The Institute of Company Secretaries of India or commonly referred to as ICSI provides guidelines on auditing standards. The primary aim of ICSI auditing standards is to support the company secretaries (CS) in getting expertise in auditing techniques and tools. It also imparts the best auditing practices while performing the audit and also promoting standardisation and uniformity in maintaining the professional standards of the Company Secretary (CS). The ICSI issued the first four auditing standards, which will be applicable mandatorily on the audit assignments accepted by the auditor on or after 1st April 2020. These auditing standards issued by ICSI will bring significant changes in the quality of audits performed by the company secretaries and will also bring uniformity and consistency.
What is the Aim behind Reconstructing the Auditing Standard Issued by ICSI?
The basic aim behind reconstructing the auditing standards by ICSI is as follows:
- To create uniformity amongst its members while conducting the audit.
- Varied auditors are involved in a single audit. The new auditing standards issued by ICSI will help in bringing synchrony amongst them.
- All the practising company secretaries will have a common outlook towards conducting of audits and all of them will have a common standard for preparing the reports which must be submitted to the authorities.
- By the introduction of auditing standards by ICSI, it is expected that there will be solidarity in corporate governance practices.
- Improvement of the level of applicability of laws regulations while conducting the audit.
Types of Auditing Standard Issued by ICSI
The auditing standard issued by ICSI has been
divided into four parts, as shown below:
CSAS-1: Auditing Standard Issued by ICSI on Audit Management
This Auditing Standard applies to the Auditor undertaking audit engagement under any statute. The auditing standard on Audit engagement deals with the auditor’s role and responsibilities relating to an audit engagement and also the process of entering into an understanding or an agreement with the appointing authority for auditing purpose. The Auditing Standard on Audit Engagement (CSAS-1) applies to the practising Company Secretaries or PCS as defined in the Company Secretaries Act, 1980, who commences the audit assignment as per:
and Exchange Board of India (SEBI) Act, 1992
other law prevailing in India.
fundamental objective of the auditing standard is to lay down for the auditor
basic principles and procedures which must be followed while accepting or
continuing with the Audit Engagement by agreeing to the terms of engagement
with the Appointing Authority or any changes therein and matters related
Coverage of CSAS-1 Accounting Standard
Applicability of CSAS-1
This auditing Standard issued by ICSI is applicable
to the Auditors in the following situations:
New Audit Engagement
- It covers audit that is being conducted for the first time and therefore the appointment of the auditor is required here.
- In case the audit in the previous period was done by another auditor, it will also be covered here.
Recurring Audit Engagement
covers the situation where the same auditor is requested to conduct audit for
the subsequent period as well.
this type of cases, the auditor must obtain recent Audit Engagement letter in
case the period of engagement has expired, which must also include all the
revised terms if the circumstances so require the auditor shall follow the
auditing standard even if the audit engagement continues.
Read, More: Why Secretarial Audit is Mandatory for Companies?.
Changes in Terms of Audit Engagement
case there is any change in terms of audit management in the middle of the
ongoing audit, the auditor shall follow the standard and also initiate a
revised engagement letter following the terms of the standard prescribed.
Engagement means all the detailed
terms of reference of appointment, which will include the scope of audit,
remuneration and also the limiting conditions if any.
Note: Predecessor or Previous Auditor here is referred to an Auditor who has conducted the most recent audit assignment of the auditee and also has submitted a report thereon prior to the current auditor or was engaged as an auditor, but he could not complete the audit assignment due to resignation, termination or any other case1
What are the steps to be taken by the auditor with respect to Audit
The auditor shall follow the following steps with regard
to the Audit Engagement:
- The appointment of the auditor shall be made in the manner prescribed in the applicable laws, acts, rules or regulations or standards in case no such methods has been prescribed by the appointing authority.
- A certificate confirming the eligibility for appointment as an auditor must be submitted to the concerned authority by the auditor.
- An audit engagement letter along with a copy of the resolution must be obtained by the auditor.
Audit Engagement Letter
The audit engagement letter shall include the
- Objective and scope of the audit.
- Responsibilities of the auditor and the auditee.
- Written representations to be provided by the auditor including particulars of the previous auditor.
- Period within which the audit report shall be submitted by the auditor.
- All the commercial terms regarding the fees and reimbursement out of pocket expenses.
- Limitations of the audit, if any.
Communication to the Predecessor or Previous Auditor
Communication shall be done by the auditor to the previous auditor if any before accepting the audit engagement.
Limiting the Audit Engagement
The auditor shall accept the audit engagement within the limit of a number of audits.
