CA Durgesh Kabra
Audit Reporting (which is on the basis of the Audit procedures and evidences) is governed by The Companies Act 2013 and relevant rules and standards notified by Central Government or agencies so appointed for the same.
As all of us are aware about the Standards on Auditing are applicable to the Auditor for establishing the concluding report on financial statements of the company.
- Standards on Auditing are mandatory to be by followed by practitioners under the direction issued by the council of ICAI
- As per the Section 143(9) of Companies Act-2013, Every auditor shall comply with the Standards on Auditing
- Auditor violating Section 143 will be penalized as per Section 147(2) and 147(3) Unknowingly Minimum Rs. 25000 and Maximum Rs. 5 Lac or Knowingly/Willfully with the intention to deceive Imprisonment up to 1 year; and Minimum fine Rs. 1 lac Maximum fine Rs. 5 lac AND Refund remuneration Pay damages for losses suffered due to misleading statement in Audit Report.
As Auditor we have the following Powers:
- Right to access books of accounts be it physical or electronic & vouchers of the company at all times
- Right to ask for such information & explanation as he may consider necessary to enquire on the below matters:
- Whether loans & advances made have been properly secured
- Whether personal expenses have been charged to revenue account
- Whether transactions of the Co. which are represented merely by book entries are prejudicial to the interests of the Co.
- Whether loans and advances made by the company have been shown as deposits
- Whether cash has actually been received for the shares allotted & if no cash has been received, whether the position as stated in the accounts is not misleading
Inspite of the above powers exercised satisfactory, due to less importance to working papers file on audit completion to be maintained by practicing unit it seems negligence on part of the practitioner. As the Audit period is in peak now to facilitate the audit documentation and various evidences required while conducting the Audit procedures hope the following checklist with reference to relevant Standards on Auditing will stand handy and useful to one and all.
The Standard on Auditing in relation to Documentation is SA 230 which is briefly described below in flowchart:
SA 230 – Documentation Audit Procedures & Audit Evidence 
| SA | Description | Required Documentations/ Analysis/Evidences | Yes/ No/ NA | Specific Remarks |
| SA 200 | Specifies the requirement of Sufficient Appropriate Evidences to be obtained | Relevant Papers Collection at each stage of Audit as necessary | ||
| SA 210 | Agreeing with Audit Engagement Terms | Audit Engagement Letter | ||
| SA 220 | Quality Control for an Audit of Financial Statements | Quality Control Policies and Procedures by Auditing Firms for Audit Plans, Personnel, etc. | ||
| SA 230 | Audit Documentation (Most Important) | – Audit programmes.- Analyses.- Issues memoranda.- Summaries of significant matters.
– Letters of confirmation and representation. – Checklists. – Correspondence (including e-mail) concerning significant matters.
The auditor may include abstracts or copies of the entity’s records (for example, significant and specific contracts and agreements) as part of audit documentation. Audit documentation, however, is not a substitute for the entity’s accounting records. |
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| SA 240 | The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements | – Industry specific Risk Identifying factors- Documents on understanding of Internal Control Process- Inquiries and communication with entity’s employees /management | – | – |
| SA 250 | Consideration of Laws and Regulations in an Audit of Financial Statements | List of Relevant Registration with various states, legislations along with responsible person’s inquiry, Checklist of Compliances for prevention and detection from non compliances | ||
| SA 260 | Communication with those Charged with Governance | Not necessarily required to be documented unless some specific considerations | ||
| SA 265 | Communicating Deficiencies in Internal Control to those Charged with Governance and Management | Obtaining reply for the same is required. | ||
| SA 299 | Responsibility of Joint Auditors | Clear bifurcation of scope and responsibility is to be done. | ||
| SA 300 | Planning an Audit of Financial Statements | Audit Strategy and Audit PlanUpdate Audit Plans as per need like unexpected events , changes in conditions, Before starting initial audit engagement – Client acceptance and previous auditor communications/correspondence | ||
