Contents-SA

There are total 27 Standards in CA Intermediate Syllabus as

announced by the ICAI.
No. SA Name of the Standard
1 Introduction to Standards
Standards on Quality Control
Quality Control for Firms that perform Audits & Reviews of
1 SQC 1 Historical Financial Information, and Other Assurance & Related
Services Engagements.
200-299 General Principles and Responsibilities
Overall Objectives of the Independent Auditor and the Conduct
2 SA 200
of an Audit in Accordance with Standards on Auditing
3 SA 210 Agreeing the Terms of Audit Engagements
4 SA 220 Quality Control for an Audit of Financial Statements
5 SA 230 Audit Documentation
The Auditor’s Responsibilities relating Fraud in an Audit of
6 SA 240
Financial Statements
Consideration of Laws and Regulations in an Audit of Financial
7 SA 250
Statements
Excluded SA 260 Communication with Those Charged with Governance (Revised)
Communicating Deficiencies in Internal Control to Those
Excluded SA 265
charged with Governance & Management
8 SA 299 Joint Audit of Financial Statements

300-499 Risk Assessing and Response to Assessed Risks

9 SA 300 Planning an Audit of Financial Statements
Identifying and Assessing the Risk of Material Misstatement
10 SA 315
through Understanding the Entity & its Environment
11 SA 320 Materiality in Planning & Performing an Audit
Excluded SA 330 The Auditor’s response to Assessed Risk
Audit Considerations relating to Entities using Service
Excluded SA 402
Organization
Excluded SA 450 Evaluation of Misstatement identified during the Audit.

500-599 Audit Evidence

12 SA 500 Audit Evidence
13 SA 501 Audit Evidence – Specific Considerations for Selected Items
14 SA 505 External Confirmation
15 SA 510 Initial Audit Engagements – Opening Balances
16 SA 520 Analytical Procedures
17 SA 530 Audit Sampling
Auditing Accounting Estimates, Including Fair Value Accounting
Excluded SA 540
Estimates & Related Disclosure
18 SA 550 Related Parties
 No. SA Name of the Standard
19 SA 560 Subsequent Events
20 SA 570 Going Concern (Revised)
21 SA 580 Written Representation

600-699 Using Work of Others

Excluded SA 600 Using the Work of another Auditor
22 SA 610 Using the Work of an Internal Auditor (Revised)
Excluded SA 620 Using the Work of an Expert

700-799 Audit Conclusions & Reporting

23 SA 700 Forming an Opinion and Reporting on Financial Statements
Communicating Key Audit Matters in the Independent Auditor’s
24 SA 701
Report
Modifications to the opinion in the Independent Auditor’s
25 SA 705
Report
Emphasis of Matter Paragraphs and Other Matter Paragraphs in
26 SA 706
the Independent Auditor’s Report
27 SA 710 Comparatives
The Auditor’s Responsibility in Relation to Other Information in
Excluded SA 720
Documents Containing Audited Financial Statement

GN Guidance Notes on Audit

SA 700, 701, 705 and 706 are studied in the chapter “Audit Report &
CARO” and hence not included here.

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 1 - Audit Vocabulary
Short Long
ABCD Account Balance, Class of transactions and Disclosures.
AE Accounting Estimate (SA 540)
AE Auditor’s Expert (SA 620)
AO Adverse Opinion (SA 705)
CAAT Computer Assisted Audit Technique
DO Disclaimer of Opinion (SA 705)
EMP Emphasis of Matter Paragraph (SA 705)
EP Engagement Partner (SA 220)
EQC Engagement Quality Control (SA 220)
EQCR Engagement Quality Control Review (SA 220)
ET Engagement Team (SA 220)
FRF Fraud Risk Factors (SA 240)
FRF Financial Reporting Framework (SA 200)
FS Financial Statements.
IA Internal Auditor (SA 610)
IC Internal Control
L&R Laws & Regulations (SA 250).
LOE Letter of Engagement (SA 210)
LOR Letter of Representation (SA 580)
ME Management’s Expert (SA 500)
MS Mis-Statements
MMS Material Mis-Statements
MO Modified Opinion (SA 705)
NTE Nature, Timing & Extent
OA Other Auditor (SA 600)
OB Opening Balances (SA 510)
OMP Other Matter Paragraph (SA 705)
PA Principal Auditor (SA 600)
QC Quality Control (SA 220)
QO Qualified Opinion (SA 705)
RAP Risk Assessment Procedures
Re Regarding
ROMM Risk of Material Mis-Statement
SA Standards on Auditing
SAAE Sufficient Appropriate Audit Evidence
STD Scope, Timing and Direction
TCWG TCWG
ToAE Terms of Audit Engagement (SA 210)
WR Written Representation (SA 580)

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 2 – Introduction to Standards

Topic Heading Detailed Explanation

Statements The ‘Statements’ have been issued with a view to securing compliance by members on
matters which, in the opinion of the Council, are critical for the proper discharge of their
functions. ‘Statements’ therefore are mandatory.
Guidance Notes ‘Guidance Notes’ are primarily designed to provide guidance to members on matters
which may arise in the course of their professional work and on which they may desire
assistance in resolving issues which may pose difficulty. Guidance Notes are
recommendatory in nature. A member should ordinarily follow recommendations in a
guidance note relating to an auditing matter except where he is satisfied that in the
circumstances of the case, it may not be necessary to do so.

Standards on Quality Control (SQC - 1)

Services covered by the pronouncements of the Auditing & Assurance Standards

Board under the authority of the Council of ICAI

Assurance
Related Services
Services

Framework for Assurance

Engagements

Assurance Engegements
Audit & Review of
other than audits or
Historical Financial
Review of historical
Information
Information

Standards on Review Standards on Assurance

Standards on Auditing
Engagements Engagements
(SAs) Standards on Related
(SREs) (SAEs) Services
100 - 999
2000 - 2699 3000 - 3699 (SRSs)
4000 - 4699

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 200 Series
200 – 299
General Principles &
Responsibilities

Overall Objectives of the Independent Auditor and the Conduct of

SA 200
an Audit in Accordance with Standards on Auditing
SA 210 Agreeing the Terms of Audit Engagements
SA 220 Quality Control for an Audit of Financial Statements
SA 230 Audit Documentation
The Auditor’s Responsibilities relating Fraud in an Audit of
SA 240
Financial Statements
Consideration of Laws and Regulations in an Audit of Financial
SA 250
Statements
SA 260
Communication with TCWG (Excluded)
(Revised)
Communicating Deficiencies in Internal Control to TCWG &
SA 265
Management (Excluded)
SA 299 Responsibility of Joint Auditors

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 Overall Objectives of the Independent Auditor and the
SA
Conduct of an Audit in Accordance with Standards on
200 Auditing

Topic Heading Detailed Explanation

Overall Auditor should obtain reasonable assurance whether FS as a whole are free from material
Objective of the misstatement whether due to fraud or error.
Auditor

Applicable There are 2 types of Financial Reporting Framework:

Financial 1. Fair presentation framework – FRF that contains the 2 acknowledgements for
Reporting flexibility and better presentation of FS :-
Framework a) Management may provide disclosures beyond the framework; or
(FRF) b) Management may depart from the framework.

1. Compliance framework – FRF that does not contain the 2 acknowledgements as

mentioned above.

Audit Risk

Risk of Material Mis-statement Detection Risk

Inherent Risk Control Risk

Topic Heading Detailed Explanation

Audit Risk Audit risk is the risk that an auditor may give an inappropriate opinion on financial
information which is materially misstated.
Inherent risk It is the susceptibility of ABCD to MMS, assuming that there were no related internal
controls.
Control Risk It is the risk that a MS will not be prevented, or detected and corrected, by the entity’s
INTERNAL CONTROL.
Detection Risk It is the risk that AUDIT PROCEDURES will fail to detect a MMS.
Detection risk relates to the NTE of AP that are determined by the auditor to reduce audit
risk to an acceptably low level.

