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RECENT AMENDMENTS IN AUDITING STANDARDS Presented by: Mukesh Thakur.

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Presentation on theme: "RECENT AMENDMENTS IN AUDITING STANDARDS Presented by: Mukesh Thakur."— Presentation transcript:

1 RECENT AMENDMENTS IN AUDITING STANDARDS Presented by: Mukesh Thakur

2 Purposes of Changes in Standards To keep alignment with the International Practice. To converge with International Standards on Auditing.

3 AGENDA Introduction of Standard on Quality Control 1. Renumbering and rearrangement of Existing Auditing Standards. Revision of Some existing standards.

4 Standards on Quality Control (SQCs)

5 SQC 1 Quality control for Firms that Perform Audit and Reviews of Historical Financial Information, and other Assurance and Related Services Engagements Purpose of introduction –There was no guidelines to the firms responsibilities for its system of quality control for the services provided by them. –There has been different standards issued a on different aspects. Hence, there is need of one standard which correlate and harmonize each standard. –SQC – 1 took birth to mitigate the above requirements. –This standard will play a role as Mother Standard.

6 Scope and Applicability The standard is to apply on Chartered Accountant Firms and Proprietorship. This will cover all the services falling under the engagement Standards. The effective date of the standard is April 1, 2009.

7 Objective of the Standard The firm should establish a system of quality control designed to provide it with reasonable assurance that –The firm and its personnel comply with professional standards and regulatory and legal requirements and –That the Reports issued by the firm or engagement partner(s) are appropriate in the circumstances.

8 Elements of a system of quality control Leadership ResponsibilitiesEthical RequirementsAcceptance and Continuance of client relationships and specific engagements.Human resourceEngagement PerformanceMonitoring

9 Leadership Responsibilities for quality within the firm CEO or managing partner of the firm should establish policies and procedures designed to promote an internal culture based on the recognition that the quality is essential. Any person(s) assigned the operational responsibilities should be sufficient and appropriate experience and ability and the necessary authority to assume the responsibility.

10 Ethical Requirements The policies and procedure of the firm should be designed to provide reasonable assurance that the firm and its personnel comply relevant ethical requirement as prescribed in Chartered Accountants Act, These includes –Integrity –Objectivity –Professional Competence and due care –Confidentiality and –Professional Behavior. (ICPOP)

11 Ethical Requirements cont… Policies and procedure of firm should emphasize on following principals The leadership of the firm Education and Training Monitoring A Process of Dealing with non compliances Independence

12 Ethical Requirements cont… Independence - The standard has laid down detailed guidelines to ensure the independence of the firm, personnel or others as required by the code. These can be summarized as follows –Policies designed by the firm should contain Communication of independence requirement to personnel or others, identity and removal of threats to independence –The policy designed by the firm should require The engagement Partner should provide relevant information about the engagement to firm. The accumulation and communication of relevant information to appropriate personnel so that threats of independence can be readily identified and resolved. –At least annually, the firm should obtain written confirmation of compliance with its policies and procedure on independence from all firm personnel required to be independent.

13 Ethical Requirements cont… –The standard discusses familiarity threats that arises when the firm uses the same senior personnel on assurance engagement for a long period of time. The firm should reduce this threats to acceptable level. In case of audit of listed companies, engagement partner should be rotated after a pre-defined period not more than 7 years.

14 Acceptance and continuance of client relationships and specific requirements The policies and procedure of the firm should be such that it ensure that It has considered the integrity of the client and does not have information that would lead to conclude that the client lacks integrity Is competent to perform the engagement and has capabilities, time and resources to do so Can comply with the ethical requirements

15 Acceptance and continuance of client relationships and specific requirements cont. Examples of matters that should be ensured to check integrity of the client –Business reputation of clients Key management Personnel (KMPs), Owners, related parties etc. –The nature of the client business –Attitude of KMPs etc. towards such matters as aggressive interpretation of Accounting Standards and internal control Environment. –Whether the client is aggressively concerned with maintaining the firms fees as low as possible. –Indications of an inappropriate limitation of scope of work. –Information that the client might be involved in money laundering or other criminal activities. –The reason for proposed appointment of firm and non reappointment of previous firm.

16 Human Resource The policies and procedure of the firm should ensure that it has sufficient personnel with the capabilities, competence and commitment to ethical principles necessary to perform its engagements in accordance with the legal requirements and to enable the firm to issue reports that is appropriate in the circumstances. These policies should cover –Recruitment –Performance evaluation –Capabilities –Competence –Career Development –Promotion –Compensation and –Estimation of personnel needs.

17 Human Resource cont. Capabilities and competencies can be developed through –Professional Education –Continuing Professional Development, including training –Work Experience –Coaching by more experienced staff. The standard requires that each engagement should be assigned to engagement partner having such capability. The role and responsibilities of such partner should be defined and communicated to the client. Assignment should be given to staff having appropriate capabilities, competence and time to perform the engagement in accordance with professional standards and regulatory and legal requirement.

18 Human Resource cont. The policies and procedure of the firm should also ensure –Engagement performance –Consultation –Strategy in case of Differences of opinion within the engagement team –Engagement quality control Review –Engagement Documentation –Confidentiality, integrity, accessibility and retrievability of engagement documentation –Retention of Engagement Documentation as per requirement of law or regulation.

