slide1 n.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
(AAS) 3 PowerPoint Presentation
Download Presentation
(AAS) 3

Loading in 2 Seconds...

play fullscreen
1 / 86

(AAS) 3 - PowerPoint PPT Presentation


  • 199 Views
  • Uploaded on

(AAS) 3. DOCUMENTATION . Harinderjit Singh. NIRC / ICAI. 9.7.2005. DOCUMENTATION (AAS 3) OVERVIEW . Introduction Form and content Ownership and Custody of Working Papers Exposure Draft on Revised (AAS) 3 - Audit Documentation. DOCUMENTATION (AAS 3) INTRODUCTION .

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about '(AAS) 3' - bertille


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
slide1

(AAS) 3

DOCUMENTATION

Harinderjit Singh

NIRC / ICAI

9.7.2005

documentation aas 3 overview
DOCUMENTATION (AAS 3)OVERVIEW
  • Introduction
  • Form and content
  • Ownership and Custody of Working Papers
  • Exposure Draft on Revised (AAS) 3 - Audit Documentation
documentation aas 3 introduction
DOCUMENTATION (AAS 3)INTRODUCTION
  • Document evidence that audit carried out in accordance with basic principles (AAS2)
  • Documentation refers to working papers prepared or obtained by auditor
  • Working papers aid in :
    • Planning and performance of audit
    • Supervision and review of audit work
    • Providing evidence of audit work performed
documentation aas 3 form and content
DOCUMENTATION (AAS 3)FORM AND CONTENT
  • Working Paper to record:
  • audit plan,
  • nature, timing & extent of audit procedures
  • conclusions drawn from evidence obtained
documentation aas 3 form and content1
DOCUMENTATION (AAS 3)FORM AND CONTENT

Form & content affected by :

  • nature of engagement
  • form of auditor’s report
  • nature & complexity of client’s business
  • nature & conditions of client’s records & degree of reliance on internal controls
  • need in particular circumstances for direction, supervision and review of work performed by assistants
documentation aas 3 form and content2
DOCUMENTATION (AAS 3)FORM AND CONTENT
  • Standardisation of working papers (e.g. checklists, specimen letters, standard organisation of working papers)
  • Working Paper sufficiently complete and detailed
  • Significant matters together with auditor’s conclusion thereon
  • Ensure working papers obtained from client properly prepared
  • Permanent & current audit files (PAF & CAF)
documentation aas 3 form and content paf
DOCUMENTATION (AAS 3)FORM AND CONTENT - PAF
  • PAF includes
    • Legal & organisational structure of entity
    • Legal documents & agreements
    • Study & evaluation of internal controls
    • Audited F/S for PYs
    • Significant ratios & trends
    • Management letters, if any
    • Significant accounting policies
    • Significant audit observations of earlier years.
documentation aas 3 form and content paf1
DOCUMENTATION (AAS 3)FORM AND CONTENT - PAF
  • CAF includes:
    • Acceptance of annual reappointment
    • Board & general meetings minutes
    • Nature, timing & extent of audit procedures- review
    • Audit matters communicated/discussed with client including terms of engagement etc.
    • Representation letters
    • Significant aspects of audit –Experts / third party
    • FS & related audit report
documentation aas 3 ownership and custody of working papers
DOCUMENTATION (AAS 3)OWNERSHIP AND CUSTODY OF WORKING PAPERS
  • Working Papers
  • Property of auditor
  • Extracts of working papers available to client at auditor’s discretion.
  • Reasonable procedures for custody & confidentiality of working papers
  • Retention of working papers
exposure draft revised aas 3 audit documentation salient matters
EXPOSURE DRAFT REVISED (AAS) 3 AUDIT DOCUMENTATION SALIENT MATTERS
  • Caption changed from “Documentation” to “Audit Documentation”
  • Fallout of Enron
  • Changes to Audit Documentation
  • New concept of Experienced Auditor
  • Identification of Prepares & Reviewer
  • Retention period - 10 years vis-à-vis 8 years prescribed by Companies Act
slide11

(AAS) 6 (REVISED)

