Page 84 - Microsoft Word - 00 P1 IW Prelims.docx

Chapter 83 4

Laws and regulations

Guidance regarding responsibility to consider laws and regulations in an audit of
financial statements is provided in ISA 250 Consideration of Laws and Regulations in
an Audit of Financial Statements.

Non-compliance with laws and regulations may lead to material misstatement if
liabilities for non-compliance are not recorded, contingent liabilities are not disclosed
or if they lead to going concern issues which would require disclosure or affect the
basis of preparation of the financial statements.

1.1 Definition

Non-compliance means acts of omission or commission by the entity,
either intentional or unintentional, which are contrary to the prevailing
laws or regulations. Non-compliance must specifically relate to the
business activities.

1.2 Responsibilities

Directors Auditors

 Responsible for ensuring the entity  Obtain sufficient appropriate
complies with relevant laws and evidence of compliance with laws
regulations and regulations generally
recognised to have a direct effect
 Monitor legal requirements on the financial statements

 Develop internal controls to ensure  Perform specified procedures to
compliance help identify instances of non-
compliance with other laws and
regulations that may have a
material effect on the financial
statements

 Respond appropriately if non-
compliance is identified or
suspected

80