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CA Inter Chapter 11 Summary Notes

Chapter 11 outlines the fundamental ethical principles for auditors, emphasizing integrity, objectivity, and confidentiality. It details the importance of independence, quality control, and the necessity of clear engagement letters and contracts. Additionally, it covers audit planning, changes in engagement, professional liability, and documentation requirements to ensure compliance with legal and regulatory standards.

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194 views4 pages

CA Inter Chapter 11 Summary Notes

Chapter 11 outlines the fundamental ethical principles for auditors, emphasizing integrity, objectivity, and confidentiality. It details the importance of independence, quality control, and the necessity of clear engagement letters and contracts. Additionally, it covers audit planning, changes in engagement, professional liability, and documentation requirements to ensure compliance with legal and regulatory standards.

Uploaded by

vardhanitushar9
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Chapter 11: Ethics and Terms of Audit Engagements - ICAI CA Intermediate

1. Fundamental Ethical Principles

Integrity: Be honest and straightforward in all professional and business relationships.

Objectivity: Do not let bias, conflict of interest, or undue influence override professional judgments.

Professional Competence: Maintain professional knowledge and skill at a required level.

Confidentiality: Respect the confidentiality of information acquired during the course of work.

Professional Behavior: Comply with relevant laws and regulations and avoid any conduct that

discredits the profession.

2. Independence in Audit

Independence of Mind: Ability to act with integrity, objectivity, and professional skepticism.

Independence in Appearance: Avoid facts and circumstances that a third party might perceive as

compromising independence.

3. Quality Control for Firms

Leadership Responsibilities: Tone at the top, promote internal culture of quality.

Client Acceptance & Continuance: Evaluate integrity and risks before accepting.

Human Resources: Competency and capabilities of staff.

Engagement Performance: Supervision and review.

Monitoring: Regular inspections and reviews.


Chapter 11: Ethics and Terms of Audit Engagements - ICAI CA Intermediate

4. Engagement Letters & Contracts

Scope of Work: Nature and extent of audit procedures.

Responsibilities: Duties of auditor and client.

Fees & Billing: Clear mention of fee structure.

Limitations: Mention what is excluded or restricted.

5. Audit Planning

Objectives: Define the overall strategy.

Timeline & Resources: Allocation of personnel and time.

Engagement Partner: Overall responsible authority.

6. Terms of Audit Engagement

Written Agreement: Clear documentation of terms.

Roles & Expectations: Defined for both auditor and client.

Use of Experts/Internal Auditors: Clarify their involvement.


Chapter 11: Ethics and Terms of Audit Engagements - ICAI CA Intermediate

7. Changes in Engagement

Revised Scope or Terms: Communicate in writing.

Disengagement: Must be documented, with valid reason.

8. Letter of Representation

Purpose: Written confirmation from management on audit-relevant matters.

Areas Covered: Going concern, liabilities, compliance with laws.

9. Professional Liability & Due Care

Standard of Care: Reasonable and prudent auditor standards.

Negligence Avoidance: Proper documentation and skepticism.

10. Legal & Regulatory Framework

ICAI Standards: Must comply with SA (Standards on Auditing).

Companies Act Requirements: Adhere to statutory duties.


Chapter 11: Ethics and Terms of Audit Engagements - ICAI CA Intermediate

11. Ethics in Fees

Reasonable Fees: Based on time and effort.

No Contingency Fees: Fees should not be outcome-based.

12. Documentation Requirements

Retention of Records: As per SA 230.

Audit Trail: Essential for legal and professional compliance.

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