CU-BCOM-SEM-III-Auditing Standards in India

UNIT 10 – RATIONALE TO AUDITING STANDARDS Structure 10.0 Learning Objectives 10.1 Introduction 10.2 Standards issued by AASB 10.3 Objectives and functions of AASB 10.4 Standard setting process 10.5 Compliance with SA 10.6 Summary 10.7 Keywords 10.8 Learning Activities 10.9 Unit End Questions 10.10 References 10.0 LEARNING OBJECTIVES After studying this unit students will be able to :  Explain the AASB  Describe the objectives and functions of AASB  learn about standard setting process  compliance with standards on auditing 10.1 INTRODUCTION In India Auditing Standards are issued by Auditing and Assurance Standards board under the Authority of ICAI. The ICAI is committed to the goal of enabling the accountancy profession in India to provide services of high quality in the public interest and which are accepted worldwide. To further this goal, the ICAI develops and promulgates technical Standards and other professional literature. The ICAI being one of the founder members of the International Federation of Accountants (IFAC), the Standards developed and promulgated by the AASB under the authority of the Council of the ICAI are in conformity with the corresponding International Standards issued by the International Auditing and Assurance Standards Board (IAASB), established by the IFAC. 10.2 STANDARDS ISSUED BY AASB 101 CU IDOL SELF LEARNING MATERIAL (SLM)

The following Standards issued by the Auditing and Assurance Standards Board under the authority of the Council are collectively known as the Engagement Standards: (a) Standards on Auditing (SAs), to be applied in the audit of historical financial information. (b) Standards on Review Engagements (SREs), to be applied in the review of historical financial information. (c) Standards on Assurance Engagements (SAEs), to be applied in assurance engagements, other than audits and reviews of historical financial information. (d) Standards on Related Services (SRSs), to be applied to engagements involving application of agreed upon procedures to information, compilation engagements, and other related services engagements, as may be specified by the ICAI. The Institute of Chartered Accountants of India (ICAI) constituted the Auditing Practices Committee (APC) on 17th September 1982, to review the existing auditing practices in India and to develop Statements on Standard Auditing Practices so that these may be issued under the authority of the Council of the Institute. The ICAI is one of the founder members of the International Federation of Accountants (IFAC). It is one of the membership obligations of the Institute to actively propagate the pronouncements of the International Auditing and Assurance Standards Board (IAASB) of the IFAC to contribute towards global harmonization and acceptance of the Standards issued by the IAASB. Accordingly, while formulating Engagement and Quality Control Standards, the AASB takes into consideration the corresponding Standards, if any, issued by the IAASB. In addition, the AASB also takes into consideration the applicable laws, customs, usages and business environment prevailing in India 10.3 OBJECTIVES AND FUNCTIONS OF THE AUDITING AND ASSURANCE STANDARDS BOARD  The following are the objectives and functions of the Auditing and Assurance Standards Board: To review the existing and emerging auditing practices worldwide and identify areas in which Standards on Quality Control, Engagement Standards and Statements on Auditing need to be developed.  To formulate Engagement Standards, Standards on Quality Control and Statements on Auditing so that these may be issued under the authority of the Council of the Institute.  To review the existing Standards and Statements on Auditing to assess their relevance in the changed conditions and to undertake their revision, if necessary.  To develop Guidance Notes on issues arising out of any Standard, auditing issues pertaining to any specific industry or on generic issues, so that those may be issued under the authority of the Council of the Institute. 102 CU IDOL SELF LEARNING MATERIAL (SLM)

