Tax Audit and Application of AAS

Transcription

1 Tax Audit and Application of AAS INTRODUCTION The provision for compulsory Tax Audit was introduced in order to curb tax evasion as stated by the then FM in his budget speech. It was also aimed at computing the taxable income according to the law and to ensure transparency in financial statements filed by the assessees. Thus, accountants (CA) were conceived as facilitators in the performance of the functions of the Assessing Officers and the forms and questionnaire was framed in the manner where much of the work, which was done earlier by the Assessing Officer, was passed on to accountant (CA). Since the above reporting involved carrying out an audit of accounts of the assessee liable under S. 44AB of Income Tax Act, 1961, the provision of Audit being governed by compliance with various Accounting Standards (AS) and Standards on Quality Control read with Standards of Assurance (SA) became applicable. This paper aims at revisiting the areas of compliance under AUDIT through Audit and Assurance Standards, their contents, peculiarities of audit u/s. 44AB of Income Tax Act, 1961, importance of documentation and trends in compliances while carrying out Tax Audit. Evolution of Auditing Standards Institute of Chartered Accountants of India has from time to time issued Guidance Notes and Statements on a number of matters with the formation of Auditing Practices Committee. Various statements on Standard Auditing Practices (SAPs) were issued and made applicable w.e.f. 1 st April In the year 2002, the above committee was renamed as Auditing and Assurance Standards Board (AASB) and in July 2002, the SAPs were renamed as Auditing and Assurance Standards (AASs). In all, 35 standards were issued till the year However, the council of the Institute of Chartered Accountants of India at its 267 th meeting, held on March 12-14, 2007 approved the revised classification and numbering pattern of AASs. The revised Preface replacing the Preface to Standards on Auditing Practices issued in 1983-paved way for total revamp of the existing structure of the Auditing and Assurance Standards (AAS) on the lines of the International Auditing and Assurance Standards Board (IAASB). The new standards to be issued by the AASB henceforth are to be collectively known as Engagement Standards and comprise of a. Standards on Auditing (SA) b. Standards on Review Engagement (SRE) c. Standards on Assurance Engagement (SAE) d. Standards on related Service (SRS) 1

2 Brief particulars of changes Audit: The concept of audit has undergone a change with the thrust on providing an assurance to the reader of financial statements by expressing an opinion. In audit, the Chartered Accountant s objective is to provide a high (but not absolute) level of assurance on the reliability of financial statements. The auditor provides a positive opinion, which essentially states that based on the work performed; the financial statements comply with relevant accounting standards and principles. The level of testing procedures to obtain the evidence necessary to support such an opinion is high. The purpose of auditing is to satisfy the users of financial statements that the accounts presented to them are drawn up on correct accounting principles and that they represent a true and fair view of the state of affairs of the organisation. In forming the audit opinion, the auditor obtains sufficient appropriate audit evidence to be able to draw conclusions on which to base that opinion. An audit engagement involves a study and evaluation of internal accounting controls, detailed tests of accounting records, or corroborative evidence through inspection, observation and confirmation, which is not usually required in a review engagement. In audit, the Chartered Accountant s objective is to provide a high (but not absolute) level of assurance on the reliability of financial statements. Absolute assurance in auditing is not given due to the following reasons: The need for judgment, The use of test checks, The inherent limitations of any accounting and internal control systems and The fact that most of the evidence available to the auditor is persuasive, rather than conclusive, in nature Though any audit is not a guarantee about absence of misstatement in a set of financial statement or future viability of an enterprise, the auditors are cast with the responsibility of carrying out their assignments with utmost professional care and sincerity to uphold the faith posed by public in them. Review: In contrast, a review provides a negative assurance report giving only a moderate level of assurance on the reliability of the financial information. The report essentially states that nothing has come to the reviewer s attention to indicate that the financial information is not presented fairly in accordance relevant accounting standards and principles. Review engagements are designed as a limited review of financial statements; therefore the risk of mistakes, omissions or incorrect disclosures is considerably greater than with an audit. 2