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Topic Heading Detailed Explanation
Ethical (a) Integrity;
requirements (b) Objectivity;
relating to an (c) Professional competence and due care;
audit of FS (d) Confidentiality; and
(e) Professional behaviour.
Independence comprises both independence of mind and independence of appearance.

Professional (1) Professional skepticism in simple words means having a questioning and alert mind.
Skepticism (2) Professional skepticism involves being alert to:
(a) Fraud Risk Factors (Conditions indicating possible frauds).
(b) Contradictory audit evidence.
(c) Reliability of documents.
Professional The application of relevant training, knowledge and experience in making informed
Judgement decisions about the courses of action that are appropriate in the audit.
Inherent Auditor seeks persuasive evidence rather than conclusive evidence.
Limitations of The inherent limitations of an audit arise from:
an Audit (1) The nature of financial reporting: The preparation of FS involves judgment by
management in applying the requirements of the applicable FRF.
(2) The nature of audit procedures:
(a) Management & others do not provide complete information intentionally/
unintentionally.
(b) Audit is not an official investigation.
(3) Balance between benefit and cost:
(a) User expectation that the auditor will form an opinion on the FS within a
reasonable period of time and at reasonable cost.
(b) It results into use of Test Checking.
(4) Other Matters that Affect the Limitations of an Audit
a) Fraud, particularly fraud involving senior management or collusion.
b) The occurrence of non-compliance with laws and regulations.
c) Future events or conditions that may cause an entity to cease to continue as a
going concern.

S. No. Detailed Explanation

1 The auditor need not comply with the SA that are not relevant to the circumstances of the audit.
2 Objectives of SA are more important than the Procedures in the SA.
3 Entire SA is not relevant. Follow only relevant portions of the SA.
If the auditor fails to achieve the overall objectives, then he should express modified audit opinion
4
or withdraw from the engagement.

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 SA
Agreeing the Terms of Audit Engagements
210

Topic Heading Detailed Explanation

Premises or Management and TCWG have the following fundamental responsibilities:
Pre-conditions 1. Preparation and presentation of FS in accordance with the applicable FRF.
for Accepting 2. Design, implementation and maintenance of Internal Controls;
an Audit. 3. To provide the auditor with:
a) All relevant information for the preparation and presentation of the FS;
b) Any additional information requested by the auditor; and
c) Unrestricted access within the entity.

Form and The form and content of the audit engagement letter may vary for each entity.
Content of the General Form and Contents of LOE:
Engagement 1. Scope of the audit, including reference to laws, SA, Code of ethics .
Letter 2. Letter of Weakness in Internal Control.
3. Inherent limitations of an audit.
4. Management will provide Written Representations.
5. Premises or Pre-conditions for accepting an Audit.
6. The basis on which fees are computed and any billing arrangements.
7. Audit may be subjected to a Peer Review under the CA Act, 1949.
8. A request to acknowledge receipt of the engagement letter.

Topic Heading Detailed Explanation

Circumstances Following factors may make it appropriate to revise the terms or to remind the existing
when an terms to the entity:
auditor needs (a) Entity misunderstands scope of the audit.
to revise LOE in (b) Δ Terms of the audit engagement.
recurring Audit (c) Δ management.
engagements. (d) Δ ownership.
(e) Δ size of the entity’s business.
(f) Δ Laws.
(g) Δ FRF.
(h) Δ Audit report.

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Topic Heading Detailed Explanation
Auditors Duty Step 1: Obtain Reasons for change in ToAE.
when Step 2: If reasonable justification is given, the auditor should do the following:
management (a) Auditor may accept the change and document the reasons.
requests (b) Enter into a Revised LOE.
change in TOAE Step 3: If no reasonable justification is given, auditor should refuse to accept the change.
If management does not permit to continue, the auditor should do the following:
(a) Auditor should withdraw (resign).
(b) Communicate the matter to TCWG.
(c) Communicated to the shareholders & regulatory authorities.

SA
Quality Control for an Audit of Financial Statements
220

Implement Quality Control (QC) Procedures in every engagement to obtain

reasonable assurance that

1) Audit complies with Professional Standards 2) Audit Report issued is

and Legal requirements appropriate

The following information would assist the auditor in accepting and continuing of relationship with the client:
(i) Integrity of the KMP & TCWG;
(ii) Whether the engagement team has the necessary capabilities, including time and resources;
(iii) Whether the engagement team can comply with relevant ethical requirements; and
(iv) Significant matters that have arisen during audit engagement, and their implications for continuing the
relationship.

Topic Heading Detailed Explanation

Engagement A) Directions
Partner’s (EP) Partner should inform Team members (3) Problems that may arise.
responsibility regarding: (4) Audit Plan

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Topic Heading Detailed Explanation
regarding (1) Nature of entity’s business. (5) Allocation of staff.
Engagement (2) Risk-related issues.
performance B) Supervision
and delegation: (1) Tracking progress of audit. (4) Need to modify audit plan.
(1) Direction (2) Work is carried out as planned. (5) Co-ordination among Team.
(2) Supervision (3) Addressing significant matters. (6) Identifying matters for consultation.
(3) Review C) Reviews
A review consists of consideration whether, for example:
a) The work has been performed in accordance with professional standards and
regulatory and legal requirements;
b) Significant matters have been raised for further consideration;
c) Appropriate consultations have taken place and the resulting conclusions have been
documented and implemented;
d) There is a need to revise the nature, timing and extent of work performed;
e) The work performed supports the conclusions reached and is appropriately
documented;
f) The evidence obtained is sufficient and appropriate to support the auditor’s report;
and
g) The objectives of the engagement procedures have been achieved.

SA
Audit Documentation
230

Assist Audit team in planning

& performing

Assist in Supervision,
Assist External Inspection Direction & Review

Evidence of basis
for conclusion Evidence of Audit
regarding Planning &
achievement of Performance as
overall objectives per SA & Laws

Record Matters of Assist QC Review

Continuing Significance

Create Accountability

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Topic Heading Detailed Explanation
Meaning of Record of
Audit (1) Audit procedures performed
Documentation (2) Audit evidence obtained
(3) Audit Conclusions reached.
Factors (a) The size and complexity of the entity.
effecting “Form, (b) The nature of the audit procedures to be performed.
content and (c) The identified risks of material misstatement (ROMM).
extent of audit (d) The significance of the audit evidence obtained.
documentation” (e) The nature and extent of exceptions identified.
(f) The audit methodology and tools used.
Ownership of 1) Unless otherwise specified by law or regulation, audit documentation is the
Documentation PROPERTY of the Auditor.
2) Auditor may at his discretion, make portions of, or extracts from, audit
documentation available to CLIENTS.
Retention 7 years from date of audit report.
period

SA The Auditor’s Responsibilities relating Fraud in an Audit of

240 Financial Statements

Topic Heading Detailed Explanation

Definition of Fraud may be defined as an intentional act by one or more individuals among
Fraud management, TCWG, employees, or third parties, involving the use of deception to obtain
an unjust or illegal advantage.

Fraud Risk Events or conditions that indicate an incentive or pressure to commit fraud or provide an
Factors opportunity to commit fraud.

Fraud risk factors

Misappropriation of Assets Fraudulent Financial Reporting

I. Fraud Risk Factors Relating to Misstatements Resulting from Misappropriation

of Assets:
(1) Recent or anticipated changes to employee compensation or benefit plans.
(2) Inventory items that are small in size, of high value, or in high demand.

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(3) Fixed assets which are small in size, marketable, or lacking observable identification of ownership.
(4) Inadequate internal control over assets may increase the susceptibility of misappropriation of those
assets.
(5) Behaviour indicating displeasure or dissatisfaction with the entity or its treatment of the employee.

