CU-BCOM-SEM III-Auditing Standards in India

The auditor must decide whether he or she has received fair assurance that the financial statements as a whole are free of material misstatement, whether due to fraud or mistake, in order to shape that opinion. The conclusion must take into account: the auditor's determination of whether sufficient appropriate audit evidence has been obtained in accordance with SA 330; the auditor's determination of whether sufficient appropriate audit evidence has been obtained in accordance with SA 330; the auditor's determination of whether sufficient appropriate audit evidence has been obtained in accordance with SA Whether uncorrected misstatements are material, individually or in aggregate, as determined by the auditor in accordance with SA 450; The auditor must determine if the financial statements are prepared in compliance with the provisions of the relevant financial reporting system in all material respects. This assessment must take into account the qualitative dimensions of the entity's accounting procedures, as well as measures of potential bias in management's decisions. In particular, the auditor must determine whether the financial statements sufficiently document the significant accounting policies selected and applied, and whether the accounting policies selected and applied are compliant with the applicable financial reporting framework and are acceptable, in light of the requirements of the applicable financial reporting framework.  Management's accounting assumptions are fair, and the financial statements' information is relevant, credible, comparable, and understandable.  The financial statements contain sufficient disclosures to allow intended users to consider the impact of material transactions and events on the information presented in the financial statements; and  The language used in the financial statements, including the titles of each financial statement, is relevant. If the auditor decides that the financial statements are prepared in all material respects in compliance with the relevant financial reporting system, the auditor must express an unmodified opinion. If the auditor: 201 CU IDOL SELF LEARNING MATERIAL (SLM)

(a) Concludes that the financial statements as a whole are not free of material misstatement based on the audit evidence obtained; or (b) Concludes that the financial statements as a whole are not free of material misstatement based on the audit evidence obtained (c) if the auditor is unable to obtain sufficient suitable audit evidence to conclude that the financial statements as a whole are free of material misstatement, the auditor's opinion in the auditor's report shall be modified in compliance with SA 705 (Revised). 8.3 AUDITOR’S REPORT The title of the auditor's report must explicitly state that it is the report of an impartial auditor. Addressee: Depending on the circumstances of the engagement, the auditor's report may be submitted to the appropriate individual.  Opinion: The auditor's opinion should be included in the first section of the report, with the heading \"Opinion.\"  Identify the company whose financial statements have been audited in the Opinion section of the auditor's report.  Acknowledge that the financial statements were audited.  Determine the title of each of the financial statements' statements.  Refer to the notes, which provide a list of significant accounting policies; and • Specify the date of each financial statement in the financial report, as well as the time covered by each financial statement. Management’s Responsibility for the Financial Statements: (a) The duties of those in the company who are responsible for the preparation of financial statements are described in this section of the auditor's report. The auditor's report does not have to directly include \"management,\" but it must use the word that is relevant in the sense of the entity's legal and/or regulatory system. In the case of certain organisations, a reference to those in charge of governance might be sufficient. (b) A section titled \"Management's [or other reasonable term] Responsibility for the Financial Statements\" must be included in the auditor's report. 202 CU IDOL SELF LEARNING MATERIAL (SLM)

(c) Management's responsibility for the preparation of the financial statements shall be defined in the auditor's report in the same way as it is described in the audit engagement words. Management is responsible for the preparation of financial statements in accordance with the applicable financial reporting framework; this responsibility includes the design, implementation, and maintenance of internal control relevant to the preparation of financial statements that are free of material misstatement, whether due to fraud or espionage. (d) In the case of financial statements prepared in compliance with a fair presentation process, the auditor's report should apply to \"the preparation and fair presentation of these financial statements\" or \"the preparation of financial statements that offer an accurate and fair view,\" as necessary. Auditor’s Responsibility: A segment titled \"Auditor's Responsibility\" must be included in the auditor's report. According to the auditor's report, the auditor's duty is to express an opinion on the financial statements based on the audit. The audit must be done in compliance with the Institute of Chartered Accountants of India's Standards on Auditing, according to the auditor's report. The auditor's report must also state that such Standards enable the auditor to follow ethical guidelines and to prepare and conduct the audit in such a way that it provides fair assurance that the financial statements are free of material misstatement. The auditor's report must state that an audit entails performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements: (a) An audit entails performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. (b) The procedures chosen are based on the auditor's judgement, which includes an evaluation of the risks of material financial statement misstatement, whether due to fraud or mistake. Internal control applicable to the entity's preparation of the financial statements is considered by the auditor in making such risk assessments in order to design audit procedures that are acceptable in the circumstances, but not for the purpose of voicing an opinion on the efficacy of the entity's internal control. The auditor shall omit the expression that the auditor's analysis of internal control is not for the purpose of voicing an opinion on the effectiveness of internal control in situations where the auditor still has a duty to express an opinion on the effectiveness of internal control in connection with the audit of the financial statements; and 203 CU IDOL SELF LEARNING MATERIAL (SLM)

(c) An audit also involves assessing the appropriateness of the accounting policies used and the reasonableness of management's accounting figures, as well as the financial statements' overall presentation. Where the financial statements are prepared in accordance with a fair presentation framework, the description of the audit in the auditor’s report shall refer to “the entity’s preparation and fair presentation of the financial statements” or “the entity’s preparation of financial statements that give a true and fair view”, as appropriate in the circumstances. Auditor’s Opinion: A segment titled \"Opinion\" must be included in the auditor's report. [I] The auditor's opinion shall use one of the following words, which are considered equivalent, when presenting an unmodified opinion on financial statements prepared in compliance with a fair presentation process, unless otherwise specified by statute or regulation: (a) The financial statements present the information equally in all material respects, as required by [the relevant financial reporting framework]; or (b) In compliance with [the relevant financial reporting framework], the financial statements provide an accurate and equitable picture of. [II] The auditor's opinion on financial statements prepared in accordance with a compliance process must be that the financial statements are prepared in all material respects in accordance with [the applicable financial reporting framework]. If the reference to the applicable financial reporting framework, in the auditor's opinion, is not to Accounting Standards promulgated by the Accounting Standards Board (ASB) of the Institute of Chartered Accountants of India (ICAI) or Accounting Standards notified by the Central Government by publishing the Companies (Accounting Standards) Rules, 2006, or Accounting Standards notified by the Central Government by publishing the Companies (Accounting Standards) Rules, 2006, or Accounting Standards notified by the Central Government by publishing the Companies (Accounting Standards) Rules, Other Reporting Responsibilities: If the auditor addresses other reporting responsibilities in the auditor's report on the financial statements that are not covered by the SAs, these other reporting responsibilities must be addressed in a separate section of the auditor's report titled \"Report on Other Legal and Regulatory Requirements,\" or The headings, statements, and definitions shall be under the sub-title \"Report on the Financial Statements\" if the auditor's report includes a separate 204 CU IDOL SELF LEARNING MATERIAL (SLM)

