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AMENDMENTS IN AUDITING SA s SA 265 -COMMUNICATING DEFICIENCIES IN INTERNAL CONTROL TO THOSE CHARGED WITH GOVERNANCE AND MANAGEMENT SA EVALUATION OF MISSTATEMENTS IDENTIFIED DURING THE AUDIT SA 720 -THE AUDITOR’S RESPONSIBILITY IN RELATION TOOTHER INFORMATION IN DOCUMENTS CONTAINING AUDITED FS

 TYPE OF STANDARD NUMERICAL SERIES  STANDARDS ON QUALITY CONTROL  STANDARDS ON AUDITING  STANDARDS ON REVIEW ENGAGEMENTS  STANDARDS ON ASSURANCE ENGAGEMENTS  RELATED SERVICES

 Introductory Matters100 – 199  General Principles and Responsibilities200 – 299  Risk Assessment &Response to Assessed Risk 300 – 499  Audit Evidence  Using Work of Others600 – 699  Audit Conclusions and Reporting700 – 799  Specialised Areas800 – 899

 OBJECTIVE – ◦ Communication of matters ◦ Not Scope  DEFINITION ◦ Deficiency in Internal Control ◦ Significant Deficiency in Internal COntrol

1. Identified deficiency in Internal Controls 2. Whether Significant? 3. Communicate in writing on timely basis to Governing Body (GB) 4. Communicate to Management, unless irrelevant  To include: ◦ Purpose of audit ◦ Internal control not part of audit, checked to identify quantum of audit procedures ◦ No comprehensive check made for such non-compliance

 Deficiency – ◦ Ineffective control or non-existing control  Deficiencies Includes- ◦ possibility of misstatements to happen  Indicators of deficiency – ◦ Weak control environment, management frauds, non-remedial measures, absence of risk assessment process, misstatements, prior period items, ineffective control on FS

 FACTORS 1.Nature of Entity 2.Size and Complexity of Entity 3.Nature and Size of deficiencies 4.Legal requirements  Discrepancies may be insignificant individually but not collectively

 In writing or oral followed by in writing  Timing – In advance, such that the addressee, if required, can accordingly respond on it  To communicate in writing even if reported in previous year  Insignificant discrepancies not to be reported to GB

Communicate only if management not involved  SIGNIFICANT DEFICIENCIES ◦ In writing or oral followed by writing ◦ To be reported even if reported in previous year and still uncorrected  INSIGNIFICANT DEFICIENCIES ◦ In writing or oral ◦ Not to be reported if reported in previous year and even if still uncorrected If required suggestions may also be included in report

EVALUATION OF MISSTATEMENTS IDENTIFIED DURING THE AUDIT

 Misstatement – A difference between the amounts, classification, presentation, or disclosure of a reported financial statement item and the amount, classification, presentation, or disclosure that is required for the item to be in accordance with the applicable financial reporting framework. Misstatements can arise from error or fraud.  Uncorrected misstatements – Misstatements that the auditor has accumulated during the audit and that have not been corrected.

 Accumulation of Uncorrected Misstatements  Consideration of misstatements as the Audit progresses  Communication and Correction of Misstatements  Evaluating effect of uncorrected misstatements  Communication with Those Charged with Governance  Written Representation and Documentation

 Avoid immaterial misstatements TYPES OF MISSTATEMENT  Factual Mistatements  Judgmental Mistatements  Projected Mistatements

 Need for revision of Nature, Timing and Extent (NTE) of Audit Procedures (AP) to be applied  Communicate to management to provide time for taking remedial action  COMMUNICATION ◦ Timely communication ◦ Check any Legal restrictions to communicate

 Quantification and Projection  Impact on other areas  Materiality Levels  Circumstances effecting evaluation – ◦ Regulatory environment, Debt convenants, Ratio, Increases management on managerial remueration / dividend, etc

 In writing  Overall impact  When management and governing body same report to management sufficient  Written Representations & Documentation

THE AUDITOR’S RESPONSIBILITY IN RELATION TOOTHER INFORMATION IN DOCUMENTS CONTAINING AUDITED FINANCIAL STATEMENTS

 SCOPE - Auditor not responsible to check other information but for credibility he may read other information  OBJECTIVE – Develop Auditor’s response with respect to the documents in the report

 (a) Other information – Financial and non-financial information (other than the financial statements and the auditor’s report thereon) which is included, either by law, regulation or custom, in a document containing audited financial statements and the auditor’s report thereon. (b) Inconsistency – Other information that contradicts information contained in the audited financial statements. A material inconsistency may raise doubt about the audit conclusions drawn from audit evidence previously obtained and, possibly, about the basis for the auditor’s opinion on the financial statements. (c) Misstatement of fact – Other information that is unrelated to matters appearing in the audited financial statements that is incorrectly stated or presented. A material misstatement of fact may undermine the credibility of the document containing audited financial statements.

 SEARCH ◦ Auditor should arrange and read other information in advance like Management’s report, Financial summaries, Ratios, etc  RESPOND WHEN INCONSITENCIES IDENTIFIED ◦ If change needed in Auditor’s report – Proceed ◦ If change required in FS and Management refuses – Report to GB, Add separate para in Auditor’s report or withdraw, if permitted ◦ If required, expert opinion may be recommended