© The Institute of Chartered Accountants of India

ii

This Study Material has been prepared by the faculty of the Board of Studies (Academic). The
objective of the Study Material is to provide teaching material to the students to enable them to
obtain knowledge in the subject. In case students need any clarification or have any suggestion for
further improvement of the material contained herein, they may write to the Director of Studies.
All care has been taken to provide interpretations and discussions in a manner useful for the
students. However, the Study Material has not been specifically discussed by the Council of the
Institute or any of its committees and the views expressed herein may not be taken to necessarily
represent the views of the Council or any of its Committees.
Permission of the Institute is essential for reproduction of any portion of this material.

© THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

All rights reserved. No part of this book may be reproduced, stored in a retrieval system, or
transmitted, in any form, or by any means, electronic, mechanical, photocopying, recording, or
otherwise, without prior permission, in writing, from the publisher.

Basic draft of this publication was prepared by CA. Vandana D Nagpal.

Edition : April, 2023

Committee/Department : Board of Studies (Academic)

E-mail : [email protected]

Website : www.icai.org

Price : ` /- (For All Modules)

ISBN No. : 978-81-19472-09-3

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The Institute of Chartered Accountants of India,
ICAI Bhawan, Post Box No. 7100,
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BEFORE WE BEGIN…..

Evolving Role of a CA. - Shift Towards Strategic Decision Making

The role of a chartered accountant is evolving continually to assume newer responsibilities in a

dynamic environment. There has been a notable shift towards strategic decision making and
entrepreneurial roles that add value beyond traditional accounting and auditing. The causative
factors for the change include globalisation leading to increase in cross border transactions and
consequent business complexities, significant developments in information and technology and
financial scams underlining the need for a stringent regulatory set up. These factors necessitate
an increase in the competence level of chartered accountants to bridge the gap in competence
acquired and competence expected from stakeholders. Towards this end, the scheme of
education and training is being continuously reviewed so that it is in sync with the requisites of
the dynamic global business environment; the competence requirements are being stepped up
to enable aspiring chartered accountants to acquire the requisite professional competence to
take on new roles.

Skill Requirements at Final Level

Under the Revised Scheme of Education and Training, at the Final Level, you are expected to
apply the professional knowledge acquired through academic education and the practical
exposure gained during articleship training in addressing issues and solving practical problems.
The integrated process of learning through academic education and practical training should also
help you inculcate the requisite technical competence, professional skills and professional
values, ethics and attitudes necessary for achieving the desired level of professional
competence.

Auditing – Core and Practical Subject

Auditing has been conceived of to provide a highly useful technical service to the economy to know
performances in financial and other appropriate terms in a reliable manner. It is needless to say
that multitudes of significant decisions in the economic society are taken based on the financial
information and, therefore, ensuring reliability of such information is an imperative necessity. Audit
is a subject that requires a lot of quick and logical application of mind to answer practical problems.
It is one of the most practical-oriented subjects in the C.A. curriculum. This paper aims to provide
knowledge of generally accepted auditing procedures and of techniques and skills needed to apply
them in audit engagements. A good knowledge of the subject would provide a strong foundation to

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students while pursuing the Chartered Accountancy course. A good understanding of the theoretical
concepts, particularly, in the context of auditing standards would make practical training an
enriching and enjoying experience. While studying this paper, students are advised to integrate
the knowledge acquired in other subjects in a meaningful manner along with practical training. Such
learning would only help a student to become a better professional.
Know your syllabus and Study Material

