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SA-200 : ‘Overall objectives of Independent auditor’
Objectives of an auditor are set forward in SA-200. Itstates:
To obtain reasonable assurance Free from Material Misstatement To report the findings. To communicate
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Adequately cover all relevant aspects
Information is reliable and sufficient by evaluatingthe systems and internal controls and
various other tests
Properly disclosed subject to statutoryrequirements
BUT we are not expected to check outside ourscope of competence
And all these facts should be disclosed in ourreport.
Adequately cover all relevant aspects
Information is reliable and sufficient by evaluatingthe systems and internal controls and
various other tests
Properly disclosed subject to statutoryrequirements
BUT we are not expected to check outside ourscope of competence
And all these facts should be disclosed in ourreport.
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Examination of system of accounting and internalcontrol
Reviewing the system & procedures
Verification of the authenticity and validity oftransaction
Comparison of items of FS with underlying records
Checking of arithmetical accuracy and the fact thatfinancials are as per norms prescribed.
Verification of title, existence and value of assets
Verification of liabilities
Checking the result shown by P&l
Reporting
Examination of system of accounting and internalcontrol
Reviewing the system & procedures
Verification of the authenticity and validity oftransaction
Comparison of items of FS with underlying records
Checking of arithmetical accuracy and the fact thatfinancials are as per norms prescribed.
Verification of title, existence and value of assets
Verification of liabilities
Checking the result shown by P&l
Reporting8CA KANIKA KHETAN
Audit required by Law
Voluntary Audit
Special Audit
• Trust
• NPO etc
Audit required by Law
Voluntary Audit
Special Audit
• Trust
• NPO etc
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Safeguards the interest of persons not associated with the
management.
Acts as moral check on employees
Helpful in settling liability for taxes and other liabilities that
arise due to change in organizational structure.
Useful for settling trade disputes
Help in the detection of wastages and losses
Government may require audited and certified statement.
Safeguards the interest of persons not associated with the
management.
Acts as moral check on employees
Helpful in settling liability for taxes and other liabilities that
arise due to change in organizational structure.
Useful for settling trade disputes
Help in the detection of wastages and losses
Government may require audited and certified statement.
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SA 200 states these limitations as:
The nature of Financial Reporting
The nature of Audit Procedures: Tampering with evidences like non availability,
colluded frauds etc No legal powers
Timeliness of Financial Reporting and the Balancebetween benefit and cost.
Others
SA 200 states these limitations as:
The nature of Financial Reporting
The nature of Audit Procedures: Tampering with evidences like non availability,
colluded frauds etc No legal powers
Timeliness of Financial Reporting and the Balancebetween benefit and cost.
Others
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Economics
BehavioralScience
Stats &Maths
DataProcessing
AuditAccounting
Law FinancialManagement
Production
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Leadershipresponsibility
To ensurequality of theengagement
Shouldemphasize on
The importance to audit quality of:•Work complying with professional standards andregulatory requirements•Complying with firm’s quality control policies.•Issuing appropriate audit report•Raising concerns without any fear.
The importance to audit quality of:•Work complying with professional standards andregulatory requirements•Complying with firm’s quality control policies.•Issuing appropriate audit report•Raising concerns without any fear.
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Qualities of an Auditor and audit firm
The Auditor should be independent, tact, firm, conceptually sound,
should maintain integrity, objective and independence.
They should take care that following qualities are there in there firm
and should maintain quality control:
Leadership responsibility,
Ethical requirements,
Acceptance and continuance of client relationships,
Human resources,
engagement performance and
monitoring.
Qualities of an Auditor and audit firm
The Auditor should be independent, tact, firm, conceptually sound,
should maintain integrity, objective and independence.
They should take care that following qualities are there in there firm
and should maintain quality control:
Leadership responsibility,
Ethical requirements,
Acceptance and continuance of client relationships,
Human resources,
engagement performance and
monitoring.