| SA 315 | Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and its Environment | Factors, Operations, Ownership, Internal Control understanding, as well documenting. | ||
| SA 320 | Materiality in Planning and Performing an Audit | Selection of Samples , Quantitative and Qualitative factors for materiality | ||
| SA 330 | The Auditor’s Responses to Assessed Risks | Material misstatement addressed to management, test of controls for its effectiveness | ||
| SA 402 | Audit Considerations Relating to an Entity Using a Service Organization | Differs from Service to Service | ||
| SA 450 | Evaluation of Misstatements Identified during the Audit | Needs to be documented with proper evaluation and conclusion. | ||
| SA 500 | Audit Evidence | Reliability of relevant test of evidences, non conflict with other evidences on same matter | ||
| SA 501 | Audit Evidence — Specific Considerations for Selected Items | Reliability of relevant test of evidences, non conflict with other evidences on same matter | ||
| SA 505 | External Confirmations | Procedures for confirmation requests from related to third parties – For e.g. Bank, Receivable, Payable, Stock, Loans, Investment | ||
| SA 510 | Initial Audit Engagements – Opening Balances | Recent financial statements and previous auditor report | ||
| SA 520 | Analytical Procedures | Comparison of information for prior period, data reliability, significant fluctuations | ||
| SA 530 | Audit Sampling | The technical analysis for sample selection sustentative procedures, etc. | ||
| SA 540 | Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures | Management Representation Letter with appropriate assumptions made and its reasonableness | ||
| SA 550 | Related Parties | List of parties transactions entered, minutes books relevant details , Identifications of information provided by management transactions, | ||
| SA 560 | Subsequent Events | Adequate disclosure representation from those charged with governance | ||
| SA 570 | Going Concern | Relevant factors of sustainability | ||
| SA 580 | Written Representations | Specifying each and every item disclosed in balance sheet | ||
| SA 600 | Using the work of Another Auditor | Division of Responsibility | ||
| SA 610 | Using the work of Internal Auditors | Report and Summary of Internal Audit report | ||
| SA 620 | Using the Work of an Auditor’s Expert | Reliance and reliability of work performed | ||
| SA 700 | Forming an Opinion and Reporting on Financial Statements | details mailed earlier | ||
| SA 705 | Modification to the opinion in the Independent Auditor’s Report | details mailed earlier | ||
| SA 706 | Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s Report | details mailed earlier | ||
| SA 710 | Comparative Information– Corresponding Figures and Comparative Financial Statements | needs to be given and working paper e kept | ||
| SA 720 | The Auditor’s Responsibility in Relation to Other Information in Documents containing Audited Financial Statements | Financial and Non Financial Information required as per law regulation or custom (other than financial statements and auditor’s report) , Inconsistent information | ||
| SA 800 | Special Considerations — Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks | Engagement Letter, Purpose and Intended users, Steps to determine applicable framework by management,Factors having impact on information presented.Interpretation is significant when Adoption of Another reasonable Interpretation would have produced a material difference in the information presented in the financial statementsExamples of special purpose frameworks are:
Cash Receipts and Disbursements – Cash Flow Reporting provisions contained in Contract – like loan agreement, project grant or bond indenture |
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| SA 805 | Special Considerations– Audits of Single Financial Statements and Specific Elements, Accounts or Items of a Financial Statement | Engagement Letter with clear scopeIdentifying factors of the matters to be reportedExamples:Single Financial Statement – only cash flow
Element – Account or Group including relevant notes (Account Receivable, Schedule of externally managed assets, etc.) |
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| SA 810 | Engagements to Report on Summary Financial Statements | Agreement with management for understanding scope of audit of summary financial statements in event of non acceptance of such agreement this audit reporting shall not be takenEvaluation sheetManagement criteria and its acceptanceAudited Financial Statement