The Study Material of Advanced Auditing, Assurance and Professional Ethics subject has been
designed having regard to the needs of home study and distance learning students. The study
material deals with the conceptual theoretical framework in detail. In each chapter, the topic has
been covered in a step by step approach. The text has been explained, where appropriate, through
illustrations, diagrams, tables, flowcharts, screenshots etc. You should go through the chapter
carefully ensuring that you understand the topic and then test your knowledge by attempting
question.
The Study Material has been divided into nineteen chapters in line with the syllabus and further
bifurcated into three modules for the easy handling and convenience of students. For bare text of
Guidance Notes and Auditing Standards, the students are advised to refer the “Auditing
Pronouncements” which has been webhosted on the BOS Knowledge Portal by the Board of
Studies. For understanding the coverage of the syllabus, it is important to read the study material
along with the Study Guidelines.
Framework of Chapters – Uniform Structure Comprising of Specific Components
Efforts have been made to present each topic of the syllabus in a lucid manner. Care has been
taken to present the chapters in a logical sequence to facilitate easy understanding by the students.
Structure of the Study Material
The content for each chapter/unit at the Final level has been structured in the following manner –
S. Components of Each About the Component
No. Chapter
1. Learning Outcomes Learning outcomes which you need to demonstrate after
learning each topic have been detailed in the first page of each
chapter/unit. Demonstration of these learning outcomes would
help you to achieve the desired level of technical competence.
2. Chapter Overview As the name suggests, this chart/table would give a broad
outline of the contents covered in the chapter.

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3. Beginning with a After Chapter Overview in flowchart, importance of the Chapter

Story and key points to make the Chapter interesting are explained
in the form of Story.
4 Introduction A brief introduction is given at the beginning of each
chapter/unit which would help you get a feel of the topic.
5. Content The concepts and provisions of law/standard are explained in
student-friendly manner with the aid of Examples /
illustrations/diagrams/flow charts. These value additions would
help you develop conceptual clarity and get a good grasp of
the topic. Diagrams and Flow charts would help you
understand the concept/provision in a better manner.
Illustrations would help you understand the application of
concepts/provisions.
6. Test Your Test your Understanding feature is also newly added feature.
Understanding With the help of this feature student can test their
understanding and refer the answer given after the end of the
Chapter.
7. Key Takeaways This feature summarise the Key Takeaways for revision
purpose.
8. Exercise Questions Exercising questions and answers alongwith Integrated Case
with Case Study/ Scenario based MCQs would help you to apply what you have
Case Scenario / Test learnt in problem solving. In effect, it would sharpen your
Your Knowledge application skills and test your understanding as well as your
application of concepts/provisions.

Though all efforts have been taken in developing this Study Material, the possibilities of errors /
omissions cannot be ruled out. You may bring such errors / omissions, if any, to our notice so
that the necessary corrective action can be taken.

We hope that the student-friendly features in the Study Material makes your learning process
more enjoyable, enriches your knowledge and sharpens your application skills.

Happy Reading and Best Wishes!

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SYLLABUS
PAPER 3: ADVANCED AUDITING, ASSURANCE AND
PROFESSIONAL ETHICS
(One Paper – Three hours 100 Marks)

Objective:
(a) To gain the ability to analyse current auditing practices and procedures and apply them in
auditing engagements.
(b) To develop the ability to solve cases relating to audit engagements.

Contents:
1. Quality Control
SQC 1 Quality Control for Firms that Perform Audits and Reviews of Historical Financial
Information and Other Assurance and Related Services Engagements
SA 220 Quality Control for an Audit of Financial Statements
2. General Auditing Principles and Auditors Responsibilities
SA 240 The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements
SA 250 Consideration of Laws and Regulations in an Audit of Financial Statements
SA 260 Communication with Those Charged with Governance
SA 299 Joint Audit of Financial Statements
SA 402 Audit Considerations Relating to an Entity Using a Service Organisation.
(Note: Content of SA 200 Overall Objectives of the Independent Auditor and the Conduct of
an Audit in Accordance with Standards on Auditing; SA 210 Agreeing the Terms of Audit
Engagements and SA 230 Audit Documentation is covered in depth at Intermediate level.
Thus, application part of above SAs may be discussed in the form of Case Study at Final
level.)
3. Audit Planning, Strategy, and Execution
SA 300 Planning an Audit of Financial Statements; (Content is covered in depth at
Intermediate level, therefore, application part of SA 300 may be discussed in the form of
Case Study at Final level.)