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SA-220: Quality Control for an Auditor:It requires that quality standards of the firm should bemaintained and complied with to have an appropriateaudit report
Code of Ethics for Professional Accountants (IESBA code)States the following fundamental principles of professional
ethics: Integrity and Independence Objectivity Professional Competence and due care Confidentiality Professional behavior
SA-220: Quality Control for an Auditor:It requires that quality standards of the firm should bemaintained and complied with to have an appropriateaudit report
Code of Ethics for Professional Accountants (IESBA code)States the following fundamental principles of professional
ethics: Integrity and Independence Objectivity Professional Competence and due care Confidentiality Professional behavior
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Meaning: Independence implies that the judgmentof a person is not subordinate to the wishes ordirection of another person. In simple wordsdecision of the auditor is not influenced by wishesor directions of any other person.
Independence can be of two types: Independence of mind: Opinion is free from bias. Independence of appearance: The avoidance of
facts and circumstances that are so significantthat a third party can significantly conclude thatauditors integrity had been compromised
Meaning: Independence implies that the judgmentof a person is not subordinate to the wishes ordirection of another person. In simple wordsdecision of the auditor is not influenced by wishesor directions of any other person.
Independence can be of two types: Independence of mind: Opinion is free from bias. Independence of appearance: The avoidance of
facts and circumstances that are so significantthat a third party can significantly conclude thatauditors integrity had been compromised
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Independence of Auditors can have various threatslike:
Self Interest threats- like financial interest or otherengagements
Self- review threats- like contradicting one’s ownstatement
Advocacy threats- like dealing in shares andsecurities
Familiarity threats – like former partner or a relativeof director
Intimidation threats – like fear of loss of revenue
Independence of Auditors can have various threatslike:
Self Interest threats- like financial interest or otherengagements
Self- review threats- like contradicting one’s ownstatement
Advocacy threats- like dealing in shares andsecurities
Familiarity threats – like former partner or a relativeof director
Intimidation threats – like fear of loss of revenue
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A Chartered Accountant has a responsibility to remainindependent while performing audits. Following guidingprinciples can be considered for it:
The auditor should always be AND appear to beindependent.
Key fundamental principles like integrity, objectivityand professional skepticism should be maintained
Consider whether there are threats before taking upwork.
If such risk arises, auditor should desist from the taskand put in safeguards.
If the risk still persists then auditor must not accept thework
A Chartered Accountant has a responsibility to remainindependent while performing audits. Following guidingprinciples can be considered for it:
The auditor should always be AND appear to beindependent.
Key fundamental principles like integrity, objectivityand professional skepticism should be maintained
Consider whether there are threats before taking upwork.
If such risk arises, auditor should desist from the taskand put in safeguards.
If the risk still persists then auditor must not accept thework
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It means – Questioning and alert mind and criticalassessment of evidences.
It is the duty of an auditor to question anycontradicting evidences and other circumstancesthat may indicate fraud.
The auditor is not to doubt all the evidences butshould not disregard past experiences with thosecharged with governance.
We should take decisions on the evidences basedon the circumstances and should not overlookunusual circumstances.
It means – Questioning and alert mind and criticalassessment of evidences.
It is the duty of an auditor to question anycontradicting evidences and other circumstancesthat may indicate fraud.
The auditor is not to doubt all the evidences butshould not disregard past experiences with thosecharged with governance.
We should take decisions on the evidences basedon the circumstances and should not overlookunusual circumstances.
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Following factors should be considered beforeaccepting any audit engagement: The integrity of the management The competency, time and resources of audit
teamWhether the team can comply with ethical
requirementsAny complications in previous or current
audit complications, if any.
Following factors should be considered beforeaccepting any audit engagement: The integrity of the management The competency, time and resources of audit
teamWhether the team can comply with ethical
requirementsAny complications in previous or current
audit complications, if any.
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The work force of an organisation should be
competent, capable and committed for the
organisation. Therefore there is a need to establish
proper procedure and policies for issues like
Recruitment, performance evaluation, career
development, promotion etc.
These policies help the firm to establish integrity
of the employees
The work force of an organisation should be
competent, capable and committed for the
organisation. Therefore there is a need to establish
proper procedure and policies for issues like
Recruitment, performance evaluation, career
development, promotion etc.
