WELCOME
Presentation on
Auditing Standards
Introduction
The C&AG of India who is the head of Supreme Audit Institution
(SAI India) discharges his constitutional functions through
IA&AD. The Constitution provides for the C&AG.
In pursuance of these provisions, the Parliament enacted the
CAG (DPC Act 1971.
In exercise of powers conferred by the DPC Act, the CAG
framed the Regulations on Audit and Accounts, 2007, which
provide the overarching governance frame work for both
accounting and auditing functions.
The CAG’s Auditing Standards constitute the next layer of the
audit governance framework and set out the professional
standards of auditing for the orgn as well as for its personnel –
the individual auditors.
Purpose and Authority of the Standards
• These standards establish the norms which are
applicable to all public sector audit engagements,
irrespective of their form or context.
• These standards incorporate the Prerequisites for the
functioning of SAI and Fundamental Auditing
Principles of the International Standards of SAI.
• These standards determine the audit procedures that
shall be applied in audit and constitute the criteria or
benchmark against which the quality of audit results
is evaluated.
Audit Mandate
• The audit mandate is laid down in the Constitution of
India, DPC Act and specific legislations enacted over
time by the Parliament and State Legislatures.
• The general provisions relating to audit are elaborated
in Sections 13 to 21 and 24 of the DPC Act.
Prerequisites for functioning
• The pre-requsites constitute the principles that are
essential for the functioning of SAI –
– Independence
– Accountability and Transparency
– Ethics
– Quality assurance
SAI shall have a sufficiently broad mandate and full
discretion in the discharge of its functions
SAI shall have unrestricted access to information
SAI shall have the freedom to decide the form, content
and timing of audit reports, to publish and disseminate
them
There shall exist effective follow up mechanisms on
SAI’s recommendations
Accountability and Transparency
• Accountability and transparency are two important
elements of good governance.
• Accountability refers to the legal and reporting
framework, organizational structure, strategy,
procedures and actions to ensure that SAI and its
personnel can be held responsible for their actions.
• Transparency refers to SAI’s timely, reliable, clear
and relevant public reporting on its status, mandate,
strategy, activities and performance as also of the
audit findings, conclusions and public access to
information about SAI
Quality Assurance and Quality Control
• SAI shall establish policies and procedures designed
to -
– promote an internal culture that quality is essential
in performing all of its work. The Head of SAI shall retain
overall responsibility for the system quality control
– provide it with reasonable assurance that the SAI including
all personnel comply with the relevant ethical requirements
– provide reasonable assurance that its audits are carried out
in accordance with relevant standards, applicable legal and
regulatory requirements. It issues reports that are
appropriate in the circumstances and that it has sufficient
resources with the competence, capabilities and
commitment to ethical principles.
General Standards
• Public sector audit environment is that in which
governments and other entities exercise responsibility
for the use of national wealth, natural resources,
resources derived from taxation and other sources in the
delivery of services to citizens and other recipients.
• These entities are accountable for their management,
performance and use of resources
Types of Public Sector Audits
Financial Audit – focuses on determining whether an
entity’s financial information is presented in accordance
with financial reporting and regulatory framework
Compliance Audit – focuses on whether a particular
subject matter is in compliance with the criteria.
Performance Audit – focuses on whether interventions,
programmes and institutions are performing in
accordance with the principles of economy, efficiency
and effectiveness and whether there is room for
improvement.
Elements of Public Sector Auditing
• All public sector audits have the same basic elements-
– The three parties
• (the auditor, responsible party, Intended users)
– Subject matter, criteria and subject matter information
• Condition or activity that is measured or evaluated against certain
criteria
– Types of engagement
• Attestation Engagements – responsible party measures the subject
matter against the criteria e.g. Financial Audits
• Direct Reporting Engagements – Auditor measures or evaluates
the subject matter against the criteria e.g. Compliance Audits &
Performance Audits
General Principles
• Ethics and Independence
• Professional Judgement, Due Care and Scepticism
• Quality Control
• Audit Team Management and Skills
• Audit Risk
• Materiality
• Documentation
• Communication
Principles related to the Audit Process
• Principles related to the audit process relate to the
specific steps in the audit process and comprise of-
– Planning an audit : understand the nature of the entity,
conduct risk assessment, identify and assess the risks of
fraud relevant to the audit objectives
– Conducting an Audit : Perform audit procedures that
provide sufficient and appropriate audit evidence to support
the audit report
– Reporting and follow-up : Prepare report based on the
conclusions reached
Thank You