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SA 450 Evaluation of Misstatements identified During the Audit

SA 520 Analytical Procedures
SA 540 Auditing Accounting Estimates, Including Fair Value Accounting Estimates and
Related Disclosures
SA 610 Using the Work of Internal Auditors
SA 620 Using the Work of an Auditor’s Expert
4. Materiality, Risk Assessment and Internal Control
Evaluation of Internal Control Procedures; Components of Internal Controls; Internal Control and
Risk Assessment; auditor’s response to assessed risks; Risk-Based Audit- Audit Risk Analysis;
Reporting on Internal Control Weaknesses, Framework on Reporting of Internal Controls.
SA 265 Communicating Deficiencies in Internal Control to Those Charged with Governance
and Management.
SA 330 The Auditor’s Responses to Assessed Risks
(Note : Content of SA 315 Identifying and Assessing the Risk of Material Misstatement
through Understanding the Entity and its Environment and SA 320 Materiality in Planning
and Performing an Audit is covered in depth at Intermediate level. Thus, application part of
above SAs may be discussed in the form of Case Study at Final level.)
5. Audit Evidence
(Note : Content of SA 500 Audit Evidence; SA 501 Audit Evidence - Specific Considerations
for Selected Items; SA 505 External Confirmations; SA 510 Initial Audit Engagements –
Opening Balances; SA 530 Audit Sampling & SA 550 Related Parties is covered in depth at
Intermediate level. Thus, application part of above SAs may be discussed in the form of
Case Study at Final level.)
6. Completion and Review
(Note: Content of SA 560 Subsequent Event; SA 570 Going Concern and SA 580 Written
Representation is covered in depth at Intermediate level. Thus, application part of above
SAs may be discussed in the form of Case Study at Final level.)
7. Reporting
SA 700 Forming an Opinion and Reporting on Financial Statements
SA 701 Communicating Key Audit Matters in the Independent Auditor’s Report
SA 705 Modifications to the Opinion in the Independent Auditor’s Report
SA 706 Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent
Auditor’s Report

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SA 710 Comparative Information – Corresponding Figures and Comparative Financial

Statements
SA 720 The Auditor’s Responsibility in Relation to Other Information
8. Specialised Areas
Basic and Overview of SA 800 Special Considerations-Audits of Financial Statements
Prepared in Accordance with Special Purpose Frameworks
Basic and Overview of SA 805 Special Considerations-Audits of Single Financial Statements
and Specific Elements, Accounts or Items of a Financial Statement
Basic and Overview of SA 810 Engagements to Report on Summary Financial Statements
9. Related Services : Basic and Overview of SRS 4400 Engagements to Perform
Agreed-upon Procedures Regarding Financial Information
Basic and Overview of SRS 4410 Compilation Engagements
10. Review of Financial Information
Basic and Overview of SRE 2400 Engagements to Review Historical Financial Statements
Basic and Overview of SRE 2410 Review of Interim Financial Information Performed by the
Independent Auditor of the Entity
11. Prospective Financial Information and Other Assurance Services
Basic and Overview of SAE 3400 The Examination of Prospective Financial Information
Basic and Overview of SAE 3402 Assurance Reports on Controls at a Service Organisation
Basic and Overview of SAE 3420 Assurance Engagements to Report on the Compilation of
Pro Forma Financial Information Included in a Prospectus
12. Digital Auditing and Assurance
Auditing digitally and Digital auditing, Usage of Automated Tools such as CAAT, Data
Analytics, Artificial Intelligence, etc., Remote Auditing.
13. Group Audits
Audit of Consolidated Financial Statements - Responsibility of Parent Company, Auditor of
the Consolidated Financial Statements; Audit Considerations - Permanent Consolidation,
Current Period Consolidation; Reporting.
Audit of Group Financial Statements including the work of Component Auditors,
SA 600 Using the Work of Another Auditor

