PHILIPPINE STANDARDS ON AUDITING AND
Firms are required to design
QUALITY MANAGEMENT
Global Organizations and Standard-Setting
Boards of the Accountancy Profession
Internation Federation of Accountants (IFAC) is the
global organization for the accountancy profession. To
pursue its purpose, it supports four independent
standard-setting boards namely:
1. International Auditing and Assurance Standards
Board (IAASB)
2. International Accounting Education Standards
Board (IAESB)
3. International Ethics Standards Board for
Accountants (IESBA)
4. International Public Sector Accounting Standards
Board (IPSASB)
The Auditing and Assurance Standards Council (AASC)
is to adopt the International Auditing and Assurance
Standards Board (IAASB) standards and practice
statements to attain uniformity of the local GAAS
with the IAASB pronouncements. This harmonization
is expected to enhance the reliability and acceptability
of audited financial statements of Philippine
companies.
AASC members are assigned to workgroups
Preparation of Exposure Drafts. Each workgroup
is assigned specific international standard or
practice statement to review on proposed PH
stamdard.
The draft shall also be published in the PICPA
Accounting Times to give it further exposure.
The comments and suggestions received are then
considered by AASC and the exposure draft is
revised as appropriate.
When the revised draft is approved by the AASC,
it is issued as a final PH standard or PS.
The AASC undertakes a review of the standards and
practice statements issued by IAASB to determine if
these can be adopted in the Philippines with or without
changes, after considering any local requirements
imposed by law or practice.
System of Quality Control
To preserve and maintain the quality of the
professional services conducted by practitioners, the
engagement standards prescribed a structure that will
manage the achievement of quality objectives of
firms.
Components of a Firm’s System of Quality
Management
1. Governance and Leadership. The firm should
establish policies and procedures designed to
promote an internal culture based on recognition
that quality is essential in the performance of the
engagements.
2. Risk Assessment.
and implement a risk assessment process that
established quality objectives, identifies and
assesses quality risks, and designs and
implements responses to address quality risks.
The risk assessment process serves as a
preventive control of the SQM to identify and
respond to quality risks.
3. Ethical Requirements. The firm should establish
policies and procedures designed to provide it with
reasonable assurance that the firm and its
personnel comply with ethical requirements,
which include:
• Integrity
• Objectivity
• Professional Competence and Due Care
• Confidentiality
• Professional Behavior
Any issues involving the engagement team
member’s non-compliance with ethical
requirements must be properly resolved and
documented.
4. Independence. The engagement partner should:
a. Obtain relevant information to identify
circumstances and relationships that create
threats to independence;
b. Evaluate information on identified breaches of
the firm’s independence policies and
procedures to determine whether they create
a threat to independence;
c. Take appropriate safeguards to eliminate such
threats or reduce them to an acceptable level;
and
d. Document conclusions on independence and
the basis for conclusion.
5. Acceptance and Continuance of Client
Relationships and Specific Engagements. The
firm should establish policies and procedures for
the acceptance and continuance of client
relationships and specific engagements, designed
to provide it with reasonable assurance that it will
only undertake or continue relationships and
engagement where it:
• Has considered the integrity of the client;
• Is competent to perform the engagement and
has the capabilities, time and resources to do
so; and
• Can comply with ethical requirements
6. Engagement Performance. The firm should
establish policies and procedures designed to
provide it with reasonable assurance
• That engagements are performed in
accordance with professional standards and
other regulatory and legal requirements; and
• That the audit report issued is appropriate in
the circumstances
7. Human Resources. The firm should establish
policies and procedures designed to provide it with
reasonable assurance that it has sufficient
personnel with the capabilities, competence, and
commitment to ethical principles necessary to
perform the engagement.

8. Monitoring and Remediation Process. A

detective control is necessary to constantly
monitor the components of the SQM. The
continued adequacy and operational effectiveness
of quality control policies and procedures is to be
monitored.

Engagement quality review (EQR) is an objective

evaluation of the significant judgments made by the
engagement team and the conclusions reached
thereon, performed by the engagement quality
reviewer, and completed on or before the date of the
engagement report.

The engagement quality reviewer is a partner,

other individual in the firm, or an external individual,
appointed by the firm to perform the engagement
quality review and should NOT be a member of the
engagement team.

Mandatory Engagement Quality Reviews

1. Audits of financial statements of listed entities

2. Audits or other engagements for which an EQR is
required by law or regulation
3. Audits or other engagements for which the firm
determines that an EQR is an appropriate
response to address one or more quality risk/s.