section on other reporting obligations. Following the \"Report on the Financial Statements,\" there would be a \"Report on Other Legal and Regulatory Requirements.\" Signature of the Auditor: The auditor’s report shall be signed. Date of the Auditor’s Report:The auditor's report must be dated no earlier than the date on which the auditor has obtained sufficient appropriate audit evidence on which to base the auditor's opinion on the financial statements, including evidence that: (a) All of the financial statements, including the related notes, have been prepared; and (b) Those with recognised authority have asserted that the financial statements are true and correct. Place of Signature: The auditor's report must specify a particular venue, usually the city where the audit report is signed. When the auditor forms an opinion in compliance with SA 700 (Revised), the auditor determines that a correction to the auditor's opinion on the financial statements is required, SA 705 addresses the auditor's duty to issue an accurate report. The following are the SA 705's concise requirements: Modified Opinions Come in a Variety of Forms: This SA defines three categories of adjusted opinions: o a qualified opinion, o an unfavourable opinion, and o a statement of disclaimer of opinion The type of modified opinion that is appropriate is determined by: (a) the nature of the matter giving rise to the modification, that is, if the financial statements are materially misstated or may be materially misstated due to an inability to obtain sufficient appropriate audit evidence; and (b) the auditor's judgement about the pervasiveness of the effects or potential for material misstatement. Unqualified Report:If the auditor determines that the financial statements provide an accurate and fair picture in compliance with the financial reporting system used for their preparation and presentation, an unqualified opinion should be given. An unqualified opinion implies that any improvements in accounting standards or their implementation methods, as well as their 205 CU IDOL SELF LEARNING MATERIAL (SLM)

implications, have been properly calculated and reported in the financial statements. An unqualified opinion also means that the financial statements have been prepared in accordance with commonly accepted accounting standards that have been regularly applied; the financial statements have been prepared in accordance with relevant statutory requirements and regulations; and the financial statements have been prepared in accordance with relevant statutory requirements and regulations. (c) all factual matters relating to the proper reporting of financial reports are adequately disclosed, subject to regulatory requirements, where appropriate. Basis for opinion: The auditor's report must contain a section titled \"Basis for Opinion\" immediately following the Opinion section. Key audit matters: In accordance with SA 701, the auditor shall communicate main audit matters in the auditor's report for audits of full sets of general-purpose financial statements of specified entities. 8.4 SA 705 - MODIFICATION TO THE OPINION IN THE INDEPENDENT AUDITOR'S REPORT This Auditing Standard (SA) addresses the auditor's duty to release an accurate report when the auditor determines that a revision to the auditor's opinion on the financial statements is required after developing an opinion in compliance with SA 700 (Revised). This SA also addresses how the auditor's report's structure and content are affected when the auditor expresses a changed opinion. This SA applies to financial statement audits for fiscal years starting on or after April 1, 2018. Types of Modified opinions: A qualified opinion, an adverse opinion, and a disclaimer of opinion are the three forms of changed opinions identified by this SA. The type of modified opinion that is appropriate is determined by: 206 CU IDOL SELF LEARNING MATERIAL (SLM)

 The nature of the matter giving rise to the modification, that is, if the financial statements are materially misstated or may be materially misstated due to a lack of appropriate audit evidence; and  The auditor's judgement about the pervasiveness of the effects or possible ramifications. A Qualified Opinion: The auditor must express a qualified opinion when: (i) The auditor concludes that misstatements, individually or in the aggregate, are material but not pervasive to the financial statements after gathering sufficient appropriate audit evidence; or (ii) The auditor is unable to obtain sufficient appropriate audit evidence on which to base the opinion but concludes that the possibility of misstatements exists. A Disclaimer of Opinion: If the auditor is unable to obtain sufficient suitable audit proof on which to base an opinion, and the auditor finds that undetected misstatements, if any, may have material and pervasive effects on the financial statements, the auditor shall disclaim the opinion. Where the auditor concludes that, despite having obtained sufficient appropriate audit evidence on each of the individual uncertainties, it is not possible to form an opinion on the financial statements due to the potential interaction of the uncertainties and their possible cumulative effect, the auditor shall disclaim an opinion. An Adverse Opinion: When the auditor determines, after gathering ample relevant audit data, that misstatements are both substantial and pervasive to the financial statements, the auditor must express an adverse opinion. Whenever the auditor expresses an opinion that is not unqualified, the report should provide a detailed explanation of all the substantive factors and, unless it is impracticable, a quantification of the potential effect(s) on the financial statements, both individually and in aggregate. In cases where it is not possible to reliably measure the impact of changes made to the audit report, the auditor can do so based on management estimates after conducting as many audit tests as possible, and clearly show that the figures are based on management estimates. Normally, this material will be presented in a separate paragraph preceding the opinion or disclaimer of opinion, with a reference to a more detailed discussion in a note to the financial statements, if applicable. Disclosure in the Auditor’s Report 207 CU IDOL SELF LEARNING MATERIAL (SLM)

The following paragraphs address the manner of certification and, if applicable, the manner of disclosure in the auditor's report. AS-1 – Accounting Policies Disclosure If (a) accounting practises needed to be reported under Revised Schedule VI or any other provisions of the Companies Act, 1956 (now Schedule III of the Companies Act, 2013) have not been disclosed, or (b) Records have not been prepared on an accrual basis; members of a corporation should quality their audit reports. (c) The going concern accounting assumption was not observed and this fact was not reported in the financial statements, or (d) Adequate reports about adjustments in accounting policies were not made. If a company has been granted a special exemption from any of the above requirements, but the fact of the exemption has not been properly reported in the reports, the member should note the exemption in his audit report without making it a topic of audit qualification. In light of the above, the auditor would need to weigh a variety of factors when deciding if the audit report should be qualified or only disclosures made. In the case of businesses not subject to the Companies Act, the member should review the applicable legislation and make appropriate qualifications in his audit report if proper accounting policy disclosures have not been made in accordance with the statutory requirements. Similarly, the member should check to see whether the financial statements were prepared using the fundamental accounting assumptions. In appropriate situations, he should decide if a qualification in his report is required, taking into account the requirements of the relevant laws. In the event of noncompliance by enterprises not subject to the Companies Act, and where the applicable legislation does not warrant such disclosures, the member should make sufficient disclosure in his audit report without necessarily subjecting it to audit certification. The auditor should consider the materiality of the relevant item when making a qualification or disclosure in the audit report. As a result, the auditor does not have to qualify or disclose things that, in his opinion, are not material. A statement that is not a topic of audit qualification should be made in the auditor's report in such a way that the reader understands that the disclosure is not an audit qualification. A 208 CU IDOL SELF LEARNING MATERIAL (SLM)