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14. Special Features of Audit of Banks & Non-Banking Financial Companies

15. Overview of Audit of Public Sector Undertakings: Concept of Propriety Audit;
Performance Audit; Comprehensive Audit.
16. Internal Audit : Provisions of Internal Audit as per Companies Act, 2013; Scope of Internal
Auditing; Relationship between Internal and External Auditor; Basics of Internal Audit
Standards issued by the ICAI; Drafting of Internal Audit Report; Audit Trail, Internal Audit
as a Management Function.
17. Due Diligence, Investigation and Forensic Accounting: Due Diligence Review; Audit
versus Investigation; Steps for Investigation; Types of Investigation; Procedure, Powers, etc.
of Investigator; Types of Fraud, Indicators of Fraud, Follow-up thereof; Forensic Accounting-
meaning, difference between Statutory Audit and Forensic Accounting, Forensic Accounting
and Investigation Report, Introduction of Forensic Accounting and Investigation Standards
18. Emerging Areas: Sustainable Development Goals (SDG) & Environment, Social and
Governance (ESG) Assurance etc.
19. Professional Ethics and Liabilities of Auditors: Introduction of Code of Ethics as per
IESBA and Code of Ethics with special reference to the relevant provisions of the Chartered
Accountants Act, 1949 and the Regulations thereunder; Application of Fundamental
Principles; Application of Threats, Evaluation of Threats; Addressing Threats and
Safeguards; Conceptual Framework; Important Provisions of Chartered Accountants
Act,1949 and Chartered Accountants Regulations 1988.
Note: If any new legislations / Engagement and Quality Control Standards/ Guidance Notes/
Statements are enacted in place of the existing legislations / Engagement and Quality Control
Standards / Guidance Notes / Statements, the syllabus will accordingly include the corresponding
provisions of such new legislations / Engagement and Quality Control Standards / Guidance Notes
/Statements, with effect from the date to be notified by the Institute.
Similarly, if any existing legislations / Engagement and Quality Control Standards/ Guidance Notes
/Statements ceases to be in force, the syllabus will accordingly exclude such legislations/
Engagement and Quality Control Standards/ Guidance Notes / Statements with effect from the date
to be notified by the Institute.
Further, the specific inclusions/exclusions in any topic covered in the syllabus will be effected by
way of Study Guidelines every year, if required.

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CONTENTS

MODULE – 1

Chapter 1: Quality Control

Chapter 2: General Auditing Principles and Auditors Responsibilities
Chapter 3: Audit Planning, Strategy and Execution
Chapter 4: Materiality, Risk Assessment and Internal Control
Chapter 5: Audit Evidence
Chapter 6: Completion and Review
Chapter 7: Reporting

MODULE – 2

Chapter 8: Specialised Areas

Chapter 9: Related Services
Chapter 10: Review of Financial Information
Chapter 11: Prospective Financial Information and Other Assurance Services
Chapter 12: Digital Auditing & Assurance
Chapter 13: Group Audits
Chapter 14: Special Features of Audit of Banks & Non-Banking Financial Companies

MODULE – 3

Chapter 15: Overview of Audit of Public Sector Undertakings

Chapter 16: Internal Audit
Chapter 17: Due Diligence, Investigation & Forensic Accounting
Chapter 18 : Emerging Areas: Sustainable Development Goals (SDG) & Environment, Social
And Governance (ESG) Assurance
Chapter 19: Professional Ethics & Liabilities of Auditors

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DETAILED CONTENTS MODULE - 1

CHAPTER 1: QUALITY CONTROL

LEARNING OUTCOMES .......................................................................................................... 1.1

CHAPTER OVERVIEW ............................................................................................................. 1.2