 To review the existing Guidance Notes to assess their relevance in the changed circumstances and to undertake their revision, if necessary.  To formulate General Clarifications, where necessary, on issues arising from Standards.  To formulate and issue Technical Guides, Practice Manuals, Studies and other papers under its own authority for guidance of professional accountants in the cases felt appropriate by the Board. 10.4 STANDARD SETTING PROCESS Project proposals to develop new, or revise existing Standards, Statements or General Clarifications are identified based on international and national developments, input from members of the Council of the ICAI, AASB members, members of other committees of the ICAI and/or recommendations received from other interested parties, such as regulators or professional accountants. The AASB determines the priorities of various projects on hand for commencement. In the preparation of Standards, Statements and General Clarifications, AASB is assisted by Study Groups/Task Forces constituted to consider specific projects. The AASB appoints one of the professional accountants as a convenor of the Study Group/Task Force. The convenor, in consultation with the Chairman, AASB, nominates other members of the Study Group/Task Force, ordinarily five to seven in number. For operating convenience and economy, a study group is usually based in the area where the convenor is located. In situations considered necessary, the Board may also consider having an outside expert on such Study Groups/Task Forces and such an expert need not necessarily be a professional accountant. The Study Group/Task Force is responsible for preparing the basic draft of the Standard/ Statement/ General Clarification. In addition, a separate group of experts may be formed to advice the Study Group /Task Force. The Study Group/Task Force develops the preliminary draft of the Standard/ Statement/ General Clarification based on appropriate research and consultation, which may include, depending on the circumstances, consultation with the other professionals, regulators and other interested parties, as well as reviewing professional pronouncements issued by IFAC member bodies and other professional bodies. The draft submitted by the study group, along with issue papers/background papers, is sent to the Chairman, AASB for approval The draft Standard/Statement/General clarification, along with other agenda papers, as approved by the Chairman, is hosted on the website of the AASB, ordinarily, at least twenty one days in advance of the AASB meeting at which such draft Standard/ Statement is planned to be considered. A notification to that effect is also sent to the AASB members. The printed version 103 CU IDOL SELF LEARNING MATERIAL (SLM)

of the agenda papers, including background papers and draft Standard/ Statement/General Clarification prepared by the Study Group/Task Force for review and debate are made available to the members of and special invitees to the AASB at the concerned meeting. The draft of the proposed Standard/ Statement/General Clarification, as modified in the light of the deliberations of the Board and approved by the Chairman, AASB, is circulated to the Council members of the ICAI for their comments before being issued as an Exposure Draft. Normally, a period of ten days is given for receiving comments on the Draft Exposure Draft. AASB finalizes the Exposure Draft of the proposed Standard/ Statement on the basis of the comments so received, if any. Ordinarily, an Exposure Draft of a General Clarification is not issued. The Exposure Draft of the proposed Standard / Statement is issued, by way of publication in the monthly Journal of the Institute and/or hosted on the website of the ICAI wherefrom it is downloadable free of charge, for comments by the professional accountants and the public. The Exposure Draft is sent to the members of the Council of the ICAI, the Institute’s past Presidents, Regional Councils and their branches. Copies of the Exposure Draft are also sent to the following bodies: i. The Ministry of Company Affairs, Government of India ii. The Comptroller and Auditor General of India iii. The Reserve Bank of India . iv. The Insurance Regulatory and Development Authority v. .The Central Board of Direct Taxes vi. The Central Board of Excise and Customs vii. The Securities and Exchange Board of India viii. The Central Registrar of Co-operative Societies ix. The Institute of Cost and Works Accountants of India. x. The Institute of Company Secretaries of India xi. The Indian Banks Association. xii. Industry organizations such as Federation of Indian Chambers of Commerce and Industry, Associated Chambers of Commerce, Confederation of Indian Industry xiii. Indian Institute(s) of Management xiv. The Telecom Regulatory Authority of India xv. xv. The Standing Conference on Public Enterprises xvi. Recognized stock exchanges in India xvii. Any other body considered relevant by the AASB keeping in view the nature and requirement of AAS/Statement. 104 CU IDOL SELF LEARNING MATERIAL (SLM)