reference to the paragraph containing the above disclosure should not be included in the paragraph containing the auditor's opinion on accurate and fair view. 8.5 SUMMARY Forming an Opinion and Reporting on Financial Statements (Sa 700) the title, introductory paragraph, management's obligation on financial statements, and the auditor's report contain the following information: Auditor accountability, audit opinion, other reporting duties, auditor signature, audit report date, and signature location. Unqualified recommendation When the auditor gives an unequivocal view, • The financial statements have been prepared in accordance with commonly accepted accounting standards. • The financial statements meet all applicable legislative and regulatory criteria. • All material matters pertaining to the proper reporting of financial statements, as well as any regulatory requirements, have been duly disclosed. an expert's view • After gathering sufficient acceptable audit data, the auditor determines that individual or aggregate misstatements are material but not systemic. • The auditor is unable to obtain adequate suitable audit evidence on which to base his or her decision, but the auditor determines that undetected misstatements may have material but not pervasive effects on financial statements. Negative feedback When the auditor concludes, after gathering ample relevant audit data, that misstatements are both substantial and pervasive to financial statements, the auditor must express an adverse opinion. Disclaimer of a Personal Opinion If the auditor is unable to obtain adequate suitable audit proof on which to base his or her opinion, and the auditor determines that the potential effects on financial statements of 209 CU IDOL SELF LEARNING MATERIAL (SLM)

undetected misstatements, if any, may be both material and pervasive, the auditor must disclaim his or her opinion. 8.6 KEYWORDS  Fundamental Accounting assumptions - Going concern, Consistency, Accrual  ASB- Accounting Standards Board 8.7 LEARNING ACTIVITY 1. Go through the Audit report of any listed Level-1 company ______________________________________________________________________________ ____________________________________________________________________________ 8.8 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. When does an auditor issue unqualified opinion and what does it include? 2. Explain briefly about adverse opinion in Auditor’s report 3. Discuss briefly about managements responsibility with regards to preparation of financial statements in Auditor’s report 4. Discuss briefly about Auditor’s responsibility in Auditor’s report 5. Describe briefly about Disclaimer of opinion Long Questions 1. Explain in detail about qualified opinion in Auditor’s report 2. Explain in detail the contents of Auditors report 3. Explain in detail about Audit opinion 4. Describe in detail about unmodified opinion with an example 210 CU IDOL SELF LEARNING MATERIAL (SLM)

5. Elaborate the provisions relating to SA-700. B. Multiple choice Questions 1. An auditor expresses_________ opinion in his report, having obtained sufficient appropriate audit evidence concludes that the misstatements in the financial statements are material but not pervasive a. Qualified opinion b. Unqualified opinion c. Unmodified opinion d. Disclaimer of opinion 2.It is the responsibility of the auditor to prepare financial statements as per Generally accepted Accounting principles a. True b. False c. Partly True d. None of these 3.All accounting policies followed must be disclosed in the financial statements and thereby fundamental accounting assumptions followed in the preparation of financial statements must be disclosed a. True b. False c. Partly True d. None of these 4._______ in Audit report where Auditor wishes to draw the attention of Share holders without qualifying the same. 211 CU IDOL SELF LEARNING MATERIAL (SLM)

a. Emphasis of matter paragraph b. Other matters Paragraph c. Both a and b d. None of these 5. An auditor is unable to expresses opinion in his report ,as he is unable to obtain sufficient appropriate audit evidence in that case he issues _________ report a. Unqualified report b. Unmodified report c. Modified report d. None of these Answers 1-a 2-b 3-b,4-a 5-c 8.9 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 212 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 9 – INTERNATIONAL RESOURCES TO 213 AUDITING NEEDS Structure 9.0 Learning Objectives 9.1 Introduction 9.2 IAASB 9.3 History 9.4 Objectives of ISA 9.5 Structure of international standards on auditing 9.6 Auditing pronouncements of IAASB 9.7India's response to auditing needs 9.8 NFRA 9.9 Summary 9.10 keywords 9.11 Learning activity 9.12 Unit End questions 9.13 References 9.0 LEARNING OBJECTIVES After studying this unit students will be able to :  Explain the international auditing and assurance standard board  Learn objectives of international standards on auditing  Outline auditing pronouncements of IAASB  Describe India's response to auditing needs CU IDOL SELF LEARNING MATERIAL (SLM)

9.1 INTRODUCTION International auditing standards are a set of professional guidelines that govern the roles of an independent auditor when performing a financial audit of financial data. The International Federation of Accountants, Auditing and Assurance Standards Board issues the standards. The auditor is required to know the entire text of international standards on auditing, including application and other explanatory content, in order to be aware of the objectives and to apply the requirements appropriately. 9.2 IAASB The International Auditing and Assurance Standards Board (IAASB) is a non-profit organisation that sets high-quality international standards for auditing, quality management, review, other assurance, and related services, as well as promoting the alignment of international and national standards. As a result, the IAASB improves the quality and consistency of practise around the world, as well as public trust in the global auditing and assurance profession. In developing its pronouncements, the IAASB follows a strict due process. The IAASB's Consultative Advisory Group national auditing standard setters, IFAC member bodies and their representatives, regulatory and oversight bodies, companies, governmental agencies, investors, preparers, and the general public are among those who provide input. Amount of exposure Proposed pronouncements are posted on the website in draught form, with the opportunity for public comment; final pronouncements are followed by a Basis for Conclusions based on the comments received. The IAASB's work is overseen by the Public Interest Oversight Board (PIOB), which ensures that the IAASB's actions meet due process and are sensitive to the public interest. 9.3HISTORY OF IAASB In March 1978, the International Auditing and Assurance Standards Board (IAASB) was created. The International Auditing Practices Committee was its previous name (IAPC). 214 CU IDOL SELF LEARNING MATERIAL (SLM)

