Pre-Audit Lecture

PSA 200 defines audting by stating the objective of FS Audit

Such definition conveys the ff thoughts:
1. Systematic Process
2. Obtaining and evaluating evidence about assertions regarding economic actions and events
3. Conducted objectively
4. Auditor ascertain the degree of correspondence between assertions and established criteria
5. Auditors communicate the audit results to various interested users

Types of Audits
1. FS Audit - done by external auditors
Responsible for the FS - Mgt
Auditor's Responsibility - to express an opinion to the fair presentation of the FS. Provide only reasonable
assurance (not absolute) because of the ff limitations: TERIN
1. The use of Testing/Sampling risk
2. Error in application of judgement /Non-sampling Risk
3. Reliance on mgt's representation
4. Inherent limitations of the clients accounting and internal control system
5. Nature of evidence - Audit evidence is generally persuasive rather than conclusive in nature
General Principles governing the audit of F/S PSA 200 guidelines: RI POA
1. Auditor should comply with relevant ethical requirements
2. Auditor shuld conduct an audit in accordance with PSA
3. Auditor should exercise professional judgement
4. Auditor should obtain sufficient appropriate audit evidence
5. Auditor should plan and perform the audit with an attitude of professional skepticism
Need for an independent F/S Audit
1. Conflict of interest between mgt and users of F/S
2. Expertise
3. Remoteness
4. Financial consequences
Theoretical framework of Auditing VICE CPA
1. All Financial data are verifiable
2. Auditor should always maintain independence
3. No longterm conflict between the auditor and the client mgt
4.Effective internal control system reduces the possibility of errors and frauds
5. Consistent compliance with applicable financial reporting framework results in fair presentation
of F/S
6. What was held true in the past will continue to hold true in the future in the absence of
known conditions to the contrary
7. An audit benefits the public

2. Compliance Audit - whether the organization has adhered to specific procedures, rules or regulations
ex. BIR examiners whether entities comply with tax rules and regulations
3. Operational Audit - Measuring the performance, also known as performance or mgt audit. Done by internal
auditors

RA. 9298 The Philippine Accountancy Act of 2004 Topics

1. Objectives of this Act

a. Standardization and regulation of Accounting Education
b. CPA Examination and registration
c. Supervision, control and regulation of the practice of Accountancy in the Phil.
2. Practice of Accountancy include but not limited to (PCAG)
a. Public Practice - with certificate of accreditation provided with meaningful experiece at least 3years
SEC shall not register any corp organized for the practice of accountancy
b. Commerce or Industry
c. Academe/Education
d. Government

3. Board of Accountancy
a. Under the control of PRC
1. administrative supervision of the BOA, custodian of its records, secretariat and support services

b. Composition, Term and Qualification - Composed of a Chairman and 6 members

1. Appointed by the President through recommendation of PRC (3 recommendees for each position and ranked)
from list of 5 nominees for each position submitted by Accredited national professional org of CPA (APO)
with compensation and allowances.

a. APO submit 5nominees not later than 60days prior o the expiry of the term of an incumbent chairman
or member w/ adequate documentation to the PRC
b. APO failed to submit nominees to PRC, the APO shall submit 3nominees w/ adequate documentation
for each vacant position to the President

2. Term -
Chairman and members - 3years complete term and renewable for another 1 term. No member shall
serve more than 2 complete terms until the lapsed of 1 year. That no person shall
serve in the board for more than 12years
Vice-Chairman - elected by the board, term 1year
3. Qualification - natural born and resident, CPA 10years, GMRC, no pecuniary interest, not directly or
not officers or director of APO at the time of his appointment, indirectly related to any schools or review center

4. Removal of the members of the board

The President of the Phils, upon the recommendation of the PRC, after due process may suspend or remove
the member

c. Power of BOA - regulate rules, supervise registration of CPA, licensing exam, issue, revoke, cancel registration,
adopt official seal, adopt Code of Ethics, monitor condition of Accountancy and auditing practice, investigate
violation of this act, cease or desist order, prepare syllabi,

Assistants of BOA in carrying out its function:

1. Accounting and Auditing Standard Setting council, created within 90days from the effectivity of IRR
a. FRSC
a. 1 chairman - senior accounting practioner
b. 14 rep from (BSBB MCA)- each from BOA, SEC, BSP, BIR, Major org of preparers and users of
F/S, COA, 8 from APO (PCAG 2each)
c. Chairman shall be appointed by the PRC upon the recommendation of the BOA
d. Chairman and members shall have a term of 3yrs renewable for another term

b. AASC a. 1 chairman - senior practioner in public accountancy

b. 14 rep from (BSBC AA)- each from BOA, SEC, BSP, COA, Asso. of CPA in Public Practice
9 from APO (6P 1C 1A 1G)
c. Chairman shall be appointed by the PRC upon the recommendation of the BOA
d. Chairman and members shall have a term of 3yrs renewable for another term
 Note: Differences between the two
1. BIR
2. Major org of prepares and users of F/S
3. Association of CPA in Public Practice
4. APO composition

2. Educational Technical Council, created within 60days from the effectivity of IRR
ETC a. 1 chairman
b. 6 reps from (BA)-1BOA, 5 from APO (1P 1C 2A 1 G)
c. Chairman and members shall be appointed by PRC upon the recommendation of the BOA,
in coordination with the APO
d. Chairman and members shall have a term of 3yrs renewable for another term
e. functions:
a. determine min. standard curriculum for accountancy
b. establish teaching standard
c. monitor progress of the accounatncy program
d. evaluate periodically the performacne of educational instituition offering accounatancy
education
shall render a report of its findings and recommendations to the BOA, then BOA
shall review it if meritorious, forward to PRC to make proper representation to CHED.

3. QRC (Quality Review Committee) - conduct an oversight into the quality of audit of FS through
the review of the quality control measures. 7members
QRC a. 1 chairman
b. 6 reps from (BA)-1BOA, 5 from APO (2P 1C 1A 1 G)
c. Chairman and members shall be appointed by PRC upon the recommendation of the BOA,
in coordination with the APO
d. Chairman and members shall have a term of 3yrs renewable for another term
e. functions:
a. Conduct quality review for registration to practive public accountancy
b. recommend to the BOA the revocation of the Cert of Registration and the PIC
who has not observed quality control

4. PRC CPE Council - the board upon approval by the PRC, within 30days from the effectivity of this resolution
a. 1 chairman - from BOA
b. 2 reps- 1st member President of PICPA, 2nd member President of Academe or if no
such academe org, the PRC shall be appointed by the PRC chairperson from
at least 3 recomendees of BOA
c. Chairman and members shall be co-terminus w/ their corresponding incumbency

d. the board shall at close of each calendar year, submit an annual report to the President of the Phil through the
PRC giving detailed account of its proceedings and accomplishments during the year and making
recommendation for the adoption of measures
e. Board shall submit to PRC the result of exam within 10 calendar days, unless extended for just cause
f. Examination - 75% ave. with no grades lower than 65%. If 4subjects has 75%, conditional, provided re-examine
2years, and should have gen ave of 75% with no grade of 65%. 2 successive fails, shall take refresher course
24units
g. Issuance of Certification of Registration and Professional ID
ID - Renewable every 3 years
revocation of certificate -after the expiration of 2yrs from the date of revocation may be reinstated
h. Other Topics
 1.Certificate of Accreditation - for practicing of Public Accountancy (single or partnership)
requirements for issuance and other matters
1. 3yrs meaningful experience in areas of Public Accountancy
2. no need to register with SEC
3. ownership of working paper - to CPA in absence of written agreement
4. Accreditation to practive public accountancy, partners and staff, shall register with the PRC and board,
and renewable every 3yrs
2. Continuing Professinal Education Program
3. Seal and use of Seal
a. must be circular in form with a smaller circle within

CPA

4. Foreign Reciprocity in practice of Accountancy in PP - no person not a citizen shall practice PP in the
Phil unless, the country he belongs also admit Filipinos doing PP in their country without restriction
5. Coverage of Temporary/Special Permit - for foreign CPA, in the judgement of the Board, his expertise
is essential to the Devt of the Phil and no Filipino CPA is qualified for that expertise
6. Penal Provision - Violator fine of P50,000 or not exceeding 2 years imprisonment or both