Contents:
1. Audit Quality................................................................................................................... 1.3
2. SQC 1 Quality Control for Firms that perform Audits and Reviews of historical
Financial Information, and other Assurance and related Services Engagements .............. 1.3
2.1 Elements System of Quality Control...................................................................... 1.3
3. SA 220 Quality Control for an Audit of Financial Statements: ......................................... 1.14
3.1 Leadership Responsibility for Quality of Audits ................................................... 1.14
3.2 Relevant Ethical Requirements........................................................................... 1.15
3.3 Acceptance and Continuance of Client Relationships and Audit Engagements .... 1.16
3.4 Assignment of Engagement Teams .................................................................... 1.16
3.5 Engagement Performance .................................................................................. 1.16
3.6 Engagement Quality Control Review................................................................... 1.16
3.7 Monitoring.......................................................................................................... 1.18
3.8 Documentation ................................................................................................... 1.18
4. SQC 1 Vs. SA 220 Key Differences in Nature, Scope and Applicability .......................... 1.19
5. Mechanisms for Review of Quality Control .................................................................... 1.20
5.1 Peer Review Board ............................................................................................ 1.20
5.2 Quality Review Board ......................................................................................... 1.20
5.3 National Financial Reporting Authority (NFRA) ................................................... 1.21
KEY TAKEAWAYS ................................................................................................................. 1.24
TEST YOUR KNOWLEDGE .................................................................................................... 1.26

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CHAPTER 2: GENERAL AUDITING PRINCIPLES & AND AUDITORS RESPONSIBILITIES

LEARNING OUTCOMES .......................................................................................................... 2.1

CHAPTER OVERVIEW ............................................................................................................. 2.2
Contents:
1. General Auditing Principles and Auditor’s Responsibilities ............................................... 2.3
2. SA 240 “The Auditor’s Responsibilities Relating to Fraud in an Audit of
Financial Statements” ..................................................................................................... 2.4
2.1 The objectives of the auditor in accordance with SA 240 ....................................... 2.4
2.2 How Fraudulent Financial Reporting may be caused by Entities? .......................... 2.6
2.3 How Misappropriation of Assets may be Accomplished by Entities? ...................... 2.7
2.4 Whose Primary Responsibility is to Prevent and Detect Fraud? ............................. 2.7
2.5 Responsibilities of the Auditor .............................................................................. 2.8
2.6 Maintaining Professional Skepticism ................................................................... 2.14
2.7 Discussion among the Engagement Team .......................................................... 2.15
2.8 Risk Assessment Procedures and related activities be geared towards
obtaining information for use in identifying risk of Material Misstatement
due to Fraud ...................................................................................................... 2.15
2.9 Responses to the Assessed Risks of Material misstatement due to Fraud
at the Financial Statement Level......................................................................... 2.15
2.10 Audit Procedures Responsive to Assessed risks of Material Misstatement
due to Fraud at the Assertion Level .................................................................... 2.16
2.11 Audit Procedures Responsive to Risks related to Management override of
Controls ............................................................................................................. 2.16
2.12 Evaluation of Audit Evidence .............................................................................. 2.17

2.13 Circumstances in which auditor is unable to continue the engagement ................ 2.17
2.14 Management Representations ............................................................................ 2.18
2.15 Communications to Management and with those charged with Governance ......... 2.19

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2.16 Communications to Regulatory and Enforcement Authorities ............................... 2.19
2.17 Documentation ................................................................................................... 2.19
3. SA 250 Consideration of Laws and Regulations in an Audit of Financial Statements ...... 2.21
3.1 Effect of Laws and Regulations of Financial Statements of an Entity ................... 2.21
3.2 Objectives of auditor in accordance with SA 250 ................................................. 2.22
3.3 Responsibility of Management for Compliance with Laws and Regulations .......... 2.22
3.4 Responsibility of the Auditor ............................................................................... 2.23
3.5 Audit Procedures when Non-Compliance is Identified or Suspected .................... 2.26
3.6 Reporting of Identified or Suspected Non-Compliance ........................................ 2.27
3.7 Documentation.................................................................................................... 2.28
4. SA 260 Communication with Those Charged with Governance ...................................... 2.28
4.1 Objectives of Auditor in Accordance with SA 260 ................................................ 2.30
4.2 Matters to be Communicated by the Auditor........................................................ 2.30
4.3 Communication of Auditor’s Independence in Case of Listed Entities .................. 2.34
4.4 Documentation ................................................................................................... 2.35
5. SA 299 Joint Audit of Financial Statements ................................................................... 2.35
5.1 Objectives in accordance with SA 299 ................................................................ 2.36

