Opinions

Adverse Opinion material and persasive

Disclaimer of Opinion could be material or pervasice
Qualified Opinion material but not pervasive
material but not pervasive
Unqualified Opinion prepared in all material aspects in accordance with the applic

FRAMEWORK

PSAs- Philippine Standards on Auditing (PSA)

PSREs- Philippines Standards on Review Engagements
PSAEs- Philippine Standards on Assurance Engagements
AASC- Auditing and Assurance Standard Council
The Code- The Code of Ethics for Professional Accountants
PSQCs- Philippine Standards on Quality Control
COSO- Committee on Sponsoring Organization
CoCo- Criteria of Control

Assertion Based
Engagement

Evaluation is performed by the responsible party

Subject matter is in the form of an assertion

2 Types of Assurance
Engagement
Reasonable Assurance
Engagement
Positive conclusion
concept relating to accumulating evidence necessary for the
practitioner to conclude in relation to the subject matter
information taken as a whole.
 SCOPE OF TH
with sufficient evidence Compilation Engagement
without sufficient evidence an engagement in which a practitioner
with sufficient evidence applies accounting and financial
without sufficient evidence reporting expertise to assist
management in the preparation and
in accordance with the applicable financial reporting framework presentation of financial information of
an entity in accordance with an

ORK applicable financial reporting

framework, and reports as required by
this Philippine Standard on Related
Services (PSRS).
 

PSRS- Philippine Standard on Related Services

Engagement Acceptance

1. Relevant ethical requirements

2. Engagement exhibits all the following characteri
a. The subject matter is appropriate
b. The criteria used are suitable and are
c. The practitioner has access to sufficie

d. IV. The practitioner’s conclusion, in th

engagement or a limited assurance eng

e. V. The practitioner is satisfied that th

Direct Reporting
Engagement
CRITERIA

1. Relevance
the practioner performs the evaluation and measurement 2. Completeness
Assurance report 3. Reliability
responsible party provides the subject matter 4. Neutrality
ssurance 5. Understandability
ment
Limited Assurabce An attitude of professional skepticism means
Engagement Professional Skepticismmind, of the validity of ev
with a questioning
contradicts or brings into question the reliab
responsible party.
Negative Conclusion
COPE OF THE FRAMEWORK
hich a practitioner
nd financial
o assist
reparation and
cial information of
ce with an
eporting
rts as required by
ard on Related

equirements
bits all the following characteristcis
bject matter is appropriate
eria used are suitable and are available to the intended users
ctitioner has access to sufficient appropriate evidence to support the practitioner’s conclusion

practitioner’s conclusion, in the form appropriate to either a reasonable assurance

ent or a limited assurance engagement, is to be contained in a written report; and

practitioner is satisfied that there is a rational purpose for the engagement

assist decision-making
no omission
consistent evaluation
free from bias
clear and comprehensive

ofessional skepticism means the practitioner makes a critical assessment,

ng mind, of the validity of evidence obtained and is alert to evidence that
ngs into question the reliability of documents or representations by the
y.
 ASSURANCE

ATTESTATION BASED

AUDIT

RA9298

AASC Pronouncement
adapted from
 Preface- to facilitate understanding of the objectives and operating procedures of the AASC
Auditing and Assurance Standards Council
AASC- created by PRC, recommended by BOA
replaces the ASPC Auditing Standards and Practices Council

Mission-
the promulgation of auditing standards, practices and procedures which
shall be generally accepted by the accountinf profession in the Philippines

Correction No. of Members

Chairman 10 years 1
Board of Accountancy 1
Securities and Exchange Comission 1
Bangko Sentral ng Pilipinas 1
Comission on Audit 1
Association of CPAs in Public Practice 1
Public Practice 9
Commerce and Industry 1
Academe/ Education 1
Government 1
18 members