3 Related Services: These are the services provided by a Chartered Accountant, which do not provide any assurance at all. In fact, these are the services, which are carried out at the behest of an enterprise to fulfill the objectives of an enterprise as per the procedure laid down by the enterprise. A diagrammatic chart of the same is shown herein below. CHARTERED ACCOUNTANTS ACT, 1949/CODE OF ETHICS/GUIDANCE NOTES/PRONOUNCEMENTS OF ICAI STANDARDS ON QUALITY CONTROL (SQCs) Services covered by the pronouncements of the Auditing and Assurance Board under the authority of the council of ICAI Assurance Service Related Services Framework for Assurance Engagements Audits and reviews of historical financial information Assurance Engagements other than audits or reviews of historical financial information Standards on Auditing (SAs) Standards on Review Engagements (SREs) Standards on Assurance Engagements (SAEs) Standards on Related Services (SRSs)

4 A comparative List of old AASs with new Engagement Standards is given as Annex I. Importance of Auditing Standards Quality Standards & Assurance Apart from the mandatory compliance of these standards, a professional also should endeavour to ensure compliance so as to ensure the quality control in the output services rendered by him. Quality is the prime-driving factor of this whole concept. Its aim is to ensure that the members comply with the technical standards for maintaining the quality of the attestation works they perform. Attestation services includes auditing, verification of financial transactions, books, accounts or records or preparation, verification or certification of financial accounting and related statements as defined U/Sec 2(2)(ii) of the CA Act, 1949 but does not include: - (i) (ii) (iii) (iv) (v) (vi) Management consulting Representing clients before authorities Engagements for the compilation of financial statements Engagements to prepare tax returns or advising clients in taxation matters Engagements solely to assist the client in preparing, compiling or collating information other than financial statements Testifying as expert witness and providing expert opinion on AS or applicability of certain laws. Apart from quality aspect, the compliance with Auditing Standards while carrying out attest function is also necessary in view of the following PEER REVIEW a. Peer Review requirements b. Compliance with Professional Ethics c. Rising court cases and complaints under Consumer Protection Act The Institute has issued a statement on Peer Review. The basic objectives of peer review is to enhance the quality of the professional work by adopting technical standards which includes the following: Accounting standards issued by the Institute of Chartered Accountants of India. Auditing and assurance standards issued by the Institute of chartered accountants of India. Framework for the preparation and presentation of financial statement Frame work of statements on standard auditing practices 4

5 Guidance notes on related services issued by the Institute of Chartered Accountants of India. Compliance of the Guidance Notes issued by the Institute of Chartered Accountants of India. Notification/Directions issued by the Institute of Chartered Accountants of India including those of a self-regulatory nature; and Compliance of the provisions of the various relevant Statutes and/or Regulations, which are applicable in the context of the specific engagements being reviewed. Requirements of professional ethics The auditing and assurance standards are our basic tools to conduct any audit and it has to be followed with out any reservation. Compliance with the standards to be ensured whenever an audit including a tax audit is carried out. Application of auditing procedures and reporting practices appropriate to the particular situation. Auditor should show integrity, objectivity and independence. Audit should be performed and report prepared with due professional care by persons having training, experience and competence in auditing. While discharging their attest functions, it is the duty of the members of the Institute of Chartered Accountants of India to ensure that these standards are followed in the audit of financial information covered by their reports. If, for any reason, the member is unable to perform an audit in accordance with the generally accepted auditing standards, his report should draw attention to any material departures there from, failing which he would be held guilty of professional misconduct under clause 9 of Part I of the Second Schedule to the Chartered Accountants Act, Also, the clauses 5,6,7,8 and 9 of Part I of Second Schedule may also get attracted in case of failure of compliance Standards on Auditing Auditor should have specialized skills and competence to carry out audit. Auditor should ensure that all accounting information that should be recorded has in fact been recorded. Auditor should review and assess the conclusions drawn from audit evidences to arrive at an overall conclusion with regard to the following: (a)financial statements have been prepared using acceptable accounting policies. (b)such policies are consistently applied. Rise in number of complaints and court cases It is common knowledge that the cases against the professionals for alleged failures in compliance of various standards and legal requirements are increasing. Recent judgment of Hon ble Bombay High Court in the case of PWC vs. SEBI raises a possibility of being regulated by regulators albeit in a limited way has also necessitated adherence to various standards promulgated by ICAI. 5

