Ch-3 Audit Documentation & Audit Evidence

SA 230: Audit Documentation

Audit Documentation refers to

• record of audit procedures performed,
• relevant audit evidence obtained, and
• conclusions the auditor reached.

It includes Audit programmes, Analyses, Issues memoranda, Summaries of significant matters, Letters
of confirmation and representation, Checklists, Correspondence (including e-mail) concerning
significant matters
Objective of the Auditor:
Objective of auditor is to prepare documentation that provides:
(a) A sufficient and appropriate record of the basis for auditor’s report and
(b) Evidence that the audit was planned and performed in accordance with SAs and applicable legal
and regulatory requirements.

Nature of Audit Documentation

Audit documentation provides:
(a) evidence of auditor’s basis for a conclusion about achievement of overall objectives of auditor &
(b) evidence that audit was planned and performed in accordance with SAs and applicable legal and
regulatory requirements.

Purpose of Audit Documentation [RTP-May’21]

Following are the purpose of Audit documentation:
1. Assisting ET to plan and perform the audit.
2.Assisting members of ET to direct and supervise audit work, and discharge review responsibilities.
3. Enabling ET to be accountable for its work.
4. Retaining a record of matters of continuing significance to future audits.
5. Enabling conduct of quality control reviews and inspections in accordance with SQC 1.
6. Enabling conduct of external inspections as per applicable legal, regulatory or other requirements.

Factors affecting Form, Content & Extent of Documentation [RTP Nov-18]

Form, content and extent of audit documentation depend on factors such as:
• The size and complexity of the entity.
• The identified risks of material misstatement.
• The nature and extent of exceptions identified.
• The nature of the audit procedures to be performed.
• The audit methodology and tools used.
• The significance of the audit evidence obtained.

CA SHUBHAM KESWANI 32
 • The need to document a conclusion or the basis for a conclusion not readily determinable from
the documentation of the work performed or audit evidence obtained.

Learn with Fun J

Documentation of Significant Matters and

Related Significant Professional Judgements (RTP Nov-20/22)
Judging significance of a matter requires an objective analysis of the facts and circumstances.
Examples of significant matters include:
1. Matters that give rise to significant risks.
2. Results of audit procedures indicating
(a) that F.S. could be materially misstated, or
(b) need to revise auditor’s previous assessment of ROMM and auditor’s responses to those risks.
3. Circumstances causing auditor significant difficulty in applying necessary audit procedures.
4. Findings that could result in a modification to audit opinion or inclusion of EOM Para in auditor’s
report.

Some eg. of circumstances in which it is appropriate to prepare audit documentation relating to use of
professional judgement include, where matters and judgements are significant:
• Rationale for auditor’s conclusion when a requirement provides that auditor ‘shall consider’ certain
information or factors, and that consideration is significant in context of particular engagement.
• Basis for auditor’s conclusion on reasonableness of areas of subjective judgements (for eg,
reasonableness of significant accounting estimates).
• Basis for auditor’s conclusions about authenticity of a document when further investigation (such
as making appropriate use of an expert or of confirmation procedures) is undertaken in response
to conditions identified during audit that caused auditor to believe that document may not be
authentic.

Completion Memorandum or Audit Documentation Summary [May-19]

• Auditor may consider it helpful to prepare and retain as part of AD a summary (sometimes known
as a completion memorandum) that describes-
Þ the significant matters identified during audit and
Þ how they were addressed.
• Such a summary may facilitate effective and efficient review and inspection of AD, particularly
for large and complex audits.
• Further, it may assist auditor’s consideration of significant matters.
• It may also help auditor to consider whether there is any individual relevant SA objective that
auditor can’t achieve that would prevent auditor from achieving overall objectives of auditor.

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 Documentation of Matters Arising after Date of the Auditor’s Report [RTP Nov-22]
If, in exceptional circumstances, auditor performs new or additional audit procedures or draws new
conclusions after date of auditor’s report, auditor shall document:
1. The circumstances encountered
2. The new or additional audit procedures performed, audit evidence obtained, and conclusions
reached, and their effect on the auditor’s report and
3. When and by whom the changes to audit documentation were made and reviewed.

Audit File [Nov-19]

Audit file may be defined as
• one or more folders or other storage media,
• in physical or electronic form,
• containing records that comprise
• audit documentation for a specific engagement.

Time limit: Complete assembly of audit file in not more than 60 days after date of auditor’s report.
Admin. process that doesn’t involve performing new audit procedures or drawing new conclusions.

Changes may, however, be made to the audit documentation during the final assembly process, if they
are administrative in nature.

Examples of such administrative changes include:

(i) Deleting or discarding superseded documentation.
(ii) Sorting, collating and cross-referencing working papers.
(iii) Signing off on completion checklists relating to the file assembly process.
(iv) Documenting audit evidence that auditor has obtained, discussed and agreed with relevant
members of the engagement team before the date of auditor’s report.

ü After assembly of final audit file has been completed, auditor shall not delete or discard audit
documentation of any nature before end of its retention period.
ü SQC 1 à Retention period for audit engg is no shorter than 7 years from date of A/R, or, if later,
date of group A/R.

Ownership of Audit Documentation

• SQC 1 provides that, unless specified by law or regulation, AD is property of auditor.
• He may at his discretion, make portions, or extracts from, AD available to clients, provided such
disclosure doesn’t undermine validity of work performed, or, in case of assurance engagements,
independence of auditor or of his personnel.

“Success is the sum of small efforts, repeated day in and day out”

CA SHUBHAM KESWANI 34
 SA 500: Audit Evidence

• Audit evidence is info. used by auditor in arriving at conclusions on which auditor's opinion is based.
• It includes both information contained in accounting records underlying the F.S. and other
information.

Q. Auditor of Fresh and Well Ltd explained to the audit team members about relationship b/w Audit
Evidence and Opinion of Auditor. Explain.
While conducting audit of a Co, auditor obtains audit evidence and basis that auditor forms an audit
opinion on F.S. of that Co.
Explaining this further, audit evidence includes:-
(1) Information contained in the accounting records: Accounting records include
Ø records of initial a/c entries and supporting records, such as checks and records of EFTs
Ø invoices
Ø contracts
Ø general and subsidiary ledgers, JEs and other adjustments to F.S. not reflected in JEs and
Ø records such as work sheets and spreadsheets supporting cost allocations, computations,
reconciliations and disclosures.

(2) Other information that authenticates a/c records and also supports auditor’s rationale behind true
and fair presentation of F.S.
For example
Ø minutes of meetings,
Ø written confirmations from trade receivables and trade payables,
Ø manuals containing details of internal control etc.