Implementing Rules and Regulations of RA 9298

Objectives - same with RA9298 Objective
Scope of Practice
1. Public Accountancy
2. Commerce and Industry
must be a CPA when:
a. Company has at least P5M paid up capital, and /or
b. annual revenue of at least P10M
c. provided that the application of this IRR only applies after its efectivity and shall not result
to the deprivation of the employment of the incumbent position
3. Academe/Education
4. Government

Annex A - APO (PICPA)

Topics: (important only)
1. 15 national directors apportiined accroding to areas
2. PICPA renew its Certificate of Accreditation once every 3years

Annex B - Public Accountancy Practice

Topics:
1. withn 90days of this revised rules, all cpa, staff members, firms in the practice of public accountancy
shall register with the BOA and PRC
2. Registration shall be valid 3yrs, and may be renewed on or before Sept 30 on the year of expiry, if not
renewed on Sep 30, the registration is still valid until dec 31 of the expiry year only.

Annex C - CPE
1. CPE Credit Units for registerd accounting professional shall be 60credit units for 3yrs, provided
that a minimum of 15 shall be earned in each year. Any excess credit units in 1yr may be carried
over to the succeeding years within the three-year period only, except earned from doctoral or
master's degree.

2. 1Credit Hr of CPE Program, 1 credit unit

 3. Exemption from CPE requirements
a. Permanent Exemption - a registered professional upon reaching 65yo
b. Temporary Exemption - a registered professional practising in the abroad, 2years prior to renewal

4. Sources of Credit units

a. Seminar
participant 1
resource speaker 5
panelist 3
facilitator 2
b. Degree Earner
c. Author
d. Inventor

Preface to Phil Std on QC, Auditing, other Assurance and related Service Topics

1. Objective- to facilitate understanding of the objectives and operating procedures of the auditing and assurance standards
council (AASC) and the scope and authority of the documents issued by the AASC.
2. AASC mission - assist BOA in establishment and promulgation of audting stds, practices and procedures
AASC works.
a. promulgation of standards/ pronouncement
Engagement Standards (ES) application Practice Statements
1. Framework fo Assurance Engagements
a. Phil Standards on Auditing (PSA) audit of historical FI Phil Auditing Practice Stmt
audit of FS
b. Phil Standards on Assurance E.(PSAE) dealing with subject Phil Assurance E. Practice Stmt
matters other than
historical FI
c. Phil Standards on Review E. (PSRE) Review of hist. FI Phil Review E. Practice Stmt

2. Related Services
Phil Standards on Related S. (PSRS) compilation of E., Phil Related Services Practice S
Agreed-upon procedure,
Other related services
Phil Standards on QC (PSQC) all services falling
under the 4 ES

General Application of prouncement:

apply whenever an independent examination of FS of any entity, profit-oriented or not,
when such examination is conducted for the purpose of expressing opinion thereon

Note: the Professional Accountant(PA) can depart from the ES in exceptional cases to achieve more
effectively the objective of the E, but should be prepared to justify the departure.

b. convergence of International Standards and Practice Statement issued by IAASB to Phil Practice Statement
to determine if these can be adopted in the Phil w/ or without changes
Procedures of adopting ISPS in Phil implementation REC FP
1. Review of existing International pronouncements by workgroup
2. If there are changes to be applied, exposure drafts are made with markings for approval
ED distributed for comment through publication, bulletin for not shorter than 90days
3. Consideration of comments and suggestions and approval of ED by AASC
Issuance of ED - approval of majority of the members of the AASC
Issuance of Final Phil Std and Practice Stmt and Interpretation - at least 9 members
4. Final PSPS, as well as Interpretation, submiited to the PRC through BOA for approval
 5. Publication of pronouncement (PAS or PAPS) with effectivity date
c. Discussion paper- Other papers published by AASC but do not establish any basic principles

