Se ha denunciado esta presentación.
Se está descargando tu SlideShare. ×

Auditing Standards- IndusInd Bank

Más Contenido Relacionado

Audiolibros relacionados

Gratis con una prueba de 30 días de Scribd

Ver todo

Auditing Standards- IndusInd Bank

  1. 1. 1 AUDIT MEANING OF AUDIT ‘Audit’ or ‘Auditing’ is an activity which is undertaken by any business organization on its own or by the requirement under any law – to go through its accounts, transactions, and documents – to ensure correctness, legality of it. It is an examination of the accounts and can be conducted by internal or external agencies – known as the auditors. Auditing refers to a systematic and independent examination of books, accounts, documents and vouchers of an organization to ascertain how far the financial statements present a true and fair view of the concern. It also attempts to ensure that the books of accounts are properly maintained by the concern as required by law. Auditing has become such an ubiquitous phenomenon in the corporate and the public sector that academics started identifying an "Audit Society". The auditor perceives and recognizes the propositions before him/her for examination, obtains evidence, evaluates the same and formulates an opinion on the basis of his judgement which is communicated through his audit report. Any subject matter may be audited. Audits provide third party assurance to various stakeholders that the subject matter is free from material misstatement. The term is most frequently applied to audits of the financial information relating to a legal person. Other areas which are commonly audited include: internal controls, quality management, project management, water management, and energy conservation. As a result of an audit, stakeholders may effectively evaluate and improve the effectiveness of risk management, control, and the governance process over the subject matter. The word audit is derived from a Latin word "audire" which means "to hear". During the medieval times when manual book-keeping was prevalent, auditors in Britain used to hear the accounts read out for them and checked that the organization's personnel were not negligent or fraudulent.
  2. 2. 2 INDUSIND BANK IndusInd Bank Limited is a Mumbai based Indian new generation bank, established in 1994. The bank offers commercial, transactional and electronic banking products and services. IndusInd Bank was inaugurated in April 1994 by then Union Finance Minister Manmohan Singh. IndusInd Bank is the first among the new-generation private banks in India. The bank started its operations with a capital amount of Rs. 1 billion among which Rs. 600 million was donated by the Indian Residents and Rs. 400 million was raised by the Non- Resident Indians. A decade after its establishment i.e. in June 2004, IndusInd Bank was merged with Ashok Leyland Finance Ltd, which was one of the largest leasing finance and hire purchase companies in India, at that time. With this, the bank increased its customer base and geographical penetration. The bank has specialized in retail banking services and continuously upgrades its support systems by introducing newer technologies. It is also working on expanding its network of branches all across the country along with meeting the global benchmark. According to the bank, its name is derived from the rich and vivid Indus Valley Civilisation. IndusInd Bank has 745 branches, and 1635 ATMs spread across 392 geographic locations of the country as on May 2015. It also has a representative office in London and another in Dubai. Mumbai has the maximum number of bank branches followed by New Delhi and Chennai. The bank has also proposed to double the branches count to 1200 by March 2017. The idea behind IndusInd Bank, named after the Indus Valley civilization, was conceived by Mr. Srichand P. Hinduja, the head of the Hinduja Group. One of the first new-generation private banks in India, IndusInd Bank was inaugurated in April 1994. It was established with the help of collective contributions from the NRI community, towards the economic and social development of India.
  3. 3. 3 HISTORY The bank was incorporated on January and obtained Certificate of Commencement of Business in February 1994. The bank was promoted by IndusInd Enterprises and Finance Ltd. (IEFL) and five Mauritius based companies’ viz. IndusInd International Holdings Ltd. (IIHL) IndusInd (Mauritius) Holdings Ltd. (IMHL) IndusInd Ltd. (IL) IndusInd Investments Ltd. (IIL) DeFive Mauritius Holdings Ltd. (DFMHL). The bank commenced commercial operation in April. It undertook all kinds of banking business. IndusInd Bank incorporated in April 1994 derives its name from the Indus Valley civilization. The bank was the vision of Srichand P Hinduja, a Non–Resident Indian businessman and head of the Hinduja Group. A decade after its incorporation, June 2004, the bank was merged with Ashok Leyland Finance, which is among the largest leasing finance and hire purchase companies in India. IndusInd Bank has emerged as one of the fastest–growing banks in the banking sector in India. Currently it has a network 180 branches along with 183 ATMs. IndusInd Bank, which began in 1994, boats of 573 branches, and 1055 ATMs spread across 392 locations of the country. We also have representative offices in London and Dubai, catering to every need of the customer. It is the first Indian bank to receive ISO 9001:2000 certification for its corporate office and its entire network of branches. The bank has entered into a strategic alliance with Religare Securities for offering a value– added 3–in–1 savings accounts–linked package to customers – comprising a savings bank account, a depository account, and an Internet trading account.