The IAPC's initial efforts were centred on three areas: financial statement auditing's object and scope, engagement letters, and general auditing guidelines. The IAPC's guidelines were re- established in 1991 as International Standards on Auditing (ISAs). The IAPC underwent a systematic review in 2001, and the board was renamed the International Auditing and Assurance Standards Board in 2002. (IAASB). In 2003, IFAC adopted a package of reforms aimed at making its standard-setting procedures, including those of the IAASB, more open to the public interest, among other items. The IAASB launched the Clarity Project in 2004, a multi-year initiative to improve the clarity of its ISAs. This programme entailed applying new conventions to all ISAs, either as part of a substantive revision or as a selective redrafting to reflect the new conventions and general clarification issues. 9.4 OBJECTIVES OF THE ISA The ISA's goals are two-fold.  Comparing national accounting and auditing standards to international standards, determining the extent to which applicable auditing and accounting standards are compiled, and analysing the institutional framework's strengths and limitations in maintaining high-quality financial reporting.  Assist the government in developing and implementing a country action plan for institutional capacity development with the aim of \"strengthening the country's corporate financial reporting structure.\" 9.5 STRUCTURE OF INTERNATIONAL STANDARDS ON AUDITING Every international auditing standard is divided into parts as follows: Introduction The purpose, scope, and subject matter of ISA, as well as the responsibilities of the Auditor and others in the sense in which ISA is created, are all covered in the introduction. Objectives 215 CU IDOL SELF LEARNING MATERIAL (SLM)

Any ISA contains a straightforward statement of the Auditor's purpose in the Audit Area covered by that ISA. Definitions Important terms are clearly defined in each ISA Requirements Any goal is backed up by explicit criteria, which are articulated in the term \"the Auditor shall.\" Application And Other Explanatory Material It outlines the criteria explicitly and provides examples of procedures that might be suitable depending on the circumstances. 9.6 AUDITING PRONOUNCEMENTS OF IAASB The International Auditing and Assurance Standards Board (IAASB) establishes and publishes the following International Standards:  International Standards on Auditing (ISAs) and International Standards on Review Engagements (ISREs), which are used in audit and review engagements on historical financial data.  International Standards on Assurance Engagements (ISAEs) for assurance engagements that aren't audits or evaluations of historical financial data.  ISRSs (International Standards on Related Services) for use in related services engagements.  ISQCs (International Standards on Quality Control) will be applicable to all programmes that come under the IAASB's Engagement Standards. List of International Standards on Auditing: Currently, International Standards on Auditing have 36 and 1 Quality Control Standard: ISA 200: Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with International Standards on Auditing ISA 210: Agreeing the Terms of Audit Engagements 216 CU IDOL SELF LEARNING MATERIAL (SLM)

ISA 220: Quality Control for an Audit of Financial Statements ISA 230: Audit Documentation ISA 240: The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements ISA 250: Consideration of Laws and Regulations in an Audit of Financial Statements ISA 260: Communication with Those Charged with Governance ISA 265: Communicating Deficiencies in Internal Control to Those Charged with Governance and Management ISA 300: Planning an Audit of Financial Statements ISA 315: Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment ISA 320: Materiality in Planning and Performing an Audit ISA 330: The Auditor’s Responses to Assessed Risks ISA 402: Audit Considerations Relating to an Entity Using a Service Organization ISA 450: Evaluation of Misstatements Identified during the Audit ISA 500: Audit Evidence ISA 501: Audit Evidence-Specific Considerations for Selected Items ISA 505: External Confirmations ISA 510: Initial Audit Engagements-Opening Balances ISA 520: Analytical Procedures ISA 530: Audit Sampling ISA 540: Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures ISA 550: Related Parties ISA 560: Subsequent Events ISA 570: Going Concern 217 CU IDOL SELF LEARNING MATERIAL (SLM)

ISA 580: Written Representations ISA 600: Special Considerations-Audits of Group Financial Statements (Including the Work of Component Auditors) ISA 610: Using the Work of Internal Auditors ISA 620: Using the Work of an Auditor’s Expert ISA 700: Forming an Opinion and Reporting on Financial Statements ISA 705: Modifications to the Opinion in the Independent Auditor’s Report ISA 706 Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s Report ISA 710: Comparative Information-Corresponding Figures and Comparative Financial Statements ISA 720: The Auditor’s Responsibilities Relating to Other Information in Documents Containing Audited Financial Statements ISA 800: Special Considerations-Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks ISA 805: Special Considerations-Audits of Single Financial Statements and Specific Elements, Accounts or Items of a Financial Statement ISA 810: Engagements to Report on Summary Financial Statements International Standard on Quality Control (ISQC) 1, Quality Controls for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements 9.7 INDIA’S RESPONSE TO AUDITING NEEDS In India, the Ministry of Corporate Affairs (MCA) and policymakers have worked hard to implement required reforms to broaden the reach of auditing. Mandatory auditor rotation, internal financial controls over financial statements, fraud reporting, adherence of Indian Accounting Standards (Ind AS) to IFRS, tighter independence norms for auditors, caps on the 218 CU IDOL SELF LEARNING MATERIAL (SLM)

number of audits for an auditor, and so on are some of the notable changes. Both of these reforms are aimed at improving audit independence, making financial reporting more robust and accurate, and improving corporate governance and investor trust. 9.8 NFRA The National Financial Reporting Authority (NFRA) is an independent body established under Section 132 of the Companies Act of 2013. This authority was established on October 1, 2018, and it has been in operation since then. The aim of the Central Government tends to be the establishment of a separate and autonomous regulatory body to assist in the framing and implementation of accounting and auditing regulations, as well as improving investor and public trust in an entity's financial reporting. The need for this authority is said to have arisen as a result of recent corporate frauds. Composition of the NFRA According to the Companies Act, the NFRA must have a chairperson appointed by the Central Government, as well as a maximum of 15 members. The following criteria must be met before such a chairperson and members are appointed: Accountancy, auditing, banking, or law should be their specialties. They must declare to the Central Government that their appointment does not include any conflicts of interest or lack of independence. During their term of office and for two years thereafter, all full-time members, including the chairperson, should not be affiliated with any audit firm (including similar consulting firms). The terms and conditions for the chairperson and members' appointments have yet to be established. However, the authority's composition is outlined in the draught NFRA rules as follows: A Chartered Accountant and an individual of eminence with experience in accountancy, auditing, banking, or law serves as Chairperson. Member – Accounting. Member – Auditing. 219 CU IDOL SELF LEARNING MATERIAL (SLM)

Member – Enforcement. One MCA official, not lower than the rank of Joint Secretary or equivalent (ex-officio) The RBI will appoint one delegate to serve on the RBI Board of Directors. SEBI will appoint one delegate, who will either be the Chairman of SEBI or a full-time member of SEBI. The Central Government may appoint a retired high court chief justice or a person who has served as a high court judge for more than 5 years, according to the President of the Institute of Chartered Accountants of India (ex-officio) Any other person can be invited to the meeting by the Chairman to provide their expert opinion. Role of the NFRA The following are the duties of the NFRA: Make guidelines for the establishment of accounting and auditing policies and standards, as well as their basis. Compliance with accounting and auditing principles is monitored and enforced: Oversee the quality of service provided by professionals (such as auditors, CFOs, and others) and recommend steps to enhance service quality; Perform all other tasks that are relevant to the above. Prior to the establishment of this authority, the Central Government will issue accounting guidelines based on the ICAI's recommendations. Only after meeting with the National Advisory Committee on Accounting Standards, which can make recommendations, will the ICAI issue a directive. The ICAI will now have to work with the NFRA and look into its recommendations. As a result, the NFRA essentially replaces the National Advisory Committee on Accounting Standards. Powers of the NFRA The NFRA would be able to investigate professional or other wrongdoing by a specified class of CA firms or CAs. Where the NFRA has started an investigation, no other authority can start or continue it. Suo moto (on its own) or in response to a referral from the Central Government, such an inquiry may be launched. 220 CU IDOL SELF LEARNING MATERIAL (SLM)