RISK ASSESSMENT AND INTERNAL CONTROL

NIRC /ICAI 9.7.2005

aas 6 revised risk assessment and internal control overview
AAS 6 (Revised) - Risk Assessment and Internal Control Overview
  • Introduction
  • Inherent Risk
  • Accounting & Internal Control Systems
  • Control Risk
  • Detection Risk
  • Audit Risk in Small Business
  • Communication of Weaknesses
aas 6 revised risk assessment and internal control introduction
AAS 6 (Revised) - Risk Assessment and Internal Control Introduction
  • Understanding of accounting & internal control system and audit risk
  • Sufficient to plan & develop an effective audit approach
  • Professional judgment to assess audit risk & design audit procedures
  • Applicability – 1.4.2002
aas 6 revised risk assessment and internal control introduction1
AAS 6 (Revised) - Risk Assessment and Internal Control Introduction
  • Certain terminologies:
    • Inappropriate opinion
    • Inherent Risk
    • Control risk
    • Detection risk
    • Control environment
    • Control procedures
    • Internal Control System
    • Accounting System
aas 6 revised risk assessment and internal control inherent risk
AAS 6 (Revised) - Risk Assessment and Internal Control Inherent Risk
  • Relate inherent risk assessment to material account balance & classes of transactions in developing audit program.
  • High inherent risk assessments are made taking into account factors relevant both to F/S as a whole & to specific assertions.
  • Reasons for assessing inherent risk as not high should be documented.
aas 6 revised risk assessment and internal control assessing inherent risk
AAS 6 (Revised) - Risk Assessment and Internal ControlAssessing Inherent Risk
  • Factors for Evaluation

At Level of F/S

  • integrity of management
  • management experience & knowledge & changes in management during period
  • unusual pressures on management
  • nature of entity’s business
  • factors affecting industry in which entity operates.
aas 6 revised risk assessment and internal control assessing inherent risk1
AAS 6 (Revised) - Risk Assessment and Internal ControlAssessing Inherent Risk
  • At Level of Account Balance & Class of Transactions
  • quality of accounting system
  • F/S susceptible to misstatement
  • complexity of transactions & events
  • degree of judgement
  • susceptibility of assets to loss or misappropriation
  • unusual & complex transactions at or near period end
  • transactions not subject to ordinary processing
aas 6 revised risk assessment and internal control inherent limitations of internal controls
AAS 6 (Revised) - Risk Assessment and Internal Control Inherent Limitations of Internal Controls
  • Reasonable but not absolute assurance
  • Control be cost effective
  • Addressing unusual transactions
  • Human error
  • Collusion by employees & third parties
  • Management overriding control
  • Manipulation in estimates & judgments in FS.
slide19
AAS 6 (Revised) - Risk Assessment and Internal Control Understanding Accounting & Internal Control Systems
  • CAKE
  • inquiries of appropriate level of personnel
  • inspection of documents & records
  • observation of activities & operation
aas 6 revised risk assessment and internal control accounting systems understanding
AAS 6 (Revised) - Risk Assessment and Internal Control Accounting Systems - Understanding
  • major classes of transactions
  • how such transactions initiated
  • significant accounting records, supporting documents & specific accounts
  • accounting & financial reporting process - initiation to inclusion in FS
aas 6 revised risk assessment and internal control control environment understanding
AAS 6 (Revised) - Risk Assessment and Internal Control Control Environment - Understanding
  • Management’s attitudes,awareness & actions regarding internal controls & their importance in entity.
aas 6 revised risk assessment and internal control control risk
AAS 6 (Revised) - Risk Assessment and Internal ControlControl Risk
  • Preliminary Assessment of Control Risk
  • At assertion level for each material account balance or class of transaction.
aas 6 revised risk assessment and internal control control risk1
AAS 6 (Revised) - Risk Assessment and Internal ControlControl Risk
  • Preliminary Assessment of Control Risk
  • Control risk assessed at high level for some or all assertions where accounting & internal controls not effective or evaluating not efficient.
  • Preliminary assessment of control risk for a FS assertion high unless:
    • internal controls identified
    • tests of control to support assessment planned
aas 6 revised risk assessment and internal control control risk2
AAS 6 (Revised) - Risk Assessment and Internal ControlControl Risk
  • Documentation of Understanding & Assessment of Control Risk
  • Document :
    • understanding of entity’s accounting & internal control system;
    • assessment of control risk.
  • When control risk assessed at less than high, document basis.
  • Different techniques for documentation:
    • narrative
    • questionnaires
    • checklists
    • flow charts
aas 6 revised risk assessment and internal control control risk3
AAS 6 (Revised) - Risk Assessment and Internal ControlControl Risk
  • Tests of Control
  • Audit evidence re. effectiveness of accounting & internal control system & operation of controls throughout period.
aas 6 revised risk assessment and internal control control risk4
AAS 6 (Revised) - Risk Assessment and Internal ControlControl Risk
  • Tests of Control
  • Tests of control may include:
    • inspection of documents for controls re.authorisation
    • inquiries & observation of controls which have no audit trail
    • testing computerized application or overall IT function