  4. 4. 4 PRODUCTS & SERVICES IndusInd Bank provides multi-channel facilities, which comprise of ATMs, Net Banking, Mobile Banking, Phone Banking, Multi-city Banking and International Debit Cards. It is also credited for being one of the first banks to become a part of RBI’s Real Time Gross Settlement (RTGS) system. Enlisting the help of KPMG, IndusInd Bank has adopted an enterprise-wide risk management system, including global best practices in the area of Risk Management. The other products and services offered by the bank include:  Personal Banking  Accounts  Deposits  Loans  Cards - Debit Card, Credit Card, Gold Debit Card, Indus Money  Indus Protect  Wealth Management Services  Portfolio Management  Investments  Insurance  Corporate Banking  Fund Based Facilities  Non Fund Based Facilities  Value Added Facilities  Supply Chain Management  International Banking  Correspondent Banking  SWIFT  Rupee Drawing Arrangement R  Advisory Services A  Facilities to Exporters
  5. 5. 5  Trade Finance  RFC Account for Residents R  Gold Banking  Remittance Services  Suvarna Mudra  Others  Investment Banking  Treasury  NRI Services  Online Banking  RTGS/ NEFT BRANCHES & ATMS Within a few years of its foundation, IndusInd Bank started climbing the ladder of success and became one of the fastest-growing banks in the Indian banking sector. By 2006, it had expanded its branch network, from 61 in 2004, to 137. Apart from setting up 150 ATM centers of its own, the bank also concluded multilateral arrangements with other banks, taking the total number of authorized ATM outlets to 15,000. All the branches as well as ATMs of IndusInd Bank are connected to its central database, via a satellite that operates on the latest version of IBM’s AS400-720 hardware & Midas Kapiti (now Misys) software. BUSINESSES IndusInd Bank operates in a diverse range of businesses, which include Corporate Banking, Retail Banking, Treasury and Foreign Exchange, Investment Banking, Capital Markets, Non- Resident Indian (NRI) / High Networth Individual (HNI) Banking and Information Technology (through a subsidiary). It also claims the distinction of being the first bank in India that received ISO 9001:2000 certification for its Corporate Office and its entire network of branches.
  6. 6. 6 BOARD OF DIRECTORS Mr. Romesh Sobti has joined the bank as Managing Director & CEO, taking charge from Mr. Bhaskar Ghose. Mr. R. Seshasayee, a Chartered Accountant by profession is the current Chairman. The other members on the board are Dr. T. T. Ram Mohan, Mr. Ajay Hinduja, Mr. S. C. Tripathi, Mr. Ashok Kini, Mrs. Kanchan Chitale, Mr. Vijay Vaid, Mr. R. S. Sharma and Mr. Y. M. Kale. RATINGS ICRA AA for Lower Tier II subordinate debt program by ICRA and ICRA AA- for Upper Tier II bond program by ICRA. CRISIL A1+ for certificate of deposit program by CRISIL. CARE AA for Lower Tier II subordinate debt program by CARE. Ind AA- for Upper Tier II bond program by India Ratings and Research and Ind A1+ for Short Term Debt Instruments by India Ratings and Research.
  7. 7. 7 STANDARDS ON AUDITING Auditing standards represent a codification of the best practices in the field of auditing. Auditing standards are therefore, the performance benchmarks for the auditors. Auditing standards contain guidance for the professionals on how they should carry out their professional engagements. They cover the basic principles and essential procedures to apply those basic principles that relates to judgement or behaviour. Auditing standards are framed to ensure probity, integrity and quality in the professional’s work, essential for ensuring the confidence of the society in the financial information being reported by the business enterprises. NEED FOR AUDITING STANDARDS Auditing standards play critical role in:  Ensuring application of accepted financial reporting standards thereby lending credibility and wider acceptability to the financial statements.  Providing benchmarks against which the performance of the members can be measured and evaluated global level also.  Ensuring compliance with the applicable legislative and regulatory framework.  Ensuring right approach of the professionals in complex/emerging areas of audit.  Ensuring consistency and quality in the work performed by the professionals. OBJECTIVES OF SA Each SA contains an objective or objectives, which provide the context in which the requirements of the standards on auditing are set. The auditor uses the objectives to judge whether sufficient appropriate audit evidence has been obtained in the context of the overall objective of the auditor. Where an individual objective has not been or cannot be achieved, the auditor considers whether this prevents the auditor from achieving his overall objective.
  8. 8. 8 GENERALLY ACCEPTED AUDITING PRINCIPLES Generally accepted accounting principles (GAAP) are the standard framework of guidelines for financial accounting used in any given jurisdiction; generally known as accounting standards or standard accounting practice. These include the standards, conventions, and rules that accountants follow in recording and summarizing and in the preparation of financial statements. Many businesses choose to "opt out" of GAAP practices as they operate on a cash basis, as opposed to an accrual basis. A comparison would be the way that most people balance their checkbook when a check is written, its amount is deducted from the total balance even though the funds have not yet left the account. Financial decisions made after the check is written are based on the balance after the check is deducted. DEFINITION Authoritative rules, practices, and conventions meant to provide both broad guidelines and detailed procedures for preparing financial statements and handling specific accounting situations. Generally accepted accounting principles (GAAP) provide objective standards for judging and comparing financial data and its presentation, and limit the directors' freedom in showing an unrealistic picture through creative accounting. An auditor must certify that the provisions of GAAP have been followed in reporting an organization's financial data in order it to be accepted by investors, lenders, and tax authorities. GLOBAL STANDARDIZATION Many countries use or are converging on the International Financial Reporting Standards (IFRS) that was established and is maintained by the International Accounting Standards Board. In some countries, local accounting principles are applied for regular companies but listed or large companies must conform to IFRS, so statutory reporting is comparable internationally, across jurisdictions. All listed and grouped EU companies have been required to use IFRS since 2005, Canada moved in 2009, Taiwan in 2013, and other countries are adopting local versions.
  9. 9. 9 In the United States, while "...the SEC published a statement of continued support for a single set of high-quality, globally accepted accounting standards, and acknowledged that IFRS is best positioned to serve this role..." progress is less evident.