In a suit concerning the following matters, the same powers as a Civil Court under the Code of Criminal Procedure, 1908. The NFRA can specify the location and time for the discovery and production of books of account and other documents. Summoning and requiring the presence of individuals and questioning them under oath Inspection of any person's books, registers, or other documents at any location appointing committees to examine witnesses or records It has the authority to enact the following punishments when professional or other wrongdoing is proven: Penalty: For individuals a fine between Rs. 1, 00,000 to 5 times the fees received; For firms a fine Between Rs. 5, 00,000 to 10 times the fees received; Debarring the individual/firm from practising as an ICAI member for a period ranging from 6 months to 10 years, as determined by the ICAI. Anyone who is dissatisfied with the NFRA's decision can file an appeal with the Appellate Authority. Scope of the NFRA As previously stated, the NFRA has the authority to examine and perform quality assessments for a specific class of businesses. Although the draught NFRA Rules have not yet been prescribed, if enforced as written, they will apply to the following types of businesses: Companies listed in India Unlisted Companies whose: Net worth ≥ Rs. 500 crore; or Paid up Capital ≥ Rs. 500 crore; or Annual turnover ≥ Rs. 1000 crore (As on 31st March of the preceding financial year); OR Companies whose securities are listed outside India 221 CU IDOL SELF LEARNING MATERIAL (SLM)

The NFRA also has the authority to investigate a specific class of bodies corporate or individuals (auditors) for professional or other wrongdoing by a member or firm of Chartered Accountants or auditors. According to the draught NFRA regulations, auditors or audit firms that directly or indirectly perform the audit of the following categories of companies or their subsidiaries (including through the network/brand to which it belongs) are covered: Audit of ≥ 200 companies in a year; Audit of ≥ 20 listed companies; Company or companies (whether listed or not), having: Net Worth ≥ Rs. 500 crores; or Paid up Capital ≥ Rs. 500 crores; or Annual turnover ≥ Rs. 1000 crores ;( As on 31st March of the immediately preceding financial year); OR Company or Companies listed outside India Note: The above restriction of companies will not apply where : The Central Government or any regulator requests that the NFRA conduct an investigation; or the NFRA agrees to conduct an investigation in the public interest on its own. Final thoughts As a result, the ICAI's regulatory powers will continue to apply to private companies and unlisted public companies that fall below the above-mentioned threshold. The Quality Review Board will continue to perform quality audits of private limited companies, unlisted public companies, and other companies to which the NFRA has assigned authority. 9.9 SUMMARY  The International Federation of Accountants and the International Auditing and Assurance Standards Board issue international standards on auditing.  The International Auditing and Assurance Standards Board is an autonomous body that sets high quality international standards for auditing, assurance, and other relevant services and promotes the alignment of international national standards. 222 CU IDOL SELF LEARNING MATERIAL (SLM)

 The International Association of Accounting Standards Boards (IAASB) creates international standards for evaluation engagements, assurance engagements, and related services.  The auditing and assurance standard board, which is constituted by the Institute of Chartered Accountants of India, has released 36 international auditing standards and one quality management standard. 9.10 KEYWORDS  ICAI-Institute of Chartered Accountants of India  IFAC – International Federation of Accountants  NFRA- National Financial Reporting Authority  IAASB-International auditing and assurance Standards Board 9.11 LEARNING ACTIVITY 1. Learn about the Auditing standards issued by AASB in India , how many standards are issued under the clarity project. ______________________________________________________________________________ ______________________________________________________________________________ 9.12 UNIT END QUESTIONS A.Descriptive Questions Short Questions 1. Write a short note about the structure of international standards on auditing 2. Explain briefly about the objectives of international standards on auditing 3. Discuss about international auditing and assurance Standards Board 4. Write a short note about auditing pronouncements of IAASB Long Questions 223 CU IDOL SELF LEARNING MATERIAL (SLM)

1. Discuss in detail about auditing pronouncements of international auditing assurance standard board 2. Elaborate about structure and objectives of international standards on auditing 3. Explain in detail about IAASB 4. Explain about NFRA in detail B. Multiple choice Questions 224 1._____________ is a body constituted under section 132 of Companies Act 2013 a. AASB b. NFRA c. IFAC d. None of these 2. The term ISRE stands for a. International standards on review engagements b. International standards on related engagements c. Both a and b d. None of these 3. International standards on auditing are issued by __________ a. International auditing and assurance Standards Board b. International Federation of accountants c. Auditing assurance Standards Board d. None of these 4. Full form of NFRA a. National financial reporting Authority CU IDOL SELF LEARNING MATERIAL (SLM)

b. National financial regulatory Authority c. National financial registering Authority d. None of these 5. Full form of IAASB a. International Auditing and Assurance standards board b. International Accounting and Assurance standards board c. International Assurance standards board d. None of these Answers 1-b 2-a 3-b 4-a 5-a 9.13 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 225 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 10 – RATIONALE TO AUDITING STANDARDS Structure 10.0Learning Objectives 10.1Introduction 10.2Standards issued by AASB 10.3Objectives and functions of AASB 10.4Standard setting process 10.5 Compliance with SA 10.6 Summary 10.7 Keywords 10.8 Learning activity 10.9 Unit End Questions 10.10References 10.0 LEARNING OBJECTIVES After studying this unit students will be able to :  Explain about AASB  Describe the objectives and functions of AASB  learn about standard setting process  Compliance with standards on auditing 10.1INTRODUCTION In India, the Auditing and Assurance Standards Council, which is governed by the ICAI, issues auditing standards. The ICAI is dedicated to empowering India's accounting profession to provide high-quality services in the public interest that are recognised worldwide. The ICAI creates and publishes technical Standards and other professional literature in order to achieve this 226 CU IDOL SELF LEARNING MATERIAL (SLM)