18 members including the chairman

17 members and a chairman
Term: 3 years renewable for one more term

AASC Pronouncement IAASB International Auditing and Assurance Standards Board

adapted from

Steps:
1. Preparatio of exposure draft by AASC workgroups
2. Approval by the majority of the AASC members (8members)
3. ED is widely distributed for comment (gen. not shorter than 90 days)
4. Comments are received and ED is revised as appropriate
5. Issuance of Final Philippine Standards and Practice Statements, as well as interpretations
(requires approval of at least ten members)
6. Submission to the Professional Regulation Comission through Board of Accountancy for approval
shall be published in the Official Gazette
After publication, the AASC pronouncement becomes operative from the effective date stated therein
@
Assertion Based Engagement
PRBOA- Professional Regulation Board of Accountancy
International Standards and Practice Statements
IAASB- International Auditing and Assurance Standard Board
ASPC- Auditing Standards and Practices Council established by Philippine Instititute of Certified Pu
PAPSs Philippine Auditing Practice Statements- are issued to provide interpretive guidance and practical

Preface to Philippine Standards on Q

Auditing, Other Assurance and Re
facilitates the understanding of the objectives and operating procedures of the Auditing and Assurance S

AASC Mission: promulgation of auditing standards, practices and procedures w

Philippine Standards and Practice Statements

The pronouncements of the ASPC shall be in the form of:

·         Philippine Standards on Quality Control (PSQCs)

·         Philippine Standards on Auditing (PSAs)
·         Philippine Standards on Review Engagements (PSRE
·         Philippine Standards on Related Services (PSRSs)
·         Philippine Auditing Practice Statements (PAPSs)
·         Philippine Review Engagement Practice Statements
·         Engagement Practice Statements (PAEPSs)
·         Philippine Related Services Practice Statements (PRS

ASPC's Engagement Standards

PSA
PSRE
PSAE
PSRS
pine Instititute of Certified Public Accountants and the Association of CPAs in Public Practice
pretive guidance and practical assistance to professinal accountants in implementing PSA to promote good practice

ndards on Quality Control,

nce and Related Services
f the Auditing and Assurance Standards Council (AASC or Council)

ds, practices and procedures which shall be accepted by the accounting profession in the Philippines

in the form of:

n Quality Control (PSQCs)

n Auditing (PSAs)
n Review Engagements (PSREs) Philippine Standards on Assurance Engagements (PSAEs)
n Related Services (PSRSs)
actice Statements (PAPSs)
agement Practice Statements (PREPSs) Philippine Assurance
Statements (PAEPSs)
vices Practice Statements (PRSPSs)
 Follows a systematic and objective process in obtaining and evaluating evidence w
Auditing
AAA-
eventsAmerican Accounting
to a certain Association
degree of gorespondence between these assertions and establi
users

As to Auditor:
External/ Independent Auditors
Internal Audits
Government (State) Audits

Purpose of an Audit
The purpose of an audit is to enhance the degree of confide
intended users in the financial statements. This is achieved
expression of an opinion by the auditor on whether the fina
statements are prepared, in all material respects, in accord
with an applicable financial reporting framework.

Risk Assesment Procedure Premilinary stages and Planning

Further Audit Procedure Testing of Internal Control and Substantice Procedures and Completion of Audit Procedures

Audit Risk- Inherent Risk X Control Risk X Detection

 ng and evaluating evidence which tests the assertions against a suitable criteria.

n these assertions and established criteria and communicationg the results to interested

like in FS Audit
for operational and compliance audit of private companies
can be FS, operational or compliance, and normally performed by COA

of an Audit
enhance the degree of confidence of
al statements. This is achieved by the
he auditor on whether the financial
all material respects, in accordance
eporting framework.

mpletion of Audit Procedures

Risk X Control Risk X Detection Risk

Free from Material Misstatement
Materiality
Material Misstatement
Materiality
 Assertion a positive statement about an action, event, condition, or performance over a spec

Attest Function attestation the opinion of the auditor in the audit report

Attestation is defined by the AICPA’s Committee on Basic Auditing

Concept is:
 
“A communicated statement of opinion, based upon convincing
evidence by an independent, competent, authoritative person,
concerning the degree of correspondence in all material respects of
accounting information communicated to an entity (individually, firm,
or governmental unit) with established criteria.”
 

