UNIT 1 Fundamentals of Assurance Services

Introduction to Auditing Page 1 of 43
“Not intended for publication. For classroom instruction purposes only”.

Introduction to Auditing
A Learning Package for PRE 1 –

Auditing and Assurance Principles
by
Michael C. Diputado
And
Jose Rizal Memorial State University
All rights reserved. This book or any portion thereof

may not be reproduced or used in any manner whatsoever
without the express written permission of the author
except for the use of brief quotations in a book review.
Page and Cover designed: Michael C. Diputado
ISBN ____________________________
First Edition. ______________________
Published by:
JOSE RIZAL MEMORIAL STATE UNIVERSITY
Gov. Guading Adaza St. Sta Cruz, Dapitan City, 7101

Tel. No. (065) 908-8294
[email protected]

Course Introduction
The Introduction to Auditing is a course for the Accountancy programs namely:

Bachelor of Science in Accountancy (BSA), Bachelor of Science in Management
Accounting (BSMA), Bachelor of Science in Internal Auditing (BSIA) and Bachelor of
Science in Accounting Information System (BSAIS). It aims to equip students the basic
knowledge, skills and perspective that are necessary in facing challenges in the business
environment. Each unit is design to make the readers familiar with the basic principles,
functions, methods and standards that auditors must follows in conducting audit.
This course will offer variety of activities that will address the multiple intelligences and
diversity of students. Moreover, activities are provided to enhance students’ learning.
This course will utilize a flexible learning package which include course
introduction, course syllabus, learning guide, learning contract, summative assessments
are included that will provide to the students as to what the course is all about, the course
requirements, and what are the activities and assessments to be accomplished.
This learning package is distinct from other books because it has the following
major parts:
Course Introduction – It presents the vital information about the course.
Course Syllabus – This provides vital information on the course outcomes,
learning outcomes, activities, assessments, grading system and the course requirements.
Learning Guide – This provides significant information as to the students’
schedules of submitting the output and the course requirements, feedback modality,
communication mechanism, and the contact information of the instructor/professor and
other authorities of the University/Campus.
Learning Contract – It is a document which contains the commitment of the
learners in accomplishing the activities which includes also the Data Privacy Act,
plagiarism rules, safety reminders, and parents’ support.
Summative Assessments – These are forms which include the summative
assessment plan, summative assessment instructions, and assessment rubrics.
Flexible Learning Module – This is the meat of the package that contains the
front contents, module content (learning outcomes, pretest, content, learning activities,
and assessments), and the back contents.
Moreover, the flexible learning module included in this FLS Package
composed of 4 units. Each unit offers a basketful of opportunities, activities, and interactive
and innovative strategies towards its end. It provides outcomes-based education model
being implemented in both basic and higher education institutes.
I hope that you will have a meaningful and fruitful learning in this course.
-The Author

Learning Guide
The key to successfully finish this material lies in your perseverance to sincerely
and honestly perform the learning activities and accomplish the assessments. This
flexible learning package is developed with the aim to aid your learning for this course.
Aside from meeting the content and performance standards of this course in performing
all the learning activities and assessments, you will be able to learn the skills and values
which are needed in achieving the future skills and the graduate attributes to become
globally competitive individuals.
Classroom Rules and Conduct
The following are the house rules which will help you to be on track and
successfully finish this course:
1. Schedule and manage your time to read and understand every component of this
learning package.
2. Study on how you can manage to perform all the learning activities in consideration
with your resources and accessibility to technology. Do not ask questions that are
already answered in the guide.
3. If you did not understand the readings and the other tasks, read again. If there are
still clarifications and questions, feel free to reach me through the contact
information indicated in this guide.
4. Do not procrastinate. As much as possible, follow the time table.
5. Read and understand the assessment and technology tools as indicated in the
directions in every assessment or activity.
6. Before the end of the midterms, you will be tasked to send back the material trough
the pigeon boxes in your department. For online learners, you will submit your
output and other tasks in the google classroom. While waiting for my feedback of
your accomplished module, you may continue on accomplishing the tasks in the
succeeding units that are scheduled for the finals.
7. Most importantly, you are the learner; thus, you do all the tasks in your own. You
may ask assistance and guidance from your parents, siblings or friends, but all the
activities shall be performed by you alone.
8. Course requirements must be submitted as to schedule.
9. Plagiarism is strictly prohibited. Be aware that plagiarism in this course would
include not only using another’s words, but another’s specific intellectual posts in
social media. Assignments must be done independently and without reference to
another student’s work. Any outside sources used in completing an assignment,
including internet references must be fully cited on any homework assignment or
exercise.
10. All students should feel free to talk to the instructor face-to-face or through media
during office hours.
11. Academic accommodations are available for students with special needs.
Students with special needs should schedule an appointment with the instructor
early in the semester to discuss any accommodations for this course.

Evaluation
To pass the course, you must observe the following:
1. Read the course module and answer the pretest, quizzes, self-
assessment activities.
2. Write your thoughts and suggestions in the comment boxes.
3. Perform all the learning activities.
4. Accomplish the assessments.
5. Submit the course requirements.
6. Perform Summative Assessment.
Technology Tools
In order to perform all the learning activities and accomplish the assessment, you
will need these software applications: word processing, presentation, publication, and
spreadsheet. These are applications that are available in our desktop or laptop that will
not require internet connection. All activities will be submitted through pigeon boxes. For
online learners, materials will be uploaded in google classroom.
Feedback Modality and Communication Mechanisms
Feedback system will be facilitated through text messaging. If you need to call,
send me a message first and wait for me to respond. Do not give my CP number to
anybody. I will not entertain messages or calls from numbers that are not registered. You
may send your clarifications and questions through the google classroom.
Grading Plan
The term grade is computed using the formula:
30% - Formative Assessment/Student Engagement

70% - Summative Assessment (Major output and requirements)
Midterm Grade = 100% of the Midterm Grade

Final Grade = 50% of the Midterm Grade + 50% of the Final Grade
Contact Information
Person/Office Email address CP number

Instructor [email protected] 09553020983
IMDO [email protected] 09399168104
FLS
CBA
DSAS
Library
DRMMO

LEARNING AGREEMENT
By signing this learning agreement, I commit to the following terms and conditions of
Jose Rizal Memorial State University in the implementation of Flexible Learning
System. Specifically, I commit to observe the following:
1. That I must observe all guidelines of the state pertaining to the prevention of
COVID, specifically to stay home, to observe physical distancing and the use of
face masks when interacting with others.
2. That I shall prioritize my health and safety while I comply with all the necessary
learning activities and assessments needed in my enrolled courses.
3. That I will exhaust all means of complying the requirements at home or in a less
risky place and location that will not allow me to be exposed to other people.
4. That I have already read and understood all instructions pertaining to my enrolled
courses.
5. That I commit to do all the learning activities diligently, following deadlines and the
learning guide enabling me to deliver the course requirements.
6. That I commit to answer all forms of assessment in the learning package honestly.
7. That I shall initiate in giving feedback to my instructor at least once every two
weeks.
8. That I shall not reproduce or publish any part of the learning package content
without the written consent of the University and the author/s.
9. That I shall not commit any form of plagiarism in all course requirements.
Conformed:
Name and signature of student Date signed
Name and signature of parent/guardian Date signed
Contact Number of Parent/Guardian
**Please email the signed copy of this learning agreement to your instructor as soon
as you have received the learning package.



Introduction to Auditing
A Learning Package for PRE 1 –

Auditing and Assurance Principles
by
Michael C. Diputado
And
Jose Rizal Memorial State University
All rights reserved. This book or any portion thereof

may not be reproduced or used in any manner whatsoever
without the express written permission of the author
except for the use of brief quotations in a book review.
Page and Cover designed: Michael C. Diputado
ISBN ____________________________
First Edition. ______________________
Published by:
Gov. Guading Adaza St. Sta Cruz, Dapitan City, 7101

Tel. No. (065) 908-8294
[email protected]

Acknowledgment
I would like express my sincere thanks with a deep sense of gratitude and respect
to all those who provides me immense help and guidance throughout the preparation of
this humble piece of work especially to the people of my department the College of
Business and Accountancy (CBA) and the University President of JRMSU, Dr. Daylinda
Luz R. Laput for the golden opportunity to undertake such a great challenging and
innovative work.
To my family and friends, thank you for your undying love and support.
Above all, to God Almighty, thank you for guiding me throughout this work and
giving me fulfillment in this professional mission.
-The Author

PREFACE
The Introduction to Auditing (An FLS Package for the Auditing and Assurance
Principle) is created to cater the needs of the students especially we are in the amidst of
pandemic which affect everyone. The purpose of this package is to continue the academic
journey of the students despite the stumbling blocks of no face-to-face learning and the
vulnerable net connectivity of some areas. Moreover, to make things possible, a collective
effort of both the instructor and the students is needed to keep away from compromising
education.
In order to cope up with today’s rapidly changing environment affecting the practice
of profession, this package is designed help the readers to equip them with the basic
knowledge and skills that are necessary in facing.
This package covers Generally Accepted Auditing standards specifically (the

Philippine Standards on Auditing (PSAs)), the Philippine Accountancy Law, the nature of
Assurance and Non-assurance services, the consideration of internal control and legal,
regulatory and ethical requirements that professional accountants must comply with.
This package contains four units and each unit contains several topics that
features the essential concept, principles that will help the readers to mold them with the
skills that are significant to fully understand the business environment specifically the
functions and role of the auditor.
At the end of each unit, assignments are provided to help the reader to strengthen
not only their analytical skills but also their communication skills necessary for successful
careers in the near future.
Moreover, this package is intended for all Accountancy related programs namely:
Bachelor of Science in Accountancy (BSA), Bachelor of Science in Management
Accounting (BSMA), Bachelor of Science in Internal Auditing (BSIA) and Bachelor of
Science in Accounting Information System (BSAIS).
-The Author

