Regulation 127 — Audit Regulations 2020
Original Rule Text
# 127. Principles of Public-sector auditing and principles related to audit process
(1) The general principles of public sector auditing that the auditor should consider prior to commencement and at more than one point during audit comprise ethics and independence, professional judgement, due care and skepticism, quality control, audit team management and skills, audit risk, materiality, documentation and communication as given in the Auditing Standards. (2) Principles related to the audit process are explained in the Auditing Standards and comprise
(a) Planning
(i) Establish the terms of the audit engagement
(ii) Obtain understanding of the entity
(iii) Conduct risk assessment
(iv) Determine Materiality
(v) Identify risks of fraud, as applicable
(vi) Develop an audit plan – audit objectives, scope, approach and methodology, resource allocation, timelines across stages of audit
(b) Conducting the Audit
(i) Perform the planned audit procedures to obtain audit evidence
What This Means
This regulation outlines two categories of auditing principles. General principles — including ethics, independence, professional judgment, due care, skepticism, quality control, team management, audit risk, materiality, documentation, and communication — must be considered before and throughout the audit. Process principles cover the three phases of audit: planning (understanding the entity, risk assessment, audit plan), conducting (evidence gathering and evaluation), and reporting (preparing reports and following up).
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- 1General principles: ethics, independence, judgment, due care, skepticism, quality control, materiality, documentation
- 2Planning phase: understand entity, assess risks, determine materiality, identify fraud risks, develop audit plan
- 3Conducting phase: execute planned procedures, gather evidence, evaluate and draw conclusions
- 4Reporting phase: prepare report based on conclusions, follow up on reported matters
- 5These principles apply to ALL types of audit: financial, compliance, and performance
- 6Audit plan must specify objectives, scope, approach, methodology, resources, and timelines
Practical Example
An audit team starting a compliance audit of defense procurement begins with the general principles: they declare no conflicts of interest (ethics), maintain independence from the Ministry, and apply professional skepticism to procurement claims. In planning, they assess procurement risks, set materiality at Rs 10 crore, and develop a 3-month audit plan. During conduct, they gather evidence through record review and interviews. The report presents findings with recommendations, and follow-up tracks implementation.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
What is 'professional skepticism' in audit?▼
How is 'materiality' determined in government audit?▼
Is fraud detection a primary objective of CAG audit?▼
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.