Standards on Auditing – List of all SAs with Practical Approach Details

Standards on Auditing (SA) provide a Chartered Accountant most effective tool to evidence, justify & defend their auditing actions. In an era where Chartered Accountants are increasingly subjected to public scrutiny and are facing investigation at the drop of the hat, SAs provide them the necessary shield to withstand the storm. SAs are nothing but a tool to evidence the audit process and conclusion. Generally, there has been an impression that the SAs are largely required to be applied to large audits. It is argued that client is not big enough to keep all such evidence as it would be available anytime in future, should there be any enquiry. In cricket terminology, it is similar to someone saying that the batsman need not wear helmet to a spinner, as the ball is slow and can be easily dodged. Yes, it may not be true always.

Standards on Auditing

SA – no. name of Standard on Auditing Practical Approach
SA-200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with International Standards on Auditing We  should  see  to  it  that  all  the  relevant laws, standards  and  regulations  relating  to that company are getting complied while preparation of financial statements. The audit evidence for the same are to be collected and documented. None of the audit procedures applied should hamper the independence of the auditor.
SA-210 Agreeingthe Terms of Audit Engagements The auditor before the start of the audit should collect engagement letter from the management which clearly specifies the scope of the audit and describes clearly the management’s responsibility and the auditor’s responsibility.
SA-220 Quality Control for an Audit of Financial Statements The engagement leader should  keep  control  on the overall performance of audit. The leader should see to it that the professional ethics and standards are being taken care of and points covered in ‘Standards on quality control (SQCs)’ are getting covered while conducting audit.
SA-230 Audit Documentation Documentation of each audit procedure conducted and the audit working papers provided by the client should be maintained either in hard or soft form.
SA-240 The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements It is expected that the auditor should use professional skepticism in conduct of audit. This means he should not blindly accept whatever information is provided by the management. The auditor for assurance should obtain a management representation letter. If any kind of fraud is identified during the audit it should be reported.
SA-250 Consideration of Laws and Regulations in an Audit of Financial Statements The auditor can verify the measures that are being taken by the staff of the entity under review for complying with the relevant laws & regulations. The internal controls of the entity can also be verified so as to ensure the check points relating to such applicable laws.
SA-260 Communication with Those Charged with Governance The auditor should see to it that all audit observations which require attention of the top management should be communicated to them.
SA-265 Communicating Deficiencies in  Internal Control to Those Charged with Governance and Management The deficiencies noticed in IFC testing should be informed to the higher authorities of the entity as well as to those who are actually involved in carrying out that particular process.
SA-299 Responsibility of Joint Auditors In case of joint audit we need to properly communicateaboutthescopeof work of eachjoint auditor. There should be proper communication and reliance on each of the auditor’s work. Joint responsibility allocation should be signed and confirmed by each of the joint auditors.
SA-300 Planning an Audit of Financial Statements All the details relating to the business under audit should be taken into consideration and the audit plan should be developed accordingly. The audit plan should be documented.
SA-315 Identifying  and  Assessing  the   Risks of Material Misstatement through Understanding the Entity and Its Environment The auditor should after gaining the knowledge of the business and having a discussion with the management of the organization under review should set the materiality level for the purpose of the audit assignment. This involves assessing the probable areas where there are chances of occurrence of errors.
SA-320 Materiality in Planning and Performing an Audit The auditor should for the purpose of the audit assignment decide what can be the material transactions for the entity. This may include deciding the value and volume of vouchers that are to be vouched. Deciding which transactions can be ignored or should be given high weightage.
SA-330 The Risks Auditor’s Responses to Assessed On the basis of the risks identified as per SA 315, the auditor should decide on what way it should be presented in the report. To inform the team about the risks identified and the course of action to be taken on the same
SA-402 Audit Considerations Relating to an Entity Using a Service Organization This SA is applicable where the organisation under review is using the services of other organisations for such items those are having an impact on the financial statements of that entity.
SA-450 Evaluation of Misstatements Identified during the Audit If any kinds of errors are identified in the financial statements during the audit then proper call should be taken regarding the same on the basis of the materiality of the amount which is misstated. The misstatements so identified are to be reported to the higher authorities.
SA-500 Audit Evidence The audit evidence obtained should form the basis of the points reported in the financial statements and the audit report.
SA-501 Audit Evidence-Specific Considerations for Selected Items This SA is applicable for the specific considerations like inventory when it is material from the prospective of financials, litigations and claims involving the entity and presentation and disclosure of segment information.
SA-505 External Confirmations This SA is to be considered when the auditor    is obtaining external confirmations as audit evidence.    The    design    and    performance of such procedures is mentioned in the  standard.
SA-510 Initial      Audit      Engagements-Opening Balances As per this SA when we are doing the audit for the first time, we need to verify whether the financials and the accounting policies mentioned are not contradicting each other. While starting the audit of a new financial year we are supposed to verify the opening balances.
SA-520 Analytical Procedures Financial analytical procedures include use of ratios, analysing prior period items, checking relevance of budgets and forecasts, etc.
SA-530 Audit Sampling Audit sampling is dependent on the materiality level set while doing the audit of a particular organisation. Sampling refers to the selecting data for the purpose of vouching & verification.
SA-540 Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures This SA is to be referred when there is use of accounting estimates in the preparation of financial statements. The auditors responsibilities relating to the same are stated in this SA.
SA-550 Related Parties Firstly the related parties of the entity are to be identified. Then the transactions pertaining to them are to be identified and reported as per the accounting standard.
SA-560 Subsequent Events The events occurring after the balance sheet date are to be identified and appropriate actions and reporting is to be done accordingly.
SA-570 Going Concern We need to identify if there are any items which have occurred that affect the continuity of the business. If so the same have to be reported.
SA-580 Written Representations The written representation is a kind of confirmation obtained from the managementregarding the overall transactions of the entity. This SA is to be considered for the preparation of written representation.
SA-600 Using the Work of Another Auditor This SA is regarding the approach of the engagement leader as well as the  engagement  partner  when he is using and relying on the work done by his subordinate or another auditor.
SA-610 Using the Work of Internal Auditors This SA is relevant when the statutory auditor is using the work of internal auditor for the purpose of the audit.
SA-620 Using The Work Of An Auditor’s Expert This SA becomes  relevant  when  the  expertise  of other party is to be used and obtained for the purpose of obtaining audit evidence.
SA-700 Forming an Opinion and Reporting on Financial Statements The auditor can give the following types of opinion:

  • 1) Unqualified opinion
  • 2) Qualified opinion
  • 3) Modified opinion
  • 4) Disclaimer of opinion

This SA is to be referred while giving any of the opinion mentioned above.

SA-701 Communicating Key Audit matters in the Independent Auditor’s report The points that are mentioned in the audit report are to be discussed with the auditee’s top management and their respective staff.
SA-705 Modifications to the Opinion in the Independent Auditor’s Report When the auditor feels that modification of the opinion given in the previous report is required, then this SA becomes relevant and is to be referred.
SA-706 Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s Report When there are circumstances when qualified or disclaimer of opinion is not required but emphasis is to be given on certain items then emphasis on matter paragraph is used while reporting. This SA then becomes relevant in such circumstances.
SA-710 Comparative Information-Corresponding Figures and Comparative Financial Statements When conducting the audit of current financial year we are supposed to report the figures of the previous financial year as well so we need to check those figures as well whether those are true and correct.
SA-720 The Auditor’s Responsibilities Relating to Other Information in Documents Containing Audited Financial Statements This SA becomes applicable when there is any other information disclosed in the financial statements.
SA-800 Special Considerations – Audit of Financial Statements Prepared in Accordance with Special Purpose Frameworks The special frameworks applicable to the entity are to be identified if any and the care is to be taken if those are correctly followed.
SA-805 Special Considerations – Audit of Single Financial Statements and specific Elements, Accounts or Items of a Financial Statements This SA is relevant only when there are any such specific assignments as mentioned in this SA. The approach of the auditor pertaining to the same is mentioned in this SA.
SA-810 Engagements to report on Summary Financial Statements This SA is relevant when the auditor is conducting the audit of summary financial statements which are less detailed than the normal financials.

b. Standards on review engagements (Sres)

Sre- no. name of Standard on review engagement Description
Sre-2400 Engagements To Review Financial Statements The purpose of this Standard on Review Engagements (SRE) is to establish standards and provide guidance on the practitioner’s professional responsibilities when a practitioner, who is not the auditor of an entity, undertakes an engagement to review financial statements and on the form and content of  the  report that the practitioner issues in connection with such a review. The objective of a review of financial statements is to enable a practitioner to state whether, on the basis of procedures  which  do  not  provide all the evidence that would be required in an audit, anything has come to the practitioner’s attention that causes the practitioner to believe that the financial statements are not prepared, in all material respects, in accordance with the applicable financial reporting framework (negative assurance).
Sre-2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity The purpose of this Standard on Review Engagements (SRE) is to establish standards and provide guidance on the auditor’s professional responsibilities when the auditor undertakes an engagement to review interim financial information of an audit client, and on the form and content of the report. The term “auditor” is used throughout this SRE, not because the auditor is performing an audit function but because the scope of this SRE is limited to a review of interim financial information performed by the independent auditor of the financial statements of the entity.

C. Assurance engagements other Than Audits or reviews of Historical Financial Information (SAes)

SAe- no. name of Standard on Assurance engagement Description
SAE-3400 The Examination of Prospective Financial Information As per this SAE the term prospective financial information means statements prepared on the basis of future assumptions and best judgment estimates of the management. The auditor has to verify whether the assumptions made by management  are reasonable and consistent with the purpose of the information required. The auditor should see  to it that the estimates and assumptions used are properly disclosed by the management.
SAE-3402 Assurance Reports On Controls At A Service Organisation This Standard on Assurance Engagements (SAE) deals with assurance engagements undertaken by a professional accountant in public practice to provide a report for use by user entities and their auditors on the controls at a service organization that provides a service to user entities that is likely to be relevant to user entities’ internal control as it relates to financial reporting.
SAE-3420 Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus The objectives of the practitioner are:

(a) To obtain reasonable assurance about whether the pro forma financial information has been compiled, in all material respects, by the responsible party on the basis of the applicable criteria; and

(b) To report in accordance with the practitioner’s findings.

Standards on related Services (SrS)

SrS- no. name of Standard on related Service Description
SRS-4400 Engagements to Perform Agreed Upon Procedures Regarding Financial Information The objective of an agreed-upon procedures engagement is for the auditor to carry out procedures of an audit nature to which the auditor and the entity and any appropriate third parties have agreed and to report on factual findings.
SRS-4410 Engagements        to       Compile Financial Information This Standard on Related Services (SRS) deals with the practitioner’s responsibilities when engaged to assist management with the preparation and presentation of historical financial information without obtaining any assurance on that information, and to report on the engagement.