In addition to enhancing professional accountants’ standards of practice, standards for auditing, reviews, other assurance, quality control, and associated services aim to enhance public trust in financial reporting by producing high-quality audits.

SAS will apply to any independent review of financial data conducted by a firm, regardless of its size or legal status, and regardless of whether it is attempting to earn a profit. SAs must submit applications together since they are all connected. This numbering scheme is similar to that used by the IAASB for its international auditing standards. A number of engagement and quality control standards have been published by the ICAI’s Auditing and Assurance Standards Board.

  • To ensure quality, SQC is used by companies that conduct audits, reviews of historical financial information, and other engagements for assurance and related services. According to SQC, the company must set up a system of quality control that will give it a reasonable level of assurance that the firm and its employees adhere to professional standards, statutory and regulatory requirements, and that any reports produced by the company or its engagement partners are relevant to the situation. As a result, SQC improves audit quality
  • There are Standards on Auditing (SAs) for auditing historical financial data. Every time an independent audit is conducted, these apply
  • In order to examine jobs’ historical financial information, Standards on Review Engagements (SRE) are used.
  • The Standards on Assurance Engagements (SAEs) cover assurance engagements other than audits and reviews of financial information.
  • The Standards on Related Services (SRSs) for all engagements related to data, compilation, and other services.

The Standard on Auditings- Main Components

International Federation of Accountants’ International Standards on Auditing (ISAs) form the basis of ICAI’s Standards on Auditing (SAs). The AASB publishes these standards with permission from the ICAI council. Section 143(2) of the Companies Act of 2013 requires the auditor to ensure compliance with certain auditing standards.

A few of the fundamental auditing standards’ guiding principles are as follows:

  • Risk-Based Auditing

In accordance with the ICAI’s auditing requirements, the auditor must perform a “Risk Based Audit.” A risk-based audit aims to ensure that financial statements are free from major errors, including those resulting from fraud. 

In risk-based auditing, the following steps are involved: evaluating the likelihood that the financial statements contain major misstatements, developing and implementing additional audit procedures to address identified risks, and reducing the risk of major misstatements in financial statements to a tolerably low level based on the audit evidence gathered, publishing an appropriate audit report accordingly.

According to auditing standards, the auditor must consider the following rebuttable supposed risks of material misrepresentation:

  1. There is a possibility of fraud in revenue recognition 
  2. Management-related risks override controls
  • Scalability

An audit of all entities must be performed in accordance with the ICAI’s auditing guidelines. The nature, size, and legal structure of the company do not matter when applying these standards. According to the International Federation of Accountants (IFAC), “high-quality auditing standards should be applied to the audit of financial statements of all companies of any size, and can in fact be implemented.” Increasingly, the idea of creating separate auditing standards for small and less complex entities is being discussed.

International Auditing and Assurance Standards Board updated standards, such as ISA 315 and ISA 540, support the idea of scalability while providing additional application guidelines for audits of smaller, less complicated organizations.

  • Professional Skepticism

As defined in SA 200, “Overall Objectives of the Independent Auditor and the Conduct of an Audit by Standards on Auditing,” professional skepticism refers to the attitude of questioning, alertness to possible errors or fraud, as well as critical evaluation of audit evidence. In addition to SA 200, at least ten other standards, including SA 240, SA 300, emphasize the need to conduct the audit with skepticism.

  • Materiality

In auditing standards, the term “materiality” is used. A piece of information is considered material when its absence or misstatement could influence how users decide to make economic decisions based on financial statements. Company size and unique characteristics determine the level of materiality. A professional judgment must be used when determining materiality.

  • Audit evidence

These auditing standards provide comprehensive instructions on how to gather sufficient and suitable audit evidence. The service includes advice on sampling, connected parties, inventory verification by physical observation, accounting estimates, and external confirmation.

As part of the auditing standards (SA 560), the going concern assumption must be assessed and a subsequent event must be verified. As specified in clause (xix), these two ideas/standards are now even more vital than they were before. Emphasize the importance of appropriately crafted management representation letters (SA 580). Audit representation letters are not a substitute for stronger audit evidence, but they might be the only option available to the auditor in certain situations, such as when off-balance sheet items or contingent liabilities are involved.

  • Documentation

This documentation provides an overview of how the audit was conducted (including the preparation phase), the evidence the auditor gathered, and the conclusions reached. In some cases, audit documentation is referred to as “working papers” or “work papers.”. While SA 230 “Audit Documentation” offers specific and general recommendations on the audit documentation, most auditing standards require the auditor to complete particular documentation. As auditors are scrutinized more closely by various regulators, they must have several documents.


Auditing smaller, less complicated businesses and practitioners may find it difficult to comply with the many auditing requirements. There are Implementation Guides available from the ICAI to assist auditors in applying these standards. There have been numerous instances of noncompliance with these audit requirements found by the Quality Review Board. In addition, due to an increase in fraud cases, regulators are more vigilant, and chartered accountants are accused of neglecting their duties. Additionally, this is leading to actions against chartered accountants, which affects their credibility. To support the audit conclusion, the auditor must follow the auditing standards, other authoritative pronouncements, and most importantly, provide sufficient documentation.

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