5.2 Audit planning, Risk Assessment and Allocation of Work .................................... 2.36
5.3 Responsibility and Co-ordination among Joint Auditors ....................................... 2.37
5.4 Audit Conclusion and Reporting ......................................................................... 2.39
5.5 Communication with Those Charged with Governance ........................................ 2.39
6. SA 402 Audit Considerations Relating to an Entity Using a Service Organisation ........... 2.40
6.1 Objectives of user auditor in accordance with SA 402 ......................................... 2.42

6.2 Type 1 report and Type 2 report ......................................................................... 2.42

6.3 Obtaining an Understanding of the Services ....................................................... 2.43
6.4 Using Type 1 or Type 2 Report ........................................................................... 2.45

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6.5 Responding to the Assessed Risks of Material Misstatement .............................. 2.45

6.6 Tests of Controls ................................................................................................ 2.46
6.7 Fraud, Non-compliance with laws and Regulations and uncorrected misstatements in
relation to activities at the service organisation ....................................................... 2.47
6.8 Reporting by the user auditor ............................................................................... 2.47

KEY TAKEAWAYS ................................................................................................................. 2.49

TEST YOUR KNOWLEDGE .................................................................................................... 2.51

CHAPTER 3: AUDIT PLANING, STRATEGY & EXECUTION

LEARNING OUTCOMES .......................................................................................................... 3.1

CHAPTER OVERVIEW ............................................................................................................. 3.2
Contents:
1. Commencing An Audit .................................................................................................... 3.3
1.1 Benefits/Advantages of Planning in an Audit of Financial Statements .................... 3.4
1.2 Nature and Extent of Planning .............................................................................. 3.4
1.3 Planning - A Continuous Process ......................................................................... 3.4
1.4 Overall Audit Strategy and Audit Plan - Responsibility of the Auditor ..................... 3.5
1.5 Acceptance and Continuance of Client Relationships and Audit Engagements ...... 3.5
1.6 Contents of an Audit Plan ..................................................................................... 3.6

1.7 Changes to Planning Decisions ............................................................................ 3.7

2. Overall Audit Strategy ..................................................................................................... 3.8
2.1 Factors while establishing Overall Audit Strategy .................................................. 3.8

2.2 Benefits of Overall Audit Strategy ......................................................................... 3.8

2.3 Considerations in Establishing the Overall Audit Strategy ..................................... 3.9
2.4 Documenting the Audit Plan ............................................................................... 3.11
2.5 Relationship between the Overall Audit Strategy and the Audit Plan .................... 3.12

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3. Audit Programme ......................................................................................................... 3.13
3.1 Formulating an Audit Programme ....................................................................... 3.13
3.2 Drawing up the audit programme ........................................................................ 3.14
4. Audit Execution ............................................................................................................ 3.16
4.1 Execution Planning ............................................................................................ 3.17
4.2 Risk and Control Evaluation ............................................................................... 3.17
4.3 Testing .............................................................................................................. 3.17
4.4 Reporting ........................................................................................................... 3.17
4.5 Other Important Considerations .......................................................................... 3.18
KEY TAKEAWAYS ................................................................................................................. 3.56
TEST YOUR KNOWLEDGE .................................................................................................... 3.58

