Standards,

Laws, and
Regulation
AUDITING CONCEPTS
Republic Act No.
9298
PHILIPPINE ACCOUNTANCY ACT OF 2004
Republic Act No. 9298
Philippine Accountancy Act of 2004
Objectives:
◦ The standardization and regulation of accounting education
◦ The examination for registration of Certified public accountants
◦ The supervision, control and regulation of the practice of accountancy in the Philippines

Scope of Practice:
◦ Practice of public accountancy
◦ Practice in commerce and industry
◦ Practice in Education/Academe
◦ Practice in government
Republic Act No. 9298
Professional Regulatory Board of Accountancy (BOA)

Composed of a chairman and 6 members;

A Chairman/vice chairman shall be elected from its members for a term of one year.
◦ Natural born citizen
◦ CPA with at least 10 years’ experience
◦ Good moral character; not convicted in crimes involving moral turpitude
◦ Not have any pecuniary interest in any school
Republic Act No. 9298
Article III: Examination, Registration, and Licensure
◦ Filipino citizen
◦ Good moral character
◦ Holder of a degree of BS Accountancy
◦ Not convicted of any criminal offense involving moral turpitude

Scope of examination
◦ Financial Accounting and Reporting
◦ Advance Financial Accounting and Reporting
◦ Management Advisory Services
◦ Auditing
◦ Taxation
◦ Regulatory Framework for Business Transactions
Republic Act No. 9298
Ratings:
◦ General Average of 75% with no grade lower than 65% in any given subject - Passed
◦ Majority of subjects 75% - Conditional (Shall take the remaining subjects within 2 years from the
preceding examination)
◦ Failed to get 75%/65% - Failed (retake the examination; take a refresher course if failed for 2
examinations)
Republic Act No. 9298
Ratings:
◦ General Average of 75% with no grade lower than 65% in any given subject - Passed
◦ Majority of subjects 75% - Conditional (Shall take the remaining subjects within 2 years from the
preceding examination)
◦ Failed to get 75%/65% - Failed (retake the examination; take a refresher course if failed for 2
examinations)
Generally Accepted
Auditing Standards
GAAS
Generally Accepted Auditing
Standards
Set of systematic guidelines used by auditors when conducting audits on companies' financial
records. GAAS helps to ensure the accuracy, consistency, and verifiability of auditors' actions and
reports.
GAAS are the auditing standards that help measure the quality of audits.
Generally accepted auditing standards (GAAS) comprises a list of 10 standards, divided into the
following three sections:
1. General Standards
2. Standards of Fieldwork
3. Standards of Reporting
Generally Accepted Auditing
Standards
General Standards

1. Technical Training and Proficiency

2. Independence

3. Professional Care
Generally Accepted Auditing
Standards
Standards of Fieldwork

1. Planning

2. Internal Control Consideration

3. Evidential Matter
Generally Accepted Auditing
Standards
Standards of Reporting

1. Generally Accepted Accounting Principles

2. Inconsistency

3. Disclosure

4. Opinion
PSA 220
FRAMEWORK FOR PHILIPPINE STANDARDS ON AUDITING
PSA 220
This Philippine Standard on Auditing (PSA) deals with the specific responsibilities of the auditor
regarding quality control procedures for an audit of financial statements. It also addresses, where
applicable, the responsibilities of the engagement quality control reviewer.

The objective of the auditor is to implement quality control procedures at the engagement level
that provide the auditor with reasonable assurance that:

1. The audit complies with professional standards and regulatory and legal requirements; and

2. The auditor’s report issued is appropriate in the circumstances.

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.

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

1. Accounting standards generally accepted in the Philippines

2. International Accounting Standards

3. Another authoritative and comprehensive financial reporting framework which has been
designed for use in financial reporting and is identified in the financial statements.
Levels of Assurance
Assurance in the context of this Framework refers to the auditor’s satisfaction as to the reliability of
an assertion being made by one party for use by another party.
Framework for Auditing and
Related Services
 Framework for Auditing and
Related Services
Audit Engagement

1. provides a high, but not absolute, level of assurance

2. expressed positively in the audit report as reasonable assurance

3. the objective of the audit of financial statements is to enable the auditor to express an opinion whether the FS
are prepared, in all materials respects, in accordance with an identified financial reporting framework.

