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Unit 6: Laws and Regulations in Audit

6. Non-compliance may involve acts designed to conceal it, such as ................; ..............; Notes
................; .................; ....................

6.3 Laws and Regulations for Auditing Procedures

Non-compliance means acts of omission or commission by the entity, either intentional or
unintentional, which are contrary to the prevailing laws or regulations. Non-compliance does
not include personal misconduct (unrelated to the business activities of the entity) by those
charged with governance, management or employees of the entity.

Auditor’s Duty

Following are the Duties as per SA 250
1. Duty to understand the entities Environment and to obtain general understanding about:
(a) The legal and regulatory framework applicable to the entity and the industry or
sector in which the entity operates; and
(b) How the entity is complying with that framework?
2. Duty to obtain sufficient appropriate audit evidence: The auditor shall obtain sufficient
appropriate audit evidence regarding compliance with the provisions of those laws and
regulations generally recognized to have a direct effect on the determination of material
amounts and disclosures in the financial statements.
3. Duty to execute procedures: The auditor shall perform the following audit procedures to
help identify instances of non-compliance with other laws and regulations that may have
a material effect on the financial statements:
(a) Inquiring of management and, where appropriate, those charged with governance,
as to whether the entity is in compliance with such laws and regulations; and
(b) Inspecting correspondence, if any, with the relevant licensing or regulatory
authorities.
The auditor shall remain alert to the possibility that other audit procedures applied may
bring instances or suspected of non-compliance with laws and regulations to the auditor’s
attention.
4. Duty to get Representations by Management: The auditor shall request management and,
where appropriate, those charged with governance to provide written representations
that all known instances of non-compliance or suspected non-compliance with laws and
regulations whose effects should be considered when preparing financial statements have
been disclosed to the auditor.

Notes Audit Procedures necessary to applied by the auditor when Non-compliance is
identified or suspected are: (a) An understanding of the nature of the act and the
circumstances in which it has occurred; and (b) Further information to evaluate the possible
effect on the financial statements.
If the auditor suspects there may be non-compliance, the auditor shall discuss the matter with
management and, where appropriate, those charged with governance. If management or, as
appropriate, those charged with governance do not provide sufficient information that supports
that the entity is in compliance with laws and regulations and, in the auditor’s judgment, the

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