Contents (SA 200) BASIC PRINCIPLES GOVERNING AN AUDIT.....................................................................................2 (SA 210) TERMS OF AUDIT ENGAGEMENT. .................................................................................................6 (SA220) QUALITY CONTROL FOR AUDIT WORK ........................................................................................... 8 (SA 230) AUDIT DOCUMENTATION (Revised) . ............................................................................................. 8 (SA240) THE AUDITOR’S RESPONSIBILITY TO CONSIDER FRAUD AND ERROR IN AN AUDIT OF FINANCIAL STATEMENTS (revised) ............................................................................................................................ 11 (SA 250) CONSIDERATION OF LAWS AND REGULATONS IN AN AUDIT OF FINANCIAL STATEMENTS (revised) 14 (SA 260) COMMUNICATIONS WITH THOSE CHARGED WITH GOVERNANCE (revised) .................................. 15 SA 265 COMMUNICATING DEFIDCIENCIES IN INTERNAL CONTRO TO THOSE CHARGED WITH GOVERNANCE AND MANAGEMENT ............................................................................................................................... 17 (SA 299) JOINT AUDITORS ....................................................................................................................... 18
Transcript
Contents (SA 200) BASIC PRINCIPLES GOVERNING AN AUDIT .....................................................................................2
(SA 210) TERMS OF AUDIT ENGAGEMENT. .................................................................................................6
(SA220) QUALITY CONTROL FOR AUDIT WORK ...........................................................................................8
It is expected from auditor to maintain highest level of integrity (honesty), sincerity and
objectivity, not only, in carrying work of audit but also in carrying all other services provided by
auditor.
The auditor should be straight forward, honest and sincere in his approach to his professional work.
He must be fair and must not allow prejudice or bias to override his objectivity.
Moreover, it s expected from auditor to behave in an independent manner, means, his expression
of opinion should not be influenced by any factor or any person.
2) Confidentiality:
Auditor should not disclose any confidential matter which he came across during the process of
audit unless and until it is allowed by client or demanded by court of law.
The height of confidentiality is expected from auditor in a way that even though client has selected
some another auditor, still confidentiality should be maintained. It is remarked that an auditor
should keep his ears and eyes open but his mouth shut.
3) Skills and competence:
Such skills are possessed by auditor through general education, practical experience and constant
touch with latest developments.
4) Work performed by others:
Auditor is not able to carry entire work of audit on his own so, he will have to take assistance of
others like articles, experts, branch auditors, etc.
When the auditor delegates work to assistants or uses work performed by other auditors and
experts, he will continue to be responsible for forming and expressing his opinion on the financial
Integrity, objectivity , independence
Confidentiality
Skills and competence
work performed by others
Audit reporting and conclusion
Documentation
Audit planning
work peformed by others
Audit evidence
System of accounting and internal control
information. However, he will be entitled to rely on work performed by others, provided he
exercises adequate skill and care and is not aware of any reason to believe that he should not have
so relied.
5) Documentation:
Documentation are the working papers prepared by the auditor for himself and not for his client
so that if at a later date any case is filed against auditor about negligence of his duties then it can be
available as proof to outsiders.
These working papers are prepared at each and every stage of audit, i.e., audit planning,
implementation and reporting.
6) Audit planning:
The main objective of audit planning is to conclude the work of audit in a timely and efficient
manner which can give satisfaction to both auditor as well as client.
Plans should be made to cover other things:
Acquiring knowledge of the client’s accounting system, policies and internal control procedures.
Establishing the expected degree of reliance to be placed on internal control.
Determining and programming the nature, timing and extent of the audit procedures to be performed.
Coordinating the work to be performed.
7) Audit evidences:
Auditor should generate necessary and appropriate audit evidences through compliance and
substantive procedure to enable the auditor to express his opinion about truth and fairness of
financial statements.
Compliance procedures are tests designed to obtain reasonable assurance that those controls on
which audit reliance is to be placed are in effect.
