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Advanced Auditing

Notes the business to ensure that they were correct and reliable. Such a demand laid down the foundation
for the profession of auditing. The extent of reliance placed by the public on the auditors has
increased so much with time that it is, unreasonably of course, felt by the public that nothing can
go wrong with an organization which has been audited. Though the fact that an audit has been
carried out is not a guarantee as to the future viability of an enterprise, it is extremely important
that the auditors carry out their assignments with utmost professional care and sincerity, to
uphold the faith posed by the public in them.

2.1 Indian Auditing Standards

Undoubtedly growth of trade and commerce has witnessed utilization of public money,
employment of management skills from other than the owners of resources and government
involvement. The trend seen since last century is more of deregulation with government assuming
the role of policy maker. This in turn has created a demand from investors, managements,
regulators and general public to have the accounts of the business ventures examined by a
person independent of the owners and managements to ensure that such financial statements
are proper and reliable. The need and role of auditors in this perspective was felt by the society
and the reliance placed by public on the auditors has increased so much with the passage of time
that it is perceived, unreasonably of course, by the public that nothing is wrong in the financial
statements of an enterprise which were audited.

2.1.1 International Response to Auditing Needs

As a response to the above needs, the International Federation of Accountants (IFAC) was
established in 1973 with the objective of “worldwide development and enhancement of the
accountancy profession of high quality in the public interest”. The International Auditing and
Assurance Standards Board (IAASB), earlier known as the International Auditing Practices
Committee, of the IFAC was established to “improve the quality and uniformity of practice
throughout the world”, by, inter alia, issuing International Standards on Auditing (ISAs) and
guidance on the application of the ISAs.
2.1.2 India’s Response to Auditing Needs

The Institute of Chartered Accountants of India was set up in 1949 to regulate the profession of
chartered accountancy in India. Since its establishment, the Institute has taken numerous steps to
ensure that its members discharge their duties with due professional care, competence and
sincerity. One of the steps is the establishment of the Auditing Practices Committee, or the
Auditing and Assurance Standards Board, as it is now known in September, 1982.

Notes One of the main objectives of the Board is to issue auditing standards. Accordingly,
the Board issues Statements on Standard Auditing Practices and Auditing and assurance
Standards under the authority of the Council.

2.1.3 Rationale of Auditing Standards

In simplest possible terms, auditing standards represent a codification of the best practices of the
profession, which already exist. Auditing standards help the members in proper and optimum
discharge of their profession duties. Auditing standards also promote uniformity in practice as
also comparability.

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