6 TAX AUDIT UNDER SECTION 44AB OF THE INCOME TAX ACT 1961 : Section 44AB of the Act, which was inserted in the Act by the Finance Act, 1984 with effect from April 1, 1985, provides for compulsory audit of the accounts of the assessee under the following circumstances: (i) In case of a person carrying on business, where his total sales, turnover or gross receipt in the business exceeds Rs. 40 lakhs in any previous year; or (ii) In case of a person carrying on profession where his gross receipt in profession exceeds Rs. 10 lakhs in any previous year. (iii) Assessees covered by section 44AD or 44AE or 44AF, 44BB or 44BBB and claiming profits lower than that presumed under these sections. The objective behind such a move has been stated in the CBDT s Circular No. 387, dated 6th July Relevant portion of this Circular is extracted below: 17.1 Compulsory audit of accounts of certain persons carrying on business or profession. Accounts maintained by companies are required to be audited under the Companies Act, Accounts maintained by co-operative societies are also required to be audited under the Co-operative Societies Act, There is, however, no obligation on other categories of taxpayers to get their accounts audited A proper audit for tax purposes would ensure that the books of account and other records are properly maintained, that they faithfully reflect the income of the taxpayer and claims for deduction are correctly made by him. Such audit would also help in checking fraudulent practices. It can also facilitate the administration of tax laws by a proper presentation of the accounts before the tax authorities and considerably saving the time of the Assessing Officer in carrying out routine verification like checking correctness of totals and verifying whether purchases and sales are properly vouched or not. The time of the Assessing Officer thus saved, could be utilized for attending to more important investigational aspects of a case. Thus, the audit under section 44AB is coupled with the dual responsibility of fulfilling expectations from revenue as well as providing assurance while performing the audit. The reporting is also in the form of Audit Report with a questionnaire to be answered covering different aspects including computation of deductions available under the provisions of income tax. Hence, the tax audit u/s. 44AB stands out differently as compared to other audits. The auditor is expected to have complete knowledge of the provisions of income tax as well as the business carried on by the auditee and thus, an auditor is able to perform the role of assessing officer to a certain extent. While it is the duty of the management, where tax audit is applicable, to prepare all the required details as per Form 3CD. After due verification only, the auditor has to issue the Form 3CA/Form 3CB audit report together with Form 3CD certificate. This is 6

7 a statutory compliance. The purpose of the audit is not only to assure the tax department the true and fairness of the financial statement but also to assure - a) Proper maintenance of books and records b) From the I.T Act point of view, the allowable and disallowable expenses, taxable and exempt incomes which facilitates the work of the revenue authorities. c) To ensure the compliance and reliability of various income tax provisions. Particulars 1) Appointment Letter defining scope SA-210 2) Management representation letter SA-580 3) List of related parties & transactions SA-550 4) Trial Balance SA-500 5) Financial statements duly signed by the SA-500 owners 6) Notes on accounts and Disclosure AS-1 of accounting policies Relevant Standards 7) Valuation of Inventories and for the total year AS-2 quantitative inflow, outflow statement. 8.) Bank balance confirmation SA-505 9) Bank loan statements SA-505, Sec 43B of I.T Act 10) Major sundry debtors and creditors SA-505 balance confirmation 11) Analytical Ratio analysis SA ) Sample purchase and sales bills SA ) Proof of assets purchased & revenue SA-500, Sec 36(1)(iii) & 43A of I.T expenditure Act. 14) Extraordinary Items nature & disclosure ASA ) Notes on the nature of business SA ) Depreciation calculation statement AS-6, Sec 32 of I.T Act 17) Liabilities including contingent liabilities A.S 29 with detailed working estimation 18) Statutory Compliances Relevant P.F, ESI, Bonus, VAT Act s provisions. AUDIT REPORT Audit reports under the provisions of section 44AB have either to be in Form No. 3CA or 3CB. Form No. 3CA will be applicable in a case where the accounts of the business or profession of a person have been audited under any other law and Form No. 3CB will be applicable in the case of a person who carries on business or profession, but whose accounts have not been audited under any other law. 7

