S A 220

Leadership Responsibilities for Quality on Audits

Actions of engagement partner and appropriate messages to other members of engagement
team, in taking responsibility for overall quality on each audit engagement, emphasis:
• Importance to audit quality of:
• Performing work that complies with professional standards and regulatory & legal
requirement.
Complying with firm’s quality control policies and procedures.
Issuing appropriate auditor’s report.
Engagement team’s ability to raise concerns without fear of reprisals.
• Fact that quality is essential in performing audit engagements.

S A 240
Responses to assessed ROMM due to Fraud at FS Level and Assertion Level
In determining overall responses to address assessed ROMM due to fraud at FS level, auditor
shall:
• Assign & supervise personnel with knowledge & ability for significant engagement
responsibilities.
• Evaluate whether selection and application of accounting policies by entity may be
indicative of fraudulent financial reporting.
• Incorporate element of unpredictability in selection of NTE of audit procedures.
Audit procedures responsive to assessed ROMM due to fraud at assertion level:
• Auditor shall design and perform further audit procedures.
• In doing so, auditor may change NTE of audit procedures to obtain more reliable audit
evidence or to obtain additional corroborative information.
Fraud Risk Factors relating to Fraudulent Financial Reporting [Extra Points]
Incentives/Pressures
• Excessive pressure exists for management to meet requirements of third parties due to
following:
Profitability or trend level expectations of investors, creditors or other external parties.
Need to obtain additional debt or equity financing to stay competitive.
Marginal ability to meet listing requirements or debt repayment.
Adverse effects of reporting poor financial results on significant pending transactions.
• Information available indicates that personal financial situation of management/TCWG is
threatened by entity’s financial performance arising from following:
Significant financial interest in entity.
Significant portions of their compensation being contingent upon achieving aggressive
targets.
Personal guarantees of debts of entity.
Excessive pressure on management to meet financial targets established by TCWG.
Attitudes/Rationalizations
Relationship between management and current or predecessor auditor is strained due to
following:
Frequent disputes with auditor on accounting, auditing or reporting matters.
Unreasonable demands on auditor such as unrealistic time constraints regarding completion
of audit or issuance of auditor’s report.
Restrictions on auditor that inappropriately limit access to people or information.
Domineering management behaviour in dealing with auditor.
Fraud Risk Factors relating to Misappropriation of Assets (Extra Points)
Opportunities
Inadequate internal control over assets may increase susceptibility of misappropriation of
those assets. For example, misappropriation of assets may occur because of following:
Inadequate segregation of duties or independent checks.
Inadequate management oversight of employees responsible for assets.
Inadequate record keeping of assets.
Inadequate system of authorization and approval of transactions.
Inadequate physical safeguards over cash, investments, inventory or fixed assets.
Lack of complete and timely reconciliation of assets.
Lack of timely and appropriate documentation of transactions.
Lack of mandatory vacations for employees performing key control functions.
Inadequate management understanding of IT, which enable IT employees to misappropriate.
Documentation under SA 240
Auditor’s documentation of understanding of entity and assessment of ROMM shall include:
Significant decisions reached during discussion among engagement team regarding
susceptibility of entity’s FS to material misstatement due to fraud.
Identified and assessed ROMM due to fraud at FS level and at assertion level.
Auditor’s documentation of responses to assessed ROMM shall include:
Overall responses to assessed ROMM due to fraud at FS level and at assertion level and NTE
of audit procedures.
Results of audit procedures including those address the risk of management override of
controls.
S A 260
Significance of Communication with TCWG
An effective two-way communication is important in assisting:
• Auditor and TCWG in understanding matters related to audit and in developing constructive
working relationship.
• Auditor in obtaining information relevant to the audit from TCWG.
• TCWG in fulfilling their responsibility to oversee financial reporting process.
Significant Matters that were discussed or subject to correspondence with Management
Significant matters that were discussed with management include matters such as:
• Significant transactions occurred during the year.
• Business conditions affecting the entity, and business plans that may affect ROMM,
• Concerns about management consultation with other accountants on accounting/auditing
matters.
• Discussions regarding initial or recurring appointment of auditor.
• Matters on which there was disagreement with management except initial differences of
opinion.