Substantive procedures are designed to obtain evidence as to the completeness, accuracy and
validity of the data produced by the accounting system.
o Such substantive procedure are of two types:
Tests of details of transactions and balances;
Analysis of significant ratios and trends including the resulting enquiry of unusual fluctuation
and items.
8) System of accounting and internal control:
Auditor should check appropriateness of system of accounting and internal control set by
management, to observe whether they are good enough to record each and every transaction
correctly.
9) Audit reporting and conclusion:
Expression of opinion about the truth and fairness of the financial statement is the ultimate
objective with which an auditor is appointed. Audit report may be a clean report , qualified,
adverse or disclaimer of opinion.
When a qualified opinion, adverse opinion or a disclaimer of opinion is to be given or
reservation of opinion on any matter is to be made, the audit report should state the reasons
therefore.
(SA 200A) OBJECTIVES AND SCOPE OF THE AUDIT OF FINANCIAL STATEMENTS
1) The main object of an audit of a financial statement, prepared within a framework of recognized
accounting policies and practices and relevant statutory requirements, is to enable an auditor to
express opinion about truth and fairness of financial statements.
2) Such main object is supported by following four incidental objectives. They are
Each and every transaction should have been recorded
Such transactions should have been correctly recorded.
Such transactions should be supported with the evidences.
Financial statement should be presented in a statutory manner.
If any of these incidental objectives are not achieved then main objective will not be achieved.
3) Moreover, the user should not assume that the auditor’s opinion is an assurance as to the future
viability of the enterprise or the efficiency or effectiveness with the management has conducted the
affairs of the enterprise.
4) In fact, preparation and presentation of financial statement is ultimate responsibility of the
management and such responsibilities are not reduced on the part of management whether audit is
carried or not.
5) Moreover, discovery of frauds and errors is just an incidental objective flowing from the main objective
of expression of opinion and which may be achieved or may not be. So, even after conducting work of
an audit if any misstatement is lying in the financial statement still auditor will not be held responsible
for the same provided he has exercised reasonable care and skill.
6) The scope of an audit is mainly decided by following:
Terms of engagement, in between auditor and management.
Statutory requirements mean requirements of act.
Pronouncements of Institute, means AS and AAS or SA.
Legal judgment given by various courts of law.
7) Terms of engagement in between auditor and management cannot restrict the scope already decided
by statute or pronouncements of Institute. If any management is trying to restrict the scope of work of
the auditor through terms of engagement then it will be treated as limitation on the scope of the work
where auditor may give qualified or adverse opinion or disclaimer of opinion.
8) Scope of an audit will differ from audit to audit (i.e. club, hospital, library, company, etc) but still there is
a common scope which is becoming applicable and which is derived from incidental objectives.
9) Such common scope is as follows:
To check appropriateness of system of accounting.
To check appropriateness of system of internal control.
Vouching and Verification.
(SA 210) TERMS OF AUDIT ENGAGEMENT. 1) The auditing standard is issued with the objective to establish standard on:
Agreeing the terms of the engagement with the client, and
The auditor’s response to a request by a client to change the terms of an engagement to one that
provides a lower level of assurance.
2) The auditor and the client should agree on the terms of the engagement. The agreement should be in
writing. The auditor should send an engagement letter, preferably before the commencement of the
engagement to help avoid any misunderstanding.
3) Moreover, it should be confirmed that there is a common understanding between the auditor and
management. Principal contents of audit engagement letter:
Objective of Audit of financial statements.
Management’s responsibility for the financial statements.
Management’s responsibility for selection and consistent application of accounting policies and
accounting standards.
Auditor's response
to change the terms
to the one which provides lower level of assurance
Agreeing to terms of agreement
Management 's responsibility
for
maintain internal control
financial
statement
Accounting
policy &
Standards
for Going concern
Making judgements
&
estimates
Management’s responsibility for preparing the financial statements on a going concern basis.
Management’s responsibility for making judgments and estimates that are reasonable and prudent.
Management’s responsibility for the maintenance of adequate records and internal controls.
The scope of audit, including reference to applicable legislation, regulations, etc.
The fact that having regard to test nature of an audit, persuasive rather than conclusive nature of
audit evidence together with inherent limitations of internal control system, there is an
unavoidable risk that some fraud and error may remain undetected.