aim. Since the ICAI is a founding member of the International Federation of Accountants (IFAC), the Standards established and promulgated by the AASB under the authority of the ICAI Council are consistent with the International Standards published by the IFAC's International Auditing and Assurance Standards Board (IAASB). 10.2STANDARDS ISSUED BY AASB The Engagement Standards are the following standards published by the Auditing and Assurance Standards Board under the jurisdiction of the Council: (a) Auditing Standards (SAs), to be used in the audit of historical financial data. (b) SREs (Standards on Review Engagements), which will be used to review historical financial data. (c) SAEs (Standards on Assurance Engagements), which are to be used in assurance engagements other than audits and analyses of historical financial data. (d) Standards on Related Services (SRSs), which will be used in engagements involving the application of agreed-upon procedures to information, compilation engagements, and other related services engagements as the ICAI can specify. On September 17, 1982, the Institute of Chartered Accountants of India (ICAI) formed the Auditing Practices Committee (APC) to review existing auditing practises in India and create Statements on Standard Auditing Practices to be released under the authority of the Institute's Council. The International Federation of Accountants includes the ICAI as one of its founding members (IFAC). One of the Institute's membership responsibilities is to vigorously promote the pronouncements of the IFAC's International Auditing and Assurance Standards Board (IAASB) in order to contribute to global harmonisation and adoption of the IAASB's Standards. As a result, when developing Engagement and Quality Control Standards, the AASB considers the IAASB's corresponding Standards, if any exist. Furthermore, the AASB considers the relevant rules, customs, usages, and business climate in India. 227 CU IDOL SELF LEARNING MATERIAL (SLM)

10.3 OBJECTIVES AND FUNCTIONS OF THE AUDITING AND ASSURANCE STANDARDS BOARD • The Auditing and Assurance Standards Board's priorities and functions are as follows: Review current and emerging auditing practises around the world and identify areas where Quality Control Standards, Engagement Standards, and Auditing Statements should be established. • To establish Engagement Standards, Quality Control Standards, and Auditing Statements that will be published under the authority of the Institute's Council. • To determine the validity of current Auditing Standards and Statements in light of changing circumstances and, if appropriate, to revise them. • To create Guidance Notes on issues emerging from any Standard, auditing issues relating to any particular sector, or general issues, and to issue them under the authority of the Institute's Council. • To determine the current Guidance Notes' validity in light of the changed circumstances and, if applicable, to revise them. • To draught General Clarifications on issues arising from Standards, as needed. • To develop and publish Technical Guides, Practice Manuals, Studies, and other articles under its own jurisdiction for the guidance of practising accountants in cases the Board deems necessary. 10.4 STANDARD SETTING PROCESS Project proposals to implement new Standards, Statements, or General Clarifications are defined based on international and national developments, feedback from members of the ICAI Council, AASB members, members of other ICAI committees, and/or advice from other interested parties, such as regulators or professional accountants. The AASB decides the priority of different projects in the pipeline for start-up. AASB is aided in the preparation of Standards, Statements, and General Clarifications by Study Groups/Task Forces formed to look at particular projects. One of the experienced accountants is appointed as the Study Group/Task Force convenor by the AASB. Other members of the Study 228 CU IDOL SELF LEARNING MATERIAL (SLM)

Group/Task Force, usually five to seven, are nominated by the convenor in consultation with the Chairman, AASB. A study group is normally centred in the field where the convenor is situated for operational convenience and economy. The Board can also recommend getting an outside expert on certain Study Groups/Task Forces if it is deemed appropriate, and this expert does not have to be a skilled accountant. The Study Group/Task Force is in charge of drafting the standard/statement/general clarification's basic draught. A separate group of experts may also be created to provide advice to the Study Group/Task Force. Based on adequate analysis and consultation, the Study Group/Task Force produces a preliminary draught of the Standard/ Statement/ General Clarification, which may include, depending on the circumstances, consultation with other experts, regulators, and other interested parties, as well as reviewing professional pronouncements provided by IFAC member bodies and other professional bodies. The study group's draught, along with problem papers and background papers, is sent to the Chairman of the AASB for approval. The draught Standard/Statement/General clarification, as well as other agenda papers authorised by the Chairman, is posted on the AASB website at least twenty-one days before the AASB meeting at which the draught Standard/Statement is scheduled to be discussed. A notice to that effect is also sent to the representatives of the AASB. The printed version of the agenda papers, including context papers and draught Standard/ Statement/General Clarification prepared by the Study Group/Task Force for review and debate, is distributed to AASB members and special invitees at the relevant meeting. Before being published as an Exposure Draft, the draught of the proposed Standard/Statement/General Clarification, as updated in light of the Board's deliberations and accepted by the Chairman, AASB is circulated to the ICAI Council members for their feedback. In most cases, a ten-day cycle is set aside for collecting input on the Draft Exposure Draft. On the basis of any feedback received, the AASB finalises the Exposure Draft of the proposed Standard/ Statement. Normally, a General Clarification does not include an Exposure Draft. 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. 229 CU IDOL SELF LEARNING MATERIAL (SLM)

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. Any Exposure Draft respondent receives an acknowledgment. Unless the respondent has expressly stated otherwise, the responses of the respondents are considered public information. Comments received up to ten days before the AASB meeting at which they are proposed to be considered are hosted on the AASB website and held there until the date of the AASB meeting at which the Exposure Draft and comments on it are considered. When the comments are posted on the AASB's website, the representatives of the AASB and the Institute's Council are informed. At the AASB meeting where the Exposure Draft is scheduled for review, copies of the Exposure Draft and comment letters are also made available to AASB members.The AASB finalises the 230 CU IDOL SELF LEARNING MATERIAL (SLM)

draught of the proposed Standard/ Statement after considering the comments received, and submits it to the ICAI Council for consideration and approval. The AASB's completed draught of the General Clarification is presented to the ICAI Council for consideration and approval. The ICAI Council considers the proposed Standard/Statement/General Clarification's final draught and, if necessary, modifies it in consultation with the AASB. The concerned Standard/Statement/General Clarification is then published with the approval of the ICAI Council. 10.5 COMPLIANCE WITH AUDITING STANDARDS Statements on Auditing are released to ensure competent accountants' compliance with matters that the ICAI Council believes are vital to the effective discharge of their attest functions. As a result, auditing standards are needed. Compliance with Auditing Standards: Every auditor must follow the auditing requirements, according to section 143(9) of the Companies Act, 2013. In addition, under section 143(10) of the Act, the Central Government, in consultation with and after review of the National Financial Reporting Authority's recommendations, can prescribe auditing standards as recommended by the Institute of Chartered Accountants of India. 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  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. 231 CU IDOL SELF LEARNING MATERIAL (SLM)