These policies help the firm to establish integrity
of the employees
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The firm should establish policies and procedures toensure that the engagements are performed in accordancewith professional standards and it maintains the qualityof work to be relied on.
The policies should be conveyed through written orelectronic manuals and should be reviewed regularly.
Factors to be covered in policy include:
How the work is briefed to the team
How the work is to be documented
To provide training to audit team
To review the work performed
To keep policies updated
The firm should establish policies and procedures toensure that the engagements are performed in accordancewith professional standards and it maintains the qualityof work to be relied on.
The policies should be conveyed through written orelectronic manuals and should be reviewed regularly.
Factors to be covered in policy include:
How the work is briefed to the team
How the work is to be documented
To provide training to audit team
To review the work performed
To keep policies updated23CA KANIKA KHETAN
To ensure that all policies and procedure arecomplied with we need to regularly monitor them.
Objectives of monitoring can be listed as: Adherence to professional and legal
requirements Ensuring that the quality control system is
appropriately designed and effectivelyimplemented so that reports generated by firm isappropriate according to circumstances.
To ensure that all policies and procedure arecomplied with we need to regularly monitor them.
Objectives of monitoring can be listed as: Adherence to professional and legal
requirements Ensuring that the quality control system is
appropriately designed and effectivelyimplemented so that reports generated by firm isappropriate according to circumstances.
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Before conducting audit we should ensure the following:
Whether the financial reporting framework is acceptable
An agreement that management acknowledges andunderstand its responsibilities like:
1. To provide the auditor:• Access to all records , documentation and additional
information as the auditor may require• Unrestricted access to any person from the entity if
the auditor considers that the person can providereliable audit evidence.
2. That preparation of financial statements and havingadequate internal control is the duty of the management.
Before conducting audit we should ensure the following:
Whether the financial reporting framework is acceptable
An agreement that management acknowledges andunderstand its responsibilities like:
1. To provide the auditor:• Access to all records , documentation and additional
information as the auditor may require• Unrestricted access to any person from the entity if
the auditor considers that the person can providereliable audit evidence.
2. That preparation of financial statements and havingadequate internal control is the duty of the management.
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For a better relation between management and auditorICAI issue SA-210 “ Agreeing the Terms of AuditEngagements”. For maintaining a transparency inagreement and to avoid confusions following terms ofaudit should be reduced in writing and agreed uponbetween management and auditor:
The objective and scope of audit
The responsibilities of the auditor and that ofmanagement
Identification of applicable frameworks
Form and content of reports to be issued andpossibilities of deviations.
For a better relation between management and auditorICAI issue SA-210 “ Agreeing the Terms of AuditEngagements”. For maintaining a transparency inagreement and to avoid confusions following terms ofaudit should be reduced in writing and agreed uponbetween management and auditor:
The objective and scope of audit
The responsibilities of the auditor and that ofmanagement
Identification of applicable frameworks
Form and content of reports to be issued andpossibilities of deviations.
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The auditors can take up assignments that arerecurring in nature. They need not to send a newengagement letter or written agreement at the startof each period but the same should be send in case:
There is a change in management, ownership, ornature or size of the organization.
There is any misunderstanding or change in termsof engagement.
There is any change in reporting framework orregulatory or legal requirements.
The auditors can take up assignments that arerecurring in nature. They need not to send a newengagement letter or written agreement at the startof each period but the same should be send in case:
There is a change in management, ownership, ornature or size of the organization.
There is any misunderstanding or change in termsof engagement.
There is any change in reporting framework orregulatory or legal requirements.
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In case there is any limitation by the management in
audit terms which can influence the decision making
capacity of the auditor, the auditor should not accept
such a limited engagement.
In case the terms of audit changes after the audit is
accepted and auditor is not agreeing upon the terms
then the auditor can withdraw from it and determine
whether there is any contractual or other obligation
arising from the same.
In case there is any limitation by the management in
audit terms which can influence the decision making
capacity of the auditor, the auditor should not accept
such a limited engagement.
In case the terms of audit changes after the audit is
accepted and auditor is not agreeing upon the terms
then the auditor can withdraw from it and determine
whether there is any contractual or other obligation
arising from the same.
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