Taxmann's Audit of Financial Statements

About the Author

e h t g n i d a e h s i d tn wndysci i a i c e da s oe t nhn l um e l c a ear l e er t np Fe n i H orf m o i u i y ar oo.Fn e g d c e spccn s n n c i i x e a ay a t t t )eH i St ln Hf.ds e Rnu (od e e F o r sae l s I c yr otg e c n ra rr . n t eb orAm i p a s ya i I hsA di r se m2 c i f e2& dCere n l hhaa aIHeh t f i Ci r t nto .a t d i f psnh nf o nwI e i i Co e dmst m ecnnercda i u i t e t t ee hatots a c uateaCea T drotteDbe s a t d c apbi i r a i h rned u n ca l gi cefi e a r In nf r m i aA a FDu i t rs r r Cu s ,I e e &as stnC hA n g fs t o i dn o i Ait w & i e r s iatt y & r e n e n e l b hi t un t i mpot l i md ha mcra t eu o xocau MAb ecApQ

Pranav Jain

Pranav Jain, FCA

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I-5

Pre face In the past few years as large number of bank loans have turned bad and number of corporate frauds are getting unearthed, allegations of negligence by auditors have been rising.

As a consequence, The Institute of Chartered Accountants of India (ICAI) and government through oversight bodies like National Financial Reporting Authority (NFRA), Securities and Exchange Board of India (SEBI) have become more committed to driving audit quality, primarily through their audit inspection processes. There is changing public expectation and audits are under increasing scrutiny, with continued discussion of the need to better address the gap between what the auditor is required to do and what the stakeholders expect the auditor to do. Law and regulations are changing, with enhanced and evolving reporting requirements, which are driving different business and reporting decisions.

High expectations from auditors is not entirely misplaced. The word “audit” is intended to convey a clear message to the users of the financial statements that the auditor has obtained reasonable assurance that the financial statements are free from material misstatement, regardless of the size or type of the entity.

It is important to note that Standards on Auditing do not distinguish the audit approach required for audit of a “one-person entity” from the audit approach required for audit of a large corporate with facilities at multiple locations and employing thousands of people. “An audit is an audit”. The basic approach to an audit, therefore, does not change just because the entity is small.

This book has been written to assist audit staff in carrying out audit of the financial statements. The book comprehensively covers the entire process related to audit of financial statements of companies not following Ind AS and other non-corporate entities (such as Trusts, LLP) I-7

E C A F E R P

I-8

starting with appointment/reappointment of auditors and concluding with issuance of audit report. Even though the book does not specifically address the requirements of Ind AS. The contents of the book are relevant in most aspects of audit of financial statements prepared as per the Ind AS. For example, risk assessment procedures or audit of cash and bank balances are equally relevant to audit of Ind AS compliant entities.

The book provides guidance on “Risk Based Audit” as per the Standards on Auditing issued by the Institute of Chartered Accountants of India besides covering the procedures to be performed by the auditor for each financial statement area, disclosures required by Schedule III (Division 1) and Accounting Standards. Practical examples have been included to explain the audit procedures and other concepts, for example, reconciliation of balance of trade payables with the balance confirmation received from the party has been explained by way of a numerical example. Similarly numerical examples have been included to explain the concept of FIFO and weighted average in case of valuation of inventories.

Many audit procedures require an auditor to refer to provisions of the Companies Act, 2013 and Accounting Standards. An effort has been made to include the applicable provisions of the Companies Act, 2013 in relevant chapters. For example, relevant provisions of Companies Act, 2013 related to Share Capital have been included in the chapter on Audit of Share Capital. Similarly relevant extracts of accounting standards have been included in respective chapters to give an overview of the accounting standard. This will enable the audit staff to link the audit procedures of a particular financial statement area with the legal requirements and the requirements of the accounting standards.

In addition to the disclosure requirements of Schedule III (Division 1) and Accounting Standards, reporting requirements under the Companies Act, 2013 and The Companies (Auditor’s Report) Order, 2020 [CARO, 2020] have also been incorporated as applicable in the relevant chapters.

For example, reporting requirements related to Property, Plant and Equipment in CARO, 2020 have been included in the chapter on Audit of Property, Plant and Equipment. This will facilitate linking of the audit procedures to relevant reporting requirements.

An effort has been made to address commonly noticed errors in application of standards or disclosure requirements. This has been done either by including a numerical example or by reference to opinion of Expert Advisory Committee of the ICAI.

E C A F E R P

I-9

The book also includes various templates to facilitate documentation requirements as required by various standards on auditing as well as to obtain information from the entity in a meaningful format.

It is, however, important to caution that the book is not a substitute for complete text of the standards on auditing, accounting standards, Companies Act, 2013 or other pronouncements. It is advisable to refer to the complete text of the standards/pronouncements for comprehensive knowledge on the subject.

The ICAI holds the copyright for the publications of the ICAI. Text from various publications of the Institute of Chartered Accountants of India has been reproduced under permission from the ICAI. i 2 h 2 l 0 e 2 D , l i w r e p N A

CA. PRANAV JAIN

Gratitude I started my career in auditing in July 1997 when I commenced my practical training for chartered accountancy. During these 25 years, I have learnt a lot from my teachers, seniors, peers, clients, and juniors. In a way all of them have contributed to the creation of this book and this is indeed overwhelming. I am grateful to each one of them.

It would not have been possible for this book to see the light of the day without the blessings of Bhagwan Mahavira, Mata Saraswati, and Ganpati Bappa.

I am what I am today all because of my father Late Sh. Sunil Kumar Jain. He made sure that I get the best education and acquire professional qualification. I still vividly remember how deeply he was involved in my education particularly in strengthening my English. He always believed in continuous learning and upgrading skills. His words on the day I cleared my CA Final examination still echo in my ears- “Your studies have not ended; they have just begun”. How right he was! A strong believer of good education for all, my father was always happy to share his knowledge and selflessly taught many relatives. Perhaps his zeal to share his knowledge has inspired me to write this book!

This book would not have been possible without the blessings of my mother Smt. Sushma Jain, my father-in-law, Sh. Naveen Kumar Jain and my motherin-law Late Smt. Shashi Jain.

Besides my parents, my grandmother Smt. Snehalata Jain and my aunt, Late Ms. Anita Jain played a key role not only in my upbringing but also in my getting good education.

I am always inspired by my Principal, CA. Suresh Chand Mathur who even at the age of more than ninety years continues to go to office and work enthusiastically. I learnt my lessons in office discipline from him during my training.

I would like to express my deep gratitude to my colleagues, CA. Salil Bhandari, Ms. Sushmita Singha, CA. Darshan Chhajer for their continuous I-11

E D U T I T A R G

I-12

motivation and encouragement to go beyond routine audit practice and share my knowledge. I am also grateful to all my team members particularly CA. Mohit Aggarwal, CA. Chayanika Joshi, CA. Krishna Chopra, Mr. Utkarsh Nagar, Ms. Subuhi Gul, and Ms. Monika Jangra who not only provided their valuable feedback from time to time but also helped me in developing templates, researching, and compiling information for the book.

I would like to thank the Institute of Chartered Accountants of India for granting permission to draw references to and reproduce from various publications of the Institute.

I would like to thank Taxmann Publications, particularly Mr. Punit Aggarwal for providing me with an opportunity to write this book and trusting me as I wrote my first book.

Lastly, I would like to express my deepest gratitude from the bottom of my heart to my dear wife Poonam and my son Shubhankar for their understanding, support, and continuous motivation. I would like to apologize to both of them for not being able to spend time with them due to my preoccupation with this book. I know these words cannot bring back those moments and I really appreciate their patience.

I hope that this book would serve its intended purpose and help in improving the quality of audit and enable the audit fraternity to meet the ever increasing expectations of the regulations and other stakeholders. I look forward for suggestions and feedback for further improvements. .

