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CMA Intermediate · Corporate Accounting and Auditing

Brief Introduction to Auditing Standards for CMA Inter

Standards on Auditing (SAs) are ICAI standards that set how an auditor must plan, perform and report an audit. They are grouped in number series: general principles, risk assessment and response, audit evidence, using others' work, reporting, and special considerations. To solve questions, identify the situation, name the SA that governs it, and state its requirement.

What this chapter covers

This chapter gives you a map of the Standards on Auditing. It does not ask you to memorise every paragraph. It asks you to know what each series of SAs deals with, what the overall objectives of the auditor are, and how the standards connect.

The SAs, taken together, provide the standards for the auditor's work in fulfilling the overall objectives of the auditor. Some SAs deal with general responsibilities. Others apply those responsibilities to specific topics. SA 200 sets the overall objectives. SA 315 and SA 330 deal with identifying and assessing risks of material misstatement and responding to them. SA 500 and other relevant SAs deal with audit evidence. SA 220 deals with quality control for an audit of financial statements, and SQC 1 deals with quality control in firms.

ICAI groups the SAs in number series: 200-299 general principles and responsibilities (including SA 220), 300-499 risk assessment and response, 500-599 audit evidence, 600-699 using the work of others, 700-799 audit conclusions and reporting, and 800-899 special considerations. This is ICAI's general numbering scheme. SA 200 itself does not set it out, so learn it as a map and not as a rule of SA 200.

This chapter is the base for the auditing half of Paper 10. Later chapters on company audit, audit procedures and reporting use the same ideas: risk, evidence, documentation and opinion. If you understand how the SAs link, those chapters become easier.

Auditing standards are a favourite source of standalone MCQs in Section A, because one clear fact can be tested in a single question: which SA covers what, what audit risk is made of, or what an opinion does and does not assure. The same ideas also support written answers in later auditing chapters, where naming the right SA and its requirement earns step marks. The chapter is compact, so effort here pays back quickly.

Brief Introduction to Auditing Standards: topics in the order to study them

  1. 1Standards on Auditing (SAs) Framework and OverviewStart here to learn what SAs are, how they relate to each other, and the role of SQC 1 (for firms) and SA 220 (for an audit of financial statements) in quality control. Note that SA 220 sits in the 200 series of general principles.
  2. 2SA 200 to SA 299: General Principles and ResponsibilitiesSA 200 gives the overall objectives, audit risk, professional skepticism and scope of the opinion, which every later SA builds on. SA 220 on quality control also belongs to this series.
  3. 3SA 300 to SA 499: Risk Assessment and ResponseOnce you know audit risk, you can see how SA 315 and SA 330 identify, assess and respond to the risks of material misstatement. The series begins with planning.
  4. 4SA 500 to SA 599: Audit EvidenceEvidence is the auditor's response to assessed risk, so it follows the risk series.
  5. 5SA 600 to SA 699: Using the Work of OthersThis series deals with relying on others, for example the work of another auditor. It comes after evidence because it affects how much evidence you gather yourself.
  6. 6SA 700 to SA 799: Audit Conclusions and ReportingThis series is where the earlier work ends in conclusions and the auditor's report. It draws on risk, evidence and documentation from all the earlier series.
  7. 7SA 800 to SA 899: Special ConsiderationsThis is a separate series for special audit situations. Read it after the main series, once you know the general requirements that it adapts.

How to prepare Brief Introduction to Auditing Standards

Treat this chapter as a map first and a set of facts second. Aim to say in one line what each SA series does and how it links to the others.

  1. Write the series on one page, using ICAI's numbering scheme: SA 200-299 general principles and responsibilities (including SA 220), SA 300-499 risk assessment and response to assessed risks, SA 500-599 audit evidence, SA 600-699 using the work of others, SA 700-799 audit conclusions and reporting, and SA 800-899 special considerations. Add one line of purpose to each.
  2. Read SA 200 carefully and note its key ideas: overall objectives, professional skepticism, professional judgment, sufficient appropriate evidence and audit risk.
  3. Learn audit risk as a function of the risks of material misstatement and detection risk. Remember it is a matter of professional judgment, not precise measurement.
  4. Link the SAs: for example, SA 315 and SA 330 apply throughout the audit, and a specific SA such as SA 540 expands on them without repeating them.
  5. Learn the limits of the opinion: it covers whether the financial statements are prepared, in all material respects, in accordance with the applicable framework. It does not assure future viability or management efficiency.
  6. Practise MCQs that ask which SA covers a situation, and a few short written answers using the format: situation, relevant SA, requirement, conclusion.
  7. Revise from your one-page map and the quick revision points the day before the exam.

Common mistakes in Brief Introduction to Auditing Standards

  • Memorising SA numbers without knowing what each one does

    Fix: Attach a one-line purpose to each series and each key SA, then practise matching situations to SAs.

  • Saying the audit opinion guarantees the entity's future viability or management efficiency

    Fix: Remember the opinion deals only with whether the statements are prepared, in all material respects, under the applicable framework.

  • Treating audit risk as a precise figure

    Fix: State that it is a function of the risks of material misstatement and detection risk, and that its assessment is professional judgment.

  • Confusing SQC 1 with SA 220

    Fix: SQC 1 is about the firm's quality control system; SA 220 is about quality control on an audit of financial statements.

  • Studying each SA in isolation

    Fix: Remember the SAs have interrelationships. Specific SAs build on SA 315 and SA 330 and do not repeat them.

  • Writing long theory answers without naming the SA

    Fix: Open each written answer by naming the relevant SA, then state its requirement and apply it to the case.

Last-day revision: Brief Introduction to Auditing Standards

  • SAs taken together set the standards for the auditor's work in fulfilling the overall objectives of the auditor.
  • Some SAs deal with general responsibilities; others apply them to specific topics.
  • SA 200 covers the overall objectives of the independent auditor and the conduct of an audit under the SAs.
  • Audit risk is a function of the risks of material misstatement and detection risk.
  • Assessment of risks is a matter of professional judgment, not precise measurement.
  • Whether sufficient appropriate evidence has been obtained is a matter of professional judgment.
  • SA 500 and other relevant SAs give further guidance on audit evidence.
  • SA 315 identifies and assesses risks; SA 330 designs responses to assessed risks.
  • Professional skepticism applies throughout the audit and is not repeated in each SA.
  • The opinion does not assure future viability or the efficiency of management.
  • Section 143(3)(i) of the Companies Act, 2013 requires the auditor to report on internal financial controls.
  • SQC 1 is for firms; SA 220 deals with quality control for an audit of financial statements.

Brief Introduction to Auditing Standards practice questions

Brief Introduction to Auditing Standards in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Brief Introduction to Auditing Standards: frequently asked questions

Do I need to learn every SA in detail for this chapter?

No. This chapter is a brief introduction. Focus on what each series covers, the key ideas of SA 200, and how the SAs link together. Detailed procedures belong to later chapters.

What is audit risk in simple terms?

Audit risk is the risk of giving an inappropriate opinion when the financial statements are materially misstated. It is a function of the risks of material misstatement and detection risk. Assessing it is a matter of professional judgment.

Does the auditor's opinion assure the future of the company?

No. The opinion deals with whether the financial statements are prepared, in all material respects, in accordance with the applicable financial reporting framework. It does not assure future viability or the efficiency of management.

How are MCQs asked from this chapter?

Expect standalone questions on which SA deals with a topic, the components of audit risk, and what the opinion covers. Each has four options and no negative marking, so always attempt every question.