CA Final - Advanced Auditing

C.A. FINAL – ADVANCED AUDITING

IMPORTANT AREAS FOR MAY 2010 EXAM
(COMMON TO BOTH OLD SYLLABUS AND NEW SYLLABUS)

MOST IMPORTANT:
1) THE CHARTERED ACCOUNTANTS (AMENDMENT) ACT, 2006 IS VERY IMPORTANT FOR THE EXAM. (REFER LATEST INSTITUTE SUPPLIMENTARY STUDY MATERIAL ON CHAPTER 17 FOR OLD SYLLABUS- CHAPTER-23 IS SUFFICIENT FOR NEW SYLLABUS)
2) PRACTICAL QUESTIONS ON COMPANY AUDIT AND ACCOUNTING STANDARDS ARE VERY IMPORTANT
3) RECLASSIFICATION OF AAS IN TO SA, SAE, SRE AND SRS IS EXPECTED IN MAY 2010 EXAM. STUDENTS ARE EXPECTED TO KNOW THE CORRESPONDING NEW NUMBERS FOR EACH AAS NUMBER. THE PRINCIPLES AND PROCEDURES LAID DOWN IN THE RECLASSIFIED STANDARDS SHOULD BE STUDIED. YOU SHOULD DOWNLOAD THE RECLASSIFIED STANDARDS FROM THE INSTITUTE WEBSITE.

1. RECLASSIFIED STANDARDS ON AUDITING
(SA, SRE, SAE, SRS)
a. SA-200- Basic Principles, Objective and Scope of Audit of Financial Statements
b. SA-210- Agreeing the Terms of Audit Engagements
c. SA-230- Audit Documentation
d. SA-240- Revised- Auditor’s Responsibilities Relating to Fraud
e. SA-250- Revised- Auditor’s Responsibilities Relating to Laws and Regulations
f. SA-260- Revised- Communication with Those Charged with Governance
g. SA-315- NEW STANDARD-VERY IMP.-Identifying and Assessing Risks of MM
h. SA-320- Materiality in Planning and Performing an Audit
i. SA-330- NEW STANDARD-VERY IMP-Auditor’s Responses to Assessed Risks
j. SA-510- Initial Audit Engagements- Opening Balances
k. SA-540- Auditing Accounting Estimates
l. SA-550- Related Parties
m. SA-560- Subsequent Events
n. SA-570- Going Concern
o. SA-580- Written Representations


p. SA-610- Using the Work of Internal Auditors
q. SA-620- Using the Work of an Auditor’s Expert
r. SA-700- (AAS-28) – Auditor’s Report on Financial Statements
s. SA-720- Auditor’s Responsibility in Relation to Other Information in Documents
t. SRS-4410- (AAS-31)- Engagements to compile Financial information
u. SRS-4400-(AAS-32)- Engagements to perform agreed upon procedures
v. SRE-2400-(AAS-33)- Engagements to Review financial statements
w. SAE-3400-(AAS-35)-Examination of prospective financial information
x. SQC-1- Standards on Quality Control

Note: AAS-6, AAS-20, AAS-29 have been withdrawn due to issue of SA-315 and SA-330

2. AS-1, 4, 5, 9, 10, 11, 12, 13, 16, 18, 22, 26 (Revise previous years exam questions on AS since some of them may be repeated)

3. Guidance Notes
a. Section 227(3) (e), (f)
b. Auditor’s Report on Revised Accounts before circulation to shareholders
c. Proposed Dividend
d. Independence of Auditors
e. Audit Reports and Certificates for special purposes
f. Audit of Miscellaneous Expenditure

4. Company Audit-
a. Chapter-4- (Chapters 4 & 5 of old syllabus consolidated in Chapter 6 of New Syllabus)
i) Appointment by special resolution- DCA clarification
ii) Ceiling on company audits- Notification under Code of Ethics
iii) Can the scope of audit be restricted?
iv) True and Fair-to be read with Significance of True and Fair
v) Statutory Auditor in relation to Branch Accounts & Branch Auditor
vi) Gist of CLB Circulars

b. Chapter 5-
i) Auditor’s Duty and Statutory books- Registers under sections 301, 303, 372A, 49
ii) Personal expenses of Directors
iii) Preparation and Presentation of Final Accounts (Section 211)
iv) Divisible profits, dividends and reserves- Distribution of capital profits, Capital Reserve (Reserves)

c. Chapter 6- (Chapter 8 of New Syllabus)
i) Matters under section 227(3)
ii) Inquiry under section 227(1A)
iii) CARO Reporting Requirements- Statement on CARO is very important- Exemption of Private Limited company from CARO- Reporting clauses 1, 2, 4, 5, 7, 9, 10, 13, 14, 15, 16, 17, 18, 19, 21- Council’s comments under clauses in Statement on CARO from Page 54
iv) Distinguish between Audit Report and Certificate