19 Monitoring The policies and procedure relating to system of quality control of the firm should be relevant, adequate, operating effectively and complied with in practice. Such policies and procedure should include ongoing consideration and evaluation of the firm’s system of quality control, including periodic inspection of selected engagement. Deficiencies observed as a result of monitoring process should be –Evaluated –Communicated to engagement partner –Necessary remedial action should be taken as per the nature of the deficiency.

20 RENUMBERING AND REARRANGEMENT OF EXISTING STANDARDS

21 Engagement and other Quality control Standards Standards on quality control SQC 1 ‘Quality control for firms that perform Audit and reviews of historical financial information and other Assurance and Related Services Audit and Reviews of Historical Financial Information Assurance Engagements other than Audits or Reviews of Historical Financial Information Related Services

22 Audit and Reviews of Historical Financial Information Standards on Auditing (SAs) – 100 to 999 Standards on Review Engagements (SREs)2000 to 2699 Standards on Auditing –Introductory Matters 100 to 199 –General Principles and Responsibilities 200 to 299 –Risk Assessment and Response to Assessed Risks 300 to 499 –Audit Evidence 500 to 599 –Using works of others 600 to 699 –Audit conclusions and Reporting 700 to 799 –Specialized Areas 800 to 899 Standards on Review Engagements

23 Audit and Reviews of Historical Financial Information cont… Introductory Matters (drafted) General Principles and Responsibilities SANAMEAAS SA 200Basic Principles Governing an AuditAAS 1 SA 200AObjective and Scope of the Audit of Financial StatementsAAS 2 SA 210Terms of Audit EngagementAAS 26 SA 220Quality control for Audit workAAS 17 SA 230DocumentationAAS 3 SA 240The auditor’s responsibilities to consider Fraud and Error in an Audit of Financial Statements (revised as ‘The auditor’s responsibilities relating to Fraud in an Audit of Financial Statements’) AAS 4 SA 250Consideration of Laws and Regulations in an Audit of Financial Statements AAS 21 SA 260Communication of Audit Matters with those charged with governanceAAS 27 SA 299Responsibility of Joint AuditorsAAS 12

24 Audit and Reviews of Historical Financial Information cont… Risk Assessment and Responses to Assessed Risks SANameAAS SA 300Audit Planning (revised as planning an audit of financial statements) AAS 8 SA 310Knowledge of the BusinessAAS 20 SA 315Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and its Environment New SA 320Audit MaterialityAAS 13 SA 330The Auditor Responses to Assessed RisksNew SA 400Risks Assessments and Internal ControlAAS 6 SA 401Audit in a computer Information Systems EnvironmentAAS 29 SA 402Audit Considerations Relating to Entities Using Service Organisations AAS 24

25 Audit and Reviews of Historical Financial Information cont… Audit Evidence SANameAAS SA 500Audit EvidenceAAS 5 SA 501Audit Evidence – Additional Considerations for specific itemsAAS 34 SA 505External ConfirmationsAAS 30 SA 510Initial Engagements – Opening BalancesAAS 22 SA 520Analytical ProceduresAAS 14 SA 530Audit SamplingAAS 15 SA 540Auditing of Accounting EstimatesAAS 18 SA 550Related PartiesAAS 23 SA 560Subsequent EventsAAS 19 SA 570Going ConcernAAS 16 SA 580Representation by management (revised Written Representations)AAS 11

26 Audit and Reviews of Historical Financial Information cont… Using work of others Audit Conclusions and Reporting Specialized Areas (drafted) SANameAAS SA 600Using the work of another AuditorAAS 10 SA 610Relying on the work of an Internal AuditorAAS 7 SA 620Using the work of an ExpertAAS 9 SANameAAS SA 700The Auditor’s Report on Financial StatementsAAS 28 SA 710ComparativesAAS 25

27 Audit and Reviews of Historical Financial Information cont… Standards on Review Engagements –SRE 2400 Engagement to Review Financial Statements (AAS 33)

28 Assurance Engagements other than Audits or Reviews of Historical Statements Standards on Assurance Engagements (SAEs) 3000 to 3699 –SAE 3400 The examination of Prospective Financial Statements (AAS 35)

29 Related Services Standards on Related Services (SRSs) 4000 to 4699 –SRS 4400 Engagement to perform Agreed upon procedures Regarding Financial Statements (AAS 32) –SRs4410 Engagements to compile Financial Information (AAS 31)

30 Revision of Existing Standard and insertion of new Standards

31 Standards that has been revised –SA 240 (AAS 4) Auditor’s Responsibility to consider Fraud and Error in an audit to Financial Statements (Revised as “Auditor’s Responsibilities Relating to Fraud in an audit of Financial Statements”) –SA 300 (AAS 8) Audit Planning (Revised as “Planning an Audit of Financial Statements) –SA 580 (AAS 11) Representation by Management (Revised as “Written Representations) New Standards Introduced –SA 315 Identifying and assessing the Risks of Material Misstatement through understanding the Entity and its environment. –SA 330 The Auditor Responses to an Assessed Risks.


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