2 0 j 0 n 0 a 1 G 1 i a h y l r e a D D 8 w 0 e 1 N

CA. PRANAV JAIN

m o c . l i a m t o h @ v a n a r p n i a j : l i a m E

Chapter-Heads PAGE

About the Author Preface

I-5 I-7

Gratitude Contents

I-11 I-15

CHAPTER 1

: STRUCTURE OF AUDIT

1

CHAPTER 2

: PRELIMINARY ACTIVITIES, APPOINTMENT, ROTATION, RESIGNATION AND REMOVAL OF AUDITORS

3

CHAPTER 3

: JOINT AUDIT

38

CHAPTER 4

: ASSESSMENT OF RISKS OF MATERIAL MISSTATEMENT

50

CHAPTER 5

: ASSESSING INHERENT RISKS OF MATERIAL MISSTATEMENT

69

CHAPTER 6

: EVALUATION AND RESPONSE TO RISK OF FRAUD

83

CHAPTER 7

: EVALUATION OF INFORMATION TECHNOLOGY ENVIRONMENT

109

CHAPTER 8

: UNDERSTANDING INTERNAL CONTROLS

114

CHAPTER 9

: USING THE WORK OF INTERNAL AUDITOR

160

CHAPTER 10 : MATERIALITY

169

CHAPTER 11 : RESPONSE TO ASSESSED RISKS

188

CHAPTER 12 : FURTHER AUDIT PROCEDURES

207

CHAPTER 13 : ENGAGEMENT TEAM DISCUSSIONS

222

CHAPTER 14 : AUDIT MANAGEMENT AND LOGISTICS

230

CHAPTER 15 : COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCE

268

CHAPTER 16 : COMPLETION OF PLANNING

275

CHAPTER 17 : CORE CONCEPTS

277

CHAPTER 18 : AUDIT EVIDENCE

306

CHAPTER 19 : OPENING BALANCES

312

CHAPTER 20 : AUDIT SAMPLING

318

CHAPTER 21 : AUDIT OF SHARE CAPITAL

323

I-13

S D A E H R E T P A H C

I-14 PAGE

CHAPTER 22 : AUDIT OF RESERVES & SURPLUS

345

CHAPTER 23 : AUDIT OF BORROWINGS

351

CHAPTER 24 : AUDIT OF TRADE PAYABLES, OTHER LIABILITIES

370

CHAPTER 25 : AUDIT OF PROVISIONS AND CONTINGENT LIABILITIES

393

CHAPTER 26 : AUDIT OF PROPERTY, PLANT AND EQUIPMENT

413

CHAPTER 27 : AUDIT OF INTANGIBLE ASSETS

431

CHAPTER 28 : AUDIT OF INVESTMENTS

444

CHAPTER 29 : AUDIT OF INVENTORIES

462

CHAPTER 30 : AUDIT OF TRADE RECEIVABLES

480

CHAPTER 31 : AUDIT OF LOANS & ADVANCES AND OTHER ASSETS

495

CHAPTER 32 : AUDIT OF CASH AND BANK BALANCES

518

CHAPTER 33 : AUDIT OF REVENUE FROM OPERATIONS

536

CHAPTER 34 : AUDIT OF OTHER INCOME

547

CHAPTER 35 : AUDIT OF PURCHASES

556

CHAPTER 36 : AUDIT OF EMPLOYEE BENEFITS EXPENSES

566

CHAPTER 37 : AUDIT OF OTHER EXPENSES

589

CHAPTER 38 : OTHER AUDIT PROCEDURES

603

CHAPTER 39 : AUDIT OF RELATED PARTY TRANSACTIONS

610

CHAPTER 40 : CONSOLIDATED FINANCIAL STATEMENTS

619

CHAPTER 41 : OVERVIEW OF BANK AUDIT

633

CHAPTER 42 : ASSESSMENT OF GOING CONCERN

638

CHAPTER 43 : ASSESSMENT OF SUBSEQUENT EVENTS

648

CHAPTER 44 : OVERVIEW OF STANDARDS ON AUDITING

654

CHAPTER 45 : OVERVIEW OF ACCOUNTING STANDARDS

661

CHAPTER 46 : WRITTEN REPRESENTATIONS

669

CHAPTER 47 : AUDIT QUALITY ASSURANCE, AUDIT COMPLETION AND EVALUATION OF RESULTS OF TESTS PERFORMED

674

CHAPTER 48 : COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCE

692

CHAPTER 49 : FORMING AN OPINION - AUDIT REPORT ON THE FINANCIAL STATEMENTS

697

Contents

E G A P

About the Author

I-5 Preface

I-7 Gratitude

I-11 Chapter-Heads

I-13

1

PRELIMINARY ACTIVITIES, APPOINTMENT, ROTATION, RESIGNATION AND REMOVAL OF AUDITORS

n o i t c u d o r t n I

s r o t i d u a s a t n e m t n i o p p A

s r o t i d u a f o n o i t a t o R

s r o t i d u a y b n o i t a n g i s e R

s r o t i d u a f o l a v o m e R

t n e m e g a g n E / t m n er i o l C F

17

APPENDIX 3 :

e t a c fi i t r e c r o r t e i t d t u l e a t d n n e a m t t n n e o i s n p o p C A

s r o t i d u a s u o i v e r p m o r f C O N

25

APPENDIX 5 :

I-15

23

APPENDIX 4 :

16 APPENDIX 1 :

e c n a u n i t n o C d n a e c n a t p e c c A t n e m t n i o p p a r o f l a s o p o r P

APPENDIX 2 :

s t n e m e r i u q e r g n i t r o p e R

15 2.6

9 2.4

4 2.2

12 2.5

8 2.3

3 2.1

1 u

t i d u A f o e r u t c u r t S

STRUCTURE OF AUDIT

2

22

S T N E T N O C

E G A P

t n e m t n i o p p a f o e c n a t p e c c A t n e i l c r u o y w o n K

r e t t e l t n e m e g a g n E

n o i t a r a l c e d y t i l a i t n e d fi n o c d n a e c n e d n e p e d n I JOINT AUDIT

n o i t c u d o r t n I

s n o i s i v o r p l a g e L

s t i d u a t n i o J

d e t i m i l R Q P f o t i d u a y r o t u t a t S

e h t r o f s r o t i d u a t n i o j e h t 2 n2 e0 e2 w1 , t3 e bh nc r oa i t M u b: i d r e t s d i n d e kr ra oe Wy s r e t t a m r e h t O

ASSESSMENT OF RISKS OF MATERIAL MISSTATEMENT

n o i t c u d o r t n I

e c n a r u s s a e l b a n o s a e R

t n e m e t a t s s i m l a i r e t a M

k s i r t i d u A

k s i r t n e r e h n I

k s i r l o r t n o C

k s i r n o i t c e t e D

t i d u a d e s a b k s i r f o s t i f e n e B

t n e m s s e s s a k s i r f o t p e c n o C

s e r u d e c o r p t n e m s s e s s a k s i R

e l b a t k s i R

68

APPENDIX 2 :

53 4.9

52 4.7

67

APPENDIX 1 :

52 4.8

52 4.6

51 4.4

50 4.2

52 4.5

51 4.3

50 4.1

47 APPENDIX 2 :

39 3.3

44 APPENDIX 1 :

42 3.4

38 3.2

36 APPENDIX 9 :

27 APPENDIX 7 :

38 3.1

30 APPENDIX 8 :

26 APPENDIX 6 :

I-16

3

4

E G A P

ASSESSING INHERENT RISKS OF MATERIAL MISSTATEMENT

w e i v e r l a c i t y l a n a y r a n i m i l e r P

t n e m n o r i v n e s t i d n a y t i t n e e h t g n i d n a t s r e d n n o U i s u l c n o C

EVALUATION AND RESPONSE TO RISK OF FRAUD

n o i t c u d o r t n I

d u a r f f o s c i t s i r e t c a r a h C

e l g n a i r t d u a r F

d u a r f f o s e p y T

d u a r f f o n o i t c e t e d d n a n o i t n e v e r p e h t r o f y t i l i b i s n o p s e R

r o t i d u a e h t f o s e i t i l i b i s n o p s e R

d u a r f t c e t e d o t g n i n n a l P

d u a r f o t e u d t n e m e t a t s s i m l a i r e t a m f o s k s i r o t s e s n o p s e R

s t n e m e t a t s l a i c n a n i f e h t n o t c a p m i f o n o i t a r e d i s n o C

h t i w d e g r a h c e s o h t d n a t n e m e g a n a m o t n o i t a e cc i n n ua n mr e mv oo Cg e c n e d i v e t i d u a f o n o i t a u l a v E

n o i n i p o t i d u a d n a s t n e m e r i u q e r g n i t r o p e R

n o i t a t n e m u c o D

s n o i t a t n e s e r p e r t n e m e g a n a M

t n e m e g a g n e e h t m o r f l a w a r d h t i W

t i d u a r /o dt ri a d ou ba l ha t i n wr e st e n i i r i d u n qa nt i rn oe f m te s i g l a k cn ea hm c, ee vt e i t t i a r m t s m uo l l c I

102

APPENDIX 1 :

100 6.14

t n e m s s e s s a k s i r d u a r F

107

APPENDIX 2 :

100

6.15

99 6.13

t n e m n o r i v n e s t i d n a y t i t n e e h t g n i d n a t s r e d n U

6.11

98 6.9

98 6.12

98

97

6.10

94 6.8

87 6.6

85 6.4

88 6.7

86 6.5

84 6.3

82 APPENDIX 1 :

83 6.2

n o i t c u d o r t n I

5.4

81

5.2

83 6.1

79

70 5.3

69 5.1

S T N E T N O C

I-17

5

6

S T N E T N O C

E G A P

EVALUATION OF INFORMATION TECHNOLOGY ENVIRONMENT

UNDERSTANDING INTERNAL CONTROLS

n o i t c u d o r t n I

l o r t n o c l a n r e t n i f o s e v i t c e j b O

l o r t n o c l a n r e t n i g n i d n a t s r e d n u r o f d e e N

l o r t n o c l a n r e t n i d n a r o t i d u A

l o r t n o c l a n r e t n i f o s n o i t a t i m i L

t i d u a e h t o t t n a v e l e r s l o r t n o C

l o r t n o c l a n r e t n i f o s t n e n o p m o C

? s n a e m t n e m n o r i v n e l o r t n o c y r o t c a f s i t a s a t a h W

s l o r t n o c l a n r e t n i f o n o i t a u l a v E

s l o r t n o c f o s e p y T

e r i a n n o i t s e u q l o r t n o c l a n r e t n I

l a n r e t n i g n i d n a t s r e d n u r o f t r a h c w o l f e v i s t l a o r r t t s n uo l l c I

