The Auditing Practices Committee was established by the Institute of Chartered Accountants of India (ICAI) in 1982 to create the standard on auditing practices.
The objectives of the standards for auditing, reviews, other assurance, quality control, and associated services are to produce high-quality audits by enhancing professional accountants’ standards of practice and, eventually, to boost the public’s trust in financial reporting.
The SAS will be applicable whenever an independent review of financial data is conducted for any firm, regardless of whether the business objective is to earn a profit or not, regardless of the entity’s size or legal status. All SAs are connected and must submit applications together. The number assigned to SA is comparable to the numbering scheme used for the IAASB’s international standards on auditing. 46 Engagement and Quality Control Standards have been published by the ICAI’s Auditing and Assurance Standards Board.
- SQC, or Standards on Quality Control, to be used by businesses that conduct audits, reviews of historical financial information, and other engagements for assurance and related services to ensure quality. According to SQC, the company must set up a system of quality control that will give it a reasonable level of assurance that the firm and its employees abide by professional standards, statutory and regulatory requirements, and that any reports produced by the company or its engagement partners are pertinent to the situation. SQC thus lays the stage for improving audit quality
- For the auditing of historical financial data, there are Standards Auditing (SAs). These apply every time an independent audit is conducted
- to examine jobs’ historical financial information, there are Standards on Review Engagements (SREs)
- For assurance engagements other than financial information audits and reviews, there are Standards on Assurance Engagements (SAEs)
- Standards on Related Services (SRSs) for all engagements concerning the application of established practices to data, compiling, and other services-related engagements.
The Standard on Auditings- Main Components
The International Federation of Accountant’s International Standards on Auditing (ISAs) serve as the foundation for the Standards on Auditing (SAs) published by the ICAI (IFAC). These standards are published by the AASB with permission from the ICAI council. The auditor must oversee adherence to certain auditing standards, according to Section 143(2) of the Companies Act of 2013.
The following is an explanation of some of the fundamental auditing standards’ guiding principles:
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Risk-Based Auditing
According to the ICAI’s auditing requirements, the auditor must conduct a “Risk Based Audit.” A risk-based audit aims to gain a reasonable assurance that the financial statements are free from major misstatements, including those brought on by fraud or mistakes.
The following rebuttable supposed risks of material misrepresentation must be taken into account by the auditor in accordance with the standards on auditing:
- The possibility of revenue recognition fraud
- Controls that are overridden by management-related risks
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Scalability
All entities must be audited in accordance with the ICAI’s auditing guidelines. In other words, when using these standards, the nature, size, and legal structure of the company are all immaterial. In other words, “An Audit is an Audit.” According to the International Federation of Accountants (IFAC), “high-quality auditing standards should be applied to the audits of the financial statements of companies of all sizes, and in fact, are capable of being implemented.” There is growing talk about creating separate auditing standards for small and less complex entities on a global scale.
However, updated standards published by the International Auditing and Assurance Standards Board, such as ISA 315 and ISA 540, support the idea of scalability while also giving additional application guidelines particular to audits of smaller, less complicated businesses.
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Professional skepticism
Professional skepticism is described as “An attitude that includes a questioning mind, being alert to conditions which may indicate possible misstatement due to error or fraud, and a critical assessment of audit evidence” in SA 200, “Overall Objectives of the Independent Auditor and the Conduct of an Audit by Standards on Auditing.” At least ten other standards, including SA 240, SA 300, and others, in addition to SA 200, place emphasis on the necessity to conduct the audit with professional skepticism.
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Materiality
The term “materiality” is used in the auditing standards. If a piece of information’s absence or misstatement could have an impact on how users decide to make economic decisions based on the financial statements, it is considered material. Materiality varies depending on the size and unique conditions of each company. The auditor must use professional judgment when determining materiality.
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Audit evidence
The series 500-599 of auditing standards offer comprehensive instructions on how to gather sufficient and suitable audit evidence. This includes advice on sampling, connected parties, physical observations of inventory verification, accounting estimates, and external confirmations.
Assessment of the going concern assumption (SA 570) and subsequent event verification are both required by the auditing standards (SA 560). These two ideas/standards are now more important than they were before in light of clause (xix) of the updated CARO 2020. emphasize management representation letters that are appropriately crafted (SA 580). Although a representation letter is not a substitute for stronger audit evidence, the auditor may have no choice but to rely on a representation letter to protect themselves in some situations, such as when there are off-balance sheet items or contingent liabilities.
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Documentation
The audit documentation serves as a record of the audit methods carried out (including the preparation phase), the pertinent audit evidence gathered, and the findings reached by the auditor. Sometimes, terms like “working papers” or “work papers” are used to refer to audit documentation. While SA 230 “Audit Documentation” offers specific and general recommendations on the audit documentation, the majority of auditing standards demand that the auditor complete particular documentation. The auditor must have several documents thorough job done because different regulators are now scrutinizing auditors more closely.
Conclusion
It may be difficult to comply with the many auditing requirements, especially for small practitioners and when auditing smaller, less complicated businesses. To help the auditor apply these standards, the ICAI has published Implementation Guides for The auditor must obtain auditing standards.
The Quality Review Board has found numerous instances of non-compliance with these requirements for audits. Additionally, there is greater vigilance as a result of the rise in fraud cases, and most regulators have auditors “on the radar.” Chartered accountants are accused of neglecting their duties. This is having an impact on practicing chartered accountants’ credibility in addition to leading to actions against chartered accountants. The auditor can only support the audit conclusion if they follow the auditing standards, and other authoritative pronouncements, and most crucially, provide sufficient documentation.
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