An acknowledgement is sent to every respondent to an Exposure Draft. Except where the respondent has specifically indicated otherwise, the respondents’ comments are considered a matter of public records. Comments which are received up to ten days prior to the date of the AASB meeting at which such comments are proposed to be considered, are hosted on the website of the AASB and kept there till the date of the AASB meeting at which the Exposure Draft and comments thereon are considered. The members of the AASB as well as the Council of the Institute are notified when the comments are hosted on the website of the AASB. Copies of the Exposure Draft and comment letters are also made available to the AASB members at the AASB meeting at which the Exposure Draft is scheduled for discussion After taking into consideration the comments received, the draft of the proposed Standard/ Statement is finalized by the AASB and submitted to the Council of the ICAI for its consideration and approval. The draft of the General Clarification, as finalized by the AASB, is submitted to the Council of ICAI for its consideration and approval. The Council of the ICAI considers the final draft of the proposed Standard/ Statement/General Clarification, and if found necessary, modifies the same in consultation with AASB. The concerned Standard/ Statement/ General Clarification is then issued under the authority of the Council of the ICAI 10.5 COMPLIANCE WITH AUDITING STANDARDS Statements on Auditing are issued with a view to securing compliance by professional accountants on matters which, in the opinion of the Council of ICAI, are critical for the proper discharge of their attest functions. Standards on Auditing are, therefore, mandatory. Duty to comply with Auditing Standards: As per section 143(9) of the Companies Act, 2013, every auditor shall comply with the auditing standards. Further, as per section 143(10) of the Act, the Central Government may prescribe the standards of auditing as recommended by the Institute of Chartered Accountants of India, in consultation with and after examination of the recommendations made by the National Financial Reporting Authority. 10.6 SUMMARY  The AASB determines the broad areas in which the SAs need to be formulated and the priority in regard to the selection thereof  In the preparation of SAs, the AASB is assisted by Study Groups constituted to consider specific subjects. In the formation of Study Groups, provision is made for participation of a cross-section of members of the Institute 105 CU IDOL SELF LEARNING MATERIAL (SLM)

 On the basis of the work of the Study Groups, an exposure draft of the proposed SA is prepared by the Committee and issued for comments by members of the Institute.  After taking into consideration the comments received, the draft of the proposed SA is finalized by the AASB and submitted to the Council of the Institute  The Council of the Institute considers the final draft of the proposed SA, and, if necessary, modifies the same in consultation with the AASB. The SA is then issued under the authority of the Council.  Compliance of SAs by the Auditor is a mandatory requirement as per the Companies Act, 2013. 10.7 KEYWORDS  MCA-Ministry of corporate Affairs  SEBI-Securities and Exchange board of India 10.8 LEARNING ACTIVITIES 1. Learn about Guidance notes issued by ICAI on Auditing standards , are guidance notes mandatory or recommendatory in nature for professional Accountants? ______________________________________________________________________________ ______________________________________________________________________________ 10.9 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1.Explain briefly about AASB. 2.List out the Engagement standards issued by AASB? 3. Is compliance with Auditing standards mandatory for Auditors? Long Questions 1.Explain in detail about Standard setting process by Auditing and Assurance standards board? 2.What are objectives and functions of AASB? B. Multiple Choice Questions 106 1.The term SAE in relation to Engagement standards stands for a. Standards on Assurance Engagements b. Standards on Auditing Engagements c. Standards on Auditing d. None of these CU IDOL SELF LEARNING MATERIAL (SLM)

2. Standards on Auditing is to be applied in the a. Audit of historical financial information b. Review of historical Financial Information c. Both a and b d. None of these 3.Compliance of Auditing standards by Auditor is mandated by a. ICAI b. Companies Act 2013 c. Both a and b d. None of these Answers 1-a, 2-a, 3-c 10.10 REFERENCES Textbook:  T1 ArunaJha, Auditing, Taxmann’s Publications, University Edition  T2 Ravinder Kumar, Auditing: Principles and Practice :PHI Learning Pvt. Ltd Reference Books:  R1 N.D Kapoor, Auditing, Sultan Chand & Sons  R2 Gupta; Contemporary Auditing, Tata McGraw Hill 107 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 11 – AUDITING AND ASSURANCE STANDARDS BOARD (AASB) Structure 11.0 Learning Objectives 11.1 Introduction 11.2 Historical retrospect 11.3 Setting up of AASB 11.4 IAASB 11.5 AASB 11.6 Scope and Functions of AASB 11.7 Summary 11.8 Keywords 11.9 Learning Activities 11.10 Unit End Questions 11.11 References 11.0 LEARNING OBJECTIVES After studying this unit students will be able to  Understand about AASB  Learn about setting up of AASB  Outline the scope and functions of AASB 11.1 INTRODUCTION The Institute of Chartered Accountants of India (ICAI) has been formulating auditing and accounting standards for the guidance of its members in the larger interests of the society. In the changing environment, it is obvious that a professional accountant shall adhere to standards and procedures laid down by the professional accountancy bodies of which he is a member while discharging his duties in a responsible manner. In this direction, the role of a professional accounting body is to lay down such standards and procedures with the aim of providing guidance to members. 11.2 HISTORICAL RETROSPECT The ICAI, since its inception, has been committed to research in the field of accountancy. As early as in 1955, the Council of ICAI set up the Research Committee. The Council at that point 108 CU IDOL SELF LEARNING MATERIAL (SLM)