157

APPENDIX 3 :

l a n r e t n i f o h g u o r h t k l a w g n i t n e m u c o d r o f e t s l a o l p r t mn eo Tc s l o r t n o c l a n r e t n i f o g n i t s e T

USING THE WORK OF INTERNAL AUDITOR

n o i t c u d o r t n I

t n e m e r i u q e r l a g e L

160

9.2

t n e m n o r i v n e T I f o n o i t a u l a n v o E i s u l c n o C

160

9.1

s l o r t n o c y g o l o n h c e t n o i t a m r o f n i l a r e n e G

APPENDIX 2 :

8.11

122 8.9

s l o r t n o c y g o l o n h c e t n o i t a m r o f n I

126

129 APPENDIX 1 :

124 8.10

122 8.8

116 8.6

115 8.4

117 8.7

116 8.5

115 8.3

113 APPENDIX 1 :

114 8.2

n o i t c u d o r t n I

7.1A

114 8.1

112 7.3

109

110 7.2

109 7.1

I-18

7

8

158

9

E G A P

e g a t s g n i n n a l p t a n o i t c n u f t i d u a l a n r e t n i f o n o i t a r e d i s n o C

f o n o i t a r e d i s n o c d n a r o t i d u a l a r no rt e i t d n u i a fl o a n kr re ot wn i ef ho t s t gr no i p s e Ur r o t i d u a e h t y b d e m r o f r e p e b o t s e r u d e c o r P s t n e m e r i u q e r g n i t r o p e R

s k s i r d n a n o i t c n u f t i d u a l a n r e t n i f o n od i e t i a f i ut l n a e vd Ei MATERIALITY

n o i t c u d o r t n I

y t i l a i r e t a m g n i t c e f f a s r o t c a F

y t i l a i r e t a m f o s e p y T

y t i l a i r e t a m l l a r e v O

y t i l a i r e t a m e c n a m r o f r e P

y t i l a i r e t a m c i f i c e p S

y t i l a i r e t a m e c n a m r o f r e p c i f i c e p S

l a i v i r t y l r a e l C

y t i l a i r e t a m f o n o i s i v e R

n o i t a t n e m u c o D

y t i l a i r e t a m g n i t a l u c l a c r o f e t a l p m e T

RESPONSE TO ASSESSED RISKS

n o i t c u d o r t n I

l e v e l t n e m e t a t s l a i c n a n i f e h t t a s k s i r o t s e s n o p s e r l l a r e v O

l e v e l n o i t r e s s a e h t t a s k s i r d e s s e s s a o t e s n o p s e R

d u a r f f o k s i r e h t o t g n i d n o p s e R

t n e m e t a t s l a i c n a n i f e h t o t d e t a l e r s e r u d e c os rs pe c eo vr i t p n ag t n s i s bo ul Sc

s e r u d e c o r p t i d u a f o g n i m i T

e r u s o l c s i d d n a n o i t a t n e s e r p f o y c a u q e d A

201

11.7

t i d u a y r o t u t a t s n i n o i t c n u f t i d u a l a n r e t n i f o e c n a v e l e R

11.6

200

11.4

190 11.2

198

199

11.5

192

11.3

188 11.1

182 10.10

180 10.8

183 APPENDIX 1 :

181 10.9

180 10.7

177 10.5

171 10.3

179 10.6

171 10.4

170 10.2

165 9.7

169 10.1

166 APPENDIX 1 :

165 9.6

163 9.5

163 9.4

161 9.3

S T N E T N O C

I-19

10

11

S T N E T N O C

E G A P

n a l p e h t f o n o i t a c i n u m m o C

m a r g o r p t i d u a e l p m n a o S i s u l c n o C

FURTHER AUDIT PROCEDURES

n o i t c u d o r t n I

s e r u d e c o r p e v i t n a t s b u S

n o i s u l c n o C

ENGAGEMENT TEAM DISCUSSIONS

n o i t c u d o r t n I

n o i s s u c s i d m a e t t n e m e g a g n e f o s t i f e n e B

n o i s s u c s i d m a e t t n e m e g a g n e f o s e v i t c e j b O

s n o i s s u c s i d m a e t t n e m e g a g n e g n i d l o H

n o i t a t n e m u c o D

n o i s s u c s i d m a e t t n e m e g a g n E

AUDIT MANAGEMENT AND LOGISTICS

n o i t c u d o r t n I

n a l p t i d u A

s e i t i l i b i s n o p s e r & s e l o r g n i n g i s s A

t e g d u b e m i T

m u d n a r o m e m g n i n n a l p t i d u A

m a r g o r p t i d u A

t s i l t n e m e r i u q e R

e l b a t e m i t t i d u a e v i t a r t s u l l I

s e i t i l i b i s n o p s e r & s e l o R

242

APPENDIX 2 :

237

14.7

n o i t a t n e m u c o D

240

APPENDIX 1 :

236

14.6

236

14.4

230 14.2

236

14.5

235 14.3

230 14.1

225 13.5

223 13.3

226 APPENDIX 1 :

223 13.4

222 13.2

220 12.3

204 APPENDIX 1 :

222 13.1

209 12.2

e t e l p m o c s i n a l p t i d u a e h t r e h t e h w g n i n i a t r e c s A 11.9

207 12.1

202 11.11

202

202 11.10

201 11.8

I-20

12

13

14

E G A P

s r u o h d e t e g d u b l a t o T

m u d n a r o m e m g n i n n a l p t i d u A m a r g o r p t i d u a e v i t a r t s u l l I t s i l t n e m e r i u q e R

COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCE

n o i t c u d o r t n I

d e t a c i n u m m o c e b o t s r e t t a M

s n o i t a r e d i s n o c r e h t O

e c n a n r e v o g h t i w d e g r a h c e s o h t o t r e t t e l t f a r D COMPLETION OF PLANNING

n o i t c u d o r t n I

d e r e d i s n o c e b o t s r e t t a M

n o i s u l c n o C

CORE CONCEPTS

n o i t c u d o r t n I

m s i c i t p e k s l a n o i s s e f o r P

s t n e m e t a t s s i m g n i t a u l a v E

s n o i t a m r i f n o C

n o i t a t n e m u c o d t i d u A

s e c n e r e f f i d t i d u a d e t s u j d a f o y r a m m u S

s n o i t a m r i f n o c l a n r e t x e r o f t e e h s l o r t n o c e v i t a r t s u l l I

AUDIT EVIDENCE

n o i t c u d o r t n I

306

18.1

305

APPENDIX 2 :

297 17.5

280 17.3

302 APPENDIX 1 :

289 17.4

277 17.2

276 16.3

277 17.1

275 16.2

271 APPENDIX 1 :

275 16.1

270 15.3

266 APPENDIX 6 :

250 APPENDIX 4 :

269 15.2

254 APPENDIX 5 :

245 APPENDIX 3 :

268 15.1

S T N E T N O C

I-21

15

16

17

18

S T N E T N O C

E G A P

e c n e d i v e t i d u A

t i d u a r e h t a g n a c r o t i d u a e h t h c i h w m o r f s e c r u o s e ec l n b i e s d s i ov Pe e c n e d i v e t i d u a f o s c i t s i r e t c a r a h c y e K

t i d u a f o s s e n e t a i r p o r p p a d n a y c n e i c i f f u s g n i t c e f f a e sc r n oe t d c i av Fe e c n e d i v e t i d u a f o y t i l i b a i l e r g n i t c e f f a s r o t c a F

e c n e d i v e t i d u a e t a i r p o r p p a & t n e i c i f f u s g n i n i a t b O e c n e d i v e t i d u a f o s e p y T

s m e t i d e t c e l e s r o f s n o i t a r e d i s n o c c i f i c e p S

OPENING BALANCES

n o i t c u d o r t n I

s t n e m e g a g n e g n i u n i t n o C

s t n e m e g a g n e l a i t i n I

d r a w r o f t h g u o r b s e c n a l a b g n i n e p o f o n o i t a c i f i r e V

