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M. V. Kali Prasad

M. V. Kali Prasad taps audit standards for insights that may help students

OKAY, you are studying audit and assurance standards (AAS) for your exams. You can apply many of the phrases from those pronouncements to your preparation and think of Exam Assurance Standards (EAS). Thus, modelled on the AAS on Frauds and Errors is EAS 4.

While studying, watch out for frauds and errors. If a candidate is not CA material, but takes up the course because others advised him so to do, it is a case of an error, since it emerges from innocence. But if he does not really concentrate while studying, or does not give his 100 per cent, he is committing a fraud. The teachers, the coaching organisations, and so on, being those charged with governance also may commit a fraud by not covering the subject properly and completely, in the manner as required. Otherwise, it defies logic why the thousands of students studying in different institutions spread across the country fail to pass CA, for no fault of theirs.

Preparation evidence (EAS 5): The candidate should put in sufficient and appropriate effort in preparation for the examinations. The candidate should generate enough evidence that he has studied for the examination. Preparation can be by writing or studying. It is debatable which of the two — studying or writing — is more reliable. Though writing is considered more reliable , when there are good internal controls systems during studies, studying is no less dependable as preparation evidence.

The candidate should write sufficient and appropriate answer for every question in every paper. There are two types of answers: conclusive and persuasive. The answers may comprise both substantive and compliance components. The candidate should combine both the types to make a comprehensive answer. The substantive procedures are the passing of entries in accounts, reasoning out the answers, and so on, while the compliance procedures could be opening of the necessary accounts, quoting the necessary standards, legal provisions, case laws, and so on.

A candidate should be thorough in his preparation for the examinations and be objective in his presentation.

Inherent risk (EAS 6): It is the risk that the candidate may not pass the examination despite the best of preparation. It has two components — control risk and detection risk. Both these together make up the result risk.

The candidate should decide the extent of risk he is willing to take. He should ensure that the subject matter does not escape his attention in the course of his preparation. The nature, extent and timing of his preparation depends upon his result risk and his apprehensions about the control risk. Where he apprehends a high control risk, he should carry out additional, amended, altered or extended procedures to safeguard himself against the risk.

Detection risk is the risk that the candidate might not be able to recall the answers at the time of the examination. He may have resorted to a test study (akin to test check) and the probability of a question appearing from an area he has omitted is very high. He should carefully plan his procedures to minimise the risk.

Relying upon friends (EAS 7) (internal auditors): A candidate is entitled to rely upon his friends and cousins in the process of preparation for the examination. Before relying upon them, he should consider their integrity, knowledge, methodology adopted and the degree of seriousness. A candidate cannot be absolved of his responsibility by saying that he has relied upon a friend.

Preparation planning (EAS 8): Planning is essential for any job and preparation for examinations is not an exception. The candidate should plan all his actions and prepare a comprehensive plan aimed at achieving his objective of clearing the examination in the first attempt, preferably with a rank. In the course of planning he should consider his intellectual level, memory power, grasping abilities, time rationing, distractions by way of cricket matches, new picture releases, TV serials, friends, marriages, and so on.

He would do well to discuss the matters with his seniors, fellow candidates, advisors, teachers and guides at the planning stage.

He should draft a suitable programme before the commencement of preparation laying down the nature, extent and timing of preparation procedures.

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