Unrestricted access to whatever records, documentation and other information requested in
connection with audit.
4) Additional matters in the engagement letter:
Planning of the audit.
Written confirmation from management in connection with audit.
Request for the client to confirm the terms of engagement by acknowledging the receipt of the
engagement letter.
Any other reports or letters the auditor expects to issue.
Fees and billing arrangements.
Involvement of other auditors and experts.
Involvement of internal auditors and other staff of the client.
Arrangement with predecessor auditor.
Any restrictions on the auditor’s liability, where such possibility exists.
5) Moreover, when the auditor of parent company is also the auditor of its subsidiary , branch or division,
he should consider certain factors like legal requirements, independence of management, degree of
ownership by parent, extent of work performed by other auditors etc. in deciding whether to issue
separate engagement letters.
6) In case of recurring audit, the auditor should consider whether the circumstances require the terms of
the engagement to be revised and whether there is a need to remind the client of the existing terms of
the engagement.
7) Acceptance of a change in engagement:
In case an auditor is requested to change the engagement to one that provides a lower level of
assurance before completion of the engagement, he should consider the appropriateness of doing
so and should agree on the new terms.
A change in circumstances that affects the entity’s requirements or a misunderstanding concerning
the nature of service originally requested would ordinarily be considered a reasonable basis for
requesting change in engagement.
Before agreeing to change, the auditor should consider any legal or contractual implications of the
change and the auditor would not agree to change of engagement if there is no reasonable
justification for doing so.
If the auditor is unable to agree to a change of the engagement and is not permitted to continue
the original engagement, he should withdraw from the engagement and consider any obligation to
report the circumstances necessitating the withdrawal to other parties, viz. Board of Directors or
shareholders.
(SA220) QUALITY CONTROL FOR AUDIT WORK 1) The purpose of this Standard is to establish standards on the quality control regarding:
Policies and procedures of an audit firm regarding audit work generally.
Procedures regarding the work delegated to assistants on an individual audit.
2) The objective of issuing auditing standards is to provide similar quality of services to the client by every
auditor so that it should not make any difference to the client, with whatever firm of auditor; client is
getting his books of accounts audited.
3) For providing similar quality of services, Institute has advised that every firm of auditor should follow all
standards on auditing issued by the Institute and accordingly their quality of services will be similar.
4) Moreover, such quality control should be maintained not only at firm level but also at individual level
and for the purpose it becomes responsibility of the auditor to communicate, to guide, to supervise, to
control necessary auditing standards to the subordinates working under him.
5) Following are the essential factors for incorporating quality control audit work:
Professional Requirements – Adherence to basic principles such as independence, integrity, objectivity,
confidentiality, etc.
Skills and competence – Audit personnel should have required degree of skill and competence.
Assignment – Audit work should be assigned only to competent personnel.
Delegation – There is to be sufficient direction, supervision and review of work at all levels.
Consultation – Consultancy within and outside the firm with experts.
Acceptance and retention of clients – Evaluation of prospective client and review of existing client
should be done.
Monitoring – Continued adequacy and effectiveness of quality control policies should be monitored.
(SA 230) AUDIT DOCUMENTATION (Revised). 1) The main objective of the auditor is to prepare documentation that provides;
A sufficient and appropriate record of the basis for the auditor’s report; and
Evidence that the audit was planned and performed in accordance with SAs and applicable legal and
regulatory requirements.
2) For understanding this standard the term experienced auditor means:
An individual (whether internal or external to the firm) who has practical audit experience, and a reasonable
understanding of:
Audit processes.
SAs and applicable legal and regulatory requirement.
The business environment in which the entity operates.
Auditing and financial reporting issues relevant to the entity’s industry.
3) Here, documentation are the working papers prepared by the auditor for himself and not for the client
so that if at a later date, if any case is filed against the auditor about negligence of his duties then it can
be available as a proof to the outsider.
4) These working papers are prepared at each and every stage of audit, i.e.
Audit planning
Audit Implementation
Audit reporting.