A combination of tests of accounting records and other information is generally used by auditor to
support his opinion on the F.S.

Objective of the Auditor

Design and perform audit procedures in such a way as to enable auditor to obtain SAAE to be able to
draw reasonable conclusions on which to base auditor’s opinion.

Sufficiency and Appropriateness of Audit Evidence [SAAE]

Ø Auditor shall design and perform audit procedures that are appropriate in circumstances for
purpose of obtaining SAAE.
Ø Audit evidence is necessary to support auditor’s opinion and report.
Ø It also includes information obtained from other sources such as previous audits.
Ø In addition to other sources inside and o/s entity, entity’s accounting records are an important
source of audit evidence.
Ø Also, info that may be used as audit evidence may have been prepared using work of a mgt’s expert.

CA SHUBHAM KESWANI 35
Ø Audit evidence comprises both information that supports and corroborates management’s
assertions, and any information that contradicts such assertions.
Ø In some cases, absence of info (for eg, mgt’s refusal to provide a requested representation) is
used by auditor, and therefore, also constitutes audit evidence.

Sufficiency of Audit Evidence [RTP Nov-20]

Þ It is measure of quantity of audit evidence.
Þ It is affected by
ü auditor’s assessment of risks of misstatement (higher the assessed risks, more the audit
evidence is likely to be required) and
ü also by quality of such audit evidence (the higher the quality, the less may be required).
Þ Obtaining more audit evidence, however, may not compensate for its poor quality.

Further, auditor’s judgement as to sufficiency may be affected by the factors such as:
(a) Materiality: It may be defined as significance of classes of transactions, account balances and
presentation and disclosures to users of F.S.
Less evidence would be required in case assertions are less material to users of F.S.
If assertions are more material to users of F.S, more evidence would be required.

(b) Risk of material misstatement: It may be defined as risk that F.S. are materially misstated prior
to audit. This consists of two components described as follows at assertion level:
• Inherent risk—Susceptibility of an assertion to a misstatement that could be material before
consideration of related controls.
• Control risk—Risk that a misstatement that could occur in an assertion that could be material will not
be prevented or detected and corrected on a timely basis by entity’s IC.
Lower ROMM à Less evidence & Higher ROMM à More evidence

(c) Size of a population: It refers to no. of items included in population. Less evidence would be required
in case of smaller, more homogeneous population but on other hand in case of larger, more
heterogeneous populations, more evidence would be required.

Appropriateness of Audit Evidence

It’s the measure of quality of audit evidence; i.e., its relevance and reliability in providing support for
conclusions on which auditor’s opinion is based.

Relevance deals with logical connection between purpose of audit procedure and assertion under
consideration.

Example
Ø Purpose of audit procedure is to test overstatement in existence or valuation of creditors, testing
recorded creditors maybe relevant audit procedure.

CA SHUBHAM KESWANI 36
Ø But, if testing for understatement in existence or valuation of accounts payable, testing recorded
accounts payable may not be relevant, but testing information as subsequent disbursements, unpaid
invoices, suppliers’ statements, and unmatched receiving reports may be relevant.
Ø Given set of audit procedures may provide audit evidence that is relevant to certain assertions,
but not others.
Ø For eg, inspection of documents related to collection of receivables after the period end may
provide audit evidence regarding existence and valuation, but not necessarily cut-off.
Ø Audit evidence regarding existence of inventory is not substitute for obtaining audit evidence
regarding valuation of inventory.

Reliability [RTP May-18]

Reliability of audit evidence is influenced by source and nature, and circumstances under which it is
obtained, including controls over its preparation and maintenance where relevant.

While recognising that exceptions may exist, following generalisations about reliability of audit
evidence may be useful:
• Reliability of audit evidence is increased when it is obtained from independent sources o/s entity.
Reliability of A.E. that is generated internally is increased when related controls over its
preparation and maintenance are effective.
• Audit evidence obtained directly by auditor (for eg, observation of application of a control) is more
reliable than A.E. obtained indirectly or by inference (for eg, inquiry about application of a control).
• A.E. in documentary form, whether paper, electronic, or other medium, is more reliable than
evidence obtained orally (for eg, a contemporaneously written record of a meeting is more reliable
than subsequent oral representation of matters discussed).
• A.E. provided by original documents is more reliable than one provided by photocopies or facsimiles,
or that have been filmed, digitised or transformed into electronic form, reliability of which may
depend on controls over preparation and maintenance.

Independent Sources/Internally à Directly à Documentary à Original

Management Expert [MTP Nov-21]

When audit evidence has been prepared using work of a mgt’s expert, auditor shall:
(a) Evaluate the competence, capabilities and objectivity of that expert
(b) Obtain an understanding of the work of that expert and
(c) Evaluate the appropriateness of that expert’s work as audit evidence for relevant assertion.
CCO à Understanding à Appropriateness as Audit Evidence

Inconsistency in or Doubts over Reliability of Audit Evidence

If: (a) audit evidence obtained from 1 source is inconsistent from another or
(b) auditor has doubts over reliability of info. to be used as audit evidence,
è auditor shall determine what modifications or additions to audit procedures are necessary to resolve
the matter and consider effect on other aspects of audit.

CA SHUBHAM KESWANI 37
 Methods of obtaining Audit Evidence
Audit procedures to obtain audit evidence can include:
(i) Inspection: Examining records or documents, whether internal or external, in paper form, electronic
form, or other media, or a physical examination of an asset.

(ii) Observation: Looking at a process or procedure being performed by others. Eg. Auditor’s
observation of inventory counting by entity’s personnel, or of the performance of control activities.

(iii) External Confirmation: AE obtained by auditor as direct written response from a 3rd party
(confirming party), in paper or electronic form or other medium.

(iv) Recalculation: Checking mathematical accuracy of documents or records. Recalculation may be

performed manually or electronically.

(v) Reperformance: Auditor’s independent execution of procedures or controls that were originally
performed as part of entity’s IC. Eg. Re-performing reconciliation of bank statement, re-performing
aging of accounts receivable.

(vi) Analytical Procedures: Evaluations of financial info made by a study of plausible relationships among
both financial and non- financial data.

(vii) Inquiry: [RTP May-18]

o Inquiry consists of seeking info of knowledgeable persons, both financial and non- financial,
within or outside entity.
o Inquiries may range from formal written inquiries to informal oral inquiries.
o Inquiry is used extensively throughout the audit in addition to other audit procedures.
o Evaluating responses to inquiries is an integral part of the inquiry process
o Responses to inquiries may provide auditor with info. not previously possessed or corroborative
audit evidence. Alternatively, responses might provide info. that differs significantly from info
already obtained, for eg, info regarding possibility of mgt override of controls.
o In some cases, responses to inquiries provide a basis for auditor to modify or perform additional
audit procedures.
o Auditor may consider it necessary to obtain WR from mgt and, where appropriate, TCWG to
confirm responses to oral inquiries.

