Contents. Preface I-5 Syllabus I-7

Transcription

1 Contents Preface I-5 Syllabus I-7 1 Introduction 1.1 Meaning and definition of auditing Narrow concept of auditing Auditing in a broad sense Elements of financial audit Objectives of auditing Objectives of financial audit Types of error and fraud Advantages of auditing To owners - Present and potential To others To management Inherent limitations 7 1.6A Relationship with Accounting Types of audit Classification on the basis of organisational structure Classification on the basis of specific objectives Classification on the basis of time 12 Test Your Knowledge 16 2 Audit Planning and Internal Control System 2.1 Considerations for commencing an audit 17 I-9

2 Contents I Audit programme Concept Advantages of an audit programme Disadvantages of an audit programme and safeguards Audit notebook Concept Contents Advantages Disadvantages Working Papers Ownership and custody of working papers Internal control system Meaning and nature Inherent limitations of internal control (as laid down by SA 315) Internal check Definition Advantages of internal check Disadvantages of internal check Internal check and the auditor Internal audit Meaning and definition Scope of internal audit (on the basis of SA 610) Statutory status Inter-relationship of internal control, internal check and internal audit 25 Test Your Knowledge 26 3 Audit Procedure 3.0 Vouching Introduction Meaning and definition of vouching 27

3 I-11 Contents Objects of vouching Routine checking and vouching Types of voucher Importance of vouching Vouching of credit sales Vouching of purchase transactions Vouching of debit side of cash book Vouching of credit side of cash book Verification of assets Meaning and definition of verification of assets Objects of verification of assets Difference between vouching and verification Difference between verification and valuation of assets Verification of specific assets Verification of liabilities Meaning Objects of verification of liabilities Audit procedures for verification of liabilities 40 Test Your Knowledge 40 4 Company Auditor: Appointment and Removal 4.1 Eligibility for appointment of an auditor Auditor s qualifications Disqualifications of an auditor Automatic vacation on becoming disqualified Appointment of Auditor Appointment of Auditor of listed as well as company 42 to which companies (Audit and Auditors) Rules, Appointment of auditor in case of Government companies (section 134) Compulsory re-appointment Ceiling on number of audits 45

4 Contents I Remuneration of the auditor - Section Removal of auditor Resignation of the auditor - Section 140(2) and (3) Appointment of an auditor in place of a retiring auditor Rights/Powers of an auditor Duties of Auditor - Section 143, section 144, section 145 and section Test Your Knowledge 49 5 Auditor s Report and Liabilities 5.1 The audit report : As a means of communication Elements of Audit Report Audit report of a limited company Duty to report Duty to enquire Duty to report on additional matters Types of audit report Difference between clean audit report and qualified audit report Liabilities of auditor Under the Companies Act, Civil liability under the Companies Act Criminal liability under the Companies Act 56 Test Your Knowledge 58 6 Cost Audit, Management Audit and Tax Audit 6.1 Meaning Objectives of cost audit Importance of cost audit Provisions regarding cost audit under the Companies 60 Act, Cost Audit Report Management Audit Definition of management audit 62

5 I-13 Contents Importance of management audit Who appoints the management auditor Who should be appointed as the management auditor Terms of appointment Audit report Management audit in relation to cost audit Tax Audit Introduction Compulsory tax audit under section 44AB Exemptions and deductions under the Income-tax Act Selective tax audit 67 Test Your Knowledge 68 7 Introduction to EDP Auditing 7.1 Introduction Meaning of EDP auditing Difference between auditing of manual accounts & computerised 69 accounts 7.4 Types of EDP Accounting Systems Types of internal control in CIS/EDP environment Distinguish between general controls and application controls Audit approaches in a computer environment CAATs 72 Test your knowledge 75 8 Conceptual Framework for Corporate Governance 8.1 Introduction Definition of Corporate Governance Narrow definition Broader definition Need/Benefits of Corporate Governance 78

6 Contents I Theories of Corporate Governance Agency/shareholder theory Stewardship theory Stakeholder Theory Difference between the agency/shareholder and stakeholder perspective to corporate Governance Principles/Four Pillars of Corporate Governance Models of Corporate Governance Anglo-Saxon Model German Model Japanese Model Summary Indian Model 88 Test Your Knowledge 89 9 Board Committees and their Functions 9.1 Background and definition of Board Committees Feature of Board Committees Importance of Board Committees Board Committees under the Companies Act, Mandatory Board Committees Audit Committee - Section Nomination and Remuneration Committee - Section Stakeholders Relationship Committee - Section CSR Committee - Section Non-mandatory committees 94 Test Your Knowledge Quirky Governance : Insider Trading and Whistle Blowing 10.1 Introduction Insider Trading 95