of time felt the necessity to establish such a Committee to deal with the growing complexities of the problems faced by membership at large and with a view to ensuring the highest of traditions and technical competence in the discharge of the duties by chartered accountants. As back as in 1964, the Council published the “Statement on Auditing Practices” as prepared by the Research Committee not only for the benefit of its members but also for others outside the profession, who might be interested in this subject. It was hoped that this Statement would provide valuable guidance in the performance of audits, particularly of companies. The Council of the Institute fully realized that techniques of accounting and auditing had undergone changes and shall further undergo changes as the business environment are changing. Since the members were expected to keep pace with recent developments, this Statement attempted to set out practices which were generally accepted in other countries and which the Council considered desirable in the light of prevailing circumstances in India. The issuance of the Statement on Auditing Practices might be considered as a path break as far as establishing sound auditing practices is concerned. 11.3 SETTING UP OF AASB The International Federation of Accountants (IFAC) came into existence in 1977 and constituted International Auditing Practices Committee (IAPC) to formulate International Auditing Guidelines. These guidelines were later on converted into International Standards on Auditing (ISA). Considering the developments in the field of auditing at international level, the need for issuing Standards and Guidance Notes in tandem with international standards but conforming to national laws, customs, usages and business environments was felt. With this objective, our Institute constituted the Auditing Practices Committee (APC) on September 17, 1982, to spearhead the new framework of Statements on Standard Auditing Practices (SAPs) and Guidance Notes (GNs) . 11.4 INTERNATIONAL AUDITING AND ASSURANCE STANDARDS BOARD (IAASB): The IFAC Board has established the IAASB to develop and issue, in the public interest and under its own authority, high quality auditing standards for use around the world. The IAASB functions as an independent standard-setting body under the auspices of IFAC. 11.5 AUDITING AND ASSURANCE STANDARDS BOARD: 109 CU IDOL SELF LEARNING MATERIAL (SLM)

ICAI is a member of the IFAC and is committed to work towards the implementation of the guidelines issued by the IFAC. ICAI constituted the AASB (erstwhile Auditing Practices Committee) to review the existing auditing practices in India and to develop Engagement and Quality Control Standards (erstwhile Statements on Standard Auditing Practices) so that these may be issued by the Council of the Institute 11.6 SCOPE AND FUNCTIONS OF AASB The main function of the AASB is to review the existing auditing practices in India and to develop Statements on Standards on Auditing (SAs) so that these may be issued by the Council of the Institute. While formulating the SAs, the AASB takes into consideration the ISAs issued by the IAPC, applicable laws, customs, usages and business environment in India. The SAs are issued under the authority of the Council of the Institute. The AASB also issues Guidance Notes on the issues arising from the SAs wherever necessary. The AASB has also been entrusted with the responsibility to review the SAs at periodical intervals. Scope of SAs The SAs apply whenever an independent audit is carried out; that is, in the independent examination of financial information of any entity, whether profit oriented or not, and irrespective of its size, or legal form (unless specified otherwise) when such an examination is conducted with a view to expressing an opinion. The SAs may also have application, as appropriate, to other related functions of auditors. Any limitation on the applicability of a specific SA is made clear in the introductory paragraph of the SA. 11.7 SUMMARY  AASB Under the authority of Institute of Chartered Accountants of India issues auditing standards  International auditing standards are issued by International Federation of accountants and international auditing assurance Standards Board  The main function of auditing and assurance standard board is to review the existing auditing practices and develop new standards on auditing 11.8 KEYWORDS  QCS – Quality control standards  SAP- Standards Auditing practices  GNs- Guidance notes 110 CU IDOL SELF LEARNING MATERIAL (SLM)

