SA 250 — Consideration of Laws and Regulations

Issued by ICAI AASB · Risk Assessment

Material non-compliance with laws and regulations and how to respond.

Objective

To obtain sufficient appropriate audit evidence regarding compliance with laws and regulations generally recognised to have a direct effect on the determination of material amounts and disclosures, and to perform specified audit procedures on other laws and regulations.

Key requirements

Understanding of the regulatory framework applicable to the entity
Procedures to identify instances of non-compliance with laws affecting financial reporting
Inquiries of management about compliance with laws and regulations
Inspection of correspondence with regulatory authorities
Communication of identified non-compliance to TCWG; reporting where appropriate

Typical procedures

Review of correspondence with regulators (RBI, SEBI, MCA, CBDT, GSTN, NFRA)
Inquiry on pending litigation and show-cause notices
Review of board / committee minutes for compliance matters
Reading the FS for compliance-related disclosures

Common pitfalls

No documented review of regulatory correspondence
Skipping inquiry of legal counsel on pending matters
Missing CARO clause (vii) disputed dues

SA 250 in practice

SA 250 sits in the Risk Assessment phase of the audit. The Standards on Auditing are issued by the ICAI Auditing and Assurance Standards Board (AASB) and deemed to be prescribed by the Central Government under Section 143(10) of the Companies Act 2013. Compliance with SAs is mandatory for every audit conducted by a Chartered Accountant in India.

For authoritative text, refer to the ICAI AASB Compendium of Standards on Auditing at icai.org.

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