“If you can DREAM it, you can DO it”

CA SHUBHAM KESWANI 38
 SA 580- “Written Representations”

WR may be defined as a
Þ written statement by management provided to the auditor
Þ to confirm certain matters or
Þ to support other audit evidence.
WR don’t include F.S, assertions therein, or supporting books and records.

Is WR Enough?
• WR provide necessary audit evidence, they don’t provide SAAE on their own about any of matters
with which they deal.
• Furthermore, fact that mgt has provided reliable WR doesn’t affect nature or extent of other audit
evidence that auditor obtains about fulfilment of mgt’s responsibilities, or about specific assertions.

Objectives of Auditor [Jan-21]

(a) To obtain written representations
To obtain WR from mgt. Also that mgt believes that it has fulfilled its responsibility for preparation
of F.S. and for completeness of the info provided to auditor;

(b) To support other evidence

To support other audit evidence relevant to F.S. or specific assertions in F.S. by means of WR

(c) To respond appropriately

Respond appropriately to WR provided by mgt or if mgt doesn’t provide WR requested by auditor

Obtain à Support à Respond

Reconfirmation from Mgt

Auditor may also ask mgt to reconfirm its acknowledgement and understanding of those responsibilities
in WR.
This is particularly appropriate when:
• Terms of audit engagement were prepared in a previous year
• Those who signed terms of audit engg. on behalf of entity no longer have relevant responsibilities
• There is any indication that mgt misunderstands those responsibilities
• Changes in circumstances make it appropriate to do so

Previous Year + Signing ppl changed + Misunderstanding + changes in Circumstances

CA SHUBHAM KESWANI 39
 Date of and Period(s) Covered by Written Representations
ü WR shall be for all F.S. and period(s) referred to in A/R. Because WR are necessary audit evidence,
auditor’s opinion cannot be expressed, and auditor’s report can’t be dated, before date of WR.
ü Because auditor is concerned with events occurring up to date of A/R that may require adjustment
or disclosure in F.S, WR are dated as near as practicable, but not after, date of A/R.
“पास िजतना बेह्तर उतना”

Doubt as to the Reliability of Written Representations

a) If WR are inconsistent with other audit evidence, auditor shall perform audit procedures to
attempt to resolve the matter.
b) If matter remains unresolved, auditor shall reconsider the assessment of competence, integrity,
ethical values or diligence _____ of mgt, & determine the effect on reliability of representations
(oral or written) and audit evidence in general.
c) If auditor concludes that WR is not reliable,
auditor shall take appropriate actions, including determining possible effect on opinion in A/R as
per SA 705.

Form of Written Representations

WR is a form of a representation letter addressed to auditor.
If law or regulation requires mgt to make written public statements about responsibilities, and auditor
determines that such statements provide some or all of representations required, relevant matters
covered by such statements need not be included in representation letter.

Requested Written Representations Not Provided [RTP May-18 + MTP Mar-21]

If mgt doesn’t provide one or more of requested written representations, auditor shall:
(a) Discuss the matter with management;
(b) Re-evaluate integrity of management and evaluate effect that this may have on reliability of
representations (oral or written) and audit evidence in general; and
(c) Take appropriate actions, including determining possible effect on opinion in auditor’s report in
accordance with SA 705.

Discuss à Re-evaluate integrity à SA 705

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 SA 501- “Audit Evidence- Specific Considerations for Selected Items”

The objective of auditor is to obtain SAAE regarding:

(a) Existence and condition of inventory;
(b) Completeness of litigation and claims involving entity; and
(c) Presentation and disclosure of segment information in accordance with applicable FRF.

INVENTORY [MTP May-20]

When inventory is material to F.S, auditor shall obtain SAAE regarding existence and condition of
inventory by:
(a) Attendance at physical inventory counting, unless impracticable, to:
(i) Evaluate management’s instructions and procedures for recording and controlling results of
entity’s physical inventory counting;
(ii) Observe performance of mgt’s count procedures;
(iii) Inspect the inventory; and
(iv) Perform test counts.
(b) Performing audit procedures over entity’s final inventory records to determine whether they
accurately reflect actual inventory count results.

Evaluate instructions à Observe à Test check + Inspect à Final results recorded

Matters Relevant in Planning Attendance at Physical Inventory Counting [RTP May-20]

Matters relevant in planning attendance at physical inventory counting include, for eg:
• Locations at which inventory is held, including Materiality of inventory and RoMM at different
locations, in deciding at which locations attendance is appropriate
• Nature of inventory.
• The nature of the internal cOntrOl related to inventory.
• Whether adequate Procedures are expected to be established and proper instructions issued for
physical inventory counting.
• Whether the entity maintains a Perpetual inventory system.
• The Romm related to inventory.
• Stages of completion of work inprogress.
• The Timing of physical inventory counting.
• Whether assistance of an auditor’s experT is needed.

Physical Inventory Counting Conducted Other than at the Date of F.S.

Auditor shall, additionally perform audit procedures to obtain audit evidence about changes in
inventory between count date and date of f.s. are properly recorded.

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If Auditor is unable to Attend Physical Inventory Counting due to Unforeseen Circumstances
Auditor shall make or observe some physical counts on alternative date, and perform audit procedures
on intervening transactions.

Attendance at Physical Inventory Counting Is Impracticable

Auditor shall perform alternative audit procedures to obtain SAAE regarding existence and condition
of inventory.
If not possible à modify opinion as per SA 705.
Explanation:
This may be due to factors such as nature and location of inventory, for eg, inventory is held in a
location that may pose threats to the safety of auditor.

Persuasive Evidence is MUST

Matter of general inconvenience to auditor à not sufficient to support a decision by auditor that
attendance is impracticable.
As per SA 200, matter of difficulty, time, or cost ___ is not valid basis for auditor to omit an audit
procedure for which there is no alternative or to be satisfied with audit evidence that is less than
persuasive.

Perform Alternate Audit Procedures

For eg inspection of documentation of
ü subsequent sale of inventory items acquired or
ü purchased prior to physical inventory counting

Modified Opinion
If SAAE not Possible à Modify Opinion as per SA 705 as a result of scope limitation.

