Page 32 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori
2B. General Business Regulations: Some entities are subject to laws and regulations related to general operating
aspects of the business, such as occupational safety and health.
3. Non-Compliance Consequences: Non-compliance with laws and regulations can lead to fines, litigation, or
other consequences that may materially affect the financial statements.

(CNO-SA250.040) Objectives of auditor in accordance with SA 250
(Shortcut: DON)
Laws having Direct Effect: Obtain sufficient appropriate audit evidence for compliance with laws and
regulations that directly impact the financial statements' material amounts and disclosures.
Other Laws: Perform specific audit procedures to detect instances of non-compliance with laws and regulations
that could materially affect the financial statements.
Non-Compliance: Take appropriate action when non-compliance or suspected non-compliance with laws and
regulations is identified during the audit.

(CNO-SA250.060) Responsibility of Management for Compliance with Laws and Regulations
1. Compliance: Management ensures operations align with laws and regulations, including those affecting
financial statements.
2A. Code of conduct: A code of conduct is developed, publicized, and followed by Employees
2B. Training: Also, employees are trained to understand it.
2C. Record-Keeping: A register of significant laws and regulations is maintained, along with a record of
complaints.
3. Monitor Legal requirements: Procedures are in place to monitor legal requirements and ensure operating
procedures meet these requirements. Legal advisors are engaged to assist in monitoring legal requirements. In
larger entities, an internal audit function, an audit committee, and a compliance function may be assigned.

(CNO-SA250.080) Responsibility of the Auditor
1. Auditor's Responsibility (Limited responsibilities): The auditor's main responsibility is to obtain
reasonable assurance that the financial statements are free from material misstatement, be it from fraud or error,
while considering the applicable legal and regulatory framework. Prevention of non-compliance is not their
duty, nor can they be expected to detect all non-compliance.
2. Inherent Limitations: Inherent limitations of an audit mean that there is a risk of not detecting some material
misstatements in the financial statements, even when the audit is properly planned and executed in line with the
SAs.
2A. Laws Relating to Operating Aspect: The existence of numerous laws and regulations, mainly related to the
operating aspects of an entity, increases the potential effects of inherent limitations. These laws typically don't
impact the financial statements and aren't captured by the entity’s financial reporting systems.
2B. Non-compliance Concealment: Non-compliance might involve actions meant to hide it, like collusion,
forgery, deliberate omission of transactions, management overriding controls, or intentional misrepresentations
made to the auditor.
2C. Non-Compliance Determination: The ultimate determination of whether an act constitutes non-
compliance is a matter for legal determination by a court of law.
2D. Removed from Books / Financial Statements: The further removed non-compliance is from the events
and transactions reflected in the financial statements, the less likely the auditor is to detect or recognize it.

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