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AUDITING
The word ‘AUDIT’ is derived from Latin
word “AUDIRE”, which means to hear.
In olden days, some experienced people
ordinarily judges the accounts of business
people for the purpose of the correctness of
accounts.
[PSA 200 Def.] in conducting an audit of
financial statements, the overall objectives
of the auditor are:
o to obtain reasonable assurance about
whether the financial statements as a
whole are free from material
misstatement, whether due to fraud o Evaluations the results without bias
or error, thereby enabling the auditor or prejudice on the individual or
to express an opinion on whether the entity making the representations
financial statements are prepared, in Audit Procedures
all material respects, in accordance Audit Evidence
with the applicable financial Audit Opinion
reporting framework; and Assertions about Economic Actions &
o to report on the financial statements, Events
and communicate as required by the o Subject matter of auditing are the
PSAs, in accordance with the representations or assertions made by
auditor's findings the individuals or entity.
Auditing is a systematic process of Degree of Correspondence
objectively obtaining evidence regarding o Closeness with which the assertions
assertions about economic actions and can be identified with established
events to ascertain the degree of criteria.
correspondence between the assertions and Established Criteria
established criteria and communicating o Assertions comply with the
results to interested users. established criteria?
o Financial Reporting Standards
Council (FRSC), in the Philippine
Financial Reporting Standards
Systematic Process
o Structured, framework, step by step
procedure
Competent & Independent Person
o Must be qualified, competent, Communicating the Results
independent mental attitude = o Referred to as ATTESTATION
impartial and objective (free from o By attesting the degree of
bias) correspondence with established
Objectively obtains and evaluates criteria through a written report:
evidence Audited Financial Statements
o Examines the management assertions Interested Users
(representations) o Individuals who rely on the auditor’s
1. Existence or Occurrence findings
2. Rights & Obligations
3. Completeness
4. Valuation & Allocation Auditing is a structured process that..
5. Presentation & Disclosure
1. Involves the application of analytical skills, 2. Apply professional judgment in planning
professional judgment and professional and performing audit
skepticism 3. Obtain sufficient appropriate evidence to
2. Is usually performed by a team of reduce the risk to acceptably low level
professionals from directed with managerial 4. perform audit with attitude of professional
skills; skepticism
3. Uses appropriate form of technology and
Why is independent necessary?
4. Replies with the relevant technical
standards: ISAs, ISQCs, IFRS, IPSASs, & 1. To avoid conflict of interest between
any applicable international, national or management and users of financial
local equivalents as appropriate. statements
5. Complies with required standards of 2. Expertise > complexity of verifying quality
professional ethics of financial information
3. Remoteness > asymmetry of financial
information: affecting the quality and
reliability of financial information
4. Performance Audits
Performance audits cover a wide variety of
assessments. An entity may request or
require a performance audit to evaluate any
of the following objectives:
o Program effectiveness and results
o Internal controls
o Compliance with certain
requirements
o Prospective analysis
These objectives are not mutually exclusive.
Performance audits are beneficial because
they can help management and those
charged with governance and oversight
LS 1.20 R.A. 9298 & Management Services
Overview
VISION
Republic Act 9298 (Accountancy Law)
To be a dynamic force towards national prosperity
and excellence for the global perspective Six Areas of Revision:
MISSION 1. Structural
2. Mandate of the Accountancy Regulatory
To implement the Code of Good Office and the BOA
Governance for the professions in the 3. Practice of Accountancy
Philippines 4. Accountancy Examination and Program
Towards this end, Accountancy Professions Matters
shall endeavors to: 5. Special Revisions
o build a growing pool of accountants 6. Penalties and Sanctions
who are dynamic, proactive,
responsive, and innovative
leadership in the advancement of
knowledge and the improvement of
the quality of life
o Direct the accountants towards a
high level of competence in their
field of work and strict adherence to
the code of conduct, and in this
regard to have ethical commitment,
ethical awareness and ethical
competency and,
o to provide a culture of excellence so
that accountants could develop
strong values of commitment,
rationality, expertise, and
responsibility
Introduction
1. The Auditing Standards & Practices Council
has been authorized to issue PSAs. The
purpose of this document is to describe the
framework within which PSAs are issued in
relation to the services which may be
performed by auditors.
2. For ease of reference, except where
indicated the term ‘auditor’ is used
throughout the PSAs when describing both
auditing & related services which may be
performed. Such reference is not intended to
imply that a person performing related
services need be the auditor of the entity’s
financial statements.