Lower assessments of control risk more audit evidence should be obtained

aas 6 revised risk assessment and internal control control risk5
AAS 6 (Revised) - Risk Assessment and Internal ControlControl Risk
  • Tests of Control
  • Considering effectiveness of controls:
    • How applied?
    • Consistency on application during period
    • By whom applied?
    • Deviations from prescribed controls
  • Results of tests of control evaluates whether controls operating as contemplated in preliminary assessment of control risk.
aas 6 revised risk assessment and internal control control risk6
AAS 6 (Revised) - Risk Assessment and Internal ControlControl Risk
  • Final Assessment of Control Risk
  • When preliminary assessment of control risk not supported:
    • revise assessed level of control risk
    • modify nature, timing & extent of planned substantive procedures.
aas 6 revised risk assessment and internal control detection risk
AAS 6 (Revised) - Risk Assessment and Internal ControlDetection Risk
  • Consider assessed levels of inherent & control risks in determining nature, timing & extent of substantive procedures.
  • To reduce audit risk to an acceptably low level consider:
    • nature of substantive procedure
    • timing of substantive procedure
    • extent of substantive procedures
  • Inverse relationship between detection risk & combined level of inherent and control risk
aas 6 revised risk assessment and internal control detection risk1
AAS 6 (Revised) - Risk Assessment and Internal ControlDetection Risk
  • Regardless of assessed levels of inherent and control risks, some substantive procedures performed
  • Higher assessment of inherent & control risks means more of substantive procedures
  • Qualified or declaimer of opinion when detection risk regarding an assertion for material balance or transaction cannot be reduced to an acceptable level,
aas 6 revised risk assessment and internal control audit risk in small business
AAS 6 (Revised) - Risk Assessment and Internal Control Audit Risk in Small Business
  • Inadequate segregation of duties & lack of supervisory controls
  • Audit evidence may have to be obtained entirely through substantive procedures.
aas 6 revised risk assessment and internal control communication of weaknesses
AAS 6 (Revised) - Risk Assessment and Internal Control Communication of Weaknesses
  • Communicate material weaknesses in accounting & internal control at an appropriate level of management.
  • Ordinarily in writing
  • Important to indicate that only weaknesses which have come to the auditor’s attention as a result of audit have been reported.
aas 6 revised risk assessment and internal control matters for discussion
AAS 6 (Revised) - Risk Assessment and Internal Control Matters for Discussion
  • Complex CIS environment-need for specialist
  • Extent of substantive procedures should reflect reliance/nonreliance on internal controls
  • Risk based audit approach-prevalent now formalised
  • Assessing internal controls enables effective and efficient audit
slide34

AAS - 21

CONSIDERATION OF LAWS AND REGULATIONS IN AN AUDIT OF FINANCIAL STATEMENTS

NIRC / ICAI 9.7.2005

aas 21 consideration of laws regulations in an audit of fs overview
AAS 21 - CONSIDERATION OF LAWS & REGULATIONS IN AN AUDIT OF FSOverview
  • Introduction
  • Responsibility of Management
  • Auditor’s consideration
  • Procedures when noncompliance discovered
  • Communicating/Reporting noncompliance
  • Withdrawal from Engagement
aas 21 consideration of laws regulations in an audit of fs introduction
AAS 21 - CONSIDERATION OF LAWS & REGULATIONS IN AN AUDIT OF FSIntroduction
  • Consideration of laws & regulations in an audit of FS.
  • Noncompliance of laws & regulations by entity materially affecting F/S
  • Term `noncompliance’ refers to acts of omission or commission by entity being audited, either intentional or unintentional contrary to prevailing laws & regulations.
aas 21 consideration of laws regulations in an audit of fs indications of noncompliance
AAS 21 - CONSIDERATION OF LAWS & REGULATIONS IN AN AUDIT OF FS Indications of Noncompliance
  • Investigation by government departments or payment of fines
  • Payments for unspecified services or loans to consultants, related parties, employees or government employees
  • Purchases at prices significantly above or below market price
  • Unusual payments in cash & other unusual transactions
aas 21 consideration of laws regulations in an audit of fs indications of noncompliance1
AAS 21 - CONSIDERATION OF LAWS & REGULATIONS IN AN AUDIT OF FS Indications of Noncompliance
  • Unusual transactions with companies registered in tax havens
  • Payments without proper exchange control documentation
  • Unauthorized or improperly recorded transactions
  • Media comment
slide39

