Audit Amendments 30th March 2014 PDF

CA FINAL ADVACED AUDITING
By….
CA VINOD PARAKH JAIN
CA FINAL AUDIT AMENDMENTS

A COMPILATION OF AMENDMENTS APLLICABLE FROM NOV
2013 & NOV 2012 EXAMS ONWARDS AND THESE ARE APPLICABLE FOR
MAY 2014 ALSO (THERE ARE NO NEW AMENDMENTS FOR MAY 2014)
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Dear Friends,
The study material of the ICAI is like a BIBLE running into 1100 Pages. We have tried to
cover comprehensively all the Topics .This book is not a substitute for study Material. This
book has been prepared to provide students a tool for systematic revision.
The salient features of the book are:
 Questions and Answers from Practice Manual, Latest Revision Test Papers
have been Incorporated in the Module.
 Covering More then 100 Questions in Case of Professional Ethics, and 100 Questions
in case of Engagement Standards.
 Incorporation of FLOWCHARTS at appropriate place
 Tabular Presentation
 Coverage of Bank Audit as per Latest RBI Guidelines
The reason for Low score in Audit Subject is lack of coverage of all the topics by students,
we have tried to contain the same by covering all the topics of Study Module
comprehensively
I look forward for your valuable suggestions and criticism, if any.
Thanks and Warm Regards,
CA Vinod Parakh Jain
(vpjclasses.com)
WE HAVE COMPREHENSIVELY COVERED ICAI MODULE CONSISTING OF

MORE THAN 1100 PAGES
Complied by: CA Vinod Parakh Jain: Classes at: VPJ Classes Hindi Bhawan (ITO) Delhi. Cnct :07503630594,
8130713615. website: www. vpjclasses.com
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Dear Students,
ICAI revised it’s Module in Jan 2012 and Jan 2013 and introduced number of New Topics which
we updated in our Material and we were very happy to find that two questions were asked from our
updated material in Nov 2013 exams .
Further we found that students were not reading some major topics which were revised in ICAI Module.
So we have incorporated the same also in our Revised Material.
The Audit Paper will now become More Typical. As all of you Know in the current Companies
Act- Auditing Standards have become Mandatory and audit subject will become more dynamic
as in the New Companies Act - the words" as may be Prescribed " is coming in almost 75% of the
Provisions which will lead to Radical Changes in the Audit Subject. Further NFRA coming into
Picture makes our audit Subject more dynamic.
Happy Reading
ALL THESE WERE APPLICABLE FOR NOV 2013 AND NOV 2012
EXAMS & ONWARD
ALL THESE AMENDMENTS ARE BASED ON AUDIT MODULE ISSUED
BY ICAI IN JAN 2013
These Updates can be downloaded at our facebook page – vpj

classes or our site vpjclasses.com
Lot of queries are being recd. W.r.t. Audit Updates. There are no such Updates.
Panic is being created via showing very OLD UPDATES as Amendments. Further to
create more tensions for the students these amendment (so claimed) are hardly of
8-10 pages have been jumbled up in a 50 page documents to create more
confusions. Students are trying to search where the amendments are. In this
Process some of the real amendments have been missed - which were applicable
for Nov 2013 & Nov 2012 exams.
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TWO QUESTIONS FROM OUR UPDATED MODULE

FOUND PLACE IN EXAMS OF NOV 2013 WHEREAS
OTHERS ARE UPDATING NOW
ICAI SUGGESTED ANSWERS
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What the Answers Should have been What the Student Wrote
(Updated on our Facebook page - Vpj
because of reading wrong
classes on September 11 2013).
COVERED ONLY BY US Material
The Peer Review process shall apply to all the The peer review process is directed at
assurance services provided by a Practice Unit. the attestation services of a practice unit:
(1) Once a practice unit is selected for
1. Once a Practice Unit is selected for Review, its review, its attestation engagement records
assurance engagement records pertaining to the Peer pertaining to the immediately preceding
Review Period shall be subjected to Review. three completed financial years shall be
2. The Review shall cover: subjected to review.
(i) Compliance with Technical, Professional and Ethical (2) The Review shall focus on:
Standards: (i) Compliance with Technical Standards
(ii) Quality of reporting. (ii) Compliance with Ethical Standards.
(iii) Systems and procedures for carrying out (iii) Compliance with Professional
assurance services. Standards.
(iv) Training programmes for staff (including articled (iv) Quality of Reporting.
and audit assistants) concerned with assurance (v) Office systems and procedures with
functions, including availability of appropriate regard to compliance of attestation
infrastructure. services systems and procedures.
(v) Compliance with directions and / or guidelines (vi) Training Programs for staff (including
issued by the Council to the Members, including Fees Articled and Audit Assistants concerned
to be charged, Number of audits undertaken, register with attestation functions, including
for Assurance Engagements conducted during the appropriate
year and such other related records. infrastructure.
(vi) Compliance with directions and / or guidelines
issued by the Council in relating to article assistants
and / or audit assistants, including attendance
register, work diaries, stipend payments, and such
other related records.
Question 3(d) on Professional Similar Questions in Our Amendment

Ethics in Nov 2013 Exams. September 11 2013
Module issued
C.A. Prabhu, is a leading income tax Similar Question was there in
practitioner and consultant for derivative
products. He resides in Mumbai near to the our Amendment Module
ABC commodity stock exchange and does based on New Questions
trading in commodity derivatives. Every
day, he invests nearly 50% of his time to inserted on PE in Jan 2013
settle the commodity transactions. Is C.A. Module Edition issued by
Prabhu liable for professional misconduct ?
(4 Marks) ICAI applicable for Nov 2013
Exams.
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WE WERE THE ONLY ONE WHO GAVE THESE AMENDMENTS ON

September 10 2013 APPLICABLE FOR NOV 2013 EXAMS
Link….
https://skydrive.live.com/view.aspx?resid=636C986018151808%21108&cid=636c986018151808&app=W
ordPdf&wdo=2&authkey=%21ANTgcdrxf44Oar0
SIMILARLY WE WERE THE ONLY ONE WHO GAVE UPDATES IN FEB.

2012
WHICHWERE APPLICABLE FOR NOV 2012 EXAMS –
Link…. UPLOADED ON CACLUB ON

http://www.caclubindia.com/forum/ca-final-amendment-for-may-2012-by-ca-vinod-parakh-jain-sir-
192751.asp#.UzcIXaiSw0I
SOME OF THESE TOPICS HAVE STILL NOT BEEN UPDATED IN MANY

BOOKS. BECAUSE OF THESE NO/LATE UPDATES, MANY STUDENTS
WOULD HAVE LOST MARKS AND MAY BE LOST THEIR ATTEMPT,
THOSE WHO WERE ON BORDERLINE BY READING OUTDATED
MATERIAL.
CONNECT WITH US FOR LATEST UPDATE ON IDT AND AUDIT………..

Connect with us at the Following Face book Page: vpj classes or our site vpjclasses.com
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AUDIT GENERALLY CONSIDERED AS A LOW SCORING SUBJECT, EVEN

RANK HOLDERS NOT BEING ABLE TO SCORE……….., Our Students are
Scoring More than the Rank Holders in The Audit Subject.
Around 60% of Our Students are scoring more than 55% Marks in
Audit Subject.
Mark Sheet of Our Student- TOP Bhadur Shahi

THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
Examination Results May 2012
Final Examination Results
ROLL Number 122250

FINANCIAL REPORTING 62
STRATEGIC FINANCIAL MANAGEMENT 46
ADVANCED AUDITING AND FINANCIAL MANAGEMENT 64
CORPORATE AND ALLIED LAWS 57
MAY 2012- 2nd Rank Holder’s Marksheet

Examination Results May 2012
ROLL Number 111935

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Mark Sheet of Our Student- Kamal Sharma

Examination Results Nov 2012
ROLL Number 120668

NOV 2012 – 1st Rank Holder’s Marksheet

ROLL Number 111935

Most of the Student know the answer , but do not know how to write , we
help the student to realize their Potential by conducting such sessions
When We started our Journey, It was a great challenge for us to Initially to
Prove that Audit Subject can be completed in such a short span of 22
classes and not being a CRASH COURSE and subject to 100% Satisfaction.
And the UTMOST delivering Results.
We at VPJ classes have proved the same in such a short span of Time.
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Where the result was just 3% in Nov. 2013. Our No. of Students became CA in
this tough time.
A big congratulation to have prefix CA with their names
Jivesh Rahul Dason Arpit Narayan kadel Rishabh
And Many More……………………….
Mark Sheet of Our Student- Shreyans Jain

ROLL Number 16649

Nov 2013 -1st Rank Holder’s Marksheet

ROLL Number 111935

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With 350+ Questions covered in Class Itself.