Comparative list of summary with complete set of financial statement |
Note: Sources various publications of ICAI, BCAS, WIRC
| GENERAL LIST OF DOCUMENTS TO CHECK AND FILED IN AUDIT WORKING PAPER FILE: | |||
| SR NO | PARTICULARS | YES/NO/NA | REMARKS |
| DIRECT TAX REPORTING | |||
| 1 | Copy Of Computation Of Income of Last Year | ||
| 2 | Summary of Disallowances to be made and Allowances as per 43B | ||
| 3 | Deferred Tax Working | ||
| 4 | Form 26AS | ||
| 5 | Advance Tax Payments Challans | ||
| 6 | Invoice Of Addition To Fixed Assets | ||
| 7 | Invoice Of Sale Of Fixed Assets | ||
| 8 | TDS Payments Challans | ||
| 9 | Cash Ledger With Transaction More Than Rs. 20000/- | ||
| 10 | Status Of Pending Income Tax Assessement | ||
| 11 | Certificate Under Sec. 40(A)(3) & 269SS & 269T Of Income Tax | ||
| 12 | List of Parties covered under 40 A 2(b) with relation and transactions | ||
| 13 | TDS details as per Clause 34 | ||
| 14 | Quantitative Details | ||
| INDIRECT TAX – VAT/EXCISE/ST/CUSTOM | |||
| 15 | Applicability of VAT/CST | ||
| 16 | Applicability of Excise | ||
| 17 | Applicability of ST | ||
| 18 | Applicability of Customs | ||
| 18 | Respective Returns Copy | ||
| 19 | Respective Challans Copy | ||
| 20 | Respective Order Status, if any | ||
| 21 | Reconciliation Statement of Turnover declared and booked, wherever required | ||
| COMPANY LAW | |||
| 21 | Shareholding Pattern | ||
| 22 | List Of Directors | ||
| 23 | List Of KMP | ||
| 24 | Register Extracts of Transactions with related parties | ||
| 25 | Minutes Of Meeting | ||
| 26 | Fixed Assets Register | ||
| 27 | List Of Related Party As Per As18 | ||
| 28 | Ledger Of Related Party From Tally Having Transaction | ||
| 29 | Calculation Of Foreign Exchange Profit/Loss | ||
| 30 | Representation From Director For Qualification | ||
| 31 | Any Change In MOA/AOA | ||
| 32 | Copy Of Annual Return Filled With MCA | ||
| 33 | Calculation Of Director Remuneration As Per Companies Act | ||
| Checklist as provided below as per CA, 2013 | |||
| 34 | CSR – Applicability and Its Compliances | ||
| 35 | Cash Flow Statement by other than Small and One Person Company | ||
| 36 | Consolidated Financial Statement preparation applicable | ||
| 37 | Internal Financial Controls policy and monitoring process | ||
| 38 | Schedule II – Depreciation Useful life if not the same technical report | ||
| 39 | KMP appointment and its compliances | ||
| 40 | Directorship List – Appointment or Disqualification if any | ||
| 41 | Independent Director and/or Women Director | ||
| 42 | Deposits repayment other than Directors | ||
| 43 | Annual return Extracts – MGT 9 | ||
| 44 | Number of meetings by BOD (OM, EOM,BM) and its minutes | ||
| 45 | Vigil Mechanism | ||
| 46 | List of Contracts or Arrangements with Related Party | ||
| 47 | Various Committees to be Formed | ||
| 48 | Interest by directors | ||
| 49 | Various Forms filed with ROC | ||
| 50 | Corporate Governance | ||
| 51 | Secretarial Audit Requirement or Compliance Certificate from Practicing CS | ||
| COMPLIANCE IN OTHER ALLIED LAWS | |||
| 52 | PF Payment Challans and Returns copy, if any | ||
| 53 | Profession Tax Payment Challans and Returns copy, if any | ||
| 54 | ESIC Payment Challans and Returns copy, if any | ||
| 55 | LWF Payment Challans and Returns copy, if any | ||
| 56 | SEBI compliances | ||
| MISCELLANEOUS – OTHERS | |||
| 57 | Audit Engagement Letter(With Reference to SA 210) | ||
| 58 | Opening and Closing Trail Balance | ||
| 59 | Last Year Signed Financial Statement | ||
| 60 | List of Various Registration Obtained in other laws | ||
| 61 | List of Branches | ||
| 62 | List and place of books maintained | ||
| 63 | Loan Payment Sch. & Loan Confirmation Letter | ||
| 64 | Cash Balance Confirmation Letter Along With Denomination | ||
| 65 | Bank Balance Confirmation | ||
| 66 | Outstanding Entry Passed – Provide Supporting Xerox Copy | ||
| 67 | Draft Financial Statement | ||
| 68 | Management Representation Letter | ||
(Author can be reached at durgeshkabra@gmail.com)
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Author Bio
Informative file sir
Thanks for your sharing.
Regards,
Jatandar
Thank for your information
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regards,
Karthik. K
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Thank you for this wonderful article
Informative file sir
Thanks for your sharing.
Regards,
A.S.Moorthy