AASC Formation
1. Created by PRC upon the recommendation of BOA
2. Old AASC = ASPC (Audting Standards and Practices Council), established by PICPA
3. members = 15
a. 1 Chairman with 3years term and renewable for another term
b. members
B S A C P
BOA SEC Association COA PICPA in
of CPA in PP practices
1 1 1 1 P/C/A/G 7/1/1/1

Code of Ethics (COE)

The PICPA has adopted the code of Ethichs developed by IFAC

Preface to the Code of Ethics

1. International - IFAC - International Federation of Accountancy
2. Local - PICPA

International code serve as a model on w/c to base national ethical guidance. Any conflict, national will pervail
Public Interest - collective well-being of the community of people and intitutions the professional accountant serves

Objective of Code
To work to the highes standards of professionalism, highest level of performance & generally to meet the public
interest requirement set out.

Four basic need to be met PC QC

a. Professionalism
b. Credibility
c. Quality of Services
d. Confidence

Fundamental Principles to obtain objective (PIO-CP)

1. Professional Competence and due care - professional service based on up to date development in practice,
legislation and techniques. Act diligently in accordance with technical and professional stds
2. Integrity - should be straightforward and honest in performing professional services
3. Objectivity - fair, not prejudice or bias, no conflict of interest or influence
4. Confidentiality - should not disclose info w/o proper & specific authority or unless there is a legal
duty to disclose
5. Professional behavior - act with good reputation of the profession and refrain from any conduct w/ might
bring discredit to the profession. Comply with relevant laws and regulations and aviod any action that may
discredit to the profession (Ex. Marketing and promoting their works, PA should be honest and truthful)

Note: Objective and Fundamental Principles are of a general nature and are not intended to be used
to solve professional accountant's ethical problems in a specific case.

Part of Codes
A. Code for all professional accountants (PA) - concepts
B. PA in Public Practice (PP) application
C. Employed PA

A. Code for all professional accountants (PA) Topics

Fundamental Principles of Professional Ethics (PIO-CP)

1. Professional Competence and due Care - PA shoul continue to improve his knowledge and skills
a. PA should not portray themselves as having expertise or experience they do not possess.
b. Attain professional competence by acquiring general education followed by specific education,
training and exam.
c. maintain professional competence by continuing awareness of development in the accountancy
profession including relevant national & international pronouncement

2. Integrity - implies not merely honesty but fair dealing abd truthfulness

3. Objectivity - to be fair, intellectually honest, and free of conflicts of interest

Objectivity Factors (WAR-RP)
a. Work Pressures
b. Acceptance of gifts or entertainment
c. Reasonableness
d. Relationships
e. Personnel engaged

Resolution of ethical standards

a. the PA should be constantly conscious of and be alert to factors w/c give rise to conflicts of
interest
b. if not resolve in no. 1, consider in order of priority
1. review the conflict problem w/ immediate superior, then to next level if not yet resolve
2. seek advice from independent advisor
3. no other recourse but to resign

4. Confidentiality - not to disclose client's info unless w/ consent or required by regulatory

1. confidentiality continues even after the end of the relationship betweenj the PA and the client
2. PA has the obligation to ensure his staff observed also the confidentiality
3. Information should not be used for personal and 3rd party advantage
4. confidentiality is a part of statute or law

5. Professional Behavior - good reputation

Threats to Compliance with the Fundamental Principles SSAFI

a. self interest - when a firm or a member of the engagment team could benefit from a financial interet in, or
other self-interest conflict with a client
1. Finacial Interest in a client
2. undue dependence on total fees from a client
3. Having close business relationship with the client
4. concern about the possibility of losing a client
5. potential employment with the client
6. contingent fees relating to assurance engagement
7. Quoted fees are so low versus the performance of service
8. accepting referral fee or commission, and gifts and hospitality

b. self-review - re-evaluation of previous judgment made by himself

 1. Discovery of significant error during re-evalutaion of the work
2. Reporting on the operation of financial systems after being involved in their design
or implementation
3. Having prepared the original data used to generate records that are subject matter of the
engagement
4. A member of the assurance team, being or having recently been, a director or
officer of the client
5. performing a service for a client that directly affects the subject matter of the
assurance engagement

