## Statements vs Guidance Notes

ICAI issues two categories of pronouncements that practitioners must distinguish:

### Statements

Issued by the Council of ICAI to secure compliance on critical matters for proper discharge of professional functions.
Mandatory in nature — no discretion to deviate.

### Guidance Notes

Issued to provide guidance on professional matters that may arise in practice and pose difficulty.
Recommendatory in nature — a member should ordinarily follow a GN relating to an auditing matter.
Exception: A member may deviate if satisfied that in the specific circumstances of the case, following the GN is not necessary.

Feature	Statements	Guidance Notes
Purpose	Compliance on critical matters	Guidance on professional issues
Nature	Mandatory	Recommendatory
Deviation allowed?	No	Yes, with justification

> Exam signal: When a question asks whether a GN can be ignored, the answer is yes — but only when the auditor is satisfied it is not necessary in the circumstances of the case.

Worked example

### Example 1

Example 1: ICAI issues a Statement requiring auditors to report fraud to the appropriate authority within the entity. Since this is a Statement, the auditor has no discretion — compliance is mandatory regardless of the circumstances or management's objection.

Example 2: A Guidance Note recommends a specific format for confirming debtors' balances. An auditor auditing a bank whose debtors are all sovereign governments finds the standard format inapplicable. The auditor may deviate from the GN format, provided he is satisfied it is not necessary in those particular circumstances — this is permissible since GNs are recommendatory.

⚠️ Common exam mistakes

Treating Guidance Notes as mandatory — they are recommendatory; the auditor can deviate with justification.
Assuming Statements are merely advisory — they are mandatory and must be followed without exception.
Forgetting the exact condition for GN deviation: the member must be satisfied that in the circumstances of the case, it may not be necessary — not just that it is inconvenient.
Confusing 'Statements' (mandatory) with 'Standards on Auditing / SAs' — these are separate categories of ICAI pronouncements.

Reference:

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