5) Audit working papers are mainly of two types:
Permanent audit file
Current audit file
Basis Evidencemain
objective
Permanent file
Current
file
6) Permanent audit file contains permanent information in respect of clients which is not changing from
year to year and which an auditor must refer every year before starting with the work of an audit to
have a recall about entire organization.
A permanent audit file normally includes:
Information concerning the legal and organizational structure of the entity.
Extracts or copies of important legal documents, agreements and minutes relevant to the audit.
A record of the study and the evaluation of the internal controls related to the accounting system.
Copies of audited financial statements for previous years.
Analysis of significant ratios and trends.
Copies of management letters issued by the auditor, if any.
Record of communication with the retiring auditor, if any, before acceptance of the appointment
as auditor.
Notes regarding significant accounting policies.
Significant audit observations of earlier years.
7) Current audit file of auditor contains auditor’s current year’s observations, information, queries,
weaknesses, justification, etc., which will become helpful to him only in the next year.
8) The auditor shall prepare audit documentation that is sufficient to enable an experienced auditor,
having no previous connection with the audit, to understand:
The nature, timing, and extent of the audit procedures performed to comply with the SAs and
applicable legal and regulatory requirements.
The results of the audit procedures performed, and the audit evidence obtained.
Significant matters arising during the audit, the conclusions reached thereon, and significant
professional judgments made in reaching those conclusions.
9) Audit working papers are the properties of auditor and at his own willingness he can hand it over to the
management otherwise there is no compulsion on the part of auditor.
10) Moreover, auditor is not required to exercise right on his own working papers as right of lien can be
exercised only on the property of the other whereas the audit working papers are prepared by the
auditor and so its being property of the auditor.
11) Moreover, based on the basic principle of confidentiality given within AAS – 1 (SA 200), audit working
papers are generated by the auditor during the process of audit and so auditor must maintain the
confidentiality of the same otherwise auditor can be held guilty of negligence of his professional duties.
12) For what number of years, auditor should preserve working papers that depends upon his own
professional judgment to decide but Institute has advised as far as possible , auditor should preserve it
for ten years and for preserving working papers for such a longer period of time, it should be in the form
of bound book which is known as audit note book.
13) If after conducting work of audit in exceptional circumstances, the auditor performs new or additional
audit procedures (when subsequently the accounts are amended) or draws new conclusions after the
date of the audit then he shall document:
The circumstances encountered.
Te new or additional audit procedures performed, audit evidence obtained, and conclusions
reached, and their effect on the auditor’s report.
When and by whom the resulting changes to audit documentation were made and reviewed.
14) After the assembly of the final audit file has been completed, the auditor shall not delete of discard
audit documentation of nay nature before the end of its retention period (10 years).
15) Moreover, where the auditor finds it necessary to modify existing audit documentation or add new
audit documentation after the assembly of the final audit file has been completed, the auditor shall
document:
a) The specific reasons for making them.
b) When and by whom they were made and received.
(SA240) THE AUDITOR’S RESPONSIBILITY TO CONSIDER FRAUD AND
ERROR IN AN AUDIT OF FINANCIAL STATEMENTS (revised) This standard on auditing (SA) deals with the auditor’s responsibilities relating to fraud in an audit of financial statements.
Experienced auditor
Sufficient to enable another
auditor
Confidentiality & preserve WP
right to l ien his own
WP
WP property of auditor
WP of 2 types
Permanent & current
fi le
Wp prepared at every stage - P- I -R
WP prepared for himself , acts as proof
The main objective of the auditor:
To identify and assess the risks of material misstatement in the financial statements due to fraud. To obtain sufficient appropriate audit evidence about the assessed risks of material misstatement due
to fraud, through designing and implementing appropriate responses.
To respond appropriately to identified or suspected fraud.
[Basically, this Standard does not give responsibility to the auditor to discover every kind of frauds and errors as it is not his objective rather it indicates what should be his job when any suspect about frauds or errors arises or when any fraud or error is actually discovered]
FRAUD – It refers to international misrepresentation of financial information by one or more individuals among employees, management, those charged with governance or third parties. A fraud may involve any of the following situations:-
Manipulation or falsification of accounting records.