Inventory under custody of 3rd Party

When inventory under custody and control of 3rd party is material to F.S., auditor shall:
(a) Request confirmation from 3rd party as to qty and condition of inventory.
(b) Perform inspection or other audit procedures appropriate in the circumstances.

Litigation & Claims [MTP Apr-21]

Q. Pride India Ltd is a manufacturer of various FMCG products. Co.is having several cases of litigation
pending in courts. Auditor wanted to identify litigation and claims resulting to risk of material
misstatements. Required Suggest the auditor with reference to SAs.

Auditor shall design and perform audit procedures in order to identify litigation and claims involving
entity which may give rise to a RoMM, including:
(a) Inquiry of management and others within entity, including in-house legal counsel;
(b) Reviewing minutes of meetings of TCWG and correspondence between entity and its external legal
counsel &

CA SHUBHAM KESWANI 42
(c) Reviewing legal expense accounts.

If auditor assesses RoMM in L/Cs identified, or audit procedures indicate other material L/Cs may
exist, auditor shall seek direct communication with the entity’s external legal counsel.
Further if:

Mgt refuses to permit External Legal Counsel refuses to

Or respond

AND

Auditor is unable to obtain SAAE by performing alternative audit procedures

Modify opinion in auditor’s report as per SA 705

Written Representations:
Auditor shall request WR that all known actual or possible L&Cs that affect F.S. have been disclosed
to auditor & accounted for and disclosed as per applicable FRF.

Learn with Fun J

Meeting the Legal Counsel

Auditor may judge it necessary to meet with entity’s external legal counsel to discuss likely outcome
of litigation or claims.
This may be the case, for example, where:
Ø The auditor determines that the matter is a significant risk.
Ø The matter is complex.
Ø There is disagreement between management and the entity’s external legal counsel.
Ordinarily, such meetings require mgt’s permission and held with a representative of mgt in attendance.

Segment Information [MTP Mar-21]

Auditor shall obtain SAAE regarding presentation and disclosure of segment information in accordance
with applicable FRF by:
(a) Obtaining an understanding of methods used by mgt in determining segment information.
Further,
(i) Evaluating whether such methods are likely to result in disclosure in accordance with applicable
FRF; and
(ii) Where appropriate, testing application of such methods; and

CA SHUBHAM KESWANI 43
(b) Performing analytical procedures or other audit procedures appropriate in circumstances

Understanding of the Methods Used by Management

Example of matters that may be relevant when obtaining understanding of methods used by mgt in
determining segment information and whether such methods are likely to result in disclosure in
accordance with the applicable FRF include:
• Sales, transfers and charges between segments, and elimination of intersegment amounts.
• Comparisons with budgets and other expected results, for example, operating profits as a
percentage of sales.
• The allocation of assets and costs among segments.
• Consistency with prior periods, and the adequacy of the disclosures with respect to inconsistencies

Learn with Fun J

“Kudos for this hard work, it’ll pay off SUPER SOON”

CA SHUBHAM KESWANI 44
 SA 505 External Confirmation

• Audit evidence
• obtained as a direct written response
• to the auditor from a third party (the confirming party),
• in paper form, or by electronic or other medium.

Definition of other Important Terms [RTP May-20]

Positive confirmation request – A request that confirming party respond directly to auditor indicating
whether confirming party agrees or disagrees with info. in request, or providing requested information.

Negative confirmation request –Request that confirming party respond directly to auditor only if
confirming party disagrees with information provided in the request.

Non-response – A failure of confirming party to respond, or fully respond, to positive confirmation

request, or a confirmation request returned undelivered.

Exception –Response that indicates a difference between information requested to be confirmed, or

contained in entity’s records, and info provided by confirming party.
Exception needs to be assessed to the entire population after analysing reason for difference.

External Confirmation Procedures [RTP May-20]

When using external confirmation procedures, auditor shall maintain control over external
confirmation requests, including:
(a) Determining information to be confirmed or requested (क्या जानना है)
(b) Selecting the appropriate confirming party (िकस्से जानना है)
(c) Designing the confirmation requests, including determining that requests are properly addressed
and contain return information for responses to be sent directly to auditor (पूछ लो) &
(d) Sending the requests, including follow-up requests when applicable, to confirming party (भेजदो)

Determining the Information to be Confirmed or Requested

Performed to confirm or request information regarding account balances and their elements. Also be
used to confirm terms of agreements, contracts, or transactions between entity and other parties, or
confirm absence of certain conditions, such as a “side agreement”.

Selecting Appropriate Confirming Party

More relevant and reliable audit evidence à confirming party is knowledgeable about information to
be confirmed.

CA SHUBHAM KESWANI 45
 Designing Confirmation Requests
Design of a confirmation request may directly affect confirmation response rate, and reliability and
nature of the audit evidence obtained from responses.

Factors to consider when designing confirmation requests include: [V. Imp]

• The assertions being addressed.
• The layout and presentation of the confirmation request.
• Prior experience on the audit or similar engagements.
• Specific identified RoMM, including fraud risks.
• Management’s authorisation or encouragement to the confirming parties to respond to the auditor.
Confirming parties may only be willing to respond to a confirmation request containing
management’s authorisation.
• The method of communication [for example, in paper form, or by electronic mode (like e-mail) or
other medium].
• The ability of the intended confirming party to confirm or provide the requested information (for
example, individual invoice amount versus total balance).

Learn with Fun J

Follow-Up on Confirmation Requests

Auditor may send add. confirmation request when reply to previous request has not been received
within reasonable time. For eg, auditor may, having re-verified accuracy of original address, send an
additional or follow-up request.

Management’s Refusal to Allow the Auditor to Send a Confirmation Request [Nov-20]

If mgt refuses to allow the auditor to send a confirmation request, the auditor shall:
(a) Inquire as to mgt’s reasons for refusal, and seek audit evidence as to their validity and
reasonableness;
(b) Evaluate implications of management’s refusal on auditor’s assessment of relevant RoMM, including
risk of fraud, and on NTE of other audit procedures; and
(c) Perform alternative audit procedures designed to obtain relevant and reliable audit evidence.
Ø If auditor concludes that mgt’s refusal is unreasonable, or auditor is unable to obtain relevant and
reliable audit evidence from alternative audit procedures, auditor shall communicate with TCWG
as per SA 260.
Ø Auditor also shall determine implications for audit and auditor’s opinion as per SA 705.