  10. 10. 10 STANDARDS FOLLOWED BY INDUSIND BANK SA 200- OBJECTIVE AND SCOPE OF THE AUDIT OF FINANCIAL STATEMENTS INTRODUCTION SCOPE OF SA This Standard describes the overall objective and scope of the audit of general purpose financial statements of an enterprise by an independent auditor. According to para 3.3 of the Preface to the Statements of AccountingStandards2 issued by the Institute of Chartered Accountants of India, “the term ‘General Purpose Financial Statements’ includes balance sheet, statement of profit and loss and other statements and explanatory notes which form part thereof, issued for the use of shareholders/members, creditors, employees and public at large.” References to financial statements in this Standard should be construed to refer to general purpose financial statements. OBJECTIVE OF AN AUDIT The objective of an audit of financial statements, prepared within a framework of recognised accounting policies and practices and relevant statutory requirements, if any, is to enable an auditor to express an opinion on such financial statements. The auditor’s opinion helps determination of the true and fair view of the financial position and operating results of an enterprise. The user, however, should not assume that the auditor’s opinion is an assurance as to the future viability of the enterprise or the efficiency or effectiveness with which management has conducted the affairs of the enterprise. RESPONSIBILITY FOR THE FINANCIAL STATEMENTS While the auditor is responsible for forming and expressing his opinion on the financial statements, the responsibility for their preparation is that of the management of the enterprise. Management’s responsibilities include the maintenance of adequate accounting records and
  11. 11. 11 internal controls, the selection and application of accounting policies and the safeguarding of the assets of the enterprise. The audit of the financial statements does notrelieve management of its responsibilities. SCOPE OF AN AUDIT The scope of an audit of financial statements will be determined by the auditor having regard to the terms of the engagement, the requirements of relevant legislation and the pronouncements of the Institute. The terms of engagement cannot, however, restrict the scope of an audit in relation to matters which are prescribed by legislation or by the pronouncements of the Institute. The audit should be organised to cover adequately all aspects of the enterprise as far as they are relevant to the financial statements being audited. To form an opinion on the financial statements, the auditor should be reasonably satisfied as to whether the information contained in the underlying accounting records and other source data is reliable and sufficient as the basis for the preparation of the financial statements. In forming his opinion, the auditor should also decide whether the relevant information is properly disclosed in the financial statements subject to statutory requirements, where applicable. The auditor assesses the reliability and sufficiency of the information contained in the underlying accounting records and other source data by: (a) Making a study and evaluation of accounting systems and internal controls on which he wishes to rely and testing those internal controls to determine the nature, extent and timing of other auditing procedures; and (b) Carrying out such other tests, enquiries and other verification procedures of accounting transactions and account balances as he considers appropriate in the particular circumstances. The auditor determines whether the relevant information is properly disclosed in the financial statements by: (a) Comparing the financial statements with the underlying accounting records and other source data to see whether they properly summarise the transactions and events recorded therein; and
  12. 12. 12 (b) Considering the judgments that management has made in preparing the financial statements; accordingly, the auditor assesses the selection and consistent application of accounting policies, the manner in which the information has been classified, and the adequacy of disclosure. The auditor’s work involves exercise of judgement, for example, in deciding the extent of audit procedures and in assessing the reasonableness of the judgments and estimates made by management in preparing the financial statements. Furthermore, much of the evidence available to the auditor can enable him to draw only reasonable conclusions there from. Because of these factors, absolute certainty in auditing is rarely attainable. In forming his opinion on the financial statements, the auditor follows procedures designed to satisfy himself that the financial statements reflect a true and fair view of the financial position and operating results of the enterprise. The auditor recognises that because of the test nature and other inherent limitations of an audit, together with the inherent limitations of any system of internal control, there is an unavoidable risk that some material misstatement may remain undiscovered. While in many situations the discovery of a material misstatement by management may often arise during the conduct of the audit, such discovery is not the main objective of audit nor is the auditor’s programme of work specifically designed for such discovery. The audit cannot, therefore, be relied upon to ensure the discovery of all frauds or errors but where the auditor has any indication that some fraud or error may have occurred which could result in material misstatement, the auditor should extend his procedures to confirm or dispel his suspicions. The auditor is primarily concerned with items which either individually or as a group are material in relation to the affairs of an enterprise. However, it is difficult to lay down any definite standard by which materiality can be judged. Material items are those which might influence the decisions of the user of the financial statements3. It is a matter in which a decision is arrived at on the basis of the auditor’s professional experience and judgement. The auditor is not expected to perform duties which fall outside the scope of his competence. For example, the professional skill required of an auditor does not include that of a technical expert for determining physical condition of certain assets.
  13. 13. 13 Constraints on the scope of the audit of financial statements that impair the auditor’s ability to express an unqualified opinion on such financial statements should be set out in his report, and a qualified opinion or disclaimer of opinion should be expressed, as appropriate. EFFECTIVE DATE This Standard on Auditing becomes operative for all audits relating to accounting periods beginning on or after April 1, 1985.
