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CA FINAL
ADVANCED AUDITING &
PROFESSIONAL ETHICS
BY – CA AARTI N. LAHOTI
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CA AARTI N. LAHOTI Email ID - aartinlahoti9@gmail.com
YouTube Channel – Aarti Lahoti
CA FINAL – ADVANCED AUDITING &
PROFESSIONAL ETHICS QUICK REVISION CLASS NOTES
2
CA AARTI N. LAHOTI Email ID - aartinlahoti9@gmail.com
YouTube Channel – Aarti Lahoti
CA FINAL – ADVANCED AUDITING &
PROFESSIONAL ETHICS QUICK REVISION CLASS NOTES
Tests of Control
SA 330 Auditor’s Responses to Assessed Risks
Substantive Procedures
Factors to be considered in
Audit Considerations Relating to an Entity
SA 402 understanding the nature of services
Using a Service Organisation (Revised)
provided by the service organisation
Evaluation of Misstatements Identified Procedures to be followed for
SA 450
During the Audit identified/ uncorrected misstatements
Methods of obtaining audit evidence
Assertions addressed through
SA 500 Audit Evidence (Revised)
substantive procedures
Management’s expert
Audit Evidence – Specific Considerations Procedures of verification of existence
SA 501
for Selected Items (Revised) & condition of inventory
Situations where external
confirmations may be used
Negative confirmation requests
External Confirmation Process
SA 505 External Confirmations (Revised)
Designing the confirmation request
Management’s refusal to allow the
auditor to send a confirmation request
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YouTube Channel – Aarti Lahoti
CA FINAL – ADVANCED AUDITING &
PROFESSIONAL ETHICS QUICK REVISION CLASS NOTES
5
CA AARTI N. LAHOTI Email ID - aartinlahoti9@gmail.com
YouTube Channel – Aarti Lahoti
CA FINAL – ADVANCED AUDITING &
PROFESSIONAL ETHICS QUICK REVISION CLASS NOTES
Acceptance of Engagement
The Examination of Prospective Financial
SAE 3400 Examination Procedures
Information
Presentation & Disclosure
Assurance Report on Controls at a Service Assessment of suitability of criteria
SAE 3402
Organisation
Factors to be considered before
accepting an engagement to report on Pro
Assurance Engagements to Report on the
Forma Financial Information
SAE 3420 Compilation of Pro Forma Financial
Agreement with the responsible party
Information Included in a Prospectus
Planning & performing the
engagement
Engagements to Perform Agreed-upon -
SRS 4400 Procedures Regarding Financial
Information
Objective of Compilation Engagement
Engagement Level Quality Control for
SRS 4410 Compilation Engagements (Revised) Compilation Engagement
Compilation Procedures
Case Study Practice
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YouTube Channel – Aarti Lahoti
CA FINAL – ADVANCED AUDITING &
PROFESSIONAL ETHICS QUICK REVISION CLASS NOTES
2. PROFESSIONAL ETHICS
Summary of Important Clauses
SR. PART SCHEDULE
CLAUSE PARTICULARS
NO.
1) 2 I FIRST Pays or allows or agrees to pay or allow, directly or indirectly, any
share, commission or brokerage in the fees or profits of his
professional business.
to any person other than
- member of the Institute or
- partner or
- retired partner or
- the legal representative of a deceased partner, or
- member of any other professional body or
- with such other persons having such qualifications as may be
prescribed, for the purpose of rendering such professional
services from time to time in or outside India.
2) 3 I FIRST Accepts or agrees to accept any part of the profits of the
professional work of a person who is not a member of the Institute.
Provided that nothing herein contained shall be construed as
prohibiting a member from entering into profit sharing or other
similar arrangements, including receiving any share, commission or
brokerage in the fees, with a member of such professional body or
other person having qualifications, as is referred to in item (2) of
this Part;
3) 4 I FIRST Enters into partnership, in or outside India, with any person other
than a CA in practice or such other person who is a member of any
other professional body having such qualifications as may be
prescribed, including a resident who but for his residence abroad
would be entitled to be registered as a member under clause (v) of
sub-section (1) of section 4 or whose qualifications are recognised
by the Central Government or the Council for the purpose of
permitting such partnerships.