8 Incidentally, it will be seen that the Report in Form 3AC/3CB is different than the model one contained in SA 700 (earlier AAS-28) and hence, an auditor is expected to perform with more responsibility. FORM NO. 3CD This form is the statement of particulars required to be furnished under section 44AB. This form has two parts and two Annexures. As this form is an integral part of the report to be given under section 44AB, it is essential that every item in this form and its two Annexures are properly filled by the tax auditor. No item of this form should be left blank and if any particular item is not applicable to the concerned assessee, this should be indicated rather than leaving that item blank. If one closely examines Form No. 3CD, one would find that information required in this form is the information which the Assessing Officer needs in completing the assessment of the assessee. Part A of this form requires to give name, address, PAN, status, previous year ended and assessment year. These are basic informations and have to be given for every assessee. Part B requires various other informations. Starting from Para 7 of the form and spanning up to Para 32 and 2 Annexures, no information worth name is left which is required in computing total income of the assessee. For completing this form, the tax auditor has to be thoroughly conversant with the various provisions of computation of income under the head Profits and gains of business or profession. He has to discharge his duty as per the professional standards set by the Institute of Chartered Accountants of India. Otherwise as informed by the CBDT vide Press Release dated December 10, 1999 in case of any professional negligence in preparation of Tax Audit Report, the CBDT has instructed its field officers to take up the matter with the Institute of Chartered Accountants of India for disciplinary proceedings. Practical Aspects of Compliance While performing the attest function, a professional should take into account the Technical Standards issued by ICAI from time to time. Technical Standards include - (i) Accounting Standards (ii) A.A.S now renamed as Engagements and quality control statements (iii) Framework for preparation and presentation of financial statements & Framework of statements on SAP and Guidance Notes on related services (iv) Statements (v) Guidance Notes (vi) Notifications DOCUMENTATION Every professional work needs to be backed up by adequate documents, more so when an auditor is performing an audit. AAS 3 (SA 230) deals in detail about the documents to be maintained when discharging the attest function. Broadly documents can be classified into two files i.e., permanent & current. Further they can be classified into mandatory records and recommendatory records. Working 8

9 papers are part of mandatory records. Recommendatory records include the Practice Unit s profile, Staff details, general office procedures etc. The mandatory documents include audit plan, audit programme, the nature, timing and extent of audit procedures, data sampling and verification details, the observations, explanations and conclusions drawn there from. Permanent File: This should contain the letter of engagement, correspondence with retiring auditor, constitution of the entity, nature and history of business, location and process details, internal controls evaluation sheets, methods of accounting, EDP security etc, earlier year s financial statements etc. Current File: This should contain annual appointment letter, acceptance letter, draft financial statements, work estimate, work assignment, queries raised and explanations received, checklists, authorization levels, Management Representation letter, other expert s opinion, applicable accounting standards and their appliance details, detailed working papers and conclusions, analytical tests conducted and results, third party confirmations and certificates, finalized Balance Sheet and P&L account with all schedules duly signed by the Management, draft and finalized Audit Report. Standards on Quality Control (SQCs) : SQC 1, Quality Control for Firms that Perform Audit and Reviews of Historical Financial Information, and other Assurance and Related Services Engagements This is the mother standard for all other standards and is all pervasive standard in respect of quality control. This is applicable for all the audit services from Some of the relevant auditing standards are as follows. A.A.S 3 (SA 230) Documentation A.A.S 5 (SA 500) Audit Evidence External/internal A.A.S 7 (SA 501) Reliance on the work of internal auditor A.A.S 8 (SA 300) Audit Planning A.A.S 9 (SA 620) Reliance on expert opinion. A.A.S34 (SA 501) Additional Consideration for specification of evidence 1. SA230 on Audit documentation issued by The Institute of Chartered Accountants of India (ICAI) The auditor should document matters, which are important in providing evidence that the audit was carried out in accordance with the generally accepted auditing standards in India. The Standard also touches upon the Timely Preparation of Audit Documentation; Documentation of the Audit Procedures Performed and Audit Evidence Obtained and Assembly of the Final Audit File 9