AUDIT SAMPLING

n o i t c u d o r t n I

g n i l p m a s f o s e p y T

e z i s e l p m a s e h t g n i t c e f f a s r o t c a F

s s e c o r p g n i l p m a s e h T

s r e t t a m r e h t O

AUDIT OF SHARE CAPITAL

n o i t c u d o r t n I

s t n e m e r i u q e r g n i t r o p e R

f o ) 1 n o i s i v i D ( I I I e l u d e h c S r e p s a s3 t 1 n 0 e2 mt , ec r A i u s qe ei r n a ep r um so oC l c s e i h Dt

l a t i p a c e r a h s f o t i d u A

341

21.4

340

21.3

325

21.2

322 20.5

319 20.3

323

21.1

320 20.4

319 20.2

313 19.3

318 20.1

317 APPENDIX 1 :

312 19.2

310 18.9

308 18.7

312 19.1

309 18.8

308 18.6

307 18.5

306 18.3

307 18.4

306 18.2

I-22

19

20

21

E G A P

AUDIT OF RESERVES & SURPLUS

f o ) 1 n o i s i v i D ( I I I e l u d e h c S r e p s a s3 t 1 n 0 e2 mt , ec r A i u s qe ei r n a ep r um so oC l c s e i h Dt AUDIT OF BORROWINGS

n o i t c u d o r t n I

s t n e m e r i u q e r g n i t r o p e R

f o ) 1 n o i s i v i D ( I I I e l u d e h c S r e p s a s3 t 1 n 0 e2 mt , ec r A i u s qe ei r n a ep r um so oC l c s e i h Dt s g n i w o r r o b f o t i d u A

e l u d e h c s s g n i w o r r o B

r e t t e l n o i t a m r i f n o c t n e i l c e h t f o d a e h r e t t e l e h t n O

AUDIT OF TRADE PAYABLES, OTHER LIABILITIES

n o i t c u d o r t n I

s t n e m e r i u q e r g n i t r o p e R

f o ) 1 n o i s i v i D ( I I I e l u d e h c S r e p s a s3 t 1 n 0 e2 mt , ec r A i u s qe ei r n a ep r um so oC l c s e i h Dt s e i t i l i b a i l r e h t o d n a s e l b a y a p e d a r t f o t i d u A

e c n a l a b f o n o i t a m r i f n o c r o f t s e u q e R

AUDIT OF PROVISIONS AND CONTINGENT LIABILITIES

n o i t c u d o r t n I

s e i t i l i b a i l t n e g n i t n o c & s n o i s i v o r p f o t i d u A

s t n e m e r i u q e r g n i t r o p e R

401

25.3

s u l p r u s d n a s e v r e s e r f o t i d u A

394

25.2

392 APPENDIX 1 :

367 APPENDIX 2 :

393

25.1

387 24.4

365 APPENDIX 1 :

386 24.3

372 24.2

n o i t c u d o r t n I

23.2

370 24.1

361 23.4

352

360 23.3

351 23.1

348 22.3

346 22.2

345 22.1

S T N E T N O C

I-23

22

23

24

25

S T N E T N O C

E G A P

t r e p x e t n e m e g a n a m f o n o i t a u l a v E

r i f n o c r e y w a l y n a p m o c e h t f o d a e h r e t t e l en hi o t t na Om y t i l i b a i l t n e g n i t n o C

AUDIT OF PROPERTY, PLANT AND EQUIPMENT

n o i t c u d o r t n I

t n e m p i u q e d n a t n a l p , y t r e p o r p f o t i d u A

s t n e m e r i u q e r g n i t r o p e R

fd o n )a 1 t nn ol a i s p i v , i y Dr t (e Ip I I o r ep l “ u d0 e1 hcS s A r e d pn sa a 3 s1 t 0 n e2 , mt c eA r i u qs e ei n r ” at ep n r ume s m o oC p l i c u s eq i he Dt

AUDIT OF INTANGIBLE ASSETS

n o i t c u d o r t n I

s t n e m e r i u q e r g n i t r o p e R

f o ) 1 ” ns t oe i s s i s v a i De (b l Ii I g I n ea l t u n di e“ h6 c2 SS rA e pd sn a a s3 t 1 n 0 e2 mt , ec r A i u s qe ei r n a ep r um so oC l c s e i h Dt s t e s s a e l b i g n a t n i f o t i d u A

AUDIT OF INVESTMENTS

n o i t c u d o r t n I

s t n e m t s e v n i f o t i d u A

s t n e m e r i u q e r g n i t r o p e R

449

28.2

t fn o e )g 1 n nt i on i s o i c v i , s Dn (o Ii I s I i v eo l u r dp e“ h9 c2 SS ” rA s e t p e d s ns sa a a s3t t 1n n e 0 e2 g mt n ,i ec t r n Ao i u sc qe ei d r nn eaa p r s u e smt i o oC i l l i c b s ea i hi Dt l

455

28.3

444 28.1

439 27.4

439 27.3

434 27.2

425 26.4

417 26.2

431 27.1

424 26.3

413 26.1

410 APPENDIX 3 :

409 APPENDIX 2 :

-

406 APPENDIX 1 :

401 25.4

I-24

26

27

28

E G A P

-

3 1 0 2 , t c A s e i n a p m o C f o 6 8 1 s / u s t i m i l f o n o i t a c i f i r e V s t n e m e r i u q e r g n i t r o p e R

” fs o e )r i 1 o nt n oe i s v i v n i i Df (o In I I o i ea t l u u da l ev h“ c2 SrS e A pd sn a a s3 t 1 n 0 e2 m, t ec r i A u s qe ei r n a ep r u sm oo l C c s e i h Dt s e i r o t n e v n i f o t i d u A

d l e h s e i r o t n e v n i f o n o i t a m r i f n o c f o r e t t e l r os f r te a h mt ro oy Fb AUDIT OF TRADE RECEIVABLES

n o i t c u d o r t n I

s t n e m e r i u q e r g n i t r o p e R

f o ) 1 n o i s i v i D ( I I I e l u d e h c S r e p s a s3 t 1 n 0 e2 mt , ec r A i u s qe ei r n a ep r um so oC l c s e i h Dt s e l b a v i e c e r e d a r t f o t i d u A

e c n a l a b f o n o i t a m r i f n o c r o f t s e u q e R

AUDIT OF LOANS & ADVANCES AND OTHER ASSETS

n o i t c u d o r t n I

s t n e m e r i u q e r g n i t r o p e R

f o ) 1 n o i s i v i D ( I I I e l u d e h c S r e p s a s3 t 1 n 0 e2 mt , ec r A i u s qe ei r n a ep r um so oC l c s e i h Dt s t e s s a r e h t o d n a s e c n a v d a & s n a o l f o t i d u A

h t i w e c n a i l p m o c3 1 d0 n2 a, sc t e cA ns ae vi dn aa &p sm no aC of l o f6 o 8 e1 l u n do et i hc ce Ss

516

APPENDIX 1 :

AUDIT OF INVENTORIES

n o i t c u d o r t n I

510

31.4

508

31.3

501

31.2

494 APPENDIX 1 :

495 31.1

489 30.4

479 APPENDIX 1 :

488 30.3

480 30.2

ft o s e )v 1 n ni or i o s i f v i g Dn i (t In I I u o ec l u c da e“ h3 c1 SS rA e pd n sa a s3 t 1 n 0 e2 mt , ec r A i u s qe ei r n a ep r u sms ” o oC t l n c s ee i hm Dt 29.2

480 30.1

476 29.4

467

476 29.3

462 29.1

461 APPENDIX 1 :

455 28.4

S T N E T N O C

I-25

29

30

31

S T N E T N O C

E G A P

AUDIT OF CASH AND BANK BALANCES

s t n e m e r i u q e r g n i t r o p e R

f o ) 1 n o i s i v i D ( I I I e l u d e h c S r e p s a s3 t 1 n 0 e2 mt , ec r A i u s qe ei r n a ep r um so oC l c s e i h Dt d n a h n i s e u q e h c / h s a c f o n o i t a c i f i r e v l a c i s y h P

r e t t e l n o i t a m r i f n o c y t i t n e e h t f o d a e h r e t t e l e h t n O t e e h s l o r t n o c k n a B

AUDIT OF REVENUE FROM OPERATIONS

n o i t c u d o r t n I

s t n e m e r i u q e r g n i t r o p e R

f o ” )n 1 o nt i oi i n s i g v o i c De (r Ie I I u en l e u v de er h“ c9 SS rA e pd sn a a s3 t 1 n 0 e2 mt , ec r A i u s qe ei r n a ep r um so oC l c s e i h Dt e u n e v e r f o t i d u A

AUDIT OF OTHER INCOME

n o i t c u d o r t n I

s t n e m e r i u q e r g n i t r o p e R

f o ” )n 1 o nt i oi i n s i g v o i c De (r Ie I I u en l e u v de er h“ c9 SS rA e pd sn a a s3 t 1 n 0 e2 mt , ec r A i u s qe ei r n a ep r um so oC l c s e i h Dt e m o c n i r e h t o f o t i d u A

