Page 24 - DCOM509_ADVANCED_AUDITING

Unit 2: Auditing Standards and IFRS

2.1.4 Evolution of Auditing Standards Notes

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 applicable w.e.f.
1st April 1985.

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 2008. The council of the Institute of Chartered
Accountants of India at its 267th 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)
Brief particulars of changes in 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.

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Caution 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.
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.

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 fulfil the objectives of an enterprise as per the procedure laid down by the
enterprise.

2.2 Importance or Relevance of Auditing Standards

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.

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