AAS 2

Objective and Scope of the audit of financial statements

The scope of an audit will be based on the terms of engagement, relevant laws and the pronouncements of the Institute.

He should plan the audit so as to cover all aspects that are relevant to the financial statements being audited.

AAS 8

Audit Planning

Auditor should plan his work based on the client’s business to enable him to conduct an effective audit in an efficient and timely manner.

He could discuss elements of his overall plan and certain audit procedures with the client to improve the efficiency of the audit. Wherever necessary he could intimate his requirements as to records and information required from the company.

Audit program should be clearly documented.

AAS 12

Responsibility of joint auditors

The division of work should be adequately documented and matters of relevance may be communicated to the joint auditors in writing.

AAS 15

Audit Sampling

The auditor should design and select an audit sample, perform audit procedures thereon, and evaluate sample results so as to provide sufficient appropriate audit evidence.

While determining the sample size, the auditor should consider the sampling risk, the tolerable error, and the expected error.

AAS 16

Going concern

The auditor should consider the appropriateness of the going concern assumption underlying the preparation of the financial statements.

If, the auditor opines that there exists an indication of risk that the going concern assumption is inappropriate, he should obtain sufficient evidence to satisfy himself that the company will continue its operations for the foreseeable future.

AAS 17

Quality control for Audit work

The audit firm should implement quality control policies and procedures designed to ensure that all audits are conducted in accordance with Auditing and Assurance standards.

The progress of the engagement should be clearly monitored and documented.

AAS 3

Documentation

Auditor should have proper working papers that will enable him to substantiate his results.

The working papers are very necessary for the following reasons.

It serves as an evidence that the work performed by him is based on an examination made by him.

It serves as evidence that his opinion is not arbitrary but is based on the information and explanations given to him by the company.

It serves as an evidence to show that the auditor has called for information before framing an opinion.

It shows the various tests applied by the auditor to verify the accuracy and completeness of the information.

AAS 4

The Auditor’s res­ponsibility to con­sider Fraud and Error in an audit of financial statements

The auditor should consider the risk of material misstatements in the financial statements resulting from fraud or error.

He should approach the audit with a perspective, which enables him in the process of preventing and in the process, taking corrective measures, for the probable frauds and errors that exist.

AAS 5

Audit Evidence

The auditor should evaluate whether he has obtained sufficient appropriate evidence before he draws his conclusions.

AAS 7

Relying upon the work of an Internal Auditor

The auditor should evaluate the internal audit function and accordingly adopt less extensive procedures than otherwise required.

Reliance placed on work of internal auditor should be clearly documented.

AAS 9

Using the work of an expert

When the auditor plans to use the services of an expert he should satisfy himself as to the expert’s skill and competence.

He should satisfy himself that the substance of the expert’s findings is properly reflected in the financial statement.

If, in exceptional cases the work of an expert does not support the representations of the management, the auditor should arrange for discussions with the client and the expert and try to resolve the inconsistencies.

AAS 10

Using the work of another auditor

The principal auditor should discuss with the other auditor the audit procedures applied.

There should be proper co-ordination between the two auditors.

When the principal auditor bases his opinion on the financial information of the entity as a whole and relies on the reports of the other auditors, he should clearly state in his report the extent to which he has relied on such information.

AAS 11

Representations by management

 The auditor should use his professional judgment in determining matters on which he wishes to obtain Represen­tations by management.

Written representation from the manage­ment must be obtained on matters material to financial information.

AAS 13

Audit materiality

The auditor should consider materiality and its relationship with audit risk when conducting the audit.

He should use his professional judgment in assessing what is material.

AAS 14

Analytical procedures

The auditor should apply analytical procedures at the planning and overall review stages of the audit.

AAS 18

Audit of Accounting estimates

The auditor should obtain sufficient appropriate evidence on the accounting estimates contained in the financial statements.

AAS 19

Subsequent events

The auditor should consider the effect of subsequent events on the audit report.

AAS 30

External confirmations

The auditor should determine whether the external confirmations are necessary to support certain assertions in financial statements.

AAS 34

Audit evidence—Additional consi­derations for speci­fic items

The auditor should perform audit procedures designed to obtain appropriate audit evidence during his presence in physical inventory counting.

AAS 27

Communication of Audit matters

The auditor should communicate matters of governance interest with those charged with governance of the entity.

AAS 28

Auditor’s report on financial statements

The auditor should review and assess the conclusions drawn from the audit evidence obtained as the basis for the expression of an opinion on the financial statements.

He should express an unqualified opinion if he opines that the financial statements give a true and fair view.

The basis of confirmation from outside parties should be placed on record.