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. Purpose of introduction
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 Responsibilities
Ethical Requirements
Acceptance and Continuance of client relationships and specific engagements.
Human resource
Engagement Performance
Monitoring

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. Can comply with the ethical requirements
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) – to 999
Standards on Review Engagements (SREs) 2000 to 2699
Standards on Auditing
Introductory Matters to 199
General Principles and Responsibilities to 299
Risk Assessment and Response to Assessed Risks to 499
Audit Evidence to 599
Using works of others to 699
Audit conclusions and Reporting to 799
Specialized Areas to 899
Standards on Review Engagements

23. Audit and Reviews of Historical Financial Information cont…
Introductory Matters (drafted)
General Principles and Responsibilities SA
NAME
AAS
SA 200
Basic Principles Governing an Audit
AAS 1
SA 200A
Objective and Scope of the Audit of Financial Statements
AAS 2
SA 210
Terms of Audit Engagement
AAS 26
SA 220
Quality control for Audit work
AAS 17
SA 230
Documentation
AAS 3
SA 240
The 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 250
Consideration of Laws and Regulations in an Audit of Financial Statements
AAS 21
SA 260
Communication of Audit Matters with those charged with governance
AAS 27
SA 299
Responsibility of Joint Auditors
AAS 12

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

25. Audit and Reviews of Historical Financial Information cont…
Audit Evidence SA
Name
AAS
SA 500
Audit Evidence
AAS 5
SA 501
Audit Evidence – Additional Considerations for specific items
AAS 34
SA 505
External Confirmations
AAS 30
SA 510
Initial Engagements – Opening Balances
AAS 22
SA 520
Analytical Procedures
AAS 14
SA 530
Audit Sampling
AAS 15
SA 540
Auditing of Accounting Estimates
AAS 18
SA 550
Related Parties
AAS 23
SA 560
Subsequent Events
AAS 19
SA 570
Going Concern
AAS 16
SA 580
Representation 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) SA
Name
AAS
SA 600
Using the work of another Auditor
AAS 10
SA 610
Relying on the work of an Internal Auditor
AAS 7
SA 620
Using the work of an Expert
AAS 9 SA
Name
AAS
SA 700
The Auditor’s Report on Financial Statements
AAS 28
SA 710
Comparatives
AAS 25

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

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

29. 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. Revision of Existing Standard and insertion of new Standards
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.