S A 300
Planning - A Continuous Process
Planning is not a discrete phase of an audit but rather a continual and iterative process.
Planning includes the need to consider matters such as:
• Analytical procedures to be applied as risk assessment procedures.
• Obtaining general understanding of legal and regulatory framework applicable to entity.
• Determination of materiality.
• Involvement of experts.
• Performance of other risk assessment procedures.
Formulating an Audit Programme
In formulating on audit programme, important matters which need to be considered are:
• Nature of business in which organisation is engaged.
• Overall plan prepared for the audit.
• System of internal control and accounting procedures.
• Size of organisation and structure of its management.
• Information regarding organisation of business.
• Accounting policies followed by client.

S A 450
Factual, Judgmental and Projected Misstatements
• Factual Misstatements: Misstatements about which there is no doubt.
• Judgmental Misstatements: Differences arising from judgments of management regarding
AE that auditor considers unreasonable or accounting policies that auditor considers
inappropriate.
• Projected Misstatements: Auditor’s best estimate of misstatements in population during
sampling.
Documentation under SA 450
• Amount below which misstatements would be regarded as clearly trivial.
• All misstatements accumulated during audit and whether they have been corrected.
• Auditor’s conclusion whether uncorrected misstatements are material & basis for that
conclusion.

S A 570
Delay in Approval of FS
If there is delay in approval of FS and auditor believes that such delay can be related to
events or conditions relating to going concern assessment, auditor shall perform additional
procedures and consider effect on auditor’s conclusion.

S A 600
Documentation by Principal Auditor regarding Component Audited by Other Auditor
• Principal Auditor shall document in his working papers procedures performed and
conclusions reached regarding components audited by other auditors.
• He shall document results of discussions with other auditor & review of other auditor
procedures.
• If other auditor’s report is modified, principal auditor should also document how he has
dealt with qualifications or adverse remarks contained in other auditor’s report in framing his
own report.

S A 610
Work of Internal Audit Function that can be used by External Auditor
Work of internal audit function that can be used by external auditor include the following:
• Testing of operating effectiveness of controls.
• Substantive procedures involving limited judgment.
• Observations of inventory counts.
• Testing of compliance with regulatory requirements.
• Audit or review of insignificant components of group.
Factors for Evaluating Existence of Threats to Objectivity of Internal Auditor
In evaluating existence and significance of threats to objectivity of internal auditor, following
factors may be relevant:
• Extent to which internal audit function organizational status and relevant policies &
procedures support objectivity of internal auditors
• Family and personal relationships with individual working in entity.
• Association with division or department in entity to which the work relates.
• Significant financial interests in entity other than remuneration consistent with other
employees.

S A 620
Considerations When Deciding Whether to Use an Auditor’s Expert
• Whether management has used a management’s expert in preparing FS. If so, auditor’s
decision on whether to use auditor’s expert may also be influenced by following factors:
Nature, scope and objectives of management’s expert’s work.
Whether management’s expert is employed by entity or engaged by it.
Whether management’s expert is subject to technical performance standards.
Management’s expert competence and capabilities.
Extent to which management can exercise control or influence over management’s expert
work.
• Nature, significance and complexity of matter.
• ROMM in the matter.
• Availability of alternative sources of audit evidence.
Evaluating Competence and Capabilities of Auditor’s Expert
Matters which may affect NTE of Audit Procedure adopted by Auditor for Auditor Expert
Same as SA 500 [Management Expert]
Evaluating Objectivity of Auditor’s External Expert
• Inquiry of entity about any known interests or relationships with auditor’s external expert
that may affect objectivity.
• Discuss with that expert any applicable safeguard and evaluate whether safeguards are
adequate to reduce threats to an acceptable level. Interests and relationships that may be
relevant to discuss with auditor’s expert include:
• Financial interests
Business and personal relationships
Provision of other services by expert
Evaluating Relevance & Reasonableness of Assumptions/Methods and Source Data use by
Expert
• Assumptions & Methods
Factors relevant to auditor’s evaluation of assumptions and methods include whether they
are:
Generally accepted within auditor’s expert’s field.
Consistent with requirements of applicable FRF.
Consistent with management, and if not, reason and effect of differences.
Dependent on use of specialised models.
• Source Data
Following procedures may be used to test that data:
Verifying origin of data, including obtaining understanding & testing internal controls over
data.
Reviewing data for completeness and internal consistency.

S A 700
Location of Description of Auditor’s Responsibilities for Audit of FS
Description of auditor’s responsibilities shall be included:
• Within body of auditor’s report.
• Within appendix to auditor’s report and report shall include reference to location appendix.
• By specific reference within auditor’s report to location on website of appropriate authority,
where auditing standards expressly permit the auditor to do so.

