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PL4: Audit & ASSURANCE
Learning Objectives

The objective of the syllabus is to develop understanding the process of conducting assurance engagements in the context of International Standards on Assurance and the applicable regulatory framework.

Key Competencies

On successful completion of this exam, the student shall be able to:

  • Describe the basic concepts related to audit & assurance engagements.
  • Describe the limitations inherent in audit.
  • Demonstrate the knowledge of the process of conducting and audit engagement from acceptance till reporting.
  • Showcase the knowledge of audit procedures applicable to the practical conduct of an audit.
  • Explain auditor’s responsibilities related to subsequent events and manner in which auditor discharge its responsibilities for such events.
  • Explain the nature of review engagements and how those differ from the audit engagements including review of interim financial statements.

GRID Weightage
Basic Concepts of audit and Audit Engagement 15-20
Audit planning, materiality and risk assessment 20-25
Performance of audit 40-50
Audit opinion 25-30
Total 100
Components
Basic Concepts of audit (ISA 200)
  • The origination of audit profession and the concept of agency relationship.
  • Basic concepts governing an audit.
  • Basic concept of other assurance engagements and their comparison to external audit.
  • Objectives and general principles governing an audit (ISA 200)

Acceptance of Audit (ISA 210, ISA 240)
  • Statutory framework requirements regarding appointment and removal of auditor.
  • Auditor’s qualifications and disqualifications as per the applicable regulatory framework.
  • Explain the factors involved and auditor’s responsibility while agreeing the terms of Engagement.
  • Distinguish fraud from error.
  • Describe auditor’s and management responsibilities regarding fraud and error in light of Auditor’s responsibility to consider fraud.

Audit planning, Materiality & Risk Assessment (ISA 300, ISA 330,ISA 320)
  • Describe the process of audit planning and the factors to be considered in the light of planning an audit.
  • Explain the risk assessment model, the types of risks concerning an audit and the relationship of various types of risks.
  • Elaborate the procedures auditor carries out to assess control, and detection risk.
  • Explain the concept of materiality, performance materiality and its significance in performance of audit.
  • Describe the relationship between materiality and audit risk.
  • Describe the documentation requirement for planning, materiality and risk assessment.

Performance of Audit (ISA 500, ISA 501, ISA 530, ISA 330, ISA 520, 230, ISA 550, ISA 610, ISA 620)
  • Explain the concept of sufficient and appropriate audit evidence.
  • Discuss the parameters auditor uses to assess the relevance and reliability of audit evidence.
  • Elaborate the financial statement assertions related to classes of transactions and account balances.
  • Explain the statistical and non statistical audit sampling techniques.
  • Discuss the relationship between sampling and audit risk.
  • Describe the basics of test of controls.
  • Elaborate how the auditor determines the nature timing and extent of test of controls.
  • Describe the types of substantive procedures and the respective environment in which auditor applies these procedures.
  • Describe how the auditor determine the nature timing and extent of substantive procedures.
  • Elaborate the concept of analytical substantive procedures and the method for their application.
  • What factors auditor considers while applying the analytical substantive procedures.
  • Elaborate the evaluation of results of substantive analytical procedures.
  • Explain the concept and purpose of temporary and permanent audit file and their respective contents.
  • Discuss the factors auditor considers while deciding the nature and extent of audit documentation.
  • Explain the responsibility, confidentiality of audit documentation.
  • Discuss what impact related party transactions can have on audit risk.
  • Describe how the auditor responds to the risk arising from related party transactions.
  • Explain the relationship between external auditor and internal auditor and audit expert.
  • Discuss when and to what extent external auditor can place the reliance on the work of internal auditor and the expert.
  • Discuss the procedures auditor applies to determine such a reliance.

Audit Opinion and Subsequent Events (ISA 570, ISA 560)

Develop comprehensive understanding of:

  • Differentiate between audit report and audit opinion.
  • Explain the types of audit opinions.
  • Describe the factors, circumstances, auditor needs to consider while issuing and opinion.
  • Drafting various kinds of audit opinions.
  • Elaborate the statutory requirements related to audit report.
  • Describe the concept of adjusting and non adjusting events.
  • Elaborate the effect of subsequent even occurring at various timings on auditor’s opinion.