FRSC- Financial Reporting Standard Council

 
. At present, the FRSC issued three frameworks:
Framework for Full PFRS;
Framework for PFRS for Small and Medium Entities (SMEs);
Framework for PFRS for Small Entities.
 
n, or performance over a specified period of time
Inherent Limitation of An Audit
uditor in the audit report 1. Evidence Rely Heavily on Management Representations
2. Cost-Benefit Relationships (Also Known as Reasonable Con
3. Human Factor

Information Risk
affects business risk
business risk is a risk that an entity will fail tomeet its objectiv
timely, relevant, and reliable information

Demand for Auditing

1. Conflicts of Interest
2. Remoteness
3. Complexity

Financial Statement Audit Operational Audit

Objective: is a review of an entity’s operating procedures and
to enable the auditor to express an opinion whether methods to determine their efficiency and
the financial statements are prepared, in all material effectiveness.
respects, in accordance with an established accounting performance audit, management audit, comprehensive
framework. audit, or program results audit. The value-for-money
Done by: audit is the term frequently used international term for
by a licensed and accredited Certified Public the operational audit. Internal auditor is normally
Accountant (CPA). His or her responsibility is to hired as full-time employee of the entity to conduct
examine the client’s financial statement and gather these types of audit.
sufficient appropriate evidence to render an opinion
regarding the client’s financial statements
n Audit
nagement Representations
lso Known as Reasonable Concept)

tity will fail tomeet its objectives, which is to earn profits

Compliance Audit
erating procedures and determination of whether transactions and events
efficiency and conform to laws and regulations. Compliance audit
has added significance in audits of government entities
ment audit, comprehensive because generally, there are more compliance
dit. The value-for-money requirements than in audit of non-government entities.
used international term for Purpose:
nal auditor is normally determine whether the auditee is following specific
of the entity to conduct procedures, rules, or regulations set down by higher
authority. The criteria could be a law prohibiting bribes
or a code and accompanying regulations (such as the
National Internal Revenue Code). The audit of income
tax return is a prime example of compliance audit in
which the Bureau of Internal Revenue is determining a
person’s or entity’s adherence to tax regulation.
 
Elements of Quality Control
Leadership responsibilities for quality within the firm;
Relevant ethical requirements;
Acceptance and continuance of client relationships and
specific engagements;
Human resources;
Engagement performance; and
Monitoring.

The Philippine Ethics Code establishes the fundamental

principles of professional ethics, which include:
 
Integrity;
Objectivity;
Professional competence and due care;
Confidentiality; and
Professional behavior.
Professional competence and due care;
Confidentiality; and
Professional behavior.
Engagement Risk

PSQC
-applicable to all
engagements

assurance and related

services
e firm;

hips and

amental
 PSA 220
to all -deals with specific
ents responsibilities
d related
s
(COSO)- Committee of Sposoring Organization of the Treadway Commission Framework
(RAP) Risk Assesment Procedures=
1. Inquiries of management
2. Analytical Procedures
3. Observation and Inspection

PAS 315, par 12

auditor shall obtain an understanding of internal control relevant to the audit

Purpose of Internal Control

1. The realiability of the entity's financial reporting
2. The effectiveness and the efficiency of its operations
3. Its compliance with the applicable laws and regualtions

Limits of Internal Control

1. Human error
2. Collusion of two or more people or inapproprioate management override

Components of Internal Control

COSO internal control components are:
1. Control Environment
2. Risk Assessment
3. Information and Communication
4. Control Activities
5. Monitoring
Control Environment

Elements of Control Environmrnt

1. Communication and enforcement of integrity and ethical values
2. Commitment to competence
3. Participation by those charged with governance
a. Independence from the management
b. Their experience and stature
c. The extent of their involvement and the information they receive, and the scrutiny of activities
d. The appropriateness of their actions
4. Managements philisophy and operating style
5. Organizational Structure
6. Assignment of authority and responsibility
7. Human rresource policies and practices
he scrutiny of activities