Misappropriation of assets. Suppression or omission of effects of transactions from records or documents.
Wrong accounting procedures.
Misapplication of accounting policies.
Error – It refers to unintentional mistakes in financial statements. An error may involve any of the following situations:-
Mathematical or clerical mistake.
Oversight or misrepresentation of facts. Misapplication of accounting policies. 1) Prevention and detection of fraud and error is the responsibility of the management and for this
purpose management should implement and continuously operate an adequate system of internal control.
2) Auditor should plan his audit procedures in such a way that as far as possible auditor will discover all possible frauds and errors otherwise if any fraud or error is lying in financial statement then it may affect his own expression of opinion.
3) Inherent Limitations of Audit: Every system is working with limitations, even the system of audit is also
working with limitations. The limitation of the part of system of audit is that even though all the
transactions are checked by auditor, there is no absolutes surety that every kind of frauds and errors will be discovered. People have accepted the system of audit with such limitation all because of the fact that the benefits of the system are more than limitations.
Our Institute is a responsible body and so they cannot convey randomly about limitation of system of audit. So it has given following reasons or justifications for such limitation:
Identify find appropriate
evidence
The objective of an audit is to enable auditor to express opinion about truth and fairness of financial statements and not to discover fraud and error so when objective is not to detect fraud and error, people should not expect from the auditor to discover every kind of fraud and error.
Discovery of fraud and error is not a main objective. It is just an incidental objective, flowing from main objective and such incidental objectives may be achieved or may not be.
Auditor is always facing lack of time and so he is not able to conduct full audit and he relies upon test audit only. When he is just doing test audit, people should not expect from him to discover, every kind of frauds and errors.
Auditor cannot start his work of audit with suspicious frame of mind about frauds and errors but during the process of audit, if he finds anything suspicious, he cannot neglect it and he must readjust his audit procedures and try to make it extensive. If he is starting his work with suspicious frame of mind, it will be treated as investigation and not auditing.
Even after conducting work of an audit any fraud or error is discovered at a later date, then auditor will not be held responsible, provided, he has exercised reasonable care and skill.
4) When the auditor identifies a misstatement resulting from fraud or error, he should communicate that
information to the appropriate level of management on a timely basis. The auditor should communicate to the management any material weakness in internal control related to the prevention or detection of fraud and error, which has come to his attention as a result of the performance of the audit.
5) While performing his duties under this standard, the auditor shall maintain an attitude of professional
skepticism (more than audit but less than investigation) throughout the audit, recognizing the possibility that a material misstatement due to fraud could exist, notwithstanding the auditor’s past experience of the honesty and integrity of the entity’s management and those charged with governance.
Managements
responsibility
to
detect fraud error
plan proper
audit procedures
Inherent
limitation
Communication to appropriate
level of managemnt
professional
skepticism
(SA 250) CONSIDERATION OF LAWS AND REGULATONS IN AN AUDIT OF
FINANCIAL STATEMENTS (revised)
1) Preparation and presentation of financial statements is the responsibility of
management. In day to day running and in preparation of such financial management will have to consider,
requirements of various Laws.
Eg.: Companies Act, Income Tax Act, service Tax Law, Excise Act etc.
2) This SA distinguishes the auditor’s responsibilities in relation to compliance with two different
categories of laws and regulations as follows:
The provision of those laws and regulations generally recognized to have a direct effect on the
determination of the material amounts and disclosures in the financial statements such as tax and
labour laws.
Other laws and regulations that do not have a direct effect on the determination of the material
amounts and disclosures in the financial statements, but compliance with which may be
fundamental to the operating aspects of the business, to an entity’s ability to continue its business,
or to avoid material penalties for example, compliance with the terms of an operating license or
compliance with environmental regulations.
3) The following policies and procedures may assist management in discharging its responsibilities for the
prevention and detection of non compliance with laws and regulations:
Instituting and operating appropriate systems of internal control.