100% COVERAGE. NOT A FAST TRACK COURSE
Cover Your Entire Audit in JUST

70 Hours with our Expert
Guidance and save AT LEAST
240+ Hours of Self Study with
One’s Own Limitations
FOR MAY 2014/NOV 2014

Batch Start Days Timing Fees
Date to be Announced – Regular Batch 6:45 -10:30 AM 5,500
Starting from Mid May
By
{ACA, DISA, CVO, B.COM (H)
8 Years Practical Experience across leading MNC’s
Key Features:
 Questions of RTP, Suggested Answers & Practice Manual are practiced in the class
 Simple and effective way of teaching through concept building, class-room practice,
home-exercise and power point presentation.
 Industry Relevant examples to explain SA ,SRE,SAE, SRS etc.
 ONE TO ONE ATTENTION. HANDLING OF QUERIES IN THE CLASS ITSELF
 Short revisionary notes for quick revision Concept explained via Flow chart at appropriate places
 LIVE BACK UP OF CLASSES
NOTE: Entire syllabus will be covered via 2 Modules
CLASSES AT ITO- HINDI BHAWAN.
Log on to vpjclasses.com; Facebook Page-vpj classes
For details contact: 7503630594, 8130713615
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PEER REVIEW
OBJECTIVES OF PEER REVIEW
Earlier Amended
The main objectives of peer review are as discussed The main objective of Peer Review is to ensure
below: that in carrying out the assurance service
(i) To ensure that members while performing assignments, the members of the Institute
attestation services comply with technical standards, a) comply with Technical, Professional and
Ethical Standards and Professional Standards laid Ethical Standards as applicable including
down by the Institute; other regulatory requirements thereto and
(ii) To ensure that such a member has in place proper b) have in place proper systems including
system (including documentation system) for documentation thereof, to amply
maintaining the quality of attestation services demonstrate the quality of the assurance
performed by him; services.
(iii) To ensure adherence to various statutory and other
regulatory requirements; and
(iv) To enhance the reliance placed by the users of
financial statements for economic decision making.
Topic 21.2- of Study Material Link:

(Page-21.1) http://220.227.161.86/19377sm_aape_finalnew_cp21.pdf
Updated in SM in Year Jan
2013
SCOPE OF PEER REVIEW
EARLIER AMENDED
The peer review process is directed at The Peer Review process shall apply to all the assurance services
the attestation services of a practice provided by a
unit: Practice Unit.
(1) Once a practice unit is selected for 1. Once a Practice Unit is selected for Review, its assurance
review, its attestation engagement engagement records pertaining to the Peer Review Period shall
records pertaining to the immediately be subjected to Review.
preceding three completed financial 2. The Review shall cover:
years shall be subjected to review. (i) Compliance with Technical, Professional and Ethical
(2) The Review shall focus on: Standards:
(i) Compliance with Technical (ii) Quality of reporting.
Standards (iii) Systems and procedures for carrying out assurance services.
(ii) Compliance with Ethical Standards. (iv) Training programmes for staff (including articled and audit
(iii) Compliance with Professional assistants) concerned with assurance functions, including
Standards. availability of appropriate infrastructure.
(iv) Quality of Reporting. (v) Compliance with directions and / or guidelines issued by the
(v) Office systems and procedures with Council to the Members, including Fees to be charged,
regard to compliance of attestation Number of audits undertaken, register for Assurance
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services systems and procedures. Engagements conducted during the year and such other
(vi) Training Programs for staff related records.
(including Articled and Audit (vi) Compliance with directions and / or guidelines issued by the
Assistants) concerned with Council in relating to article assistants and / or audit
attestation functions, including assistants, including attendance register, work diaries,
appropriate infrastructure. stipend payments, and such other related records.
Note: A Practice Unit means members in practice, whether practicing individually or a firm of Chartered
Accountants.
Technical, Professional and Ethical Standards – means Assurance services shall not include:
(i) Accounting Standards (i) Management Consultancy
(ii) Standards issued by ICAI including Engagements;
(a) Engagement standards (ii) Representation before various
(b) Statements Authorities;
(c) Guidance notes (iii) Preparing tax returns or advising
(d) Standards on Internal Audit clients in taxation matters;
(e) Statements on Quality Control (iv)Compilation of financial statements;
(f) Notifications / Directions / Announcements / (v) Assist the client in preparing,
Guidelines / Pronouncements / Professional compiling or
standards collating information other than financial
(iii) Framework for the Preparation and presentation of FS, statements;
framework of statements and SA’s, SAE’s. SQC and Guidance (vi) Testifying as an expert witness;
Notes and framework for assurance (vii) Providing expert opinion on the basis
engagements; of
(iv) Provisions of the various relevant statutes and / or facts
regulations applicable in the specific engagements (viii) Engagement for Due diligence
Note: The phrase 'Assurance Services' is used interchangeably with Audit Services, Attestation Functions,
and Audit Functions.

2013
Applicability (New Norms)
Practice Units subject to Review

1. Every Practice Unit, based on their category as determined below will be subject to Peer Review in
accordance with this statement.
Level 1 Level II Level III

Periodicity of Review- Once in 3 years. Periodicity of Review- Periodicity of
– Once in 4 years Review-
Once in 5
Years
A Practice Unit which has undertaken any of the under- (i) A Practice Unit which has Any other
mentioned assurance services in the period under undertaken any of the Practice Unit
review: under-mentioned providing
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(i) Central Statutory Audit of Public Sector Banks, assurance services in the assurance
Private Sector Banks, Foreign Banks, Cooperative period under review: services not
Banks and Public Financial Institutions; (ii) Statutory / Internal / / covered in
(ii) Central Statutory Audit of Central or State Public Concurrent / Systems / Level I and
Sector Undertakings and Central Cooperative Tax audit and / or Level II here
Societies based on criteria such as turnover or paid Departmental Review of in above.
up capital etc. as may be decided by the Board; Branches / Offices of
(iii) Central Statutory Audit of Insurance Companies; (iii) Public Sector or Private
(iv) Statutory Audit of asset management companies Sector and / or Foreign
or mutual funds; Banks;
(v) Statutory Audit of enterprises whose equity or (iv) Insurance Companies;
debt securities are listed in India or abroad; (v) Co-operative Banks
(vi) Statutory Audit of Entities which have raised funds (vi) Statutory Audit of
from public or banks or financial institutions of Regional Rural Banks,
over Rupees Fifty Crores during the period under (vii) Statutory Audit of Non –
Review; Banking Financial
(vii) Statutory Audit of Entities which have raised Companies (NBFCs)
donations and / or contributions over Rupees Fifty (viii) Statutory Audit of
Crores during the period under Review; entities having Net
(viii) Statutory Audit of entities having Net Worth of Worth of over Rs. Five
more than Rupees Five Hundred Crores at any Crores or an annual
time during the period under Review; turnover of more than
(ix) Statutory Audit of entities which have been funded Rs. Fifty Crores during
by Central and / or State Government(s) schemes of the period under
over Rupees Fifty Cores during the period under Review.;
Review.
2. Any Practice Unit not selected for Peer Review, may suo moto apply to the Board for the conduct of
its Peer Review. The Board shall act upon the same within 30 days from the date of receipt of such
request.
3. An Auditee (Client) may request the Board for the conduct of Peer Review of its auditor (Practice
Unit). The Board shall act upon the same within 30 days from the date of receipt of such request.

2013
Eligibility of Reviewer
EARLIER AMENDED
A Peer Review shall -
a) a member of ICAI;
b) possessing at least 10 A Peer Review shall -
years experience of a) Be a member with at least 10 years of experience in
audit; and practice;
c) currently active in the b) Is in Practice as per the Chartered Accountants Act,
practice of attestation 1949.
service engagements; c) Should have undergone the requisite training as
and prescribed by the Board.
d) be free from any d) Should furnish a declaration as prescribed by the Board,
obligation or conflict or at the time of acceptance of Peer Review appointment.
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interest in the reviewed e) Should have signed the Declaration of Confidentiality as

firm or its partners or prescribed by the Board.
personnel. f) Should have conducted audit of Level I Entities for at
least 7 years to be eligible for conducting Peer Review of
Level I Entities as referred to in Para II of this Statement.
For being a Reviewer a member should not have: -

a) Disciplinary action / proceedings pending against him
b) been found guilty by the Council or the Disciplinary Board
or Committee at any time.
c) been convicted by a Competent Court whether within or
outside India, of an offence involving moral turpitude and
punishable with transportation or imprisonment.
d) any Obligation or conflict of interest in the Practice Unit or
its Partners / Personnel.
A Reviewer shall not accept any professional assignment from the Practice
Unit for a period two years from the date of appointment.
Topic 21.5.1- of Study Link:

Material (Page-21.5) http://220.227.161.86/19377sm_aape_finalnew_cp21.pdf
2013
Peer Review Process (THIS PROCESS HAVE BEEN TOTALLY BEEN REVISED )
Process of Peer Review
Stage I – Planning Stage II - Execution Stage Stage III - Reporting stage in

