Page 21 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori

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02 GENERAL AUDITING PRINCIPLES AND

AUDITOR’S RESPONSIBILITIES

Case Study-- CA Bijoy
Allegations: CA. Bijoy's client, a listed company, is facing allegations of violations of securities laws, price
manipulation, and undisclosed related-party transactions. Despite being highly leveraged, the company has met
its obligations. SEBI has also taken notice of the allegations.
Audit Risk: Given these allegations, there is a heightened level of audit risk and potential fraud risk factors. Last
year's audits were conducted as per standards and didn't reveal any wrongdoing, but the current scenario
demands greater vigilance.
Audit Procedure: The perceived increase in risk necessitates the design and implementation of specific audit
procedures to detect material misstatement due to fraud.
Impact on the financial statements: Suspected non-compliance could have significant impacts on the financial
statements and could lead to penalties. Bijoy is considering whether he needs legal advice if management is
uncooperative, and how this could affect his opinion.
Communication with Audit Committee: If Bijoy suspects management fraud, whether he should
communicate these suspicions to the audit committee and discussing the nature, timing, and extent of audit
procedures necessary to complete the audit.

Introduction
Auditor's Responsibilities (SA 200): Establishes the overall responsibilities of an independent auditor during a
audit of financial Statements. Emphasizes the need for professional skepticism and alertness to potential
misstatements due to errors or fraud.
Fraud Detection (SA 240): Specifies the auditor's responsibilities in identifying and addressing fraud during an
audit. Requires the auditor to remain vigilant for any material misstatements due to fraud.
Legal Compliance (SA 250): Outlines the auditor's duties in assessing an entity's compliance with laws and
regulations. Non-compliance may lead to fines, litigation, or other consequences that could materially affect
financial statements.
Governance Communication (SA 260): Details the auditor's responsibilities in communicating with those
charged with governance. Emphasizes the importance of timely communication during an audit.
Joint Audit (SA 299): Provides special considerations for auditors' responsibilities in a joint audit scenario.
Third-Party Services (SA 402): Discusses the auditor's responsibility to obtain sufficient appropriate audit
evidence when activities are outsourced to a third-party service organization.

SA 240

THE AUDITOR’S RESPONSIBILITIES RELATING TO FRAUD IN AN AUDIT OF FINANCIAL STATEMENTS

(CNO-SA240.020) Auditor's Responsibilities and Objectives Under SA 240.
Intro:
▪ SA 240 deals with the auditor’s responsibilities relating to fraud in an audit of financial statements.
▪ It assists the auditor.
o in identifying and assessing the risks of material misstatement due to fraud and
o in designing procedures to detect such misstatement.

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