Unit 1 – Fundamentals of Assurance Services
“Auditing is a systematic process by which a competent, independent

person objectively obtains and evaluates evidence regarding assertions
about economic actions and events to ascertain the degree of
correspondence between those assertions and established criteria and
communicating the results to interested users.”
Learning Outcomes
At the end of the unit, you will be able
 Understand the concept, nature, types and objective of auditing and assurance
engagements at the same time to be familiar with the non- assurance services and
the relationship and distinction between accounting and auditing.
Pretest
Directions: Read the following sentences. Write the letter “T” if the statement is True and
“F” if the statement is False. Write your answer on the space before the number. You may
view this test at our google class.
__________1. Assurance engagement is an agreement in which a practitioner expresses

a conclusion designed to enhance the degree of confidence of the intended users other
than the responsible party about the outcome of the evaluation or measurement of a
subject matter against criteria.
__________2. CPAs are the exclusive providers of assurance engagements as the

subject matter of assurance engagement is limited only to financial information of a
business.
__________3. All engagements performed by professional accountants are assurance

engagements.
__________4. The auditor’s opinion is an assurance as to the efficiency with which

management has conducted the affairs of the entity.
__________5. Because most of the evidence available to the auditor is conclusive, rather
than persuasive, in nature, absolute assurance in auditing is not attainable.
__________6. In a limited assurance engagement, the practitioner expresses his/her

conclusion in positive form.

__________7. In a financial statement audit, reasonable assurance is obtained when the

auditor has gathered sufficient appropriate audit evidence to reduce audit risk to an
acceptably low level.
__________8. The responsible party may also be one of the intended users.
__________9. The conclusion: “Based on our work described in this report, nothing has
come to our attention that causes us to believe that internal control is not effective, in all
material respects, based on XYZ criteria” expresses a limited assurance in negative form.
__________10. The independent auditor’s opinion is an assurance as to the future viability

of the entity.
Thank you for answering the test. Please

see the back content for the answer key or you may
view it in the google class.
The next section is the content of this unit. It

contains vital information. Please read the content.
Content
INTRODUCTION
Philosophy of an Audit Businesses, institutions and individuals must maintain records of

their financial condition and progress. These records are necessary to evaluate and guide
business operations, to determine financial status, to meet legal requirements and to serve
as a basis for credit. Creditors and investors, present and prospective may wish to study
the financial statements of many enterprises for credit extension and investment purposes.
Government agencies will need financial reports to help them carry out the duties imposed
upon them by law. Internal management needs financial reports for planning, directing
and controlling business operations.
These parties therefore, need reliable and credible financial information. The process
employed to establish the reliability or unreliability of the financial statements and
supporting records is referred to as an audit examination. Auditing of financial records has
become an important factor in the dissemination of financial information and the services
of the independent certified public accountant are considered indispensable. Increasingly,
his written report is required to add credibility to the financial statements.
Auditing is a form of attestation. Attestation, in a general sense, refers to an expert’s

communication about the reliability of someone else's assertion. Attestation in a narrower
sense is a written communication that expresses a conclusion about the reliability of a
written assertion that is the responsibility of another party.

An independent auditor's opinion contained in the audit report provides both internal and
external users with input to making logical and informed decision about financial position,
managerial performance and economic vulnerability. Without auditors, decisions such as
these are more likely to be made from bias financial information resulting from a business
entity's undisclosed errors, irregularities or illegal acts.
Auditing Defined
Auditing has been defined in different ways by different sources. The definition given by
the American Accounting Association provides an effective means of introducing and
initially exploring the topic.
“Auditing is a systematic process by which a competent, independent person

objectively obtains and evaluates evidence regarding assertions about
economic actions and events to ascertain the degree of correspondence
between those assertions and established criteria and communicating the
results to interested users.”
This definition includes several key words and phrases briefly discussed in this section.
Systematic process
This implies a structured, logical, and organized series of steps and procedures. Auditing
consists of' a series of sequential steps that include information testing system and testing
of transactions and balances.
Competent, Independent person.
The auditor must be qualified to understand the criteria used and the competence to know
how and what evidence to accumulate to reach the proper conclusion. The auditor must
also have an independent mental attitude which involves impartial and objective thinking.
Objectively obtains and evaluates evidence
This means examining the bases for the assertions (representations) and judiciously
evaluating the results without bias or prejudice either for or against the individual (or entity)
making the representations.
Assertions. about economic actions and events
These are the representations made by the individual or entity. They comprise the subject
matter of auditing Assertions include information contained in financial statements, internal
operating reports and tax returns. In the audit of financial statements, assertions are the
representations of management as to the fairness of the financial statements.
Degree of correspondence
This refers to the closeness with which the assertions can be identified with established
criteria. The expression of correspondence may be quantified, such as the amount of a

shortage in a petty cash fund, or it may be qualitative, such as the fairness

(reasonableness) of financial statements.
Established criteria
These are the standards against which the assertions or representations are judged.
Criteria may be specific rules prescribed by a legislative body, budgets and other
measures of performance set by management, or financial reporting standards
established by the Financial Reporting Standards Council (FRSC) and other authoritative
bodies
Communicating the results
This is often referred to as attestation. The final stage in the audit process is the audit
report - the communication of the findings to users. By attesting to the degree of
correspondence with established criteria, the investigator. Enhances (or weakens) the
credibility of the representations or claims that have been made by another party. The
communication of findings is achieved through a written report.
Interested users
These are individuals who use (rely on) the auditor's findings. In a business environment,
this Includes stockholders, management, creditors governmental agencies, and the
public.

The IFAC Education Committee defines auditing as follows:
Auditing is a structured process that:

a. involves the application of analytical skills, professional judgment, and professional
skepticism;
b. is usually performed by a team of professionals, directed with managerial skills;
c. uses appropriate forms of technology and adheres to a methodology
d. complies with all relevant technical standards, such International Standards on
Auditing (ISAs), International Standards on Quality Control (ISQCs), International
Financial Reporting Standards (IFRS), International Public Sector Accounting
Standards (PSAS), and any applicable international, national or local equivalents
as appropriate; and
e. complies with required standards or professional ethics."
Objective of Auditing
The Philippine Standards on Auditing (PSA) 120 "Framework of Philippine Standards on

Auditing states the objective of an audit as follows:
“The objective of an audit of financial statements is to enable the auditor to express an

opinion whether the financial statements are prepared, all material respects, in
accordance with an identified financial reporting framework. The phrase used to express
the auditor s opinion is present fairly, m all material respects. A similar objective applies
to the audit of financial or other information prepared m accordance with appropriate
criteria.”
The auditor's opinion helps establish the credibility of the financial statements. The user,
however, should not assume that the auditor s opinion is an assurance as to the future
viability of the entity nor an opinion as to the efficiency or effectiveness with which
management has conducted the affairs of the entity.
Why Independent Auditing is Necessary
Without wide public acceptance, professions cannot exist, and independent auditing is no
exception. Over the years, society has perceived a need for audits of publicly held
companies, which has developed as a result of the separation of ownership and
management. Auditing services are used extensively by business, government, and other
not-for-profit organizations. As society becomes more Complex, there is an increased
likelihood that unreliable information will be provided to decision makers. This is referred
to as "Information Risk". Some of the factors that contribute to information risk are
a. Remoteness of information users from information providers
Decision makers, almost always, do not get first-hand knowledge about ne

business enterprise with which they do business lor the reasons that in many
cases,
 Owners are divorced from management,
 directors are not involved in day-to-day operations or decisions,
 business may be dispersed among numerous geographic locations and
complex corporate structure.

b. Potential bias and motives of information provider
A conflict of interest may be assumed to exist between management an owner

regarding the financial statements. Management usually desires to present the
results of its stewardship in the most favorable light. Information may possibly be
biased in favor of the provider when his goals are inconsistent with the decision
maker. This could be attributed to either an international emphasis designed to
influence users in a certain manner or maybe an honest optimism about future
events.
c. Voluminous data
As businesses grow, possibly millions of exchange transactions are processed

daily via manual or sophisticated computerized systems. This increases therefore
the likelihood that improperly recorded information may be included or buried in
the records.
d. Complex exchange transactions
New and changing business relationships may lead to innovative accounting and
reporting problems. Some transactions are so complex and hence more difficult to
record properly. quantifiable will require increased disclosures. Also, transactions
not quantifiable will require increased disclosures.
How Information Risk May Be Reduced
To reduce information risk or the risk that information upon which a business decision is
made is inaccurate, managements of businesses and the users of the " financial
statements may adopt any or all of the following approaches:
a. Allow users to verify information
The user may go to the business establishment to examine records and obtain
information about the reliability of the statement Although impractical because of
costs, this is usually adopted BIR examiners or a business intending to purchase
another busine It is common for a purchaser to use a special audit team
independently verity and evaluate key information of the prospect business. This
is also known as "due diligence audit”.
b. User shares information risk with management
It is important to emphasize the fact that management has the primary

responsibility of providing reliable information to users. If users rely on inaccurate
financial statements and as a consequence incurs a financial loss, a lawsuit may
be brought against management to recover part of such loss.
c. Have the financial statements audited
To obtain reliable information, the user can have an independent audit performed.
The audited information is then used in the decision-making process on the
assumption that it is reasonably complete, accurate, and unbiased.