4) 6 I FIRST Solicits clients or professional work either directly or indirectly by
- circular,
- advertisement,
- personal communication or
- interview or
- by any other means
Provided that nothing herein contained shall be construed as
preventing or prohibiting –
i Any CA from applying or requesting for or inviting or securing
professional work from another CA in practice; or
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CA AARTI N. LAHOTI Email ID - aartinlahoti9@gmail.com
YouTube Channel – Aarti Lahoti
CA FINAL – ADVANCED AUDITING &
PROFESSIONAL ETHICS QUICK REVISION CLASS NOTES
8
CA AARTI N. LAHOTI Email ID - aartinlahoti9@gmail.com
YouTube Channel – Aarti Lahoti
CA FINAL – ADVANCED AUDITING &
PROFESSIONAL ETHICS QUICK REVISION CLASS NOTES
11) 2 II FIRST accepts or agrees to accept any part of fees, profits or gains from a
lawyer, a CA or broker engaged by such company, firm or person or
agent or customer of such company, firm or person by way of
commission or gratification.
12) 2 III FIRST Does not supply the information called for, or does not comply with
the requirements asked for, by the Institute, Council or any of its
Committees, Director (Discipline), Board of Discipline, Disciplinary
Committee, Quality Review Board or the Appellate Authority;
13) 2 IV FIRST In the opinion of the Council, brings disrepute to the profession or
the Institute as a result of his action whether or not related to his
professional work.
14) 1 I SECOND Discloses information acquired in the course of his professional
engagement to any person other than his client so engaging him
without the consent of his client or otherwise than as required by
any law for the time being in force
15) 3 1 SECOND If he permits his name or name of his firm to be used in connection
with the estimate of earnings contingent upon future transactions
in a manner which may lead to the belief that he vouches for
accuracy of the forecast.
SAE 3400 ‘The Examination of Prospective Financial Information’
16) 4 I SECOND Expresses his opinion on FS of any business or enterprise in which
he, his firm, or a partner in his firm, or his relatives (AS 18) has a
substantial interest;
This clause is meant for reports/ certificates which are to be
submitted to any outside authority, but not where statements are
prepared by members in employment for INFORMATION SYSTEMS
of their employers etc.
17) 5 I SECOND Fails to disclose a material fact known to him which is not disclosed
in a financial statement, but disclosure of which is necessary in
making such financial statement where he is concerned with that
financial statement in a professional capacity.
18) 6 I SECOND Fails to report a material misstatement known to him to appear in
a financial statement with which he is concerned in a professional
capacity;
19) 7 I SECOND Does not exercise due diligence, or is grossly negligent in the
conduct of his professional duties;
20) 8 I SECOND Fails to obtain sufficient information which is necessary for
expression of an opinion or its exceptions are sufficiently material
to negate the expression of an opinion.
21) 10 I SECOND Fails to keep moneys of his client other than fees or remuneration
or money meant to be expended in a separate banking account or
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CA AARTI N. LAHOTI Email ID - aartinlahoti9@gmail.com
YouTube Channel – Aarti Lahoti
CA FINAL – ADVANCED AUDITING &
PROFESSIONAL ETHICS QUICK REVISION CLASS NOTES
to use such moneys for purposes for which they are intended
within a reasonable time.
Exception: (i) Fees/ Remuneration (even advance)
(ii) Reasonable time usage
22) 1 II SECOND Contravenes any of the provisions of this Act or the regulations
made there under or any guidelines issued by the Council.
23) 3 II SECOND Includes in any information, statement, return or form to be
submitted to the Institute, Council or any of its Committees,
Director (Discipline), Board of Discipline, Disciplinary Committee,
Quality Review Board or the Appellate Authority any particulars
knowing them to be false.
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YouTube Channel – Aarti Lahoti
CA FINAL – ADVANCED AUDITING &
PROFESSIONAL ETHICS QUICK REVISION CLASS NOTES
11
CA AARTI N. LAHOTI Email ID - aartinlahoti9@gmail.com
YouTube Channel – Aarti Lahoti
CA FINAL – ADVANCED AUDITING &
PROFESSIONAL ETHICS QUICK REVISION CLASS NOTES
16. A CA cannot exercise lien over the client documents/records for nonpayment of his fees.
17. It is not permissible for CA Firm to print its vision and values behind the visiting cards, as it
would result in solicitation and therefore would be violative of the provisions of Clause (6)
of Part-I of First Schedule to the CA Act, 1949.
