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CA Ravi Taori
circumstances. In bank audits, auditors have a legal obligation to report fraud to supervisory authorities such as
the RBI.
2B. Reporting fraud (If No Correction): Auditors may need to report misstatements to authorities when
management and those in governance fail to take corrective action.
2C. Reporting fraud depends on Audit Mandate: For some clients, fraud reporting requirements may be
dictated by specific provisions in the audit mandate or related legislation or regulation, irrespective of how the
fraud was discovered.

(CNO-SA240.520) Documentation
1A. RMM due to fraud documentation: The auditor's documentation should include the significant decisions
made by the engagement team about the potential for material misstatement in the entity's financial statements
due to fraud. It should also include the identified and assessed risks of such misstatements at both the financial
statement and assertion levels.
1B. Response to Risk &Results Documentation: The auditor's response to the assessed risks should be
documented. This includes the overall responses at the financial statement level, the nature, timing, and extent
of audit procedures, and how these procedures link with the assessed risks at the assertion level. The results of
the audit procedures, including those designed to address the risk of management override of controls, should
also be documented.
1C. Communication: The auditor should document any communications about fraud made to management,
those charged with governance, regulators, and others.
2. Revenue Recognition presumption : If the auditor concludes that the risk of material misstatement due to
fraud related to revenue recognition is not applicable, they should document the reasons for this conclusion.

SA 250

CONSIDERATION OF LAWS AND REGULATIONS IN AN AUDIT OF FINANCIAL STATEMENTS

Introduction.
Scope: SA 250 pertains to the auditor's responsibility to consider laws and regulations during a financial
statement audit.
Exclusions: This standard does not apply to other assurance engagements where the auditor is specifically tasked
with testing and reporting on compliance with specific laws or regulations.
Objective: The aim of SA 250 is to assist the auditor in identifying material misstatements in the financial
statements due to non-compliance with laws and regulations.

(CNO-SA250.020) Effect of Laws and Regulations On Financial Statements Of An Entity (Classification of
laws)
1A. Legal Framework: Entities are subject to various laws and regulations, forming their legal and regulatory
framework.
1B. Laws having Direct Effect: Some laws and regulations directly affect an entity's financial statements by
determining
reported amounts and disclosures.
1C. Other Laws: Other laws and regulations, while not directly affecting financial statements, must be complied
with by management or set the provisions under which the entity conducts its business.
2A. Industry-Specific Regulations: Entities in heavily regulated industries, like banks and chemical companies,
face unique regulatory challenges.

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