11.9 LEARNING ACTIVITIES 1. Compliance with Auditing standards is mandated by Companies Act 2013, hence does it mean that compliance with SAs is not mandatory while conducting the Audit of a Partnership firm, Sole proprietor ,trust etc.? ______________________________________________________________________________ ______________________________________________________________________________ 11.10 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1.Briefly explain about scope of AASB 2.what is the role of ICAI as a member of IFAC Long Questions 1.Describe in detail about setting up of AASB, its scope and objectives 2.Explain the role of ICAI in formulation of AASB and in standard setting process B. Multiple choice Questions 1.While formulating Standards on Auditing AASB takes into consideration of a. ISA b. SA c. Both a and b d. None of these 2.AASB issues ____________ to give explanation and clarity on SAs issued a. Standards on Auditing b. Review c. Guidance notes d. None of these 3.International standards on Auditing is issued by ____________ a. IAASB b. ICAI c. IFAC d. None of these 111 CU IDOL SELF LEARNING MATERIAL (SLM)

Answers 1-a, 2-c, 3-c 11.11 REFERENCES Textbook:  T1 ArunaJha, Auditing, Taxmann’s Publications, University Edition  T2 Ravinder Kumar, Auditing: Principles and Practice :PHI Learning Pvt. Ltd Reference Books:  R1 N.D Kapoor, Auditing, Sultan Chand & Sons  R2 Gupta; Contemporary Auditing, Tata McGraw Hill 112 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 12 – COMPARATIVE STATEMENT OF AS AND IND AS Structure 12.0 Learning Objectives 12.1 Introduction 12.2 Comparative statement between As and Ind AS 12.3 Revised ISA issued under clarity project 12.4 Redrafted standards 12.5 Summary 12.6 Keywords 12.7Learning Activities 12.8 Unit End Questions 12.9 References 12.0 LEARNING OBJECTIVES After studying this unit students will be able to  Explain the meaning of AS and Ind AS  Outline differences between AS and Ind AS  State the revised ISAs issued under clarity project  Learn about redrafted standards 12.1 INTRODUCTION Accounting Standards Accounting Standards are formulated by the Accounting Standards Board and issued by the Council of the ICAI. Accounting Standards forms part of Companies Act, 2013 as well which are notified under Companies (Accounting standards) rules, 2006. The Accounting Standards are issued for use in the presentation of ‘general purpose financial statements’ which are issued to the public by such ‘commercial, industrial or business enterprises’ as may be specified by the Institute from time to time and subject to the attest function of its members. They become mandatory on the dates specified in the respective Accounting Standards or notified by the Council in this behalf. Ind AS Indian Accounting Standards (Ind-AS) are the International Financial Reporting Standards (IFRS) converged standards issued by the Central Government of India under the supervision 113 CU IDOL SELF LEARNING MATERIAL (SLM)

and control of Accounting Standards Board (ASB) of ICAI and in consultation with National Financial Reporting Authority (NFRA). The Ind AS are named and numbered in the same way as the corresponding International Financial Reporting Standards (IFRS). In July 2014, the Finance Minister of India, in his Budget Speech, announced an urgency to converge the existing accounting standards with the International Financial Reporting Standards (IFRS) through adoption of the new Indian Accounting Standards (Ind AS) by the Indian companies from the financial year 2015-16 voluntarily and from the financial year 2016-17 on a mandatory basis. Pursuant to the above announcement, various steps were taken to facilitate the implementation of IFRS-converged Indian Accounting Standards (Ind AS). Moving in this direction, the Ministry of Corporate Affairs (MCA) had issued the Companies (Indian Accounting Standards) Rules, 2015 vide Notification dated February 16, 2015 covering the revised roadmap of implementation of Ind AS for companies other than Banking companies, Insurance Companies and NBFCs and Indian Accounting Standards (Ind AS). 12.2 COMPARATIVE STATEMENT BETWEEN AS AND IND AS Following table provide a quick glance on differences between new standards (Ind-AS) and existing standards (AS):- r. Area Ind-AS (Indian Accounting Accounting Standards no Standards as converged with IFRS) 1 Substance Ind-AS are generally substance Accounting Standards (‘AS’) are based. For example, generally rule based and are less consolidation is required under flexible. For example, as per AS 21, Ind-AS 110 if the consolidation is required if a company holding company has control holds more than 50% of the voting over its subsidiary and rights or control the board of directors definition of control is substance based. 2 Applicability Ind-AS will be applicable in AS applicable to not only the phases to mainly large companies, but to other entities as companies well. To the companies, notified standards under company rules are applicable and for other entities, AS published by ICAI are applicable 114 CU IDOL SELF LEARNING MATERIAL (SLM)