c. advocacy - PA pormotes his opinion or position to the point that obejectivity will be compromised
1. promoting shares in a listed entity when the entity is a FS client
2. acting as an advocate on behalf of an assurance client in litigation or disputes
with third parties

d. familiarity - because of close relationship, the PA becomes sympathetic to the interest of others
1. a member of the engagement team having a close or immediate family relationship with a
a director or officer of the client
2. former partner of the firm being a director or officer of the client
3. accepting gifts or preferential treatment from a client, unless the value is insignificant
4. long association of senior personnel with the assurance client

e. intimidation - the PA may be deterred from acting objectively by threats, acxtual or perceived
1. being threatened with dismissal or replacement in relation to a client engagement
2. being threatened by litigation
3. being pressured to reduce inappropriately the extent of work peformed in order to reduce
fees.

Safeguards to threat
1. Identify the threat
2. Soon as identified, decide whether to accept or reject engagement
3. If accepted, document the threat identified, and safeguard procedures to be applied to eliminate or reduce
the threats to an acceptable level
4. If accepted and the threats cannot be eliminated, withdraw from the engagement

Broad Categories of Safeguards that may eliminate or reduce such threats to an acceptable level

a. safeguard created by profession, legislation or regulation

1. Educational, training and experience requirements
2. Continuing education requirements
3. Corporate governance regulations
4. Professional stds and mlonitoring and disciplinary processes
5. External review of a firm's quality control system

b. safeguards in the work of environment

1. Firm-wide safeguards:
a. leadership of the firm that stresses the importance of compliance with the fundamental
principle
b. Policies and procedures, well created and documented, etc…
2. Engagement specific guards:
a. Review the work done
b. Rotating senior assurance team personnel, etc…

c. Safeguards within the client's system and procedures

B. PA in Public Practice (PP) Topics
1. Independence - independence in mind and independece in appearance
Indepence in mind - the estate of mind that permits the expression of a conclusion wihtout being affected
by influences that compromised judgment. Auditor's perception of hiw own independence
Independence in appearance - the avoidance of facts and circumstances that are so significant
that a reasonable and informed third party would reasonably conclude such independence
The public's perception of the professional accountant's independence

Independence Requirement
Assurance engagements are classified into the ff in terms of independ to client requirement:
1. F/S Audit - the members of the assurance team, the frim and the network are required
2. Non-audit (not restricted) - members of the assuracne team, and the firm
3. Non-audit (restricted) - members of the assurance team only, but he firm must not have matarial
financial interest (direct or indirect) in the client

Independence Interpretations and Rulings Impair

1.Financial Interes independence Threat
a. Direct financial interest in assurance client Yes
material or immaterial
b. Indirect financial interest, must be material Yes
2. Loans and guarantees - material only an not
made under normal leneding procedures Yes
3. Close Business Relationships Self-interest/
a. Material indirect Financial interest only Yes Intimidation
4. Family and personal relationship
a. Immediate family member who is
director, officer Yes
5. Past Employment with assurance engagement
a. Assurance team is employed as Yes
a director or officer
6. Serving as an officer or director on the BOD clients Yes
7. Long association with assurance clients Yes
Safeguard - required that lead engagement
partners be rotated at least once every 5yrs
8. Provisions of accntg and bookkeeping services
to assurance clients Yes
Safeguard - a firm or network should not
provide accounting and bookkeeping services
for an audit that is a listed entity
9. Provision of taxation services to Assurance clients No
10. Provision of legal services to assurance clients
a. acting as advocacy services - material Yes
b. to support in the execution of transaction No
11. Recruiting Senior manager No
12. Fees- overdue Yes
13. Contngent Fees Yes
14. Gifts and hospitality - more than a token Yes
15. Actual or threatened litigation Self-interest/
Intimidation

Identification of threats (discussed above) and safeguards available to eliminate the threats or reduce them
to acceptable level.
 Instances where threat may be created and action to be taken Kind of threat maybe created
a. Provision applicable to FS Audit Self-interest Threat
1. Identification of Self-interest threat
2. Evaluation of self-interest threat
3. Eliminating or reducing the threat (safeguarding) by means of
disposal of financial interest or removal of such member
to the team
note: when the client is listed entity, FS audit will always
include its related entities
b. Privision applicable to Non FS Audit Self-interest Threat
1. Identified with self-interest threat
2. the only applicable safeguarding is to dispose such financial
interest or reduce the amount until no longer material

c. Close business relationships with assurance engagement Self-interest and intimidation

