Montalbo, Klouie C.

PSA 120: FRAMEWORK OF PHILIPPINE STANDARDS ON AUDITING

Purpose: To describe the framework within which PSAs are issued in relation to the services which may
be performed by auditors.
Authorized to issue: Auditing Standards and Practices Council

Financial Reporting Framework

Financial statements
- are ordinarily prepared and presented annually and are directed toward the common information
needs of a wide range of users.
- 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 which has been designed for
use in financial reporting and is identified in the financial statements.

Framework for Auditing and Related Services

Purpose: To distinguish audits from related services.

Auditing Related Services

Nature of Service Agreed-upon
Audit Review Compilation
Procedures
Level of Assurance High, not
Moderate
absolute None None
assurance
assurance
Report Provided Positive Negative
Factual finding of Identification of
assurance on assurance on
procedures compiled info
assertion assertion
Objective To enable the To enable an Engaged to carry Engaged to use
auditor to auditor to state out audit accounting
express an whether procedures to expertise to
opinion anything has which the collect, classify,
whether the come to the auditor and the and summarize
financial auditor’s entity and any financial
statements, attention that appropriate third information
in all material causes the parties have
respects, in auditor to agreed and
accordance believe that FS report on factual
with an are not findings
identified prepared, in all
reporting materials
framework respects, in
accordance with
the framework
Levels of Assurance
- refers to the auditor's satisfaction as to the reliability of an assertion being made by one party for use
by another party.
- the auditor assesses the evidence collected as a result of procedures conducted and expresses a
conclusion
- determined by the procedures performed and their results.

Auditor Association with Financial Information

- when the auditor attaches a report to that information or consents to the use of the auditor's name in
a professional connection.

If inappropriate use of auditor’s name occurs, auditors may:

1. Request management to stop doing so
2. Inform any known third-party users.
3. Seek legal advice.