Page 34 - CA Final PARAM Digital Book.

report under “Going Concern Para” as per SA 570 and under clause (j) of Section 143(3) of the Companies
Act, 2013. Also, the auditor is required to issue an adverse opinion as per SA 705, “Modifications to the
Opinion in the Independent Auditor’s Report”.

QNO Why it is difficult to detect Non-compliance? New Course – (SM23)
23.400 TITANIUM CNO-- SA250.080

Discuss why the potential effects of inherent limitations of an auditor’s ability to detect material
misstatements described in SA 200 are far greater in respect of non-compliance with laws and regulations?
Answer In the context of laws and regulations, the potential effects of inherent limitations on the auditor’s ability to
detect material misstatements are greater for such reasons as the following: -

➢ There are many laws and regulations, relating principally to the operating aspects of an entity that
typically do not affect the financial statements and are not captured by the entity’s information
systems relevant to financial reporting.

➢ Non-compliance may involve conduct designed to conceal it, such as collusion, forgery, deliberate
failure to record transactions, management override of controls or intentional misrepresentations
being made to the auditor.

➢ Whether an act constitutes non-compliance is ultimately a matter for legal determination by a court
of law.

Management Responsibility for Compliance with Laws Old Course- (N20E, N23R)
QNO and Regulations
23.500
TITANIUM CNO - SA250.060
PQ Limited, a listed entity, is in the business of manufacturing of specialty chemicals. The company has
appointed CA Jazz as CFO of the company. CA Jazz is concerned about compliance with the provisions of
laws and regulations that determine the reported amounts and disclosure in financial statements of PQ

Limited. Accordingly, CA Jazz wants to implement such policies and procedures that can assist him in the
prevention and detection of non-compliance with laws and regulations. Help CA Jazz by citing examples of
such policies and procedures.
Answer In PQ Ltd, listed entity, CA Jazz has been appointed as CFO. PQ Ltd is in the business o f manufacturing
of specialty chemicals. CA Jazz is concerned about compliance with the provisions of Laws and
regulations and wants to implement such policies and procedures that would assist him in prevention
and detection of non-compliance with laws and regulations. CA Jazz is specifically wanting examples
of types of policies and procedures that PQ Ltd may implement so that relevant laws and regulations
are properly complied with. Such examples of policies and procedures are given in SA 250.
As per SA 250, “Consideration of Laws and Regulations in an Audit of Financial Statements”,
The following are examples of the types of policies and procedures PQ Ltd. may implement to assist
in the prevention and detection of non-compliance with laws and regulations:
i. Monitoring legal requirements and ensuring that operating procedures are designed to meet
these requirements.
ii. Instituting and operating appropriate systems of internal control.
iii. Developing, publicizing and following a code of conduct.
iv. Ensuring employees are properly trained and understand the code of conduct
v. Monitoring compliance with the code of conduct and acting appropriately to discipline employees
who fail to comply with it.
vi. Engaging legal advisors to assist in monitoring legal requirements.
vii. Maintaining a register of significant laws and regulations with which the entity has to comply
within its particular industry and a record of complaints.

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