  14. 14. 14 SA 230- AUDIT DOCUMENTATON INTRODUCTION 1. SCOPE OF THIS SA This Standard on Auditing (SA) deals with the auditor’s responsibility to prepare audit documentation for an audit of financial statements. 2. DEFINITIONS Audit documentation – The record of audit procedures performed, relevant audit evidence obtained, and conclusions the auditor reached (terms such as “working papers” or “work papers” are also sometimes used). 3. EFFECTIVE DATE This SA is effective for audits of financial statements for periods beginning on or after April 1, 2009. OBJECTIVE The objective of the auditor is to prepare documentation that provides: (a) A sufficient and appropriate record of the basis for the auditor’s report; and (b) Evidence that the audit was planned and performed in accordance with SAs and applicable legal and regulatory requirements. REQUIREMENTS 1. TIMELY PREPARATION OF AUDIT DOCUMENTATION: The auditor shall prepare audit documentation on a timely basis. Preparing sufficient and appropriate audit documentation on a timely basis helps to enhance the quality of the audit and facilitates the effective review and evaluation of the audit evidence obtained and conclusions reached before the auditor’s report is finalised. Documentation prepared after
  15. 15. 15 the audit work has been performed is likely to be less accurate than documentation prepared at the time such work is performed. 2. DOCUMENTATIONOF THE AUDIT PROCEDURES PERFORMED AND AUDIT EVIDENCE OBTAINED Form, Content and Extent of Audit Documentation: The auditor shall prepare audit documentation that is sufficient to enable an experienced auditor, having no previous connection with the audit, to understand: (a) The nature, timing, and extent of the audit procedures performed to comply with the SAs and applicable legal and regulatory requirements; (b) The results of the audit procedures performed, and the audit evidence obtained; and (c) Significant matters arising during the audit, the conclusions reached thereon, and significant professional judgments made in reaching those conclusions. In documenting the nature, timing and extent of audit procedures performed, the auditor shall record: (a) The identifying characteristics of the specific items or matters tested; (b) Who performed the audit work and the date such work was completed; and (c) Who reviewed the audit work performed and the date and extent of such review. The auditor shall document discussions of significant matters with management, those charged with governance, and others, including the nature of the significant matters discussed and when and with whom the discussions took place. If the auditor identified information that is inconsistent with the auditor’s final conclusion regarding a significant matter, the auditor shall document how the auditor addressed the inconsistency.
  16. 16. 16 Departure from a Relevant Requirement If, in exceptional circumstances, the auditor judges it necessary to depart from a relevant requirement in a SA, the auditor shall document how the alternative audit procedures performed achieve the aim of that requirement, and the reasons for the departure. Matters arising after the Date of the Auditor’s Report If, in exceptional circumstances, the auditor performs new or additional audit procedures or draws new conclusions after the date of the auditor’s report, the auditor shall document: (a) The circumstances encountered; (b) The new or additional audit procedures performed, audit evidence obtained, and conclusions reached, and their effect on the auditor’s report; and (c) When and by whom the resulting changes to audit documentation were made and reviewed. 3. ASSEMBLY OF THE FINAL AUDIT FILE The auditor shall assemble the audit documentation in an audit file and complete the administrative process of assembling the final audit file on a timely basis after the date of the auditor’s report. After the assembly of the final audit file has been completed, the auditor shall not delete or discard audit documentation of any nature before the end of its retention period. In circumstances other than those envisaged in paragraph 13 where the auditor finds it necessary to modify existing audit documentation or add new audit documentation after the assembly of the final audit file has been completed, the auditor shall, regardless of the nature of the modifications or additions, document: (a) The specific reasons for making them; and (b) When and by whom they were made and reviewed.
  17. 17. 17 APPLICATION AND OTHER EXPLANATORY MATERIAL Documentation of the Audit Procedures Performed and Audit Evidence Obtained Form, Content and Extent of Audit Documentation The form, content and extent of audit documentation depend on factors such as:  The size and complexity of the entity.  The nature of the audit procedures to be performed.  The identified risks of material misstatement.  The significance of the audit evidence obtained.  The nature and extent of exceptions identified.  The need to document a conclusion or the basis for a conclusion not readily determinable from the documentation of the work performed or audit evidence obtained.  The audit methodology and tools used. Audit documentation may be recorded on paper or on electronic or other media. Examples of audit documentation include:  Audit programmes.  Analyses.  Issues memoranda.  Summaries of significant matters.  Letters of confirmation and representation.  Checklists.  Correspondence (including e-mail) concerning significant matters. The auditor may include abstracts or copies of the entity’s records (for example, significant and specific contracts and agreements) as part of audit documentation. Audit documentation, however, is not a substitute for the entity’s accounting records. The auditor need not include in audit documentation superseded drafts of working papers and financial statements, notes that reflect incomplete or preliminary thinking, previous copies of documents corrected for typographical or other errors, and duplicates of documents.
  18. 18. 18 Oral explanations by the auditor, on their own, do not represent adequate support for the work auditor performed or conclusions the auditor reached, but may be used to explain or clarify information contained in the audit documentation. Documentation of Compliance with SAs Audit documentation provides evidence that the audit complies with SAs. For example:  The existence of an adequately documented audit plan demonstrates that the auditor has planned the audit.  The existence of a signed engagement letter in the audit file demonstrates that the auditor has agreed the terms of the audit engagement with management, or where appropriate, those charged with governance.  An auditor’s report containing an appropriately qualified opinion demonstrates that the auditor has complied with the requirement to express a qualified opinion under the circumstances specified in the SAs. Documentation of Significant Matters and Related Significant Professional Judgments Judging the significance of a matter requires an objective analysis of the facts and circumstances. Examples of significant matters include:  Matters that give rise to significant risks (as defined in SA 315)5.  Results of audit procedures indicating (a) that the financial statements could be materially misstated, or (b) a need to revise the auditor’s previous assessment of the risks of material misstatement and the auditor’s responses to those risks.  Circumstances that cause the auditor significant difficulty in applying necessary audit procedures.  Findings that could result in a modification to the audit opinion or the inclusion of an Emphasis of Matter paragraph in the auditor’s report. Documentation of significant professional judgments Documentation of the professional judgments made, where significant, serves to explain the auditor’s conclusions and to reinforce the quality of the judgment. Such matters are of particular interest to those responsible for reviewing audit documentation, including those
  19. 19. 19 carrying out subsequent audits, when reviewing matters of continuing significance (for example, when performing a retrospective review of accounting estimates). Some examples are:  The rationale for the auditor’s conclusion when a requirement provides that the auditor ‘shall consider’ certain information or factors, and that consideration is significant in the context of the particular engagement.  The basis for the auditor’s conclusion on the reasonableness of areas of subjective judgments (for example, the reasonableness of significant accounting estimates).  The basis for the auditor’s conclusions about the authenticity of a document when further investigation (such as making appropriate use of an expert or of confirmation procedures) is undertaken in response to conditions identified during the audit that caused the auditor to believe that the document may not be authentic. The auditor may consider it helpful to prepare and retain as part of the audit documentation a summary (sometimes known as a completion memorandum) that describes the significant matters identified during the audit and how they were addressed, or that includes cross- references to other relevant supporting audit documentation that provides such information. Such a summary may facilitate effective and efficient reviews and inspections of the audit documentation, particularly for large and complex audits. Further, the preparation of such a summary may assist the auditor’s consideration of the significant matters. It may also help the auditor to consider whether, in light of the audit procedures performed and conclusions reached, there is any individual relevant SA objective that the auditor has not met or is unable to meet that would prevent the auditor from achieving the auditor’s overall objective. Identification of Specific Items or Matters Tested, and of the Preparer and Reviewer Recording the identifying characteristics serves a number of purposes. For example, it enables the engagement team to be accountable for its work and facilitates the investigation of exceptions or inconsistencies. Identifying characteristics will vary with the nature of the audit procedure and the item or matter tested. For example:  For a detailed test of entity-generated purchase orders, the auditor may identify the documents selected for testing by their dates and unique purchase order numbers.