CHAPTER 4: MATERIALITY, RISK ASSESSMENT AND INTERNAL CONTROL

LEARNING OUTCOMES .......................................................................................................... 4.1

CHAPTER OVERVIEW ............................................................................................................. 4.2
Contents:
1. Materiality & Risk Assessment ....................................................................................... 4.3
1.1 Identification of Risks ........................................................................................... 4.4
1.2 Audit Risk Components ........................................................................................ 4.4
1.3 Steps for Risk Identification ................................................................................ 4.10
2. Risk-Based Audit Approach .......................................................................................... 4.12
2.1 Audit Risk Analysis ........................................................................................... 4.13

2.2 General Steps in the Conduct of Risk Based Audit .............................................. 4.13
3. Internal Control System - Nature, Scope, Objectives and Structure ................................ 4.18
3.1 Nature of Internal Control ................................................................................... 4.20

3.2 Scope of Internal Controls .................................................................................. 4.20

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3.3 Objectives of Internal Control System ................................................................. 4.21

3.4 Structure of Internal Control ............................................................................... 4.22
4. Components of Internal Controls ................................................................................... 4.24
4.1 Control Environment .......................................................................................... 4.25
4.2 Entity’s Risk Assessment Process ...................................................................... 4.26
4.3 Control Activities ................................................................................................ 4.28
4.4 Information System, Including the Related Business Processes, Relevant to Financial
Reporting, and Communication .......................................................................... 4.29
4.5 Monitoring of Controls ........................................................................................ 4.30
5. Review of the System of Internal Controls ..................................................................... 4.33
6. Internal Control Assessment & Evaluation ..................................................................... 4.36
6.1 Techniques of Evaluation of Internal Control ....................................................... 4.37
7. Reporting To Clients on Internal Control Weaknesses ................................................... 4.48
8. Frameworks of Internal Control ..................................................................................... 4.52
8.1 International Internal Control Frameworks .......................................................... 4.53
KEY TAKEAWAYS ................................................................................................................. 4.60
TEST YOUR KNOWLEDGE .................................................................................................... 4.62

CHAPTER 5: AUDIT EVIDENCE

LEARNING OUTCOMES .......................................................................................................... 5.1

CHAPTER OVERVIEW ............................................................................................................. 5.2
Contents:

1. SA 500 Audit Evidence ................................................................................................... 5.3

2. SA 501 Audit Evidence- Specific Considerations for Selected Items ................................ 5.5
3. SA 505 External Confirmations ....................................................................................... 5.7

4. SA 510 Initial Audit Engagements-Opening Balances ...................................................... 5.8

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5. SA 530 Audit Sampling ................................................................................................... 5.9
6. SA 550 Related Parties ................................................................................................ 5.11
KEY TAKEAWAYS ................................................................................................................. 5.26
TEST YOUR KNOWLEDGE .................................................................................................... 5.29

CHAPTER 6: COMPLETION & REVIEW

LEARNING OUTCOMES .......................................................................................................... 6.1

CHAPTER OVERVIEW ............................................................................................................. 6.2
Contents:
1. SA 560 Subsequent events ............................................................................................. 6.4
2. SA 570 Going Concern ................................................................................................... 6.6
3. SA 580 Written representations ...................................................................................... 6.8
KEY TAKEAWAYS ................................................................................................................. 6.22
TEST YOUR KNOWLEDGE .................................................................................................... 6.23

CHAPTER 7: REPORTING

LEARNING OUTCOMES .......................................................................................................... 7.1

CHAPTER OVERVIEW ............................................................................................................. 7.2

Contents:
1. Introduction .................................................................................................................... 7.3
2. The Auditor’s Report on Financial Statements ................................................................. 7.4

3. SA 700 Forming an Opinion and Reporting on the Financial Statements .......................... 7.4
3.1 Purpose ............................................................................................................... 7.5
3.2 Basic Elements of the Auditor’s Report ................................................................. 7.6