4. The auditor obtains sufficient audit evidence to be able to draw conclusions on which to base that opinion.

5. Absolute assurance in auditing is not attainable as a result of such factors as need for judgement, the use of
testing, the inherent limitations of any accounting and internal control systems and the fact that most of the
evidence available to the auditor is persuasive, rather than conclusive, in nature
Framework for Auditing and
Related Services
Review Engagement
1. moderate level of assurance
2. expressed in the form of negative level of assurance
3. the objective of a review of a financial statements is to enable an auditor to state whether, on the
basis of procedures which do not provide all the evidence that would be required in an audit,
anything has come to the auditor’s 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. A similar objective applies to the review of financial or other information
prepared in accordance with appropriate criteria.
4. Comprises only inquiry and analytical procedures which are designed to review the reliability of an
assertion that is the responsibility of one party for use by another party.
Framework for Auditing and
Related Services
Agreed – Upon Procedures

1. report of the factual findings, no assurance is expressed

2. Users of the report assess for themselves the procedures and findings reported by the auditor

3. Draw their own conclusions from the auditor’s work

4. Is engaged to carry out those procedures of an audit nature to which the auditor and the entity
and any appropriate third parties have agreed and to report on factual findings

5. The report is restricted to the parties that have agreed to the procedures to be performed
Framework for Auditing and
Related Services
Compilation Engagement

1. No assurance is expressed in the report

2. The compiled information derived some benefit from the accountant’s involvement

3. The accountant is engaged to use accounting expertise as opposed to auditing expertise to

collect, classify and summarize financial information.
PSA 220
QUALIT Y CONTROL FOR AUDIT OF HISTORICAL FINANCIAL
INFORMATION
Quality Control for Audit of
Historical Financial Information
PSA 220 deals with the specific responsibilities of the auditor regarding quality control procedures
for an audit of financial statements. It also addresses, where applicable, the responsibilities of the
engagement quality control reviewer. This PSA is to be read in conjunction with the Revised Code
of Ethics for Professional Accountants in the Philippines.
Quality Control for Audit of
Historical Financial Information
Engagement teams have the responsibility to:

1. Implement quality control procedures that are applicable to the audit engagement

2. Provide the firm with relevant information to enable the functioning of that part of the firm’s
system of quality control relating to independence

3. Are entitled to rely on the firm’s systems, unless information provided by the firm or other
parties suggests otherwise
Quality Control for Audit of
Historical Financial Information
The engagement partner shall take responsibility for the overall quality on each audit engagement to
which that partner is assigned.
The actions of the engagement partner and appropriate messages to the other members of the
engagement team, in taking responsibility for the overall quality on each audit engagement, emphasize:

1. The importance to audit quality of:

1. Performing work that complies with professional standards and regulatory and legal requirements;
2. Complying with the firm’s quality control policies and procedures as applicable;
3. Issuing auditor’s reports that are appropriate in the circumstances; and
4. The engagement team’s ability to raise concerns without fear of reprisals; and

2. The fact that quality is essential in performing audit engagements.

 Quality Control for Audit of
Historical Financial Information
Relevant Ethical Requirements
Throughout the audit engagement, the engagement partner shall remain alert, through observation and making
inquiries as necessary, for evidence of non-compliance with relevant ethical requirements by members of the
engagement team.
The Philippine Ethics Code establishes the fundamental principles of professional ethics, which include:
1. Integrity;
2. Objectivity;
3. Professional competence and due care;
4. Confidentiality; and
5. Professional behavior.
 Quality Control for Audit of
Historical Financial Information
Independence

The engagement partner shall form a conclusion on compliance with independence requirements that apply to the
audit engagement. In doing so, the engagement partner shall:

1. Obtain relevant information from the firm and, where applicable, network firms, to identify and evaluate
circumstances and relationships that create threats to independence;

2. Evaluate information on identified breaches, if any, of the firm’s independence policies and procedures to
determine whether they create a threat to independence for the audit engagement; and

3. Take appropriate action to eliminate such threats or reduce them to an acceptable level by applying safeguards,
or, if considered appropriate, to withdraw from the audit engagement, where withdrawal is permitted by law or
regulation. The engagement partner shall promptly report to the firm any inability to resolve the matter for
appropriate action.
Quality Control for Audit of
Historical Financial Information
Acceptance and Continuance of Client Relationships and Audit Engagements

The engagement partner shall be satisfied that appropriate procedures regarding the acceptance
and continuance of client relationships and audit engagements have been followed and shall
determine that conclusions reached in this regard are appropriate.