Cash Defalcation (Misappropriation of Assets)

Topic Heading Detailed Explanation

Cash Defalcation 1. Making payments against fictitious vouchers.
by inflating cash 2. Making payments against inflated vouchers.
payments. 3. Manipulating totals of wage rolls by including dummy workers.
4. Casting a larger totals for petty cash expenditure.

Cash Defalcation 1. Teeming and Lading.

by suppressing 2. Adjusting unauthorised or fictitious discounts etc. to customer’ accounts.
cash receipts 3. Writing off as bad debts, cash which has already been received.
4. Not accounting for cash sales fully.
5. Not accounting for miscellaneous receipts.
6. Writing down asset values in entirety, selling them and misappropriating the
proceeds.

I. Fraud Risk Factors Relating to Misstatements Resulting from Fraudulent

Financial Reporting:
1. A significant portion of management's compensation depends on net profits.
2. There is a high turnover of management or board members.
3. Frequent disputes with the auditor.
4. Unreasonable time constraints on the auditor to complete audit.
5. Significant pressure to obtain additional capital.
Ways of manipulation of accounts:-
1. Recording fictitious sales or omission of sales.
2. Recording fictitious purchases or suppression of purchases.
3. Over valuation or under valuation of stock.
4. Recording fictitious expenses or omission of expenses.
5. Taking credit for accrued income not likely to be received or omission of income.
6. Revenue expenses changed to capital and vice-versa.

Topic Heading Detailed Explanation

What is 1. Owing to the inherent limitations of an audit, there is a risk that auditor will not be
Auditor’s able to detect all MMS.
responsibility? 2. Risk due to Fraud is harder to detect than risk due to Error.
3. Risk due to Management Fraud is harder to detect than risk due to Employee Fraud.
4. Auditor is responsible for maintaining an attitude of professional skepticism
throughout the audit, considering the potential for management override of controls.

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Topic Heading Detailed Explanation
5. Conclusion - Detection of fraud and error is not the duty of the auditor provided that
he complies with the requirements given in SA, maintains professional skepticism and
is not grossly negligent in the performance of his duties.

A) Professional Skepticism
B) Discussion Among the Engagement Team
C) Inquiry of others

Topic Heading Detailed Explanation

A) Overall 1. Increase professional skepticism.
responses 2. Assign proper audit personnel.
3. Evaluate selection & application of accounting policies:
4. Special attention to complex transactions.
5. Incorporating Unpredictability in audit procedures.
B) Audit Change in nature, timing and extent of audit procedures:
procedures 1. Δ NATURE.
responsive to a) Physical observation/ inspection of certain assets.
assessed risk at b) Use more CAAT.
assertion level. 2. Δ TIMING - perform near the year end.
3. Δ EXTENT.
a) Increase sample size.
b) Perform analytical procedures at more detailed level.

C) Management Management is in a unique position to perpetrate fraud because of management's ability

override of to manipulate accounting records and prepare fraudulent FS by overriding controls.
controls.

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 SA Consideration of Laws and Regulations in an Audit of
250 Financial Statements

Types of Laws
A B

Direct Effect on material Fundamental Impact on

Amounts and Disclosures in FS Operations and Going Concern

Undertake specified procedures

Obtain SAAE regarding
to help identify non-compliance
Compliance
that may impact FS

The following are the procedures MANAGEMENT may implement to assist in the prevention and detection of
non-compliance with laws and regulations-
a) Monitoring legal requirements.
b) Instituting and operating appropriate systems of internal control.
c) Developing, publicising and following a code of conduct.
d) Monitoring compliance with the code of conduct and acting appropriately to discipline employees who
fail to comply with it.
e) Engaging legal advisors to assist in monitoring legal requirements.
f) Maintaining a register of significant laws and regulations with which the entity has to comply within its
particular industry and a record of complaints.
g) Ensuring employees are properly trained and understand the code of conduct.

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Topic Heading Detailed Explanation
Auditor’s For Laws that directly affect FS For Laws that don’t affect FS but GC
Consideration The auditor shall obtain SAAE The auditor shall perform following audit
of Compliance regarding compliance with such laws. procedures to identify non-compliance with
with Laws and other laws:
Regulations a. Inquiring of management; and;
b. Inspecting correspondence with regulatory
authorities.
1. The auditor shall obtain a general understanding of the legal and regulatory
framework applicable to the entity;
2. Exercise Professional Skepticism.
3. Obtain written representation.

Indicators for 1. Investigation by regulatory organizations.

verifying 2. Payment of fines, additional taxes or penalties.
compliance 3. Unusual payments in cash.
with laws and 4. Unusual payments towards legal fees.
regulations 5. Unusual transactions with companies registered in tax havens.
6. Adverse Media Comment.

Reporting Responsibilities of Auditor

TCWG Audit Report Regulators

Topic Heading Detailed Explanation

Reporting to The auditor shall communicate with TCWG matters involving non-compliance with laws
TCWG and regulations that come to the auditor’s attention.

Reporting in Inadequately reflected in FS Adequately reflected in FS

Audit Report Qualified opinion/ Adverse Opinion Emphasis of Matter paragraph
.
Reporting to 1. Client confidentiality may be an issue but law may override confidentiality
Regulators requirements.
2. Consider the need to seek legal advice.

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 SA
Responsibility of Joint Auditors
299

Topic Heading Detailed Explanation

Advantages of 1. Pooling and sharing of expertise.
Joint Audit 2. Advantage of mutual consultation.
3. Lower work load.
4. A sense of healthy competition towards a better performance.
Disadvantages 1. The fees being shared.
of Joint Audit 2. Psychological problem where firms of different standing are associated in the joint
audit.
3. Problems of coordination of the work.
4. Lack of clear division of responsibility.

Topic Heading Detailed Explanation

Division of 1. By mutual discussion:
Work a. Usually in terms of audit of identifiable units/ specified areas.
b. Sometimes, in terms of assets/ liabilities/ income/ expenditure, etc.
c. Critical areas covered by all auditors.
2. Document the division & communicate to client.

Coordination 1. Share significant information with other joint auditors which :

a. Deserve their attention.
b. Require disclosure.
c. Require mutual discussion.
d. Application of judgment by others auditors.
2. Before finalization of audit.

Topic Heading Detailed Explanation

Responsibilities 1. Each Joint Auditor responsible only for work allocated, whether or not separate
of Joint report therefor is made.
Auditors. 2. It is the separate and specific responsibility of each joint auditor to study and evaluate
the prevailing IC relating to the work allocated to him.
3. Each Joint Auditor jointly and severally responsible for:
a. Audit work which is not divided among them.
b. Decisions taken by all the joint auditors concerning the nature, timing or extent
of the audit procedures to be performed by any of the joint auditors.
c. Matters which are brought to the notice of the joint auditors by any one of them.

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Topic Heading Detailed Explanation
d. Examining that fs complies with the disclosure requirements of the relevant
statute.
e. Ensuring that the audit report complies with the requirements of the relevant
statute.
f. Each joint auditor is entitled to assume that the other joint auditors have carried
out their work in accordance with the GAPA.
g. For obtaining and evaluating information and explanation from the
management.

Topic Heading Detailed Explanation

Reporting 1. Normally, joint auditors are able to arrive at an agreed report.
2. If disagreement, then:
a. each one of them should express his opinion through a separate report.
b. a joint auditor is not bound by majority view.