AUDIT OF PURCHASES

n o i t c u d o r t n I

s e s a h c r u p f o t i d u A

557

35.2

s e c n a l a b k n a b d n a h s a c f o t i d u A

556

35.1

553 34.4

552 34.3

548 34.2

532 APPENDIX 2 :

547 34.1

545 33.4

535 APPENDIX 3 :

530 APPENDIX 1 :

545 33.3

539 33.2

n o i t c u d o r t n I

32.2

536 33.1

528 32.4

522

528 32.3

518 32.1

I-26

32

33

34

35

E G A P

s t n e m e r i u q e r g n i t r o p e R

f o ) 1 n o i s i v i D ( I I I e l u d e h c S r e p s a s3 t 1 n 0 e2 mt , ec r A i u s qe ei r n a ep r um so oC l c s e i h Dt AUDIT OF EMPLOYEE BENEFITS EXPENSES

n o i t c u d o r t n I

s t n e m e r i u q e r g n i t r o p e R

f o ) 1 n o i s i v i D ( I I I e l u d e h c S r e p s a s3 t 1 n 0 e2 mt , ec r A i u s qe ei r n a ep r um so oC l c s e i h Dt s e s n e p x e s t i f e n e b e e y o l p m e f o t i d u A

g n i t s e t l l o r y a p r o f r e p a p k r o W

5 1 S A r e p s a e r u s o l c s i d e v i t a r t s u l l I

AUDIT OF OTHER EXPENSES

n o i t c u d o r t n I

s t n e m e r i u q e r g n i t r o p e R

f o ) 1 n o i s i v i D ( I I I e l u d e h c S r e p s a s3 t 1 n 0 e2 mt , ec r A i u s qe ei r n a ep r um so oC l c s e i h Dt s e s n e p x e r e h t o f o t i d u A

e l u d e h c s e s a e L

s i s a b p i h s r e n i a t e R s e s n e p x e l a n o i s s e f o r p & l a g e L

s e s n e p x e r e h t o g n i t s e t r o f r e p a p k r o W

OTHER AUDIT PROCEDURES

s e r u d e c o r p r e h t O

d n u f n o i t c e t o r p d n a n o i t a c u d e r o t s e v n I

, t c A s e i n a p m o C e h t f o ) 2 ( 4 6 1 s / u n o i t a c i f i l a u q s i D ’ s r o t c 3 e1 r i 0 D2

s e e t t i m m o c d n a s r o t c e r i d f o d r a o b f o s g n i t e e m f o s e t u n i M

606

38.4

601 APPENDIX 2 :

605

38.3

603

38.2

602 APPENDIX 3 :

600 APPENDIX 1 :

603

38.1

596 37.4

585 APPENDIX 2 :

595 37.3

589 37.2

580 APPENDIX 1 :

589 37.1

574 36.4

573 36.3

568 36.2

561 35.4

566 36.1

561 35.3

S T N E T N O C

I-27

36

37

38

S T N E T N O C

E G A P

g n i t e e m f o s e t u n i m f o y r a m m u S

s e i n a p m o C e h t f o ) 2 ( 4 6 1 s / u n o i t a r a l c e d ’3 s r 1 o0 t 2 c et , r c i DA AUDIT OF RELATED PARTY TRANSACTIONS

n o i t c u d o r t n I

s t n e m e c n u o n o r p s u o i r a v r e d n u s e i t r a p d e t a l e R s e r u d e c o r p t i d u A

s t n e m e r i u q e r g n i t r o p e R

8 1 S A d r a d n a t s g n i t n u o c c a r e p s a s t n e m e r i u q e r e r u s o l c s i D CONSOLIDATED FINANCIAL STATEMENTS

n o i t c u d o r t n I

s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o c f o n o i t a r a p e r P

n a n i f d e t a d i l o s n o c f o t i d u a n i r o t i d u a e h t y b s st nn oe i t m a r e e t a dt i s s na l oi Cc

s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o c n i s e r u s o l c s i D

s t n e m e r i u q e r g n i t r o p e R

t r o p e r s ’ r o t i d u a t n e d n e p e d n I

OVERVIEW OF BANK AUDIT

n o i t c u d o r t n I

r o t i d u A

t i d u a k n a b n i s u c o f f o s a e r a y e K

s r e t t a m r e h t O

634 41.3

ASSESSMENT OF GOING CONCERN

n o i t c u d o r t n I

638

42.1

636

41.4

634 41.2

627 APPENDIX 1 :

633 41.1

626 40.5

620 -

40.3

624 40.4

620 40.2

617 39.5

613 39.3

619 40.1

617 39.4

611 39.2

609 APPENDIX 2 :

610 39.1

608 APPENDIX 1 :

I-28

39

40

41

42

E G A P

e h t n o t b u o d tn n r ae cc i f n i o n gc i g s n ti s o a cg ya as ma e tu a n hi t t sn no oc i t o i t d y nt ol i ci rb oa s s’ t y n t i et vn Ee n r e c n o c g n i o g f o t n e m s s e s s a s ’ t n e m e g a n a M

d e w o l l o f e b o t s e r u d e c o r p d n a s e i t i l i b i s n o p s e r s ’ r o t i d u A g n i t r o p e r d n a n o i s u l c n o c s ’ r o t i d u A

e c n a n r e v o g h t i w d e g r a h c e s o h t h t i w n o i t a c i n u m m o C s r e t t a m r e h t O

ASSESSMENT OF SUBSEQUENT EVENTS

n o i t c u d o r t n I

r o t i d u a e h t y b d e m r o f r e p e b o t s e r u d e c o r P s n o i t a r e d i s n o c r e h t O

e r i a n n o i t s e u q y r i u q n i s t n e v e t n e u q e s b u S

OVERVIEW OF STANDARDS ON AUDITING

n o i t c u d o r t n I

g n i t i d u a n o s d r a d n a t S

s d r a d n a t s l o r t n o c y t i l a u q d n a t n e m e g a g n e f o t s i L

s t n e m e r i u q e r n o i t a t n e m u c o d c i f i c e p S

s r e h t O

OVERVIEW OF ACCOUNTING STANDARDS

n o i t c u d o r t n I

a i d n I n i s d r a d n a t s g n i t n u o c c A

s e i t i t n e e t a r o p r o C : s d r a d n a t s g n i t n u o c c a f o y t i l i b a c i l p p A

s e i t i t n e e t a r o p r o c n o N : s d r a d n a t s g n i t n u o c c a f o y t i l i b a c i l p p A

s d r a d n a t s g n i t n u o c c a f o t s i L

s r e t t a m r e h t O

666

45.5

662

45.3

667

45.6

664

45.4

661 45.2

660 44.5

655 44.3

661 45.1

659 44.4

655 44.2

652 APPENDIX 1 :

649 43.2

654 44.1

651 43.3

648 43.1

646 42.6

641 42.4

647 42.7

644 42.5

641 42.3

639 42.2

S T N E T N O C

I-29

43

44

45

S T N E T N O C

E G A P

WRITTEN REPRESENTATIONS

e c n e d i v e t i d u a s a s n o i t a t n e s e r p e r n e t t i r W s n o i t a t n e s e r p e r n e t t i r w y e K s n o i t a r e d i s n o c r e h t O

AUDIT QUALITY ASSURANCE, AUDIT COMPLETION, AND EVALUATION OF RESULTS OF TESTS PERFORMED

n o i t c u d o r t n I

e c n a r u s s a y t i l a u q t i d u A

y t i l a i r e t a m f o t n e m s s e s s a e R

s t n e m e t a t s s i m l a i r e t a m f o s k s i R

s e r u d e c o r p w e i v e r l a c i t y l a n a l a n i F

s t n e m e t a t s s i m f o n o i t a u l a v E

l o r t n o c l a n r e t n i f o n o i t a u l a v E

d u a r f f o k s i r f o n o i t a u l a v E

s t n e m e t a t s l a i c n a n i f f o n o i t a u l a v E

s t n e m e t a t s l a i c n a n i f f o y t i l a u q g n i r u s n E

t s i l k c e h c e c n a r u s s a y t i l a u q t i d u A

k s i r n o n o i s u l c n o C : e l b a t k s i R

COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCE

n o i t c u d o r t n I

n o i t e l p m o c t i d u A : d e t a c i n u m m o c e b o t s r e t t a M

e c n a n r e v o g e g r a h c e s o h t o t r e t t e L

692

48.2

n o i t c u d o r t n I

694

APPENDIX 1 :

692

48.1

691 APPENDIX 2 :

683 47.10

681 47.8

685 APPENDIX 1 :

681 47.9

681 47.7

677 47.5

676 47.3

679 47.6

676 47.4

675 47.2

671 46.4

669 46.2

674 47.1

670 46.3

669 46.1

I-30

46

47

48

E G A P

FORMING AN OPINION - AUDIT REPORT ON THE FINANCIAL STATEMENTS

n o i t c u d o r t n I

g n i t r o p e r t i d u a r o f t i d u a n o s d r a d n a t S

3 1 0 2 , t c A s e i n a p m o C e h t r e d n u g n i t r o p e R

n o i n i p o e s r e v d a h t i w t r o p e r s ’ r o t i d u a e l p m a S t s u r t r o f t r o p e r s ’ r o t i d u a t f a r D t r o p e r O R A C