As an expert in the application of financial reporting standards, the independent

auditor further enhances the quality of financial reporting
Overall Objectives of the Auditor
PSA 200 “Overall Objectives of the independent Auditor and the Conduct of an Audit in
Accordance with Philippine Standards on Auditing" establishes the independent auditor’s
overall responsibilities when conducting an audit of financial statements in accordance
with PSAs. Specifically, it sets out the overall objectives of the independent auditor, and
explains the nature and scope of an audit designed to enable the independent auditor to
meet those objectives. It also explains the scope, authority and structure of the PSAs. and
includes requirements establishing the general responsibilities of the independent auditor
applicable in all audits, including the obligation to comply with the PSAs.
In conducting an audit of financial statements, the overall objectives of the auditor are:
a. to obtain reasonable assurance about whether the financial statements as a whole

are free from material misstatement, whether due to fraud or error. thereby
enabling the auditor to express an opinion on whether the financial statements are
prepared, in all material respects, in accordance with an applicable financial
reporting framework; and
b. To report on the financial statements, and communicate as required by the PSAS,

In accordance with the auditor’s findings. In all cases when reasonable assurance
cannot be obtained and a qualified opinion in the auditor s report is insufficient in
the circumstances for purposes of reporting to the intended users of the financial
statements, the PSAS require that the auditor disclaim an opinion or withdraw from
the engagement, where withdrawal is legally permitted.
Scope of Independent Audit
The term "scope of an audit” refers to the audit procedures deemed necessary in the
circumstances to achieve the objective of the audit. The procedures required to conduct
an audit in accordance with PSAs should be determined by the auditor having regard to
the requirements of PSAS, relevant professional bodies, legislation, regulations and,
where appropriate, the terms of the audit engagement and reporting requirements.
Since the primary objective of an independent audit is to express an opinion on the

company's financial statement, the auditor will conduct a critical and systematic
examination of the statements and of the related documents records, procedures, and
control. Audit evidences may be gathered to enable him to substantiate the
representations in the financial statements. Interna al controls will be evaluated for
effectiveness since they affect the reliability of the financial records. By inquiry,
observation, confirmation and inspection, the auditor can test the existence and validity of
assets, liabilities, overall reasonableness of other account balances in the financial
statements. When sufficient and competent audit evidences have been gathered, the
auditor can then formulate his opinion on the" fairness with which the financial statements
have been prepared. He then prepares the audit report containing the scope of his

examination and the opinion he has expressed on the financial statements for submission
to the client, who in turn furnishes copies of the report to various interested parties.
Advantages and Practical Benefits of Independent Audit
A. To the Auditee or Client.

 Independent audit makes the financial statements more credible and reliable.
 Management is the beneficiary of constructive suggestions in improving
business operations.
 Commission of fraud by management and employee is minimized.
 Audited financial statements provide a more credible basis for the preparation
of tax returns.
 Better and sound management decisions may be made if financial records and
reports are accurately maintained and provided.
B. To Creditors, Prospective Investors, Employees

 Financial institutions have more credible basis in deciding whether financial
assistance will be extended to the auditee.
 Suppliers and other creditors will have reliable basis in making decisions
related to extension of credit
 Potential and current investors will have more credible basis in evaluating
managerial efficiency
 Employees will have a better and credible basis in requesting for fringe
benefits and wage adjustments.
 In the event of sale, purchase, or merger of a business, both buyer and
seller will have more confident basis for aiming at a decision as to the terms
and conditions of the arrangement.
C. To Government Agencies and Legal Community

 BIR has more assurance concerning accuracy and dependability of tax
return if they have been based on audited financial statements.
 Government institutions like GSIS, SSs, DBP will have better basis in
extending financial assistance to business enterprises.
 Audited statements provide the legal community an independent basis for
administering estates and trust, setting action in bankruptcy and
insolvency, etc.
Types of Audit
Based on primary audit objectives, there are three major types of audit namely:
Financial Statement Audit
A financial statement audit is conducted to determine whether the financial statements of

an entity are fairly presented in accordance with the applicable financial reporting
framework. This type of audit will be the focus of the discussion in this module.

Compliance Audit
A compliance audit involves a review of an organization’s procedures to determine

whether the organization has adhered to specific procedures, rules or regulations. The
performance of a compliance audit is dependent upon the existence of verifiable data and
recognized criteria established by an authoritative body. A common example of this type
of audit is the examination conducted by Bureau of Internal Revenue (BIR) personnel to
determine whether entities comply with tax rules and regulations.
Operational Audit
An operational audit is a study of a specific unit of an organization for the purpose of

measuring its performance. The main objective of this type of audit is to assess entity’s
performance, identify areas for improvements and make recommendations to improve
performance. This type of audit is also known as performance audit or management audit.
Unlike compliance and financial audit, where the criteria are usually defined, the criteria
for evaluating the effectiveness and efficiency of operations are not clearly established.
The criteria used for operating audit would typically vary depending on the organization’s
standards and objectives.
It should be noted that, although there are different types of audit, all audit possesses the
same general characteristics. They all involve:
 Systematic examination and evaluation of evidence which are undertaken to

ascertain whether assertions comply with established criteria and
 Communication of the results of the examination, usually in a written report, to the
party by whom, or on whose behalf, the auditor was appointed.
The table below shows a comparison of the three different types of audits:
Financial Audit Compliance Audit Operational Audit

Assertions made The financial That the That organization’s
by the auditee statements are organization has activities are
fairly presented. complied with laws, conducted
regulations or effectively and
contracts. efficiently.
Established Financial Reporting Laws, regulations Objectives set by
Criteria Framework such as and contracts. the board of
the Philippine directors
Financial Reporting
Standards (PFRS)
Content of the An opinion about Reports on the Recommendations
auditor’s report whether the degree of or suggestions on
financial statements compliance with the how to improve
are fairly presented applicable laws, operations.
in conformity with regulations and
the applicable contracts.
financial reporting
framework.

Types of Auditors
Auditors can be classified according to their affiliation with the entity.
External (Independent) auditors
These are audits performed by CPAs who are independent of the organizations whose
assertion is the subject matter of the audit. External auditors usually perform FS audit, but
may also perform operational and compliance audits.
Internal auditor
An internal audit is an independent appraisal function established within an organization

to examine and evaluate its activities as a service to the organization. Internal auditors
normally report the result of their examination to those charged with governance, although
internal audit is an independent appraisal function, internal auditors, being employees of
the auditee-organization, cannot be as independent as external auditors as long as the
employer-employee relationship exist. Internal audits mainly comprise operational and
compliance audit.
Governmental audit
Government auditing involves the determination of whether government funds are being
handled properly and in compliance with the applicable laws and regulations, and whether
the government programs of a particular agency are conducted effectively and efficiently.
Governmental auditors can perform FSs audit, operational audit and compliance audit.
Responsibility for the financial statements
The management is responsible for preparing and presenting the financial statements in
accordance with the applicable financial reporting framework. The auditor's responsibility
is to form and express an opinion on these financial statements based on the audit results.
An audit of financial statements does not relieve management of its responsibilities.
Hence, it is management's responsibility to adopt and implement adequate accounting
and internal control systems that will help ensure the preparation of reliable financial
statements.
Assurance provided by the auditor
The auditor's opinion on the financial statements is not a guarantee that the financial
statements are dependable. An audit conducted in accordance with the PSAs 1s designed
to provide only reasonable assurance (not absolute assurance) that the financial
statements taken as a whole are free from material misstatements. This is because there
are inherent limitations of an audit that affect the auditor's ability to detect material
misstatements. These limitations may arise from the nature of the procedures performed,
nature of the financial reporting framework used, and the nature of evidence obtained by
the auditor.
Nature of the procedures

There are practical and inherent limitations on the auditor's ability to obtain evidence. for
example:
 The use of testing or sampling risk
Due to cost constraints, auditors do not examine all evidence available. Many audit
conclusions are made by examining only sample of evidence. Whenever a sample
is taken, there is always a possibility that the auditor's conclusion, based on the
sample, may be different from the conclusion that would have been reached if the
auditor examines the entire population.
 Error in the application of judgment or non-sampling risk
Even if the auditor examines all evidence available, there is no absolute assurance
that material misstatement in the financial statements will be detected. This is
because the work undertaken by the auditor to form an opinion is permeated by
judgment. Errors in the application of judgment may cause auditors to commit
mistakes in the application of audit procedures or evaluation of evidence obtained.
Nature of financial reporting
The application of the applicable financial reporting such as the PFRS involves application
of significant judgment and framework estimates on the part of the management. Many
financial statement items involve subjective decisions that are subject to an inherent
variability which cannot be eliminated by performing audit procedures. For example, it is
difficult for the auditor to determine the proper valuation of accounts receivable without
management's honest assessment. If the management lacks integrity, management may
provide the auditor with false representations causing the auditor to depend on unreliable
evidence.
Nature of evidence
Audit evidence obtained by the auditor does not consist of "hard facts which prove or
disprove the accuracy of the financial statements. Instead, it comprises pieces of
information and impressions which are gradually accumulated during the course of an
audit and which, when taken together, persuade the auditor about the fairness of the
financial statements. Thus, audit evidence is generally persuasive rather than conclusive
in nature.
Owing to the inherent limitations of an audit, there is unavoidable risk that even an audit
conducted in accordance with the PSAs may not be able to detect material misstatement
in the financial statements. Accordingly, the subsequent discovery of a material
misstatement of the financial statements does not in itself indicate a failure to conduct the
audit in accordance with the PSAs.
In addition, the auditor's opinion on the financial statements deals with whether the
financial statements are prepared in accordance with the applicable financial reporting
framework. The opinion of the auditor is not an assurance as to the future viability of the
entity nor the efficiency or effectiveness with which management has conducted the affairs
of the entity.