AAS 21 - CONSIDERATION OF LAWS & REGULATIONS IN AN AUDIT OF FSIntroduction

  • Noncompliance generally based on expert’s advice but ultimately determined by a court of law.
  • Auditor likely to be aware of those noncompliances linked to events & transactions ordinarily reflected in F/S.
  • Auditor’s responsibility to consider fraud & error in audit covered by AAS - 4.
slide40
AAS 21 - CONSIDERATION OF LAWS & REGULATIONS IN AN AUDIT OF FSResponsibility of Management for Compliance
  • Achieved by:
    • Monitoring legal requirements
    • Internal control systems
    • Establishing legal department and/or engaging legal advisor.
    • Maintaining register of significant laws affecting entity & records of noncompliances.
    • Appropriating responsibilities to internal audit & audit committee.
aas 21 consideration of laws regulations in an audit of fs auditor s consideration
AAS 21 - CONSIDERATION OF LAWS & REGULATIONS IN AN AUDIT OF FSAuditor’s Consideration
  • Audit does not prevent noncompliance but may act as a deterrent.
  • Risk from noncompliance higher due to:
    • inherent limitations of accounting & internal control systems
    • persuasive rather than conclusive audit evidence
    • override of controls by management etc.
  • Recognition of conditions or events leading to noncompliance.
  • Statutory requirements may require to report compliance

with certain provisions of laws & regulations.

aas 21 consideration of laws regulations in an audit of fs auditor s consideration1
AAS 21 - CONSIDERATION OF LAWS & REGULATIONS IN AN AUDIT OF FSAuditor’s Consideration
  • Understanding legal & regulation framework:
    • CAKE
    • inquiring & discussing with management
  • Identifying instances of noncompliance:
    • inquiring with management
    • inspecting correspondences-regulatory authorities
aas 21 consideration of laws regulations in an audit of fs auditor s consideration2
AAS 21 - CONSIDERATION OF LAWS & REGULATIONS IN AN AUDIT OF FSAuditor’s Consideration
  • Sufficient appropriate audit evidence regarding compliance affecting amounts & disclosures in FS
  • Other procedures (besides above) outside scope of audit.
  • Written representations from management.
  • In absence of evidence to contrary entitled to assume compliance .
aas 21 consideration of laws regulations in an audit of fs procedures when noncompliance discovered
AAS 21 - CONSIDERATION OF LAWS & REGULATIONS IN AN AUDIT OF FSProcedures When Noncompliance Discovered
  • Obtain understanding of nature of act & circumstances to evaluate possible effect of noncompliance on FS
  • Evaluating possible effect on F/S, consider:
    • potential financial consequences
    • whether they require disclosure
    • whether they affect true & fair view
  • Document findings & discuss with management.
aas 21 consideration of laws regulations in an audit of fs procedures when noncompliance discovered1
AAS 21 - CONSIDERATION OF LAWS & REGULATIONS IN AN AUDIT OF FSProcedures When Noncompliance Discovered
  • Consult entity’s lawyers or other lawyers on possible effects/consequences
  • Effect of lack of evidence on auditor’s report.
  • Reliability of management representations in light of noncompliance.
aas 21 consideration of laws regulations in an audit of fs communicating reporting of noncompliance
AAS 21 - CONSIDERATION OF LAWS & REGULATIONS IN AN AUDIT OF FSCommunicating/Reporting of Noncompliance
  • To Management
  • Communicate to audit committee, BOD and senior management
  • Intentional and/or material noncompliance communicate without delay
  • Senior management including members of BOD involved in noncompliance- communicate matter to next higher level.
aas 21 consideration of laws regulations in an audit of fs communicating reporting of noncompliance1
AAS 21 - CONSIDERATION OF LAWS & REGULATIONS IN AN AUDIT OF FSCommunicating/Reporting of Noncompliance
  • To Users of Auditor’s Report
  • Qualified or adverse opinion. when material noncompliance not properly reflected in FS.
  • Qualified or disclaimer of opinion. if precluded from obtaining sufficient appropriate audit evidence regarding material noncompliance. .
aas 21 consideration of laws regulations in an audit of fs communicating reporting of noncompliance2
AAS 21 - CONSIDERATION OF LAWS & REGULATIONS IN AN AUDIT OF FSCommunicating/Reporting of Noncompliance
  • To Regulatory and Enforcement Authorities
  • Report to regulatory and enforcement authorities in case duty of confidentiality overridden by statute, law or by courts of law.
aas 21 consideration of laws regulations in an audit of fs withdrawal from engagement
AAS 21 - CONSIDERATION OF LAWS & REGULATIONS IN AN AUDIT OF FS Withdrawal from Engagement
  • No remedial action on material noncompliance
  • Involvement of highest authority affecting reliability of management representations
  • Communication to incoming auditor re.detailed reasons & attendant circumstances leading to withdrawal
aas 21 consideration of laws regulations in an audit of fs matters of discussion
AAS 21 - CONSIDERATION OF LAWS & REGULATIONS IN AN AUDIT OF FS Matters of Discussion
  • How many Acts are there - mind boggling!
  • Peculiar Acts
  • Laws & Regulations affecting F/S
  • Sufficient understanding of laws & regulations
  • Expert opinion/ Court of Law
slide51

