Our Recommendations :-
Follow CA Final FB Page

SA 200 (Revised) “Overall Objectives of the Independent Auditor and Conduct of Audit in accordance with SAs”

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Swati asked over 2 years ago

SA 200 (Revised) “Overall Objectives of the Independent Auditor and Conduct of Audit in accordance with SAs” Q. No. 1 Explain the Overall Objectives of Independent auditor. Q. No. 2 Comment on the following: “The Auditor shall comply with relevant ethical requirements including independence” Q. No. 3 SA 200 requires that the auditor shall and perform an audit with professional skepticism. Explain the statement. Q. No. 4 Comment on the following: “The auditor shall exercise professional judgement in planning and performing an audit of financial statements. Q. No. 5 State your opinion on the following: The audit of financial statements relieves management of its responsibilities. Q. No. 6 “An opinion expressed by the auditor is neither an assurance as to the future viability of the enterprise nor the efficiency or effectiveness with which management has conducted the

    1       0 Answer Now Comment Report
1 Answers
Important Note – Preparing for CA Final?
CAKART provides Indias top faculty each subject video classes and lectures – online & in Pen Drive/ DVD – at very cost effective rates. Get video classes from CAKART.in. Quality is much better than local tuition, so results are much better.
Watch Sample Video Now by clicking on the link(s) below – 
For any questions Request A Call Back  
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 megha answered about 2 years ago

