Revised/New Standards on Auditing (SAs) issued by AASB

SA	Subject	Date
SQC 1	Quality Control for Firms that Perform Audits and Reviews of Historical Financial Information, and Other Assurance and Related Services Engagements	01/04/2009
200	Overall objectives of the Independent Auditor and the conduct of an Audit in accordance with Standards on Auditing	—
210	Terms of Audit Engagements	01-04-2010
220	Quality Control for an Audit of Financial Statements	01-04-2010
230	Audit Documentation	01-04-2009
240	The Auditor’s Responsibility Relating to Fraud in an  Audit of Financial Statements	01-04-2009
250	Consideration of Laws and Regulations in an Audit of Financial Statements	01-04-2009
260	Communication with those Charged with Governance	01-04-2009
265	Communicating Deficiencies in Internal Control to those Charged with Governance and Management	01-04-2010
299	Responsibility of Joint Auditors	01-04-1996
300	Planning of Audit of Financial Statements	01-04-2008
315	Identifying and Assessing the Risks of Material Misstatement  through Understanding the Entity and its Environment	01-04-2008
320	Materiality in Planning and Performing an Audit	01-04-2010
330	The Auditor’s Response to Assessed Risks	01-04-2008
402	Audit Considerations Relating to an Entity Using a Service Organisation	01-04-2010
450	Evaluation of Misstatements Identified during the Audit	01-04-2010
500	Audit Evidence	01-04-2009
501	Audit Evidence – Specific Considerations for Selected Items	01-04-2010
505	External Confirmations	01-04-2010
510	Initial Audit Engagements – Opening Balances	01-04-2010
520	Analytical Procedures	01-04-2010
530	Audit Sampling	01-04-2009
540	Auditing Accounting Estimates, Including Fair  Value Accounting Estimates, and Related Disclosures	01-04-2009
550	Related Parties	01-04-2010
560	Subsequent Events	01-04-2009
570	Going Concern	01-04-2009
580	Written Representations	01-04-2009
600	Using the Work of Another Auditor	01-04-2002
610	Using the work of an Internal Auditor	01-04-2010
620	Using work of an Auditor’s expert	01-04-2010
700	Forming an Opinion and Reporting on Financial Statements	01-04-2012
705	Modifications to the Opinion in the Independent Auditor’s Report	01-04-2012
706	Emphasis of Matter Paragraphs and Order Matter Paragraphs in the Independent Auditor’s Report	01-04-2011
710	Comparatives Information – Corresponding Figures and Comparative Financial Statements	01-04-2011
720	The Auditor’s Responsibility in Relation to Other Information in Documents Containing Audited Financial Statements	01-04-2010
800	Special Consideration – Audits of Financial Statements Prepared in Accordance with Special Purpose Framework	01-04-2011
805	Special Consideration – Audits of Single Financial Statements and Specific Elements, Accounts or Items of a Financial Statement	01-04-2011
810	Engagements to Report on Summary Financial Statements	01-04-2011
SRE	Standards on Review Engagements
2400	Engagements to Review Financial Statements	01-04-2010
2410	Review of Interim Financial Information Performed by  the Independent Auditor of the Entity	01-04-2010
3000	Assurance Engagements other than Audits or Reviews of Historical Financial information	—
SAE	Standards on Assurance Engagements
3400	The Examination of Prospective Financial Information	01-04-2007
3402	Assurance Reports on Controls at a Service Organisation  Related Services	01-04-2011
SRS	Standards on Related Services
4400	Engagements to Perform Agreed-upon Procedures Regarding Financial Information	01-04-2004
4410	Engagements to Compile Financial Information	01-04-2004
D.	Statements on Auditing
1	Statement on Auditing Practices	—
2	Statement on Qualifications in Auditor’s Report	—
3	Statement on CARO 2003	—
4	Statement of payments to Auditors for other services	—
5	Statement on responsibility of Joint Auditors	—
E.	Guidance Notes
1	Guidance Note on Tax Audit u/s. 44AB of Income-tax Act, 1961	—
2	Guidance Notes on Accounting Aspects	—
3	Guidance Note on Turnover in case of Contractors	—
4	Guidance Note on Applicability of Accounting Standard (AS)-25 to Interim Financial Results	—
5	Guidance Note on Remuneration paid to key management personnel – Whether a related party transaction	—