AUDITING AND ASSURANCE STANDARDS (AAS) 28 – AUDITOR’S REPORT ON FINANCIAL STATEMENTS

NIRC / ICAI 9.7.2005

slide52

AAS28 – AUDITOR’S REPORT ON FINANCIAL STATEMENTSOVERVIEW

  • Introduction
  • Basic Elements of Auditors Report
  • Unqualified Opinion
  • Modified Reports
  • Limitation on Scope
  • Disagreement with Management
  • Statement on Qualifications in Auditor’s Report
  • Matters for Discussion
slide53

AAS28 – AUDITOR’S REPORT ON FINANCIAL STATEMENTSIntroduction

  • Clear written expression of opinion on FS taken as a whole.

BASED ON

CONCLUSIONS DRAWN FROM

AUDIT EVIDENCE OBTAINED

slide54

AAS28 – AUDITOR’S REPORT ON FINANCIAL STATEMENTSBasic Elements of Auditor’s Report

  • Title
  • Addressee
  • Opening or introductory paragraph
  • Scope paragraph
  • Opinion paragraph
  • Date of report
  • Place of signature, and
  • Auditor’s signature
slide55

AAS28 – AUDITOR’S REPORT ON FINANCIAL STATEMENTSBasic Elements of Auditor’s Report

  • Title

Appropriate title - “Auditor’s Report”

  • Addressee

Appropriately addressed - e.g. To the Members

slide56

AAS28 – AUDITOR’S REPORT ON FINANCIAL STATEMENTSBasic Elements of Auditor’s Report

  • Opening or introductory Paragraph
    • Financial statements of entity audited, including date and period covered
    • FS responsibility of entity’s management and responsibility of auditor to express an opinion on FS.
slide57

AAS28 – AUDITOR’S REPORT ON FINANCIAL STATEMENTSBasic Elements of Auditor’s Report

  • Scope Paragraph
    • Audit conducted in accordance with auditing standardsgenerally accepted in India.
    • Audit planned & performed to obtain reasonable assurance that FS are free of material misstatement..
    • Terms of Engagement
    • Matters prescribed by Legislation / Pronoucement of ICAI
slide58

AAS28 – AUDITOR’S REPORT ON FINANCIAL STATEMENTSBasic Elements of Auditor’s Report

  • Scope Paragraph
    • Auditor’s report should describe audit as including:
      • Examining, on a test basis, evidence to support amounts & disclosures in FS
      • Assessing accounting principles used in preparation of FS
      • Assessing significant estimates made by management in preparation of FS
      • Evaluating overall FS presentation.
    • Audit provides a reasonable basis for opinion.
slide59

AAS28 – AUDITOR’S REPORT ON FINANCIAL STATEMENTSBasic Elements of Auditor’s Report