Conflict of Interest
The auditor must not have any substantial conflict of interest with the auditee. In case there is any conflict of interest, it must be disclosed by the auditor before accepting the audit engagement. The following points will be considered as substantial conflict of interest:
auditor who holds paid-up share capital up to 2% or share of nominal value of
Rs. 50,000, whichever is lower.
auditor who is indebted to the auditee for an amount not exceeding Rs. five
auditor who was once in employment of the auditee before two years.
CSAS-2: Auditing Standard Issued by ICSI on Audit Process and Documentation
section covers specific protocols prescribed for the auditors to follow the
audit process and documentation. The basic aim of this standard is to prescribe
principles to an auditor:
auditor must conduct audit as per the specified audit process.
auditor must maintain documentation like:
- A sufficient and an appropriate report
to form the basis of auditor’s report.
- Must provide evidence that the audit was
performed by the applicable auditing standards and as per the statutory
Audit Documents here is referred to the working papers which is prepared or the
reports obtained by the auditor in connection with the audit.
Note:Audit Evidence mentioned above means the relevant information and documents
which is gathered while conducting audit for arriving at a conclusion on which
the auditor concludes his opinion.
What are the Steps to Conduct Proper Audit Process and Documentation?
The proper steps to
conduct an appropriate audit process and documentation have been listed below:
audit plan must be prepared by the auditor for conducting audit as per the
terms of audit engagement. Audit planning means to establish and develop an
overall audit process, including but:
the broad audit areas
look out for previous audit findings and also the observations from the
Management, Predecessor or Previous Auditor, in case of change of Auditor
of the subject matters and even the audit areas which requires special
Assessment and Materiality.
technique of conducting audit.
of the audit resources for the purpose of audit
the schedule for conducting audit.
auditor must follow the audit plan.
auditee shall check the risk assessment with respect to the audit engagement
considering the following factors:
and Business Environment.
Information about the Auditee
auditor must obtain sufficient information regarding the auditee which will be
relevant for conducting of audit and forming an opinion and its expression.
The auditor shall use systematic and comprehensive
checklists for auditing and also to verify the compliance requirements.
Collection and Verification of Audit Evidence
will be done by auditor for compliance with applicable laws, act, rules,
regulations and the standards.
complete and relevant evidence by the auditor to support the opinion.
process of gathering and evaluating of evidence shall continue till the auditor
is satisfied that sufficient and suitable evidence exists to provide a basis
for formation of the audit opinion.
auditor shall get confirmations from third parties, wherever it is required,
with respect to information which is related to such party.
Analysis of Audit Evidence
auditor shall check the Audit Evidence before getting into any conclusion.
case the auditor finds that the audit evidence is conflicting evidence the
auditor shall evaluate the extent and credibility of contradictory evidence to
reach into any conclusion or collect more evidence to resolve the conflict.
auditor shall adequately document the audit evidence in the papers, including
the basis and extent of planning, work performed and also the findings of the
documents must be discussed with the management with respect to significant
Record Keeping and Retention
auditor shall set up policies and procedures for maintenance of Audit
Audit Documents shall be collected for records within a period of 45 days from
the date of signing of Auditor’s Report.
Audit Documents must be maintained in physical or electronic form and also
retain for a period of 8 years from the date of signing of Auditor’s Report.
CSAS-3: Auditing Standard Issued by ICSI on Forming of Opinion
This auditing standard issued
by ICSI applies to the auditor undertaking audit under any statute. This
standard deals with the manner for forming auditor’s opinion on subject matter
of the audit. The basic objective of the auditor here is to prescribe the basis
and manner for evaluation of conclusions drawn from the audit evidence and also
to obtain and express the opinion through a written report.
What does the Auditor Cover through this Reporting Standard?
CSAS-4: Auditing Standard Issued by ICSI on Secretarial Audit
Auditing Standard issued by ICSI applies to the auditor undertaking Secretarial
Audit, which is prescribed under Section 204 of the Companies Act, 2013 and SEBI
(Listing Obligations and Disclosure Requirements), 2015. The Standard deals
with the basis and manner to carry out the Secretarial Audit.
significant objective of this Standard is to set the principles for evaluation
of statutory compliances and also for corporate conduct of auditing.
This standard covers the following:
and segregating the applicable laws.
the corporate conduct and also compliance of laws.
and reporting the events and actions having a major bearing on auditor’s
standards issued by ICSI are introduced with an aim to regularize the audit
conducts and also to have a single protocol for the auditors all over the
nation. These accounting standards will be applicable with effect from 1st
April 2020. The Company Secretaries will check the applicability
of the mentioned auditing standards by ICSI, in every audit as they have expertise
in auditing methods, tools and techniques. This will make the audit errorless,
professional, uniform and also fast.
Also, Read: An Internal Auditor: Why are they important in a Company?.