Principles Governing an Audit - Auditing Concepts, Auditing & Secretarial Practice | Auditing and Secretarial Practice - B Com PDF Download

Basic Principals Governing an Audit

SA 200 “Basic Principals Governing an Audit”, describes the basic principles which govern the auditor’s professional responsibilities and which should be complied with wherever an audit is carried. They are described below:

(i) Integrity objectivity and independence: An auditor should be honest, sincere, impartial and free from bias. He should be a man of high integrity and objectivity.

(ii) Confidentiality: The auditor should respect confidentiality of information acquired during the course of his work and should not disclose the information without the prior permission of the client, unless there is a legal duty to disclose.

(iii) Skill and competence: The auditor must acquire adequate training and experience. He should be competent, skillful and keep himself abreast of the latest developments including pronouncements of ICAI on accounting and auditing matters.

(iv) Work performed by others: If the auditor delegates some work to others and uses work performed by others including that of an expert, he continues to be responsible for forming and expressing his opinion on the financial information.

(v) Documentation: The auditor should document matters which are important in providing evidence to ensure that the audit was carried out in accordance with the basic principles.

(vi) Planning: The auditor should plan his work to enable him to conduct the audit in an effective, efficient and timely manner. He should acquire knowledge of client’s accounting system, the extent of reliance that could be placed on internal control and coordinate the work to be performed.

(vii) Audit evidence: The auditor should obtain sufficient appropriate evidences through the performance of compliance and other substantive procedures to enable him to draw reasonable conclusions to form an opinion on the financial information.

(viii) Accounting System and Internal Control: The management is responsible for maintaining an adequate accounting system incorporating various internal controls appropriate to the size and nature of business. He auditor should assure himself that the accounting system is adequate and all the information which should be recorded has been recorded. Internal control system contributes to such assurance.

(ix) Audit conclusions and reporting: On the basis of the audit evidence, he should review and assess the audit conclusions. He should ascertain:

1. As whether accounting policies have been consistently applied;
2. Whether financial information complies with regulations and statutory requirements; and
3. There is adequate disclosure of material matters relevant to the presentation of financial information subject to statutory requirements.

The auditor’s report should contain a clear written opinion on the financial information. A clean audit report indicates the auditor’s satisfaction in all respects and when a qualified, adverse or a disclaimer of opinion is to be given or reservation of opinion on any matter is to be made, the audit report should state the reasons thereof.