10 The significance of Audit documentation can be explained as follows: i. Assists the audit team to plan and perform the audit; ii. Self-Defense in a Court of Law: Onus in a Court proceeding lies on the auditor to prove that he was not professionally negligent in the performance of his duties iii. Self defense in case Consumer Protection Act, 1986 is invoked. iv. Audit evidence in case of Review by FRRB- Financial Reporting Review Board- The FRRB reviews the general-purpose financial statements either suo motto or on a reference made to it by any regulatory body like, Reserve Bank of India, Securities and Exchange Board of India, Insurance Regulatory and Development Authority, Department of Company Affairs, etc. The FRRB also reviews the general-purpose financial statements of enterprises relating to which serious accounting irregularities in the general-purpose financial statements have been highlighted by the media reports. v. To fulfill statutory requirements under Chartered Accountants Act, 1949 vi. To fulfill requirements of Peer Review wherein working papers will also be reviewed in order to establish whether the attestation work has been carried out as per norms of Technical, Ethical and Professional Standards vii. To fulfill requirements of Quality Review-[Chapter VII A of Chartered Accountants Act 1949 Sections 28A to Sections 28D] viii. Documentation fulfils the need to document oral discussions of significant matters and communicate to those charged with governance, as discussed in, SA 260 Communication with those Charged with Governance Hence, in orders to fulfill the requirements of Quality review also, it is essential that the professionals set up procedures to ensure proper documentation. Standard checklists, specimen letters should be maintained and working papers should be well organized. Audit Process The five stages in any audit are: 1. Pre-engagement 2. Understanding the business of the entity 3. Audit planning 4. Substantive procedures 5. Reporting Pre-Engagement Before commencement of any audit the auditor should 1. Procure Engagement letter from the dealer. An engagement letter in case of an audit documents and confirms the auditor s acceptance of appointment, the objective and scope of audit and the extent of the auditor s responsibilities to the client. SA 210 [earlier AS 26] issued by the Institute of Chartered Accountants of India requires the auditor and the client to agree on the terms of engagement of the audit. The engagement letter should be sent by the auditor, preferably before the engagement to avoid any misunderstandings later. Two copies of the letter should be 10