Hello, Here is your answer, **Q. No. 1 Explain the Overall Objectives of Independent auditor.** **Ans**. In conducting an audit of financial statements, the overall objectives of the auditor are: (a) To obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, thereby enabling the auditor to express an opinion on whether the financial statements are prepared, in all material respects, in accordance with an applicable financial reporting framework; and (b) To report on the financial statements, and communicate as required by the SAs, in accordance with the auditor's findings. 12. In all cases when reasonable assurance cannot be obtained and a qualified opinion in the auditor's report is insufficient in the circumstances for purposes of reporting to the intended users of the financial statements, the SAs require that the auditor disclaim an opinion or withdraw from the engagement, where withdrawal is legally permitted. .......................................................................... **Q. No. 2 Comment on the following: “The Auditor shall comply with relevant ethical requirements including independence”** **Ans**. The Auditor shall comply with relevant ethical requirements including independence” Ethical Requirements Relating to an Audit of Financial Statements A14. The auditor is subject to relevant ethical requirements, including those pertaining to independence, relating to financial statement audit engagements. Relevant ethical requirements ordinarily comprise the Code of Ethics issued by the Institute of Chartered Accountants of India. A15. The Code establishes the following as the fundamental principles of professional ethics relevant to the auditor when conducting an audit of financial statements and provides a conceptual framework for applying those principles; (a) Integrity; (b) Objectivity; (c) Professional competence and due care; (d) Confidentiality; and (e) Professional behavior. A16. In the case of an audit engagement it is in the public interest and, therefore, required by the Code of Ethics, that the auditor be independent of the entity subject to the audit. The Code describes independence as comprising both independence of mind and independence in appearance. The auditor's independence from the entity safeguards the auditor's ability to form an audit opinion without being affected by influences that might compromise that opinion. Independence enhances the auditor's ability to act with integrity, to be objective and to maintain an attitude of professional skepticism. A17. Standard on Quality Control (SQC) 1 sets out the responsibilities of the firm for establishing policies and procedures designed to provide it with reasonable assurance that the firm and its personnel comply with relevant ethical requirements, including those pertaining to independence. Revised SA 220 sets out the engagement partner's responsibilities with respect to relevant ethical requirements. ..................................................................................... **Q. No. 3 SA 200 requires that the auditor shall and perform an audit with professional skepticism. Explain the statement.** **Ans**. A18. Professional skepticism includes being alert to, for example: • Audit evidence that contradicts other audit evidence obtained. • Information that brings into question the reliability of documents and responses to inquiries to be used as audit evidence. • Conditions that may indicate possible fraud. • Circumstances that suggest the need for audit procedures in addition to those required by the SAs. A19. Maintaining professional skepticism throughout the audit is necessary if the auditor is, for example, to reduce the risks of: • Overlooking unusual circumstances. • Over generalising when drawing conclusions from audit observations. • Using inappropriate assumptions in determining the nature, timing, and extent of the audit procedures and evaluating the results thereof. A20. Professional skepticism is necessary to the critical assessment of audit evidence. This includes questioning contradictory audit evidence and the reliability of documents and responses to inquiries and other information obtained from management and those charged with governance. It also includes consideration of the sufficiency and appropriateness of audit evidence obtained in the light of the circumstances, for example in the case where fraud risk factors exist and a single document, of a nature that is susceptible to fraud, is the sole supporting evidence for a material financial statement amount. A21. The auditor may accept records and documents as genuine unless the auditor has reason to believe the contrary. Nevertheless, the auditor is required to consider the reliability of information to be used as audit evidence". In cases of doubt about the reliability of information or indications of possible fraud (for example, if conditions identified during the audit cause the auditor to believe that a document may not be authentic or that terms in a document may have been falsified), the SAs require that the auditor investigate further and determine what modifications or additions to audit procedures are necessary to resolve the matter. A22. The auditor cannot be expected to disregard past experience of the honesty and integrity of the entity's management and those charged with governance. Nevertheless, a belief that management and those charged with governance are honest and have integrity does not relieve the auditor of the need to maintain professional skepticism or allow the auditor to be satisfied with less-than-persuasive audit evidence when obtaining reasonable assurance. ..................................................................... **Q. No. 4 Comment on the following: “The auditor shall exercise professional judgement in planning and performing an audit of financial statements.** **Ans**. Professional Judgment A23. Professional judgment is essential to the proper conduct of an audit. This is because interpretation of relevant ethical requirements and the SAs and the informed decisions required throughout the audit cannot be made without the application of relevant knowledge and experience to the facts and circumstances. Professional judgment is necessary in particular regarding decisions about: • Materiality and audit risk. • The nature, timing, and extent of audit procedures used to meet the requirements of the SAs and gather audit evidence. • Evaluating whether sufficient appropriate audit evidence has been obtained, and whether more needs to be done to achieve the objectives of the SAs and thereby, the overall objectives of the auditor. • The evaluation of management's judgments in applying the entity's applicable financial reporting framework. • The drawing of conclusions based on the audit evidence obtained, for example, assessing the reasonableness of the estimates made by management in preparing the financial statements. A24 The distinguishing feature of the professional judgment expected of an auditor is that it is exercised by an auditor whose training, knowledge and experience have assisted in developing the necessary competencies to achieve reasonable judgments. A25. The exercise of professional judgment in any particular case is based on the facts and circumstances that are known by the auditor. Consultation on difficult or contentious matters during the course of the audit, both within the engagement team and between the engagement team and others at the appropriate level within or outside the firm, such as that required by Revised SA 220, assist the auditor in making informed and reasonable judgments. A26. Professional judgment can be evaluated based on whether the judgment reached reflects a competent application of auditing and accounting principles and is appropriate in the light of, and consistent with, the facts and circumstances that were known to the auditor up to the date of the auditor's report. ............................................................................. **Q. No. 5 State your opinion on the following: The audit of financial statements relieves management of its responsibilities.