Page 56 - CA Final PARAM Digital Book.

• Reporting:
SA 700, “Forming an Opinion and Reporting on Financial Statements” establishes standards
on the form and content of the auditor’s report issued as a result of an audit performed by
an auditor of the financial statements of an entity. The auditor should review and assess
the conclusions drawn from the audit evidence obtained as the basis for the expression
of an opinion on the financial statements. This review and assessment involves
considering whether the financial statements have been prepared in accordance with an
acceptable financial reporting framework applicable to the entity under audit. It is also
necessary to consider whether the financial statements comply with the relevant statutory
requirements such as compliance of Provisions & Enactments of the Company Law,
Accounting Standards framed by ICAI, latest Guidelines etc.

The auditor’s report should contain a clear written expression of opinion on the financial
statements taken as a whole. A measure of uniformity in the form and content of the
auditor’s report is desirable because it helps to promote the reader’s understanding of the
auditor’s report and to identify unusual circumstances when they occur. A statute
governing the entity or a regulator may require the auditor to include certain matters in the
audit report or prescribe the form in which the auditor should issue his report.

• Other Important Considerations:
In addition to above, there are certain other consideration which auditor is required to take
care while executing the audit such as using the work of other auditor, using the work of an
auditor’s expert etc.
Author’s Note

These are phases in audit. Flow is similar to core audit process that we teach before starting SA’s

Formulating Audit Programme - Involves Evaluation of Old Course – (M21E)
QNO System of Internal Control & Accounting
149.020
TITANIUM CNO— APSE.280
Audit planning is necessary to conduct an effective audit in an efficient and timely manner for which
purpose formulating an audit programme becomes an essential part of audit plan. Study and evaluation

of system of Internal control and accounting procedures are important part of it. As auditor, discuss the
features of examination of the system of Internal control.
Answer System of internal control and accounting procedures: The study and evaluation of internal control
helps the auditor to establish the reliance he can place on the internal control in determining the
nature, timing and extent of his substantive auditing procedures.

The auditor also obtains an understanding of the accounting system to identify points in processing
of transaction and handling of assets where errors or fraud may occur.

When the auditor relies on internal control, it is at these points that he must be satisfied that
internal control procedures applied by the entity are effective for his purpose.

The auditor’s examination of the system of internal control should have three features - review and
preliminary evaluation, testing of compliance and evaluation.

(i) Review and preliminary evaluation - The auditor should review the accounting system and related
internal control to gain an understanding of the flow of transactions and the specific control
procedures to be able to make a preliminary evaluation and identification of these aspects of internal
control on which it might be efficient and effective to rely in conducting his audit.

(ii) Test of compliance - Compliance tests should be conducted by the auditor to gain evidence that
those internal controls on which he intends to rely operate generally as identified by him and that
they function effectively throughout the period of intended reliance. Based on the results of his

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