Peer Review
1. Empanelment of Reviewers 1. Initial Meeting 1.Preliminary Report of Reviewer
The reviewer should be An initial meeting shall be held  At the end of review a preliminary
member of ICAI having at least between the reviewer and the report is sent to the PU (before making
10 years audit experience practice unit to confirm the accuracy any report to the Board) in case
(cumulative) & currently in of responses to the questionnaire. systems and procedures of the PU are
found to be deficient or where
practice 2. Compliance Review
noncompliance has been noticed.
The reviewers expected to carry out  The report does not contain name of
2. Selection of PU the compliance review of the key any individual of the PU.
PUs is selected for Peer review on controls- independence, maintenance  No preliminary report is required in
a random basis as per of professional skills and standards, case no deficiencies/ noncompliance
applicability. consultation, staff selection & are noticed.
3. Intimation to Practice Unit (PU) supervision and office administration  The report is addressed to the PU.
 The report should also contain a
PU is informed in writing of its to gain an understanding of the
paragraph that discusses the scope of
selection for peer review along working of the PU and specific control the review performed.
with a panel of 3 reviewers & a procedures existing at the PU.  If the reviewer draws a conclusion
copy of questionnaire. 3. Selection of Attestation Service that there existed a limitation on
4. Initial communication by PU Engagements It depend upon: scope of review, the fact, along with
PU shall intimate its choice of  Number of practicing members such limitation on the scope of the
P a g e | 15
reviewer to Board within 15 days involved, review, should also be communicated

from receipt of information.  Degree of reliance to be placed on to the PU.
Within 1 Month of receipt of general controls and the total  The report on his letterhead. It should
intimation, PU should send number of engagements be dated, signed by reviewer and must
undertaken by the PU during the have membership number and
completed questionnaire along
period under review. reviewer's code number allotted by
with 4. Review of Records - Compliance and the Board.
complete list of client Substantive Approach 2. Reply to Preliminary Report
5. Selection of sample Attestation  The reviewer would conduct The PU has to send its representations,
service Engagement compliance procedures to gain in writing, to the reviewer within 21 days
should be done by Reviewer on evidence that those general controls from the receipt of the preliminary
Random basis. on which he intends to rely upon, report.
6. Communication of Sample actually exists and functioning 3. Interim Report of the Reviewer
selection effectively throughout the period of
If the reviewer is not satisfied with the
reliance.
Reviewer sends a written reply of the PU, then he has to submit an
 Based on the results of compliance
intimation to the PU about the procedures, the reviewer concludes interim report to the Board.
sample selected by him 2 weeks either to rely or not to rely on the Then Board may then give
in advance from the date the general controls. recommendations to the PU and instruct
reviewer intends to begin review.  In case he decides to rely on the the reviewer to carry out a further
7. Confirmation of Visit general controls, he would also review after minimum six months to
Reviewer in consultation with PU determine the extent of reliance to
verify whether systems and procedures
be placed on such controls.
fix the dates for on site review to have been modified appropriately
 In such case, the NTE of substantive
complete the peer review procedures would be normally less 4. Final Report of the Reviewer
process in the four months of extensive and vice-versa. The reviewer shall submit his final report
receipt of initial intimation to PU.  The substantive approach involves to the Board. The final report should
application of such review incorporate the findings as discussed
procedures that provide the reviewer with the PU
with the evidence as to the
appropriateness of the factors on
which the review is required to be
focused on.
NEW PROCEDURE
Peer Review Process
The Peer Review process will include

1. Selection of Practice Unit and appointment of Reviewer,
2. Planning
3. Execution and
4. Reporting.
1 Selection of Practice Unit & appointment of Reviewer :

a) Notification to the Practice Unit: A Practice Unit which has been selected for a Peer Review shall be
notified by the Board.
b) Name of three Reviewers shall be recommended by the Board to the Practice Unit so selected.
c) The Practice Unit shall select one out of the three Reviewers & intimate to the Board within seven
days of receipt of the names.
d) The Board shall intimate the Reviewer so selected and seek his consent within seven days.
2 Planning :
(i) Information to be furnished by Practice Unit On intimation by the Board, of the Reviewer’s consent,
the Practice Unit shall within 15 days furnish the following information to the Reviewer:
 Duly filled-in Questionnaire sent by the Board.
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 Complete list of assurance service clients indicating the nature of service provided and the fees
charged for the period under Review.
 A note on the policies and procedures adopted by the Practice Unit in relation to Independence,
Staff Supervision and Development, ‘Second Person’ Review and the process generally followed
in carrying out
 assurance services.
 Details of any proceedings against the Practice Unit or any of its partners or qualified assistants
taken by any regulatory, monitoring or enforcement bodies relating to investigation or
allegation of deficiency in the conduct of Attest function by them during the period of three
years preceding the period of Review or at any time thereafter i.e. till the date of submission of
the duly filled-in Questionnaire.
(ii) Selection of Sample by the Reviewer:

a) The Reviewer shall within 15 days of receiving the information from the Practice Unit select a
sample of the assurance services that he would like to Review and intimate the same to the
Practice Unit.
b) The Reviewer may also seek further / additional clarification from the Practice Unit on the
information furnished / not furnished.
c) The Reviewer shall plan for an on–site Review visit or initial meeting in consultation with the
Practice Unit. The Reviewer shall give the Practice Unit at least fifteen days time to keep ready
the necessary records of the selected assurance services.
d) The Reviewer and Practice Unit shall mutually cooperate and ensure that the entire Review
process is completed within 90 days from the date of notifying the Practice Unit about its
selection for Review.
3 Execution
(i) Peer Review visits will be conducted at the Practice Unit's head office or /and branch(es) or any
other locations. This on-site Review should not extend beyond seven working days.
(ii) Compliance Review-General Controls
a) The Reviewer is required to carry out a compliance Review of the following General Controls for
evaluating the degree of reliance to be placed upon them for effective Review:
 Independence
 Maintenance of Professional Skills and Standards
 Outside Consultation
 Staff recruitment, Supervision and Development
 Office Administration
(iii) Selection of Assurance Service Engagements for Review
a) The number of assurance service engagements to be Reviewed shall depend upon:
 Standard of quality controls generally prevailing;
 The size and nature of assurance service engagements undertaken by the Practice Unit.
 The methodology generally adopted by the Practice Unit in providing assurance services.
 The number of partners / members involved in assurance service engagements in the
Practice Unit;
 The number of locations / branch offices of the practice Unit;
 The Fees charged / received / service tax paid by the Practice unit.
b) From the initial sample selected at the planning stage, the Reviewer, in consultation with the
Practice Unit, may reduce or enlarge the initial sample size of assurance service engagements
for Review.
(iv) Review of Records

The Reviewer is required to adopt a combination of compliance approach and substantive approach in
the Review process.
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a) Compliance Approach – Assurance Service Engagements

The compliance approach is to assess whether proper control procedures have been established /
followed by the Practice Unit to ensure that assurance services are being performed in accordance
with Technical, Professional and Ethical Standards.
The following areas shall be considered:
 Assurance services records for Administration
 Review and Evaluation of System of Internal controls
 Substantive Tests
 Financial Statements Presentation and
 Assurance Services Conclusions
 Assurance Services Reporting
b) Substantive Approach - Assurance Service Engagements

This approach requires a Review of the assurance working papers in order to establish the extent of
compliance, whether the assurance work has been carried out as per the Technical, Ethical, and
Professional Standards.
4 Reporting
The Peer Review Report should state that the system of quality control for the assurance services of the
Practice Unit for the period under Review has been designed so as to carry out the assurance services in
a manner that ensures compliance with Technical, Professional and Ethical standards.
The Peer Review Report shall address his report of compliance or otherwise on the following areas of
controls:
a) Independence
b) Maintenance of Professional skills and standards.
c) Outside Consultation
d) Staff recruitment, Supervision and Development.
e) Office Administration.
(i) Discussion/Communication of Findings
a) After completing the on-site Review, the Reviewer, before making his Report to the Board, shall
communicate his findings in the Preliminary Report to the Practice Unit if in his opinion, the
systems and procedures are deficient or non-compliant with reference to any matter that has
been noticed by him or if there are other matters where he wants to seek clarification.
b) The Practice Unit shall within 15 days after the date of receipt of the findings, make any
submissions or representations, in writing to the Reviewer. (i.e Response to the Preliminary
Report).
(ii) Peer Review Report of Reviewer
a) At the end of an on-site Review if the Reviewer is satisfied with the reply received from the
Practice Unit, he shall submit a Peer Review Report to the Board along with his initial findings,
response by the Practice Unit and the manner in which the responses have been dealt with. A
copy of the report shall also be forwarded to the Practice Unit.
b) In case the Reviewer is of the opinion that the response by the Practice Unit is not satisfactory,
the Reviewer shall accordingly submit a modified Report to the Board incorporating his reasons
for the same. The Reviewer shall also submit initial findings (i.e Preliminary Report), response by
the Practice Unit (Response to Preliminary Report) and the manner in which the responses have
been dealt with. A copy of the report shall also be forwarded to the Practice Unit.
c) In case of a modified report, The Board shall order for a “Follow On” Review after a period of
one year from the date of issue of report as mentioned in (b) above. If the Board so decides, the
period of one year may be reduced but shall not be less than six months from the date of issue
of the report.
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2013
Procedures of Reviewer- THIS TOPIC HAVE BEEN DELETED

IN ICAI MODULE
Procedures of Reviewer
Off Site Procedures

The reviewer would start his review procedures as soon as the PU’s response to the questionnaire is
received by him. He should examine PU response so as to:
 Determine initial sample of the clients to whom attestation services have been rendered.
 Obtain a basic understanding of quality control policies and procedures of the PU.
 Develop an appropriate plan to conduct review in an effective, efficient and timely manner
On Site Procedures
 To have a Initial Meeting with PU.
 Evaluation of PU’s policies and procedures:
 Compliance & Substantive Testing
Compliance Review Procedures

In this the reviewer should consider General Controls which comprises of five controls
Does the PU have  Does the PU have an  Is there any  Does the PU have  Does the PU have
a policy to ensure established plan for policy for written guidelines established
independence, personnel needs at consulting on the responsibility procedures for
objectivity and all levels, based on experts (both at each level, and on record retention,
integrity, on the current and internal and the expected including security
part of partners anticipated clientele, external)? performance and aspects?
and staff? Who is business growth,  Has the PU qualifications  Does the PU
responsible for impending built up a necessary for maintain a record
this policy? retirements, etc.? network of advancement to the containing
Does the PU  Does the PU have an other next level? particulars like
communicate established accountants,  Does the PU have a client name,
these policies and recruitment policy? solicitors and system for gathering nature of
the expected  Are applicants and advocates, and evaluating engagement,
standards of new personnel and technical information on the particulars
professional informed of the consultants performance of regarding date of
behaviour to all personnel policies in industries personnel? commencement of
staff? and procedures in which its  Does the PU have a audit, date of audit
Does the PU relevant to them? clients system of assigning report, billing, etc?
monitor  Does the PU have operate? an audit to the most  Does the PU
compliance with continuing education appropriate maintain staffs
P a g e | 19
policies and programmes for personnel? register?