3.3 Auditor’s Report Prescribed by Law or Regulation .............................................. 7.18

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3.4 Auditor’s Report for Audits Conducted in Accordance with both Standards on
Auditing Issued by ICAI and International Standards on Auditing or Auditing
Standards of Any Other Jurisdiction .................................................................... 7.20
3.5 Supplementary Information Presented with the Financial Statements .................. 7.20
4. SA 701 Communicating Key Audit Matters in the Independent Auditor’s Report ............. 7.21

4.1 Purpose ............................................................................................................. 7.22

4.2 Scope ................................................................................................................ 7.22
4.3 Determining Key Audit Matters ........................................................................... 7.23

4.4 Communicating Key Audit Matters ...................................................................... 7.24

5. SA 705 Modifications to the Opinion in the Independent Auditor’s Report....................... 7.25
5.1 Types of Modified Opinions ................................................................................ 7.25
5.2 Objective ........................................................................................................... 7.26
5.3 Circumstances When a Modification to the Auditor’s Opinion is Required ............ 7.26
5.4 Determining the Type of Modification to the Auditor’s Opinion ............................. 7.26

5.5 Consequence of an Inability to Obtain Sufficient Appropriate Audit Evidence

Due to a Management-Imposed Limitation after the Auditor Has
Accepted the Engagement ................................................................................. 7.31
5.6 If the auditor decides to withdraw ....................................................................... 7.31
5.7 Other Considerations Relating to an Adverse Opinion or Disclaimer of Opinion ... 7.32
5.8 Form and Content of the Auditor’s Report When the Opinion is Modified ............. 7.32
5.9 Communication with Those Charged with Governance ........................................ 7.39
6. SA 706 Emphasis of Matter Paragraphs and other Matter Paragraphs in the
Independent Auditor’s Report ....................................................................................... 7.39

6.1 Objective ........................................................................................................... 7.39

6.2 When to give emphasis of Matter Paragraphs in the Auditor’s Report? ................ 7.40
6.3 When the auditor includes an Emphasis of Matter paragraph in the
auditor’s report, the auditor shall ........................................................................ 7.40

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7. Distinction Between Notes on Accounts and Qualifications ............................................ 7.46
8. Distinction Between Audit Report and Certificate ........................................................... 7.48
9. Communication To Management and those Charged with Governance .......................... 7.48
9.1 When All of Those Charged with Governance Are Involved
in Managing the Entity ........................................................................................ 7.48

9.2 Matters to be Communicated .............................................................................. 7.49

9.3 Planned Scope and Timing of the Audit .............................................................. 7.49
9.4 Significant Findings from the Audit ..................................................................... 7.49

10. Reporting Requirements in Case of Comparative Information ........................................ 7.50

10.1 Audit Procedures for Comparative Information .................................................... 7.50
10.2 Audit Reporting .................................................................................................. 7.51

11. SA 720 The Auditor’s Responsibilities Relating to Other Information .............................. 7.52
11.1 Objective ........................................................................................................... 7.53
11.2 Obtaining the Other Information.......................................................................... 7.54
11.3 Responding When a Material Inconsistency Appears to Exist or Other
Information Appears to be Materially Misstated ................................................... 7.55
11.4 Responding When the Auditor Concludes that a Material Misstatement
of the other Information Exists ............................................................................ 7.55
11.5 Responding When a Material Misstatement in the Financial Statements
Exists or the Auditor’s Understanding of the Entity and Its Environment Needs
to be updated ..................................................................................................... 7.56
11.6 Reporting ........................................................................................................... 7.57
11.7 Reporting Prescribed by Law or Regulation ........................................................ 7.57
12. Duties of Auditors ......................................................................................................... 7.58
12.1 Reporting under CARO 2020 .............................................................................. 7.66
13. Illustrative Audit Reports ............................................................................................... 7.73
KEY TAKEAWAYS ................................................................................................................. 7.91
TEST YOUR KNOWLEDGE .................................................................................................... 7.94

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