SA 250: Consideration of Laws and Regulations in an Audit of Financial Statements :

This Standard deals with the auditor’s responsibility to consider laws and regulations when performing an audit
of financial statements. It also deals with the effect of laws and regulations, responsibility of management for
compliance with laws and regulations, responsibility of the auditor, audit procedures and reporting of identified
or suspected non-compliance and documentation requirements

It is management’s responsibility to ensure that entity’s operations are conducted in accordance with laws and regulations. Auditor is not responsible for preventing non–compliance but he is responsible for obtaining reasonable assurance that the financial statements, taken as a whole, are free from material misstatement, whether caused by fraud or error.

Risk of non detection of material misstatements is higher with regard to material misstatements resulting from non–compliance with laws and regulations due to various factors. The auditor should obtain a general understanding of legal and regulatory framework applicable to the entity and he should see how it is complying with that framework. After obtaining general understanding, auditor should perform procedures to identify instances of non–compliance with these laws and regulations where non–compliance should be considered when preparing financial statements.

Auditor should obtain sufficient appropriate audit evidence about compliance with those laws and regulations generally recognised by Auditor to have an effect on determination of material amounts and disclosures in financial statements. To obtain written representations that management has disclosed all known actual or possible non–compliance with laws and regulations whose effects should be considered when preparing financial statements.