procedures partners and staff?  Are requirements of  Does the office
relating to  How easily are specialized expertise have a proper
independence? current and relevant and personnel skills library containing
Does the PU professional given due relevant book and
periodically literature, including consideration? all publications of
review its accounting and  Does the PU have ICAI.
association with auditing standards written guidelines
clients to ensure and pronouncements for maintaining
objectivity and by professional working papers
independence? bodies, available to (form and content)?
partners and staff?  Does the PU have
 Does the PU conduct standardized forms,
programmes for checklists, and
developing expertise questionnaires to
in specialized areas assist conduct of
and industries? audit?
Review of Records - Compliance/Substantive Review Procedures

After evaluating general controls by performing compliance procedures, the reviewer should actually
review the records of the PU. Such review may either be conducted by compliance approach or
substantive approach or a combination of both. At the first stage, the records in respect of following key
controls are to be reviewed to ensure compliance with technical standards:
 Audit Record Administration
 Financial Statements Presentation
 Review and Evaluation of System of Internal controls
 Substantive Tests
 Audit Conclusion
 Audit Report
Compliances With Technical, Ethical and Professional Standards

The Reviewer has to see the compliances of the followings:
a) AS issued by ICAI & CG
b) AAS (including General Clarifications thereof) issued by ICAI
c) Engagement Standards issued by ICIA
d) Framework for the Preparation and Presentation of Financial Statements, Framework of
Statements on Standard Auditing Practices and Guidance Notes on Related Services issued by
the Institute of Chartered Accountants of India and Framework for Assurance Engagements;
e) Statements issued by the ICAI
f) Guidance Notes issued by ICAI
g) Notifications/Directions/Announcements issued by ICAI
h) Provisions of the various relevant Statutes and/or Regulations which are applicable in the
context of the specific engagements being reviewed including instructions/guidelines/
notifications/directions issued by the regulatory bodies;
i) Ethical Standards/pronouncements issued by ICAI.
Confidentiality
Earlier Provisions New Provisions

Strict confidentiality provisions shall apply to all Strict confidentiality shall be maintained by all those
those involved in the peer review process, involved in the Peer Review process, namely,
namely, reviewers, members of the Board, the Reviewers, members of the Board, any Qualified
P a g e | 20
Council, or any person who assists any of these Assistants or Practice Unit.
parties. All persons governed by the secrecy provisions:
Those persons subject to the secrecy provision: a) shall at all times preserve and aid in preserving
1) Shall at all times after his/ their appointment secrecy with regard to any matter arising in the
preserve and aid in preserving secrecy with performance or in assisting in the performance of
regard to any matter coming to his/ their any function, directly or indirectly related to the
knowledge in the performance or in assisting process and conduct of Peer Reviews;
in the performance of any function, directly b) Reviewer shall not make use of or disclose the
or indirectly related to the process and contents of Review report or any confidential
conduct of peer reviews; information about the process of Review unless as
2) Shall not at any time communicate any such required by the Board or the Council.
matter to any other person; and
3) Shall not at any time permit any other Non-compliance with the secrecy provisions in the
person to have any access to any record, above clause shall amount to professional misconduct
document or any other material in any form as defined under Section 22 of the Chartered
which is in his/their possession or under Accountants Act, 1949.
his/their control by virtue of his/their being
or having been so appointed or his/their A Declaration of Confidentiality shall be signed by the
having performed or having assisted any persons who are responsible for the conduct of Peer
other person in the performance of such a Review i.e., Reviewers, and his Qualified Assistants
function. and be filed with the Board. All members of the Board
shall also sign a declaration of Confidentiality in a
Non-compliance with the secrecy provisions in manner as may be prescribed by the Board.
the above clause shall amount to professional
misconduct as defined under Section 22 of the
Chartered Accountants Act, 1949.
A statement of confidentiality shall be filled in by
the persons who are responsible for the conduct
of peer review i.e., reviewers, the members of
the Board and others who assist them.

2013
NBFC
Meaning:
NBFC is one whose principal business is that of receiving deposits or
that of a financial institution, such as lending, investment in
securities, hire purchase finance or equipment leasing.
P a g e | 21
Definition of NBFCs
Definition of NBFC
Section 45 I(f) of Reserve Bank of India (Amendment) Act, 1997 defines a non-banking financial company
as:
(i) A financial institution which is a company;
(ii) A non banking institution which is a company with principal business of receiving of deposits, under
any scheme or arrangement or in any other manner, or lending in any manner;
(iii) Such other non-banking institution or class of such institutions, as the Reserve Bank with the
previous approval of the Central Government may specify by notification in the Official Gazette.
For purposes of RBI Directions relating to Acceptance of Public Deposits, non-banking financial company
means only the non-banking institution which is a –¨Loan company, ¨Investment company, Hire purchase
finance company, Equipment leasing company and Mutual benefit financial company”.
Registration and Regulation of NBFCs
Under Section 45–IA of the Reserve Bank of India (Amendment) Act, 1997, no nonbanking financial
company is allowed to commence or carry on the business of a nonbanking financial institution without
obtaining a certificate of registration issued by the Reserve Bank of India.
A company incorporated under the Companies Act, 1956 and desirous of commencing business of non-
banking financial institution as defined under Section 45–IA of the RBI Act, 1934 can apply to Reserve
Bank of India in prescribed form along with necessary documents for registration. The RBI issues
Certificate of Registration after satisfying itself that the conditions as enumerated in Section 45-IA of the
RBI Act, 1934 are satisfied.
However, to obviate dual regulation, certain categories of NBFCs which are regulated by other regulators
are exempted from the requirement of registration with RBI viz. Venture Capital Fund/Merchant Banking
companies/Stock broking companies registered with SEBI, Insurance Company holding a valid Certificate
of Registration issued by IRDA, Nidhi companies as notified under Section 620A of the Companies Act,
1956, Chit companies as defined in clause (b) of Section 2 of the Chit Funds Act, 1982 or Housing Finance
Companies regulated by National Housing Bank.
The Reserve Bank of India has issued directions to non-banking financial companies on acceptance of
public deposits, prudential norms like capital adequacy, income recognition, asset classification,
provision for bad and doubtful debts, risk exposure norms and other measures to monitor the financial
solvency and reporting by NBFCs. Directions were also issued to auditors to report non-compliance with
the RBI Act and regulations to the Reserve Bank, Board of Directors and shareholders.
Type of NBFCs- Compliance and Regulatory Perspective

Currently, NBFCs registered with RBI are being classified as:
1) Asset Finance Company (AFC): The main activity of an AFC is financing of physical assets supporting
productive / economic activity. These may be in the areas such as automobiles, tractors, lathe
machines, generator sets, earth moving and material handling equipments and general purpose
industrial machines.
2) Investment Company (IC): which mainly deal in acquisition of shares and securities of other
companies. A core investment company would be a company which acquires shares and securities of
Group companies.
3) Loan Company (LC): Loan companies primarily provide finance (whether by making loans or
advances or otherwise for any activity), other than its own activity.
P a g e | 22
4) Infrastructure Finance Companies: This category of NBFCs deploys a minimum of three-fourths of

their total assets in infrastructure loans. The net owned funds of this category of NBFCs are more
than Rs. 300 crores and they should have a minimum credit rating of ‘A’ or equivalent and the
Capital to Risk-Weighted Assets Ratio (CRAR) is 15% (with a minimum Tier I Capital of 10%).
5) Core Investment Company (CIC): These are NBFCs which carry on the business of acquisition of
shares and securities in group companies and satisfies four conditions stated in the regulatory
framework for Core Investment Companies issued by RBI.
6) Infrastructure Debt Fund- Non- Banking Financial Company (IDF-NBFC): Infrastructure Debt Funds
(IDFs) are funds set up to facilitate the flow of long-term debt into infrastructure projects. The IDF
will be set up either as a trust or as a company. A trust based IDF would normally be a Mutual Fund
(MF) while a company based IDF would normally be a NBFC.
7) Non-Banking Financial Company - Micro Finance Institution (NBFC-MFI): An NBFC-MFI is defined as
a non-deposit taking NBFC(other than a company licensed under Section 25 of the Indian Companies
Act, 1956) that fulfils certain conditions.
8) Core Investment Companies, Infrastructure Debt Fund NBFC and NBFC – Micro Finance Institution
(other than Companies Act, 1956 - Section 25 companies) are non deposit holding Companies.
The above type of companies may be further classified into those accepting deposits or those not
accepting deposits
Asset Finance Loan Company Investment Infrastructure

