Auditor Expresses an Audit Opinion

Unmodified Opinion
Modified Opinion
Qualified and Adverse - Auditor concludes that, based on the audit evidence obtained, the financial
statements as a whole are not free from material misstatement
Qualified and Disclaimer of Opinion - Auditor is unable to obtain sufficient appropriate audit evidence
to conclude that the financial statements as a whole are free from material misstatement

Audit Process: More Detailed Approach

Sequence in Performing FS Audits

Preliminary Engagement Activities
Planning an Audit of Financial Statements
Study and Evaluation of Internal Control
Evidence-Gathering (Substantive Testing)
Completing the Audit
Issuance of the Audit Report
Post-Auditor Responsibilities

Preliminary Engagement Activities

This phase will require a decision from the auditor whether or not to accept a new client or continue
relationship with an existing one. This process would require evaluation not only of the auditor's
qualification, but also the integrity and auditability of the client's financial statements.
(The end output here would be the decision, whether or not, the engagement should be accepted.
Accept or reject ang dulo. Ang main consideration ni auditor dito ay may INTEGRITY ang client kasi sa
Code of Ethics, as much as possible, we would like to minimize the likelihood of being associated to a
client whose management lacks integrity kasi if associated sa client na walang integrity, most likely,
pwedeng maging perception sa auditor ay walang integrity.)

If the client doesn't accept the engagement, no procedures are required. Pero if the client accepts the
engagement, next step na tayo.

Planning an Audit of Financial Statements

Audit planning involves the development of an overall audit strategy, audit plan and audit program. The
auditor usually obtained more detailed knowledge about the client's business and industry in order to
understand the transactions and events affecting the financial statements.
(In order to do this, do Risk Assessment Procedure. Kapag planning, perform RAP with the end objective
with the identifying kung ano ang appropriate further audit procedures na dapat iperform. Isusunod ang
FAP (ToC, ST). The auditor usually obtain detailed knowledge about the client and his industry.)

Study and Evaluation of Internal Control

Since entity's internal control directly affects the reliability of the financial statements, it is appropriate
to study and evaluate these controls.

IC Consideration:
If understanding/knowing policies - RAP
Evaluating the operating effectiveness - ToC (Test of Control)

End objective: Ma-assess 'yung isa sa components ng audit risk which is 'yung control risk.

Information is more reliable if the controls are effective.

Theoretical Framework - effective internal control reduces the probability of fraud and error which
means FS is reliable.

Ultimate assessment of control risk - ultimate goal

Evidence-Gathering (Substantive Testing)

FS itself na ang i-aaudit. Kaya ka nagplano and nag-IC Consideration para malaman mo kung gaano ka-
expansive ang substantive testing na gagawin mo.

Risk-based audit - assess risk and then, magrerespond tayo sa mga risk na na-assess mo.
Focus is on the items presented at related notes sa mga items examined sa face ng FS.
Always performed by the auditor.
Di pa titingnan lahat ng notes. (e.g. going-concern, subsequent events and related parties)

Completing the Audit

'Yung mga items na hindi kinonsider sa earlier phases, dito i-coconsider.
Wrap-up procedures (e.g. Focus sa notes)
aka Review phase (the conclusions reached are reviewed to check if consistent siya sa information
obtained)
Formation of overall opinion

Issuance of the Audit Report

Ano gagawin if unmodified/modified/etc. ang opinion?
In this stage, auditor prepares and issues audit report which describes the scope of the audit and states
the auditor's conclusion regarding the fairness of the financial statements.

Post-Audit Responsibilities
The purpose of this is to identify if may areas na pwedeng ma-improve in order to improve auditing next
time and para mas maging tama ang gagawin. (e.g. omitted procedures, weaknesses, good practices)

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Questions with explanations:
Financial and compliance audits ang similar kasi in terms of criteria, parehas na FORMAL and for
EXTERNAL USERS.

Hindi lang internal auditors ang pwedeng gumawa ng internal auditing kasi pwedeng i-perform ng
external auditor/government auditors depending sa entity.

To operate effectively, an auditor must be independent of the line functions of the organizations kasi
never na siyang magiging independent sa entity because of the employer-employee relationship so
dapat sa departments na lang na ina-audit niya.

Audit Committee dapat magreport. If wala, BOD. If wala, top level management.