  20. 20. 20  For a procedure requiring selection or review of all items over a specific amount from a given population, the auditor may record the scope of the procedure and identify the population (for example, all journal entries over a specified amount from the journal register).  For a procedure requiring systematic sampling from a population of documents, the auditor may identify the documents selected by recording their source, the starting point and the sampling interval (for example, a systematic sample of shipping reports selected from the shipping log for the period April 1 to September 30, starting with report number 12345 and selecting every 125th report).  For a procedure requiring inquiries of specific entity personnel, the auditor may record the dates of the inquiries and the names and job designations of the entity personnel.  For an observation procedure, the auditor may record the process or matter being observed, the relevant individuals, their respective responsibilities, and where and when the observation was carried out. Considerations Specific to Smaller Entities The audit documentation for the audit of a smaller entity is generally less extensive than that for the audit of a larger entity. Further, in the case of an audit where the engagement partner performs all the audit work, the documentation will not include matters that might have to be documented solely to inform or instruct members of an engagement team, or to provide evidence of review by other members of the team (for example, there will be no matters to document relating to team discussions or supervision). Nevertheless, the engagement partner complies with the overriding requirement in paragraph 8 to prepare audit documentation that can be understood by an experienced auditor, as the audit documentation may be subject to review by external parties for regulatory or other purposes. When preparing audit documentation, the auditor of a smaller entity may also find it helpful and efficient to record various aspects of the audit together in a single document, with cross references to supporting working papers as appropriate. Examples of matters that may be documented together in the audit of a smaller entity include the understanding of the entity and its internal control, the overall audit strategy and audit plan, materiality, assessed risks, significant matters noted during the audit, and conclusions reached.
  21. 21. 21 Departure from a Relevant Requirement The objectives and requirements in SAs are designed to support the achievement of the overall objective of the auditor. Accordingly, other than in exceptional circumstances, the SAs call for compliance with each requirement that is relevant in the circumstances of the audit. The documentation requirement applies only to requirements that are relevant in the circumstances. A requirement is not relevant8 only in the cases where: (a) The SA is not relevant [for example, in a continuing engagement, nothing in Proposed SA 510 (Revised) is relevant]; or (b) The circumstances envisioned do not apply because the requirement is conditional and the condition does not exist (for example, the requirement to modify the auditor’s opinion where there is an inability to obtain sufficient appropriate audit evidence, and there is no such inability). Assembly of the Final Audit File Changes may, however, be made to the audit documentation during the final assembly process if they are administrative in nature. Examples of such changes include:  Deleting or discarding superseded documentation.  Sorting, collating and cross referencing working papers.  Signing off on completion checklists relating to the file assembly process.  Documenting audit evidence that the auditor has obtained, discussed and agreed with the relevant members of the engagement team before the date of the auditor’s report. An example of a circumstance in which the auditor may find it necessary to modify existing audit documentation or add new audit documentation after file assembly has been completed is the need to clarify existing audit documentation arising from comments received during monitoring inspections performed by internal or external parties.
  22. 22. 22 Ownership of Audit Documentation Standard on Quality Control (SQC) 1, “Quality Control for Firms that Perform Audits and Reviews of Historical Financial Information, and Other Assurance and Related Services Engagements”, issued by the Institute, provides that, unless otherwise specified by law or regulation, audit documentation is the property of the auditor. He may at his discretion, make portions of, or extracts from, audit documentation available to clients, provided such disclosure does not undermine the validity of the work performed, or, in the case of assurance engagements, the independence of the auditor or of his personnel.
  23. 23. 23 SA 500- AUDIT EVIDENCE INTRODUCTION SCOPE OF THIS SA This Standard on Auditing (SA) explains what constitutes audit evidence in an audit of financial statements, and deals with the auditor’s responsibility to design and perform audit procedures to obtain sufficient appropriate audit evidence to be able to draw reasonable conclusions on which to base the auditor’s opinion. This SA is applicable to all the audit evidence obtained during the course of the audit. EFFECTIVE DATE This SA is effective for audits of financial statements for periods beginning on or after April 1, 2009. OBJECTIVE The objective of the auditor is to design and perform audit procedures in such a way as to enable the auditor to obtain sufficient appropriate audit evidence to be able to draw reasonable conclusions on which to base the auditor’s opinion. DEFINITIONS For purposes of the SAs, the following terms have the meanings attributed below: (a) Accounting records – The records of initial accounting entries and supporting records, such as checks and records of electronic fund transfers; invoices; contracts; the general and subsidiary ledgers, journal entries and other adjustments to the financial statements that are not reflected in journal entries; and records such as work sheets and spreadsheets supporting cost allocations, computations, reconciliations and disclosures. (b) Appropriateness (of audit evidence) – The measure of the quality of audit evidence; that is, its relevance and its reliability in providing support for the conclusions on which the auditor’s opinion is based.
