1. Introduction
    1. Scope: This ISA deals with
      1. auditor’s responsibility to consider laws and regulations in an audit of financial statements
      2. Responsibility of
        1. Management
          1. Responsibility of management, with the oversight of those charged with governance, to ensure that the entity’s operations are conducted in accordance with the provisions of laws and regulations. Including the laws affecting FS
        2. Auditor
          1. identifying material misstatement of the financial statements due to non-compliance with laws and regulations
          2. ISA 250 distinguishes auditors responsibilty in relation to compliance with two catagories of laws and regulations
          3. Those Laws having direct effect on determination of ammounts reported in financial statements
          4. Responsibility: Obtain SAAE
          5. Other laws not having direct effect BUT Compliance with which may be fundamental to operating aspects of business or avoid material penalties
          6. Responsibility: Limited to undertaking specific audit procedures
          7. Eg: Tax and Pension laws
          8. Eg: 1. Compliance with terms of operating licence (Operating aspect of business ISA 570 may trigger) 2. Compliance with enviornmental regulations (Non compliance may cause huge penalty = effect on FS)
          9. However
          10. The auditor is not responsible for
          11. preventing non-compliance
          12. to detect non-compliance with all laws and regulations.
          13. Because
          14. Inherent Limiations
          15. Laws and regulations relating principally to operations
          16. Non compliance may involve conduct designed to conceal it (Fraud)
          17. Determination of non-compliance may be subject to court decision or other regulatory body
  2. Obejctives
    1. To obtain sufficient appropriate audit evidence regarding compliance with the provisions of those laws and regulations generally recognized to have direct effect on determinaion of material amounts in FS
    2. To perform specific audit procedures to help identify non- compliance with other laws and regulations that may have material effect on FS
    3. To respond appropriately to identified or suspected non-compliance with laws and regulations identifeid during the audit
  3. Definitions
    1. Non Compliance
      1. Acts of
        1. Omission
        2. Comission
        3. Intentional or unintentional
          1. committed by
          2. the entity,
          3. or by those charged with governance,
          4. by management
          5. or by other individuals working for entity
          6. or under the direction of the entity,
          7. which are contrary to the prevailing laws or regulations.
  4. Requirements
    1. Auditors consideration of compliance with laws and regulations
      1. Auditor shall obtain general understanding of:
        1. Legal and regulatory framework applicable to
          1. Entity
          2. Or industry
          3. Or sector in which the entiry operate
          4. As per ISA 315
        2. How the entity is complying with the framework
      2. Shall obtain sufficient appropriate audit evidence regarding compliance with the provisions of those laws and regulations generally recognized to have direct effect on determinaion of material amounts in FS
      3. Shall perform following audit procedure to help identify non-compliance with OTHER LAWS and regulations which might have a material effect on the FS
        1. Inquire management TCWG as to whether the company is in compliance with such laws and regulations
        2. Inspect Correspondence with relevant licencing or regulatory authorities
      4. Written Representation
        1. The auditor shall request management and, where appropriate, those charged with governance, to provide written representations that all known instances of non-compliance or suspected non-compliance with laws and regulations whose effects should be considered when preparing financial statements have been disclosed to the auditor.
    2. Audit Procedures When Non-Compliance Is Identified or Suspected
      1. Auditor shall obtain
        1. An understanding of the nature of the act and the circumstances in which it has occurred
        2. Further information to evaluate the possible effect on the financial statements.
      2. Auditor shall discuss the matter unless prohibitted by law with
        1. Management
        2. Those Charged with Governance
      3. Evaluate implications of identified or suspected non-compliance in relation to other aspects of audit including
        1. Auditors Risk Assessment
        2. Reliabilty of written representation
      4. If they do not provide sufficient information to support the fact that the entity is in non-compliance with laws and regulations
        1. Assess the effect of the non-compliance on FS
          1. Material
          2. Consider need to obtain legal advice
          3. Evalulate effect of lack of SAAE
          4. Immaterial
          5. ISA Khamosh
    3. Communicating and Reporting Identified or Suspected Non-Compliance
      1. Communicating with TCWG
        1. Managemen and those charged with goverance are involved?
          1. No
          2. Assess Effect
          3. Material (Consequential)
          4. Communicated with TCWG
          5. Immaterial (Inconsequential)
          6. ISA Khamosh
          7. Yes
          8. Next Higher level of authority exist? or Auditor believes the communication will be acted upon?
          9. Yes
          10. Communicat with the next higher level of authority
          11. No
          12. Consider need to obtain legal advice
        2. Intentional and Material
          1. Auditor shall communicate to TCWG as soon as practicable
      2. Potential Implicatios in Audit Report
        1. Non-Compliance Identified and management refused to adequately reflect the matter in FS
          1. Assess the effect of the non-compliance on FS
          2. Material
          3. Qualify as per ISA 705
          4. Material + Pervasive
          5. Disclaimer of Opinion as per ISA 705
          6. Immaterial
          7. ISA Khamosh
        2. If Auditor is precluded by management or TCWG from obtaining SAAE
          1. To assess if a MATERIAL non-compliance
          2. Has
          3. or is likely to have
          4. occured
          5. It is Scope Limiatation
          6. Material
          7. Qualified opinion
          8. Material + Pervasive
          9. Disclaimer of opinion
        3. If the auditor is unable determine if the non-compliance has occured because of limitation imposed by circusmatances rather than by management or by TCWG
          1. Evaluate the effect on the auditor's opinion in accordance with ISA-705
          2. It is Scope Limiatation
          3. Material
          4. Qualified opinion
          5. Material + Pervasive
          6. Disclaimer of opinion
      3. Reporting to an appropriate authority outside the entity
        1. the auditor shall determine whether law, regulation or relevant ethical requirements
          1. Requires the auditor to report to an appropriate legal authority outside the entity
          2. Establish responsibilities under which reporting to an appropriate authority outside the entity may be appropriate in the circumstances.
    4. Documentation
      1. Auditor shall document
        1. The audit procedures performed, the significant professional judgments made and the conclusions reached thereon and
        2. The discussions of significant matters related to the non-compliance with: management, those charged with governance and others, including how management and, those charged with governance have responded to the matter.