716 APPENDIX 3 :

708 APPENDIX 1 :

698 49.2

713 APPENDIX 2 :

703 49.3

697 49.1

S T N E T N O C

I-31

49

10

CHAPTER

MATERIALITY

d n a s s e c o r p t i d u a e r i t n e e h t o t l a t n e m a d n u f s i y t : i r l a o i t r i e d t u a a me fh o t ty p eb cd e ni op l cp ea hs Ti

10.1 INTRODUCTION

o r p t n e m s s e s s a k s i r f o t n e t x e d n a g n i m i t , e r u t a n e h t g n i n i m; s re e r t e u dd e nc i ; t n e m e t a t s s i m l a i r e t a m f o s k s i r e h t g n i s s e s s a d n a g n i y f i t n e d i n i

o t s e r u d e c o r p t i d u a f o ; te n c en t e x d ei dv ne ai t gd nu i a me it t a ,i e r r p uo t r a p np ea ht t n ge i nc i i n f i f mu rs e r t e e h dt a ng i u

d ns at n te i d um e at ea t hs t l na oc i sn t a n n ei mf ee t h a t t s n s o i , my dn ea i f f i i t , s n t en de i fm o e t ta c t es f s f i e em hd t e gc t ne i t r a r uo l c a vn eu f no i u

e t a t s l a i c n a n i f e h t n o t r o p e r s ’ r o t i d u a e h t n i n o i n i p o e h t g n i ms rt on f e nm i -

u

u

-

u

. ,es y cn t en he e t fum l i e f ln t a a it i r o s e t l t a d a i ec mt n ca ee n bpi xf oe e t h det ebf r yo e l s b i da s i s a nnb o os e ca h et er n r a do ,l n s e nuk ooa c i ,t s e s s t i r a mg e s oe u r gg f o ng i s a d n ueo l hs i c t i nn c i e ,id s r t oc n i eym l l ma o eu n t do a i c t v s e i s e d i h nt Mi

l or a e sot i l c a a e n t trs a u u ln sa bo ii f ,l s ccf t n s n iao ed r ne i mn f s eo lu t nae a i t ,rh s e e t lp t l a a f i c mmo naan ax o ne rs i i oi f r f c eo ye hF d c t i . l ne c o i i v pm si t t g a n o t n ui n i ot o t c mnne a u auo e oqc h t ct n yo ae l n nfc oeon tr e e o r u naul f stsn a o e i hc l i l t y p sa i psd e m. ar e t s yu a t t sa i en l ou r e a l i c qam r s ete e i dnt t d a aea onms Mt i t

,ia lt tee e n hp lv in et oc ms rna m ea pad a e n t xn n r i a f e e o a t s hrnfs o s o h w i f t F o k m,. n y te a l Anen mn anue . e tpoo tT p e emgcas c t r coa s as e ncl e nip ol la omu ca rh lR e o m a t sfkif r u l a o e l a l ai t o r ea srr e boen v aftomo a l n s n na i me i r t ar el u emp ut nt i aa eusa e R hmb r g t l dfl n i rel o i e w bu v ts hto a t h hcnr a oy gtet r m i n bn emu e t ea ve oa i dp t t m d lm a s u l uai s o e fc t e t r i m n m ba ag aduo f sas o e i t ds es ymh r t t n uo i n j t l f ef d e a v g i a o m i r n g rni e e t t aouna a r o ni fr t Mo eas s

169

: y t i l a i r e t a m s n i a l p x e

0 2 3 A S

“ Materiality in Planning and Performing an Audit”

-

-

Y T I L A I R E T A M

ta n . s ege mnr i v o ea t r a hc t y s yt s ni i f maf p s dme eo e t p c s uau j R d ff ao nso t t un i f ee o mmr aep s t a a et d hs n t la a ,i r s ce e vnr eao r nc wi of d Hen ha .t h s kou t al o l h a ei t r ne s Ot e e ap sm e e u peR ubf to Ro r f e n o v e tb o i f n lr o l ri u pwt g n i s s e s s a n i s r o t c a f e v i t a r t s u l l i g n i w o l l o f : l ea hr i t e rt e a dm i s s ni ot cn yu ao mm a rn oa t i d r e uh at ee hh Tw

s d n e r t y l l a i c e p s e , s d n e r t n o t n e m e t a t s s i m e h t f o t c a p ; my it l i l a i i b t a n t ei t f o o pr ep hn t i ) (

ry oa f ( m s e l b a v i e ; ) cs es rro oel a tdo a i f r t o t n rl i pu g fn ob t i t n n ur i ou sd t s x ora l ot afe nr so o e if gs e nib avt hoi f cro p tar a p hgl n t a i n td i n rg eo r ca me er m t a en l t i s p t s l mu i mas xe aer ) (

l ea cu nt ac i a l p r t mn oo cc sr ’ e y h t i t to n , e) o ei ht t a nr ot n te n ; s ern r muo ecs i t e i a l v t p o s s m r i p a mx y r eeo hrt t oa f f( l o u sg tt c e anr a pn d me n iv a lo , a s ct i t tn n e ebm e t d o e p e h r t ei g hw a t ) ( r6 o0 f 0 ( 2 s, t t n c eA mD eE r i M u qS eM r r ge nd i t n r ou pd ee r r e yv r oo t c a s l e u i gr t ea r rp oo yt) ; e r l f ob o t a e u yr t e a a h t p s t t fe s s o e r eru e ct s nn o i ee l t c s li s i p x emd d an ex he a t ) ( ne or i t e a h s nt e pg) ; n i x my a of t s ci e tr ra os o f y e ayb pbt i e,f e l l o b p r am p i r t ae a vxn ner r ao o t( f r c e el v f eo f nn e nr eo u hs t t r se d a e t hpe t tn g a r ea hm t t t r e n go ea f mnt s ean t me a t m y s s ee i r i mku fq ao ) (

tr n o ed mu ea t r a f t s e s v i l mo v en hi t s t gn ne i d m ne ua t ot rs r s ui sm se e h ct nr ae t s h t me uh cw r i r c ee) ; d hi s s t t n c fo a o c l y a , t e g i l e v p l i l t i m i s e nab l exi e s s rs eo o h( fp t ) ( s i m e h t y b d e t c e f f a m e t i t n e m e t a t s l a i c n a n i f e h t f o e c n a ct ; i f n i e n gm i e s t ea hs t t ) (

r o f , t n e m e t a t s s i m e h t o t t c e p s e r h t i w t n e m e g a n a m f o n o i t a ve : i t l o p mm a ex he t ) (

viii

vice versa

ii

170 Para 10.2

i

iii

iv

-

v

vi

-

vii

; s g n i n r a e ’ e g a n a m ‘ o t t n e m e t a t s s i m l a n o i t n e t n i n a ) (

t n e; s me et ga am ni t as me g yn bi t sn a u i o b c fc o a ng n ri e t t a t l a pu m eu l b c i c s a s od pn aa g fn o i p no ol i e t v a e cd i d n ne i nh aw ) (

a

b

.tee e s e l l n d t u b m ? ea i raem e c res amt r ieeda oslgd b a e i m e et nas g a a t n cl on a i nu oei t t e c r ac p tp dl eeen i a o h r c e u r xtim u gce p gq smg p ea ’ a neg i me n r t an tii lg r l d it a mt i f ns u i se enl l e c hm dea sl xe t uhw geen ng riote i aelwdm e i t wg d do f y ona i c t l wn exui l l o g o i na a f ht i yatyr e ,n t e t l e e i p r a l t c a o a t hf mt na i i h srermat e t b f e t td s taon o d i i i ns f mnr n o sn a i r oo, e i yop vtFe c c t a t . i e ta ledh l e a l n i e t i p r r ysep s m e uaemo t j a h m g r a d t x p d a , Me p u s frfme a j r o ooi l ca s i nF%f o na .5eh ob i h ow s t i c t ma a s % ss l ’ e y 5 u u l t met i f chi l l h t o a ar a a fi h ep Co rWt t

10.2 FACTORS AFFECTING MATERIALITY

-

Y T I L A I R E T A M L L A R E V O

: y t i l a i r e t a m l l a r e v o g n i n i m r e t e d n I

e dh nt uf oo re r r uu st sa e cn nd an t a s me z ui cs r e i c h et hy; t h fbo t o db te h tf gco i e l f n nf o i a i s t e t a r n n eai mhb gcm i dh o uw c j sda e r kno aa, t myn t i rt e on m t i ee d t uea h t at s eg s i hn m Ti

la ly a l i l ia c c nnu aad i nnv i i f i f d enn ho i t fmr e o m s sou . ) r r c e e h s cd ea uh l o oteh t fte lo o r a i a nnh r , o e p s i t tu a r a oo me r r, r edge r iad s a l tnso o a a h hcst e a r r sn e r u s e t oun t t dfe a b meoe s s a tb dd u ek , oeen na br aanb st so t ia n n t s eea a mmmh gerc o t da u f ut n s Js ( i u

