Ufnarovska A.V.

Donetsk National University of Economics and Trade after M. Tugan-Baranovsky

AUDITING STANDARDS

As the trade and commerce grew extensively globally, the involvement of public money therein also increased manifolds. This in turn created a demand from the investors to have the accounts of the business ventures examined by a person independent of the owners and management of the business to ensure that they were correct and reliable. Such a demand laid down the foundation for the profession of auditing. The extent of reliance placed by the public on the auditors has increased so much with time that it is, unreasonably of course, felt by the public that nothing can go wrong with an organisation which has been audited. Though the fact that an audit has been carried out is not a guarantee as to the future viability of an enterprise, it is extremely important that the auditors carry out their assignments with utmost professional care and sincerity, to uphold the faith posed by the public in them.

As a response to the above needs, the International Federation of Accountants (IFAC) was established in 1973 with the objective of “worldwide development and enhancement of the accountancy profession……. of high quality in the public interest”. The International Auditing and Assurance Standards Board (IAASB), earlier known as the International Auditing Practices Committee, of the IFAC was established to “improve the quality and uniformity of practice throughout the world”, by, inter alia, issuing International Standards on Auditing (ISAs) and guidance on the application of the ISAs.

The Institute of Chartered Accountants of India was set up in 1949 to regulate the profession of chartered accountancy in India. Since its establishment, the Institute has taken numerous steps to ensure that its members discharge their duties with due professional care, competence and sincerity. One of the steps is the establishment of the Auditing Practices Committee, or the Auditing and Assurance Standards Board, as it is now known in September, 1982. One of the main objectives of the Board is to issue auditing standards. Accordingly, the Board issues Statements on Standard Auditing Practices and Auditing and assurance Standards under the authority of the Council. Rationale of Auditing Standards In simplest possible terms, auditing standards represent a codification of the best practices of the profession, which are already existing. Auditing standards help the members in proper and optimum discharge of their profession duties. Auditing standards also promote uniformity in practice as also comparability.

Auditing Standards–setting in India

As mentioned earlier, the Auditing and Assurance Standards Board of the Institute formulates the auditing standards. Broadly, following is the procedure for formulating auditing standards:

1. The Auditing and Assurance Standards Board identifies the areas where auditing standards need to be formulated and the priority in regard to their selection.

2. In the preparation of the auditing standards, the Board is normally, assisted by study groups comprising of a cross section of members of the Institute.

3. On the basis of the work of the study groups, an Exposure Draft of the proposed auditing standard is prepared by the Board and issued for comments of the members.

4. After taking into the comments received, the draft of the proposed auditing standard is finalised by the Board and submitted to the Council of the Institute.

5. The Council considers the final draft of the proposed auditing standard and, if necessary, modifies the same in consultation with the Board. The auditing standard is then issued under the authority of the Council.

While formulating the auditing standards, the Board also takes into consideration the applicable laws, customs, usages and business environment in the country.

The Institute of Chartered Accountants of India is a member of the International Federation of Accountants. Therefore, as a matter of policy, the auditing standards issued by the ICAI are in harmony with the International Standards on Auditing. Till date, the IAASB of the IFAC has issued thirty nine Engagement Standards, comprising one Standard onQuality control (ISQC), thirty two ISAs, two International Standards on Review Engagements (ISREs), two International Standards on Assurance Engagements (ISAEs) and two International Standards on Related Services (ISRSs). The ICAI has issued thirty five auditing standards corresponding to the Engagement Standards issued by the IAASB of the IFAC and three auditing standards are in the pipeline. A list of the Engagement Standards issued by the IAASB and the auditing standards issued by the ICAI thereagainst is given as Annexure I. A reconciliation of the Engagement Standards with the auditing standards issued by the ICAI is given as Annexure II.

Further, the Council of the Institute of Chartered Accountants of India has also approved the following technical drafts:

- Preface to the Standards on Quality Control, Auditing, Review, Other

Assurance and Related Services

- Due Process of the Auditing and Assurance Standards Board

- Revised Classification and Numbering Pattern of the Auditing and

Assurance Standards

- Framework for Assurance Engagements

While discharging their attest functions, it is the duty of the members of the Institute to ensure that the auditing standards are followed in the audit of financial information covered by their audit reports. If for any reason the member is unable to perform an audit in accordance with the generally accepted auditing standards, his report should draw attention to any material departures therefrom, failing which he would be held guilty of professional misconduct under clause 9 of Part 1 of the Second Schedule to the Chartered Accountants Act, 1949.