  24. 24. 24 (c) Audit evidence – Information used by the auditor in arriving at the conclusions on which the auditor’s opinion is based. Audit evidence includes both information contained in the accounting records underlying the financial statements and other information. (d) Management’s expert – An individual or organisation possessing expertise in a field other than accounting or auditing, whose work in that field is used by the entity to assist the entity in preparing the financial statements. (e) Sufficiency (of audit evidence) – The measure of the quantity of audit evidence. The quantity of the audit evidence needed is affected by the auditor’s assessment of the risks of material misstatement and also by the quality of such audit evidence. REQUIREMENTS Sufficient Appropriate Audit Evidence The auditor shall design and perform audit procedures that are appropriate in the circumstances for the purpose of obtaining sufficient appropriate audit evidence. Information to Be Used as Audit Evidence When designing and performing audit procedures, the auditor shall consider the relevance and reliability of the information to be used as audit evidence. When information to be used as audit evidence has been prepared using the work of a management’s expert, the auditor shall, to the extent necessary, having regard to the significance of that expert’s work for the auditor’s purposes,: (a) Evaluate the competence, capabilities and objectivity of that expert; (b) Obtain an understanding of the work of that expert; and (c) Evaluate the appropriateness of that expert’s work as audit evidence for the relevant assertion. When using information produced by the entity, the auditor shall evaluate whether the information is sufficiently reliable for the auditor’s purposes, including as necessary in the circumstances:
  25. 25. 25 (a) Obtaining audit evidence about the accuracy and completeness of the information; and (b) Evaluating whether the information is sufficiently precise and detailed for the auditor’s purposes. Selecting Items for Testing to Obtain Audit Evidence When designing tests of controls and tests of details, the auditor shall determine means of selecting items for testing that are effective in meeting the purpose of the audit procedure. Inconsistency in, or Doubts over Reliability of, Audit Evidence If: (a) Audit evidence obtained from one source is inconsistent with that obtained from another; or (b) The auditor has doubts over the reliability of information to be used as audit evidence, The auditor shall determine what modifications or additions to audit procedures are necessary to resolve the matter, and shall consider the effect of the matter, if any, on other aspects of the audit. APPLICATION AND OTHER EXPLANATORY MATERIAL Sufficient Appropriate Audit Evidence Audit evidence is necessary to support the auditor’s opinion and report. It is cumulative in nature and is primarily obtained from audit procedures performed during the course of the audit. It may, however, also include information obtained from other sources such as previous audits (provided the auditor has determined whether changes have occurred since the previous audit that may affect its relevance to the current audit) or a firm’s quality control procedures for client acceptance and continuance. In addition to other sources inside and outside the entity, the entity’s accounting records are an important source of audit evidence. Also, information that may be used as audit evidence may have been prepared using the work of a management’s expert.
  26. 26. 26 Audit evidence comprises both information that supports and corroborates management’s assertions, and any information that contradicts such assertions. In addition, in some cases the absence of information (for example, management’s refusal to provide a requested representation) is used by the auditor, and therefore, also constitutes audit evidence. Most of the auditor’s work in forming the auditor’s opinion consists of obtaining and evaluating audit evidence. Audit procedures to obtain audit evidence can include inspection, observation, confirmation, recalculation, re-performance and analytical procedures, often in some combination, in addition to inquiry. Although inquiry may provide important audit evidence, and may even produce evidence of a misstatement, inquiry alone ordinarily does not provide sufficient audit evidence of the absence of a material misstatement at the assertion level, nor of the operating effectiveness of controls. As explained in Proposed SA 200 (Revised), reasonable assurance is obtained when the auditor has obtained sufficient appropriate audit evidence to reduce audit risk (i.e., the risk that the auditor expresses an inappropriate opinion when the financial statements are materially misstated) to an acceptably low level. The sufficiency and appropriateness of audit evidence are interrelated. Sufficiency is the measure of the quantity of audit evidence. The quantity of audit evidence needed is affected by the auditor’s assessment of the risks of misstatement (the higher the assessed risks, the more audit evidence is likely to be required) and also by the quality of such audit evidence (the higher the quality, the less may be required). Obtaining more audit evidence, however, may not compensate for its poor quality. Appropriateness is the measure of the quality of audit evidence; that is, its relevance and its reliability in providing support for the conclusions on which the auditor’s opinion is based. The reliability of evidence is influenced by its source and by its nature, and is dependent on the individual circumstances under which it is obtained. SA 330 requires the auditor to conclude whether sufficient appropriate audit evidence has been obtained. Whether sufficient appropriate audit evidence has been obtained to reduce audit risk to an acceptably low level, and thereby enable the auditor to draw reasonable conclusions on which to base the auditor’s opinion, is a matter of professional judgment. Proposed SA 200 (Revised) contains discussion of such matters as the nature of audit
  27. 27. 27 procedures, the timeliness of financial reporting, and the balance between benefit and cost, which are relevant factors when the auditor exercises professional judgment regarding whether sufficient appropriate audit evidence has been obtained. Sources of Audit Evidence Some audit evidence is obtained by performing audit procedures to test the accounting records, for example, through analysis and review, re-performing procedures followed in the financial reporting process, and reconciling related types and applications of the same information. Through the performance of such audit procedures, the auditor may determine that the accounting records are internally consistent and agree to the financial statements. More assurance is ordinarily obtained from consistent audit evidence obtained from different sources or of a different nature than from items of audit evidence considered individually. For example, corroborating information obtained from a source independent of the entity may increase the assurance the auditor obtains from audit evidence that is generated internally, such as evidence existing within the accounting records, minutes of meetings, or a management representation. Information from sources independent of the entity that the auditor may use as audit evidence may include confirmations from third parties, analysts’ reports, and comparable data about competitors (benchmarking data). Audit Procedures for Obtaining Audit Evidence As required by, and explained further in, SA 315 and SA 330, audit evidence to draw reasonable conclusions on which to base the auditor’s opinion is obtained by performing: (a) Risk assessment procedures; and (b) Further audit procedures, which comprise: (i) Tests of controls, when required by the SAs or when the auditor has chosen to do so; and (ii) Substantive procedures, including tests of details and substantive analytical procedures. The audit procedures described in paragraphs A14-A25 below may be used as risk assessment procedures, tests of controls or substantive procedures, depending on the context in which they are applied by the auditor. As explained in SA 330, audit evidence obtained
