International Auditing and Assurance Standards Board
In 1977, the International Federation of Accountants (IFAC) was set up with a view to bringing harmony in the profession of accountancy on an international scale. In pursuing this mission, the IFAC Board has established the International Auditing and Assurance Standards Board (IAASB) to develop and issue, in the public interest and under its own authority, high quality auditing and assurance standards for use around the world. The IFAC Board has determined that designation of the IAASB as the responsible body, under its own authority and within its stated terms of reference, best serves the public interest in achieving this aspect of its mission. The IAASB functions as an independent standard-setting body under the auspices of IFAC. The objective of the IAASB is to serve the public interest by setting high quality auditing and assurance standards and by facilitating the convergence of international and national standards, thereby enhancing the quality and uniformity of practice throughout the world and strengthening public confidence in the global auditing and assurance profession. The IAASB achieves this objective by:
- Establishing high quality auditing standards and guidance for financial statement audits that are generally accepted and recognized by investors, auditors, governments, banking regulators, securities regulators and other key stakeholders across the world;
- Establishing high quality standards and guidance for other types of assurance services on both financial and non-financial matters;
- Establishing high quality standards and guidance for other related services;
- Establishing high quality standards for quality control covering the scope of services addressed by the IAASB; and Publishing other pronouncements on auditing and assurance matters, thereby advancing public understanding of the roles and responsibility of professional auditors and assurance service providers. The IAASB’s Pronouncements: The IAASB’s pronouncements govern audit, review, other assurance and related services engagements that are conducted in accordance with International Standards. They do not override the local laws or regulations that govern the audit of historical financial statements or assurance engagements on other information in a particular country required to be followed in accordance with that country’s national standards. In the event that local laws or regulations differ from, or conflict with, the IAASB’s Standards on a particular subject, an engagement conducted in accordance with local laws or regulations will not automatically comply with the IAASB’s Standards. A professional accountant should not represent compliance with the IAASB’s Standards unless the professional accountant has complied fully with all of those relevant to the engagement.
Auditing and Assurance Standards Board
The Institute of Chartered Accountants of India is a member of the IFAC and is committed to work towards the implementation of the guidelines issued by the IFAC. The Institute of Chartered Accountants of India constituted the Auditing Practices Committee (APC) in 1982. The main function of the APC is to review the existing auditing practices in India and to develop Statements on Standard Auditing Practices (SAPs) so that these may be issued by the Council of the Institute. While formulating the SAPs in India, the APC gives due consideration to the international auditing guidelines issued by the IAPC and then tries to integrate them to the extent possible in the light of the conditions and practices prevailing in India. While formulating the SAPs, the APC takes into consideration the applicable laws, customs, usages and business environment in India. In July, 2002, the Auditing Practices Committee has been converted into an Auditing and Assurance Standards Board (AASB) by the Council of the Institute, to be in line with the international trend. A significant step has been taken aimed at bringing in
the desired transparency in the working of the Auditing and Assurance Standards Board, through participation of representatives of various segments of the society and interest groups, such as, regulators, industry and academics. The nomenclature of SAPs have also been changed to Auditing and Assurance Standards (AASs). The AASs will apply whenever an independent audit is carried out; that is, in the independent examination of financial information of any entity, whether profit oriented or not, and irrespective of its size, or legal form (unless specified otherwise) when such an examination is conducted with a view to expressing an opinion thereon. While discharging their attest function, it will be the duty of members of the Institute to ensure that the AASs are followed in the audit of financial information covered by their audit reports. If for any reason a member has not been able to perform an audit in accordance with the AASs, his report should draw attention to the material departures therefrom, auditors will be expected to follow AASs in the audits commencing on or after the date specified in the statement. Remember all
AASs are mandatory from the date mentioned herein and it is obligatory upon members of Institute to adhere to these whenever an audit is carried out.