S A 805
Forming an Opinion and Reporting Considerations
Auditor shall consider the implications whether a matter [Going Concern, Key Audit Matter,
Modified Opinion, EOM/OM, Other Information] included in auditor’s report on complete
set of FS is relevant for engagement to report on single FS or specific element of FS.
Factors that may be relevant in considering those implications include:
• Nature of matter being described in auditor’s report on complete set of FS and extent to
which it relates to single FS or specific element of FS.
• Pervasiveness of matter described in auditor’s report on complete set of FS.
• Nature and extent of difference between applicable FRFs.
• Extent of difference between period covered by complete set of FS compared to period of
single FS or element of FS.
• Time elapsed since the date of auditor’s report on complete set of FS.

S A 810
Auditor’s Evaluation whether Audited FS are available to Intended Users of Summary FS
Auditor’s evaluation whether audited FS are available to intended users of summary FS
without undue difficulty is affected by factors such as whether:
• Summary FS describe clearly from whom or where the audited FS are available.
• Audited FS are on public record.
• Management has established a process by which intended users of summary FS can obtain
ready access to audited FS.
Going Concern/Key Audit Matter/EOM/OM/Other Info. in Auditor’s Report on Audited FS
In that case, auditor’s report on summary FS shall also contain following:
(i) State that auditor’s report on audited FS contains Material Uncertainty Related to Going
Concern section, Key Audit Matter section, EOM/OM para and statement of uncorrected
material misstatement of other information.
(ii) Describe the matter referred above and effect thereof on summary FS.
Other Considerations
• Unaudited Supplementary Information Presented with Summary FS
Same as SA 700
• Comparatives
If audited FS contain comparatives but summary FS do not, auditor shall determine whether
such omission is reasonable.
Auditor shall determine effect of unreasonable omission on auditor’s report on summary FS.
• Other Information in Documents containing Summary FS
Same as SA 720
• Restriction on Distribution or Use or Alerting Readers to the Basis of Accounting
Same as SA 800

Reporting
Where Auditor’s Withdrawal is not Permitted Without Issuing Audit/Review Report
As per SEBI directive, if auditor proposes to resign:
• Within 45 days from end of any quarter, then auditor shall issue audit/limited review report
for such quarter before resignation.
• After 45 days from end any of quarter, then auditor shall issue audit/limited review report
for such quarter as well as next quarter.
• If limited review report has been issued for all three quarters, then auditor shall issue audit
report for full year before resigning from engagement.
ICAI announcement on Resignation of Auditor
Auditor of unlisted company shall not mention “professional pre-occupation” as a reason for
resignation. He shall mention resignation reasons clearly in resignation letter issued to the
Company.

SRE 2400
Practitioner not Satisfied from any Precondition
After accepting engagement, if practitioner is not satisfied from any preconditions, he shall
discuss the matter with management/TCWG and determine:
Whether matter can be resolved,
Whether it is appropriate to continue with engagement.
Whether and how to communicate the matter in practitioner’s report.
Other Topics
• Subsequent Event (after date of review report): Same as SA 560
• Withdraw from the engagement: Same as SA 705
• EOM/OM Parg: Same as SA 706
Auditor’s Responsibility for Accompanying Information
• Auditor should read other information that accompanies interim financial information to
consider whether such information is materially inconsistent with interim financial
information.
• If auditor identifies material inconsistency, auditor shall consider whether interim financial
information or the other information needs to be amended.
• If amendment is necessary in interim financial information and management refuses to
make such amendment, auditor considers the implications for review report.
• If amendment is necessary in other information and management refuses to make such
amendment, auditor considers to include additional paragraph in review report describing
material inconsistency, or withholding issuance of review report or withdrawing from
engagement.
Auditor Association [Other Considerations]
• If any document containing interim financial information indicates that such information
has been reviewed by entity’s auditor, review report will also be included in document. If
management has not included review report, auditor should take legal advice for determining
appropriate action.
• If auditor has issued a modified review report and management issues interim financial
information without including modified review report, auditor should take legal advice for
determining appropriate action and possibility of resigning from appointment to audit annual
FS.