CA SHUBHAM KESWANI 46
 Negative Confirmations [July-21]
Negative confirmations provide less persuasive audit evidence than positive confirmations.
Accordingly, auditor shall not use negative confirmation requests as sole substantive audit procedure
to address an assessed ROMM at assertion level unless all of following are present:
(a) Auditor has assessed RoMM as low and obtained SAAE regarding operating effectiveness of
controls relevant to assertion;
(b) Population comprises large no. of small, homogeneous, account balances, transactions or conditions;
(c) A very low exception rate is expected; and
(d) Auditor is not aware of circumstances or conditions that would cause recipients of negative
confirmation requests to disregard such requests.

External Confirmation as Substantive Procedures [SA 330]

Other situations where external confirmation procedures may provide relevant audit evidence in
responding to assessed risks of material misstatement include:
(i) Bank balances and other information relevant to banking relationships.
(ii) Accounts receivable balances and terms.
(iii) Inventories held by third parties at bonded warehouses for processing or on consignment.
(iv) Property title deeds held by lawyers or financiers for safe custody or as security.
(v) Investments held for safekeeping by 3rd parties
(vi) Amounts due to lenders, including relevant terms of repayment and restrictive covenants.
(vii) Accounts payable balances and terms.

Factors that may assist auditor in determining whether external confirmation procedures
are to be performed as substantive audit procedures
(i) The confirming party’s knowledge of subject matter – responses may be more reliable if confirming
party has requisite knowledge about information being confirmed.

(ii) The ability or willingness of the intended confirming party to respond –

For example, confirming party:
• may not accept responsibility for responding to a confirmation request;
• may consider responding too costly or time consuming;
• may have concerns about the potential legal liability resulting from responding;
• may account for transactions in different currencies; or
• may operate in an environment where responding to confirmation requests is not a significant
aspect of day-to-day operations.
In such situations, confirming parties may not respond, may respond in a casual manner or may attempt
to restrict reliance placed on response.

(iii) The objectivity of the intended confirming party – if confirming party is a related party of entity,
responses to confirmation requests may be less reliable.

“Believe you can & you are halfway there”

CA SHUBHAM KESWANI 47
 SA 510- “Initial Audit Engagements- Opening Balances”

Auditor’s responsibilities relating to opening balances when conducting initial audit engg.
In addition to F.S. amounts, opening balances include matters requiring disclosure that existed at
beginning of period, such as contingencies and commitments.

Initial Audit Engagement

An engagement in which either:
F.S. for prior period à not audited; or were audited by a predecessor auditor [आप नहीं थे]

Objective of Auditor w.r.t Opening Balances – in conducting an Initial Audit Engagement

It is to obtain SAAE about whether:
(a) Opening balances contain misstatements that materially affect current period’s F.S; and
(b) Appropriate a/c policies reflected in opening balances have been consistently applied in current
period’s F.S, or changes are properly accounted for and adequately presented and disclosed as per
applicable FRF.

Audit Procedures regarding Opening Balances [Nov-18]

Auditor shall read most recent financial statements (MRFS), if any, and predecessor auditor’s report,
if any for information relevant to opening balances, including disclosures.

Auditor shall obtain SAAE about whether the opening balances contain misstatements that materially
affect current period’s F.S. by:
(a) Determining whether prior period’s closing balances have been correctly brought forward to
current period or, when appropriate, any adjustments have been disclosed as prior period items in
current year’s Statement of P&L;

(b) Determining whether opening balances reflect application of appropriate a/c policies; and

(c) Performing one or more of following:

(i) Where prior year F.S. were audited, perusing copies of audited F.S. including the other relevant
documents relating to prior F.S.
(ii) Evaluating whether audit procedures performed in current period provide evidence relevant to the
opening balances or
(iii) Performing specific audit procedures to obtain evidence regarding the opening balances.

If auditor obtains audit evidence that opening balances contain misstatements that could materially
affect current period’s F.S, auditor shall perform such additional audit procedures appropriate in
circumstances to determine effect on current period’s F.S.

CA SHUBHAM KESWANI 48
If auditor concludes that such misstatements exist in current period’s F.S, auditor shall communicate
with management and TCWG as per SA 450.

Consistency of Accounting Policies relating to opening balances

Obtain SAAE à whether a/c policies reflected in opening balances have been consistently applied in
current period’s F.S, & whether changes have been properly accounted for and adequately presented
and disclosed as per applicable FRF.

Relevant Information in the Predecessor Auditor’s Report

If prior period’s F.S. à modified opinion,
auditor shall evaluate effect of the matter giving rise to modification in assessing RoMM in current
period’s F.S. as per SA 315

If its relevant and material to current period’s F.S à auditor shall modify auditor’s opinion on current
period’s F.S. as per SA 705(Revised) and SA 710

Audit Conclusions and Reporting in relation to Opening Balances

Unable to obtain SAAE à qualified or disclaimer of opinion as per SA 705.
Concludes misstatement à materially affects current period’s F.S, and effect of misstatement is not
properly accounted or adequately presented or disclosed, à qualified or adverse opinion as per SA
705.

Consistency of Accounting Policies

If auditor concludes that:
(a) current period’s a/c policies are not consistently applied in relation to opening balances in as per
applicable FRF; or
(b) change in a/c policies à not properly accounted or adequately presented or disclosed as per
applicable FRF
=> Express qualified or adverse opinion as per SA 705(Revised)

SA 510 SA 710

CA SHUBHAM KESWANI 49
 SA 550- “Related Parties”

Definition of Related Party (RP)

A party that is either:
(i) A related party as defined in applicable FRF; or
(ii) Where applicable FRF establishes minimal or no RP requirements:
(a) A person or other entity that has control or significant influence, directly or indirectly through
one or more intermediaries, over reporting entity (who controls)
(b) Another entity over which reporting entity has control or significant influence, directly or
indirectly through one or more intermediaries or (whom we control)
(c) Another entity that is under common control with reporting entity through having:
Þ Common controlling ownership
Þ Owners who are close family members or
Þ Common key management (common control)

However, entities that are under common control by a state (i.e., a national, regional or local govt)
aren’t considered related unless they engage in significant transactions or share resources to a
significant extent with one another.

Nature of Related Party Relationships and Transactions [RTP May-20]

Many RPTs are in normal course of business. In such circumstances, they may carry no higher RoMM
of F.S. than similar transactions with unrelated parties.

However, nature of related party relationships and transactions may, in some circumstances, give rise
to higher RoMM of F.S. than transactions with unrelated parties.

Example
(i) Related parties may operate through an extensive and complex range of relationships and
structures, with corresponding increase in complexity of related party transactions.
(ii) Information systems may be ineffective at identifying or summarising transn and o/s balances
between entity and RP.
(iii) RPTs may not be conducted under normal market terms and conditions; for eg, some RPTs may be
conducted with no exchange of consideration.