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 300 Series
300 – 499
Risk Assessment &
Response to Assessed Risk

SA 300 Planning an Audit of Financial Statements

Identifying and Assessing the Risk of Material Misstatement
SA 315
through Understanding the Entity & its Environment
SA 320 Materiality in Planning & Performing an Audit
SA 330 The Auditor’s response to Assessed Risk (Excluded)
Audit Considerations relating to Entities using Service Organization
SA 402
(Excluded)
SA 450 Evaluation of Misstatement identified during the Audit. (Excluded)

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 SA
Planning an Audit of Financial Statements
300

Topic Heading Detailed Explanation

Advantages of Adequate planning helps the auditor:
Audit Plan a. To devote attention to important areas.
b. Resolve potential problems on timely basis.
c. Properly organise and manage the audit.
d. Assists Selection of engagement team members with requisite capabilities.
e. Co-ordination of the work done by auditors of components and experts.
f. Facilitating direction and supervision of engagement team.
g. Provides Base for Billing the Clients for the Time & Manpower involved.

Requirements

Preliminary
Involvement of
Engagement Planning Activities
Key Team Member
Activities

Topic Heading Detailed Explanation

A) Involvement 1. Participate in discussion with audit team.
of Team 2. Benefit of their experience & insight.
3. Increases effectiveness & efficiency of planning.

B) Preliminary 1. Perform CAF/CCF procedures required under SA 220.

Engagement 2. Evaluate compliance with ethical requirements including independence.
Activities 3. Enter into LOE as per SA 210.

C) Planning 1. Contents of Audit Plan:

Activities a. Planning of the auditor's RAP occurs early in the audit process.
b. Planning the nature, timing and extent of SAP depends on the outcome of RAP.
c. Auditor may begin the execution of SAP for some classes of transactions,
account balances and disclosures before planning all remaining SAP.
2. Δ Audit Strategy & Δ Audit Plan due to.
a. Unexpected events,
b. New Information comes to the auditor’s attention.
3. Plan direction, supervision & review of team members.

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Topic Heading Detailed Explanation
Establishing 1. The auditor shall establish an overall audit strategy that sets the SCOPE, TIMING AND
Audit Strategy DIRECTION (STD) of the audit, and that guides the development of the audit plan.
2. In establishing the overall audit strategy, the auditor shall:
a. Identify the characteristics of the engagement that define its scope;
b. Ascertain the reporting objectives of the engagement;
c. Consider the factors that are significant in directing the team's efforts;
d. Consider the results of preliminary engagement activities; and
e. Ascertain the Nature, Timing & Extent (NTE) of procedures.
Developing an The audit plan shall include a description of:
Audit plan 1. The nature, timing and extent of RAP, as determined under SA 315.
2. The nature, timing and extent of SAP, as determined under SA 330.
3. Other planned audit procedures that are required to be carried out so that the
engagement complies with SAs.

SA Identifying and Assessing the Risk of Material Misstatement

315 through Understanding the Entity & its Environment

Topic Heading Detailed Explanation

Assertions Assertions means the Representations by management embodied in financial
statements used by the Auditor to assess potential misstatements.

RAP 1. Procedures to understand entity & its environment (ICs also).

2. To identify & assess ROMM due to fraud/error @ FS Level & Assertion level.

Understanding 1. Relevant industry, regulatory factors including applicable FRF.

the Entity ad its 2. The nature of the entity, including:
Environment (a) its operations;
(b) its ownership and governance structures;
(c) the types of investments that the entity is making; and
(d) the way that the entity is structured;
3. The entity’s selection and application of accounting policies.
4. The entity’s objectives and strategies and related business risks.

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 Information from other Information from Client
Engagements done for Acceptance &
the entity Continuance Process

RAP

Information from Information from

previous engagements Inquiries discussion among audit
and other audits of Others team

Topic Heading Detailed Explanation

Definition of (i) The process designed, implemented and maintained
Internal Control (ii) By TCWG, management and other personnel
(iii) To provide reasonable assurance
(iv) About the achievement of an entity's objectives with regard to
a. reliability of financial reporting,
b. effectiveness and efficiency of operations,
c. safeguarding of assets, and
d. compliance with applicable laws and regulations.

Control
Environment

Control
Monitoring
Activities
Internal
Control

Information Entity's
System RAP

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 Examples - Internal Control

Performance Segregation of Information

Physical Controls
Reviews Duties Processess

RISKS

At Financial Statement Level At Assertion Level

Presentation &
During the Year At the year end
Disclosure
1- Relate Pervasively to FS.
2- Potentially affect many
assertions
1- Occurence
3- Arise from weak control 1- Existence
Environment 1- Occurence 2- Rights &
2- Rights & Obligation
2- Completeness Obligations
3- Completeness
3- Accuracy 3- Completeness
4- Classification &
4- Cut-off 4- Valuation & understandibility
5- Classification Allocation of
Resources 5- Accuracy &
Valuation

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 SA
Materiality in Planning & Performing an Audit
320

Topic Heading Detailed Explanation

Concept of SA 320 defines material items as relatively important and relevant items, i.e., items the
Materiality knowledge of which would influence the decision of the user of financial statements.
Financial statements materially affect if such statement is erroneously stated or omitted
to be stated there in and economic decision of the users taken on the basis of such
information is influenced by such misstatements or omissions.

Audit Risk is There is an inverse relationship between materiality and the degree of audit risk. The
inversely higher the materiality level, the lower the audit risk and vice versa. For example, the risk
proportional to that a particular account balance or class of transactions could be misstated by an
Materiality extremely large amount might be very low but the risk that it could be misstated by an
extremely small amount might be very high.
1
𝐴𝑢𝑑𝑖𝑡 𝑅𝑖𝑠𝑘 ∝
𝑀𝑎𝑡𝑒𝑟𝑖𝑎𝑙𝑖𝑡𝑦
Factors to be 1. Item of materiality may be determined individually or in aggregate.
considered for 2. Materiality has both quantitative & qualitative dimensions.
determining 3. Even insignificant items in terms of quality may be material in special circumstances.
materiality 4. Sometimes the materiality of an item in terms of quantity is described in law itself.
For example, Schedule III requires disclosure of items of expenditures which are in
excess of 1% of the revenue from operations or ` 1,00,000, whichever is higher.
5. An item whose impact is insignificant at present, but in future it may be significant,
may be material item.

Materiality 1. Involves use of professional judgment.

2. Starting point - a percentage often applied to a chosen benchmark.

Performance 1. Amount(s) set by auditor at less than materiality for FS as a whole.

Materiality 2. To reduce to an appropriate low level.
3. Probability that aggregate of uncorrected & undetected misstatements exceeds
materiality for FS as a whole.

Revision as Materiality may need to be revised as a result of:

Audit 1) A change in circumstances that occurred during the audit for example, a decision to
Progresses dispose of a major part of the entity’s business.
2) New information.
3) A change in auditor’s understanding of entity and its operations as a result of
performing further audit procedures.

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 500 Series
500 – 599
Audit Evidence

SA 500 Audit Evidence

SA 501 Audit Evidence – Specific Considerations for Selected Items
SA 505 External Confirmation
SA 510 Initial Audit Engagements – Opening Balances
SA 520 Analytical Procedures
SA 530 Audit Sampling
Auditing Accounting Estimates, Including Fair Value Accounting
SA 540
Estimates & Related Disclosure (Excluded)
SA 550 Related Parties
SA 560 Subsequent Events
SA 570 Going Concern (Revised)
SA 580 Written Representation

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 SA
Audit Evidence
500

Topic Heading Detailed Explanation

Definitions Audit Evidence
Information used by auditor in arriving at conclusions on which audit opinion is based.
Audit Evidence

Sufficient Appropriate

Appropriateness of audit evidence:

Measure of quality of audit evidence which depends on:
1. Relevance; and
2. Reliability
Sufficiency of audit evidence:
Measure of quantity of audit evidence which depends on:
1. Auditor’s assessment of ROMM.
2. Quality of such audit evidence.
Relevance Relevance of an Evidence implies that whether the evidence successfully tests the
Assertion which is required to be tested. Relevance deals with the logical connection
between
1. Purpose of the audit procedure and
2. The assertion under consideration.
Reliability 1) External Evidence > Internal Evidence.
2) Direct Evidence > Indirect Evidence.
3) Documentary Evidence > Oral Evidence.
4) Original paper Evidence > Photocopied paper Evidence.
5) Evidence is more reliable when the related Internal Financial Controls are effective.