General Requirements when Auditing Financial Statements,
The procedures required to conduct an audit in accordance with PSAs should be

determined by the auditor having regard to the requirements or PSAs, relevant
professional bodies, legislations, regulations, and where appropriate, the terms of the
engagement and the reporting requirements. A provides the following guidance when
auditing financial statements
 The auditor should comply with the relevant ethical requirements, including those
pertaining to independence, relating to financial statements audit engagements.
In order to retain public confidence in the credibility of the auditors Work, auditors
must adhere to standards of ethical conduct that embody and demonstrate
integrity, objectivity, and concern for the pubic rather than self-interest.
 The auditor should conduct an audit in accordance with the Philippine Standards
on Auditing (PSAs).
These standards contain the basic principles and essential procedures which the
auditor should follow. The standards also include explanatory and other materials
that are designed to assist auditors in interpreting and applying the auditing
standards. The auditor should not represent compliance to PSA in the auditor's
report unless the auditor has complied with all the PSAs relevant to the audit.
 The auditor should apply professional judgment in planning and performing the
audit.
Professional judgment is essential to the proper conduct of the audit. This is

because compliance with the relevant ethical requirements and the PSAs and the
informed decisions required throughout the audit cannot be made without the
application of professional judgment to the facts and circumstances.
 The auditor should obtain sufficient appropriate audit evidence to reduce the audit
risk to an acceptably low level.
Audit evidence is needed to support the opinion expressed in the auditor's report.
This evidence should be both sufficient and appropriate. Whether the audit
evidence obtained is sufficient and appropriate to reduce the audit risk to an
acceptable level is a matter of professional judgment
 The auditor should plan and perform the audit with an attitude of professional
skepticism recognizing that circumstances may exist which may cause the
financial statements to be materially misstated.
An attitude of professional skepticism means the auditor makes critical

assessment, with a questioning mind, of the validity of audit evidence obtained and
is alert to audit evidence that contradicts or bring into questions the reliability of
documents or management representations. In planning and performing an audit,
the auditor neither assumes that the management is honest nor assumes
unquestioned honesty. Thus, representations from management are not a

substitute for obtaining sufficient appropriate audit evidence to be able to draw

reasonable conclusions on which to base the audit opinion.
Theoretical Framework of Auditing
The audit function operates within a theoretical framework. Below are selected postulates,
assumptions or Ideas that support many auditing concepts and standards.
 Audit function operates on the assumption that all financial data are verifiable
All balances reported in the financial statements must have supporting documents
or evidence to prove their validity. If no evidence exists in relation to the financial
statements on which an auditor is to express an opinion, then there can be no audit
to perform.
 The auditor should always maintain independence with respect to the financial
statements under audit
Independence is essential for ensuring the credibility of the auditor's report. The
report of the auditor will be of little or no value to the readers of the financial
statements if the readers are aware that the auditor is not independent with respect
to the client.
 There should be no long-term conflict between the auditor and the client
management
Short-term conflicts may exist regarding the application of auditing procedures and
accounting principles, but in the end, both the auditor and the management must
be interested in the fair presentation of the financial statements.
 Effective internal control system reduces the possibility of material misstatements

of the financial statements.
The condition of the entity's internal control system directly affects the reliability of
the financial statements. The stronger the internal control 1s, the more assurance
it provides about the reliability of the accounting data and financial statements.
 Consistent application of the applicable financial reporting framework such as the

PFRS results in fair presentation of financial statements.
Auditors often use different criteria to evaluate the validity of an assertion. In the
case of a financial statement audit, the criteria are usually the financial reporting
frameworks which could be the PFRS, PFRS for Small and Medium-sized Entities,
or PFRS for Small Entities. It is assumed that fair presentation is achieved when
the applicable financial reporting framework is applied. Hence, any deviation from
the specific requirements of the framework would render the financial statements
materially misstated.
 What was held true in the past will continue to hold true in the future in the absence
of known conditions to the contrary.

Experience and knowledge accumulated from auditing a client in prior years can
be used to determine the appropriate audit procedures that need to be performed.
 An audit benefits the public.
Financial statements are ordinarily prepared and presented in order to meet the
common information needs of a wide range of users. These users who rely on the
financial statements as their major source of information are the primary
beneficiary of the financial statement audit.
Auditing and Accounting Distinguish
Accounting is the process of recording, classifying and summarizing economic events in

a logical manner for the purpose of providing financial information for decision making. To
be able to provide relevant quantitative and financial information that different users need,
accountants must have a thorough understanding of the principles and the rules to make
sure that the entity’s economic events are properly recorded on a timely basis and at a
reasonable cost. While auditing is concerned with the determination whether the recorded
accounting information for the entity properly reflects the economic events that occurred
during the accounting period. An auditor must possess not only understanding of the
accounting rules but also an expertise in the accumulation and interpretation of audit
evidence. This skill is the major characteristics that distinguish auditors from accountants.
PHILIPPINE FRAMEWORK FOR ASSURANCE ENGAGEMENTS

Introduction
This Framework defines and describes the elements and objectives of an assurance
engagement, and identifies engagements to which Philippine Standards on Auditing
(PSAs), Philippine Standards on Review Engagements (PSREs) and Philippine Standards
on Assurance Engagements (PSAEs) apply. It provides a frame of reference for:
a. Professional accountants in public practice (“practitioners”) when performing
assurance engagements. Professional accountants in the public sector refer to the
Public Sector Perspective at the end of the Framework. Professional accountants
who are neither in public practice nor in the public sector are encouraged to
consider the Framework when performing assurance engagements1;
b. Others involved with assurance engagements, including the intended users of an

assurance report and the responsible party; and
c. The International Auditing and Assurance Standards Board (IAASB) in its

development of ISAs, ISREs and ISAEs and, consequently, the Auditing Standards
and Practices Council (ASPC) in its adoption of said standards for application in
the Philippines.
This Framework does not itself establish standards or provide procedural requirements
for the performance of assurance engagements. ISAs, ISREs and ISAEs and, therefore,
their counterpart PSAs, PSREs, and PSAEs, contain basic principles, essential
procedures and related guidance, consistent with the concepts in this Framework, for the
performance of assurance engagements. The relationship between the Framework and

the ISAs, ISREs and ISAEs is illustrated in the “Structure of Pronouncements Issued by
the IAASB” section of the Handbook of International Auditing, Assurance, and Ethics
Pronouncements. A counterpart document, entitled “Structure of Pronouncements Issued
by the IAASB and the ASPC” is presented as Appendix to the “Preface to International
Standards on Quality Control, Auditing, Review, Other Assurance and Related Services
and Preface to Philippine Standards on Quality Control, Auditing, Review, Other
Assurance and Related Services.”
_____________________________
1
If a professional accountant not in public practice, for example an internal auditor, applies this Framework, and (a) this
Framework, the PSAs, PSREs or PSAEs are referred to in the professional accountant’s report; and (b) the professional
accountant or other members of the assurance team and, when applicable, the professional accountant’s employer, are not
independent of the entity in respect of which the assurance engagement is being performed, the lack of independence and
the nature of the relationship(s) with the entity are prominently disclosed in the professional accountant’s report. Also, that
report does not include the word “independent” in its title, and the purpose and users of the report are restricted. For
assurance engagements regarding historical financial information in particular, reasonable assurance engagements are
called audits, and limited assurance engagements are called reviews.
Definition and Objective of an Assurance Engagement

“Assurance engagement” means an engagement in which a practitioner expresses a
conclusion designed to enhance the degree of confidence of the intended users other than
the responsible party about the outcome of the evaluation or measurement of a subject
matter against criteria.
The outcome of the evaluation or measurement of a subject matter is the information that
results from applying the criteria to the subject matter. For example:
 The recognition, measurement, presentation and disclosure represented in the

financial statements (outcome) result from applying a financial reporting framework
for recognition, measurement, presentation and disclosure, such as Philippine
Financial Reporting Standards, (criteria) to an entity’s financial position, financial
performance and cash flows (subject matter).
 An assertion about the effectiveness of internal control (outcome) results from
applying a framework for evaluating the effectiveness of internal control, such as
COSO2 or CoCo3 (criteria) to internal control, a process (subject matter). In the
remainder of this Framework, the term “subject matter information” will be used to
mean the outcome of the evaluation or measurement of a subject matter. It is the
subject matter information about which the practitioner gathers sufficient
appropriate evidence to provide a reasonable basis for expressing a conclusion in
an assurance report.
Subject matter information can fail to be properly expressed in the context of the subject
matter and the criteria, and can therefore be misstated, potentially to a material extent.
This occurs when the subject matter information does not properly reflect the application
of the criteria to the subject matter, for example, when an entity’s financial statements do
not present fairly, in all material respects its financial position, financial performance and
cash flows in accordance with Philippine Financial Reporting Standards, or when an
entity’s assertion that its internal control is effective is not fairly stated, in all material
respects, based on COSO or CoCo.