Responsibilities of the Auditor [RTP Nov 20]

There are specific accounting and disclosure requirements for RP relationships, transactions and
balances [RPRTB] to enable users of F.S. to understand their nature and effects on F.S.

Auditor responsibility à perform audit procedures to identify, assess and respond to RoMM arising
from entity’s failure to account for RPRTB.
Auditor needs to obtain understanding of entity’s RPRT to conclude whether F.S:
(a) Achieve a true and fair presentation; or

CA SHUBHAM KESWANI 50
(b) Are not misleading (for compliance frameworks).

Auditor’s evaluation of whether fraud risk factors are present as required by SA 240. This is because
fraud may be more easily committed through related parties.

Owing to inherent limitations of audit, there is unavoidable risk that some material misstatements of
F.S. may not be detected, even though audit is properly planned and performed as per SAs.

In context of related parties, potential effects of inherent limitations on auditor’s ability to detect
M.M. are greater for such reasons as following:
Þ Management may be unaware of the existence of all related party relationships.
Þ RP relationships may present greater opportunity for collusion, concealment or manipulation by
mgt.

Planning and performing audit with professional skepticism as required by SA 200.

A/c & disclosure à Audit procedures [Identify, Assess & Respond] à Obtain Understanding à
Fraud à ILA à Professional Skepticism

Q. How can an auditor verify the existence of related party relationships and transactions?
[RTP Nov-21]
During audit, auditor should maintain alertness for RP information while reviewing records and
documents.
He may inspect following records or documents that may provide information about RP relationships
and transactions, for example:
• Entity income tax returns. Pairing
• Internal auditors’ reports.
• Shareholder registers to identify the entity’s principal shareholders.
• Records of entity’s investments and those of its pension plans.
• Statements of conflicts of interest from mgt and TCWG.
• Contracts and agreements with key mgt or TCWG.
• Information supplied by the entity to regulatory authorities.
• Documents associated with the entity’s filings with a securities regulator e.g, prospectuses)
• Significant contracts and agreements not in the entity’s ordinary course of business.
• Significant contracts re-negotiated by the entity during the period.
• Specific invoices and correspondence from the entity’s professional advisors.
• Life insurance policies acquired by the entity.

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CA SHUBHAM KESWANI 51
 Identification of Previously Unidentified/Undisclosed RP or Significant RP Transactions
a) Promptly communicate to other members of engg. team
b) Where FRF establishes RP requirements:
• Request mgt to identify all transn with newly identified RP
• Inquire as to why entity’s IC failed to identify or disclose RP relationship/transaction
c) Perform Substantive procedures relating to newly identified RP relationship/transaction
d) If non-disclosure appears intentional, evaluate implications for audit.

Prompt comm. with team à mgt [request + inquire] à S.P. à Intentional [Evaluate Implications]

Examples of arrangements that indicate existence of RP relationships or transactions

that management has not previously identified or disclosed to auditor include:
• Participation in unincorporated partnerships with other parties.
• Agreements for provision of services to certain parties under T&Cs o/s entity’s NCOB.
• Guarantees and guarantor relationships.

What if Identified Significant RP Transactions o/s Entity’s Normal Course of Business?

a) Inspect underlying contract/agreement & evaluate:
• Business rationale (or lack thereof) suggest transaction entered to engage in fraudulent
financial reporting or conceal misappropriation of assets
• Terms of transactions are consistent with mgt explaination &
• Transaction accounted & disclosed as per FRF
b) Obtain Audit evidence that transaction authorised & approved.

Examples of transactions outside entity’s normal course of business may include:

• Complex equity transactions, such as corporate restructurings or acquisitions.
• The leasing of premises or rendering of mgt services by entity to another party if no consideration
is exchanged.
• Sales transactions with unusually large discounts or returns.
• Transactions with circular arrangements, for example, sales with a commitment to repurchase.
• Transactions with offshore entities in jurisdictions with weak corporate laws.
• Transactions under contracts whose terms are changed before expiry.

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CA SHUBHAM KESWANI 52
 SA 560, “Subsequent Events”

Definitions:
1. Subsequent Events:
ü Events occurring between date of F.S. and date of A/R, and
ü facts that become known to auditor after date of A/R.
2. Date of financial statements: Date of the end of latest period covered by the F.S.
3. Date of auditor’s report: Date the auditor dated report on F.S as per SA 700.

F.S. may be affected by certain events that occur after date of F.S. Many FRFs specifically refer to
such events.
There can be 2 types of events:
(a) Those that provide evidence of conditions that existed at the date of F.S [Adjusting] and
(b) Those that provide evidence of conditions that arose after the date of F.S. [Non-Adjusting]

SA 700 explains that date of auditor’s report informs reader that auditor has considered effect of
events and transactions of which auditor becomes aware and that occurred up to that date.

Objectives
The objectives of the auditor are to:
(a) Obtain SAAE about whether events occurring between date of F.S. and date of A/R that require
adjustment, or disclosure in, F.S. are appropriately reflected in F.S and
(b) Respond appropriately to facts that become known to auditor after date of A/R, that, had they
been known to auditor at that date, may have caused auditor to amend A/R.

Audit Procedure Regarding Events Occurring between Date of F.S and Date of A/R [July-21]
• Perform audit procedures to obtain SAAE that all events occurring between date of F.S. and A/R
that require adjustment, or disclosure, F.S. have been identified.
• Auditor is not expected to perform additional audit procedures on matters to which previously
applied audit procedures have provided satisfactory conclusions.
• Auditor shall perform procedures required above so that they cover period from date of F.S. to
date of A/R , or as near as practicable thereto.

Auditor shall consider auditor’s risk assessment which shall include following:
(a) Obtaining an understanding of any procedures mgt has established to ensure that subsequent
events are identified.
(b) Inquiring of management and TCWG as to whether any subsequent events have occurred which
might affect F.S.
(c) Reading minutes, if any, of meetings, of entity’s owners, mgt and TCWG, that have been held after
date of F.S. and inquiring about matters discussed at any such meetings for which minutes not available.
(d) Reading entity’s latest subsequent interim F.S., if any.

CA SHUBHAM KESWANI 53
When, as a result of procedures à auditor identifies events that require adjustment, or disclosure
in, F.S., determine whether each such event is appropriately reflected in F.S.

Written Representations with respect to subsequent events:

Request mgt and TCWG, to provide a WR as per SA 580 à all events occurring after date of F.S. and
for which applicable FRF requires adjustment or disclosure have been adjusted or disclosed.

