RELATED PHILIPPINE

STANDARDS IN
AUDITING(PSAs)
November 16, 2020
Related PSAs

PSA 220
PSA 230
 • Define what is system of quality control
Learning Objectives and determine its objectives.
• Identify the specific responsibilities of
PAS 220 the auditor regarding quality control
QUALITY CONTROL FOR AUDITS OF procedures for an audit of financial
HISTORICAL FINANCIAL
INFORMATION statements.
• Determine the requirements as to the
quality of audit engagements.
 QUALITY CONTROL SYSTEMS
Quality controls
-are the policies and procedures adopted by a firm designed to provide it with
reasonable assurance that:
• that the firm and its personnel comply with professional standards and regulatory and legal
requirements, and
• that reports issued by the firm or engagement partners are appropriate in the
circumstances.

Firm – A sole practitioner, partnership, corporation or other entity of professional

accountants.
 REQUIREMENTS
✔ Leadership responsibilities for quality within the firm
✔ Relevant ethical requirements
✔ Acceptance and continuance of client relationships and specific audit
engagements
✔ Assignment of engagement teams
✔ Engagement performance
✔ Monitoring
✔ Documentation
 LEADERSHIP RESPONSIBILITIES
Engagement partner
- The partner or other person in the firm who is responsible for the audit
engagement and its performance, and for the auditor’s report that is issued
on behalf of the firm, and who, where required, has the appropriate
authority from a professional, legal or regulatory body.
- The engagement partner shall take responsibility for the overall quality on
each audit engagement to which that partner is assigned.
 QUALITY CONTROL REVIEW
Engagement quality control review
– A process designed to provide an objective evaluation, on or before the
date of the auditor’s report, of the significant judgments the engagement
team made and the conclusions it reached in formulating the auditor’s report.
Engagement quality control reviewer may be a a) partner, b) other person
in the firm, c) suitably qualified external person, or d) a team made up of
such individuals, none of whom is part of the engagement team, with
sufficient and appropriate experience and authority to objectively evaluate
the significant judgments the engagement team made and the conclusions it
reached in formulating the auditor’s report.
 RELEVANT ETHICAL REQUIREMENTS
The engagement partner should consider whether members of the engagement
team have complied with ethical requirements.
1. Integrity;
2. Objectivity;
3. Professional competence and due care;
4. Confidentiality; and
5. Professional behavior.

Independence - The engagement partner should form a conclusion on compliance

with independence requirements that apply to the audit engagement.
1. identify threats to independence.
2. eliminate threats or reduce to an acceptable level by applying safeguards.
3. document conclusions on Independence.
 ACCEPTANCE AND CONTINUANCE OF
CLIENT RELATIONSHIPS AND SPECIFIC
AUDIT ENGAGEMENTS
In deciding to accept or to continue the engagement, consider:
1. The integrity of the principal owners, key management and those
charged with governance of the entity;
2. Whether the engagement team is competent to perform the audit
engagement and has the necessary time and resources; and
3. Whether the firm and the engagement team can comply with ethical
requirements.
 ASSIGNMENT OF ENGAGEMENT TEAMS

Engagement team collectively must have the appropriate capabilities and

competence to
1. Perform the audit engagement in accordance with professional standards and
applicable legal and regulatory requirements; and
2. Enable an auditor’s report that is appropriate in the circumstances to be issued.