In some assurance engagements, the evaluation or measurement of the subject matter is

performed by the responsible party, and the subject matter information is in the form of an
assertion by the responsible party that is made available to the intended users. These
engagements are called “assertion-based engagements.” In other assurance
engagements, the practitioner either directly performs the evaluation or measurement of
the subject matter, or obtains a representation from the responsible party that has
performed the evaluation or measurement that is not available to the intended users. The
subject matter information is provided to the intended users in the assurance report. These
engagements are called “direct reporting engagements.”
Under this Framework, there are two types of assurance engagement a practitioner is
permitted to perform: a reasonable assurance engagement and a limited assurance
engagement. The objective of a reasonable assurance engagement is a reduction in
assurance engagement risk to an acceptably low level in the circumstances of the
engagement4 as the basis for a positive form of expression of the practitioner’s conclusion.
The objective of a limited assurance engagement is a reduction in assurance engagement
risk to a level that is acceptable in the circumstances of the engagement, but where that
risk is greater than for a reasonable assurance engagement, as the basis for a negative
form of expression of the practitioner’s conclusion.
_________________
2
“Internal Control – Integrated Framework” The Committee of Sponsoring Organizations of the Treadway Commission.
3
“Guidance on Assessing Control – The CoCo Principles” Criteria of Control Board, The Canadian Institute of Chartered
Accountants.
4
Engagement circumstances include the terms of the engagement, including whether it is a reasonable assurance
engagement or a limited assurance engagement, the characteristics of the subject matter, the criteria to be used, the needs
of the intended users, relevant characteristics of the responsible party and its environment, and other matters, for example
events, transactions, conditions and practices, that may have a significant effect on the engagement.
Scope of the Framework

Not all engagements performed by practitioners are assurance engagements. Other
frequently performed engagements that do not meet the above definition (and therefore
are not covered by this Framework) include:
 Engagements covered by Philippine Standards for Related Services, such as

agreed-upon procedures engagements and compilations of financial or other
information.
 The preparation of tax returns where no conclusion conveying assurance is
expressed.
 Consulting (or advisory) engagements,5 such as management and tax consulting.
An assurance engagement may be part of a larger engagement, for example, when a
business acquisition consulting engagement includes a requirement to convey assurance
regarding historical or prospective financial information. In such circumstances, this
Framework is relevant only to the assurance portion of the engagement.
The following engagements, which may meet the definition in paragraph 7, need not be
performed in accordance with this Framework:

a. Engagements to testify in legal proceedings regarding accounting, auditing,

taxation or other matters; and
b. Engagements that include professional opinions, views or wording from which a
user may derive some assurance, if all of the following apply:
 Those opinions, views or wording are merely incidental to the overall
engagement;
 Any written report issued is expressly restricted for use by only the intended
users specified in the report;
 Under a written understanding with the specified intended users, the
engagement is not intended to be an assurance engagement; and
 The engagement is not represented as an assurance engagement in the
professional accountant’s report.
________________________
5
Consulting engagements employ a professional accountant’s technical skills, education, observations, experiences, and
knowledge of the consulting process. The consulting process is an analytical process that typically involves some
combination of activities relating to: objective-setting, fact-finding, definition of problems or opportunities, evaluation of
alternatives, development of recommendations including actions, communication of results, and sometimes implementation
and follow-up. Reports (if issued) are generally written in a narrative (or “long form”) style. Generally, the work performed is
only for the use and benefit of the client. The nature and scope of work is determined by agreement between the professional
accountant and the client. Any service that meets the definition of an assurance engagement is not a consulting engagement
but an assurance engagement.
Reports on Non-assurance Engagements

A practitioner reporting on an engagement that is not an assurance engagement within
the scope of this Framework, clearly distinguishes that report from an assurance report.
So as not to confuse users, a report that is not an assurance report avoids, for example:
 Implying compliance with this Framework, PSAs, PSREs or PSAEs.

 Inappropriately using the words “assurance,” “audit” or “review.”
 Including a statement that could reasonably be mistaken for a conclusion designed
to enhance the degree of confidence of intended users about the outcome of the
evaluation or measurement of a subject matter against criteria.
The practitioner and the responsible party may agree to apply the principles of this
Framework to an engagement when there are no intended users other than the
responsible party but where all other requirements of the PSAs, PSREs or PSAEs are
met. In such cases, the practitioner’s report includes a statement restricting the use of the
report to the responsible party.
Engagement Acceptance
A practitioner accepts an assurance engagement only where the practitioner’s preliminary
knowledge of the engagement circumstances indicates that:
a. Relevant ethical requirements, such as independence and professional
competence will be satisfied, and
b. The engagement exhibits all of the following characteristics:
 The subject matter is appropriate;
 The criteria to be used are suitable and are available to the intended users;

 The practitioner has access to sufficient appropriate evidence to support

the practitioner’s conclusion;
 The practitioner’s conclusion, in the form appropriate to either a reasonable
assurance engagement or a limited assurance engagement, is to be
contained in a written report; and
 The practitioner is satisfied that there is a rational purpose for the
engagement. If there is a significant limitation on the scope of the
practitioner’s work (see paragraph 55), it may be unlikely that the
engagement has a rational purpose. Also, a practitioner may believe the
engaging party intends to associate the practitioner’s name with the subject
matter in an inappropriate manner (see paragraph 61). Specific PSAs,
PSREs or PSAEs may include additional requirements that need to be
satisfied prior to accepting an engagement.
When a potential engagement cannot be accepted as an assurance engagement because
it does not exhibit all the characteristics in the previous paragraph, the engaging party may
be able to identify a different engagement that will meet the needs of intended users. For
example:
a. If the original criteria were not suitable, an assurance engagement may still be
performed if:
 The engaging party can identify an aspect of the original subject matter for
which those criteria are suitable, and the practitioner could perform an
assurance engagement with respect to that aspect as a subject matter in
its own right. In such cases, the assurance report makes it clear that it does
not relate to the original subject matter in its entirety; or
 Alternative criteria suitable for the original subject matter can be selected
or developed.
b. The engaging party may request an engagement that is not an assurance

engagement, such as a consulting or an agreed-upon procedures engagement.
Having accepted an assurance engagement, a practitioner may not change that
engagement to a non-assurance engagement, or from a reasonable assurance
engagement to a limited assurance engagement without reasonable justification. A
change in circumstances that affects the intended users’ requirements, or a
misunderstanding concerning the nature of the engagement, ordinarily will justify a request
for a change in the engagement. If such a change is made, the practitioner does not
disregard evidence that was obtained prior to the change.
Elements of an Assurance Engagement
The following elements of an assurance engagement are discussed in this section:
a. A three-party relationship involving a practitioner, a responsible party, and
intended users;
b. An appropriate subject matter;
c. Suitable criteria;
d. Sufficient appropriate evidence; and

e. A written assurance report in the form appropriate to a reasonable assurance

engagement or a limited assurance engagement.
A. Three Party Relationship
Assurance engagements involve three separate parties: a practitioner, a responsible party
and intended users. The responsible party and the intended users may be from different
entities or the same entity. As an example of the latter case, in a two-tier board structure,
the supervisory board may seek assurance about information provided by the
management board of that entity. The relationship between the responsible party and the
intended users’ needs to be viewed within the context of a specific engagement and may
differ from more traditionally defined lines of responsibility. For example, an entity’s senior
management (an intended user) may engage a practitioner to perform an assurance
engagement on a particular aspect of the entity’s activities that is the immediate
responsibility of a lower level of management (the responsible party), but for which senior
management is ultimately responsible.
 Practitioner
The term “practitioner” as used in this Framework is broader than the term “auditor”
as used in PSAs and PSREs, which relates only to practitioners performing audit
or review engagements with respect to historical financial information.
A practitioner may be requested to perform assurance engagements on a wide

range of subject matters. Some subject matters may require specialized skills and
knowledge beyond those ordinarily possessed by an individual practitioner. As
noted in paragraph 17 (a), a practitioner does not accept an engagement if
preliminary knowledge of the engagement circumstances indicates that ethical
requirements regarding professional competence will not be satisfied. In some
cases, this requirement can be satisfied by the practitioner using the work of
persons from other professional disciplines, referred to as experts. In such cases,
the practitioner is satisfied that those persons carrying out the engagement
collectively possess the requisite skills and knowledge, and that the practitioner
has an adequate level of involvement in the engagement and understanding of the
work for which any expert is used.
 Responsible Party
The responsible party is the person (or persons) who:
a. In a direct reporting engagement, is responsible for the subject matter; or
b. In an assertion-based engagement, is responsible for the subject matter

information (the assertion), and may be responsible for the subject matter.
An example of when the responsible party is responsible for both the
subject matter information and the subject matter, is when an entity
engages a practitioner to perform an assurance engagement regarding a
report it has prepared about its own sustainability practices. An example of
when the responsible party is responsible for the subject matter information

but not the subject matter, is when a government organization engages a

practitioner to perform an assurance engagement regarding a report about
a private company’s sustainability practices that the organization has
prepared and is to distribute to intended users. The responsible party may
or may not be the party who engages the practitioner (the engaging party).
The responsible party ordinarily provides the practitioner with a written

representation that evaluates or measures the subject matter against the identified
criteria, whether or not it is to be made available as an assertion to the intended
users. In a direct reporting engagement, the practitioner may not be able to obtain
such a representation when the engaging party is different from the responsible
party.
 Intended Users
The intended users are the person, persons or class of persons for whom the
practitioner prepares the assurance report. The responsible party can be one of
the intended users, but not the only one.
Whenever practical, the assurance report is addressed to all the intended users,
but in some cases, there may be other intended users. The practitioner may not
be able to identify all those who will read the assurance report, particularly where
there is a large number of people who have access to it. In such cases, particularly
where possible readers are likely to have a broad range of interests in the subject
matter, intended users may be limited to major stakeholders with significant and
common interests. Intended users may be identified in different ways, for example,
by agreement between the practitioner and the responsible party or engaging
party, or by law.
Whenever practical, intended users or their representatives are involved with the
practitioner and the responsible party (and the engaging party if different) in
determining the requirements of the engagement. Regardless of the involvement
of others however, and unlike an agreed-upon procedures engagement (which
involves reporting findings based upon the procedures, rather than a conclusion):
a. The practitioner is responsible for determining the nature, timing and extent
of procedures; and
b. The practitioner is required to pursue any matter the practitioner becomes

aware of that leads the practitioner to question whether a material
modification should be made to the subject matter information.
In some cases, intended users (for example, bankers and regulators) impose a
requirement on, or request the responsible party (or the engaging party if different)
to arrange for, an assurance engagement to be performed for a specific purpose.
When engagements are designed for specified intended users or a specific
purpose, the practitioner considers including a restriction in the assurance report
that limits its use to those users or that purpose.