Topic Heading Detailed Explanation

Inspection Inspection consists of examining records, documents or tangible assets. 3 major
categories of documentary evidence are:
(i) documentary evidence created and held by the third parties;
(ii) documentary evidence created by third parties and held by the entity; and
(iii) documentary evidence created and held by the entity.
(iv)
Observation Observation consists of looking at a process a procedure being performed by the
others. For example, the auditor may observe the counting of inventories by client
personnel.

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Topic Heading Detailed Explanation
Inquiry and Inquiry consists of seeking appropriate information from knowledgeable person inside
confirmation or outside the entity. Responses to inquiries may provide the auditor with information
which he did not previously possess or may provide him with corroborative evidence.
Confirmation Confirmation consists of the response to an inquiry to corroborate information in the
accounting records.
Analytical Review Analytical review consists of studying significant ratios and trends and investigating
unusual fluctuation and item.
Re-calculation Recalculation consists of checking the mathematical accuracy of documents or
records. Recalculation may be performed manually or electronically.
Re-performance Re-performance involves the auditor’s independent execution of procedures or
controls that were originally performed as part of the entity’s internal control.

Topic Heading Detailed Explanation

Evaluating the 1. Evaluate competence, capabilities & objectivity (CCO) of expert.
expert 2. Obtain an understanding of his work.
3. Evaluate appropriateness of his work as audit evidence.
Reviewing The auditor may also consider the following while evaluating the appropriateness of the
expert’s management’s expert’s work as audit evidence:
methods and (i) The relevance and reasonableness of that expert’s findings or conclusions, their
assumptions consistency with other audit evidence;
(ii) If that expert’s work involves use of significant assumptions and methods, the
relevance and reasonableness of those assumptions and methods; and
(iii) If that expert’s work involves significant use of source data, the relevance,
completeness, and accuracy of that source data.

SA
Audit Evidence – Specific Considerations for Selected Items
501

Topic Heading Detailed Explanation

Inventory If physical inventory counting is conducted at a date other than the date of the financial
Count at a date statements, the auditor shall perform audit procedures to obtain audit evidence about
other than FY whether changes in inventory between the count date and the date of the financial
ending date statements are properly recorded.
Inventory lying (a) Request confirmation from the third party as to the quantities and condition of
with third party inventory held on behalf of the entity.
(b) Perform inspection or other audit procedures appropriate in the circumstances i.e.
check documentation regarding issue of goods to third party along with reasons such

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Topic Heading Detailed Explanation
as Job Work (verify Excise Register) or if possible conduct an inspection at the third
party’s site.
Attendance at If attendance at physical inventory counting is impracticable, the auditor shall perform
inventory alternative audit procedures to obtain sufficient appropriate audit evidence regarding the
counting is existence and condition of inventory. If it is not possible to do so, the auditor shall modify
impracticable the opinion in the auditor’s report in accordance with SA 705.

Topic Heading Detailed Explanation

LITIGATION & 1. Inquiry – of management & others within the entity.
CLAIMS 2. Review – minutes of meetings of TCWG, communication between entity & external
legal counsel.
3. Review – legal expenses account.
Direct 1. The auditor shall do so through a letter of inquiry, prepared by management and sent
communication by the auditor, requesting the entity’s external legal counsel to communicate directly
with entity’s with the auditor.
external legal 2. If Unlikely that the entity’s external legal counsel will respond appropriately to a letter
counsel: of general inquiry the auditor may seek direct communication through a letter of
specific inquiry.
a. A list of litigation and claims;
b. Management’s assessment of the outcome of each of the identified litigation
and claims and its estimate of the financial implications; and
c. A request that the entity’s external legal counsel confirm the reasonableness of
Management’s assessments and provide further information.

SA
External Confirmation
505

Term Definition
External Audit evidence obtained as a direct written response to the auditor from a third party (the
confirmation confirming party), in paper form, or by electronic or other medium.
Positive A request that the confirming party respond directly to the auditor indicating whether the
confirmation confirming party agrees or disagrees with the information in the request.
Negative A request that the confirming party respond directly to the auditor only if the confirming
confirmation party disagrees with the information provided in the request.

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Topic Heading Detailed Explanation
Areas where 1. Bank balances.
External 2. Accounts receivable balances.
Confirmation 3. Inventories held by third parties.
can be used 4. Property title deeds held by third parties.
5. Investments purchased but delivery not taken.
6. Loans from lenders.
7. Accounts payable balances.
8. Long outstanding share application money.

Process of When using external confirmation procedures, the auditor shall maintain control over
External external confirmation requests, including:
Confirmation a. Determining the information to be confirmed or requested;
b. Selecting the appropriate confirming party;
c. Designing the confirmation requests; and
d. Sending the requests to the confirming party.

Factors to be 1. The assertions being addressed.

considered 2. ROMM.
while designing 3. The layout and presentation of the confirmation request.
a confirmation 4. Prior experience on the audit or similar engagements.
request 5. The method of communication.
6. Management’s authorization to the confirming parties to respond to the auditor.
7. The ability of the confirming party to provide the requested information.

Management’s The auditor shall:

Refusal to a. Inquire management’s reasons for the refusal, and seek audit evidence as to their
Allow the validity and reasonableness;
Auditor to Send b. Evaluate the implications of management’s refusal on ROMM;
a Confirmation c. Perform alternative audit procedures designed to obtain audit evidence.
Request d. If the auditor concludes that management’s refusal to allow the auditor to send a
confirmation request is unreasonable, or the auditor is unable to obtain relevant and
reliable audit evidence from alternative audit procedures, the auditor shall
• Communicate with TCWG.
• Express Modified Opinion.
Negative (1) Provide less persuasive audit evidence than positive confirmations.
Confirmations (2) Not to use NCR as sole audit procedure unless all the 4 conditions are met:
a. Auditor assessed RMM as low.
b. Population of relevant items comprises large number of small, homogeneous
account balances/ transactions/ conditions.
c. Very low exception rate is expected.
d. Auditor not aware of any circumstances that would cause recipients of negative
confirmation requests to disregard the request.
Analysis of (1) Response to request is not reliable –
Results of Consider its effect on nature, timing and extent of other audit procedures. May
External involve Fraud Risk Factors.
(2) Confirming party do not respond –

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Topic Heading Detailed Explanation
Confirmation Perform Alternative Audit procedure.
Procedure (3) No confirmation obtained when auditor determines that response is necessary
and alternative procedure will not provide the evidence auditor requires –
Express Modified Opinion.

SA
Initial Audit Engagements – Opening Balances
510

Topic Heading Detailed Explanation

Auditor’s Obtain SAAE in respect of opening balances (OB) about whether:
Objective 1. OB contains Material Misstatements that affect current period FS.
2. Appropriate Accounting Policies of last year has been consistently applied in the
current year as well and Changes, if any, have been properly accounted for and
presented in FS.
Definitions 1. Initial Audit Engagement – An engagement in which Prior Period FS:
a. Not audited; or
b. Audited by a predecessor auditor.
2. Opening Balances – Accounting Balances existing at the beginning comprise of:
a. Closing balances of prior period – Reflect the effect of prior period transactions
and events, and accounting policies applied.
b. Disclosure of accounts i.e., contingency and commitments.
Audit 1. The auditor shall read last years’s auditor’s report, if any, for information relevant to
procedures in opening balances, including disclosures.
respect of 2. The auditor shall obtain SAAE about whether OB contain misstatements that
Opening materially affect the current period’s FS by following steps:
Balances a. Determining whether the prior period’s closing balances have been correctly
brought forward to the current period;
b. Determining whether the opening balances reflect the application of
appropriate accounting policies; and
c. Performing one or more of the following:
(i) Where the prior year FS were audited, peruse the copies of the audited FS;
(ii) Evaluating whether audit procedures performed in the current period
provide evidence relevant to the opening balances; or
(iii) Performing specific audit procedures to obtain evidence regarding the
opening balances.
3. If the auditor obtains audit evidence that the opening balances contain
misstatements that could materially affect the current period's FS, then: -
a. the auditor shall perform such additional audit procedures as appropriate in the
circumstances to determine the effect on the current period's FS, and
b. the auditor shall communicate the misstatements with the appropriate level of
management and TCWG as per SA 450.