5. EDP Audit (Audit in a CIS Environment)- Chapter-4 of New Syllabus
a. Specific Problems relating to internal control
b. Internal controls in CIS Environment and Evaluation


c. Special Audit Techniques- Audit Software, Considerations in the use of CAAT
d. Controlling the CAAT Application
e. Black Box Approach and White Box Approach

6. INVESTIGATION – Chapter-20 of New Syllabus
Special Issues in Investigation –
Non-statutory Investigations
a. Investigation on behalf of an incoming partner
b. Investigation on behalf of a Bank proposing to advance a loan
c. Investigation for proposal to acquire a limited company or proprietory business

Due Diligence-
What is Due Diligence? Types of Due Diligence
Full fledged Financial Due Diligence- Review of Financial statements, Cash flow, Taxation, Financial Projections
Contents of Due Diligence Report

7. AUDIT OF PSU – Chapter-18 in New Syllabus
C&AG Powers u/s 619(3) & (4) -Comprehensive Audit of PSU, Committees on Public Undertakings

8. PROPRIETY AUDIT- Chapter-18 in New Syllabus
Propriety elements in 227(1A), Propriety elements in CARO 2003, Problems in Propriety Audit

9. BANK AUDIT- Chapter-11
a. Audit of Investments – Prudential Guidelines regarding market portfolio- Master circular (Held to Maturity, Held for Trading, Available for Sale)
b. Prudential norms for income recognition, asset classification (New classification regarding Agriculture advances) and provision (New provision norms for Doubtful assets and Sub-standard assets) Advances under on-lending arrangement, Take-out Finance, Stock exchange and other securities, Life Insurance Policies, Bank’s Own Certificates, Third Party guarantees- Verification of Bills Purchased and Discounted, Inter-office adjustments, Contingent liabilities
c. Concurrent Audit system in Commercial banks-Coverage of branches and Reporting systems
d. Capital Adequacy norms- Annexure III

10. AUDIT OF GENERAL INSURANCE COMPANIES – Chapter-12
a. Definition of Indian Insurance company - Licensing requirements, Obligation to Rural and social sector, Minimum paid-up capital, Deposits
b. Requirements of Schedule B to the IRDA Regulations, 2000- Part-I (Accounting Principles) – Part-III-Contents of Management Report - Audit Considerations
c. Schedule-C-Form of Auditor’s Report
d. Verification of Claims Provision, Verification of claims paid
e. Verification of Operating expenses of the Management
f. Verification of Investments - sections 27B, 27C, 27D
g. Treaty Re-insurance
h. Co-insurance – Incoming and Outgoing
i. Solvency Margin




11. Audit of Members of Stock exchanges- Chapter-17 in New Syllabus
a. Margin Deposits
b. Rolling Settlement
c. Circuit Filter and Circuit Breaker
d. Books of Accounts to be maintained under Rule 15 by a member
e. Contract Notes- Verification of contract notes

12. Audit of Non-Banking Financial Companies – Chapter-14 in New Syllabus
a. Classification of NBFC
b. Registration with RBI
c. NBFC Public Deposits Directions
d. Audit Check List- Investment, Loan, Hire Purchase, Equipment Leasing Companies
e. Obligation to Report to RBI

13. Audit of Co-operative societies – Chapter-13 in New Syllabus
Special Features of Co-operative Audit, Rights and Duties of Co-operative Auditors Audit of Multi-State Co-operative Societies,

14. Audit Committee and Corporate Governance – Chapter-9 in New Syllabus
New clause 49 of the listing agreement–SEBI Circulars- Entire Chapter-9 in New Syllabus Material is Important (Chapter 15 in Old Syllabus Material)

15. Tax Audit- Chapter-15 in New Syllabus
Audit u/s 44AB- Audit Reports, Form 3CD - Audit under VAT very important

16. Peer Review- Chapter-21 in New Syllabus
Definition, Objectives, Technical Standards, Reporting

17. Management Audit and Operational Audit – Chapter-19 in New Syllabus
Management Audit and Operational Audit
a. Scope of Management Audit and Operational Audit
b. What is Management Audit Questionnaire? (Measuring performance through MAQ)
c. Behavioural Problems in conducting Management audit & solutions to overcome such problems
d. Objectives of Operational Audit

