Audit Overview

Ms. Aljane B. Largo, CPA

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 Definition of Auditing
 According to Philippine Standard on Auditing
(PSA) – related to financial statement audit

 According to American Accounting Association

1. Systematic Process
2. Obtaining and evaluating evidence about assertions
3. Conducted objectively
4. Auditor ascertain the degree of correspondence between
assertions and established criteria
5. Communication of results to intended users

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 Type of Audits

1. Financial statement Audit

2. Compliance Audit
3. Operational Audit

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 Need of FS Audit

1. Conflict of Interest
2. Expertise
3. Remoteness
4. Financial consequences

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 Why REASONABLE assurance?

1.The use of testing (sampling risk)

2.Error in application of judgment

3.Reliance on management’s representation

4.Inherent Limitations

5.Audit evidence persuasive rather than conclusive

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 Principles Governing the Audit of FS

 1. Code of Professional Ethics

a. Integrity. Implies not merely honesty but fair dealing and
truthfulness
b. Objectivity. Obligation to be fair, intellectually honest, and
free from conflict of interest
c. Professional competence and due care. Continually strive to
improve knowledge and skills
d. Confidentiality. Should not use or disclose any information
during the course of performing professional services
e. Professional Behavior. Act in a manner consistent with the
good reputation of the profession and refrain from any conduct
which might discredit to the profession

2. Philippine Standard on Auditing

3. Professional Skepticism. “Questioning Mind”
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