SRE 2410
SAE 3402
Additional Matters requiring Reporting in Type 2 Report
• In case of type 2 report, service auditor’s assurance report shall include a separate section
after the opinion that describes tests of controls that were performed and results of those tests.
Audit Additional Topics
• In describing tests of controls, service auditor shall clearly state which controls were tested
and indicate nature of tests in detail.
• If deviations identified, service auditor shall include number and nature of deviations noted
Fundamental Principles
• Integrity
It requires professional accountant to be straightforward and honest in all relationships.
He shall not knowingly be associated with information where he believes that the
information:
Contains materially false or misleading statement.
‹ Contains statements or information provided negligently.
O m i t s required information.
However, professional accountant will not be considered to be in breach of matters
mentioned
above if he provides modified report in respect of above matter.
If he becomes associated with information described above, he shall take steps to be
disassociated from that information.
• Professional Competence and Due Core
• It requires an accountant to attain & maintain professional knowledge and act diligently as
per
technical and professional standards.
It requires exercise of sound judgment in applying professional knowledge and skill when
undertaking professional activities.
Maintaining professional competence requires continuing awareness and understanding of
technical and professional developments.
› Accountant shall take reasonable steps to ensure that those working under his authority have
appropriate training and supervision.
• Professional Behaviour
It requires an accountant to comply with relevant laws and regulations and avoid any conduct
that might discredit the profession.
• When promoting himself and his work, he shall not bring profession into disrepute.
He shall be honest and truthful and should not make:
/ Exaggerated claims for services, qualifications or experience.
Disparaging references or unsubstantiated comparisons to work of others.
● Any direct or indirect measures to advertise in violation of Advertisement Guidelines.

• Objectivity and Confidentiality: Already covered in detail in concept book

Fundamental principles should be emphasized by actions of leadership of firm, spreading
awareness
and training, monitoring and process for dealing with non-compliance.
Professional accountant might face a situation where complying with one principle conflicts
with
other. In such case, he should consult with others within organisation, TCWG, ICAI or legal
counsel.
However, such consultation does not relieve accountant from responsibility to exercise
professional
judgment to resolve the conflict or disassociate from matter creating conflict.

Addressing Threats
If professional accountant determines that identified threats to compliance with fundamental
principles are not at an acceptable level, he shall address the threats by eliminating them or
reducing
them to an acceptable level. He shall do so by:
• Eliminating circumstances including interests or relationships that are creating the threats,
or
• Applying safeguards to reduce threats to an acceptable level, or
• Declining or ending specific professional activity.

Documentation Requirements in NOCLAR

Professional accountant should follow the additional documents requirement as under:
• How management/TCWG have responded to matter.
• Course of action considered by accountant, judgments made and decisions taken.
• How accountant is satisfied that responsibility of public interest has been fulfilled.
This documentation is in addition to complying with documentation requirements under SA.

Members deemed to be in Practice (Extra Points)

• Market research and demand studies, business policy, corporate planning etc.
• Systems analysis & design, computer related services and any other services relating to
EDP.
• Advice regarding selection of ad-media, centres for holding conferences of brokers etc.,
bankers
to issue, collection centres, various agencies connected with issue and post issue activities.
• Investment counselling in respect of securities.
• Acting as registrar to an issue and for transfer of securities.
• Insurance Financial Advisory Services under IRDA Act, 1999 including Insurance
Brokerage.
• Member is deemed to be in practice during the period he renders service with armed forces.

Certain Services not to be rendered by Auditor [Section 144 of Companies Act, 2013)
Company auditor shall not provide following services to company or its holding or subsidiary
company:
Accounting & book-keeping services, Internal audit, Design & implementation of any
financial
information system, Actuarial services, Investment advisory services, Investment banking
services,
Rendering of outsourced financial services, Management services & Any other services as
prescribed

Part I Clause 6 of First Schedule

• Publishing edvertisements under box numbers: Prohibited
• Sharing Firm Profile with prospective Client: Not permitted unless it is in response to
specific
query of proposed client.
• Television or Movie Credits: Member/firm name can be included in Television or Movie
Credits
provided name exhibition is not made differently as compared to other entries in credits.