1. FS Audit no safeguards could reduce the threat threaths
2. Non FS Audit possible courses of action
a. terminate the business relation
b. reduce the magnitude of realtionship
c. refusal to accept engagement
d. removal of the member to ateam
d. family and personal relationship self-interest, familiarity and
intimidation threats
e. recent service with assurance clients
previously working as officer to client and now self-interest, self-review
serving as PA and familiarity threat

f. serving as an officer or director on the board of Assurance clients self-interest and self review

g. long association of senior personnel with Assurance Clients familiarity threat

-engagement partner should be rotated normally
5years and will not particiapte until the lapsed of 2yrs

h. assisting in preapring accounting records and FS self review threat

i. provision of taxation services no threat
j. provision for internal audit services self review threat
k. Provisions of IT services self review threat
l. temporary staff assignements self review threat
m. provision for litigation support self review threat
n. provision for legal services self review and advocacy
o. recruiting senior mgt self interest, familiarity
and intimidation threats
p. corporate finance services self review and advocacy
q. contingent fees self-interest and advocacy
r. Gifts and hospitality self-interest and familiarity
s. actual or threatened litigation self-interest or intimidation

BOA Resolution no.88 - Rules and Regulation for the Accreditation of Accounting Teacher
 Requirement for Accreditation of Accounting Teacher
1. CPA and has relevant master's Degree
2. Completion of 12units of relevant educ subjects from the CHED recognized Schools, earned either
duting undergraduate or graduate degree program of any HEI (higher education institution), in-house or
in-service training, or combination of both. Exempted, CPA + LET Passer
3. 3yrs meaningful experience in actual accounting work either in PP, Commerce and Industry or Govt.
4. Proof that the CPA has undergone CPE
a. Certificate of CPE coming from PICPA
b. Certificate of Attandance or any proofs of meaningful particiapation in other CPE programs as
approved by PICPA, total of 60unts for the past 3yrs, provided that a minimum of 15units shall
be earned in each year prior to renewal of acreditation
Registration:
Individual accounting teachers shall register with the BOA and the PRC in accordance with prescribed
rules and shall not commence to teach until a valid Certificate of Accreditation has been issued
a. Documentation Requirments
1. Application for Accreditation (Personal Info, Copy of valid CPA Board Certificate, PRC ID, TOR of
relevant degree program, TOR of 12units educ course, Certificate of CPE, Sworn Stament of
3yrs meaningful experience, NBI Clearance, Payment)
2. Renewal - every 3yrs
b. Effectivity - June 2008

BOA Resoultion no. 126 - Rules and Regulation Advertising for the Phil Accountancy Profession
any advertising by professional accountants beyond their name, address, tel no, membership in prof
org has been traditionally considered unethical in the Accountancy Profession, due to:
a. advertising can lead to undue competition between and among practitioners
b. become more on commercially inclined and not on ethical duties
c. cost of advertising may be bourne against the client
Rules and Regulations:
a. Generally, advertising and publicity in any medium are acceptable, therefore not allowed:
1. self-laudatory statement
2. Discredeting other firms
3. using testimonials of third parties
4. publishing and comparing fees with other CPA
5. publishing services in billboard, tarpaulin and streamers
b. no firm shall published clients name unless with consent
c. no firm shall use the word "accredited" (BOA, SEC, BSP, IC) if the claimed accreditation has expired
d. Awards - maybe stated

Phil. Framework for Assurance Engagements

Meaning - defines and describes the elements and objectives of an assurance E. and identifies E to which
PSA, PSAE and PSRE apply
- framework does not established standard itself but contain only basic principles, essential procedures,
and trelated guidance for the prefromance of Assurance E.