11 sent to enable the client to return a duly signed copy to the auditor as an acceptance of the terms stated therein. On recurring audits, the auditor should consider the necessity for revision or for reminding the client of the terms of engagement. The scope of an audit shall depend upon the terms of engagement, statutory requirements and the pronouncements issued by the Institute. The auditor should not agree to a change in the engagement unless there is a reasonable justification for the same. On refusal to accept change, if the auditor is not permitted to continue the original engagement, he should withdraw and consider whether he has any obligation to report withdrawal to other parties. Communicate with the previous auditor The term previous auditor means the immediately preceding auditor who held same or similar assignment comprising same/similar scope of work. The objective of communication with the previous auditor is not only for professional courtesy but also that the member may have an opportunity to know the reasons for the change in order to be able to safeguard his own interest, the legitimate interest of the public and the independence of the existing accountant. The requirements of communication with the previous auditor apply to all audit assignments, including internal audits, concurrent audits, tax audits, etc. The object of the communication is to ascertain whether there are any circumstances warranting refusal to accept the audit. There could be a need for a qualified report or something amiss with the administration of the enterprise. The communication could also bring to light the reason for qualified report, if any, and the position of the accounts of the enterprise. The communication should be in writing to serve as evidence. The view taken by the Council, as confirmed by the Rajasthan High Court is that mere posting of a letter under a certificate of posting is not enough to prove communication. There should be reasonable evidence to prove that the letter has in fact reached the retiring auditor. Even though there is proper communication the incoming auditor should before acceptance must ensure all the undisputed fees must have been paid as per notification no 1CA(70/46/99dated28/10/99of ICAI. Understanding the business of the entity Proper knowledge is a pre-requisite for any kind of planning. Hence, before planning, the auditor should acquire full knowledge of the client s business and policies, the relevant laws and the requisites of the audit (statutory and otherwise). This involves understanding /knowing: 1. the nature of business 2. the nature of its products 3. the processes involved in manufacture, production and ascertaining whether any part of the work is to be sent out of the entity for further processing 4. The key personnel involved 11

12 5. The business of the entity in order to identify the events and risks that may have an impact on the audit report 6. The transactions of related parties that are material to the financial statements. The auditor should obtain sufficient audit evidence in this regard 7. The accounting and internal control system of the dealer 8. Effect of a CIS environment on the audit. The auditor should have sufficient knowledge of the CIS to proceed with the audit. Audit planning SA 200 [earlier AAS 1] Basic Principles Governing an Audit requires an auditor to plan his work to enable him to conduct an effective audit in an efficient and timely manner. SA 300 [earlier AAS 8] Audit planning, requires an auditor to plan on a continuous basis, i.e., it should be revised on a continuous basis during the performance of audit. Audit planning involves, Developing an overall plan for the expected scope and conduct of the audit; and Developing an audit programme showing the nature, timing and extent of audit procedures. Audit Plan is prepared prior to commencement of each audit and should- Have a flexible process for discussion and resolution of material compliance issues; Provide ways of identifying and resolving important issues to reduce audit time; Explain the rationale for all audit issues which are not self evident; Take into consideration the results of other compliance checks such as internal audit of the dealer (the dealer furthers a note on the subject prior to audit); Ensure that the Audit team, as a whole, has the appropriate expertise for undertaking the audit; Provide a reasonable basis and time frame, to resolve any outstanding issues from previous audits; Provide quick access to the Auditor to the relevant books, records, returns, agreements and all other business records (including those maintained in electronic format), Establish a process to measure the progress of the audit and adjust the audit plan as mutually agreed to by the parties. The authorised signatory for the auditor should sign the audit plan. Substantive procedures An audit programme should lay down the substantive procedures for the purpose of audit. For an audit to be conducted in a systematic and comprehensive manner, the audit programme should be in writing and lay down the procedures to be followed to implement the audit plan in a detailed manner. It should also serve as a set of 12