Company Finance
Company
Company
Infrastructure Debt Fund- Non- Banking Financial Non-Banking Financial Company - Micro Finance
Company (IDF-NBFC) Institution (NBFC-MFI)
(RBI notification dt. Nov. 21, 2011) (RBI notification dated December 02, 2011)
Infrastructure Debt Funds (IDFs), to facilitate the flow of RBI having considered it necessary in the public interest
long-term debt into infrastructure projects. IDF- NBFC and being satisfied that for the purpose of enabling the
would raise resources through issue of either Rupee or Bank to regulate the credit system to the advantage of the
Dollar denominated bonds of minimum 5 year maturity. country, gave the directions for the Non-Banking Financial
The investors would be primarily domestic and off-shore Company -Micro Finance Institutions (Reserve Bank)
institutional investors, especially insurance and pension Directions, 2011.
funds which would have long term resources. IDF-NBFC An NBFC-MFI is defined as a non-deposit taking NBFC
would be regulated by the Reserve Bank. (other than a company licensed under Section 25 of the
Besides the above class of NBFCs the Residuary Non- Indian Companies Act, 1956) that fulfils the following
Banking Companies are also registered as NBFC with the conditions:
P a g e | 23
Bank. (i) Minimum Net Owned Funds of Rs.5 crore. (For NBFC-
MFIs registered in the North Eastern Region of the
country, the minimum NOF requirement shall stand at
Rs. 2 crore).
(ii) Not less than 85% of its net assets are in the nature of
“qualifying assets.”
(iii) Further the income an NBFC-MFI derives from the
remaining 15 percent of assets shall be in accordance
with the regulations specified in that behalf.
(iv) An NBFC which does not qualify as an NBFC-MFI shall
not extend loans to micro finance sector, which in
aggregate exceed 10% of its total assets.
In case of Non-Banking Financial Company - Micro Finance Institution (NBFC-MFI) - For the purpose of
ii. above,
“Net assets” are defined as total assets other than cash and bank balances and money market
instruments.
“Qualifying asset” shall mean a loan which satisfies the following criteria:-
a) loan disbursed by an NBFC-MFI to a borrower with a rural household annual income not exceeding
Rs. 60,000 or urban and semi-urban household income not exceeding Rs. 1,20,000;
b) loan amount does not exceed Rs. 35,000 in the first cycle and Rs. 50,000 in subsequent cycles;
c) total indebtedness of the borrower does not exceed Rs. 50,000;
d) tenure of the loan not to be less than 24 months for loan amount in excess of 15,000 with
prepayment without penalty;
e) loan to be extended without collateral;
f) aggregate amount of loans, given for income generation, is not less than 75 per cent of the total
loans given by the MFIs;
Updated in SM in Year Jan Link:

2013 http://220.227.161.86/19370sm_aape_finalnew_cp14.pdf
COMPANY AUDIT
Non-provision of proposed dividend
The Revised Schedule VI which is applicable from 01.04.2011 requires disclosure of the amount of
dividends proposed to be distributed to equity and preference shareholders for the period and the
related amount per share to be disclosed separately. It also requires separate disclosure of the arrears of
fixed cumulative dividends on preference shares. The Old Schedule VI specifically required proposed
dividend to be disclosed under the head “Provisions.” In the Revised Schedule VI, this needs to be
disclosed in the notes. Hence, a question that arises is as to whether this means that proposed dividend
is not required to be provided for when applying the Revised Schedule VI.
Further, as per AS-4 “Contingencies and Events Occurring After the Balance Sheet Date”, there are events
which, although take place after the balance sheet date are sometimes reflected in the financial
statement because of Statutory requirement or because of their special nature and such item includes
the amount of dividend proposed or declared by the enterprise after the balance sheet date in respect of
theperiod covered in the financial statements.
Keeping this in view and the fact that earlier the disclosure of provision for proposed dividend was
statutory requirement as per Old Schedule VI, hence it was adjusting event as per AS 4 and was provided
for. However, this statutory requirement has been changed to disclosure by way of notes as per Revised
Schedule VI. Therefore, provision for proposed dividend is non-adjusting event
P a g e | 24

2013
MANAGEMENT AND OPERATIONAL AUDIT
Internal Audit, Management and Operational Audit
Integrity, Objectivity and Independence of Internal Auditor

As per Standard on Internal Audit (SIA) 2, Basic Principles Governing Internal Audit, issued by the Council
of the Institute of Chartered Accountants of India, The internal auditor should be straightforward,
honest and sincere in his approach to his professional work. He must be fair and must not allow
prejudice or bias to override his objectivity. He should maintain an impartial attitude. He should not only
be independent in fact but also appear to be independent. The internal auditor should not, therefore, to
the extent possible, undertake activities, which are or might appear to be incompatible with his
independence and objectivity. For example, to avoid any conflict of interest, the internal auditor should
not review an activity for which he was previously responsible. It is also expected from the management
to take steps necessary for providing an environment conducive to enable the internal auditor to
discharge his responsibilities independently and also report his findings without any management
interference. For example, in case of a listed company, the internal auditor may be required to report
directly to those charged with governance, such as the Audit Committee instead of the Chief Executive
Officer or the Chief Financial Officer. The internal auditor should immediately bring any actual or
apparent conflict of interest to the attention of the appropriate level of management so that necessary
corrective action may be taken.

2013
Internal Audit Report
As per Standard on Internal Audit (SIA) 2, Basic Principles

Governing Internal Audit, issued by the Council of the
Institute of Chartered Accountants of India, the internal
auditor should carefully review and assess the conclusions
drawn from the audit evidence obtained, as the basis for
his findings contained in his report and suggest remedial
action. However, in case the internal auditor comes across
any actual or suspected fraud or any other
P a g e | 25
misappropriation of assets, it would be more appropriate

for him to bring the same immediately to the attention of
the management.
Basic Elements of the Internal Audit Report: Basic elements of the internal audit report as per Standard
on Internal Audit (SIA) 4, on Reporting issued by ICAI.
The internal auditor’s report includes the following basic elements, ordinarily, in the following layout:
(a) Title;
(b) Addressee;
(c) Report Distribution List;
(d) Period of coverage of the Report;
(e) Opening or introductory paragraph;
(i) identification of the processes/functions and items of financial statements audited; and
(ii) a statement of the responsibility of the entity’s management and the responsibility of the
internal auditor;
(f) Objectives paragraph - statement of the objectives and scope of the internal audit engagement;
(g) Scope paragraph (describing the nature of an internal audit):
(i) a reference to the generally accepted audit procedures in India, as applicable;
(ii) a description of the engagement background and the methodology of the internal audit
together with procedures performed by the internal auditor; and
(iii) a description of the population and the sampling technique used.
(h) Executive Summary, highlighting the key material issues, observations, control weaknesses and
exceptions;
(i) Observations, findings and recommendations made by the internal auditor;
(j) Comments from the local management;
(k) Action Taken Report – Action taken/ not taken pursuant to the observations made in the previous
internal audit reports;
(l) Date of the report;
(m) Place of signature; and
(n) Internal auditor’s signature with Membership Number.
A measure of uniformity in the form and content of the internal auditor’s report is desirable because it
helps to promote the reader’s understanding of the internal auditor’s report and to identify unusual
circumstances when they occur.
(1) Title: The internal auditor’s report should have an appropriate title expressing the nature of the
Report.
(2) Addressee: The internal auditor’s report should be appropriately addressed as required by the
circumstances of the engagement. Ordinarily, the internal auditor’s report is addressed to
the appointing authority or such other person as directed.
(3) Report There should be a mention of the recipients of the report in the section on Report
Distribution Distribution List.
List, Coverage The internal auditor’s report should identify the systems, processes, functional lines or
and Opening other items of the entity that have been audited, including the date of and period
or covered.
Introductory The report should include a statement that the operation of systems, procedures and
Paragraph: controls are the responsibility of the entity’s management and a statement that the
responsibility of the internal auditor is to express an opinion on the weaknesses in
internal controls, risk management and governance (entity level controls) framework,
highlighting any exceptions and cases of noncompliance and suggest or recommend
improvements in the design and operations of controls based on the internal audit.
P a g e | 26
(4) Scope The internal auditor’s report should describe the scope of the internal audit by stating
Paragraph: that the internal audit was conducted in accordance with generally accepted audit
procedures as applicable. The management needs this as an assurance that the audit has
been carried out in accordance with established Standards. “Scope” refers to the internal
auditor’s ability to perform internal audit procedures deemed necessary in the
circumstances. The report should include a statement that the internal audit was planned
and performed to obtain reasonable assurance whether the systems, processes and
controls operate efficiently and effectively and financial information is free of material
misstatement. The internal auditor’s report, in line with the terms of the engagement,
should describe the internal audit as including:
(i) examining, on a test basis, evidence to support the amounts and disclosures in
financial statements;
(ii) assessing the strength, design and operating effectiveness of internal controls at
process level and identifying areas of control weakness, business risks and
vulnerability in the system and procedures adopted by the entity
(iii) assessing the accounting principles and estimates used in the preparation of the
financial statements; and
(iv) evaluating the overall entity-wide risk management and governance framework.
The Report should include a description of the engagement background, internal audit
methodology used and procedures performed by the internal auditor mentioning further
that the internal audit provides a reasonable basis for his comments.
(5) Executive The Executive Summary paragraph of the internal auditor’s report should clearly indicate
Summary the highlights of the internal audit findings, key issues and observations of concern,
Paragraph: significant controls lapses, failures or weaknesses in the systems or processes.
(6) The Observations paragraph should clearly mention the process name, significant
Observations observations, findings, analysis and comments of the internal auditor.
(Main Report)
Paragraph:
(7) Comments The Comments from Local Management Paragraph should contain the observations and
from Local comments from the local management of the entity provided after giving due cognizance
Management: to the internal auditor’s comments.
This should also include local management’s action plan for resolution of the issues and
compliance to the internal auditor’s recommendations and suggestions on the areas of
process and control weakness/ deficiency. The management action plan, should contain,
inter alia:
(i) the timeframe for taking appropriate corrective action;
(ii) the person responsible; and
(iii) resource requirements, if any, for ensuring such compliance. Further comments
from the internal auditor, in response to the auditee feedback, are to be clearly
mentioned. This paragraph should also contain the internal auditor’s suggestions
and recommendations to mitigate risks, strengthen controls and streamline
processes with respect to each of the observations and comments made.
(8) Action The Action Taken Report paragraph should be appended after the observations and
Taken Report findings and should include:
Paragraph: (i) Status of compliance / corrective action already taken / being taken by the auditee
with respect to previous internal audit observations;
(ii) Status of compliance / corrective action not taken by the auditee with respect to
previous internal audit observations and the reasons for non-compliance thereof;
and
(iii) Revised timelines for compliance of all open items in (b) above and fixation of the
P a g e | 27
responsibility of the concerned process owner.