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Topic Heading Detailed Explanation
Audit 1. Opening Balances:
Conclusions (a) If the auditor is unable to obtain sufficient appropriate audit evidence regarding
and Reporting the opening balances, the auditor shall express a QO or DO.
(b) If the auditor concludes that the opening balances contain a misstatement that
materially effects the current period’s FS, and the effect of the misstatement is
not properly accounted for or not adequately presented or disclosed, the
auditor shall express a QO or AO.
2. Consistency in Accounting Policies:
The auditor shall express a QO or AO, if he concludes that:
(a) The current period’s accounting policies are not consistent with the opening
balances in accordance with the applicable Financial Reporting Framework; or
(b) A change in accounting policies is not properly accounted for or not adequately
presented or disclosed in accordance with the Financial Reporting Framework.
3. Modified Opinion in the Predecessor Auditor’s Report:
If the predecessor auditor’s opinion regarding the prior period’s FS was modified and
the matter still remains relevant and material to the current period’s FS, the auditor
shall modify the auditor’s opinion on the current period FS accordingly.

SA
Analytical Procedures
520

Topic Heading Detailed Explanation

Meaning of The term “analytical procedures” means evaluations of financial information through
Analytical analysis of plausible relationships among both financial and non-financial data.
Procedures 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.

Use of AP Analytical review procedures are used for the following purposes:
(a) to assist the auditor in planning the nature, timing and extent of other audit
procedures;
(b) as substantive procedures when their use can be more effective or efficient than
tests of details in reducing detection risk for specific financial statement
assertions; and
(c) as an overall review of the financial statements in the final review stage of the
audit.

Precautions/Factors Matters relevant to the auditor’s evaluation of whether the expectation can be
to be kept in mind developed sufficiently precisely to identify a misstatement that, when aggregated
while doing AP. with other misstatements, may cause the financial statements to be materially
misstated, include:

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Topic Heading Detailed Explanation
1. The ACCURACY with which the expected results of substantive analytical
procedures can be PREDICTED.
2. The degree to which information can be DISAGGREGATED.
3. The AVAILABILITY of the information, both financial and non-financial. For
example, the auditor may consider whether financial information, such as
budgets or forecasts, and non-financial information, such as the number of units
produced or sold, is available to design substantive analytical procedures.

Extent of reliance Following are relevant when determining whether data is reliable for purposes of
on AP. designing substantive analytical procedures:
1. Source of the information available. For example, information may be more
reliable when it is obtained from independent sources outside the entity;
2. Comparability of the information available. For example, broad industry data
may need to be supplemented to be comparable to that of an entity that
produces and sells specialised products;
3. Nature and relevance of the information available. For example, whether
budgets have been established as results to be expected rather than as goals to
be achieved; and
4. Controls over the preparation of the information that are designed to ensure its
completeness, accuracy and validity. For example, controls over the preparation,
review and maintenance of budgets.

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 SA
Audit Sampling
530

Audit sampling:
1. Application of audit procedures to less than 100% of items within a population of audit relevance.
2. Such that all sampling units have a chance of selection.
3. To provide a reasonable basis on which to draw conclusions about entire population.

Sampling risk:

Risk that Auditors Conclusion based on samples may be different from the
conclusion if the entire population was subjected to same audit Procedure

Leads to two types of Erroneous conclusion

Test Of Controls - More Effective Test of Controls - Less effective

than Actually are than actually are
Test of Details - Material Test of Details - Material
Misstatement does not exist when Misstatement exist when infact it
it does does not

Leads to inappropriate Audit

Leads to Additional Work
Opinion

Non-sampling risk:
Risk that auditor reaches an erroneous conclusion for any reason not related to sampling risk (e.g., inappropriate
audit procedures/misinterpretation of evidence/failure to recognise a misstatement/ deviation).

Statistical sampling –
An approach to sampling that has the following characteristics:
1. Random selection of the sample items; and
2. The use of probability theory to evaluate sample results, including measurement of sampling risk.

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Non-Statistical sampling –
A sampling approach that does not have characteristics (i) and (ii) is considered non-statistical sampling.

Stratification –
The process of dividing a population into sub-populations, each of which is a group of sampling units which have
similar characteristics (often monetary value).

Topic Heading Detailed Explanation

Requirements 1. Sample Design, Size and Selection of Items for Testing
2. Performing Audit Procedures
3. Nature and Cause of Deviations and Misstatements
4. Projecting Misstatements
5. Evaluating Results of Audit Sampling

Sample Design, (A) Sample Design

Size and Consider:
Selection of a) Purpose of audit procedure.
Item b) Characteristics of population.
(B) Sample Size
Auditor to determine sample size sufficient to reduce sampling risk to an acceptably low
level.
(C) Selection of Items for Testing
Auditor to select representative sample – Each sampling unit in the population has a
chance of Selection.

Methods of a) Random selection: This method is applied through random number generators, for
selecting example, random number tables.
sample b) Systematic selection: In this method the number of sampling units in the population
is divided by the sample size to give a sampling interval, for example 50, and having
determined a starting point within the first 50, each 50th sampling unit thereafter is
selected. Although the starting point may be determined haphazardly, the sample is
more likely to be truly random if it is determined by use of a computerised random
number generator or random number tables.
c) Monetary Unit sampling: This method is a type of value-weighted selection in which
sample size, selection and evaluation results in a conclusion in monetary amounts.
d) Haphazard selection: In this method the auditor selects the sample without following
a structured technique. Although no structured technique is used, the auditor would
nonetheless avoid any conscious bias or predictability and thus attempt to ensure
that all items in the population have a chance of selection. Haphazard selection is not
appropriate when using statistical sampling.

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 SA
Related Parties
550

Topic Heading Detailed Explanation

Meaning of A party that is either:
Related party 1. A related party as defined in the applicable financial reporting framework; or in Indian
context, as given in AS 18, "Related Party Disclosures", issued by the ICAI, will be
applicable for the purposes of this Standard.
2. Where the applicable financial reporting framework 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:
(i) Common controlling ownership;
(ii) Owners who are close family members; or
(iii) Common key management.
However, entities that are under common control by a state (i.e., a national, regional or
local government) are not considered related unless they engage in significant
transactions or share resources to a significant extent with one another.

Auditor’s 1. Obtain an understanding of RP relationships & transactions sufficient to be able to

Objectives recognize fraud risk factors (FRF1).
2. Where Financial Reporting Framework (FRF2) establishes RP requirements, then
obtain SAAE whether RP relationships & transactions have been appropriately
identified, accounted for & disclosed in FS.

Risk Assessment Procedures & Related Activities

(SA 315 & SA 240)

Maintaining Alertness for

Understanding the Entity's Sharing Related Party
Related Party Information
Related Party Relationships Information with Audit
when reviewing Records/
& Transactions Team
Documents

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Topic Heading Detailed Explanation
Understanding 1. Auditor to inquire management regarding:
Entity’s RP a. Identity of entity’s RP, changes from prior period.
Relationships & b. Nature of relationships between entity and RP.
Transactions c. Type & purpose of transactions with RP during the period.
2. Perform appropriate RAPs to obtain understanding whether management has
established controls to:
a. Identify, account for and disclose RP relationships & transactions.
b. Authorise & approve significant transactions/arrangements with RP.