Engagement team - All partners and staff performing the engagement, and any
individuals engaged by the firm or a network firm who perform audit procedures
on the engagement.
 ENGAGEMENT PERFORMANCE
Engagement partner shall take responsibility
1. For the direction, supervision and performance of the audit engagement
in compliance with professional standards and applicable legal and
regulatory requirements and for the auditor’s report.
2. For review of the audit documentation and discussion with the
engagement team, to determine whether sufficient appropriate audit
evidence has been obtained to support the conclusions reached and for
the auditor’s report to be issued.
 ENGAGEMENT PERFORMANCE
Engagement partner shall take responsibility
3. For consultations that should be made on difficult or contentious matters,
agree on the nature and scope of consultations with the consulted party
and determine that resulting conclusions have been implemented. In case
differences of opinion arise, follow the firm’s policies and procedures for
dealing with and resolving differences of opinion.
4. Engagement Quality Control Review
 ENGAGEMENT PERFORMANCE
4. Engagement Quality Control Review
For audits of financial statements of listed entities, the engagement partner shall:
a. Determine that an engagement quality control reviewer has been
appointed;
b. Discuss significant matters arising during the audit engagement, including
those identified during the engagement quality control review, with the
engagement quality control reviewer; and
c. Not date the auditor’s report until the completion of the engagement
quality control review.
 MONITORING
1. Relevance of quality controls
2. Adequacy of quality controls
3. Operating effectiveness of quality controls
4. Compliance with quality controls
 DOCUMENTATION
The auditor shall include in the audit documentation:
a) Issues identified with respect to compliance with relevant ethical requirements and
how they were resolved.
b) Conclusions on compliance with independence requirements that apply to the audit
engagement, and any relevant discussions with the firm that support these
conclusions.
c) Conclusions reached regarding the acceptance and continuance of client relationships
and audit engagements.
d) The nature and scope of, and conclusions resulting from, consultations undertaken
during the course of the audit engagement.
 DOCUMENTATION
The engagement quality control reviewer shall document, for the audit
engagement reviewed, that:
a) The procedures required by the firm’s policies on engagement quality control
review have been performed;
b) The engagement quality control review has been completed on or before the
date of the auditor’s report; and
c) The reviewer is not aware of any unresolved matters that would cause the
reviewer to believe that the significant judgments the engagement team made
and the conclusions it reached were not appropriate.
 • Determine the objectives and purposes
of audit documentation
Learning Objectives
• Explain the nature of audit
PSA 230 documentation
AUDIT DOCUMENTATION
• Establish the form, content and extent of
audit documentation
• Identify the required documentation in
audit of Financial Statements
 AUDIT DOCUMENTATION
Audit Documentation
- means the record of audit procedures performed, relevant
audit evidence obtained, and conclusions the auditor reached.
- also known as working papers or workpapers.
 OBJECTIVES
Objectives of Audit Documentation
a) provides a sufficient and appropriate record of the basis for the
auditor’s report; and
b) provides evidence that the audit was performed in accordance
with PSAs and applicable legal and regulatory requirements.
 PURPOSES
Purposes of Audit Documentation
a) Assisting the audit team to plan and perform the audit;
b) Assisting members of the audit team responsible for supervision to direct and supervise the
audit work, and to discharge their review responsibilities in accordance with PSA 220,
“Quality Control for Audits of Historical Financial Information;”
c) Enabling the audit team to be accountable for its work;
d) Retaining a record of matters of continuing significance to future audits;
e) Enabling an experienced auditor to conduct quality control reviews and inspections;
f) Enabling an experienced auditor to conduct external inspections in accordance with
applicable legal, regulatory or other requirements.
 NATURE
Nature of Audit Documentation
a) May be recorded on paper or on electronic or other media.
b) Audit documentation is not a substitute for the entity’s accounting
records.
c) The audit documentation for a specific audit engagement is assembled in
an audit file.
 EXAMPLES
Examples of audit documentation include:
• Audit programs. (a detailed list of procedures to be performed in an audit engagement)
• Analyses.
• Issues memoranda.
• Summaries of significant matters.
• Letters of confirmation and representation.
• Checklists.
• Correspondence (including e-mail) concerning significant matters.
 FORM, CONTENT AND EXTENT
Factors affecting form, content, and extent of Audit Documentation:
a) The nature of the audit procedures to be performed;
b) The identified risks of material misstatement;
c) The extent of judgment required in performing the work and evaluating the results;
d) The significance of the audit evidence obtained;
e) The nature and extent of exceptions identified;
f) The need to document a conclusion or the basis for a conclusion not readily
determinable from the documentation of the work performed or audit evidence
obtained; and
g) The audit methodology and tools used.
 REQUIREMENTS
✔The auditor shall prepare the Audit Documentation on a timely basis.
✔The auditor shall prepare audit documentation that is sufficient to enable
an experienced auditor, having no previous connection with the audit, to
understand:
a) The nature, timing and extent of the audit procedures performed to comply with
the PSAs and applicable legal and regulatory requirements;
b) The results of the audit procedures performed, and the audit evidence obtained;
and
c) Significant matters arising during the audit, the conclusions reached thereon, and
significant professional judgments made in reaching those conclusions.
 REQUIREMENTS
✔ In documenting the nature, timing and extent of audit procedures performed, the auditor
shall record :
a) The identifying characteristics of the specific items or matters tested;
b) Who performed the audit work and the date such work was completed; and
c) Who reviewed the audit work performed and the date and extent of such review.
✔ The auditor shall document discussions of significant matters with management, those
charged with governance and others on a timely basis.
a) Discussion of significant matters.
b) Nature of significant matters.
c) When and with whom discussed.
 REQUIREMENTS
✔ The auditor shall assemble the audit documentation in an audit file and complete the
administrative process of assembling the final audit file on a timely basis (not more than
60 days) after the date of the auditor’s report. After the assembly of the final audit file
has been completed, the auditor shall not delete or discard audit documentation before
the end of its retention period of at least 5 years.

Audit file
– One or more folders or other storage media, in physical or electronic form, containing
the records that comprise the audit documentation for a specific engagement.
 AUDIT FILE
2 Types of Audit File
✔ Permanent Audit Files – files which contain information of continuing importance
in the audit of the same client.
✔ Current Audit Files – files which contain information relating primarily to the audit
of single period.

Assembly of final audit file should be accomplished not more than 60 days after the
date of the auditor’s report.
 REQUIREMENTS
✔ If the auditor has identified information that contradicts or is inconsistent with
the auditor’s final conclusion regarding a significant matter, the auditor should
document how the auditor addressed the contradiction or inconsistency in
forming the final conclusion.
✔ If, in exceptional circumstances, the auditor judges it necessary to depart from a
relevant requirement in a PSA, the auditor shall document how the alternative
audit procedures performed achieve the aim of that requirement, and the reasons
for the departure.
 REQUIREMENTS
✔ When the auditor finds it necessary to modify existing audit documentation or add new audit
documentation after the assembly of the final audit file has been completed, the auditor should,
regardless of the nature of the modifications or additions, document:
a) When and by whom they were made, and (where applicable) reviewed;
b) The specific reasons for making them; and
c) Their effect, if any, on the auditor’s conclusions.
✔ When exceptional circumstances arise after the date of the auditor’s report that require the auditor
to perform new or additional audit procedures or that lead the auditor to reach new conclusions, the
auditor shall document:
a) The circumstances encountered;
b) The new or additional audit procedures performed, audit evidence obtained, and conclusions reached;
and
c) When and by whom the resulting changes to audit documentation were made, and (where applicable)
reviewed.
Thank you!

Let not your hearts be troubled. Believe in God.

-John 14:1