Assurance engagement (AE) PSAE 3000 defines

AE are intended to enhance the redibility of infirmation about a SUBJECT MATTER by evaluating whether the
subject matter conforms in all material respec with SUITABLE CRITERIA

measurement of a subject matter against criteria

evaluate the outcome = FS vs. PFRS

Type of assurance
a. Reasonable Assurance (RAE)
 1. objective - reduction in AE risk to an acceptably low level in the circumstances of the E as the basis
for a positive form of practioner's conclusion
2. Accumulating evidence necessary for the practioner to conclude in relation to subject matter information
taken as a whole. Obtain sufficient appropriate evidence
Procedures
a. Obtaining understanding of internal control
b. Assessing the risk based on the understanding
c. responding to the assessed risks and developing NTE of further procedures
d. Performing further procedures clearly linked to the identified risks- Substansive procedures,
obatining corroborating information, tests of internal cotnrol
e. Evaluating the sufficiency and appropriateness of evidence
b. Limited Assurance Engagement (LAE)
1. objective - reduction in AE risk to a level that is acceptable in the circumstances of the E, but where the
risk is greater than for a reasonable assurance engagement, as the basis for a negative
form of expression of the practioner's conclusion
Note: the level of Assurance Engagement Risk is higher in LAE compare to RAE because of the different
nature, timing, or extent of evidence-gathering procedures.

Scope of the Framework

a. Not all E performed by the practioner's are AE.
examples:
1. PSRS - agreed upon procedure, compilation of financial or other info.
2. Tax Returns Preparation
3. Consultancy - mgt or tax
4. Other Advisory Services

b. AE may be part of a larger E. so, in such circumstances, the framework is relevant only to the assurance
portion of the E.

c. Reports on non-assurance E (NAE). must be clearly distinguish from AE report. So, non-assurance E. should:
1. avoid implying compliance with PSA,PSAE and PSRE
2. avoid inappropriate use of assurance, auidt or review
3. avoiding statement that could be possibly mistaken as Assurance Report

d. Assurance reports on Prospectve Financial Information PSA 3400

Prospective Financial information measn financial information based assumptions about events
that may occur in the future and possible actions of the entity
1. Forecast - best estimate assumption Same procedure in review, as well
2. Projections - hypothetical assumptions as the level of assurance

Framework of Philippine Standard on Auditing (PSA 120) Topics

Assurance and Related Services

Summary: Auditing Related services

nature of service Audit Review Agreed- Compilation
performed in F/S upon
procedures
Objective To express an to report that nothing To carry out audit To assist the client in the
opinion on the came to his attention procedures agreed preparation of the F/S
F/S that F/S are not on
presented fairly
Level of assurance high but not Moderate/Limited No No
 provided by the absolute / Assurance Assurance Assurance
CPA Reasonable

Type of Report Positive Negative Description of Identification of information

issued Assurance on Assurance Procedures perfomedcompiled
(Opinion) & factual finding
Basic Procedures Risk Assmnt, Inquiry and analytical As agreed Assemble and read F/S
TOC & ST procedure, no
assessing of risk
Independence Required Required Not Required Not Required
Requirement

1. Audit Procedures - Discuss Later

2. Review
if there is modification in report:
a. Departure from PFRS
1. Qualification of the negative assurance, or
2. When the effect of the matter is so material and pervasive, may give advers statement
b. Scope Limitation
1. Qualification of the negative assurance, or
2. When the effect of the matter is so material and pervasive, do not provide any assurance

3. Compilation of F/S
Entities turn to professinal accountants in preparation and presentation of their F/S
1.Read the complied information
2. no making inquiries, assessment of control risk, no verification or explanations
a. When accountant become awares\ that the info is incorrect, request mgt to provide additional inof, if refuses
should witdraw from engagement

Modification of the compilation report

a. Departure from PFRS
1. disclose in separate paragraph
2. if modification is not sufficient nd the client is not willing to correct deficiencies, withdraw
b. Scope limitation - withdraw from engagement

4. Agreed-upon procedures
The report is restruicted to those partie have agreed to the procedured to be performed
Procedures in factual findings: OI RIO
a. Observation
b. Inquiry and inspection
c. Recomputation
d. Inspection
e. Obtaining confirmations
nly reasonable

usive in nature

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