STEP TOWARDS BEST AUDITING PRACTICES
The Institute of Company Secretaries of India (ICSI) has issued the first four Auditing Standards which are mandatorily applicable to the auditor on or after 1st April, 2020. The first three Standards will be applicable to all kinds of audit engagements and the fourth one will specifically be applicable for the Secretarial Audit under section 204 of the Companies Act, 2013.
This standards are mandatorily required to be observed by the Company Secretaries which aims in developing auditing expertise, techniques and tools which will inculcate best auditing practices while conducting the audit and promote standardisation and uniformity in the professional arena for the Company Secretaries.
Various Audits which can by undertaken by a PCS
♦ Secretarial Audit as per provisions of section 204 of the Companies Act 2013;
♦ Annual Secretarial Compliance Report as per SEBI Listing Regulations;
♦ Share Reconciliation Certificate as per Regulation 76 of the SEBI (Depositories and Participants) Regulations, 2018;
♦ Half-yearly certificate certifying that all share certificates were issued by Share transfer Agent/Registrar and transfer Agent within 30 days of the date of lodgement for transfer as provided under regulation 40(9) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations;
♦ Certificate regarding compliance of conditions of corporate governance as per SEBI Listing Regulations;
♦ Half-yearly certification regarding maintenance of 100% asset cover for non-convertible debt securities as per regulation 56(d) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, etc.
ICSI has issued Guidance Notes on Auditing Standards to set out the explanations, procedures and practical aspects of various provisions contained in ICSI Auditing Standards to facilitate compliance thereof by the stakeholders. The adoption of this standards will not only bring significant outcome on the quality of audits performed by Company Secretaries but also bring uniformity and consistency among peer members of the institute.
Objective of the Auditing Standards Issued By ICSI
The main objective of the Auditing Standards Issued by ICSI was to bring uniformity among the members while conducting the audit. Since various audit practices are being carried out by different auditors, while performing the audit which has become cumbersome and troublesome. These Standards are expected to harmonize the audit practices among the auditors all over the country. The Standards seek to promote best auditing practices, uniformity and consistency in the audits conducted by the members in practice. It is expected to strengthen the corporate governance practices while conducting the audit. The objective of these Standards is to streamline and enable members to effectively undertake secretarial audit and ensure compliance with the provisions of applicable laws, rules, regulations and standards applicable for the time being in force.
Page Contents
• CSAS-1- AUDITING STANDARD ON AUDIT ENGAGEMENT
Auditing Standard on Audit Engagement deals with the Auditor’s role and responsibilities with respect to an Audit Engagement and the process of entering into an understanding/ agreement with the Appointing Authority for the purpose of audit.
Applicability: The Standard is mandatorily applicable for Audit Engagements accepted by the Auditor on or after st 1 April, 2020.
Objective: The objective of the Standard is to prescribe for the Auditor, principles and procedures to be followed while accepting or continuing with an Audit Engagement by agreeing to the terms of engagement with the Appointing Authority or any changes therein and matters relating thereto
Coverage:
1. Audit Engagement Process
2. Limits on Audit Engagements
3. Conflict of Interest
4. Confidentiality
5. Change in terms of Engagement
Key Takeaways
- It lays down the Auditor’s role and responsibilities and principles and procedures with respect to an Audit Engagement and the process of entering into an understanding/agreement with the appointing Authority for the purpose of audit.
- The Auditor shall submit a Certificate to the Appointing Authority confirming eligibility for appointment as Auditor.
- The Auditor shall obtain an Audit Engagement Letter along with a copy of the resolution, if any, passed by the Appointing Authority and shall provide acceptance to the Appointing Authority.
- The Auditor shall communicate in writing to the Predecessor or Previous Auditor, if any, before accepting the Audit Engagement.
- Ensure that such engagement is within the limits prescribed by ICSI from time to time.
• CSAS-2: Auditing Standard on Audit Process and Documentation.
Auditing Standard on Audit Process and Documentation deals with responsibilities and duties of the Auditor with respect to process of conducting audit and maintaining proper audit documents including working paper files.
Applicability: The Standard is mandatorily applicable for Audit Engagements accepted by the st Auditor on or after 1 April, 2020.
