Page 235 - CA Inter Audit PARAM

CA Ravi Taori
QNO— UDIN New Course – (SM25/J25R)
700.13.50 Bhaskar CNO - SA700.050
Maithili Thakur, a CA student, was perusing audit report of a company. Her eyes fell on an 18-digit alpha
numeric number stated at end of audit report below the signatures of auditor and membership number.
Make her understand objective and significance of such a randomly generated number. Is it required to
be stated in case of audit reports only?
Answer • The 18-digit alpha numeric number noticed by her at end of audit report is Unique Document
Identification number (UDIN). It is a system generated unique number. Its basic objective is to curb
the malpractices of non-CAs impersonating themselves as CAs. It helps in securing reports and
documents issued by practising CAs. It is required to be stated in case of audit reports and
certificates.

• It was noticed that financial documents/ certificates attested by third person misrepresenting
themselves as CA Members were misleading the Authorities and Stakeholders. ICAI also received
number of complaints of signatures of CAs being forged by non CAs. To curb the malpractices, the
Professional Development Committee of ICAI implemented in phased manner an innovative
concept of UDIN i.e. Unique Document Identification Number. All Certificates were made
mandatory with effect from 1st February, 2019 as per the Council decision taken at its 379th
Meeting held on 17th – 18th December, 2018.

QNO Qualitative Aspects of Accounting Practices Old Course--(M18M/N18M/M19M/M20R/
700.17 Bhaskar CNO - SA700.160 S20M/S21M/M23R)
The auditor evaluated, in respect of T Ltd., whether the financial statements are prepared in accordance
with the requirements of the applicable financial reporting framework.
Auditor’s evaluation included consideration of the qualitative aspects of the entity’s accounting practices,
including indicators of possible bias in management’s judgments.
Advise the qualitative aspects of the entity’s accounting practices.

OR
In considering the qualitative aspects of the entity’s accounting practices, the auditor may become aware
of possible bias in management’s judgments. The auditor may conclude that lack of neutrality together with
uncorrected misstatements causes the financial statements to be materially misstated. Explain and analyse
the indicators of lack of neutrality with examples, wherever required.
Answer The auditor shall evaluate whether the financial statements are prepared, in all material respects, in
accordance with the requirements of the applicable financial reporting framework. This evaluation shall
include consideration of the qualitative aspects of the entity’s accounting practices, including indicators of
possible bias in management’s judgments.

Management makes a number of judgments about the amounts and disclosures in the financial statements.

Qualitative Aspects explained in SA 260 and it includes Management Bias
SA 260 (Revised) contains a discussion of the qualitative aspects of accounting practices in considering the
qualitative aspects of the entity’s accounting practices, the auditor may become aware of possible bias in
management’s judgments. The auditor may conclude that the cumulative effect of a lack of neutrality,
together with the effect of uncorrected misstatements, causes the financial statements as a whole to be
materially misstated.
Indicators of Lack of Neutrality
Indicators of a lack of neutrality that may affect the auditor’s evaluation of whether the financial
statements as a whole are materially misstated include the following:
The selective correction of misstatements brought to management’s attention during the audit.
(E.g., correcting misstatements with the effect of increasing reported earnings, but not)
correcting misstatements that have the effect of decreasing reported earnings).
Possible management bias in the making of accounting estimates.

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