B. Appropriate Subject Matter

The subject matter, and subject matter information, of an assurance engagement can
take many forms, such as:
 Financial performance or conditions (for example, historical or prospective
financial position, financial performance and cash flows) for which the subject
matter information may be the recognition, measurement, presentation and
disclosure represented in financial statements.
 Non-financial performance or conditions (for example, performance of an
entity) for which the subject matter information may be key indicators of
efficiency and effectiveness.
 Physical characteristics (for example, capacity of a facility) for which the
subject matter information may be a specifications document.
 Systems and processes (for example, an entity’s internal control or IT system)
for which the subject matter information may be an assertion about
effectiveness.
 Behavior (for example, corporate governance, compliance with regulation,
human resource practices) for which the subject matter information maybe a
statement of compliance or a statement of effectiveness.
Subject matters have different characteristics, including the degree to which information
about them is qualitative versus quantitative, objective versus subjective, historical versus
prospective, and relates to a point in time or covers a period. Such characteristics affect
the:
a. Precision with which the subject matter can be evaluated or measured against
criteria; and
b. The persuasiveness of available evidence. The assurance report notes
characteristics of particular relevance to the intended users.
An appropriate subject matter is:
a. Identifiable, and capable of consistent evaluation or measurement against the
identified criteria; and
b. Such that the information about it can be subjected to procedures for
gathering sufficient appropriate evidence to support a reasonable assurance
or limited assurance conclusion, as appropriate.
C. Suitable Criteria
Criteria are the benchmarks used to evaluate or measure the subject matter
including, where relevant, benchmarks for presentation and disclosure. Criteria can
be formal, for example in the preparation of financial statements, the criteria may be
Philippine Financial Reporting Standards; when reporting on internal control, the
criteria may be an established internal control framework or individual control
objectives specifically designed for the engagement; and when reporting on
compliance, the criteria may be the applicable law, regulation or contract. Examples
of less formal criteria are an internally developed code of conduct or an agreed level
of performance (such as the number of times a particular committee is expected to
meet in a year).

Suitable criteria are required for reasonably consistent evaluation or measurement

of a subject matter within the context of professional judgment. Without the frame of
reference provided by suitable criteria, any conclusion is open to individual
interpretation and misunderstanding. Suitable criteria are context sensitive, that is,
relevant to the engagement circumstances. Even for the same subject matter there
can be different criteria. For example, one responsible party might select the number
of customer complaints resolved to the acknowledged satisfaction of the customer
for the subject matter of customer satisfaction; another responsible party might
select the number of repeat purchases in the three months following the initial
purchase.
Suitable criteria exhibit the following characteristics:
a. Relevance: relevant criteria contribute to conclusions that assist decision

making by the intended users.
b. Completeness: criteria are sufficiently complete when relevant factors that

could affect the conclusions in the context of the engagement circumstances
are not omitted. Complete criteria include, where relevant, benchmarks for
presentation and disclosure.
c. Reliability: reliable criteria allow reasonably consistent evaluation or

measurement of the subject matter including, where relevant, presentation
and disclosure, when used in similar circumstances by similarly qualified
practitioners.
d. Neutrality: neutral criteria contribute to conclusions that are free from bias.
e. Understandability: understandable criteria contribute to conclusions that are

clear, comprehensive, and not subject to significantly different
interpretations. The evaluation or measurement of a subject matter on the
basis of the practitioner’s own expectations, judgments and individual
experience would not constitute suitable criteria.
The practitioner assesses the suitability of criteria for a particular engagement by

considering whether they reflect the above characteristics. The relative importance
of each characteristic to a particular engagement is a matter of judgment. Criteria
can either be established or specifically developed. Established criteria are those
embodied in laws or regulations, or issued by authorized or recognized bodies of
experts that follow a transparent due process. Specifically developed criteria are
those designed for the purpose of the engagement. Whether criteria are established
or specifically developed affects the work that the practitioner carries out to assess
their suitability for a particular engagement.

Criteria need to be available to the intended users to allow them to understand how
the subject matter has been evaluated or measured. Criteria are made available to
the intended users in one or more of the following ways:
a. Publicly.
b. Through inclusion in a clear manner in the presentation of the subject matter

information.
c. Through inclusion in a clear manner in the assurance report.
d. By general understanding, for example the criterion for measuring time in

hours and minutes.
Criteria may also be available only to specific intended users, for example the terms
of a contract, or criteria issued by an industry association that are available only to
those in the industry. When identified criteria are available only to specific intended
users, or are relevant only to a specific purpose, use of the assurance report is
restricted to those users or for that purpose.6
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6
While an assurance report may be restricted whenever it is intended only for specified intended users or for a
specific purpose, the absence of a restriction regarding a particular reader or purpose, does not itself indicate that
a legal responsibility is owed by the practitioner in relation to that reader or for that purpose. Whether a legal
responsibility is owed will depend on the circumstances of each case and the relevant jurisdiction.
D. Sufficient Appropriate Evidence
The practitioner plans and performs an assurance engagement with an attitude of

professional skepticism to obtain sufficient appropriate evidence about whether the
subject matter information is free of material misstatement. The practitioner considers
materiality, assurance engagement risk, and the quantity and quality of available
evidence when planning and performing the engagement, in particular when
determining the nature, timing and extent of evidence-gathering procedures.
Professional Skepticism
The practitioner plans and performs an assurance engagement with an attitude of
professional skepticism recognizing that circumstances may exist that cause the subject
matter information to be materially misstated. An attitude of professional skepticism means
the practitioner makes a critical assessment, with a questioning mind, of the validity of
evidence obtained and is alert to evidence that contradicts or brings into question the
reliability of documents or representations by the responsible party. For example, an
attitude of professional skepticism is necessary throughout the engagement process for
the practitioner to reduce the risk of overlooking suspicious circumstances, of over
generalizing when drawing conclusions from observations, and of using faulty
assumptions in determining the nature, timing and extent of evidence gathering
procedures and evaluating the results thereof.

An assurance engagement rarely involves the authentication of documentation, nor is the

practitioner trained as or expected to be an expert in such authentication. However, the
practitioner considers the reliability of the information to be used as evidence, for example
photocopies, facsimiles, filmed, digitized or other electronic documents, including
consideration of controls over their preparation and maintenance where relevant.
Sufficiency and Appropriateness of Evidence
Sufficiency is the measure of the quantity of evidence. Appropriateness is the measure of
the quality of evidence; that is, its relevance and its reliability. The quantity of evidence
needed is affected by the risk of the subject matter information being materially misstated
(the greater the risk, the more evidence is likely to be required) and also by the quality of
such evidence (the higher the quality, the less may be required). Accordingly, the
sufficiency and appropriateness of evidence are interrelated. However, merely obtaining
more evidence may not compensate for its poor quality.
The reliability of evidence is influenced by its source and by its nature, and is dependent
on the individual circumstances under which it is obtained. Generalizations about the
reliability of various kinds of evidence can be made; however, such generalizations are
subject to important exceptions. Even when evidence is obtained from sources external
to the entity, circumstances may exist that could affect the reliability of the information
obtained. For example, evidence obtained from an independent external source may not
be reliable if the source is not knowledgeable. While recognizing that exceptions may
exist, the following generalizations about the reliability of evidence may be useful:
 Evidence is more reliable when it is obtained from independent sources outside

the entity.
 Evidence that is generated internally is more reliable when the related controls are
effective.
 Evidence obtained directly by the practitioner (for example, observation of the
application of a control) is more reliable than evidence obtained indirectly or by
inference (for example, inquiry about the application of a control).
 Evidence is more reliable when it exists in documentary form, whether paper,
electronic, or other media (for example, a contemporaneously written record of a
meeting is more reliable than a subsequent oral representation of what was
discussed).
 Evidence provided by original documents is more reliable than evidence provided
by photocopies or facsimiles.
The practitioner ordinarily obtains more assurance from consistent evidence obtained
from different sources or of a different nature than from items of evidence considered
individually. In addition, obtaining evidence from different sources or of a different
nature may indicate that an individual item of evidence is not reliable. For example,
corroborating information obtained from a source independent of the entity may
increase the assurance the practitioner obtains from a representation from the
responsible party. Conversely, when evidence obtained from one source is
inconsistent with that obtained from another, the practitioner determines what
additional evidence-gathering procedures are necessary to resolve the inconsistency.

