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Accounting Standard 1

Compliance and Audit Checklist (AS 1 – Part 3)

By November 18, 2022May 8th, 2023No Comments
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    COMPLIANCE AND AUDIT CHECKLIST

  1. General
    1. Has the Board of Directors of the entity, or has the auditee made available a copy of the Responsibility Statement as prescribed under the Companies Act 2013
    2. Do the compliance and substantive tests conducted indicate any cause to believe that accounting policies selected and adopted by the enterprise are not appropriate and relevant to the business
    3. Are the three fundamental assumptions (Going Concern, Consistency, Accrual) being followed in accounting
  2. Accounting Policy Document
      compliance-and-audit-checklist
    1. Has the auditee provided information about (or a document covering) all the significant accounting policies adopted by it
    2. Does the information cover both the current and previous audit periods
    3. Has the entity followed the primary consideration for the selection and adoption of accounting policies, i.e., true and fair view?
    4. If yes, does the document indicate that the policies selected and adopted by the enterprise
      1. Are prudent
      2. Cover all material items
      3. Take cognisance of the substance of the transaction rather than its form
  3. Extent of coverage in Accounting Policies

      Do the Accounting policies selected and adopted by the auditee cover, where applicable, the following items?

      compliance-and-audit-checklist
    1. Measurement bases adopted
    2. Allocation of expenditure during construction
    3. Valuation of inventories
    4. Fixed Assets
    5. Depreciation methods pertaining to fixed assets
    6. Intangible Assets
    7. Treatment of goodwill
    8. Amortisation methods pertaining to Intangible assets
    9. Amortisation of Goodwill (if applicable)
    10. Assets taken on lease
    11. Assets acquired with the support of Government grants or other Government Grants received.
    12. Treatment of Borrowing Costs
    13. Accounting for Investments
    14. Activity Segments (Business and Geographical)
    15. Treatment of effects of changes in foreign exchange rates, both in accounting and in reporting
    16. Recognition of Revenue
    17. Recognition of costs and revenues in construction contracts
    18. Recognition of Employee costs, including but not limited to retirement benefits
    19. Determination of Tax Expenses
    20. Recognising research costs as an expense
    21. Identifying and accounting for the impairment of assets
    22. Determining Contingencies
    23. Recognition of Provisions
    24. Disclosure of events occurring subsequent to the reporting date
    25. Treatment of prior period items
  4. Application of Accounting Policies
    1. In the context of response to item 3, have the accounting policies adopted by the enterprise been applied (correctly) in the preparation and presentation of financial statements
    2. In case the auditee is also subjected to audit by CAG, have the observations of CAG, if any, in the accounting treatment of one or more items in the prior period(s) been attended to
  5. Changes in Accounting Policies
    1. Has the auditee introduced any change in its accounting policy during the current period
    2. If yes, indicate the reason for the change
      1. Warranted by Statute
      2. Necessitated by the pronouncement of ICAI
      3. More appropriate presentation to enhance the relevance and reliability of the information
    3. If the change is necessitated by a pronouncement of ICAI, e.g., adoption of a new Standard, have the transitional provisions been adhered to
    4. Will the change have any material effect on the amounts reported in the current period
    5. If No, will they have any material effect in later periods
    6. Can the impact of change(s) in accounting policies in current or in later periods be determined
    7. Have appropriate disclosures of the impact of change been made
  6. Disclosures of Accounting Policies and changes therein
    1. Have all significant accounting policies been disclosed
    2. Have these been disclosed in one place
    3. Does the statement of disclosure of accounting policies form an integral part of financial statements
    4. Refer to Item 1 General: In case fundamental accounting assumptions (consistency and accrual) are not followed, has this been adequately disclosed
    5. Refer to Item 1 General: In case a fundamental accounting assumption (Going Concern) is not followed, has this issue been appropriately tackled with reference to Auditing Standards?
    6. With reference to “e” above, has the entity disclosed on what basis the financial statements have been prepared? (e.g. liquidation or net realisable value basis)
    7. Have the changes (if any made) in the accounting policies been adequately disclosed – with a focus on
      1. Material effects in the current period
      2. Material effects in later periods
      3. Material effects, where not determinable
      4. Retrospective effect of the change in policy, e.g., change in the method of depreciation

Previous article – Disclosure Of Accounting Policies – FAQs (AS 1 – Part 2)

CA. S D Bala

Chartered Accountant, Author and Accounting Standard Expert

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