Ensuring employees are properly trained and understand the Code of Conduct.
direct
effect of
law & regulation
on
determination
of material
amounts
disclosures
in
F.S
Indirect
effect of
law & regulation
on
compliance
which are fundamental
to operating
aspects of business
Monitoring compliance with the Code of Conduct and acting appropriately to discipline
employees who fail to comply with it.
Establishing a legal department and/or engaging legal advisors to assist in monitoring legal
requirements.
4) It may become possible that either management
lacking in knowledge in respect of such legal requirements or
It may even become possible that they may not follow such legal requirements intentionally.
At the same time management may have maintained legal department which is taking care of
routine legal matters as well as financial statements related legal matters. Such legal department
may be punctual in respect of routine legal matters as it is subject to interest or penalty but no so
punctual about financial statements related matters.
If management is committing any intentional or unintentional mistake in considering legal
requirement then it may affect true and fair view of financial statement.
5) So Institute has issued AAs – 21 (SA 250) where auditor has responsibility to demand a list of Acts
becoming applicable to the organisation in preparing financial statements as well as a certificate from
management in respect of compliance of such legal requirements.
6) Moreover, auditor will check on random basis whether such legal requirements are actually compiled
with or not. If he is finding any mistake in compliance with such legal requirements affecting true and
fair view of financial statements then auditor may qualify his audit report. Moreover, auditor will also
look at working of legal department and if any irregularity is observed then it will be communicated to
the management.
7) In case where the entity does not take remedial steps deemed necessary by the auditor, even though
the non-compliance is not material to the financial statements, the auditor must withdraw from the
engagement.
(SA 260) COMMUNICATIONS WITH THOSE CHARGED WITH GOVERNANCE
(revised)
1) The objective of the auditor under this standard is to:
Communicate clearly with those charged with governance the responsibilities of the auditor in
relation to the financial statements audit, and an overview of the planned scope timing of the
audit;
Internal control
training employees
of
code of conduct
Monitoring compliance
with
code of conduct
Establishing
a legal department
Obtain from those charged with governance information relevant to the audit;
Provide those charged with governance with timely observation arising from the audit that are
significant and relevant to their responsibility to oversee the financial reporting process; and
Promote effective two-way communication between the auditor and those charged with
governance.
2) [Earlier before issue of AAS – 27 (SA 260) whether it was annual audit or continuous audit,
management was getting the advantage of audit only in subsequent year because even in case of
continuous audit, if auditor was finding any irregularity or any other important audit matter then he
was not communicating immediately to the management rather he was preserving all such
irregularities within his working papers and it was just communicated to the management before
drafting audit report and after completion of year only and accordingly management was not
getting benefit of the audit of the current year in the year itself.]
To overcome above problem, AAS – 27 (SA 260) was issued by the Institute where as soon as
any audit matter is observed by the auditor then immediately it will be communicated to
those who are charged with the governance (who can take necessary actions on the same) so
that such authorities can take immediate actions on the same and accordingly benefit of audit
of current year can be obtained in the current year only.
In this case, the auditor should document the working papers, mailers communicated
and any responses to those matters.
3) Following are audit matters of governance interest to be communicated to those charged with
governance: [ auditor TCWG]
The general approach and overall scope of audit.
Any expected limitation or any additional requirements.
The selection of/or changes in significant accounting policies and practices that have or could
have a material effect on the entity’s financial statements.
Audit adjustments that could have a significant effect on the entity’s financial statements or
auditor’s report.
Material uncertainties that may cast a doubt on the going concern assumption.
Disagreement with management that could be significant to entity’s financial statement or
auditor’s report.
Expected modifications to the auditor’s report.
Material weakness in the internal control system.
Questions regarding management’s integrity and fraud involving management.
SA 265 COMMUNICATING DEFIDCIENCIES IN INTERNAL CONTRO TO THOSE
CHARGED WITH GOVERNANCE AND MANAGEMENT
1) This Standard on Auditing (SA) deals with the auditor’s responsibility to communicate appropriately to
those charged with governance and management deficiencies in internal control that the auditor has
identified in an audit of financial statements.
