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S1: Introduction Financial Audit

S1: Introduction Financial Audit. A course for Audit Staff (Sr.AOs, AAOs & SOs). Learning objectives of the course. Course Objective Course Structure Audit mandate Audit objectives Form of reporting required to achieve audit objectives Need to shift from correctness to true and fair view

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S1: Introduction Financial Audit

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  1. S1: IntroductionFinancial Audit A course for Audit Staff (Sr.AOs, AAOs & SOs)

  2. Learning objectives of the course • Course Objective • Course Structure • Audit mandate • Audit objectives • Form of reporting required to achieve audit objectives • Need to shift from correctness to true and fair view • Where we stand now • Roadmap for the future

  3. Course Objective To define and explain the processes that lead to the expression of Auditor’s opinion on whether the financial statements give a “True and Fair View ” of, or “Present fairly, in all material respects”, the financial state of affairs of the entity in relation to Financial Attest Audit.

  4. Course Structure • Five modules, 24 lecture sessions • Introduction – 1 session • Understanding the entity – 5 sessions • Planning for audit – 8 sessions • Supervision and control – 2 sessions • Field work and documentation – 3 sessions • Reporting and follow-up – 3 sessions • Change management – 2 sessions • Case studies • 12 case studies • 4 sessions dedicated to one single case study covering all aspects of Financial Attest Audit

  5. Audit Mandate 149. Duties and Powers of the Comptroller and Auditor-General - The CAG of India shall perform such duties and exercise such powers in relation to the accounts of the Union / States and of any other authority or body as may be authorised by Parliament/state legislatures in relation to the accounts of the Union or of state or of any other authority or body. 150. Form of accounts of the Union and of the States - The accounts of the Union and of the States shall be kept in such form as the President may, on the advice of the Comptroller and Auditor-General of India, prescribe.

  6. Audit Mandate 151. Audit Reports – • The reports of the Comptroller and Auditor-General of India relating to the accounts of the Union shall be submitted to the president, who shall cause them to be laid before each House of Parliament. • (2) The reports of the Comptroller and Auditor-General of India relating to the accounts of a State shall be submitted to the Governor of the State, who shall cause them to be laid before the Legislature of the State. 

  7. Provisions of the CAG’s DPC Act as applicable to Financial Attest Audit of Union and State Accounts 18. (1) The CAG shall have authority- (a) to inspect any office of accounts under the control of the Union or of a State, including treasuries, and such offices responsible for the keeping of initial or subsidiary accounts. (b) to require that any accounts, books, papers and other documents which deal with or form the basis of or an otherwise relevant to the transactions to which his duties in respect of audit extend, shall be sent to such place as he may appoint for his inspection.

  8. Provisions of the CAG’s DPC Act as applicable to Financial Attest Audit of Union and State Accounts II (c) to put such questions or make such observations as he may consider necessary, to the person in charge of the office and to call for such information as he may require for the preparation of any account or report which it is his duty to prepare. 18 (2) The person in charge of any office or department, the accounts of which have to be inspected and audited by the Comptroller and Auditor-General, shall afford all facilities for such inspection and comply with requests for information in as complete a form as possible and with all reasonable expedition.

  9. Provisions of the CAG’s DPC Act as applicable to Financial Attest Audit of companies and corporations 19. (1) The duties and powers of the CAG in relation to the audit of the accounts of Government companies shall be performed and exercised by him in accordance with the provisions of the Companies Act, 1956. (2) The duties and powers of the CAG in relation to the audit of the accounts of corporations (not being companies) established by or under law made by Parliament shall be performed and exercised by him in accordance with the provisions of the respective legislations.

  10. Provisions of the CAG’s DPC Act as applicable to Financial Attest Audit of other bodies and authorities 20. (1) On request of the President, or the Governor, CAG may undertake the audit of the accounts of any body or authority on such terms and conditions as may be agreed upon between him and the concerned Government and shall have, for the purposes of such audit, right of access to the books and accounts of that body or authority: Provided that no such request shall be made except after consultation with the Comptroller and Auditor-General.

  11. Objectives of Financial Audit Financial audit is primarily concerned with expression of audit opinion on a set of financial statements. It includes: • examination and evaluation of financial records and expression of opinions on financial statements; • audit of financial systems and transactions including an evaluation of compliance with applicable statutes and regulations which affect the accuracy and completeness of accounting records; and • audit of internal control and internal audit functions that assist in safeguarding assets and resources and assure the accuracy and completeness of accounting records.

  12. Nature of Assurance by the Comptroller and Auditor General of India • The audit opinion provides reasonable assurance that the financial statements are free from material misstatement and irregularity. • An understanding of the terms "reasonable assurance" and "material" is central to an understanding of the audit and the audit opinion. • Audit can give an unqualified certificate on the financial statements under audit as long as the level of error is not judged to be material. The accepted level of error for any particular account is determined in accordance with guidelines for materiality to be laid down by the Comptroller and Auditor General of India.

  13. Where we stand now • Certificate on correctness of accounts of the State Governments, Union Government • True and fair view on accounts of Government companies, corporations, boards, autonomous bodies

  14. Roadmap for the future • Shift from cash to accrual • Shift from correctness to ‘true and fair’ view

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