Identification of (i) Inspect the underlying contracts or agreements, if any, and evaluate whether:
significant (1) The business rationale (or lack thereof) the transactions suggests that they may
related party have been entered into to engage in fraudulent financial reporting or to conceal
transaction misappropriation of assets;
outside (2) The terms of transactions are consistent with management’s explanations; &
business (3) The transactions have been appropriately accounted for and disclosed in
accordance with the applicable financial reporting framework; and
(ii) Obtain audit evidence that the transactions have been appropriately authorized and
approved.
.
Maintaining Auditor should remain alert when inspecting records with respect to information
Alertness for RP indicating existence of RP relationships or transactions that were not previously identified
Information or disclosed to auditor:
when reviewing a. Bank, legal and third party confirmations obtained as part of the auditor’s
records/ procedures;
documents b. Minutes of meetings of shareholders and of TCWG; and
c. Such other records or documents considers necessary by auditor in circumstances of
entity.

SA
Subsequent Events
560

Topic Heading Detailed Explanation

Subsequent (1) EVENTS - Events occurring between the date of the Financial Statements and the date
Events of the Auditor’s Report
(2) Facts A – FACTS which become known to the Auditor After the Date of the Auditor’s
Report but Before the Date the Financial Statements are Issued
(3) Facts B – FACTS which become known to the Auditor After the Financial Statements
have been Issued.

Auditor’s responsibility
(1) To consider Events only if they require adjustment/ disclosure in FS.
(2) To consider Facts only if they would have impacted the AR.

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Topic Heading Detailed Explanation
.
Events (1) The auditor shall perform audit procedures to obtain SAAE to ensure that Adjusting
Occurring events or Non-adjusting events have been identified.
Between FS (2) In determining nature & extent of audit procedures, auditor shall:
date and the (a) Understanding the procedures through which management has identified
Date of the subsequent events.
Auditor's (b) Read minutes of management meetings that have been held after the date of
Report the financial statements.
(c) Read the entity's latest subsequent interim financial statements, if any.
(d) If auditor identifies such events, the auditor should be determined whether each
such event is appropriately reflected in the financial statements.
(e) The auditor shall request the management to provide a Written Representation
that all such events have been adjusted or disclosed.

Specific (1) Whether new commitments, borrowings or guarantees have been entered into.
enquiries to be (2) Whether sales or acquisitions of assets have occurred or are planned.
made from (3) Whether there have been increases in capital or issuance of debt instruments, such
Management as the new issue of shares or debentures, or an agreement to merge or liquidate has
been made or has been planned.
(4) Whether any assets have been appropriated by government or destroyed, for
example, by fire or flood.
(5) Whether there have been any developments regarding contingencies.
(6) Whether any unusual accounting adjustments have been made or are contemplated.
(7) Whether any events have occurred that are relevant to the measurement of
estimates or provisions made in the financial statements.
(8) Whether any events have occurred that are relevant to the recoverability of assets.

Facts which (1) The auditor has no obligation to perform any audit procedures regarding the financial
become known statements after the date of the auditor’s report.
to the auditor (2) However, if a fact becomes known to the auditor that, had it been known to the
after the date auditor at the date of the auditor's report, may have caused the auditor to revise the
of the Auditor’s auditor's report, the auditor shall:
Report but the (a) Discuss the matter with management.
before the date (b) Determine whether the financial statements need amendment and, if so,
the F.S are (c) Inquire how management intends to address the matter in the financial state-
issued ments.
(3) If management amends the financial statements, the auditor shall:
(a) Extend the audit procedures to the date of the new auditor's report; and
(b) Provide a new auditor's report on the amended financial statements.
(4) When law, regulation or FRF does not prohibit management from restricting the
amendment of FS to the effect of subsequent events, auditor is permitted to restrict
the audit procedures on subsequent events to that amendment. In such case, the
auditor shall:
(a) Amend the audit report to include an additional date restricted to that amend-
ment. (Dual Dating)
(b) Provide a new or amended Audit Report that includes OMP that conveys that
auditor's procedures on subsequent event are restricted solely to amendments
of financial statements.

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Topic Heading Detailed Explanation

Facts which (1) The auditor has no obligation to perform any audit procedures regarding such FS.
become known (2) However, if a fact becomes known to the auditor that, had it been known to the
to the auditor auditor at the date of the auditor's report, may have caused the auditor to amend
after the FS the auditor's report, the auditor shall:
have been (a) Discuss the matter with management.
issued (b) Determine whether the financial statements need amendment and, if so,
(c) Inquire how management intends to address the matter in the FS.
(3) If the management amends the FS, the auditor shall:
(a) Carry out the audit procedures necessary in the circumstances on the amend-
ment.
(b) Review the steps taken by management to ensure that anyone in receipt of the
previously issued financial statements together with the auditor's report
thereon is informed of the situation.
(c) Extend the audit procedures to the date of the new auditor's report; and
(d) Provide a new auditor's report on the amended financial statements.
(e) In the amended auditor's report an EMP paragraph referring to a note to the FS
that discussed the reason of amendment in FS, should be included.

SA
Going Concern (Revised)
570

Topic Heading Detailed Explanation

Financial a) Fixed-term borrowings approaching maturity without realistic prospects of renewal
or repayment; or excessive reliance on short-term borrowings to finance long-term
assets.
b) Negative operating cash flows indicated by historical or prospective FS.
c) Adverse key financial ratios.
d) Substantial operating losses or significant deterioration in the value of assets used to
generate cash flows.
e) Change from credit to cash-on-delivery transactions with suppliers.

Operating a) Loss of key management without replacement.

b) Loss of a major market, key customer(s), franchise, license, or principal supplier(s).
c) Labor difficulties.
d) Shortages of important supplies.
e) Emergence of a highly successful competitor.

Other a) Non-compliance with capital or other statutory or regulatory requirements.

b) Pending legal or regulatory proceedings against the entity.

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Topic Heading Detailed Explanation
c) Changes in law or regulation or government policy expected to adversely affect the
entity.
d) Uninsured or underinsured catastrophes when they occur.

Topic Heading Detailed Explanation

Risk When performing RAP under SA 315:-
Assessment 1) The auditor shall consider whether events or conditions exist that cast significant
Procedures doubt on the entity’s ability to continue as a going concern.
(RAP) 2) The auditor shall remain alert throughout the audit for such indications.
3) The auditor shall also see whether Management has already performed a preliminary
assessment of the entity’s GCA.

Audit If events or conditions have been identified that cast significant doubt on the entity’s
Procedures ability to continue as a going concern, the auditor shall perform additional audit
When Events or procedures as follows:-
Conditions Are (a) Where management has not yet performed a GCA assessment, requesting
Identified management to make it.
(b) Evaluating management’s plans for future actions, whether the outcome of these
plans are feasible.
(c) An analysis of the cash flow forecast if prepared by management:
(i) Evaluating the reliability of the underlying data to prepare forecast; and
(ii) Determining whether there is adequate support for the assumptions.
(d) Considering whether any additional facts or information have become available since
the date on which management made its assessment.
(e) Requesting Written Representations from management regarding their plans for
future actions and the feasibility of these plans.

Topic Heading Detailed Explanation

Use of GCA Is If the FS have been prepared using the GCA but, in the auditor’s judgment, it is
Inappropriate inappropriate, the auditor shall express an ADVERSE OPINION.

Use of GCA is Case 1: Adequate Disclosure of a Material Uncertainty Is Made in the FS

Appropriate If adequate disclosure is made about the MU in the Notes to the FS, the auditor shall
but a Material express a CLEAN OPINION and the auditor’s report shall include a separate section under
Uncertainty the heading “Material Uncertainty Related to Going Concern” to:
(MU) Exists (a) Draw attention to the note in the FS that discloses the material uncertainty (MU); and
(b) State that these events or conditions indicate that MU exists.