If the engagement partner obtains information that would have caused the firm to decline the
audit engagement had that information been available earlier, the engagement partner shall
communicate that information promptly to the firm, so that the firm and the engagement partner
can take the necessary action.
Quality Control for Audit of
Historical Financial Information
Assignment of Engagement Teams

The engagement partner shall be satisfied that the engagement team, and any auditor’s experts
who are not part of the engagement team, collectively have the appropriate competence and
capabilities to:

1. Perform the audit engagement in accordance with professional standards and regulatory and
legal requirements; and

2. Enable an auditor’s report that is appropriate in the circumstances to be issued.

Quality Control for Audit of
Historical Financial Information
Engagement Performance

Direction, Supervision and Performance

The engagement partner shall take responsibility for:

1. The direction, supervision and performance of the audit engagement in compliance with
professional standards and regulatory and legal requirements; and

2. The auditor’s report being appropriate in the circumstances.

Quality Control for Audit of
Historical Financial Information
Engagement Performance

Reviews

1. The engagement partner shall take responsibility for reviews being performed in accordance
with the firm’s review policies and procedures.

2. On or before the date of the auditor’s report, the engagement partner shall, through a review
of the audit documentation and discussion with the engagement team, be satisfied that
sufficient appropriate audit evidence has been obtained to support the conclusions reached
and for the auditor’s report to be issued.
 Quality Control for Audit of
Historical Financial Information
Engagement Performance
Consultation
The engagement partner shall:
1. Take responsibility for the engagement team undertaking appropriate consultation on difficult or contentious
matters
2. Be satisfied that members of the engagement team have undertaken appropriate consultation during the
course of the engagement, both within the engagement team and between the engagement team and others at
the appropriate level within or outside the firm;
3. Be satisfied that the nature and scope of, and conclusions resulting from, such consultations are agreed with
the party consulted; and
4. Determine that conclusions resulting from such consultations have been implemented.
Quality Control for Audit of
Historical Financial Information
Engagement Performance

Engagement Quality Control Review

For audits of financial statements of listed entities, and those other audit engagements, if any, for
which the firm has determined that an engagement quality control review is required, the engagement
partner shall:

1. Determine that an engagement quality control reviewer has been appointed;

2. Discuss significant matters arising during the audit engagement, including those identified during
the engagement quality control review, with the engagement quality control reviewer; and

3. Not date the auditor’s report until the completion of the engagement quality control review
Quality Control for Audit of
Historical Financial Information
Differences of Opinion

If differences of opinion arise within the engagement team, with those consulted or, where
applicable, between the engagement partner and the engagement quality control reviewer, the
engagement team shall follow the firm’s policies and procedures for dealing with and resolving
differences of opinion.
Quality Control for Audit of
Historical Financial Information
Monitoring

An effective system of quality control includes a monitoring process designed to provide the firm with reasonable assurance
that its policies and procedures relating to the system of quality control are relevant, adequate, and operating effectively.
The engagement partner shall consider the results of the firm’s monitoring process as evidenced in the latest information
circulated by the firm and, if applicable, other network firms and whether deficiencies noted in that information may affect
the audit engagement.

PSQC 1 (Redrafted) requires the firm to establish a monitoring process designed to provide it with reasonable assurance
that the policies and procedures relating to the system of quality control is relevant, adequate and operating effectively
In considering deficiencies that may affect the audit engagement, the engagement partner may have regard to measures
the firm took to rectify the situation that the engagement partner considers are sufficient in the context of that audit.
A deficiency in the firm’s system of quality control does not necessarily indicate that a particular audit engagement was not
performed in accordance with professional standards and regulatory and legal requirements, or that the auditor’s report
was not appropriate.