  28. 28. 28 from previous audits may, in certain circumstances, provide appropriate audit evidence where the auditor performs audit procedures to establish its continuing relevance. The nature and timing of the audit procedures to be used may be affected by the fact that some of the accounting data and other information may be available only in electronic form or only at certain points or periods in time. For example, source documents, such as purchase orders and invoices, may exist only in electronic form when an entity uses electronic commerce, or may be discarded after scanning when an entity uses image processing systems to facilitate storage and reference. Certain electronic information may not be retrievable after a specified period of time, for example, if files are changed and if backup files do not exist. Accordingly, the auditor may find it necessary as a result of an entity’s data retention policies to request retention of some information for the auditor’s review or to perform audit procedures at a time when the information is available. Inspection Inspection involves examining records or documents, whether internal or external, in paper form, electronic form, or other media, or a physical examination of an asset. Inspection of records and documents provides audit evidence of varying degrees of reliability, depending on their nature and source and, in the case of internal records and documents, on the effectiveness of the controls over their production. An example of inspection used as a test of controls is inspection of records for evidence of authorisation. Some documents represent direct audit evidence of the existence of an asset, for example, a document constituting a financial instrument such as a stock or bond. Inspection of such documents may not necessarily provide audit evidence about ownership or value. In addition, inspecting an executed contract may provide audit evidence relevant to the entity’s application of accounting policies, such as revenue recognition. Inspection of tangible assets may provide reliable audit evidence with respect to their existence, but not necessarily about the entity’s rights and obligations or the valuation of the assets. Inspection of individual inventory items may accompany the observation of inventory counting.
  29. 29. 29 Observation Observation consists of looking at a process or procedure being performed by others, for example, the auditor’s observation of inventory counting by the entity’s personnel, or of the performance of control activities. Observation provides audit evidence about the performance of a process or procedure, but is limited to the point in time at which the observation takes place, and by the fact that the act of being observed may affect how the process or procedure is performed. See Proposed SA 501 (Revised) for further guidance on observation of the counting of inventory.12 External Confirmation An external confirmation represents audit evidence obtained by the auditor as a direct written response to the auditor from a third party (the confirming party), in paper form, or by electronic or other medium. External confirmation procedures frequently are relevant when addressing assertions associated with certain account balances and their elements. However, external confirmations need not be restricted to account balances only. For example, the auditor may request confirmation of the terms of agreements or transactions an entity has with third parties; the confirmation request may be designed to ask if any modifications have been made to the agreement and, if so, what the relevant details are. External confirmation procedures also are used to obtain audit evidence about the absence of certain conditions, for example, the absence of a “side agreement” that may influence revenue recognition. See Proposed SA 505(Revised) for further guidance. Recalculation Recalculation consists of checking the mathematical accuracy of documents or records. Recalculation may be performed manually or electronically. Re-performance Re-performance involves the auditor’s independent execution of procedures or controls that were originally performed as part of the entity’s internal control.
  30. 30. 30 Analytical Procedures Analytical procedures consist of evaluations of financial information made by a study of plausible relationships among both financial and non financial data. Analytical procedures also encompass the investigation of identified fluctuations and relationships that are inconsistent with other relevant information or deviate significantly from predicted amounts. See Proposed SA520 (Revised) for further guidance. Inquiry Inquiry consists of seeking information of knowledgeable persons, both financial and non- financial, within the entity or outside the entity. Inquiry is used extensively throughout the audit in addition to other audit procedures. Inquiries may range from formal written inquiries to informal oral inquiries. Evaluating responses to inquiries is an integral part of the inquiry process. Responses to inquiries may provide the auditor with information not previously possessed or with corroborative audit evidence. Alternatively, responses might provide information that differs significantly from other information that the auditor has obtained, for example, information regarding the possibility of management override of controls. In some cases, responses to inquiries provide a basis for the auditor to modify or perform additional audit procedures. Although corroboration of evidence obtained through inquiry is often of particular importance, in the case of inquiries about management intent, the information available to support management’s intent may be limited. In these cases, understanding management’s past history of carrying out its stated intentions, management’s stated reasons for choosing a particular course of action, and management’s ability to pursue a specific course of action may provide relevant information to corroborate the evidence obtained through inquiry. In respect of some matters, the auditor may consider it necessary to obtain written representations from management and, where appropriate, those charged with governance to confirm responses to oral inquiries. See SA 580 (Revised) for further guidance.
