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AAS - 1: Basic Principles Governing An Audit 1

The document describes the basic principles that govern an auditor's responsibilities when conducting an audit. It states that an audit is the independent examination of an entity's financial information to express an opinion. It outlines key requirements for auditors including integrity, objectivity, independence, competence, reliance on others' work, documentation, planning, and obtaining sufficient evidence. It also explains the responsibilities of management to maintain adequate accounting systems and internal controls. The auditor's role is to understand the system, evaluate controls, and review and assess the financial statements to express a clear written opinion.

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219 views4 pages

AAS - 1: Basic Principles Governing An Audit 1

The document describes the basic principles that govern an auditor's responsibilities when conducting an audit. It states that an audit is the independent examination of an entity's financial information to express an opinion. It outlines key requirements for auditors including integrity, objectivity, independence, competence, reliance on others' work, documentation, planning, and obtaining sufficient evidence. It also explains the responsibilities of management to maintain adequate accounting systems and internal controls. The auditor's role is to understand the system, evaluate controls, and review and assess the financial statements to express a clear written opinion.

Uploaded by

prateekjain18
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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AAS - 1 : Basic Principles Governing an Audit 1

AAS-1
BASIC PRINCIPLES GOVERNING AN
AUDIT
Purpose

Describes principles that govern auditor’s professional


responsibilities which should be complied with whenever
an audit is carried out.

Key Terms

™ An audit is the independent examination of financial


information of any entity, whether profit oriented or
not, and irrespective of its size or legal form, when
such an examination is conducted with a view to
expressing an opinion thereon. In this Standard, the
term “financial information” encompasses financial
statements

™ Compliance procedures are tests designed to obtain


reasonable assurance that those internal controls
on which audit reliance is to be placed are in effect.

™ Substantive procedures are designed to obtain


evidence as to the completeness, accuracy and
validity of the data produced by the accounting
system

Effective Date

April 1, 1985
2 Auditing and Assurance Standards - Ready Referencer

Diagrammatic representation
Audit - Independent Examination of Financial information,
Of - Any entity, irrespective of profit, size or legal form
To - Express and opinion thereon

Auditor is expected to Compliance requires auditing


comply with the basic procedures & reporting
principles while practices at appropriate
conducting an audit circumstance

Professional & Personal “Audit” Oriented


qualities requirements

• Integrity • Reliance on “Work”


• Objectivity performed by others
• Independence • Documentation
• Skill • Planning
• Competence • Obtaining audit evidence

Responsibility of Management

Maintaining – Incorporating Preparing


Adequate Accounting Various Internal Financial
system controls Statements

Auditors should review and assess

• Preparation of Financial information using Report


acceptable accounting policies Clear written
• Compliance with statutory requirements expression of
• Adequacy of disclosure of relevant and opinion
material matters
AAS - 1 : Basic Principles Governing an Audit 3

Synopsis

An auditor is expected to comply with certain basic


requirements and responsibilities while conducting an
audit. Such compliance requires application of auditing
procedures and reporting practices at appropriate
circumstances.

Professional and personal requirements include:

¾ Integrity: Moral excellence, honesty


¾ Objectivity: Straightforwardness and fair
¾ Independence: Self governing, Unprejudiced and
unbiased

¾ Confidentiality: Non disclosure and respect to


certain information

¾ Skill and Competence: Possess expertise & ability


to perform work well

Audit Oriented requirements include:

¾ Work performed by others: Auditor stands


responsible for the work that is performed by others.
He is entitled to rely on work performed by others

¾ Documentation: Auditor should record relevant


information in providing evidence that audit was
carried out in accordance with basic principles

¾ Planning: Auditor should plan his work to conduct


an effective and efficient audit
4 Auditing and Assurance Standards - Ready Referencer

¾ Audit evidence: Auditor should obtain sufficient


and appropriate evidence through compliance and
substantive procedures which would enable him to
draw reasonable conclusions

Management is responsible to maintain an adequate


accounting system incorporating various internal controls.
An auditor should gain understanding of the accounting
system, study and evaluate the internal controls in place
and reasonably assure its adequacy.

An auditor should review and assess the conclusions


based on the audit evidence and express an opinion.
Such opinion should be a clear written expression in the
form as per any prescribed agreement or statute.
Adequate reasons need to be given in case of a qualified,
adverse or disclaimer of opinion.

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