In terms of obtaining sufficient appropriate evidence, it is generally more difficult to

obtain assurance about subject matter information covering a period than about
subject matter information at a point in time. In addition, conclusions provided on
processes ordinarily are limited to the period covered by the engagement; the
practitioner provides no conclusion about whether the process will continue to function
in the specified manner in the future.
The practitioner considers the relationship between the cost of obtaining evidence and
the usefulness of the information obtained. However, the matter of difficulty or expense
involved is not in itself a valid basis for omitting an evidence gathering procedure for
which there is no alternative. The practitioner uses professional judgment and
exercises professional skepticism in evaluating the quantity and quality of evidence,
and thus its sufficiency and appropriateness, to support the assurance report.
Materiality
Materiality is relevant when the practitioner determines the nature, timing and extent
of evidence-gathering procedures, and when assessing whether the subject matter
information is free of misstatement. When considering materiality, the practitioner
understands and assesses what factors might influence the decisions of the intended
users. For example, when the identified criteria allow for variations in the presentation
of the subject matter information, the practitioner considers how the adopted
presentation might influence the decisions of the intended users. Materiality is
considered in the context of quantitative and qualitative factors, such as relative
magnitude, the nature and extent of the effect of these factors on the evaluation or
measurement of the subject matter, and the interests of the intended users. The
assessment of materiality and the relative importance of quantitative and qualitative
factors in a particular engagement are matters for the practitioner’s judgment.
Assurance Engagement Risk
Assurance engagement risk is the risk that the practitioner expresses an inappropriate
conclusion when the subject matter information is materially misstated.7 In a
reasonable assurance engagement, the practitioner reduces assurance engagement
risk to an acceptably low level in the circumstances of the engagement to obtain
reasonable assurance as the basis for a positive form of expression of the
practitioner’s conclusion. The level of assurance engagement risk is higher in a limited
assurance engagement than in a reasonable assurance engagement because of the
different nature, timing or extent of evidence gathering procedures. However, in a
limited assurance engagement, the combination of the nature, timing and extent of
evidence gathering procedures is at least sufficient for the practitioner to obtain a
meaningful level of assurance as the basis for a negative form of expression. To be
meaningful, the level of assurance obtained by the practitioner is likely to enhance the
intended users’ confidence about the subject matter information to a degree that is
clearly more than inconsequential.
In general, assurance engagement risk can be represented by the following
components, although not all of these components will necessarily be present or
significant for all assurance engagements:

a. The risk that the subject matter information is materially misstated, which in
turn consists of:
 Inherent risk: the susceptibility of the subject matter information to a

material misstatement, assuming that there are no related controls; and
 Control risk: the risk that a material misstatement that could occur will
not be prevented, or detected and corrected, on a timely basis by
related internal controls. When control risk is relevant to the subject
matter, some control risk will always exist because of the inherent
limitations of the design and operation of internal control; and
b. Detection risk: the risk that the practitioner will not detect a material
misstatement that exists.
_____________________
7
(a) This includes the risk, in those direct reporting engagements where the subject matter information is presented only in
the practitioner’s conclusion, that the practitioner inappropriately concludes that the subject matter does, in all material
respects, conform with the criteria, for example: “In our opinion, internal control is effective, in all material respects, based
on XYZ criteria.” (b) In addition to assurance engagement risk, the practitioner is exposed to the risk of expressing an
inappropriate conclusion when the subject matter information is not materially misstated, and risks through loss from
litigation, adverse publicity, or other events arising in connection with a subject matter reported on. These risks are not part
of assurance engagement risk.
The degree to which the practitioner considers each of these components is affected
by the engagement circumstances, in particular by the nature of the subject matter
and whether a reasonable assurance or a limited assurance engagement is being
performed.
Nature, Timing and Extent of Evidence-Gathering Procedures
The exact nature, timing and extent of evidence-gathering procedures will vary from one
engagement to the next. In theory, infinite variations in evidence gathering procedures are
possible. In practice, however, these are difficult to communicate clearly and
unambiguously. The practitioner attempts to communicate them clearly and
unambiguously and uses the form appropriate to a reasonable assurance engagement or
a limited assurance engagement.8
________________________________
8
Where the subject matter information is made up of a number of aspects, separate conclusions may be provided on each
aspect. While not all such conclusions need to relate to the same level of evidence gathering procedures, each conclusion
is expressed in the form that is appropriate to either a reasonable assurance or a limited assurance engagement.
“Reasonable assurance” is a concept relating to accumulating evidence necessary for the

practitioner to conclude in relation to the subject matter information taken as a whole. To
be in a position to express a conclusion in the positive form required in a reasonable
assurance engagement, it is necessary for the practitioner to obtain sufficient appropriate
evidence as part of an iterative, systematic engagement process involving:
a. Obtaining an understanding of the subject matter and other engagement
circumstances which, depending on the subject matter, includes obtaining an
understanding of internal control;

b. Based on that understanding, assessing the risks that the subject matter
information may be materially misstated;
c. Responding to assessed risks, including developing overall responses, and
determining the nature, timing and extent of further procedures;
d. Performing further procedures clearly linked to the identified risks, using a
combination of inspection, observation, confirmation, recalculation,
reperformance, analytical procedures and inquiry. Such further procedures
involve substantive procedures including, where applicable, obtaining
corroborating information from sources independent of the responsible party,
and depending on the nature of the subject matter, tests of the operating
effectiveness of controls; and
e. Evaluating the sufficiency and appropriateness of evidence.
“Reasonable assurance” is less than absolute assurance. Reducing assurance
engagement risk to zero is very rarely attainable or cost beneficial as a result of factors
such as the following:
 The use of selective testing.

 The inherent limitations of internal control.
 The fact that much of the evidence available to the practitioner is persuasive rather
than conclusive.
 The use of judgment in gathering and evaluating evidence and forming conclusions
based on that evidence.
 In some cases, the characteristics of the subject matter when evaluated or
measured against the identified criteria.
Both reasonable assurance and limited assurance engagements require the application
of assurance skills and techniques and the gathering of sufficient appropriate evidence as
part of an iterative, systematic engagement process that includes obtaining an
understanding of the subject matter and other engagement circumstances. The nature,
timing and extent of procedures for gathering sufficient appropriate evidence in a limited
assurance engagement are, however, deliberately limited relative to a reasonable
assurance engagement. For some subject matters, there may be specific
pronouncements to provide guidance on procedures for gathering sufficient appropriate
evidence for a limited assurance engagement. For example, PSA 910, “Engagements to
Review Financial Statements”9 establishes that sufficient appropriate evidence for reviews
of financial statements is obtained primarily through analytical procedures and inquiries.
In the absence of a relevant pronouncement, the procedures for gathering sufficient
appropriate evidence will vary with the circumstances of the engagement, in particular, the
subject matter, and the needs of the intended users and the engaging party, including
relevant time and cost constraints. For both reasonable assurance and limited assurance
engagements, if the practitioner becomes aware of a matter that leads the practitioner to
question whether a material modification should be made to the subject matter
information, the practitioner pursues the matter by performing other procedures sufficient
to enable the practitioner to report.
_____________________
9
PSA 910 will be renumbered as PSRE 2400 under the “Structure of Pronouncements Issued by the IAASB and ASPC”
(see paragraph 2) of this Framework.

Quantity and Quality of Available Evidence

The quantity or quality of available evidence is affected by:
a. The characteristics of the subject matter and subject matter information. For
example, less objective evidence might be expected when information about the
subject matter is future oriented rather than historical (see paragraph 32); and
b. Circumstances of the engagement other than the characteristics of the subject
matter, when evidence that could reasonably be expected to exist is not available
because of, for example, the timing of the practitioner’s appointment, an entity’s
document retention policy, or a restriction imposed by the responsible party.
Ordinarily, available evidence will be persuasive rather than conclusive.
An unqualified conclusion is not appropriate for either type of assurance engagement in
the case of a material limitation on the scope of the practitioner’s work, that is, when:
a. Circumstances prevent the practitioner from obtaining evidence required to reduce
assurance engagement risk to the appropriate level; or
b. The responsible party or the engaging party imposes a restriction that prevents the
practitioner from obtaining evidence required to reduce assurance engagement
risk to the appropriate level.
E. Assurance Report
The practitioner provides a written report containing a conclusion that conveys the
assurance obtained about the subject matter information. ISAs, ISREs and ISAEs
establish basic elements for assurance reports. In addition, the practitioner considers
other reporting responsibilities, including communicating with those charged with
governance when it is appropriate to do so.
In an assertion-based engagement, the practitioner’s conclusion can be worded either:
a. In terms of the responsible party’s assertion (for example: “In our opinion the
responsible party’s assertion that internal control is effective, in all material
respects, based on XYZ criteria, is fairly stated”); or
b. Directly in terms of the subject matter and the criteria (for example: “In our opinion
internal control is effective, in all material respects, based on XYZ criteria”). In a
direct reporting engagement, the practitioner’s conclusion is worded directly in
terms of the subject matter and the criteria.
In a reasonable assurance engagement, the practitioner expresses the conclusion in the
positive form, for example: “In our opinion internal control is effective, in all material
respects, based on XYZ criteria.” This form of expression conveys “reasonable
assurance.” Having performed evidence-gathering procedures of a nature, timing and
extent that were reasonable given the characteristics of the subject matter and other
relevant engagement circumstances described in the assurance report, the practitioner
has obtained sufficient appropriate evidence to reduce assurance engagement risk to an
acceptably low level.
In a limited assurance engagement, the practitioner expresses the conclusion in the
negative form, for example, “Based on our work described in this report, nothing has come

to our attention that causes us to believe that internal control is not effective, in all material
respects, based on XYZ criteria.” This form of expression conveys a level of “limited
assurance” that is proportional to the level of the practitioner’s evidence-gathering
procedures given the characteristics of the subject matter and other engagement
circumstances described in the assurance report.
A practitioner does not express an unqualified conclusion for either type of assurance
engagement when the following circumstances exist and, in the practitioner’s judgment,
the effect of the matter is or may be material:
a. There is a limitation on the scope of the practitioner’s work (see paragraph 55).
The practitioner expresses a qualified conclusion or a disclaimer of conclusion
depending on how material or pervasive the limitation is. In some cases the
practitioner considers withdrawing from the engagement.
b. In those cases where:
 The practitioner’s conclusion is worded in terms of the responsible party’s
assertion, and that assertion is not fairly stated, in all material respects; or
 The practitioner’s conclusion is worded directly in terms of the subject
matter and the criteria, and the subject matter information is materially
misstated,10 the practitioner expresses a qualified or adverse conclusion
depending on how material or pervasive the matter is.
_____________________
10
In those direct reporting engagements where the subject matter information is presented only in the practitioner’s
conclusion, and the practitioner concludes that the subject matter does not, in all material respects, conform with the criteria,
for example: “In our opinion, except for […], internal control is effective, in all material respects, based on XYZ criteria,” such
a conclusion would also be considered to be qualified (or adverse as appropriate).
c. When it is discovered after the engagement has been accepted, that the criteria
are unsuitable or the subject matter is not appropriate for an assurance
engagement. The practitioner expresses:
 A qualified conclusion or adverse conclusion depending on how material or

pervasive the matter is, when the unsuitable criteria or inappropriate
subject matter is likely to mislead the intended users; or
 A qualified conclusion or a disclaimer of conclusion depending on how
material or pervasive the matter is, in other cases. In some cases, the
practitioner considers withdrawing from the engagement.
Inappropriate Use of the Practitioner’s Name
A practitioner is associated with a subject matter when the practitioner reports on
information about that subject matter or consents to the use of the practitioner’s name in
a professional connection with that subject matter. If the practitioner is not associated in
this manner, third parties can assume no responsibility of the practitioner. If the practitioner
learns that a party is inappropriately using the practitioner’s name in association with a
subject matter, the practitioner requires the party to cease doing so. The practitioner also
considers what other steps may be needed, such as informing any known third-party users
of the inappropriate use of the practitioner’s name or seeking legal advice.
Non-Assurance Engagement

