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Unit 2: Auditing Practices

2.6.2 Auditing Standards-Setting in India Notes

As mentioned earlier, the Auditing and Assurance Standards Board of the Institute formulates
the auditing standards. Broadly, following is the procedure for formulating auditing standards:
1. The Auditing and Assurance Standards Board identifies the areas where auditing standards
need to be formulated and the priority in regard to their selection.
2. In the preparation of the auditing standards, the Board is normally, assisted by study
groups comprising of a cross section of members of the Institute.
3. On the basis of the work of the study groups, an exposure draft of the proposed auditing
standard is prepared by the Board and issued for comments of the members.

4. After taking into the comments received, the draft of the proposed auditing standard is
finalised by the Board and submitted to the Council of the Institute.
5. The Council considers the final draft of the proposed auditing standard and, if necessary,
modifies the same in consultation with the Board. The auditing standard is then issued
under the authority of the Council.

While formulating the auditing standards, the Board also takes into consideration the applicable
laws, customs, usages and business environment in the country.

2.6.3 Compliance with Auditing Standards

While discharging their attest functions, it is the duty of the members of the Institute to ensure
that the auditing standards are followed in the audit of financial information covered by their
audit 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 therefrom, failing which he would be held guilty of professional misconduct under
clause 9 of Part 1 of the Second Schedule to the Chartered Accountants Act, 1949.
Table 2.1: Comparative Position of International Engagement Standards, issued by the
International Auditing and Assurance Standard Board of the International Federation of
Accountants vis-a-vis, Auditing and Assurance Standards (AASs) issued by ICAI
(As on May 25, 2007)

Standards on Quality control
Sl. ISQC Title of the ISQC AAS Title of the AAS
No No. No.
01. 1 Quality Control for Firms that The Draft of SQC 1 is under
Perform Audits and Reviews of consideration of the Council.
Historical Financial Information, and
Other Assurance and Related Services
Engagements
Standards on Auditing
ISA AAS
Title of the ISA AAS/ Guidance Note
No. No.
02. 200 Objective and General Principles 01 Basic Principles Governing an
Governing an Audit of Financial Audit
Statements
02 Objective and Scope of the
Audit of Financial Statements.
03. 210 Terms of Audit Engagements 26 Terms of Audit Engagements

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