-

u

s,.r d d e o l e no ” t i e h a l ms t o s e rr s h e i t hm w e dt a y a l s rs l a oi a t i s tr i I t d en .t ue ae l ao mm eh e hw et t a , bt a y d s gsl l u ea a t o i a sw c t r n n t sa s t n ten m i i ef d em e ut aaeh lttt s l a r a lt o r a s . i e lfy y vca t i onitl i c a l a n en a i i r hi ar f e t ne t i gef ta h a nt e i mm h h l srt“l o , i a dr l f h b ee cl yi at lv t h i a l s wco a e i y esl nr i e v et sp o i ha m bhi Wma Ts

l regld l e e o h a n e r v f i t t r g e g c e lsn l a e e vgi t l awe oar b f e od ahl eo t n ncy hka t smetlu ni yued t o t argi a n i henlhr t a a i h i t i e pd t r w b sr oe e (r s t e s t e a s pc t l w t n pe mn toe ear n l e uomc mnr. o e a n ott y ct s ” as nl mr o a i t metua aes s f e i r s s fr nfi co oa e f aumr t kuea tbde sdt y e a i m a ePr t r . g t te l s o c c e e f l t i t a a r s e n f r t s g i d ec s“ e e gv i admenao a ye n ep, t es i kuts) l h a y d i o a t dt l t i t e s i n r s t l e l t e da a aa c c i t i h n r x a adc t e M enoe s t p d t y a a s t t i encne e mi n l i car r f e lbm nyr l l o l t a o al a i be catr r ma t rinereoa o r v r u v t oe t p s f teoioe d s r t e e a i e uh a ha hm Pmgt tt -

ln tt sea n cii unnc d ouene couat s c l e amfnr i n f ,ai s e e t nroh n oett i s i s dfe t c e eo b alt s c s i y nfes a aopa r sxbm t t e fn es o r eeho smbtt e yne s el s o t s b v a a n a t l n s c e n i s k ri o l a om sai t f a t ,n es d r e er e rt he deo s sh l i u up l w b o ; fe asco l t ey p s s t r e inm sul o a a i s i i x s or yl i e t i cecr l t e s a a i do i d r m F c( e rli t l . a o ms a ms r ot) ,e nne ce e i cvo u f m c i n noe c e n e a t el a v e a pa e ht hs t Sbt r

ed cn na ay mi t l ra oi f r r e e t pa sm a tc p i f ei cc ne op cs o et mn ao s i t ea hl t e sr i n yi t i t le a i s r s e i t t a i mty . t eai h ct l a nt i ap r e met c rx a oe m f , r l y e l t a pi l r ci a e i f v ro i e c ett pao Smn

l ea hi t c on t a sn a i f te n h et mn gi dd ue j t l c a e nr r oo i s c s t e f o o n rf pi sa t ’ r h ot t i ) d s ( ut an ee hm t e nt ot a ds s ei s m a bf so i t yn t i u l a o i r m e a t a m mu lm l a i r x e va Om

10.4 OVERALL MATERIALITY

Para 10.4 171

10.3 TYPES OF MATERIALITY

1. Overall Materiality

2. Performance Materiality

3. Specific Materiality

4. Specific Performance Materiality

e t a m i t l u e h t h c i h w y b s r o t c a. f d ee hg t d fu o j ee nb ol l si i tw n t i ud ou ma ae h yt t i l f a o i r e e r t u a l i ma f lr l a o r e s ve s oc ec hu Ts 5 2 f o t n u o m a n a ts : a e tr e u s d se a c wo r yp t i l t a i i d r u e t a a g mn i lm l a r r e o f vr oe tp a f ho t rl t e u ds i e s nr oa cs ,a e l , p f I m. s an xo ei l rl oi Fm

e b l l i w n o i n i p o d e i f i d o m n u n a — d e i f i t n e d i e r e w s t n e m e t a t s s ; i d me u os s Ni ) (

t o n d n a d e i f i t n e d i ; ed r e e u ws s i se t n b el l mi ew t n a t o s i s n i i mp o )d l a e i i r f e i t d a o mm mn iu ( n la l a : md e st c we er r f o Ac ) (

) ey s ra nde m oaw i d l le n i s ; s o t s mo i n t n pe n 5o i p e 2r m peom f tdt e l a o e l t a i ( a s f t yri i s s t d s omo i i l a e mm i dn r me f e o o t stut a c n ea n mdr e ger:m ndo)s s r c i ns on d e ecuos i ee l ls crgi a xtnms eni ’ n 5r sei 2 t o ma t n i e m eg d fu eo ma r (a ent t a yo a a t t i t m h l s t t a s c d i i r h e mnc j e b t daua u eds s t n smd c ut n eo n e au r e f r h s o mt s ce r t i s s neu s e e Uwj b l ) ( )y s r na os i s l le i c ; me d e 5nr 2ei hu t q fe e o kr ( e yab t m i l l l a oi i t w r e g n t n a i o l i l mi n i gwp nno i u d e s esr eae cwv x d t en a se t r mo n eed mge a i en f t i l aa a t mu s s q i d mn a : dat s edn t ne c eum o r f t r s oeu cr j ne d Uwa ) ( t nni i ed thu s ta i x e—d e )ri o s f t i ni d od i uo l l i am m n e hu 5t e 2y t bi a fdr o ep ( t o r ycp e t t i l p e a a dn i r ti e o t nn a ea mr g gei n nwu i ts d eus ebi csf xto enk e s sm i r r ot et ra i r d tu e s dla ean i t c c a. n ea sn r r nii o oi e n r cfe i e nh p ho Ut t ) (

: y t i l a i r e t a m l l a r e v o g n i n i m r e t e d n i s p e t s e e r h t e r a e r e h T

; k r a m h c n e b d e t c e l e s e h t r o f a t a d l a i c n a n i f e t a i r p o r p p a g n i y f i t n e d I

; k r a m h c n e b d e t c e l e s e h t o t d e i l p p a e b o t e g a t n e c r e p e h t g n i n i m r e t e D

iii.

; k r a m h c n e b e t a i r p o r p p a n a g n i t c e l e S

ii.

Y T I L A I R E T A M

. rd yo el l t e f a a t t u t a d s des li hi s a vs i i i c m d l nn b ai y a l t nr l i a esi f e r ah e t y yit t e i a b, l a s m nt i r en e keer t ama a t s semt t na ln l ot e a i s s r s m i i e c e emvt d ot a d ce e s i t h l mc t a en i or c nr a n ooha cct n enrf i eue e hfhh t o gt i tt c t nha eu sh f i f o t , a e s tmt e o aa i l neg p lh e l m r i t g wI i fg t s. i a, t r n t e ei esh d mutu t en na t i e e a rh t mo s t

i.

`

v

172 Para 10.4

-

` i

ii

`

-

iii

`

`

iv

10.4.1 Determining Overall Materiality

s i s ds, eiy eml nfe d noi t w oc i t e y a f r f me a rev ol y f b a n i i s m s lo a s i pd c nee ahe ntn i ,e f e s r no o of h mew r , mes r ohe cts d u en ha l t a npu u d oo i v dri egd s n ai a bsc i saf i si yrc e e t i s p l u s a . i d s r n e e uo r t o e a sd i t mrn i a s lven l mo a e r hec e t t t a vf o t Oo n s

10.4.2 Selecting an appropriate benchmark

-

,a ly y l t in i c l no a i am r n e m i t f a o e c mh s t ef k no r i a sm mr re h e sc t un e dee hb ot t fe koh rgt a f no mi hde n ca m nt o es S r be . t edn t ne a ui i r l pnc oar r i ppe h pot l ae o tvt e s odc i df ml i c eue o hh p t s s grs no t i t n t i e c d eu m l e ae s t ea nt hs t I

u

, e m o c n i , y t i u q e , s e i t i l i b a i l , s t e s s a ( s t n e m e t a t s l a i c n a n i f e h t f o ; ) ss t e n s en me p ex l E e u

x e r o f ( s u c o f o t d n) ; eA t sD r T e I s B uE en ho t s hu cc i h o wf o nt od sn e mt ey t i a em r a s r ee r s e hu t e h rt e , he t l e p hm Wa u

e r e r a s t n e m t s u j d a s u o r e m u n r e h t e h w ( s t i d u a h t i w y r o; t ) s ? i d h e ti r s a u Pq u

r o t c e s l i a t e r e l p m a x e r o f ( y r t s u ; d) nt e i a et hs t e da l ne ar yn t i i t d n e eg ea hg t n fe o y en r a up t a m no ec hr To xey era a rom oh s f e ( wx d a est cre nor t as o e f nv e i f b n si t i i yf tt i o ir yu aqp t wee eyn hbe , t dc de ncn ana m ear n r ; i ok ) uf f t yrr c ulea rnpm i t l a h s a i c pmc n i sne h siab n r y i e t e f t ni th a i wnt r ip oew e o sh ’ r y tdp t i fep n t i ra n ee el n ca epn hmo e Tac b e h t s) . e ? or da e ,y e l o p t mr aa xe ey rm oo f ( r f ky rt l a n ma hi c ci f nn eg bi s es he t t a fu o t c yu t l i f l i t t i a f l o o r vp en vo i i tt a a l x e r a t ee hr Tp