13 instructions to the assistants involved in the audit and as a means to control proper execution of the work. It also helps in peer review compliances. An audit program should be so designed that an auditor is able to perform sufficient checks and sampling for the verification of returns and preparation of the audit report under the section 44AB of Income Tax Act, The auditor should ensure Compliance with Accounting Standards, Auditing and Assurance Standards, Guidance Notes and Industry Specific Technical Guidelines. Care should be taken to document working papers as per the Audit Plan. Reporting 1. The report has to be submitted to the authority appointing the auditor. 2. It should be in the prescribed format (Form 3CA/3CB read with Form 3CD) and should be exhaustive and inclusive of all facts and summaries. 3. It should be complete in all respects and wherever the answer to any question could not be furnished, the reason for the same may be given. TRENDS/PRACTICES ON ADOPTION OF AUDITING AND ASSURANCE STANDARDS The practices followed by auditors in implementing the AAS while conducting the audits is difficult to ascertain since such practices are not in the public domain. However, on an inquiry of the practices followed by various firms, it seems that many auditors are still not aware of the changes happening in AAS and fail to follow AAS while conducting audits. This is a dangerous trend. The members concerned can not only have problems in completing the Peer Review exercise (which requires all the AAS to be strictly followed), but can also be faced with disciplinary proceedings as he can be considered negligent in the discharge of his duties. Some other recent trends and practices noticed in adoption of AAS are enumerated below: a) A trend which is developing today among the mid-sized and bigger audit firms, is the practice of carrying out Risk Based Auditing (RBA). RBA is also gaining importance due to factors like high volume of transactions, constraints in time available, etc. This is certainly a healthy trend since RBA not only reduces the time taken to complete an audit, but also results in a better quality of audit since the concentration of the checking is only on those items where the risk of falsifying the transactions is more. b) Adoption of Analytical approach and the use of Computer Assisted Audit techniques (CAAT) for compliance testing to finally determine the extent of substantive testing. c) A trend that has developed recently is that of outsourcing of some critical areas of the audit process. This is especially done in the audit of specialized businesses like banks, etc, where the audit firm may not possess the necessary skills to evaluate the complex and automated processes followed by the auditee. 13

14 d) Also, in view of the pressure of timely compliance and cost constraints, it is seen that an audit is carried out on the basis of Balance Sheet audit only, thus leaving a very important area of business systems and the organizational compliance overlooked. Conclusion Some of the practices highlighted above are not necessarily the best practices to be followed while complying with the Auditing Standards while undertaking the audit of such statements. However, it is only if one becomes aware of all practices (whether good or bad) that one can distinguish between what is good and what is bad. To conclude, as mentioned at the recently concluded World Congress of Accountants, accountancy professionals assume a variety of responsibilities in the creation of value in both the public and private sectors. In order for the accounting profession to maintain its relevance, those involved in the accounting function should continue to adopt a more proactive, expanded role in enhancing the value creating ability of their organizations. In India, it is also time for accountants and auditors to stand up and meet this challenge so that the credibility of the profession remains intact. Existing AAS No ANNEXURE 1 COMPARATIVE LIST OF AUDITING AND ASSURANCE STANDARDS WITH NEW ENGAGEMENT STANDARDS Title of the Standard New Number of the Standard 1 Basic Principles Governing an Audit SA Objectives and Scope of the Audit of Financial Statements SA 200A 3 Documentation SA The Auditors Responsibility to Consider Fraud and Error in an SA 240 Audit of Financial Statements 5 Audit Evidence SA Risk Assessments and Internal Controls SA Relying upon the work of an Internal Auditor SA Audit Planning SA Using the Work of an Expert SA Using the Work of Another Auditor SA Representations by Management SA Responsibility of Joint Auditors SA

15 13 Audit Materiality SA Analytical Procedures SA Audit Sampling SA Going Concern SA Quality Control for Audit Work SA Auditing of Accounting Estimates SA Subsequent Events SA Knowledge of Business SA Consideration of Laws and Regulations in an Audit of Financial SA 250 Statements 22 Initial Engagements Opening Balances SA Related Parties SA Audit Considerations Relating to Entities Using Service SA 402 Organizations 25 Comparatives SA Terms of Audit Engagement SA Communication of Audit Matters with Those Charged with SA 260 Governance 28 The Auditor s Report on Financial Statements SA Audit in a Computer Information Systems Environment SA External Confirmations SA Engagements to Compile Financial Information SRS Engagements to Perform Agreed Upon Procedures Regarding SRS 4400 Financial Information 33 Engagements to Review Financial Statements SRE Audit Evidence Additional Considerations for Specific Items SA The Examination of Prospective Financial Information SAE