  31. 31. 31 AUDITORS REPORT Independent Auditor's Report To the Members of IndusInd Bank Limited Report on the Financial Statements 1. We have audited the accompanying financial statements of IndusInd Bank Limited ('the Bank'), which comprise the Balance Sheet as at 31 March 2015, the Profit and Loss Account, the Cash Flow Statement for the year then ended, a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Financial Statements 2. The Bank's Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 ('the Act') with respect to the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Bank in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under section 133 of the Act read with Rule 7 of the Companies (Accounts) Rules, 2014 and provisions of Section 29 of the Banking Regulation Act, 1949 and circulars and guidelines issued by Reserve Bank of India ('RBI') from time to time. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Bank and for preventing and detecting frauds and other irregularities, selection and application of appropriate accounting policies, making judgments and estimates that are reasonable and prudent, and the design, implementation and maintenance of internal financial controls, that operate effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error. Auditor's Responsibility 3. Our responsibility is to express an opinion on these financial statements based on our audit. We have taken into account the applicable provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under
  32. 32. 32 the provisions of the Act and the Rules made there under. We conducted our audit of the Bank including its branches in accordance with Standards on Auditing ('the Standards') specified under section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. 4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Bank's preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Bank has in place an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by the Bank's Directors, as well as evaluating the overall presentation of the financial statements. 5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion 6. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements give the information required by the Banking Regulation Act, 1949 as well as the Act, in the manner so required for banking companies and give a true and fair view in conformity with accounting principles generally accepted in India: (a) In the case of the Balance Sheet, of the state of affairs of the Bank as at 31 March 2015; (b) In the case of the Profit and Loss account, of the profit of the Bank for the year ended on that date; and
  33. 33. 33 (c) In the case of the Cash Flow Statement, of the cash flows of the Bank for the year ended on that date. Report on Other Legal and Regulatory Requirements 7. The Balance Sheet and the Profit and Loss Account have been drawn up in accordance with the provisions of Section 29 of the Banking Regulation Act, 1949 read with Section 133 of the Act read with Rule 7 of the Companies (Accounts) Rules, 2014. 8. As required sub section (3) of section 30 of the Banking Regulation Act, 1949, we report that: (a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purpose of our audit and have found them to be satisfactory; (b) The transactions of the Bank, which have come to our notice, have been within the powers of the Bank; and (c) During the course of our audit we have visited 27 branches. Since the key operations of the Bank are automated with the key applications integrated to the core banking systems, the audit is carried out centrally as all the necessary records and data required for the purposes of our audit are available therein. 9. Further, as required by section 143(3) of the Act, we further report that: (i) We have sought and obtained all the information and explanation which to the best of our knowledge and belief were necessary for the purpose of our audit; (ii) in our opinion, proper books of account as required by law have been kept by the Bank so far as appears from our examination of those books; (iii) The financial accounting systems of the Bank are centralized and, therefore, returns are not necessary to be submitted by the branches; (iv) The Balance Sheet, the Profit and Loss account and the Cash Flow Statement dealt with by this report are in agreement with the books of account;
  34. 34. 34 (v) in our opinion, the aforesaid financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014, to the extent they are not inconsistent with the accounting policies prescribed by RBI; (vi) on the basis of written representations received from the directors as on 31 March 2015 taken on record by the Board of directors, none of the directors is disqualified as on 31 March 2015 from being appointed as a director in terms of Section 164 (2) of the Act; (vii) with respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us: (a) The Bank has disclosed the impact of pending litigations on its financial position in its financial statements – Refer Schedule 18 – Note 9.4 to the financial statements; (b) The Bank has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long–term contracts including derivative contracts –Refer Schedule 18 –Note 9.5 to the financial statements; and (c) There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Bank. For B S R & Co. LLP Chartered Accountants Firm's Registration No: 101248W/W–100022 Akeel Master Partner Membership No: 046768 Mumbai 16 April, 2015
  35. 35. 35 CONCLUSION IndusInd Bank incorporated in April 1994 derives its name from the Indus Valley civilization. The bank was the vision of Srichand P Hinduja, a Non–Resident Indian businessman and head of the Hinduja Group. A decade after its incorporation, June 2004, the bank was merged with Ashok Leyland Finance, which is among the largest leasing finance and hire purchase companies in India. Auditing standards contain guidance for the professionals on how they should carry out their professional engagements. They cover the basic principles and essential procedures to apply those basic principles that relates to judgement or behaviour. Auditing standards are framed to ensure probity, integrity and quality in the professional’s work, essential for ensuring the confidence of the society in the financial information being reported by the business enterprises. The project gives an idea about some Standards of Auditing that are relevant and applicable in conducting an audit of the bank. It explains the standards and their effects while conducting an audit.
  36. 36. 36 BIBLIOGRAPHY  Advanced Auditing- Manan Prakashan- Ainapure  Advanced Auditing- Seth Publication  Advanced Auditing and Professional Ethics – ICAI  http://www.businessdictionary.com/definition/generally-accepted-accounting- principles-GAAP.html#ixzz3xnKjzHQX  http://www.icai.org/new_post.html?post_id=5066&c_id=274  http://www.indusind.com/about-us.html  https://en.wikipedia.org/wiki/IndusInd_Bank  http://profit.ndtv.com/stock/indusind-bank-ltd_indusindbk/reports-auditor-report  http://resource.cdn.icai.org/17334Link_7_SA230-standard_12oct09.pdf  http://resource.cdn.icai.org/17329500_SA12oct09.pdf  http://resource.cdn.icai.org/17331Link_3_200A_SA_AAS2_12oct09.pdf

×