Understanding mgt process à Inquiry à Read [M.O.M + Interim] à W.R.

Facts which become known to auditor after date of A/R but before F.S. are issued
[MTP Nov-21]
Auditor has no obligation to perform any audit procedures regarding F.S. after date of A/R.
However, when, after date of A/R but before F.S. are issued, fact becomes known to auditor if known
before may have caused auditor to amend A/R, auditor shall:
(a) Discuss matter with mgt and, where appropriate, TCWG.
(b) Determine whether F.S. need amendment and, if so,
(c) Inquire how mgt intends to address matter in F.S.

Specific inquiries to be made from management [Nov-17]

ü Whether new commitments, borrowings or guarantees [BCG] have been entered into.
ü Whether sales or acquisitions of assets have occurred or are planned.
ü Whether any assets have been appropriated by govt or destroyed, for eg, by fire or flood.
ü Whether any events have occurred that are relevant to recoverability of assets.
ü Whether there have been increases in capital or issuance of debt instruments, such as issue of
new shares or debentures, or an agreement to merge or liquidate has been made or is planned.
ü Whether there have been any developments regarding contingencies.
ü Whether any unusual a/c adjustments have been made or are contemplated.
ü Whether any events have occurred or are likely to occur that will bring into Question
appropriateness of A/C policies, for eg, if such events call into question validity of G.C. assumption.
ü Whether any events have occurred relevant to measurement of estimates or provisions in F.S.

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CA SHUBHAM KESWANI 54
 SA 570: Going Concern [G.C.]

SA 570 (Revised) on “Going concern” deals with :

(I) Auditor’s responsibilities in audit of F.S. relating to G.C. and
(II) The implications for auditor’s report.
Its important to note that SA 701 deals with auditor’s responsibility to communicate key audit
matters in A/R. SA 701 acknowledges that matters relating to G.C. may be determined to be
KAM, and explains that a material uncertainty related to events or conditions that may cast
significant doubt on the entity’s ability to continue as a G.C. is, by its nature, a KAM.

Going Concern Basis of Accounting

• FS are prepared on assumption that entity will continue operations for foreseeable future.
• General purpose FS are prepared using going concern basis of accounting, unless mgt either intends
to liquidate entity or to cease operations, or has no realistic alternative but to do so.
• Special purpose F.S. may or may not be prepared in accordance with FRF for which G.C. basis of
accounting is relevant.
• When use of G.C. basis of accounting is appropriate, assets and liabilities are recorded on basis that
entity will be able to realize its assets & discharge liabilities in normal course of business.

Responsibility for Assessment of the Entity’s Ability to Continue as a Going Concern [G.C.]
a) It is mgt responsibility to assess entity’s ability to continue as G.C. even if FRF doesn’t include
explicit requirement.
b) Mgt’s assessment of entity’s ability to continue as G.C. involves making judgment, at particular point
in time, about inherently uncertain future outcomes of events or conditions.
c) The following factors are relevant to that judgment:
• The degree of uncertainty associated with outcome of an event or condition.
• The size and complexity of entity, nature and condition of business & degree to which it is
affected by external factors.
• Any judgment about future is based on information available at the time at which judgment is
made. Subsequent events may result in outcomes that are inconsistent with judgments that
were reasonable at time they were made.
Size & Complexity à Degree [Affected + Uncertainty] à Subsequent events

Auditor’s Responsibilities
• Auditor’s responsibilities are to obtain SAAE and conclude on, appropriateness of mgt’s use of G.C.
basis of accounting in preparation of FS
• To conclude, based on audit evidence obtained, whether a material uncertainty exists about the
entity’s ability to continue as a G.C.
• SA 200 à potential effects of inherent limitations on auditor’s ability to detect M.M. are greater
for future events or conditions that may cause entity to cease to continue as G.C.
• Auditor cannot predict such future events or conditions.

CA SHUBHAM KESWANI 55
• Absence of reference to material uncertainty about entity’s ability to continue as G.C. in A/R cannot
be viewed as a guarantee as to entity’s ability to continue as G.C.

Risk Assessment Procedures and Related Activities

When performing RAP as per SA 315, auditor shall consider whether events or conditions exist that
may cast significant doubt on entity’s ability to continue as a G.C.

In doing so, determine whether mgt has already performed a preliminary assessment of entity’s ability
to continue as a G.C. &
a) If assessment performed à discuss the assessment with mgt and determine whether mgt has
identified events or conditions that, individually or collectively, cast significant doubt on entity’s
ability to continue as going concern and, if so, mgt’s plans to address them or
b) If assessment not performed à discuss with mgt basis for use of going concern basis of
accounting, and inquire whether events or conditions exist that, individually or collectively, may
cast significant doubt on entity’s ability to continue as going concern.

Note: Auditor shall remain alert throughout audit for audit evidence of events or conditions that cast
significant doubt over entity’s ability to continue as G.C.

Evaluating mgt assessment of Going Concern [G.C.]

• Auditor shall evaluate mgt’s assessment of entity’s ability to continue as G.C.
• Auditor shall cover same period as used by mgt to make its assessment as required by applicable
FRF, or by law or regulation if it specifies longer period.
• If mgt’s assessment covers less than 12 months from date of FS, request mgt to extend
assessment period to at least 12 months.
• In evaluating mgt’s assessment, consider whether it includes all relevant info of which auditor is
aware as result of audit.

Additional Audit Procedures When Events or Conditions Are Identified

a) Where mgt has not yet performed assessment of entity’s ability to continue as going concern,
requesting mgt to make its assessment.
b) Evaluating mgt’s plans for future actions, whether outcome of these plans likely to improve situation
and whether management’s plans are feasible in the circumstances.
c) Where entity has prepared cash flow forecast, and analysis of forecast is a significant factor in
considering future outcome of events or conditions:
i. Evaluating reliability of underlying data generated to prepare forecast; and
ii. Determining whether there is adequate support for assumptions underlying forecast.
d) Considering whether any additional facts or info become available since date on which mgt made
its assessment.
e) Requesting written representations from mgt and TCWG , regarding their plans for future
actions and feasibility of these plans.