** **Ans**. The audit of financial statements does not relieve management or those charged with governance of those responsibilities. Preparation of the Financial Statements A2. An audit in accordance with SAs is conducted on the premise that management and, where appropriate, those charged with governance have responsibility: (a) For the preparation and presentation of the financial statements in accordance with the applicable financial reporting framework; this includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of financial statements that are free from material misstatement, whether due to fraud or error; and (b) To provide the auditor with: (i) All information, such as records and documentation, and other matters that are relevant to the preparation and presentation of the financial statements; (ii) Any additional information that the auditor may request from management and, where appropriate, those charged with governance; and (iii) Unrestricted access to those within the entity from whom the auditor determines it necessary to obtain audit evidence. A3. As part of their responsibility for the preparation and presentation of the financial statements, management and, where appropriate, those charged with governance are responsible for: • The identification of the applicable financial reporting framework, in the context of any relevant laws or regulations. • The preparation and presentation of the financial statements in accordance with that framework. • An adequate description of that framework in the financial statements. The preparation of the financial statements requires management to exercise judgment in making accounting estimates that are reasonable in the circumstances, as well as to select and apply appropriate accounting policies. These judgments are made in the context of the applicable financial reporting framework. A4. The financial statements may be prepared in accordance with a financial reporting framework designed to meet: • The common financial information needs of a wide range of users (i.e., "general purpose financial statements"); or • The financial information needs of specific users (i.e., "special purpose financial statements"). A5. The applicable financial reporting framework often encompasses financial reporting standards established by an authorised or recognized standards setting organization, or legislative or regulatory requirements. In some cases, the financial reporting framework may encompass both financial reporting standards established by an authorised or recognized standards setting organization and legislative or regulatory requirements. Other sources may provide direction on the application of the applicable financial reporting framework. In some cases, the applicable financial reporting framework may encompass such other sources, or may even consist only of such sources. Such other sources may include: • The legal and ethical environment, including statutes, regulations, court decisions, and professional ethical obligations in relation to accounting matters; • Published accounting interpretations of varying authority issued by standards setting, professional or regulatory organizations; • Published views of varying authority on emerging accounting issues issued by standards setting, professional or regulatory organizations; • General and industry practices widely recognized and prevalent; and • Accounting literature. Where conflicts exist between the financial reporting framework and the sources from which direction on its application may be obtained, or among the sources that encompass the financial reporting framework, the source with the highest authority prevails. A6. The requirements of the applicable financial reporting framework determine the form and content of the financial statements. Although the framework may not specify how to account for or disclose all transactions or events, it ordinarily embodies sufficient broad principles that can serve as a basis for developing and applying accounting policies that are consistent with the concepts underlying the requirements of the framework. A7. Some financial reporting frameworks are fair presentation frameworks, while others are compliance frameworks. Financial reporting frameworks that encompass primarily the financial reporting standards established by an organisation that is authorised or recognised to promulgate standards to be used by entities for preparing and presenting general purpose financial statements are often designed to achieve fair presentation. A8. The requirements of the applicable financial reporting framework also determine what constitutes a complete set of financial statements. In the case of many frameworks, financial statements are intended to provide information about the state of affairs, results of operations and cash flows of an entity. For such frameworks, a complete set of financial statements would include a balance sheet; statement of profit and loss; a cash flow statement; and related notes. For some other financial reporting frameworks, a single financial statement and the related notes might constitute a complete set of financial statements: • For example, normally, in government departments and local bodies, the primary financial statement is a statement of cash receipts and payments. • Other examples of a single financial statement, each of which would include related notes, are: Balance sheet, Statement of profit & loss, Statement of cash flows, Statement of operations by product lines. A9. SA 210 (Revised) establishes requirements and provides guidance on determining the acceptability of the applicable financial reporting framework. SA 800 deals with special considerations when financial statements are prepared in accordance with a special purpose frameworks. A10. Because of the significance of the premise to the conduct of an audit, the auditor is required to obtain agreement from management and, where appropriate, those charged with governance that they acknowledge and understand their responsibilities set out in paragraph A2 as a precondition for accepting the audit engagement. The auditor is also required to obtain written representations about whether management and, where appropriate, those charged with governance have fulfilled those responsibilities'. Considerations Specific to Central/State Governments and Related Government Entities A11. The mandates for audits of the financial statements of certain entities, such as, Central/State governments and related government entities (for example, agencies, boards, commissions), may be broader than those of other entities. As a result, the premise, relating to management's responsibilities, on which an audit of the financial statements of such an entity is conducted may include additional responsibilities, such as, the responsibility for the execution of transactions and events in accordance with legislation or proper authority. .............................................................................................. **Q. No. 6 “An opinion expressed by the auditor is neither an assurance as to the future viability of the enterprise nor the efficiency or effectiveness with which management has conducted the the affairs of the entity** **Ans**. The auditor's opinion on the financial statements deals with whether the financial statements are prepared in all material respects, in accordance with the applicable financial reporting framework. Such an opinion is common to all audits of financial statements. The auditor's opinion therefore does not assure, for example, the future viability of the entity nor the efficiency or effectiveness with which management has conducted the affairs of the entity. In some cases, however, the applicable laws and regulations may require auditors to provide opinions on other specific matters, such as the effectiveness of internal control, or the consistency of a separate management report with the financial statements. While the SAs include requirements and guidance in relation to such matters to the extent that they are relevant to forming an opinion on the financial statements, the auditor would be required to undertake further work if the auditor had additional responsibilities to provide such opinions.

    2       0 Comment Report
Get Notifications
Videos
Books
Notes
Loading
SIGN UP
Watch best faculty demo video classes

These top faculty video lectures will
help u prepare like nothing else can.