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SA 265 -COMMUNICATING DEFICIENCIES IN INTERNAL CONTROL TO THOSE CHARGED WITH GOVERNANCE AND MANAGEMENT SA 450 - EVALUATION OF MISSTATEMENTS IDENTIFIED DURING THE AUDIT SA 720 -THE AUDITORS RESPONSIBILITY IN RELATION TOOTHER INFORMATION IN DOCUMENTS CONTAINING AUDITED FS

SAs

TYPE OF STANDARD NUMERICAL SERIES STANDARDS ON QUALITY CONTROL STANDARDS ON AUDITING 999 STANDARDS ON REVIEW ENGAGEMENTS 2699 STANDARDS ON ASSURANCE ENGAGEMENTS 3699 RELATED SERVICES 4699 01-99 100-

2000-

3000-

4000-

Introductory Matters General Principles and Responsibilities

100 199 200 299

Risk Assessment &Response to Assessed Risk 300 499 Audit Evidence Using Work of Others Audit Conclusions and Reporting Specialised Areas 500 - 599 600 699 700 799 800 899

OBJECTIVE
Communication of matters Not Scope

DEFINITION
Deficiency in Internal Control Significant Deficiency in Internal COntrol

1. 2. 3.

4.

Identified deficiency in Internal Controls Whether Significant? Communicate in writing on timely basis to Governing Body (GB) Communicate to Management, unless irrelevant To include:
Purpose of audit Internal control not part of audit, checked to identify quantum of audit procedures No comprehensive check made for such non-compliance

Deficiency
Ineffective control or non-existing control

Deficiencies Includes possibility of misstatements to happen

Indicators of deficiency
Weak control environment, management frauds, non-remedial measures, absence of risk assessment process, misstatements, prior period items, ineffective control on FS

FACTORS
1. 2. 3. 4. Nature of Entity Size and Complexity of Entity Nature and Size of deficiencies Legal requirements

Discrepancies may be insignificant individually but not collectively

In writing or oral followed by in writing Timing In advance, such that the addressee, if required, can accordingly respond on it To communicate in writing even if reported in previous year Insignificant discrepancies not to be reported to GB

Communicate only if management not involved

SIGNIFICANT DEFICIENCIES
In writing or oral followed by writing To be reported even if reported in previous year and still uncorrected

INSIGNIFICANT DEFICIENCIES
In writing or oral Not to be reported if reported in previous year and even if still uncorrected If required suggestions may also be included in report

EVALUATION OF MISSTATEMENTS IDENTIFIED DURING THE AUDIT

Misstatement A difference between the amounts, classification, presentation, or disclosure of a reported financial statement item and the amount, classification, presentation, or disclosure that is required for the item to be in accordance with the applicable financial reporting framework. Misstatements can arise from error or fraud. Uncorrected misstatements Misstatements that the auditor has accumulated during the audit and that have not been corrected.

Accumulation of Uncorrected Misstatements Consideration of misstatements as the Audit progresses Communication and Correction of Misstatements Evaluating effect of uncorrected misstatements Communication with Those Charged with Governance Written Representation and Documentation

Avoid immaterial misstatements

TYPES OF MISSTATEMENT Factual Mistatements Judgmental Mistatements Projected Mistatements

Need for revision of Nature, Timing and Extent (NTE) of Audit Procedures (AP) to be applied Communicate to management to provide time for taking remedial action

COMMUNICATION
Timely communication Check any Legal restrictions to communicate

Quantification and Projection Impact on other areas Materiality Levels Circumstances effecting evaluation

Regulatory environment, Debt convenants, Ratio, Increases management on managerial remueration / dividend, etc

In writing Overall impact When management and governing body same report to management sufficient

Written Representations & Documentation

THE AUDITORS RESPONSIBILITY IN RELATION TOOTHER INFORMATION IN DOCUMENTS CONTAINING AUDITED FINANCIAL STATEMENTS

SCOPE Auditor not responsible to check other information but for credibility he may read other information OBJECTIVE Develop Auditors response with respect to the documents in the report

(a) Other information Financial and non-financial information (other than the financial statements and the auditors report thereon) which is included, either by law, regulation or custom, in a document containing audited financial statements and the auditors report thereon.

(b) Inconsistency Other information that contradicts information contained in the audited financial statements. A material inconsistency may raise doubt about the audit conclusions drawn from audit evidence previously obtained and, possibly, about the basis for the auditors opinion on the financial statements. (c) Misstatement of fact Other information that is unrelated to matters appearing in the audited financial statements that is incorrectly stated or presented. A material misstatement of fact may undermine the credibility of the document containing audited financial statements.

SEARCH
Auditor should arrange and read other information in advance like Managements report, Financial summaries, Ratios, etc

RESPOND WHEN INCONSITENCIES IDENTIFIED

If change needed in Auditors report Proceed If change required in FS and Management refuses Report to GB, Add separate para in Auditors report or withdraw, if permitted If required, expert opinion may be recommended