6	Guidance Note on Applicability of Accounting Standard (AS)-20, Earnings Per Share	—
7	Guidance Note on Terms used in Financial Statements	—
8	Guidance Note on Treatment of Reserves created on Revaluation of Fixed Asset	—
9	Guidance Note on Accrual Basis of Accounting	—
10	Guidance Note on Accounting for Depreciation for Companies	—
11	Guidance Note on Some Important Issues arising from the Amendments in Schedule XIV to the Companies Act, 1956	—
12	Guidance Note on Availability of Revaluation Reserve for Issue of Bonus Shares	—
13	Guidance Note on Accounting for Leases	—
14	Guidance Note on Accounting for Corporate Dividend Tax	—
15	Guidance Note on Accounting for Treatment of Excise Duty	—
16	Guidance Note on Accounting for Dot Com Companies	—
17	Guidance Note on Accounting for Employee Share Based Payments	—
18	Guidance Note on Accounting for State Level Value Added Tax	—
19	Guidance Note on Accounting for Fringe Benefits Tax	—
20	Guidance Note on Accounting by Schools	—
21	Guidance Note on Accounting for Credit available in respect of Minimum Alternative Tax under the Income-tax Act, 1961	—
22	Guidance Note on recognition of Revenue by Real Estate Developers	—
23	Guidance Note on Accounting on Measurement of Income Tax for Interim Financial Reporting in the context of AS 25	—
24	Guidance Note on Accounting for MODVAT/CENVAT	—
25	Guidance Note on Accounting of Self-Generated Certified Emission Reductions (CERs) (Issued 2012)	—
26	Guidance Note on Accounting for Rate Regulated Activities	—
27	Guidance Note on Accounting for Real Estate Transaction (Revised 2012)	—
28	Guidance Note on Oil and Gas Producing Activities (Revised 2013)	—
29	Guidance Note on Accounting for Derivative Transactions (Released 2015)	—
30	Guidance Note on Expenditure on Corporate Social Responsibility Activities (Issued 2015)	—
31	Guidance Notes on Auditing Aspects	—
32	Audit of Abridged Financial Statements	—
33	Audit of Accounts of Non-Corporate Entities	—
34	Audit of Cash and Bank Balances	—
35	Audit of Consolidated Financial Statements	—
36	Audit of Debtors, Loans & Advances	—
37	Audit of Expenses	—
38	Audit of Fixed Asset	—
39	Audit of Investments	—
40	Audit of Liabilities	—
41	Audit of Miscellaneous Expenditure (Revised)	—
42	Audit of Payment of Dividend	—
43	Audit of Revenue	—
44	Audit Reports and Certificates for Special Purposes	—
45	Audit of Accounts of Liquidators	—
46	Auditor’s Report on Revised Accounts of Companies Before Circulation to Share holders	—
47	Capital & Reserves	—
48	Certificate on Corporate Governance	—
49	Certificate to be issued by the Auditor of a Company pursuant to Companies (Acceptance of Deposits) Rules, 1973	—
50	Certificate of Documents for Registration of Charges	—
51	Computer Assisted Audit Techniques (CAATs)	—
52	Duty Cast on the Auditors u/s. 45-MA of the Reserve Bank of India Act, 1934	—
53	Independent of Auditors (Revised)	—
54	Preparation of Financial Statements on Letterheads and Stationery of Auditors	—
55	Provision for Proposed Dividend	—
56	Reports of the Audit Report	—
57	Revision/Rectification of Financial Statements	—
58	Sections 227(3)(e) and (f) of the Companies Act, 1956 (Revised)	—
59	Section 293A of the Companies Act and the Auditor	—
60	Special considerations in the Audit of Small Entities	—
61	Audit of Property, Plant & Equipment	—
62	Certification of XBRL Financial Statements 4 and Industry Specific Guidance Notes	—
63	Audit of Banks (Revised 2015) edition	—
64	Audit of Members of Stock Exchanges (Revised)	—
65	Audit of Companies Carrying on General Insurance Business	—
66	Audit of Companies Carrying on Life Insurance Business	—
67	Guidance on Reporting under the Companies (Auditor’s Report) Order, 2015 (CARO, 2015) and Consequential Amendment to the Format of the Auditor’s Report of a Company).
68	Guidance Note on Reporting on Fraud under Section 143(12) of the Companies Act, 2013
69	Guidance Note on Reporting under Section 143(3)(f) of the Act and Reporting under Section 143(3)(h) of the Act
Secretarial Standards notified under the Companies Act, 2013
SS1	Meetings of the Board of Directors
SS2	General Meetings