3 Guidance Ind-AS generally use the word AS generally use the word “Should” –“shall” in its guidance, which which is more advisory in nature makes it more strict. 4 New Ind-AS provide guidance on These guidance were not existing in Standards AS. various transactions like agriculture, business combinations etc. 5 Interpretations Ind-AS has incorporated Various guidance notes and other various interpretations which publications are available along with are part of IFRS, thus making it AS in existing scenario comprehensive 6 Conceptual There are specific guidances on AS contains subjectivity at quite a few Differences places. various matters like depreciation or revenue recognition Table 12.1 Comparative statement between AS and Ind As( source: accaglobal.com) 12.3 NEW/REVISED STANDARDS ISSUED UNDER THE CLARITY PROJECT. In 2004, the IAASB began a comprehensive program to enhance the clarity of its International Standards on Auditing (ISAs). The broad aim of the project was to enhance the understandability of the ISAs, which should encourage consistent application and lead to an improvement in audit quality worldwide. In addition to this enhanced understandability, many of the ISAs have been revised, resulting in substantive changes to the contents of the ISAs. A summary of the changes introduced by the Clarity Project are as follows: 19 ISAs and ISQC 1 have been redrafted to apply the new Clarity conventions and format (see discussion below) – these are referred to as ‘Redrafted ISAs’ 16 ISAs contain new and revised requirements, in addition to being redrafted to apply the new Clarity conventions and format – these are referred to as ‘Revised and Redrafted ISAs’ A standard has been issued on a new topic – ISA 265 Communicating Deficiencies in Internal Control to Those Charged with Governance and Management. 115 CU IDOL SELF LEARNING MATERIAL (SLM)

What is meant by a ‘Redrafted’ standard? Redrafted means that a standard has a new structure, in which information is presented in separate sections: Introduction, Objective, Definitions, Requirements, and Application and Other Explanatory Material. Each of these is described below. Introduction Introductory material may include information regarding the purpose, scope and subject matter of the ISA, in addition to the responsibilities of the auditors and others in the context in which the ISA is set. Objective Each ISA now contains a clear statement of the objective of the auditor in the audit area addressed by that ISA. Definitions For greater understanding of the ISAs, applicable terms have been defined in each ISA. Requirements Each objective is supported by clearly stated requirements. Requirements are always expressed by the phrase ‘the auditor shall’. Application and other explanatory material The application and other explanatory material explains more precisely what a requirement means or is intended to cover, or includes examples of procedures that may be appropriate under given circumstances. 12.4 WHAT IMPROVEMENTS ARE EXPECTED AS A RESULT OF REDRAFTED STANDARDS? It is hoped that the new format should make it easier for the auditor to understand the overall objectives when conducting an audit, and to understand his or her obligation in relation to that objective. The language used in the ISAs should clarify what is expected of the auditor, eg use of the word ‘shall’ is not ambiguous and indicates that something is expected of the auditor. The fact that the same format and type of wording is used in each standard reflects the fact that the ISAs are very much interrelated and should not be considered in isolation from each other. The IAASB is confident that the clarification of the ISAs will contribute significantly to enhancing the quality and uniformity of audit practice worldwide. In addition, the monitoring of audit quality should be easier, as a clear benchmark for audit activity is provided by the more prescriptive nature of the standards. 116 CU IDOL SELF LEARNING MATERIAL (SLM)