  • Opinion Paragraph
    • Clearly indicate financial reporting framework used to prepare the FS
    • FS give a true and fair view in accordance with that financial reporting framework
    • FS comply with statutory requirements.
slide60

AAS28 – AUDITOR’S REPORT ON FINANCIAL STATEMENTSBasic Elements of Auditor’s Report

  • Date of Report
    • Date on which auditor signs report.
    • Not earlier than the date on which FS are signed or approved by management.
  • Place of Signature
    • Specific location, where audit report signed.
slide61

AAS28 – AUDITOR’S REPORT ON FINANCIAL STATEMENTSBasic Elements of Auditor’s Report

  • Auditor’s Signature
    • Signed by auditor in personal name
    • Where firm is appointed as auditor, report signed in personal name of auditor and in name of the audit firm.
    • Partner’s/proprietor’s membership number
slide62

AAS28 – AUDITOR’S REPORT ON FINANCIAL STATEMENTSUnqualified Opinion

  • True and fair view
  • Relevant
    • GAAP
    • Statutory Requirement
    • Disclosures
    • Change – Effect & Disclosures
slide63

AAS28 – AUDITOR’S REPORT ON FINANCIAL STATEMENTSModified Reports

  • Auditor’s report considered modified when it includes:
    • Matters That Do Not Affect Auditor’s Opinion
      • Emphasis of matter
    • Matters That Do Affect Auditor’s Opinion
      • Qualified opinion
      • Disclaimer of opinion
      • Adverse opinion
slide64

AAS28 – AUDITOR’S REPORT ON FINANCIAL STATEMENTSModified Reports

  • Matters That Do Not Affect Auditor’s Opinion
    • Paragraph to highlight material matter regarding a going concern problem where going concern question not resolved and adequate disclosures made in FS.
    • Paragraph if significant uncertainty, resolution of which is dependent upon future events and which may affect FS.
slide65

AAS28 – AUDITOR’S REPORT ON FINANCIAL STATEMENTSModified Reports

  • Matters That Do Affect Auditor’s Opinion
    • Limitation on scope of auditor’s work; or
    • Disagreement with management re.acceptability of accounting policies selected, method of application or adequacy of FS disclosures.
slide66

AAS28 – AUDITOR’S REPORT ON FINANCIAL STATEMENTSModified Reports

  • Matters That Do Affect Auditor’s Opinion

A qualified opinion when:

    • disagreement with management is not so material and pervasive as to require an adverse opinion
    • Limitation on scope is not so material and pervasive as to require disclaimer of opinion.
    • ‘subject to’ or ‘except for’
slide67

AAS28 – AUDITOR’S REPORT ON FINANCIAL STATEMENTSModified Reports

  • Matters That Do Affect Auditor’s Opinion
    • Disclaimer of opinion when limitation on scope is material and pervasive
    • Adverse opinion when disagreement is material and pervasive to FS
slide68

AAS28 – AUDITOR’S REPORT ON FINANCIAL STATEMENTSModified Reports

  • Matters That Do Affect Auditor’s Opinion

Other than unqualified opinion:

    • Clear description of all substantive reasons
    • Unless impracticable quantification of possible effect(s)individually and in aggregate on FS
slide69

AAS28 – AUDITOR’S REPORT ON FINANCIAL STATEMENTS Limitation on scope

Limitation on scope of Auditor’s work

  • Describe limitation
  • Indicate possible adjustments to the FS.
slide70

AAS28 – AUDITOR’S REPORT ON FINANCIAL STATEMENTSDisagreement with Management

  • Matters
  • Acceptability of accounting policies selected
  • Method of their application,
  • Adequacy of disclosures in FS.
  • If such disagreements material to FS - qualified or adverse opinion.
slide71

Statement on Qualifications in Auditor’s Report

  • Reporting Requirements Under Companies Act
    • Statements of fact
    • Opinions
  • Reporting:
    • u/s 227(1A) of Companies Act
    • u/s 227(4A) of Companies Act
slide72

Statement on Qualifications in Auditor’s Report

  • Qualification in Auditor’s Report
    • General Considerations
    • Aspects considered while Qualifying Reports
    • Manner of Qualifying Reports
    • Director’s Comments on Qualifications
    • Separate Report to Directors etc.
    • Branch Audit Reports
    • Total Effect of Qualifications-opinion may change
slide73