,s r ie t l i p pvd uen swa o , s sH t r n o.e l t i a m d r e eet r na c e t ,gs s l r na oi i t c cn s i e l a vb n nui i f :pn e , s i dn d uo l e it c s nte u i t r i st e t s t n nn ei i mee tr ea a t t a s o t s , h . ls t r w a n e i ,e c s r nmre o e at f s f ns i i uud f e c e e, hr hs t a t e,, feen s o ya o oc sl i t r p ya e r m s m e uev r o e,e s f hr ni n Te i

: w o l e b d e t a r t s u l l i e r a s d e e n r i e h t d n a s t n e m e t a t s l a i c n a n i f e h t f o s r e s u e m o S

e u n e v e R

User

u

) t s e ) s r n e t o n i t i c e e v l l r o s ) e c n s o x o t a i t y t c e t e i l c m l o a o p c C a n T c ( i S ( y t y G t ( i i l l i b i e b u a t a n t fi fi e o o v r r e P P R

s e i t i r o h t u a x a T

u

) s t b e d t s n i a g a y t i r u c e s ( s t e s s A l a t o T

s a h c u s s r e s dk nn ea Lb

u

) s t n e t a p e l p m a x e r o f ( s t e s s A

u

-

u

g n i y a p d n e d i v i d , t n e m t s e v n i n o n r u t e r ( y t i l ) i y b t ac i t fi a op ra Pc

u

sp e u vt nr i a lt a s i t n n i es t r o o Pt

Interest of the user

/ s r e d l s o r ht o es r e a v hn Si

Commonly used benchmarks

x a t e r o f e b t i f o r P ) (

a

Y T I L A I R E T A M L L A R E V O

egd nn hneqoi o Tinent d rnac .ne e s a cahl e t nhte s s nr ot,s ee crme pd eeh h e ht xnb t t eu a t c orne ryt to ob f yb f selesa e t m d : s t k e s i a ui s e y a l h s l d tbc os t a t u l l oydsc l k r a no e rml t n at a o i o t mes,cr r s a ,ha o t f de s t e cses i fd t xnn c o s aee natu t b ani sa n le ehmi r e o h f e c s oi t vt i s f a ht i is y e t bwsyaab h t r l i p t k tna t i s i r oc n f mu a o l l rtneei m pnanen e h n a r c ,mf i oAn e f i uge, ms .e ndh e b tg l eut u n vjfpp e i t eao m n a r i ssayrr a :e r xae e p e m e dks o sr uaurs’ m y l r p eoe c t p i nrhFs t a . t i o un t t t u en , di a y a d o eu ef h t bi s ho uawau t u

-

u

u

Para 10.4 173

-

-

-

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Y T I L A I R E T A M

t sessenni xg r n i f o en omonyt o i r: rifeiot t t a i n e or ia ml xps b l f a n ( a tauoiano t r t o i sef r m i e i i f e s e t t t i r a a tdorn a e x r o i p I r x t p t a n m . t r ’ a t n s s b d o n t ep u eamerel de l heerezei d r i o er t l d i p i f t g a s hWul e a f n n l a t . mo t i i s c nbor n l w x c t o ewe oeo i g i i f dvet o N r l a o e o t l el p ‘ on r t o erl. e e f n t r i cput i t vr oa e f x ffa n o e i e o i e i s r d rctr n a d upns p s i po xo nn tnan fct ar a oi o ogo y n p , i d i l t i sl t pstn C s a t e k a a a i o s n . u a x f r s ss t ee p t a r i y o c t y t a mndi l uab e e d een, l m k y f g r t t n a r a pa l ena atr’ t a r n o d s s d omt r t a l) i eee iai t c a f v d h z v s a i coi fuiie c e l r xn r i i s r ni ae pnaaa t , f t at m g l r b i a nn reo e e s i a u b r o e d f h set nh to edpsu a ro‘ i eed ht nenogr t she uhatie fi lts t nmp o s t o u o e a ea ta sl i s rtif t r h r h r p i e a e t a c oe xu he l mo s rv e as wy Uabt po r -

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. ti ty i f fi t o o l rra ppr i ’ee d t ga ea s rm i l e a ve ma t a r l s or u ne c ‘ l da es i s c uno o t oc t s e err o t t a o i i r d r puc o 6 ra6 pe2 ph aTs .i ey r t t ol i a h ma i t r se , s i r tta a i tme a y h e e t ne si r r m h e rt de t i ts s nea odp cof rto oxx t at a i t d uee r aro o ef f he e Tbb

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Profit before Tax PBT

FY 2017-18 (` Lakhs)

FY 2018-19 (` Lakhs)

FY 2019-20 (` Lakhs) Particulars

FY 2017-18 (` Crs) FY 2018-19 (` Crs) FY 2019-20 (` Crs) Particulars

174 Para 10.4

Illustration 1

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st n i k a i s rt ho a t n bs we re m g t a nh eoi ynh c n nrce oonr t e t rir d e a t r eue r yare nenh t oher e gTbu . f s ne s i a o t lh a a n usds t f i n c o ae ue r l se f gnh sa ot i t i , xntr a e ac e r t e v r ee pe r ow ops f s o t e i H bag d . ns tn i i r f s a a i o l e rsa y p n m e oe ri ee ht tr t a h ert ,t e s l t u i p s l ya . mon 1 asap2 xb eeaph0 nmt2 si on0 i h 2 hci t t er sY o nb he F I t

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s k r a m h c n e b r e h t O ) (

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tyg dn, sn ai n eie nyiemn r l m i rr t e s eem a cl ug ur nu d e oc nant n e i ct i e av d yre e l lammrr p a on,o s r ,s i f e e n s r ni oro k a et otc r ga Fc a r ahm ee .f e r ch l d a i uc ts i t s n sn a n t a e l n oocnb I ec i v f . m si s e y n i r el t g o t a n xi t i a oas s r t p s etaeo v e lh a snr r t i oii p c tf eop no aneuta b n tn nst en i i i f a va f fs te ioer o r r h p ob st , l p r i , e e a y mo r s t t e it i e ul h d r i d tb e w s n e r . oa l a e t y s p t mie d f g i i i m l o s n n a hr at i nr i a gp xr oe u pe oct h m ot pea re hi oo Twc frbm

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Y T I L A I R E T A M L L A R E V O

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Para 10.4 175

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10.4.3 Identifying appropriate financial data

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Audit of Financial Statements AUTHOR PUBLISHER DATE OF PUBLICATION EDITION ISBN NO NO. OF PAGES BINDING TYPE

: : : : : : :

PRANAV JAIN TAXMANN APRIL 2022 2022 9789356221369 752 PAPERBACK

Rs. : 1595 | USD : 55

Description This book comprehensively covers the entire cycle of audit of financial statements, starting from the ‘appointment of the auditor’ to the ‘issuance of the audit report’. It also provides guidance on ‘risk-based audit’ as per the Standards on Auditing issued by the Institute of Chartered Accountants of India (ICAI).

This book will be helpful for audit assistants, engagement partners, and small & medium practitioners.

The Present Publication is the latest 2022 Edition, authored by CA Pranav Jain, updated till 31 st March 2022. The noteworthy features of the book are as follows: u [Comprehensive Explanation of Audit Procedures] in an easy to understand language, keeping in mind the junior staff or less experienced auditors u [Examples of Potential Risks of Material Misstatement] are included in the book for the particular financial statement area u [Interlinking of Audit Procedures & Risks of Material Misstatements] in addition to other procedures required as per the standards on auditing or meeting the statutory requirements u [Practical Examples] have been included to explain the audit procedures & other concepts u [Numerical Examples] have been included to explain the concept of FIFO & weighted average in case of valuation of inventories u [Real Case Scenarios] are used to explain the concepts to bring more clarity u [Examples for the Audit Team to Understand Audit Procedures] are included in this book u [60+ Templates] to facilitate the auditor in meeting the documentation requirements & obtain information in a meaningful format u [Linkages to Legal Requirements] are included in this book. Examples of such linkages are as follows: n Companies Act, 2013 n Accounting Standards n Standards on Auditing besides covering reporting requirements such as CARO 2020 and disclosure requirements as per Companies Act, 2013 & Accounting Standards u [Illustrative Disclosures as per revised Schedule III & Requirements of Accounting Standards] for each financial statement area to enable the auditor for the following: n Adequate disclosures in financial statements n Meeting reporting requirements n Helping even the junior-most team member to understand the concept

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