Mgt Written
Plans Cash flow forecast Add. Facts/info
Assessment Representations

CA SHUBHAM KESWANI 56
Additional procedures:
• Analysing and discussing cash flow, profit and other relevant forecasts with mgt.
• Analysing and discussing entity’s latest available interim financial statements.
• Reading terms of debentures and loan agreements and determining whether any have been
breached.
• Reading minutes of meetings of shareholders, TCWG and committees for reference to financing
difficulties.
• Inquiring of entity’s legal counsel regarding existence of litigation and claims and
reasonableness of mgt’s assessments of their outcome and estimate of financial implications.
• Confirming existence, legality and enforceability of arrangements to provide or maintain
financial support with related and third parties and assessing financial ability of such parties
to provide additional funds.
• Evaluating entity’s plans to deal with unfilled customer orders.
• Performing audit procedures regarding subsequent events to identify those that either mitigate
or otherwise affect entity’s ability to continue as a going concern.
• Confirming existence, terms and adequacy of borrowing facilities.
• Obtaining and reviewing reports of regulatory actions.
• Determining adequacy of support for any planned disposals of assets.

Auditor’s Conclusion
• The auditor shall evaluate whether SAAE has been obtained & conclude on, appropriateness of
mgt’s use of going concern basis of accounting in preparation of FS.
• Based on audit evidence obtained, conclude whether material uncertainty exists related to events
or conditions that, individually or collectively, may cast significant doubt on entity’s ability to
continue as a G.C.
• A material uncertainty exists when magnitude of impact and likelihood of occurrence is such that,
appropriate disclosure is necessary for:
a) In case of a fair presentation FRF à fair presentation of F.S. or
b) In case of compliance framework, FS not to be misleading.

Magnitude Likelihood

Material Uncertainty
Adequacy of Disclosures:
When Events or Conditions Have Been Identified and a Material Uncertainty Exists
If auditor concludes that G.C. is appropriate but material uncertainty exists, auditor shall determine
whether FS:
a) Adequately disclose principal events or conditions that may cast significant doubt on entity’s ability
to continue as a G.C. and mgt’s plans to deal with these events or conditions; and

CA SHUBHAM KESWANI 57
b) Disclose clearly that there is material uncertainty related to events or conditions that may cast
significant doubt on entity’s ability to continue as a G.C. and it may be unable to realize its assets
and discharge its liabilities in normal course of business.

When Events or Conditions Have Been Identified but No Material Uncertainty Exists
Auditor shall evaluate whether F.S. provide adequate disclosures about these events or conditions.

Implications for Reporting

Use of Going Concern Basis of Accounting Is Inappropriate
If F.S. have been prepared using G.C. basis but, in auditor’s judgment, mgt’s use of G.C. basis in
preparation of FS is inappropriate, auditor shall express an adverse opinion.

Use of Going Concern Basis of Accounting Is Appropriate but a Material Uncertainty Exists
Adequate Disclosure of a Material Uncertainty Is Made in F.S. à Auditor shall express an unmodified
opinion and report shall include separate section under the heading “Material Uncertainty Related to
Going Concern” to:
(a) Draw attention to note in F.S. that discloses the matters; and
(b) State that these events or conditions indicate that a material uncertainty exists that may cast
significant doubt on the entity’s ability to continue as a G.C. and that auditor’s opinion is not modified
in respect of the matter.

Adequate Disclosure of a Material Uncertainty Is Not Made in F.S. à If adequate disclosure about
material uncertainty is not made in financial statements, auditor shall:
(a) Express a qualified or adverse opinion, as appropriate, as per SA 705 (Revised); &
(b) In Basis for Qualified (Adverse) Opinion section of auditor’s report, state that a material
uncertainty exists that may cast significant doubt on the entity’s ability to continue as a G.C. and that
the F.S. do not adequately disclose this matter.

Management Unwilling to Make or Extend Its Assessment à Auditor shall consider the implications
for auditor’s report.
Communication with TCWG
a) Whether events or conditions constitute a material uncertainty;
b) Whether mgt’s use of going concern basis of accounting is appropriate in preparation of F.S.;
c) The adequacy of related disclosures in F.S.; and
d) Where applicable, implications for auditor’s report.

Significant Delay in Approval of Financial Statements

Inquire reasons for delay. If delay could be related to events or conditions relating to G.C. assessment
perform additional audit procedures & consider effect on auditor’s conclusion regarding existence of
a material uncertainty.

CA SHUBHAM KESWANI 58
 Events or Conditions That May Cast Significant Doubt
on Entity’s Ability to Continue as a Going Concern
Financial
• Net liability or net current liability position.
• Fixed-term borrowings approaching maturity without realistic prospects of renewal or
repayment; or excessive reliance on short-term borrowings to finance long-term assets.
• Inability to pay creditors on due dates.
• Indications of withdrawal of financial support by creditors.
• Substantial operating losses or significant deterioration in value of assets.
• Arrears or discontinuance of dividends.
• Negative operating cash flows indicated by historical or prospective F.S.
• Adverse key financial ratios.
• Change from credit to cash-on-delivery transactions with suppliers.

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Operating
• Management intentions to liquidate the entity or to cease operations.
• Loss of key mgt without replacement.
• Loss of a major market, key customer(s), franchise, license, or principal supplier(s).
• Labor difficulties.
• Shortages of important supplies.
• Emergence of a highly successful competitor.

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Other
• Non-compliance with capital or statutory or regulatory requirements
• Pending legal or regulatory proceedings against entity that may result in claims that entity is
unlikely to satisfy.
• Changes in law or regulation or government policy expected to adversely affect entity.
• Uninsured or underinsured catastrophes when they occur.

CA SHUBHAM KESWANI 59
 Learn with Fun J

Let’s Revise J

S No. Topic Points

1 G.C. Basis Foreseeable future + Realise assets + Pay off liab in NCOB
Mgt Responsibility + Factors [ Size & Complexity + Degree +
2 G.C. Assessment Subsequent events]
1. SAAE --> G.C. Appt
3 Auditor's Responsibility 2. SAAE --> M.U. exists?
4 RAP Mgt Assess. performed/not performed
5 Evaluating mgt assess At least cover 12 months
6 Add. audit procedures Request + Plan + C.F. Forecast + Add. facts/info + W.R.
1. SAAE --> G.C. Appt
7 Conclusion 2. SAAE --> M.U. exists [L+M] --> Disclosure in F.S.
8 Reporting
G.C. Inappropriate Adverse Opinion
M.U. Exists + Disclosure
given MURG Para + Opinion not modified
M.U. Exists + No
Disclosure Q/A Opinion + Basis of Q/A [M.U. exists but no disclosure]
9 Events and conditions
Net liab. + Inability to pay crs + withdraw of support +
Credit to cash / Losses + Negative cash flows + adverse key
Financial ratios
Supplier/Labour/key mgt/competitor/major
Operating market/intention to liquidate
Non-compliance/Legal proceedings/change in
Others law/catastrophe

“Today is your opportunity to build tomorrow you want”

CA SHUBHAM KESWANI 60