(9) Date The date of an internal auditor’s report is the date on which the internal auditor signs the
report expressing his comments and observations.
10) Place of The report should name the specific location, which is ordinarily the city where the
Signature: internal audit report is signed.
(11) Internal The report should be signed by the internal auditor in his personal name.
Auditor’s
Signature: The internal auditor should also mention the membership number assigned by the
Institute of Chartered Accountants of India in the report so issued by him. Further, the
internal auditor should exercise due professional care to ensure that the internal audit
report, inter alia, is:
(i) clear
(ii) factual – presents all significant matters with disclosure of material facts
(iii) specific
(iv) concise
(v) unambiguous
(vi) timely
(vii) complies with generally accepted audit procedures in India, as applicable.

2013
Management Audit Questionnaire

A management audit questionnaire is an important tool for conducting the management audit. It is
through these questionnaires that the auditors make an inquiry into important facts by measuring
current performance. Such questionnaires aim at a comprehensive and constructive examination of an
organisation’s management and its assigned tasks. Overall it is concerned with the appraisal of
management actions in accomplishing the organisation’s objectives. Its primary objective is to highlight
weaknesses and deficiencies of the organisation. It includes a review of how well or badly the
management functions of planning, organising, directing and controlling are being performed. In
addition it evaluates how effective the decision-making process is accomplishing the stated organisation
objectives. Within this framework, the questionnaire provides a means for evaluating an organisation’s
ongoing operations by examining its major functional areas. There are three possible answers to the
management audit questions: “Yes”, “No” and “N.A.”, (not applicable). A “Yes” answer indicates that the
specific area, function, or aspect under study is functioning in an acceptable manner; no written
explanation is needed in that case. On the other hand, a “no” answer indicates unacceptable
performance and should be explained in writing.
Questionnaire comments on negative answers not only provide documentation for future reference,
but, more important, provide background information for undertaking remedial action. Those questions
that are not applicable and should be ignored in the audit are checked in the “N.A.” column. The
management audit questionnaire does not give answers, but simply asks questions. If all questions are
answered with a ‘yes’, operations are proceeding as desired. On the other hand, if there are one or
more ‘no’ answers, difficulties are being experienced and must be explained in writing. If the question
does not apply, the N.A. (not applicable) column is checked. Thus, management audit questionnaire for
this part of the audit not only serves as a management tool to analyse the current situation; more
importantly, it enables the management auditors to synthesis those elements that are causing
organisational difficulties and deficiencies.
P a g e | 28
Standards on Internal Audit

The following Standards on Internal Audit are recommendatory in nature. The Standards shall become
mandatory from such date as notified by the council:
SIA 1 : Planning an Internal Audit
SIA 2 : Basic Principles Governing Internal Audit
SIA 3 : Documentation.
SIA 4 : Reporting
SIA 5 : Sampling
SIA 6 : Analytical Procedures
SIA 7 : Quality Assurance in Internal Audit
SIA 8 : Terms of Internal Audit Engagement.
SIA 9 : Communication with Management
SIA 10 : Internal Audit Evidence
SIA 11 : Consideration of Fraud in an Internal Audit.
SIA 12 : Internal Control Evaluation
SIA 13 : Enterprise Risk Management
SIA 14 : Internal Audit in an Information Technology Environment
SIA 15 : Knowledge of the Entity and its Environment.
SIA 16 : Using the Work of an Expert.
SIA 17 : Consideration of Laws and Regulations in an Internal Audit.
Topic 19.10- of Study Link:

2013
THESE TOPICS HAVE BEEN DELETED IN ICAI MODULE

Requirements of Schedule B to the IRDA (Preparation of FS and AR of Insurance Companies)
Regulations, 2002
Part I- Accounting Principles for Preparation of Financial Statements

1) Applicability of Accounting Standards - issued by the ICAI, to extent applicable to the insurers
carrying on general insurance business, except that:
i. AS 3 – Cash Flow Statements - prepared only under the Direct Method.
ii. AS 4 – Not applicable w.r.t liabilities arising out Insurance policies.
iii. AS 9 – Not applicable w.r.t income of Insurance business.
iv. AS 13 – Apply the regulations.
v. AS 17 - Segment Reporting – shall apply to all insurers
2) Premium- Premium shall be recognised as income over the contract period or the period
of risk, whichever is appropriate.
3) Premium Deficiency -Recognised if the sum of expected claim costs, related expenses and
maintenance costs exceeds related reserve for unexpired risks.
P a g e | 29
4) Acquisition Costs-If any, shall be expensed in the period in which they are incurred.
5) Claims--The components of the ultimate cost of claims to an insurer comprise the claims under
policies and specific claims settlement costs.
6) Investments : valuation in the following manner:-
a) Real Estate – Investment Property- measured at historical cost less accumulated
depreciation and impairment loss, residual value being considered zero and no
revaluation being permissible.
b) Debt Securities-Debt securities including G-Sec and redeemable preference shares shall
be considered as “held to maturity” securities and measured at historical cost subject to
amortisation.
c) Equity Securities and Derivative Instruments that are traded in active markets- Measured
at fair value as at BS date.
d) Unlisted and other than actively traded Equity Securities and Derivative Instruments-
measured at historical costs. Provision shall be made for diminution in value of such
investments.
7) Loans - Loans shall be measured at historical cost subject to impairment provisions.
8) Catastrophe Reserve – as per norms prescribed by the Authority.
Part II Disclosures forming part of Financial Statements
a) by way of notes to the Balance Sheet -
b) Accounting policies shall form an integral part of the financial statements
Part III General Instructions for Preparation of Financial Statements
Part IV Contents of Management Report:
a) Confirmation regarding the continued validity of the registration granted by the Authority;
b) Certification that all the dues payable to the statutory authorities have been duly paid;
c) Confirmation to the effect that the shareholding pattern and any transfer of shares during the
year are in accordance with the statutory or regulatory requirements;
d) Declaration that the management has not directly or indirectly invested outside India the
funds of the holders of policies issued in India;
e) Confirmation that the required solvency margins have been maintained;
f) Certification to the effect that the values of all the assets have been reviewed on the date of
the Balance Sheet
g) Disclosure with regard to the overall risk exposure and strategy adopted to mitigate the same;
h) Operations in other countries, if any,
i) Ageing of claims indicating the trends in average claim settlement time
j) Review of asset quality and performance of investment in terms of portfolios
k) A responsibility statement
l) A schedule of payments, in which Directors of the insurer are interested.
Part V Preparation of Financial Statements

(1) An insurer shall prepare the Revenue Account, Profit and Loss Account [Shareholders’
Account] and the Balance Sheet in Form B-RA, Form B-PL, and Form B-BS, or as near thereto as
the circumstances permit.
Provided that an insurer shall prepare Revenue Accounts separately for fire, marine, and
Miscellaneous insurance business and separate schedules shall be prepared for Marine Cargo,
Marine – Other than Marine Cargo and the following classes of miscellaneous insurance
business under miscellaneous insurance and accordingly application of AS 17 – Segment
Reporting - shall stand modified.
1. Motor, 2. Workmen’s Compensation/Employers’ Liability, 3. Public/Product Liability, 4.
Engineering, 5. Aviation, 6. Personal Accident, 7. Health Insurance, 8. Others
(2) An insurer shall prepare separate Receipts and Payments Account in accordance with the
Direct Method prescribed in AS 3 – “Cash Flow Statement” issued by the ICAI.
Investment norms for General Insurance Companies
In exercise of the power conferred by the Insurance Act, 1938, the Authority, in consultation with the
Insurance Advisory Committee, has made the Insurance Regulatory and Development Authority
P a g e | 30
(Investment) Regulations are subject to revision by the Authority from time to time. Regulation 4 of the
amended Regulations on investments prescribes that every insurer carrying on the business of general
insurance should invest and at all times keep invested its total assets in the following manner:
(i) Government Securities Not less than 20% of Investment Assets

(ii) Government Securities and Not less than 30% of Investment Assets (including (i)
other approved securities above)
(iii) (a) Approved investments and other Not exceeding 55%
investments (out of (iiia) other
investments shall not exceed 25% of
Investment Assets)
(b) Housing and Loans to State Not less than 5%
Government
(c) Investment in infrastructure Not less than 10%
It may be mentioned here that with regard to (iv) above, subscription/purchase of bonds or debentures
issued by HUDCO, National Housing Insurance Company or House Building Institutions duly accredited by
National Housing Banks, for house building activities, duly guaranteed by Government or carrying
current fating of not less than ‘AA’ by an independent, reputed and recognized agencies also qualify to
be included in the limits [under clause (iv)] above.