Objective
The objective of the Standard is to prescribe principles for an Auditor: (i) to conduct audit as per the specified audit
process;
(ii) to maintain documentation that provide:
a. sufficient and appropriate record to form the basis for the Auditor’s Report;
and
b. evidence that the audit was planned and performed in accordance with the applicable Auditing Standards and statutory requirements with integrity and objectivity.
Coverage :
1. Audit Planning
2. Risk Assessment
3. Information about the Auditee
4. Audit Check-lists
5. Collection and verification of Audit Evidence
6. Third Party Confirmation
7. Analysis of Audit Evidence
8. Documentation
9. Record Keeping and Retention
Key Takeaways
- It lays down the responsibilities and duties of the Auditor with respect to specific Audit Process in conducting audit. It also lays down certain principles for maintaining proper audit records.
- Formulate an audit plan as per terms of audit engagement.
- Ensure adherence to audit plan.
- Risk assessment of the Auditee with respect to and connected/relevant to the Audit Engagement shall be done considering industrial & business environment, organisational structure and compliance requirements.
- Collate the documentation for records within 45 days of date of signing of auditor’s report.
• CSAS-3: Auditing Standard on Forming of Opinion
Auditing Standard on Forming of Opinion deals with basis and manner for forming opinion by the auditor on subject matter of the audit.
Applicability: The Standard is mandatorily applicable for Audit Engagements accepted by the Auditor on or after
1st April, 2020.
Objective : The objective of the Standard is to enable the Auditor to lay down the basis and manner for evaluation of the conclusions drawn from the Audit Evidence obtained and express the opinion through written report.
Coverage:
1. Process for forming of opinion
2. Precedence and Practices
3. Third Party Report or Opinion
4. Form of an Opinion
5. Auditor’s Responsibility
6. Format of Report
Key Takeaways
- It covers the basis and manner for evaluation of the conclusions drawn from the Audit Evidence and forming Auditor’s opinion on subject matter of the audit.
- Consider all relevant audit evidence before issuing audit report.
- Prepare audit report within the agreed time-frame.
• CSAS-4: Auditing Standard on Secretarial Audit
Auditing Standard on Secretarial Audit deals with basis and manner for carrying out the Secretarial Audit u/s 204 of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements), 2015.
Applicability: The Standard is mandatorily applicable for Secretarial Audit Engagements accepted by the Auditor on or after 1st April, 2020.
Objective : The objective of the Standard is to lay down the principles for evaluation of statutory compliances and corporate conduct while conducting Secretarial Audit u/s 204 of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements), 2015
Coverage:
1. Identification and segregation of applicable laws
2. Verification of corporate conduct and compliance of laws
3. Board Composition
4. Board Processes
5. Systems and Process
6. Reporting of Fraud
7. Identification and Reporting of the events/actions having major bearing on Auditee’s affairs
Key Takeaways
- This Auditing Standard (‘the Standard’) is applicable to the Auditor undertaking Secretarial Audit under Section 204 of the Companies Act, 2013 and rules made thereunder.
- Review Memorandum of Association, Articles of Association, statutory books, disclosure by the auditee etc.
- The objective of the Standard is to lay down the principles for evaluation of statutory compliances and corporate conduct in relation thereto.
- The Auditor shall take note of the industry specific laws and other laws as may be applicable to the Auditee based on the identification/segregation by the Management and his own verification.
- The Auditor shall exercise professional judgment and maintain professional scepticism throughout the planning and performance of the audit to detect and report the fraud envisaged under the provisions of Section 143(12) of the Companies Act, 2013 read with Companies (Audit and Auditors) Rules, 2014.
- Report all the events that affect auditee’s going concern or alters the charter or capital structure or management or business operation or control, etc.
However, the Auditing standards issued by ICSI are not supported by any legal provisions as of now unlike the Secretarial Standard-1 and Secretarial Standard-2 which have a legal proviso, i.e., sub-section 10 of section 118 of the Companies Act 2013 which provides that every company shall observe Secretarial Standards with respect to General and Board Meetings specified by the Institute of Company Secretaries of India. The Auditing Standards are being brought in by ICSI with an intent to make them mandatory and with expectation that these standards will enhance the quality of compliance.
Source – https://taxguru.in/chartered-accountant/guidance-notes-icsi-auditing-standards.html
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