## Key Concepts Under SA 200
### 1. Reasonable Assurance
- Audit does NOT provide 100% guarantee
- It provides a high level of assurance
- Why not 100%? Due to inherent limitations of audit:
- Audit is conducted on a sample basis (not every single transaction)
- Performed by a professionally competent person (human judgment has limits)
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### 2. Misstatement
A misstatement is the difference between what is reported in the FS and what should be reported as per AS / Ind AS.
Remember the four forms using AAPD:
| Letter | Form | Example |
|---|---|---|
| A | Amount | ₹10,00,000 recorded as ₹1,00,00,000 |
| A | Accuracy / Classification | Revenue expense classified as capital expenditure |
| P | Presentation | Item shown under wrong head |
| D | Disclosure | Related party transaction not disclosed |
Two types of misstatement:
- Error — Unintentional (accidental mistake)
- Fraud — Intentional (deliberate act)
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### 3. Materiality (SA 320)
> A misstatement is material if it could influence the decisions of users of the Financial Statements.
The auditor considers materiality when deciding whether a misstatement needs to be reported or corrected.
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### 4. Applicable Financial Reporting Framework (FRF)
The framework adopted to prepare and present Financial Statements, determined by the nature of the entity and applicable law:
| Applicable To | Framework |
|---|---|
| Listed / larger companies | Ind AS |
| Others | AS (Accounting Standards) |
| Companies Act requirement | Schedule III |