Second Element:

Subject Matter
 “
Characteristics that affects the
Subject Matter

Qualitative / Quantitative
Objective / Subjective
Historical / Prospective
Point in time / Period of Time

2
3

1. Precision with the

subject matter
evaluated or measured
against criteria

2. Persuasiveness of
available evidence.
4

3. The assurance
report notes
characteristics of
particular
relevance of
intended users.
 Form Subject Matter Subject Matter Information

Recognition, measurement,
Financial
Financial Position, Financial presentation and disclosure
Performance or
Performance, Cash Flows represented in financial
Conditions
statements
Non-financial
Key indicators of efficiency
Performance or Performance of an Entity
and effectiveness
Condition

Physical
Capacity of a Facility Specification documents
Characteristics

Systems and An assertion about

An entity’s internal control or IT system
Processes effectiveness

A statement of compliance
Corporate Governance, compliance with
Behavior or a statement of
regulation, human resource practices
effectiveness
5
6

What is an
appropriate Subject
Matter?

1. Identifiable, and
capable of consistent
evaluation or
measurement
against the
identified criteria
7

What is an
2. Capable of being appropriate Subject
subjected to Matter?
procedures for
gathering sufficient
appropriate evidence
to support reasonable
assurance or limited
assurance
conclusion, as
appropriate.
 Third Element: Criteria
A benchmark used to evaluate
or measure the subject matter
including where relevant
benchmarks for presentation
and disclosure.

8
9

Assurance
Applicable Criteria
Example of Assurance Engagements
Engagemens and
Applicable Formal
Critera Audit of Financial Philippine Financial Reporting
Statement Standards

Assurance on Internal Established Internal Control

Control Framework

Applicable law, regulation, or

Compliance Audits
contract
 Suitable Criteria
are required for reasonable consistent evaluation
or measurement of a subject matter within the
context of professional judgment.

10
 Characteristics of Suitable Criteria
Characteristic Explanation
Relevant criteria contribute to conclusions that assist
Relevance
decision making by intended users.
Criteria are sufficiently complete when relevant factors
Completeness that could affect the conclusion in the context of the
engagement circumstances are not omitted.
Reliable criteria allow reasonable consistent evaluation
Reliability
or measurement of subject matter.
Neutral Criteria contribute to conclusions that are free
Neutrality
from bias.
Understandable Criteria contribute to conclusions that
Understandability are clear, comprehensive, and not subject to
significantly different interpretations.

11
12

Established Criteria are those embodied

Suitable
in laws or regulations, or issued by
Criteria
authorized or recognized bodies of
experts that follow a transparent due
process.

Specifically Developed Criteria those

designed for the purpose of the
engagement.
13

Criteria are
made available
in one or more
of the 1. Publicly
following
2. Through inclusion in a clear manner in
ways:
the presentation of the subject matter
information.
3. Through inclusion in a clear manner in
the assurance report.
4. By general understanding
 Fourth Element: Evidence

Professional Skepticism
An attitude that includes a questioning mind,
being alert to conditions which may indicate
possible misstatement due to error or fraud,
and a critical assessment of audit evidence.

14
15

Sufficiency and
Appropriateness Sufficiency is the measure of the
of Evidence quantity of evidence.
- Affected by the risk of the subject
matter information
- Greater risk, more evidence
Appropriateness is the measure of
quality of evidence.
- Affected by the risk of the subject
matter information
- Higher quality, less evidence
16

Generalizations 1. Evidence is more reliable when it is

about reliability obtained.
of evidence. 2. Evidence that is generated
internally is more reliable when the
related controls are effective
3. Evidence obtained directly by the
practitioner is more reliable, that
evidences obtained indirectly.
4. Evidence is more reliable when it
exist in documentary form.
17

Considerations in obtaining
evidence:

• Cost-benefit consideration
•Materiality
•Assurance Engagement Risk