The Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995 elevated the standards on auditing to the status of legal enactments. The Act also provided for the setting up of the Statutory Auditing Standards Committee with responsibility to recommend and otherwise assist the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) in the adoption of Auditing Standards. The formulation and revision of Auditing Standards is a continuous process. Changes in the financial reporting environment necessitate corresponding changes in the Auditing Standards.
The Sri Lanka Auditing Standards are based on the International Standards on Auditing (ISAs) published by the International Auditing and Assurance Standards Board (IAASB) of the International Federation of Accountants (IFAC), with slight modifications to meet local conditions and needs. Hence compliance with the Sri Lanka Auditing Standards ensures compliance in all material respects with the International Standards on Auditing.
Under the Act, compliance with these Standards is compulsory when carrying out the audits of entities specified in the said Act. This Act not only places the responsibility of complying with these Standards on the Auditors alone, but also places a corresponding responsibility on the entity's Management to take all reasonable steps to ensure that these Standards are complied with in the conduct of the audits of their accounts.
New Publication on Sri Lanka Auditing Standards
The latest publication of the Sri Lanka Auditing Standards (SLAuSs) and Sri Lanka Standard on Quality Control 1 (SLSQC 1) contains the complete set of Sri Lanka Auditing Standards and Sri Lanka Standard on Quality Control 1 that have been adopted under the Clarity Project in line with the International Auditing and Assurance Standards Board’s (IAASB) pronouncements on auditing and quality control.
The IAASB’s objective of the Clarity Project was to improve the clarity of International Standards on Auditing (ISAs). Under the Clarity Project, IAASB recognized that standards need to be understandable, clear, and capable of consistent application, thereby serving to enhance the quality and uniformity of practice worldwide. The project involved the application of new drafting conventions to all ISAs, either as part of a substantive revision or through a limited redrafting, to reflect the new conventions and matters of clarity. The final set of clarified standards comprises 36 International Standards on Auditing (ISAs) and International Standard on Quality Control 1 (ISQC 1) including:
- One new International Standard on Auditing (ISA), addressing communication of deficiencies in internal control;
- 16 ISAs that contain new and revised requirements (these have been referred to as "revised and redrafted ISAs");
- 19 ISAs that have been redrafted to apply the new conventions and reflect matters of general clarity (these have been referred to as "redrafted ISAs"; and;
- International Standard on Quality Control 1, which has been redrafted.
The Clarified Standards have a new structure, in which information is presented in separate sections: Introduction, Objective, Definitions, Requirements, and Application and Other Explanatory Material.
The Sri Lanka Auditing Standards (SLAuSs) and Sri Lanka Standard on Quality Control (SLSQC 1) follow the same structure as the aforesaid corresponding International Standards on Auditing (ISAs) and International Standard on Quality Control (ISQC 1).