Case 2: Adequate Disclosure of a Material Uncertainty Is NOT Made in the FS

If adequate disclosure about the material uncertainty is not made in the FS, the auditor
shall express a QO or AO, as appropriate.

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 SA
Written Representation
580

Topic Heading Detailed Explanation

Meaning of A written statement by management provided to the auditor to confirm certain matters
Written or to support other audit evidence. Written representations in this context do not
Representation include financial statements, the assertions therein, or supporting books and records.

Basic elements (1) It is a written statement by management provided to the auditor to confirm certain
of WR matters or to support other audit evidence.
(2) It does not include financial statements or supporting books and records.
(3) The auditor shall request management to provide a written representation that it has
fulfilled its responsibility for the preparation of FS as per FRF.
(4) The written representations shall be for all FS and period(s) referred to in the
auditor’s report.
WR as Audit 1. WR are necessary audit evidence but not sufficient appropriate audit evidence.
Evidence 2. WR do not dilute auditor’s responsibility to obtain other audit evidence for matters
covered by WR.

Management’s If management does not provide one or more of the requested written representations,
refusal to give the auditor shall-
WR (i) discuss the matter with management;
(ii) re-evaluate the integrity of management and evaluate the effect that this may have
on the reliability of representations (oral or written) and audit evidence in general;
and
(iii) take appropriate actions, including determining the possible effect on the opinion in
the auditor’s report. (Disclaimer of opinion)

Additional WR

Financial Information provided Specific Assertions

Statements to auditor

• Selection/ application of Management has Management

accounting policies disclosed all known Intentions/
• Recognition/ deficiencies in internal Judgments
measurement/ controls to the auditor
presentation/ disclosure
in FS in accordance with
FRF
• Carrying value of assets
& Liabilities
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38
 600 Series
600 – 699
Using the Work of Others

SA 600 Using the Work of another Auditor (Excluded)

SA 610 Using the Work of an Internal Auditor (Revised)
SA 620 Using the Work of an Expert (Excluded)

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 SA
Using the Work of an Internal Auditor (Revised)
610

Topic Heading Detailed Explanation

Pre-requisites 1. The entity has an INTERNAL AUDIT FUNCTION (IAF) and
for applying SA 2. The External Auditor expects to:-
610 a) Use the work of the Internal Audit Function to modify the nature, timing and
extent of his own audit procedures, or
b) Use internal auditors to provide Direct Assistance.

REQUIREMENTS

Using the work of the IAF. Using IA to provide Direct Assistance.

1) Whether work of IAF can 1) Whether Direct

be used. Assistance can be taken.
2) Areas and Extent. 2) Areas and Extent.
3) Audit Procedures. 3) Audit Procedures.

Topic Heading Detailed Explanation

Whether work (a) The extent to which the IAF’s organizational status support the OBJECTIVITY of the
of IAF can be internal auditors;
used. (b) The level of COMPETENCE of the IAF; and
(c) Whether the IAF applies a systematic and DISCIPLINED APPROACH including Quality
Control.

Nature and Examples of work of the IAF that can be used by the external auditor:
Extent of Work 1. Testing of the operating effectiveness of controls.
that can be 2. Substantive procedures involving limited judgment (Vouching).
used 3. Observations of inventory counts.
4. Testing of compliance with regulatory requirements.

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40
Topic Heading Detailed Explanation
Audit Procedure 1: The external auditor shall discuss the planned use of its work and coordinate
Procedures with them.
when using the Procedure 2: The external auditor shall read the REPORTS of the IAF and obtain an
work of the IAF understanding of the nature and extent of audit procedures performed by them and the
related findings.
Procedure 3: The external auditor shall perform sufficient audit procedures on the work
of the IAF, including evaluating whether:
(a) The work of the function had been properly planned, performed, supervised,
reviewed and documented;
(b) Sufficient appropriate evidence had been obtained to enable the function to draw
reasonable conclusions; and
(c) Conclusions reached are appropriate in the circumstances and the reports prepared
by the function are consistent with the results of the work performed.

Topic Heading Detailed Explanation

Whether The external auditor shall evaluate:-
Internal 1) Existence of threats to OBJECTIVITY and
Auditors (IA) 2) Level of COMPETENCE of the internal auditors who will be providing such assistance.
Can Be Used
Nature and The external auditor shall not use internal auditors to provide direct assistance to perform
Extent of Work procedures in following cases:
that Can Be (a) When the Audit Procedure involves making significant judgments in the audit;
Assigned to IA (b) When ROMM is High;
(Areas and (c) When the Audit Procedure relates to work which has already been, or will be,
Extent) reported to management/TCWG by the internal audit function (IAF).

Audit Procedure 1: Prior to using internal auditors to provide direct assistance for purposes of
Procedures the audit, the external auditor shall:
when using IA (a) Obtain written agreement from the entity that the internal auditors will be allowed
to follow the external auditor’s instructions, and that the entity will not intervene in
the work that internal auditor performs for the external auditor; and
(a) Obtain written agreement from the internal auditors that they will keep specific
matters confidential.
Procedure 2: The external auditor shall DIRECT, SUPERVISE and REVIEW the work
performed by internal auditors on the engagement in accordance with SA 220.

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41
 700 Series
700 – 799
Audit Conclusion &
Reporting

Forming an Opinion and Reporting on Financial Statements

SA 700
(Revised) (In Audit Report Chapter)
Communicating Key Audit Matters in the Independent Auditor’s
SA 701
Report (NEW) (In Audit Report Chapter)
Modifications to the opinion in the Independent Auditor’s Report
SA 705
(Revised) (In Audit Report Chapter)
Emphasis of Matter Paragraphs and Other Matter Paragraphs in
SA 706
the Independent Auditor’s Report (In Audit Report Chapter)
SA 710 Comparatives
The Auditor’s Responsibility in Relation to Other Information in
SA 720
Documents Containing Audited Financial Statement (Excluded)

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42
 SA
Comparatives
710

Corresponding Figures
Corresponding Figures are integral part of current period FS to be read only in relation to amounts &
disclosures relating to current period.
Auditor’s opinion on FS refers to current period only.

DETERMINE EVALUATE If possible misstatement

exists in Comparative
Information, perform
additional procedure
necessary to obtain SAAE to
Whether FS include Whether Comparative confirm/ dispel possibility of
Comparative Information Information agrees with material misstatement
required by FRF amounts & disclosures
presented in prior period
SA 560 applies if auditor had
also audited prior period FS
Whether info is
appropriately classified • Obtain WR for all
Consistency of accounting periods referred to in
policies reflected in Audit Opinion (SA 580)
Comparative Information • Obtain specific WR
vis a vis current period regarding any prior
Changes to be adequately
period that is disclosed
presented & disclosed separately in current
year P&L

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43
Topic Heading Detailed Explanation
Audit Reporting Audit opinion not to refer to corresponding figures, EXCEPT:
– 1. If Auditor’s report in prior period FS was modified and the subject matter is still
Corresponding unresolved, then Modify current audit report also.
Figures 2. If Auditor obtains audit evidence regarding existence of material misstatement in
prior period FS on which unmodified opinion was issued, then Express QO/AO on
current FS wrt Corresponding figures if misstatement has not been dealt as required
by applicable FRF.

Prior Period FS If L&R permits reference to predecessor auditor’s report on corresponding Figs, current
Audited by audit report to include Other Matter para:
Another a. FS of prior period were audited by another auditor.
Auditor b. Type of opinion expressed by predecessor auditor (reasons for modification, if any).
c. Date of that report.

Prior Period FS 1. Include Other Matters para:

are Unaudited a. That corresponding figures are unaudited.
2. BUT, this does not relieve the auditor from need to obtain SAAE that opening
balances do not contain misstatements that can potentially affect current FS.

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44