 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 ACTIVITY 1. Learn about Guidance notes issued by ICAI on Auditing standards; are guidance notes mandatory or recommendatory in nature for professional Accountants? ______________________________________________________________________________ ______________________________________________________________________________ 10.9UNIT 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 232 1. The term SAE in relation to Engagement standards stands for a. Standards on Assurance Engagements b. Standards on Auditing Engagements CU IDOL SELF LEARNING MATERIAL (SLM)

c. Standards on Auditing d. None of these 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 233 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 11 – AUDITING AND ASSURANCE STANDARDS BOARD (AASB) Structure 11.0 Learning Objectives 11.1Introduction 11.2Historical retrospect 11.3Setting up of AASB 11.4 IAASB 11.5 Summary 11.6 Keywords 11.7Learning activity 11.8 Unit End Questions 11.9 References 11.0 LEARNING OBJECTIVES After studying this unit students will be able to  Explain about AASB  Learn about setting up of AASB  Outline the scope and functions of AASB 11.1 INTRODUCTION In the greater interests of society, the Institute of Chartered Accountants of India (ICAI) has been formulating auditing and accounting standards for the guidance of its members. In today's evolving world, it's obvious that a professional accountant must follow the standards and procedures established by the professional accountancy bodies of which he is a member when 234 CU IDOL SELF LEARNING MATERIAL (SLM)

carrying out his responsibilities responsibly. A professional accounting body's function in this area is to establish certain standards and procedures in order to provide guidance to its members. 11.2 HISTORICAL RETROSPECT The ICAI has been committed to research in the field of accountancy since its inception. The Research Committee was established by the ICAI Council in 1955. The Council decided it was necessary to establish such a committee at the time to deal with the growing complexities of the problems faced by the membership as a whole, as well as to ensure the highest of traditions and professional integrity in the discharge of chartered accountants' duties. The Council first published the \"Statement on Auditing Practices\" prepared by the Research Committee in 1964, not only for the benefit of its members, but also for those outside the profession who may be interested in the subject. This Statement was intended to provide useful guidance in the conduct of audits, especially of companies. The Institute's Council was well aware that accounting and auditing practises had changed and would continue to evolve as the market climate changed. Since the members were required to keep up with recent events, this Statement sought to lay out policies that were widely recognised in other countries and that the Council found acceptable in the context of India's current situation. In terms of defining sound auditing standards, the release of the Statement on Auditing Practices may be considered a watershed moment. 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) . 235 CU IDOL SELF LEARNING MATERIAL (SLM)

11.4 INTERNATIONAL AUDITING AND ASSURANCE STANDARDS BOARD (IAASB): The IAASB was created by the IFAC Board to create and issue high-quality auditing standards for use around the world in the public interest and under its own authority. Under the auspices of IFAC, the IAASB serves as an autonomous standard-setting agency. Auditing and Assurance Standards Board: The ICAI is a member of the IFAC and has pledged to work for the adoption of the IFAC's guidelines. The AASB (erstwhile Auditing Practices Committee) was established by the ICAI to review existing auditing practises in India and develop Engagement and Quality Control Standards (erstwhile Statements on Standard Auditing Practices) to be issued by the Institute's Council. Scope and Functions of AASB The AASB's key role is to study current auditing practises in India and establish Statements on Auditing Standards (SAs) that can be released by the Institute's Council. The AASB considers the ISAs provided by the IAPC, relevant rules, customs, usages, and the Indian market climate while drafting the SAs. The SAs are released with the approval of the Institute's Council. Wherever possible, the AASB also issues Guidance Notes on issues arising from the SAs. The AASB has also been entrusted with the task of reviewing the SAs on a regular basis. SAs' Purpose The SAs apply whenever an independent audit is performed, that is, when an independent review of financial records of any organisation, profit-oriented or not, and regardless of its size or legal form (unless otherwise specified), is conducted with the intent of voicing an opinion. The SAs may also be applied to other relevant roles of auditors as required. Any limitations on a particular SA's applicability are mentioned in the first paragraph of the SA. 11.5 SUMMARY  AASB (American Association of School Boards)  International auditing standards are issued by the International Federation of Accountants and the International Auditing Assurance Standards Board 236 CU IDOL SELF LEARNING MATERIAL (SLM)

 The main function of the auditing and assurance standard board is to review existing auditing practises and develop new auditing standards under the authority of the Institute of Chartered Accountants of India. 11.6 KEYWORDS  QCS – Quality control standards  SAP- Standards Auditing practices  GNs- Guidance notes 11.7 LEARNING ACTIVITY 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.? ______________________________________________________________________________ ______________________________________________________________________________ 11.8 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 237 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 CU IDOL SELF LEARNING MATERIAL (SLM)

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 Answers 1-a 2-c 3-c 11.9 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 238 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 IndAS 12.3 Revised ISA issued under clarity project 12.4 Redrafted standards 12.5 Summary 12.6 Keywords 12.7Learning activity 12.8 Unit End Questions 12.9 References 12.0 LEARNING OBJECTIVES After studying this unit students will be able to  State the meaning of AS and Ind AS  Outline differences between AS and Ind AS  Explain about revised ISAs issued under clarity project  Learn about redrafted standards 12.1INTRODUCTION Accounting Standards The Accounting Standards Board develops accounting standards, which are then published by the ICAI Council. Accounting Standards are also a part of the Companies Act of 2013, which are governed by the Companies (Accounting Standards) Laws of 2006. The Accounting Standards 239 CU IDOL SELF LEARNING MATERIAL (SLM)

are published for use in the presentation of 'general purpose financial statements' provided to the public by such 'economic, manufacturing, or business entities' as the Institute may specify from time to time, subject to the attest role of its members. They become obligatory on the dates stated in the relevant Accounting Standards or as otherwise informed by the Council. AS INDIA Indian Accounting Standards (Ind-AS) are converged International Financial Reporting Standards (IFRS) published by the Central Government of India under the oversight and control of the Accounting Standards Board (ASB) of the Institute of Chartered Accountants of India (ICAI) and in consultation with the National Financial Reporting Authority (NFRA). The Indian Accounting Standards (Ind AS) are called and numbered in the same way as the International Financial Reporting Standards (IFRS) (IFRS). In his Budget Speech in July 2014, India's Finance Minister said that the current accounting standards must be converged with the International Financial Reporting Standards (IFRS) by adopting the new Indian Accounting Standards (Ind AS) by Indian companies from the financial year 2015-16 on a voluntary basis and from the financial year 2016-17 on a mandatory basis. Various measures were taken in response to the above announcement to promote the introduction of IFRS-converged Indian Accounting Standards (Ind AS). The Ministry of Corporate Affairs (MCA) released the Companies (Indian Accounting Standards) Rules, 2015 in this direction. The updated roadmap for the adoption of Ind AS for companies other than banking, insurance, and NBFCs, as well as Indian Accounting Standards, was published on February 16, 2015. (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):- Sr. Area Ind-AS (Indian Accounting Accounting Standards no Standards as converged with IFRS) 240 CU IDOL SELF LEARNING MATERIAL (SLM)