18. Professional Ethics (INSTITUTE MATERIAL WITH CA AMENDMENT ACT 2006 VERY IMPORTANT)- Chapter-23 in New Syllabus

a. Section 2(2) (Revised Definition of Management Consultancy Services in 2004) and Sections 7, 8, 24 – Other Misconduct (Very important – as per CA Amdt. Act, 2006)
b. First Schedule- Part-I- clauses 2, 3, 4, 6 7, 8, 9, 11 (Regulation 191 and Regulation 190A (Revised in 2004- VERY IMPORTANT),
c. First Schedule- Part-II- clause 2
d. First Schedule- Part-III- clauses 2, 3
e. Second Schedule-Part-I-clause 1- Role of C.A. in relation to Unlawful acts of his clients, clauses 4, 5, 6, 7, 10
f. Second Schedule-Part-II-clauses 1, 3, 4
g. Latest Council notifications are important in the Institute study material. (Starting from Notification No. 53/2001 till Notification no. 93/2006) –



Now these notifications have been withdrawn and issued as Council’s General Guidelines, 2008 which should be downloaded from Institute website.
h. Latest Council guidelines regarding advertisement through write up issued in May 2008
i. Latest Council Notification No.116 of 2008 issued on 25th September 2008 which includes new Regulation 53A and Regulation 53B which is relevant for clauses 2,3,4,5 of Part-I of First Schedule

19. Sarbanes Oxley Act, 2002 (Only for New syllabus) –Titles under SOX, Section 302 and Section 404, June 15th Final Rules, PCAOB Overview and Functions, Internal Control over Financial Reporting

20. PROBABLE SHORT NOTES QUESTIONS

(Certain short notes questions, which are already covered in the respective chapters given above have not been repeated here)

a. Report on Agreed Upon Procedures Engagement (SRS 4400)
b. Professional Skepticism (SA-240)
c. Audit Risk, Inherent Risk, Control Risk, Detection Risk, Audit in a Risk based Environment (Chapter 5 in the New Syllabus Material)
d. Management Representation letter (SA-580)
e. Qualified Opinion, Disclaimer of Opinion (AAS-28)
f. Company Audit- Personal expenses of Directors, Capital Reserves, Interim Dividend, Non-provision for Proposed Dividend, Non-provision for tax liability
g. Qualified and Independent Audit Committee, Audit Committee u/s 292A,
h. Special Report to the Registrar of Co-operative societies (Point No.8 in Special Features in Co-operative Audit)
i. Audit and Investigation
j. Audit of Members of Stock Exchange – refer to points given earlier
k. SA-570- Financial, Operating and Other Indications
l. EDP Audit- Black Box and White Box Approach

NOTE:
In recent exams there is a trend of asking Drafting of Letters, Audit Programmes, Questionnaires, Qualifications, Opinions etc. In the Institute Study Material, in the Chapters and in AAS, CARO etc where drafting of illustrative letters, qualifications, adverse remarks etc are given you should learn the basic requirements of drafting such letters, Letters, Audit Programmes, Questionnaires, Qualifications, Opinions etc

General Notes:

1. All the areas given in this attachment are based on LATEST EDITION of Institute Study Material
2. Do not answer the compulsory questions 1 and 2 at the beginning of the exam. First answer two or three direct and simple questions before attempting questions 1 and 2 which are practical.
3. Present the answers point-wise and avoid paragraph-wise presentation.
4. Examples and illustrations given in Chapters are important for practical questions.




FOR STUDENTS WHO ARE WRITING CA FINAL NEW SYLLABUS

You have to prepare the following topics in the New Syllabus Institute study material Volumes I and II fully for new syllabus alone.

1. Chapter – 9 – Corporate Governance (Partially covered in Chapter-15 in Old Syllabus)
2. Chapter – 22 – Sarbanes Oxley Act, 2002 (Not covered under Old Syllabus)
3. Guidance Notes on
a. Capital and Reserves (Covered in Chapter-5 in Old Syllabus)
b. Payment of Dividends (Covered in Chapter-5 in Old Syllabus)
c. Reports in Company Prospectuses (Covered in Chapter-6 in Old Syllabus)