AUDITING AND ASSURANCE STANDARDS (AAS) 29

AUDITING IN A COMPUTER INFORMATION SYSTEMS ENVIRONMENT

NIRC / ICAI 9.7.2005

aas 29 auditing in a cis environment overview
AAS - 29 Auditing in A CIS Environment Overview
  • Introduction
  • Skills and Competence
  • Planning
  • Assessment of Risk
  • Audit Procedures
  • Documentation
aas 29 auditing in a cis environment introduction
AAS - 29 Auditing in A CIS Environment Introduction

Effective Date:

On or after April 1,2003

Purpose of this AAS:

Procedures in audit under CIS environment

aas 29 auditing in a cis environment introduction1
AAS - 29 Auditing in A CIS Environment Introduction

When does a CIS environment exist?

A CIS environment exists where:

  • One or more computer(s) of any type or size is (are) involved in processing of financial information
  • Whether operated by entity or a third party
aas 29 auditing in a cis environment introduction2
AAS - 29 Auditing in A CIS Environment Introduction
  • Overall objective & scope of an auditdoes not change in CIS environment, but may effect:
    • Procedures followed, in obtaining sufficient understanding of accounting and internal control system
    • Evaluation of inherent & control risk
    • Design & performance of tests of control & substantive procedures
aas 29 auditing in a cis environment introduction3
AAS - 29 Auditing in A CIS Environment Introduction
  • Factors determining evaluation of CIS environment
    • Extent to which CIS environment used in accounting system
    • System of Internal Control in existence
    • Existence or non-existence of audit trail
aas 29 auditing in a cis environment skills and competence
AAS - 29 Auditing in A CIS Environment Skills and Competence
  • Sufficient knowledge of CIS to plan, direct, supervise, control and review work
  • Consider specialized CIS skills needed
  • Compliance with AAS 9 “Using the Work of an Expert”,
aas 29 auditing in a cis environment planning
AAS - 29 Auditing in A CIS Environment Planning
  • Understanding significance & complexity of :
    • CIS environment
    • Complexities of CIS activities
    • Availability of data for use in audit
  • Understanding would include :
    • CIS Infrastructure
    • Complexity of processing like automated computation & generation of entries
    • Determination of availability of data
aas 29 auditing in a cis environment planning1
AAS - 29 Auditing in A CIS Environment Planning
  • Understand CIS environment influencing assessment of inherent & control risk

E.g.

    • Lack of transaction trails
    • Uniform processing of transactions
    • Potential for errors and irregularities
    • Dependence of Other Controls over computer processing
aas 29 auditing in a cis environment planning2
AAS - 29 Auditing in A CIS Environment Planning
  • Evaluate reliability of Accounting and Internal Control System to:
    • Ensure authorized, correct & complete data available for processing
    • Timely detection and correction of errors
    • Ensure accuracy and completeness of output
    • Prevent unauthorized amendments to programs
    • Provide for safe custody of source code of application software
aas 29 auditing in a cis environment assessment of risk
AAS - 29 Auditing in A CIS Environment Assessment of Risk
  • Assessment of inherent and control risks for material FSassertions - AAS 6 (Revised)
  • Pervasive & account specific effect of inherent & control risks in a CIS environment
  • Emerging CIS technologies
aas 29 auditing in a cis environment audit procedures
AAS - 29 Auditing in A CIS Environment Audit Procedures
  • Adequate procedures exist to ensure data transmitted is correct and complete
  • Cross verifications of records, reconciliation statements & control systems
  • Use of manual audit procedures or computer assisted audittechniques, or a combination of both to obtain sufficient evidential matter
aas 29 auditing in a cis environment documentation
AAS - 29 Auditing in A CIS Environment Documentation
  • Document
    • Audit plan,
    • Nature, timing and extent of audit procedures performed
    • Conclusions drawn from evidence obtained
  • Audit Electronic evidence adequately and safely stored and retrievable in its entirety
aas 29 auditing in a cis environment matters for discussion
AAS - 29 Auditing in A CIS Environment Matters for Discussion
  • CIS knowledge now necessary for auditors
  • Involvement of specialists
  • Auditors also need sophisticated CAAT tools to test controls under CIS environment
  • Can audit be outsourced out of the country in a CIS environment ?