Consideration of Laws and Regulations in an Internal Audit(SIA-17)

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Consideration of Laws and Regulations in an Internal Audit(SIA-17)
  • Scope:
    • To consider laws and regulations when performing an internal audit.
    • To test and report on compliance with specific laws or regulations.
    • Non compliance- Acts of omission or commission by the entity, either intentional or unintentional, which are contrary to the prevailing laws or regulations.
    • Non-compliance does not include personal misconduct by those charged with governance, management or employees of the entity.
  • Objective:
    • To obtain sufficient appropriate audit evidence
    • To perform specified audit procedures
    • To respond appropriately to non-compliance or suspected non-compliance
  • Responsibility of Management:
    • To ensure compliance with the provisions of laws and regulations
    • This can be achieved by assigning appropriate responsibilities to the following:
      • A compliance committee
      • A audit committee.
    • Responsibility of Internal Auditor: Should not   assume   any   accountability   for   risk management decisions taken by the management.
      • Inherent limitations on the internal auditor’s ability to detect non-compliance:
        • To many laws and regulations
        • Non-compliance may involve conduct designed to conceal it
        • Legal determination by a court of law.
      • Types of Laws and Regulations:
        • Laws and regulations having direct effect on Financial Statements
          • Obtain sufficient appropriate audit evidence to ensure compliance.
        • Laws and regulations having no direct effect on Financial Statements:
          • Undertake specified audit procedures to identify non-compliance.
          • May have a significant impact on the functioning of the entity.
        • Compliance with Laws and Regulations:
          • Obtaining an Understanding of the Legal and Regulatory Framework
          • Laws and Regulations having Direct Effect on Financials.
          • Procedures to Identify Instances of Non-Compliance.
          • Non-Compliance brought to the Internal Auditor’s Attention through Other Audit Procedures
          • Written Representations
          • Internal Audit Procedures When Non-Compliance is Not Identified or
          • Suspected

 

  • Internal Audit Procedure When Non Compliance is Identified:
    • Indications of Non-Compliance with Laws and Regulations
    • Matters Relevant to the Internal Auditor’s Evaluation
    • Evaluating the Implications of Non-Compliance
  • Reporting of non-compliance:
    • Reporting Non-Compliance to those Charged with Governance
    • Reporting Non-Compliance in the Internal Auditor’s Report
    • If precluded from obtaining   sufficient   appropriate   audit evidence, then Report the same.
    • If unable to determine whether non-compliance is due to limitations imposed by the circumstances / management then evaluate the observations and findings in accordance with SIA 4.

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