Part I Clouse 7 of First Schedule

• Members of Institute who are Directors in Companies, CA Cels or Members of political
parties,
holding positions in clubs or other organisations are not permited to mention any positions.
• Members are permitted to mention title indicating membership of foreign Institute of
Accountancy, recognized by Council through agreement (MoU/MRA) with said Institute.
• Members are not permitted to use initials ‘CPA’ (Certified Public Accountant) on visiting
cards.
• Notice in Press relating to Success in Examination: It should not contain any undesirable
publicity
relating to articled/audit assistant/employee/member/firm.
• Writing Articles or Letters to Press: Members may give their names and use the description
CA.
• Organising Training Courses/Seminars for staff: He may also invite staff of other CAs and
clients.
However, undue prominence should not be given to CA name in any booklet/document
issued.
• Size of Sign Board: Members have own discretion regarding size of sign board. However,
use of
glow signs or lights on large-sized boards as used by shopkeepers is not permissible.
• Use of logo/monogrom of ony kind/form/style/design/celour.etc.on anything: Prohibited.
Only use
of CA logo is permissible, subject to CA logo guidelines.

Chapter XVI - Logo Guidelines

Guidelines for using new “CA India” logo for CA members prescribes that logo consists of
letters ‘CA’ in blue colour with a tri colour tick mark (upside down) with white background.
There should be no alteration of font and no change in spacing and dimensions. The logo
should
not be shrunk or distorted.
Transition time of one year has been provided to use existing.

Part I Clause 8 of First Schedule

• Firm not found at the given Registered address: If Communication sent by Incoming auditor
is
received back with remarks “No such office exists at this address”, and address of
communication
is same as registered with Institute on date of dispatch, letter will be deemed to be delivered,
unless the retiring auditor proves that it was not really served.
• Communication in cose of Joint Audit: It is necessary for new auditor appointed to act
jointly with
earlier auditor to communicate with such earlier auditor.

Part I Clause 4 of Second Schedule

• CA should not accept audit of college, if he is working as a part-time lecturer in college.
• CA should not accept audit of Trust where his partner is an employee/trustee of Trust.
• Members are not permitted to write books of account of their auditee clients.

Recent Decisions of Ethical Standards Board

Not Permissible for CA in Practice
• Statutory auditor cannot prepare BRSR study to audit clients. [However, he may provide
advisory
services on same and can be “Assurance provider of BRSR” for some client]
• Statutory auditor cannot engage in compilation engagement as per SRS 4410 of that entity.
• CA cannot publish vision or mission statement on letter head, visiting card etc. [It may be
printed
on firm profile and provided on specific request].
• Statutory auditor of bank cannot accept ASM assignment of customer of bank
simultaneously.
• CA cannot be appointed as internal auditor and procurement officer simultaneously.
• CA cannot act as trademark or patent attorney. [However, advice relating to Intellectual
Property
Right (IPR) is permissible].
• CA cannot accept appointment of statutory audit of society where immediate family
member i.e..
spouse/dependent of CA hold position of managing committee of institutes governed by
society.
• CA being director simplicitor in company cannot sign ROC forms of company.
• If CA is non-executive director in company, he/his firm cannot accept appointment as
statutory
auditor of company which is a joint venture of original company, as it would impact
independence.
• Statutory/tax auditor cannot be valuer of unquoted equity shares of same entity if law
prohibits.
• CA cannot exercise lien over client documents/records for non-payment of his fees.
• If CA is statutory auditor of bank, he cannot accept stock audit/inspection audit of any
branches
or sister concern of same bank for same financial year.
• Concurrent auditor of bank X cannot appoint as statutory auditor of bank Y, sponsored by
’X.
Permissible for CA in Practice
• Service assessment/performance audit of skill development council centres of government.
• Accept assignment of mystery audit.
• Mention as promoter/director on company portal without professional attainments and firm
name.
• Become professional director in management board of co-operative bank.
• Set-up practice in IFSC/GIFT city.
• Render services to IFSC units from offices outside IFSC.
• Charge fees on % of utilization amount for certifying amount spent by Institute from grant.
• Become member in management board of primary (urban) co-operative banks where there
is no
involvement of member in day-to-day operations and only sitting fees is provided for
services.
• CA Firm may register itself on Udyog Aadhar, a web portal of MSME Ministry.
• Provide services through kiosk only if services provided are permitted for practicing CA.
• Act as authorized representative of foreign company provided, he is not auditor of said
company.
• 2 or more CA collectively can take joint GST training session for their clients and share
fees.
• Engage as registration authority for obtaining digital signatures for clients.
• Engage in derivative transactions in personal capacity but not in professional capacity (for
clients).
[However, CA in practice cannot transact in commodity derivative transactions in any
copacity)
Permissible for CA in Service
• Allowed to take e-return registration if it does not conflict with employment obligation.
[However,
he cannot certify the return).
• Appear as tax representative before tax authorities on behalf of his employer, but not on
behalf
of other employees of employer.