[ auditor TWCG deficiencies in I.C]
2) This SA does not impose additional responsibilities on the auditor regarding obtaining an understanding
of internal control and designing and performing tests of controls over and above the requirements of
SA 315 and SA 330.
3) The auditor shall include in the written communication of significant deficiencies in internal control to
those charged with governance:
A description of the deficiencies and an explanation of their potential effects.
Sufficient information related with deficiencies.
4) Auditor shall also explain within his communication to management that:
The purpose of the audit was for the auditor to express an opinion on the financial statements.
The audit included consideration of internal control
5) Indicators of significant deficiencies in internal control include:
Indicators that significant transactions in which management is financially interested are not
being appropriately scrutinized by those charged with governance.
Identification of management fraud that was not prevented by the entity’s internal control.
Management’s failure to implement appropriate remedial action on significant deficiencies
previously communicated.
Absence of a risk assessment process or evidence of an ineffective entity risk assessment
process.
Evidence of an ineffective response to identified significant risk.
Misstatements detected by the auditor’s procedures that were not prevented, or detected and
corrected, by the entity’s internal control.
Evidence of management’s inability to oversee the preparation of the financial statement
6) Management and those charged with governance may already be aware of significant deficiencies that
the auditor has identified during the audit and may have chosen not to remedy them because of cost or
other considerations.
The responsibility for evaluating the costs and benefits of implementing remedial action rests
with management and those charged with governance.
7) The fact that the auditor communicated a significant deficiency to those charged with governance and
management in a previous audit do not eliminate the need for the auditor to repeat the
communication if remedial actions have not yet been taken.
8) During the audit, the auditor may identify other deficiencies in internal control that are not significant
deficiencies but that may be of sufficient importance to merit management’s attention. The
determination as to which other deficiencies in internal control merit management’s attention is a
matter of professional judgment in the circumstances, taking into account the likelihood and potential
magnitude of misstatements that may arise in the financial statements as a result of those
deficiencies.
9) The communication of other deficiencies in internal control that merit management’s attention need
not be in writing but may be oral.
10) If the auditor has communicated deficiencies in internal control other than significant deficiencies to
management in a prior and management has chosen not to remedy them for cost or other reasons, the
auditor need not repeat he communication in the current period.
(SA 299) JOINT AUDITORS 1) This Standard deals with the professional responsibilities which the auditors undertake in accepting
such appointments as joint auditors.
Joint Auditors: When the audit is huge, the responsibility of audit may be given to more than one
auditor and internally they are known as joint auditors. Such joint auditors have joint and several
responsibilities. In respect of the areas where bifurcation of work is possible, auditors have several
responsibilities and where such bifurcation is not possible then auditors have joint responsibilities
2) Joint auditors bifurcates their authorities and responsibilities on different basis like:
geographical base, function base, financial statement base, time period base, etc.
And they make working papers of such bifurcation
copy of such working papers will be given to client so that even he can have an idea who is
responsible for which area.
3) Moreover, there are certain areas where no bifurcation is possible and where they have joint
responsibilities to perform.
Following are the examples where joint auditors are jointly responsible:
Audit work not dividend among joint auditors and carried out by all of them.
Collective decisions taken by joint auditors such as the decision regarding the nature,
extent and timing of the audit procedures to be carried out.
Compliance with disclosure requirements as per statue.
4) One joint auditor should not check qualification of another joint auditor.
Moreover, one joint auditor is solely authorised and responsible for audit planning,
implementing and reporting within his own area and he should not interfere in the work of
another auditor.
But during the process of audit, if he is coming across any matter which can be helpful to
another joint auditor then he must communicate the same to another joint auditor.
5) At the end of audit, all joint auditors will give expression of opinion and if there is difference of opinion
and then report of all will be submitted because expression of opinion of one joint auditor cannot
overrule expression of opinion of another joint auditor.
6) The advantages and disadvantages are of joint audits are discussed below:
ADVANTAGES:
a) Share of expertise and advantage of mutual consultations.
b) Lower work load.
c) Better qualities performance.
d) Lower cost to carry out the work.
e) A sense of healthy competition towards a better performance.