18. → The Ethical Standards Board in 2013 generally apply the stipulations contained in the then
amended Rule 11U of Income Tax generally, wherein statutory auditor /tax auditor cannot
be the valuer of unquoted equity shares of the same entity.
→ The Board has at its recent Meeting (January, 2017) has reviewed the above, and decided
that where law prohibits for instance in the Income Tax Act and the rules framed
thereunder, such prohibition on statutory auditor/tax auditor to be the valuer will
continue, but where there is no specific restriction under any law, the said eventuality will
be permissible, subject to compliance with the provisions, as contained in the Code of
Ethics relating to independence.
19. → The Ethical Standards Board had in 2011 decided that it is not permissible for a member
who has been Director of a Company, upon resignation from the Company to be appointed
as an auditor of the said Company, and the cooling period for the same may be 2 years.
→ The Board has at its recent Meeting (January, 2017) has reviewed the above, and noted
that the Section 141 of Companies Act, 2013 on disqualification of auditors does not
mention such prohibition; though threats pertaining to the said eventuality have been
mentioned in Code of Ethics.
→ Further, the Board was of the view that a member may take decision in such situation
based on the provisions of Companies Act, 2013 and provisions of Code of Ethics.
20. The Ethical Standards Board while noting that there is requirement for a Director u/s 149(3)
of the Companies Act, 2013 to reside in India for a minimum period of 182 days in the
previous calendar year, decided that such a Director would be within the scope of Director
Simplicitor (which is generally permitted as per ICAI norms), if he is non – executive director,
required in the Board Meetings only, and not paid any remuneration except for attending
such Board Meetings.
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CA AARTI N. LAHOTI Email ID - aartinlahoti9@gmail.com
YouTube Channel – Aarti Lahoti
CA FINAL – ADVANCED AUDITING &
PROFESSIONAL ETHICS QUICK REVISION CLASS NOTES
13
CA AARTI N. LAHOTI Email ID - aartinlahoti9@gmail.com
YouTube Channel – Aarti Lahoti
CA FINAL – ADVANCED AUDITING &
PROFESSIONAL ETHICS QUICK REVISION CLASS NOTES
(c) if the amount is overdue, state the total amount overdue for more than
ninety days, & whether reasonable steps have been taken by the
company for recovery of the principal & interest;
(iv) LOANS/ INVESTMENTS/ In respect of loans, investments, guarantees, & security whether provisions
GUARANTEES/ of section 185 & 186 of the Companies Act, 2013 have been complied with.
SECURITIES If not, provide the details thereof.
(v) DEPOSITS FROM In case, the company has accepted deposits, whether the directives issued
PUBLIC by the Reserve Bank of India & the provisions of sections 73 to 76 or any
other relevant provisions of the Companies Act, 2013 & the rules framed
thereunder, where applicable, have been complied with? If not, the nature
of such contraventions be stated; If an order has been passed by Company
Law Board or National Company Law Tribunal or Reserve Bank of India or
any court or any other tribunal, whether the same has been complied with
or not?
(vi) COST RECORDS Whether maintenance of cost records has been specified by the Central
Government under sub-section (1) of section 148 of the Companies Act,
2013 & whether such accounts & records have been so made &
maintained.
(vii) STATUTORY DUES (a) whether the company is regular in depositing undisputed statutory
dues including provident fund, employees' state insurance, income-
tax, sales-tax, service tax, duty of customs, duty of excise, value added
tax, cess & any other statutory dues to the appropriate authorities &
if not, the extent of the arrears of outstanding statutory dues as on the
last day of the financial year concerned for a period of more than six
months from the date they became payable, shall be indicated;
(b) where dues of income tax or sales tax or service tax or duty of customs
or duty of excise or value added tax have not been deposited on
account of any dispute, then the amounts involved & the forum where
dispute is pending shall be mentioned. (A mere representation to the
concerned Department shall not be treated as a dispute).