2012
Trade Credit Insurance
MEANING
Trade Credit It means the business of effecting contracts of insurance in respect of trade credit insurance
Insurance transactions.
business
Trade credit It means insurance of suppliers against the risk of non-payment of goods or services by their
insurance buyers who may be situated in the same country as the supplier (domestic risk) or a buyer
situated in another country (export risk) against non-payment as a result of insolvency of the
buyer or non-payment after an agreed number of months after duedate (protracted default)
or non-payment following an event outside the control of the buyer or the seller (political
risk cover). Political risk cover is available only in case of buyers outside India and in
countries agreed upon at the proposal stage.
Trade Credit It means a transaction between two persons for supply of goods or services on open and
Insurance agreed terms.
transaction
Trade Credit It is a conditional insurance contract between two parties (insurer and seller) that cannot be
insurance traded and is always directly related to an underlying trade transaction, which is either the
policy delivery of goods or of services. The correct fulfilment of this trade transaction and
satisfaction of the contract terms which is essential for credit cover to exist
Basic Requirements of a Trade Credit Insurance Product

An insurer shall offer trade credit insurance product only if all requirements mentioned below are met:
P a g e | 31
1) Policyholder's loss is non-receipt of trade receivable arising out of a trade of goods or services.
2) Policyholder is a supplier of goods or services in consideration for a fair market value.
3) Policyholder's trade receivable does not arise out of factoring or reverse factoring arrangement or
any other similar arrangement.
4) Policyholder has a customer (i.e. Buyer) who is liable to pay a trade receivable to the policyholder in
return for the goods and services received by him from the policyholder, in accordance with a policy
document filed with the insurer.
5) Policyholder undertakes to pay premium for the entire Policy Period.
6) Any other requirement that may be specified by the Authority from time to time.
Topic 12.12- of Study Link:

2012
PROFESSIONAL ETHICS
NEW Case Study Introduced in ICAI Module OF JAN 2013 APPLICABLE FOR NOV
2013 EXAMS ONWARDS
Whether the CA Will be Guilty of Professional Misconduct in the Following Case

1. CA Sanjeev was appointed as the Auditor of SHREE Ltd. for 2007-08. Since he declined to accept
the appointment, the Board of Directors appointed CA Mohan as the auditor in the place of CA
Sanjeev, which was also accepted by CA Mohan as the auditor in the place of CA Sanjeev, which
was also accepted by CA Mohan.
Ans: Board can appoint the auditor in the case of casual vacancy under Sections 224 (5) & 6(a) of
the Companies Act, 1956.The non-acceptance of appointment by CA. Sanjeev does not constitute
a casual vacancy to be filled by the Board.
In this case, it will be deemed that no auditor was appointed in the AGM. Hence the appointment
of auditor can be made only by the Central Government and the Board appointment is defective in
law.
Clause 9 of Part-I of First Schedule states that a chartered accountant is deemed to be guilty of
professional misconduct if he “Accepts an appointment as auditor of a company without first
ascertaining from it whether the requirements of section 225 of the Companies Act, 1956 in
respect of such appointment have been fully complied with”.
2. CA Deepak, a Chartered Accountant prepared a project report for one of his clients to obtain
bank finance (long-term) of Rs. 50 lakhs from a Commercial Bank. Consequent to the sanction
of the loan by the bank CA Deepak raised a bill for his services @ 2% of the loan sanctioned.
Ans: Clause 10 of part I to First Schedule to the Chartered Accountants Act prohibits a Chartered
Accountant in practice to charge, to offer, to accept or accept fees which are based on a
percentage of profits or which are contingent upon the findings or results of such work done by
him.
However, this restriction is not applicable where such payment is permitted by the Chartered
Accountants Act, 1949, the Council of the Institute has framed regulation 192 which exempts
certain professional services from the operation of clause 10.
3. CA Ram who is a leading Income Tax Practitioner and consultant in Jaipur is also trading in
derivatives.
Ans: As per clause 11 of Part-I of First Schedule of CA Act, 1949, a Chartered Accountant is
P a g e | 32
deemed to be guilty of professional misconduct if he “engages in any business or occupation other

than the profession of Chartered Accountant unless permitted by the Council so to engage”.
However, the Council has granted general permission to the members to engage in certain specific
occupation. In respect of all other occupations specific permission of the Institute is necessary.
4. CA Chiranjiv who conducted ABC audit of a Haryana daily ‘New Era’ certified the circulation
figures based on Management Information System Report (M.I.S Report) without examining
the books of Account.
Ans: According to clause 7 of Part-I of Second Schedule of Chartered Accountants Act, 1949, a
Chartered Accountant in practice is deemed to be guilty of professional misconduct if he “does not
exercise due diligence or is grossly negligent in the conduct of his professional duties”.
AUDIT OF BANKS
Powers and The auditor of a banking company or of a nationalised bank, State Bank of India, a
Duties of subsidiary of State Bank of India, or a regional rural bank has the same powers as those
Auditors of a company auditor in the matter of access to the books, accounts, documents and
vouchers. except with following modifications:-
 The auditor of SBI and a nationalized bank may employ accountants or other
persons at the expense of the bank to assist him in audit of accounts.
 Branches of other banking companies will be audited as per section 228 of the
Companies Act, 1956.
 Regional Rural Banks Act, 1976, does not contain any provisions relating to audit of
branches.
 Accordingly, in the case of such banks, audit of branches is also carried out by the
auditors appointed for the bank as a whole.
Initial consideration by the statutory auditor

Declaration of Indebtedness:
(i)The RBI has advised that the banks, before appointing their statutory central/circle/ branch auditors,
should obtain a declaration of indebtedness. In addition to this, the RBI has further advised the banks
that no credit facility (including guaranteeing any facilities availed of by third party) should be availed of
by the proprietor/ any of the partners of the audit firm/members of his/their families or by firm/
company in which he/they are partners/directors
Appointment of Auditor:
Type of Bank How Auditor is appointed How Remuneration to be fixed
State Bank of India To be appointed by RBI Comptroller and To be fixed by RBI of India in
Auditor General of India in consultation consultation with the CG
with the CG
P a g e | 33
Format of Audit Report

The auditors, central as well as branch, should also ensure that the audit report issued by them
complies with the requirements of Revised SA 700, “Forming an Opinion and Reporting on
Financial Statements”, SA 705, “Modifications to the Opinion in the Independent Auditor’s
Report” and SA 706, “Emphasis of Matter Paragraphs and Other Matter Paragraphs in the
Independent Auditor’s Report”. The auditor should ensure that not only information relating to
number of unaudited branches is given but quantification of advances, deposits, interest
income and interest expense for such unaudited branches has also been disclosed in the audit
report. Such disclosure in the audit report is not only in accordance with the best international
trends but also provides useful information to users of financial statements, for example,
though the absolute number of unaudited branches might be quite large but in relation to
overall operations of the bank such unaudited branches are quite miniscule and thus, not
material. Therefore, the auditor should ensure that the complete information in respect of
unaudited branches is collected and disclosed in the audit report.

2013
Classification Norms relating to NPAs
Advances to In respect of Loans/credit facilities granted under “on-lending” arrangement to Primary

“on-Lending Agricultural Credit Societies (PACSs)/Farmers Service Societies (FSSs), only the particular
Arrangement” credit facility granted to PACs/FSS which is in default should be classified as NPA. Other
credit facilities granted to the PACS/FSS will not be treated as NPA. This exemption does
not extend to credit facilities granted outside the “on-lending” system.
Classification of Advances & Provisioning Norms
Doubtful Assets
Provision For Unsecured Portion
Norms  Full provision TO THE EXTENT of the UNSECURD PORTION should be made. In doing
so, the realisable value of the security available, to which the bank has a valid
recourse, should be determined on a realistic basis.
 DICGC/ECGC cover is also taken into account
For Secured Portion
Period - advance remain in doubtful category %
Up to one year 20 25 (Changed)

More than 1 up to 3 years 40
More than 3 years 100
 In case the advance covered by CGTSI guarantee becomes non-performing, no

provision need be made towards the guaranteed portion
P a g e | 34
Sub-Standard Assets
Provision General Provision: A general provision of 15% percent on total outstanding (changed
Norms from 10%) should be made without making any allowance for ECGC guarantee cover
and securities available.
Topic Provisioning of Loans Link:

and Advances- of Study http://220.227.161.86/19367sm_aape_finalnew_cp11.pdf
Material (Page-11.53)
2013
Assess the Risk of Fraud including Money Laundering

As per SA 240 (Revised), “The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial
Statements”, the auditor’s objective are to identify and assess the risks of material misstatement in the
financial statements due to fraud, to obtain sufficient appropriate audit evidence on those identified
misstatements and to respond appropriately. The attitude of professional skepticism should be
maintained by the auditor so as to recognise the possibility of misstatements due to fraud.
Deposit Taking Dealing Lending
Management  Camouflage of  Off market / related party deals  Loans to fictitious

depositors by whereby no checks are carried out on borrowers.
and employee hiding their the prices at which deals are  Transactions with
identity in transacted or there are unusual connected companies.
frauds connection with activity levels with certain  Kick backs and
funds transfer or counterparties. inducements.
money  High level of business with particular  Selling recovered
laundering. brokers, including payment of collateral at below
 Unrecorded abnormal commission. market prices.
deposits.  False deals represented by unusual  Bribes to obtain release
 Theft of customer number of cancelled deals or of security or to reduce
deposits unusually high number of unsettled the amount claimed.
particularly, from transactions.  Theft or misuse of
dormant  Delayed deal allocations collateral held as
accounts.  represented by no time stamping of security.
deals or alterations or overwriting on
deals sheets.
 Exploiting weaknesses in matching
procedures due to absence of proper
guidelines.
External  Money  Fraudulent custodial sales.  Impersonation and false
Laundering.  False information or documents information on loan
Frauds  Fraudulent regarding counterparties. applications.
instructions.  Fraudulent valuations.
 Counterfeit  Misappropriation of loan
currency. funds by agents
/customers
P a g e | 35
Due to the nature of their business, banks are ready for targeting those who are engaged in the money
laundering activities by which the proceeds of illegal acts are converted into proceeds from the legal
acts. The RBI has framed specific guidelines that deal with prevention of money laundering and “Know
Your Customer (KYC)” norms. The RBI has from time to time issued guidelines (“Know Your Customer
Guidelines – Anti Money Laundering Standards”), requiring banks to establish policies, procedures and
controls to deter and to recognise and report money laundering activities.
(Page-11.13) Link:
Updated in SM in Year Jan http://220.227.161.86/19367sm_aape_finalnew_cp11.pdf
2013
Sale/ Purchase of NPAs:

In case of a sale/ purchase of NPAs by the bank, the auditor should examine the policy laid
down by the Board of Directors in this regard relating to procedures, valuation and delegation
of powers.
The auditor should also examine that:

(i) only such NPA has been sold which has remained NPA in the books of the bank for at least 2
years.
(ii) the assets have been sold/ purchased “without recourse’ only.
(iii) subsequent to the sale of the NPA, the bank does not assume any legal, operational or any
other type of risk relating to the sold NPAs.
(iv) the NPA has been sold at cash basis only.
(v) the bank has not purchased an NPA which it had originally sold.
Sale of NPA’s Purchase of NPA’s
In case of sale of an NPA, the auditor Similarly, in case of purchase of NPAs, the
should also ensure that: auditor should verify that:
(i) on the sale of the NPA, the same has (i) the NPA purchased has been subjected to
been removed from the books of the the provisioning requirements appropriate to
account. the classification status in the books of the
purchasing bank.
(ii) the short fall in the net book value has
been charged to the profit and loss account. (ii) any recovery in respect of an NPA
purchased from other banks is first adjusted
(iii) where the sale is for a value higher than
against its acquisition cost and only the
the NBV, no profit is recognised and the
recovered amount in excess of the acquisition
excess provision has not been reversed but
cost has been recognised as profit.
retained to meet the shortfall/ loss on
account of sale of other non-performing (iii) for the purpose of capital adequacy, banks
financial assets. has assigned 100% risk weights to the NPAs
purchased from other banks.
(Page-11.95) Link:
2013
P a g e | 36
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act
(SRFAESI), 2002 Securitisation of Standard Assets:
After the enactment of the Securitization and Reconstruction of Financial Asset and Enforcement of
Security Interest Act, 2002, banks have got significant power to possess the securities of defaulting
borrower. Banks can now take possession of the assets from borrower and convert the same in Security
Receipts.
Process In the process of securitisation, assets are sold to a bankruptcy remote special purpose
vehicle (SPV) in return for an immediate cash payment.
The cash flow from the underlying pool of assets is used to service the securities issued
by the SPV.
Stages Securitisation follows a twostage process. In the first stage, there is sale of single asset or
pooling and sale of pool of assets to a 'bankruptcy remote' special purpose vehicle (SPV)
in return for an immediate cash payment and in the second stage repackaging and selling
the security interests representing claims on incoming cash flows from the asset or pool
of assets to third party investors by issuance of tradable debt securities. Thus, the non-
performing asset of the banker is taken out of the balance sheet of the bank and
converted into Security Receipts.
Accounting Securitised asset should be derecognised in the books of the bank, if the bank loses
control of the contractual rights that comprise the securitised asset. The bank loses such
control if it surrenders the rights to benefits specified in the contract.
For enabling the transferred assets to be removed from the balance sheet of the
originator in a securitisation structure, the isolation of assets or ‘true sale’ from the
originator to the SPV is an essential prerequisite. In case the assets are transferred to the
SPV by the originator in full compliance with all the conditions of true sale, the transfer
would be treated as a 'true sale' and originator will not be required to maintain any
capital against the value of assets so transferred from the date of such transfer. The
effective date of such transfer should be expressly indicated in the subsisting agreement.
In the event of the transferred assets not meeting the "true-sale" criteria the assets
would be deemed to be on the balance sheet of the originator and accordingly the
originator would be required to maintain capital for those assets.
Profit & Loss on Such Sale
When a bank sells the non-performing assets to securitising company, if the sale value of
assets is less than the Net book Value, i.e., books value of advances less provisions, the
shortfall needs to be debited to Profit & Loss Account. However, in case the sale value
being higher, excess provision cannot be reversed and is kept to meet the shortfall/ loss
on account of other non-performing assets
Acounting These Security Receipts are treated as non-SLR security (Investment) in the books of
Treatment in subscribing bank as per RBI guidelines. In the absence of ready market for the Security
the Book of Receipts, the subscribing bank needs to value Security Receipts on the basis of Net Asset
subscribing Value to be declared by Securitising Company on a quarterly basis.
Bank
(Page-11.64) of SM Link:
2012
P a g e | 37
Agricultural Debt Waiver and Debt Relief Scheme 2008 (This topic was already there in Study module
since no. of years and not so Important)
Prudential Norms While the entire 'eligible amount' shall be waived in the case of a small or
for the Borrowal marginal farmer, in the case of 'other farmers', there will be a one time
Accounts Covered settlement scheme (OTS) under which the farmer will be
under the given a rebate of 25 per cent of the 'eligible amount' subject to the condition
Agricultural Debt that the farmer repays the balance of 75 per cent of the 'eligibl e amount'
Waiver and Debt
Relief Scheme, 2008
Norms for the  As regards the small and marginal farmers eligible for debt waiver, the
Accounts subjected amount eligible for waiver, pending receipt from the Government of India,
to Debt Waiver: may be transferred by the banks to a separate account named "Amount
receivable from Government of India under Agricultural Debt Waiver
Scheme 2008"
 The balance in this account may be treated by the banks as a "performing"
asset, provided adequate provision is made for the loss in Present Value (PV)
terms, computed under the assumption that such payments would be
received from Government of India in the instalments.
 However, the provision required under the current norms for standard
assets, need not be provided for in respect of the balance in this account.
Asset Classification: Where the farmers covered under the Debt Relief Scheme have given
the undertaking, agreeing to pay their share under the OTS, their relevant
accounts may be treated by banks as "standard" / "performing" provided :
(a) adequate provision is made by the banks for the loss in PV terms for all the
receivables due from the borrowers as well as the Government; and (b) such
farmers pay their share of the settlement within one month of the due dates
Provisioning in case In case the payments are delayed by the farmers beyond one month of the
of down-gradation respective due dates, the outstanding amount in the relevant accounts of such
of accounts: farmers shall be treated as NPA. The asset classification of such accounts shall be
determined with reference to the original date of NPA

KINDLY NOTE THAT:
SUCH TOPICS WERE ALREADY THERE IN ICAI STUDY MODULE. THERE ARE
NUMEROUS TOPICS WHICH ARE PART OF VPJ CLASSES MODULE AND HAVE
NOT BEEN INCORPORATED HERE. SOME OF THESE TOPICS ARE BEING
SHOWN AS AMENDMENT. FURTHER THERE ARE VARIOUS OTHER TOPICS
WHICH HAVE BEEN MISSED BY THE OTHER AUTHORS. STUDENT CAN
REFER TO OUR MODULE FOR DETAILS. CONTACT-
8130713615,7503630594
P a g e | 38
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CA FINAL ADVACED AUDITING

CA FINAL AUDIT AMENDMENTS

The salient features of the book are:

I look forward for your valuable suggestions and criticism, if any.

Thanks and Warm Regards,

CA Vinod Parakh Jain

WE HAVE COMPREHENSIVELY COVERED ICAI MODULE CONSISTING OF

These Updates can be downloaded at our facebook page – vpj

TWO QUESTIONS FROM OUR UPDATED MODULE

ICAI SUGGESTED ANSWERS

Question 3(d) on Professional Similar Questions in Our Amendment

WE WERE THE ONLY ONE WHO GAVE THESE AMENDMENTS ON

SIMILARLY WE WERE THE ONLY ONE WHO GAVE UPDATES IN FEB.

WHICHWERE APPLICABLE FOR NOV 2012 EXAMS –

Link…. UPLOADED ON CACLUB ON

SOME OF THESE TOPICS HAVE STILL NOT BEEN UPDATED IN MANY

CONNECT WITH US FOR LATEST UPDATE ON IDT AND AUDIT………..

AUDIT GENERALLY CONSIDERED AS A LOW SCORING SUBJECT, EVEN

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OBJECTIVES OF PEER REVIEW

Topic 21.2- of Study Material Link:

Topic 21.3- of Study Material Link:

Applicability (New Norms)

Practice Units subject to Review

Level 1 Level II Level III

Topic 21.4- of Study Material Link:

interest in the reviewed e) Should have signed the Declaration of Confidentiality as

For being a Reviewer a member should not have: -

Topic 21.5.1- of Study Link:

Process of Peer Review

Stage I – Planning Stage II - Execution Stage Stage III - Reporting stage in

reviewer to Board within 15 days involved, review, should also be communicated

Peer Review Process

The Peer Review process will include

1 Selection of Practice Unit & appointment of Reviewer :

(ii) Selection of Sample by the Reviewer:

(iv) Review of Records

a) Compliance Approach – Assurance Service Engagements

b) Substantive Approach - Assurance Service Engagements