SA 250: Consideration of Laws and Regulations#
Objective#
To enable auditor to consider laws and regulations and their effect on financial statements.
Types of Laws#
1. Laws with Direct Effect
- Tax laws
- Companies Act
- Labour laws
2. Laws with Indirect Effect
- Environmental regulations
- Industry-specific regulations
Auditor's Responsibility#
- Obtain understanding of legal framework
- Audit in accordance with applicable framework
- Report non-compliance to those charged with governance
Procedures#
- Inquiry of management
- Review contracts and agreements
- Communication with legal counsel
- Analytical procedures
Reporting#
- Non-material non-compliance: Report to management
- Material non-compliance: Consider effect on opinion
- Non-compliance with laws discovered: Communicate to those charged with governance