The Council of the ICAI has issued following AASs so far. The title of each statement and the date from which it comes into force is given below :
AAS – 1 : Basic Principles Governing an Audit (April 1, 1985)
AAS – 2 : Objective and Scope of the Audit of Financial Statements (April 1, 1985)
AAS – 3 : Documentation (July 1, 1985)
AAS – 4 (Revised) : Auditor’s Responsibility to Consider Fraud and Error in an Audit of Financial Statements (April 1, 2003)
AAS – 5 : Audit Evidence (January 1, 1989)
AAS – 6 (Revised) : Risk Assessments and Internal Control (April 1, 2002)
AAS – 7 : Relying upon the Work of an Internal Auditor (April 1, 1989)
AAS – 8 : Audit Planning (April 1, 1989)
AAS – 9 : Using the Work of an Expert (April 1, 1991)
AAS – 10 (Revised) : Using the Work of Another Auditor (April 1, 2002)
AAS – 11 : Representations by Management (April 1, 1995)
AAS – 12 : Responsibility of Joint Auditors (April 1, 1996)
AAS – 13 : Audit Materiality (April 1, 1996)
AAS – 14 : Analytical Procedures (April 1, 1997)
AAS – 15 : Audit Sampling (April 1, 1998)
AAS – 16 : Going Concern (April 1, 1999)
AAS – 17 : Quality Control for Audit work (April 1, 1999)
AAS – 18 : Audit of Accounting Estimates (April 1, 2000)
AAS – 19 : Subsequent Events (April 1, 2000)
AAS – 20 : Knowledge of the Business (April 1, 2000)
AAS – 21 : Consideration of Laws and Regulations in an Audit of Financial Statements (July 1, 2001)
AAS – 22 : Initial Engagements – Opening Balances (July 1, 2001)
AAS – 23 : Related Parties (April 1, 2001) 1.6 Auditing and Assurance
AAS – 24 : Audit Considerations Relating to Entities Using Service Organisations (April 1, 2003)
AAS – 25 : Comparatives (April 1, 2003)
AAS – 26 : Terms of Audit Engagements (April 1, 2003)
AAS – 27 : Communications of Audit Matters to those charged with Governance (April 1, 2003)
AAS – 28 : The Auditor’s Report on Financial Statements (April 1, 2003)
AAS – 29 : Auditing in a Computer Information Systems Environment (April 1, 2003)
AAS 30 : External Confirmations (April 1, 2003)
AAS 31 : Engagements to Compile Financial Information (April 1, 2004)
AAS 32 : Engagements to Perform Agreed-upon Procedures Regarding Financial Information (April 1, 2004)
AAS 33 : Engagements to Review Financial Statements (April 1, 2005)
AAS 34 : Audit Evidence – Additional Consideration for Specific Items (April 1, 2005) All relevant AASs which are important from students’ view point have been covered as an integral part of the text.
Procedure for Issuing the Statements on Standard Auditing Practices Broadly, the following procedure is adopted for the formulation of Auditing and Assurance Standards.
- The Auditing and Assurance Standards Board (AASB) determines the broad areas in which the Auditing and Assurance Standards (AASs) need to be formulated and the priority in regard to the selection therefor.
- In the preparation of AASs, 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 AAS is prepared by the Board and issued for comments by members of the Institute.
- After taking into consideration the comments received, the draft of the proposed AAS is finalised by the AASB and submitted to the Council of the Institute.
- The Council of the Institute will consider the final draft of the proposed AAS, and if necessary, modify the same in consultation with the AASB. The AAS is issued under the authority of the Council. Compliance With Documents Issued by the Institute. The Institute has, from time to time, issued ‘Guidance Notes’ and ‘Statements’ on a number of matters.
The ‘Statements’ have been issued with a view to securing compliance by members on matters which, in the opinion of the Council, are critical for the proper discharge of their functions. ‘Statements’ therefore are mandatory. Accordingly, while discharging their attest function, it will be the duty of the members of the Institute:
- to examine whether ‘Statements’ relating to accounting matters are complied with in the presentation of financial statements covered by their audit. In the event of any deviation from the ‘Statements’, it will be their duty to make adequate disclosures in their audit reports so that the users of financial statements may be aware of such deviations; and
- to ensure that the ‘Statements’ relating to auditing matters are followed in the audit of financial information covered by their audit reports. If, for any reason, a member has not been able to perform an audit in accordance with such ‘Statements’, his report should draw attention to the material departures thereform. ‘Guidance Notes’ are primarily designed to provide guidance to members on matters which may arise in the course of their professional work and on which they may arise in the course of their professional work and on which they may desire assistance in resolving issues which may pose difficulty. Guidance Notes are recommendatory in nature. A member should ordinarily follow recommendations in a guidance note relating to an auditing matter except where he is satisfied that in the circumstances of the case, it may not be necessary to do so. Similarly, while discharging his attest function, a member should examine whether the recommendations in a guidance note relating to an accounting matter have
been followed or not. If the same have not been followed, the member should consider whether keeping in view the circumstances of the case, a disclosure in his report is necessary.