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 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 various transactions like AS. 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 241 CU IDOL SELF LEARNING MATERIAL (SLM)

comprehensive 6 Conceptual There are specific guidances on AS contains subjectivity at quite a few Differences various matters places. 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. The International Auditing Standards Board (IAASB) began a systematic programme to improve the consistency of its International Standards on Auditing in 2004. (ISAs). The project's overall goal was to make the ISAs more understandable, which should promote consistent application and increase audit quality around the world. In addition to improved readability, many of the ISAs have been updated, resulting in significant improvements to the ISAs' material. The following is a list of the improvements brought about by the Clarity Project: The new Clarity conventions and format have been applied to 19 ISAs and ISQC 1 (see discussion below) – these are referred to as \"Redrafted ISAs.\" 16 ISAs have been redrafted to apply the latest Clarity norms and format, as well as having new and updated specifications. These are referred to as \"Revised and Redrafted ISAs.\" A new standard, ISA 265 Communicating Deficiencies in Internal Control to Those Charged with Governance and Management, has been released. What is meant by a ‘Redrafted’ standard? The term \"redrafted\" refers to a standard's new structure, which includes parts such as Introduction, Objective, Definitions, Requirements, Application, and Other Explanatory Material. Each of these is listed in more detail below. Introduction 242 CU IDOL SELF LEARNING MATERIAL (SLM)

The purpose, scope, and subject matter of the ISA, as well as the responsibilities of the auditors and others in the sense in which the ISA is placed, may be included in the introductory content. Objective The ISA's intent, scope, and subject matter, as well as the auditors' and others' responsibilities in the context of the ISA, may be included in the introductory material. Definitions Applicable terms have been specified in each ISA for a better understanding of the ISAs. Requirements Each goal is backed up by requirements that are clearly stated. The term \"the auditor shall\" is often used to express requirements. Application and other explanatory material The application and other supporting documentation outlines what a provision entails and what it is meant to include, as well as providing examples of procedures that may be suitable in some situations. 12.4 WHAT IMPROVEMENTS ARE EXPECTED AS A RESULT OF REDRAFTED STANDARDS? The new format is intended to make it easier for the auditor to consider the overall goals of an audit and his or her responsibilities in relation to those objectives. The wording used in the ISAs should make it clear what the auditor is supposed to do; for example, the word \"must\" is not vague and means that the auditor is expected to do something. The fact that each standard uses the same format and wording illustrates the fact that the ISAs are highly interconnected and can not be viewed in isolation from one another. The IAASB is optimistic that clarifying the ISAs would greatly improve the consistency and uniformity of audit practise around the world. Furthermore, since the more prescriptive nature of the criteria provides a consistent benchmark for audit activity, tracking audit quality should be simpler. 243 CU IDOL SELF LEARNING MATERIAL (SLM)

The clarification is also expected to aid in the adoption of ISAs around the world and promote international convergence. Harmonization of auditing practises is a significant advantage for multinational audit firms. What is the impact of the ‘Revised and Redrafted’ ISAs? ‘Revised and Redrafted' is a phrase that means ‘revised and redrafted. New or revised standards and recommendations are included in ISAs, with the aim of improving audit practise in a variety of areas. The enhancements also take into account the most recent trends and thinking in the fields of reporting and auditing. The following are some examples of areas that have been impacted by the redrafting process: Materiality in audit preparation and execution, as well as its use in assessing misstatements Risk assessment and audit proof collection and review Accounting estimates, such as fair value disclosures, related party partnerships and transactions, and an entity's use of a third-party service organisation, are all subject to audit. External confirmations and written representations were used as audit verification. Using other people's work in the audit of a group's financial statements, such as component auditors' work and the work of an auditor's expert Being in touch with those in charge of governance Internal management flaws should be communicated. The auditor's opinion was changed, and Emphasis of Matter paragraphs were used. In the form of special engagements, audit and reporting issues. 200 ISA (Revised and Redrafted) The document Overall Objectives of the Independent Auditor and the Conduct of an Audit in accordance with International Standards on Auditing outlines the conventions adopted in the standards as well as the auditors' responsibilities. It clarifies that in order to understand an ISA's objectives and properly apply its requirements, the auditor must have a thorough understanding of the entire text. It describes that, in addition to goals and specifications, ISAs also provide instructions about how to meet those requirements. The guidance could go into greater detail about what a requirement entails or provide examples of 244 CU IDOL SELF LEARNING MATERIAL (SLM)

procedures that could be suitable in the given situation. This information is not meant to be interpreted as a necessity, but it is essential for the proper implementation of the ISA's requirements. The clarified ISAs tend to take a more rules-based approach, with the auditor's responsibilities and conditions more clearly defined in the standards' wording. The word \"shall\" denotes that a requirement is obligatory, and that it must be fulfilled regardless of other factors such as difficulty, risk, size, or cost. As previously mentioned, the point in favour of this strategy is that it would result in consistent implementation of the ISAs and improved audit efficiency. Conclusion The IAASB believes that the Clarity Project would result in a major improvement in the quality and accuracy of audit practise around the world. The global adoption of the clarified ISAs could benefit global auditing firms in particular, as well as international auditing practise harmonisation. In the coming years, auditing practise will shift to one that promotes uniformity and limits the space for intentional under-auditing. Audit firms should start preparing for the transition to these new requirements now. 12.5 SUMMARY  Accounting Standards are published by the Institute of Chartered Accountants of India (ICAI), and they are used in the preparation of General-Purpose Financial Statements (GPFS).  In 2004, the International Auditing Standards Board (IAASB) began a systematic programme to improve the consistency of its International Standards on Auditing (ISAs). The project's broad goal was to improve the ISAs' understandability, which should promote consistent implementation and lead to an increase in audit quality around the world, as well as to improve the ISAs' simple understand ability.  New or updated standards and recommendations are included in the revised and redrafted ISAs, with the aim of improving audit practise in a variety of areas. 12.6 KEYWORDS 245  Ind As- Indian Accounting Standards as converged with IFRS CU IDOL SELF LEARNING MATERIAL (SLM)

 IFRS-International Financial reporting standards 12.7 LEARNING ACTIVITY 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? 3. Elaborate about International Standards on Auditing issued under clarity project B. Multiple choice Questions 246 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 CU IDOL SELF LEARNING MATERIAL (SLM)

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 247 CU IDOL SELF LEARNING MATERIAL (SLM)