An Effective Internal Audit

An Effective Internal Audit -

Everything is volatile, complex, uncertain and ambiguous except constant changing. Business models are changing rapidly along with the introduction of innovative processes and products. Disruptive models and technologies are making traditional business destroyed and therefore companies need to reinvent themselves.  Newer legislation's, governance codes and practices instituted across the globe.  In the center of this environment, we have seen several business failures, in India and outside India, that not just relate to poor strategy or risk taking at unacceptable levels but also those owing to financial fraud and deprived corporate governance practices. In this environment, the role of the Board and its Committees are difficult. The importance of handling investor expectations, developing a sound business strategy with high-class execution fixed with strong systems, processes and good corporate governance practices cannot be over emphasized.

Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an Organisation’s operations. It helps an Organisation achieve its objectives by bringing an efficient, self-controlled approach to evaluate and improve the effectiveness of risk management, control, and governance processes. The internal audit activity should evaluate the competence and effectiveness of controls covering the Organisation’s governance, operations, and information systems.  This should include:

• Trustworthiness of integrity of financial and operational information.
• Effectiveness and efficiency of operations.
• Safeguarding of assets.
• Compliance with laws, regulations, and contracts

Internal Audit is a critical element in the assurance environment of the Organisations and a valuable means and contributor to dealing risks more effectively. It is a key attribute of good governance, which provides the Directors, Audit Committee and various stakeholders with an independent view on whether the Organisation has a suitable risk and control environment. It also acts as a facilitator for a strong risk and compliance culture within an Organisation.

Refining usefulness of Internal Audit

Challenged with new market events (opportunities & threats), ongoing economic challenges, increased burden to improve risk management effectiveness, and unique regulatory requirements, many Organisations are recognising the importance of internal audit and risk management functions to turn these disruptive forces into opportunities. A discussion on the potential levers for enhancing effectiveness of Internal Audit follows:

Risk Based Internal Audit

Over the last few years, the need to cope risks has become recognised as an essential part of good corporate governance practice. This has put Organisations under increasing pressure to identify all the business risks they face and to explain how they manage them. In fact, the activities involved in managing risks have been recognized as playing a central and essential role in maintaining a sound system of internal control.

While the responsibility for identifying and managing risks belongs to management, one of the key roles of internal audit is to provide assurance that those risks have been properly managed. We believe that a professional internal audit activity can best achieve its mission as a foundation of governance by positioning its work in the context of the Organisation’s own risk management framework.

Institute of Internal Audit defines risk based internal auditing (RBIA) as a methodology that links internal auditing to an Organisation’s overall risk management framework. RBIA allows internal audit to provide assurance to the board that risk management processes are managing risks effectively, in relation to the risk appetite.

Advantages

By following risk based internal auditing internal audit should be able to determine that:

• Management has identified, assessed and responded to risks above and below the risk appetite
• The responses to risks are effective but not excessive in managing inherent risks within the risk appetite
• Where residual risks are not in line with the risk appetite, action is being taken to remedy that
• Risk management processes, including the effectiveness of responses and the completion of actions, are being monitored by management to ensure they continue to      operate effectively
• Risks, responses and actions are being properly classified and reported.

This enables internal audit to provide the board with assurance that it needs on three areas:

• Risk management processes, both their design and how well they are working
• Management of those risks classified as ‘key’, including the effectiveness of the controls and other responses to them
• Complete, accurate and appropriate reporting and classification of risks

Implementation of RBIA

The implementation and ongoing operation of RBIA has three stages

Stage 1: Assessing risk maturity : Obtaining an overview of the extent to which the board and management determine, assess, manage and monitor risks. This provides an indication of the reliability of the risk register for audit planning purposes.

Stage 2: Periodic audit planning : Planning the assurance and consulting assignments for a specific period, usually annual, by identifying and prioritizing audit areas based on risk analysis.

Stage 3: Executing audit assignments : Carrying out individual risk based assignments to provide assurance on part of the risk management framework, including on the mitigation of individual or groups of risks.

Process Based Internal Audit

The process based approach to internal audit emphases on evaluation of the efficiency of various Organisational processes with the objective of rationalizing and achieving the desired efficiency in various processes. A process-based audit checks the adequacy and effectiveness of the process in meeting its objectives. A process-based audit is an evaluation of the sequential steps and interactions of a process within a system. A process is simply a way of doing something. Process is a series of actions or steps that lead to a desired result: Input – Process – Output. A process based approach to audit examines the resources (equipment, materials and people) used to transform the inputs into outputs, the environment, the methods (procedures and instructions) followed and the measures adopted to determine process performance.

Elements of a Process

• Expected inputs
• Expected activities of the process
• Expected output
• Expected results
• Verification of activities
• Action for correction / improvement
• Corrective action

Evaluating a Process – Basic Questions

• What are you trying to do? Why ?
• How do you make it happen?
• How do you know you are doing it right?
• How do you know it’s the best way of doing it ?
• How do you know it’s the right way of doing it ?
• Did you receive what you are supposed to receive from the previous process ?
• Did you do what you are supposed to do at your process ?
• Did you send what you are supposed to send to the next process?