7 I-15 Contents Meaning Legal position Rationale for Insider Trading Regulations SEBI (Prohibition of Insider Trading) Regulations, Whistle blowing Introduction Definition Types of Whistle-blowing Pros and Cons of Whistle-blowing Advantages of a good Whistle blower policy to organization Regulatory framework in India 99 Test Your Knowledge Corporate Governance Rating 11.1 Introduction Meaning Assessment criteria Corporate Governance Rating in India CRISIL s Governance and Value Creation (GVC) Ratings CARE s Corporate Governance Rating (CGR) ICRA s Corporate Governance Rating (CGR) and Stakeholder Value and Governance (SVG) Rating Advantages of Corporate Governance Ratings 103 Test Your Knowledge New Paradigm of Corporate Governance: E-Governance and Class Action Suits 12.1 Electronic - Governance/Green Governance/E-Governance Introduction Definition The Companies Act, 2013 and E-Governance 105

8 Contents I Importance of E-Governance Class Action Suits Introduction Definition Advantages of class action suits Disadvantages of class action suits Class Action Suits in India 108 Test Your Knowledge A New Means Of Corporate Governance: Shareholder Activism 13.1 Introduction Definition Features Advantages Disadvantages Shareholder activism in India Important changes introduced by the Companies Act, Test Your Knowledge Some of the Major Corporate Governance Failures in Developed World 14.1 The Bank of Credit and Commerce International Scandal (BCCI) Background Description of Crisis Major Governance Issues Aftermath Maxwell Communications (UK) Background Description of crisis Major Governance Issues Enron (US) 116

9 I-17 Contents Background Description of crisis Major Governance Issues WorldCom (US) Background Description of crisis Major Governance Issues Anderson Worldwide (USA) Background Description of crisis Major Governance Issues Vivendi (France) Background Description of crisis Major Governance Issues Aftermath 122 Test Your Knowledge Cases of Corporate Governance Failure in India 15.1 Harshad Mehta Scam Background Description of the crisis Aftermath Kingfisher Airlines Background Description of crisis Major Governance Issues Aftermath Satyam Scam Background Description of Crisis 126

10 Contents I Major Governance Issues Aftermath Changes in Regulations after Satyam Scam Common governance problems noticed in corporate failures 129 Test Your Knowledge Corporate Governance Codes And Standards 16.1 Introduction Cadbury Report (UK), Greenbury Report (UK), Hampel Report (UK), Other Important Reports The Sarbanes-Oxley Act of 2002 (USA) G20/OECD Principles of Corporate Governance 133 Test Your Knowledge Initiatives in India 17.1 Introduction Clause 49 of Listing Agreement issued by SEBI Applicability Summary of important aspects covered by the Clause Conceptual Framework for Business Ethics 18.1 Introduction Morality and Ethics Business Values and Ethics Corporate/Business Ethics Benefits of being ethical Approaches to Business Ethics Normative and Non-Normative Approach 140

11 I-19 Contents Stakeholder Management Approach and Issue Management Approach Theories of Business Ethics/Ethical theories Ethical Governance Ethical Governance and Government Ethical Governance and Corporate World Code of Ethics Meaning Importance Scope Development Efficacy Ethics Committee 146 Test Your Knowledge Corporate Social Responsibility 19.1 Introduction Definition of Corporate Social Responsibility (CSR) Business case of CSR Arguments against CSR Corporate Philanthropy Corporate Sustainability Corporate Responsibility Environmental aspect of CSR Business Ethics and CSR 152 Test Your Knowledge CSR Models and Drivers 20.1 CSR Models CSR Models in Indian Context CSR Drivers 156

12 Contents I Examples of CSR drivers from empirical studies in India 158 Test Your Knowledge Regulatory Framework and Guidance for Csr 21.1 Introduction The Companies Act, 2013 and the CSR Rules Governance Mechanism - CSR Committee Committee Membership and Organization Role of CSR Committee Reporting for CSR CSR Codes and Standards ISO 26000: Social Responsibility The Global Reporting Initiative (GRI) Guidelines Some other important Codes and Standards 164 Test Your Knowledge 164