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    Summary Notes - PSA 120

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    Laila Contado
    The document outlines the key differences between an audit and other related services such as a review, agreed-upon procedures, and a compilation. It states that an audit provides high assurance that financial statements are prepared according to the identified framework, while other services provide lower or no levels of assurance. It also discusses why absolute assurance is not attainable in an audit due to factors like judgment, testing, and inherent limitations of accounting and internal control systems. The document notes an auditor is associated with financial information if they attach a report or consent to using their name.

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    Summary Notes - PSA 120

    Uploaded by

    Laila Contado
    483 views2 pages
    The document outlines the key differences between an audit and other related services such as a review, agreed-upon procedures, and a compilation. It states that an audit provides high assurance that financial statements are prepared according to the identified framework, while other services provide lower or no levels of assurance. It also discusses why absolute assurance is not attainable in an audit due to factors like judgment, testing, and inherent limitations of accounting and internal control systems. The document notes an auditor is associated with financial information if they attach a report or consent to using their name.

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    Summary Notes_PSA 120

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    The document outlines the key differences between an audit and other related services such as a review, agreed-upon procedures, and a compilation. It states that an audit provides high assurance that financial statements are prepared according to the identified framework, while other services provide lower or no levels of assurance. It also discusses why absolute assurance is not attainable in an audit due to factors like judgment, testing, and inherent limitations of accounting and internal control systems. The document notes an auditor is associated with financial information if they attach a report or consent to using their name.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    483 views2 pages

    Summary Notes - PSA 120

    Uploaded by

    Laila Contado
    The document outlines the key differences between an audit and other related services such as a review, agreed-upon procedures, and a compilation. It states that an audit provides high assurance that financial statements are prepared according to the identified framework, while other services provide lower or no levels of assurance. It also discusses why absolute assurance is not attainable in an audit due to factors like judgment, testing, and inherent limitations of accounting and internal control systems. The document notes an auditor is associated with financial information if they attach a report or consent to using their name.

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    of 2

    PSA 120- Framework on Philippine Standards on Auditing

    Financial Reporting Framework

    The financial statements need to be prepared in accordance with one, or a combination of:

    a. Accounting standards generally accepted in the Philippines


    b. International Accounting standards; and
    c. Another authoritative and comprehensive financial reporting framework

    Framework for Auditing and Related Services

    Related services- Reviews, agreed-upon procedures, Compilations

    Comparison of audit and related services

    Audit Review Agreed-upon Compilation


    Procedures
    Level of assurance High but not absolute Moderate No assurance No assurance
    (reasonable
    assurance)
    Report provided Positive form Negative form Factual findings of Identification of
    procedures information complied
    “The financial “Nothing has come to
    statements present our attention…” (Report is restricted to
    fairly, in all material parties who have
    respects…” agreed to the
    procedures)
    Objective To enable the auditor To enable an auditor To carry out those For the accountant to
    to express to state procedures of an audit use accounting
    an opinion whether whether, on the basis nature to which the expertise as opposed
    the financial of procedures which auditor and the entity to auditing expertise to
    statements are do not provide all the and any appropriate collect, classify and
    prepared, in all evidence that third parties have summarize
    material respects, would be required in agreed and to report financial information.
    in accordance with an an audit, anything has on factual findings
    identified financial come to the auditor's
    reporting framework. attention that
    causes the auditor to
    believe that the
    financial statements
    are not prepared, in all
    material respects, in
    accordance with an
    identified financial
    reporting framework.
    Procedures Inquiry, analytical Procedures of an audit Collect, classify,
    procedure nature to which the summarize financial
    auditor and the entity information
    and any appropriate
    third parties have
    agreed
    Independence Yes Yes No No
    requirements

    Reasonable assurance
    Reasons why absolute assurance is not attainable:

    1. Need for judgement


    2. Use of testing
    3. Inherent control of accounting and internal control systems
    a. Management override
    b. Collusion
    c. Human error
    4. Evidence is persuasive rather than conclusive
    5. Other limitations may affect the persuasiveness of evidence

    Auditor association with Financial Information

    An auditor is associated with financial information when:


    1. The auditor attaches a report to that information; or
    2. The auditor consents to the use of the auditor’s name in a professional connection.
    If practitioner learns that a party is inappropriately using the practitioner’s name:

     Require management to cease doing so


     Consider further steps such as informing third parties of the inappropriate use of practitioner’s name
     Seek legal advice

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