Further, it is hoped that the clarification will assist in the adoption of ISAs around the world, and facilitate international convergence. For audit firms that operate internationally, harmonization of auditing standards is a great benefit. What is the impact of the ‘Revised and Redrafted’ ISAs? ‘Revised and Redrafted’ ISAs include new or changed requirements and guidance that aim to strengthen audit practice in a number of areas. The improvements also reflect the latest developments and thinking in reporting and auditing. Examples of areas that have been affected by the redrafting process include: Materiality in planning and performing an audit and its use in evaluating misstatements Risk assessment and the gathering and evaluation of audit evidence The audit of accounting estimates including fair value disclosures, related party relationships and transactions, and an entity’s use of a third-party service organization Audit evidence in relation to external confirmations and written representations Using the work of others in relation to the audit of group financial statements, including the work of component auditors, and the work of an auditor’s expert Communication with those charged with governance Communicating deficiencies in internal control Modifications to the auditor’s opinion and the use of Emphasis of Matter paragraphs Audit and reporting considerations in the context of special engagements. ISA 200 (Revised and Redrafted) Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with International Standards on Auditing sets out the conventions followed in the standards and the obligations of the auditors. It clarifies that the auditor is required to have an understanding of the entire text of an ISA to understand its objectives and to apply its requirements properly. It explains that, in addition to ISAs containing objectives and requirements, they also contain guidance for carrying out those requirements. The guidance may explain more precisely what a requirement means or include examples of procedures that may be appropriate in the circumstances. This guidance is not intended to be read as a requirement, but is relevant to the proper application of the requirements of the ISA. The clarified ISAs appear more rules-based in their approach, as the obligations and requirements of the auditor are more prescribed in the wording of the standards. The use of the word ‘shall’ indicate that a requirement is mandatory, and that the requirement must be carried out regardless of other factors, such as complexity, risk, size or cost. The argument in favour of this approach is that it will lead to consistent application of the ISAs, and enhanced audit quality, as discussed above. Conclusion 117 CU IDOL SELF LEARNING MATERIAL (SLM)

The IAASB is confident that, as a result of the Clarity Project, there should be a significant enhancement in the quality and consistency of audit practice worldwide. The adoption of the clarified ISAs around the world should help global auditing firms in particular, and will aid international harmonization of auditing practice. The next few years will see a change in auditing practice, to an approach which encourages uniformity and reduces the scope for deliberate under- auditing. Audit firms should be beginning to plan for their convergence to these new standards. 12.5 SUMMARY  Accounting Standards are issued by ICAI ,it forms part of companies Act 2013 and is used in the preparation of General-Purpose Financial statements  In 2004, the IAASB began a comprehensive program to enhance the clarity of its International Standards on Auditing (ISAs). The broad aim of the project was to enhance the understandability of the ISAs, which should encourage consistent application and lead to an improvement in audit quality worldwide and to enhance easy understandability  Revised and Redrafted’ ISAs include new or changed requirements and guidance that aim to strengthen audit practice in a number of areas 12.6 KEYWORDS  Ind As- Indian Accounting Standards as converged with IFRS  IFRS-International Financial reporting standards 12.7 LEARNING ACTIVITIES 1. List out the differences between Ind As and IFRS ______________________________________________________________________________ ______________________________________________________________________________ 12.8 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1.Briefly explain about Accounting Standards 2.What are the improvements expected as a result of redrafted standards Long Questions 1.Give a comparative statement between AS and Ind As 2.Explain in detail the impact of Revised and redrafted ISAs? 118 CU IDOL SELF LEARNING MATERIAL (SLM)

3.Elaborate about International Standards on Auditing issued under clarity project B. Multiple choice Questions 1.Which of the following is substance-based standard(s)? a. Indian Accounting Standards as converged with IFRS b. Indian Accounting Standards c. Both a and b d. None of these 2.The Ind As is named and numbered according to corresponding a. Accounting Standard b. IFRS c. Standards on Auditing d. None of these 3.Currently in India which of the following is applicable to other than large companies a. Ind As b. Accounting Standards c. ISA d. Both a and b Answers 1- a 2-b 3-b 12.9 REFERENCES Textbook:  T1 ArunaJha, Auditing, Taxmann’s Publications, University Edition  T2 Ravinder Kumar, Auditing: Principles and Practice :PHI Learning Pvt. Ltd Reference Books:  R1 N.D Kapoor, Auditing, Sultan Chand & Sons  R2 Gupta; Contemporary Auditing, Tata McGraw Hill 119 CU IDOL SELF LEARNING MATERIAL (SLM)