(viii)REPAYMENT OF Whether the company has defaulted in repayment of loans or borrowing
DUES to a financial institution, bank, Government or dues to debenture holders?
If yes, the period & the amount of default to be reported (in case of
defaults to banks, financial institutions, & Government, lender wise details
to be provided).
(ix) END USE OF MONEYS Whether moneys raised by way of initial public offer or further public offer
RAISED (including debt instruments) & term loans were applied for the purposes
for which those are raised. If not, the details together with delays or default
& subsequent rectification, if any, as may be applicable, be reported;
(x) FRAUD Whether any fraud by the company or any fraud on the Company by its
officers or employees has been noticed or reported during the year; If yes,
the nature & the amount involved is to be indicated;
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CA AARTI N. LAHOTI Email ID - aartinlahoti9@gmail.com
YouTube Channel – Aarti Lahoti
CA FINAL – ADVANCED AUDITING &
PROFESSIONAL ETHICS QUICK REVISION CLASS NOTES
15
CA AARTI N. LAHOTI Email ID - aartinlahoti9@gmail.com
YouTube Channel – Aarti Lahoti
CA FINAL – ADVANCED AUDITING &
PROFESSIONAL ETHICS QUICK REVISION CLASS NOTES
16
CA AARTI N. LAHOTI Email ID - aartinlahoti9@gmail.com
YouTube Channel – Aarti Lahoti
CA FINAL – ADVANCED AUDITING &
PROFESSIONAL ETHICS QUICK REVISION CLASS NOTES
(c) If answer to
(b) above is in the affirmative, give details of such change, & the effect thereof on the profit
or loss.
Serial number Particulars Increase in profit (`) Decrease in profit
(`)
Clause 13 (d) Whether any adjustment is required to be made to the profits or loss for
complying with the provisions of income computation & disclosure standards notified under
section 145(2).
Clause 13 (e) If answer to (d) above is in the affirmative, give details of such adjustments:
ICDS I TO X Increase in profit (') Decrease in profit (') Net effect (')
Clause 13 (f) Disclosure as per ICDS I TO X
4) 14 (a) Method of valuation of closing stock employed in the previous year. (b) In case of
deviation from the method of valuation prescribed under section 145A, & the effect
thereof on the profit or loss, please furnish:
Serial number Particulars Increase in profit (`) Decrease in profit (`)
5) 16 Amounts not credited to the profit & loss account, being, -
(a) The items falling within the scope of section 28;
(b) The proforma credits, drawbacks, refund of duty of customs or excise or service tax, or
refund of sales tax or value added tax where such credits, drawbacks or refunds are
admitted as due by the authorities concerned;
(c) escalation claims accepted during the previous year;
(d) any other item of income;
(e) capital receipt, if any.
6) 17 Where any land or building or both is transferred during the previous year for a consideration
less than value adopted or assessed or assessable by any authority of a State Government
referred to in section 43CA or 50C, please furnish:
7) 21 (a) Please furnish the details of amounts debited to the profit & loss account, being in the
nature of capital, personal, advertisement expenditure etc.
Amt.
Nature Sr. No. Particulars
in `
• Capital expenditure
• Personal expenditure
• Advertisement expenditure in any souvenir,
brochure, tract, pamphlet or the like published by
a political party
• Expenditure incurred at clubs being entrance fees
& subscriptions
• Expenditure incurred at clubs being cost for club
services & facilities used.
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YouTube Channel – Aarti Lahoti
CA FINAL – ADVANCED AUDITING &
PROFESSIONAL ETHICS QUICK REVISION CLASS NOTES
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CA AARTI N. LAHOTI Email ID - aartinlahoti9@gmail.com
YouTube Channel – Aarti Lahoti
CA FINAL – ADVANCED AUDITING &
PROFESSIONAL ETHICS QUICK REVISION CLASS NOTES
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CA AARTI N. LAHOTI Email ID - aartinlahoti9@gmail.com
YouTube Channel – Aarti Lahoti
CA FINAL – ADVANCED AUDITING &
PROFESSIONAL ETHICS QUICK REVISION CLASS NOTES
20
CA AARTI N. LAHOTI Email ID - aartinlahoti9@gmail.com
YouTube Channel – Aarti Lahoti
CA FINAL – ADVANCED AUDITING &
PROFESSIONAL ETHICS QUICK REVISION CLASS NOTES
12) 37 Whether any cost audit was carried out, if yes, give the details, if any, of disqualification or
disagreement on any matter/item/value/quantity as may be reported/identified by the cost
auditor.
