Important topics of Audit by CA Surbhi bansal for May 17 Exam
1. Recently five Standards on Auditing have been revised ie. SA 260, SA 570, SA 700, SA 705, SA 706 and one SA 701 new has been issued by ICAI. There are changes in the drafting requirements of audit reports under these SAs as compared to the existing ones.
2. All these standards are effective for audits of financial statements for periods beginning on or after April 1, 2017. It implies that practically auditor shall draft his audit report considering these SAs for the first time in 2018 ( ie when he will be reporting on the financial statements for 17-18).
3. As per my understanding when he is going to draft his report for current financial year 2016-17 , he will follow the existing standards only ( and not the revised & new ones). Thus, practically drafting as per new standads will be from April 2018 only.
4. Now in the absence of any official announcement by BOS in this regards till today ie November 21st , there are rounds of confusion and students are asking me too as to whether new standards applicable for the audits of financial statements prepared for the period beginning from 1.4.17, ie. 17-18 should be applicable for upcoming May 2017 exams or existing ones. I refrain from answering, better wait for announcement by ICAI in this regard. However, If I go by the general provision and past trend as to the applicability of a particular standard in exams and practical implication of applicability para contained in those standards as mentioned in point number 2, these might not be made applicable for May 2017 exams. Please note that SA 610 ( revised) and SAE 3420 , both effective from 1.4.16 were also not made applicable even for November 2016 exams. (though these two wef 1.4.16 should be applicable in may 2017 exams, let’s wait for announcement by BOS in this regard as well) So, going by this trend do you think these new ones effective from 1.4.2017 should be applicable in May 2017 exams? I doubt based on past trend. Better to wait for announcement by ICAI. I hope Board of Studies, ICAI will soon update about the same and other amendments on its website.
CONCLUSION: In my opinion, if you are appearing in May 2017 exams, prepare all Standards leaving these ones effective wef 1.4.17 for the time being. Wait for formal announcement by BOS, ICAI in this regard and then prepare accordingly.