1. Scope of application
Auditing Standard No. 250 prescribes and guides the auditor's responsibilities. and auditing firms (hereinafter referred to as "auditors") when reviewing Compliance laws and regulations of the audited entity during the audit of financial statements.
ISA 250 does not apply to other assurance engagements in which the auditor is required to examine and report separately on the entity's compliance with specific laws and regulations.
2. Impact of laws and regulations
The effects of laws and regulations on financial reporting can vary significantly. The laws and regulations governing the operations of the audited entity constitute the relevant legal and regulatory framework. The provisions of some laws and regulations have a direct impact on financial reporting, by prescribing the amounts and disclosures that must be presented in the entity's financial statements.
Some other laws and regulations require the Board of Directors to comply or have provisions requiring the entity to comply in the course of its operations but do not directly affect the entity's financial statements. Some audited entities operate in industries subject to multiple legal regulations (such as banking, securities, insurance or chemical companies, etc.).
Some other entities are subject only to certain laws and regulations that relate to their operations in general (such as laws and regulations relating to occupational health and safety and equal employment opportunity).
Non-compliance with laws and regulations may result in penalties, litigation, or other consequences that could have a material effect on the financial statements.
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