Not all engagements performed by professional accountants are assurance

engagements. This does not mean that professional accountants do not undertake such
engagements, only that these engagements are not covered by the Philippine Framework
on Assurance Engagements. Other engagements frequently performed by professional
accountants that are not assurance engagements include the following.
 Agreed-upon procedures.
 Compilation of financial or other information.
 Preparation of tax returns where no conclusion is expressed, and tax consulting
 Management consulting.
 Other advisory services.
Brief Description of Non-Assurance Services
Agreed-upon Procedures Services
An agreed-upon procedures engagement, in which the party engaging the professional

accountant or the intended user determines the procedures to be performed and the
professional accountant provides a report of factual findings as a result of undertaking
those procedures, is not an assurance engagement. While the intended user of the report
may derive some assurance from the report of factual findings, the engagement is not
intended to provide, nor does the professional accountant express, a conclusion that
provides a level of assurance. Rather, the intended user assesses the procedures and
findings and draws his or her own conclusions. However, a professional accountant may
undertake an engagement that is similar to an agreed-upon procedures engagement but
which does result in the expression of a conclusion that provides a level of assurance.
Where, in the judgment of the professional accountant, the procedures agreed to be
performed are appropriate to support the expression of a conclusion that provides a level
of assurance on the subject matter, and the professional accountant intends to do so, then
such an engagement becomes an assurance engagement governed by the Standard on
Assurance Engagement.
Compilation of Financial or Other Information
Compilation services are defined as
"presenting in the form of financial statements that is the representation of management

(owners) without undertaking to express any assurance on the statements”. PSRS 4410
formerly PSA 930)
The objective of a compilation engagement is for the CPA to use accounting expertise, as
opposed to auditing expertise, to collect, classify and summarize financial information. A
compilation improves the quality of information by displaying in Financial Accounting and
Reporting Standards and the practitioner’s identification of obvious errors. Accordingly, it
falls within the definition of an assurance service despite the fact that no assurance is
explicit practitioner's report.
Tax Services
A CPA is considered qualified to prepare corporate and individual tax returns for both audit
and non-audit clients. For smaller accounting firms, tax services provide a large portion of

third revenue. CPAS render two primary types of tax services: tax compliance and tax
planning. Tax compliance includes the preparation of tax returns for individuals,
corporations, estates and trusts, and others. Tax planning determines the tax
consequences, of planned or potential transactions and suggests the desirable course of
action to minimize the tax liability while achieving the client's objectives.
Management Consulting/ Advisory Services
Consulting services are professional services that employ the practitioner's technical
skills, education, observations, experiences, and knowledge of the analytical approach
and procedures used in a consulting engagement. Those procedures may involve
determining client objectives, fact-finding, definition of problems or opportunities,
evaluation of alternatives, formulation of proposed action, communication of results,
implementation, and follow-up. Examples of consulting services are design and installation
of accounting system, computer risk management, corporate finance, tax services, E-
business, etc.
Accounting and Data Processing or Information Technology System Services
Many accounting firms frequently provide accounting services to small clients with limited
accounting staff. These services include doing manual or automated bookkeeping,
journalizing, and posting adjusting entries or preparing (or compiling) financial statements.
In performing accounting Services, the firm serves as a substitute for or supplement to the
accounting personnel of the client. For many years, clients have outsourced or contracted
for outside services, to cut their costs. Recently, large businesses have begun to see
"outsourcing” as an alternative for information system, tax, stock and transfer agency, and
internal auditing
Reports on Not-Assurance Engagements
A practitioner reporting on an engagement that is not an assurance engagement within

the scope of the Framework, clearly distinguishes that report from an assurance report.
So as not to confuse users, a report that is not an assurance report avoids, for example:
 implying compliance with this Framework, PSAs, PSREs or PSAES.

 inappropriately using the words "assurance." "audit" or "review."
 including a statement that could reasonably be mistaken for a conclusion designed
to enhance the degree of confidence of intended users about the outcome of the
evaluation or measurement of a subject matter against criteria.
Having accepted an assurance engagement, a practitioner may not change that

engagement to a non-assurance engagement, or from a reasonable assurance
engagement to a limited assurance engagement without reasonable justification. A
change in circumstances that affects the intended users’ requirements, or a
misunderstanding concerning the nature of the engagement, ordinarily will justify a request
for a change in the engagement. If such a change is made, the practitioner does not
disregard evidence that was obtained prior to the change.
Challenges Faced by the Public Accounting Profession

As a profession, we are in a period of change in which auditors and accountants are called
upon to make professional judgments that best reflect the economics transactions or
current states of economic holdings. Further, audit firms need professional staffs that
make consistent judgments across a wide variety of companies, countries, and types of
transactions. Thus, professional judgment and processes with which to make such
Judgments consistently across both the breadth of a firm, as well as time, are critical to
the future success of each auditing firm.
Among the significant challenges faced by the profession are:
a. Accounting in highly complex often in part because companies are entering into,
increasingly complex transaction and organizational standard.
b. Audit procedures must be designed to attest material fraud and assure that the
financial statements are free from fraud.
c. Computer systems are complex. When used properly they provide opportunities
for effective contacts, but when not used properly, they create additional risks.
d. Many companies are global. The audit firm must operate in multiple countries that
require consistent high-quality audits wherever the audit takes place.
e. There is time pressure to get the audit done and to report more quickly than ever
before.
f. There is a need to generate audit fees sufficient to both
 attract new people to the profession and
 retain managers and partners, who often operate under having stress to
fulfill this most important obligation. This could meet resistance from clients
who may believe that price changes are not warranted.

The public accounting profession has been one of the most highly regarded professions
in the country. But the audit is only as good as the next engagement which must be
executed well and within the rules of the profession. The new public practitioner must be
more than a "rules person”. He or she must be able to meet the challenges of professional
judgment and adhere to standards of professional excellence and ethics.
The Accounting Profession's Credibility Crisis
A recent survey of users of financial statements particularly the investors, provides

evidence that a gap has existed between what auditors attempt to do in an audit and the
user's expectations of the audit. This phenomenon, referred to as the expectation gap,
has existed in some form since the inception of modem auditing. Although CPAs have
historically enjoyed a high degree of credibility, users of audit reports expect auditors to
detect both intentional and unintentional material misstatements and to report when an
entity is not likely to survive. Although audits are not designed for these tasks, changes in
audit standards and practices have been made to better recognize auditor's responsibility
for detecting fraudulent financial reporting and to improve the communication of the work
done by the auditor.
To address the current issues on the expectation gap of the CPA's performance. public
regulations and regulations within the firm have been adopted to include the following
 Setting requirements to ensure that only qualified people are admitted to the
accounting practice.
 Establishing international standards for accounting. reporting and auditing
services.

 Adopting the Revised Code of Ethics for Professional Accountants.

 Developing a program for quality control of public accounting practice
 Requiring practicing accountants to comply with continuing professional
development programs.
 Requiring regular, periodic reviews of auditor's compliance with professional
standards. Penalizing those found guilty of unacceptable practices.
 Monitoring adequate competition among CPA's.

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Introduction to Auditing Page 1 of 43

“Not intended for publication. For classroom instruction purposes only”.

A Learning Package for PRE 1 –

Jose Rizal Memorial State University

All rights reserved. This book or any portion thereof

Page and Cover designed: Michael C. Diputado

First Edition. ______________________

JOSE RIZAL MEMORIAL STATE UNIVERSITY

Gov. Guading Adaza St. Sta Cruz, Dapitan City, 7101

“Not intended for publication. For classroom instruction purposes only”.

The Introduction to Auditing is a course for the Accountancy programs namely:

“Not intended for publication. For classroom instruction purposes only”.

“Not intended for publication. For classroom instruction purposes only”.

To pass the course, you must observe the following:

Feedback Modality and Communication Mechanisms

The term grade is computed using the formula:

30% - Formative Assessment/Student Engagement

Midterm Grade = 100% of the Midterm Grade

Person/Office Email address CP number

“Not intended for publication. For classroom instruction purposes only”.

JOSE RIZAL MEMORIAL STATE UNIVERSITY

Name and signature of student Date signed

Name and signature of parent/guardian Date signed

Contact Number of Parent/Guardian

“Not intended for publication. For classroom instruction purposes only”.

“Not intended for publication. For classroom instruction purposes only”.

A Learning Package for PRE 1 –

Jose Rizal Memorial State University

All rights reserved. This book or any portion thereof

Page and Cover designed: Michael C. Diputado

First Edition. ______________________

JOSE RIZAL MEMORIAL STATE UNIVERSITY

Gov. Guading Adaza St. Sta Cruz, Dapitan City, 7101

“Not intended for publication. For classroom instruction purposes only”.

“Not intended for publication. For classroom instruction purposes only”.

This package covers Generally Accepted Auditing standards specifically (the

“Not intended for publication. For classroom instruction purposes only”.