13) 40 Details regarding turnover, gross profit, etc., for the previous year & preceding previous
year:
Sr. Preceding previous
Particulars Previous year
No. year
1. Total turnover of the assessee
2. Gross profit/turnover
3. Net profit/turnover
4. Stock-in-trade/turnover
5. Material consumed/finished goods produced
(The details required to be furnished for principal items of goods traded or manufactured or
services rendered)
14) 41 Please furnish the details of demand raised or refund issued during the previous year under
any tax laws other than Income-tax Act, 1961 & Wealth tax Act, 1957 alongwith details of
relevant proceedings.
AUDIT PROVISIONS UNDER GST LAW
DEFINITION OF “AUDIT” HAS “Audit” means the examination of records, returns and other
BEEN AS PER SECTION 2(13) documents maintained or furnished by the registered person under this
OF THE CGST ACT, 2017 IS Act or the rules made thereunder or under any other law for the time
GIVEN BELOW: being in force to verify the correctness of turnover declared, taxes paid,
refund claimed and input tax credit availed, and to assess his
compliance with the provisions of this Act or the rules made
thereunder.”
TYPES OF AUDIT UNDER GST
(1) AUDIT BY Audit of Accounts [Section 35(5) Read alongwith Section 44(2) and Rule 80]
PROFESSIONALS (i) Every registered person must get his accounts audited by a Chartered
- Accountant or a Cost Accountant if his aggregate turnover during a FY
exceeds ` 2 crores.
(ii) Such registered person is required to furnish electronically through the
common portal alongwith Annual Return a copy of:
• Audited annual accounts
• A Reconciliation Statement, duly certified, in prescribed FORM
GSTR-9C.
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YouTube Channel – Aarti Lahoti
CA FINAL – ADVANCED AUDITING &
PROFESSIONAL ETHICS QUICK REVISION CLASS NOTES
Reconciliation Statement will reconcile the value of supplies declared in the return
furnished for the financial year with the audited annual financial statement and
such other particulars, as may be prescribed.
Meaning Includes Value of all outward supplies
of
• Taxable supplies
Aggregate
Turnover • Exempt supplies
• Exports
• Inter-State supplies of persons having the same PAN be
computed on all India basis.
Excludes the following:
• CGST • SGST
• UTGST • IGST
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YouTube Channel – Aarti Lahoti
CA FINAL – ADVANCED AUDITING &
PROFESSIONAL ETHICS QUICK REVISION CLASS NOTES
(b) The Information System Audit report and the internal audit report.
(c) Internal Control questionnaire designed for GST compliance.
(i) The use of generalised audit software to aid the GST audit would ensure
modern practice of risk based audit are adopted.
(ii) The reconciliation of the books of account or reports from the ERP’s to the
return is imperative.
(iii) The review of the gross trial balance for detecting any incomes being set
off with expenses.
(iv) Review of purchases/expenses to examine applicability of reverse charge
applicable to goods/services. The foreign exchange outgo reconciliation
would also be necessary for identifying the liability of import of services.
(v) Quantitative reconciliation of stock transfer within the State or for
supplies to job workers under exemption.
(vi) Ratio analysis could provide vital clues on areas of non-compliance.
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YouTube Channel – Aarti Lahoti
CA FINAL – ADVANCED AUDITING &
PROFESSIONAL ETHICS QUICK REVISION CLASS NOTES
25
CA AARTI N. LAHOTI Email ID - aartinlahoti9@gmail.com
YouTube Channel – Aarti Lahoti
CA FINAL – ADVANCED AUDITING &
PROFESSIONAL ETHICS QUICK REVISION CLASS NOTES
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CA AARTI N. LAHOTI Email ID - aartinlahoti9@gmail.com
YouTube Channel – Aarti Lahoti