Just because it’s always been done that way, does not mean it’s being done correctly

Benefits of Process Approach to Internal Audit

• Focuses on process and results
• Determines effectiveness of the processes
• Evaluates the results the process delivers
• Tests linkages between departments and processes
• Follows flow of work throughout Organisation
• Determines if processes are under control and controls are effective

Essentials of an effective process

• A process must have a well-specified design; otherwise, the people performing it won’t know what to do or when.
• The people who execute the process, the performers, must have appropriate skills and knowledge; otherwise, they won’t be able to implement the design.
• There has to be an owner, a senior executive who has the responsibility and authority to ensure that the process delivers results; otherwise, it will not be effective.
• The company must align its infrastructure, such as information technologies and systems, to support the process; otherwise, they will hamper its performance.
• Finally, the company must develop and use the right metrics to assess the performance of the process over time; otherwise, it won’t deliver the right results.

These enablers give a process the potential to deliver high performance.

Methodology of Process Based Internal Audit

• Develop a Process Flow Chart for mapping processes / activities
• Identify non-value adding activities
• Look for factual evidence that the process works
• Plan – Do – Check – Act (PDCA )
• Check whether the process meets the objectives
• Evaluate the process – time/cost/quality/efforts/environment
• Identify areas for improvement
• Make recommendations for Process improvement

Agile Internal Audit

Agile IA is the mind-set that an Internal Audit function adopts to focus on stakeholder needs, accelerate audit cycles, drive timely insights, reduce wasted effort. Agile prompts internal auditors and stakeholders to determine, upfront, the value to be delivered by an audit or project. As the Internal Audit function considers their specific challenges and contemplates a custom solution, agile audits

• Are outcome driven / value driven
• Break some eggs- Challenge that’s the way we have always done it
• Focus on Impact over thoroughness – 80/20 Rule

Internal Audit Plan and Strategy

Internal audit may have a charter and an annual plan, but many do not have a higher-level, internal audit-specific strategic plan. A detailed strategy enables internal audit to align its objectives to the Organisation. The internal audit strategy should have a long-term (e.g., three to five-year) time horizon and have a road map that is based on the Organisation’s overall strategy, stakeholder expectations, regulatory requirements and the role of the other risk functions. Develop an internal audit-specific strategy that matches the Organisation’s strategic plan time horizon to increase Organisational alignment and improve internal audit’s relevance to other operating functions.

Assessing skills and managing talent

As the role of the internal auditor evolves and stakeholder expectations rise, internal audit increasingly requires competencies that exceed the more traditional technical skills. In addition to internal audit knowledge, stakeholders expect internal auditors to have the ability to team with management and business units on relevant business issues. They also expect internal audit resources to have deep sector knowledge and business acumen. Being able to look at the totality of the business and of the processes — that’s what sets a good internal auditor apart

Leveraging Data Analytics

Use analytics as part of a comprehensive program throughout the audit life cycle rather than on an ad hoc basis. Embedding data analytics into the audit plan can help internal

Audit guide the risk assessment, drive enterprise efficiencies and results that add tangible value to the business, and effectively communicate to the audit committee

Executing a focused, dynamic audit plan

Internal audit must develop an audit plan that focuses on Organisational strategic imperatives and key business risks identified during the risk assessment, including an appropriate blend of:

• Advisory and assurance reviews
• Thematic audits
• Issue-based audits

Update audit plans according to business cycles and triggering events such as a merger or acquisition, new product launch or litigation.

Conducting thematic audits

Thematic and issue based audits are not new to internal audit. But they are making a resurgence as stakeholders increasingly want to know the implications, magnitudes and insights that audit findings convey. Thematic audits are one way of doing this. Themes should be tailored to the sector, Organisational structure, business life cycle and strategy. These audits can include a mix of advisory and assurance reviews.

The future of Internal Audit is now

Today, change is coming faster than ever before – and there is more of it. The sheer velocity of change has upended the business environment and rearranged the landscape. Organisations must identify, assess and address emerging risks without losing sight of their existing business and control environment. They are not only working to get ahead of the curve – often they are struggling to keep up – and not always succeeding. Management, audit committees and boards of directors rely on internal audit to provide assessments and assurance around the effectiveness of controls and company processes, while also providing support in a diverse array of risk and business process improvement areas. In an expanding risk landscape Internal Audit has emerged as a critical lever for change. Now, more than ever, it needs to rise to the challenge and demonstrate its value.

Source from CMA Dr. S K Gupta