A N D

T I NG
D I C E
AU SURAN
AS E N T
G E M
G A
EN
 IONS
 WHAT?
ST  WHO?
 WHEN?
QUE

 WHERE?
 WHY?
IC

 HOW?
BAS
 ASSU
EN G RAN
AG E CE
MEN
T
DEFI
NI TION
( WH
AT?)
 Enga ance
nt
 an engagement in which a

geme
r practitioner expresses a conclusion
Assu
designed to enhance the degree of
confidence of the intended users other
than the responsible party about the
of

outcome of the evaluation or

ition

measurement of the subject matter

against criteria.
Defin
 ELE M
EN T
ASSU S OF
ENG RA N
AGA CE
M EN
(W
T
HEN
?)
 Enga ance
nt
geme
r
 Suitable Criteria
Assu

 Written Report
 Sufficient Appropriate Evidence
f
ents o

 Subject mater
 A Three-party relationship
Elem
 E LE M
ENT
ASSU S OF
ENG R AN
AGA CE
M E N
I. A T
HRE
E-PA
RT
T
Y RE
LATI
ONS
HIP
(WH
O?)
 arty
ip
ionsh
P
hree-
WHO?
Relat
1. Practitioner
I. A T

2. Responsible Party
3. Intended Users
 arty
ip
ionsh
P 1. Practitioner
hree-
- is the individual conducting the
Relat
engagement
I. A T

- should comply with the

requirements of the law, regulatory
requirements, and the code of
ethics.
 arty
ip
ionsh
P
hree-
2. Responsible Party
Relat
- is the party responsible for the
I. A T

underlying subject matter

- may also be the engaging party
and/or the measurer or evaluator.
 arty
ip
ionsh
3. Intended Users
P
hree-
- are the users of the assurance
report
Relat
- may be the responsible party but
I. A T

not only one

- may be involved in determining
the requirements of the
engagement.
 E LE M
ENT
ASSU S OF
ENG R AN
AGA CE
II. AP
ROPR
M EN T
IATE
SUBJ
ECT
MAT
TER
 ter
at
What about?
ject M  Financial conditions
 Non-financial condition

b

Systems and Processes

II. Su

 Physical Characteristics
 Behavior
 ter
Appropriate Subject Matter

at
ject M - the phenomenon that is measured
or evaluated by applying criteria.
b

Subject Matter Information

II. Su

- refers to the outcome of the

evaluation or measurement of a
subject matter.
 E LE M
ENT
ASSU S OF
ENG R AN
AGA CE
M EN
III. S
U
T
ITAB
LE C
RITE
RIA
 a ri
Crite
Characteristics of a Suitable Criteria:
1. Relevance
itable
2. Understandable
3. Neutral
u

4. Completeness
III. S

5. Reliable
 a ri
1. Relevance

Crite
– assist decision-makers
2. Understandability
itable

- result of subject matter

information is understood by
intended users.
u
III. S

3. Neutrality
- free from bias
 a ri
4. Completeness

Crite - does not omit relevant factors that

may affect decision making of
itable
intended users.
5. Reliability
u

- it can be consistently used in

III. S

measurement of underlying subject

matter.
 E LE M
ENT
ASSU S OF
ENG R AN
AGA CE
IV. S
M E NT
UFFI
CIE
NT A
P PRO
PRIA
EVID TE
ENC
E
 Evide te
nce
opria
Evidence
Appr

- It is the information used by the

practitioner in arriving at the
opinion, conclusion, or findings on
t
icien

which the practitioner’s report is

based.
uff
IV. S
 Evide te
nce
opria Sufficient Appropriate Evidence
• Sufficiency of Evidence
Appr

- the measure of the quantity of

evidence
t

•
icien

Appropriateness of Evidence
- the measure of the quality of
evidence
uff
IV. S
 s of
nce
QUALITY = RELIABLE
tenes
Evide  External > Internal
 Internal info from good internal
o p ri a

control > Internal info from bad

internal control
 Direct > Secondary
Appr

 Written > Oral

 Original > Copy
 ing
nce
1. Professional Judgment
ather
Evide
- the application of relevant
training, knowledge, and
of G

experience within the context

provided by auditing, accounting,
and ethical standards in making
Ways

informed decisions about courses

of action that are appropriate in the
circumstances of the audit
engagement.
 ing
nce
Professional Judgment Process:
ather
Evide  Clarify the issues and objectives
 Consider the possible alternatives
of G

 Gather and evaluate the relevant

evidence
Ways

 Reach an audit conclusion

 Carefully document rationale for the
professional judgment reached
 ing
nce
ather
Evide
2. Professional Skepticism
- an attitude that includes a
of G

questioning mind, being alert to

conditions that may indicate
possible misstatement due to fraud
Ways

or error, and a critical assessment

of audit evidence.
  Refers to an auditor’s questioning
mindset towards representations

al
made by management and

t ic is m
ssion evidential matter gathered
 Inquiry alone is never enough. The
auditor must obtain sufficient
corroborative evidence.
Skep
Profe

 Unusual financial trends need

investigation
 Documents are always checked for
authenticity or possible alteration
 Ask questions, get answers, then verify
the answers.

1-26
  Must be skeptical because a
potential conflict of interest always

al
exists between the auditor and the

t ic is m
ssion client.
 Management wants to portray the
company and its operations in the best
possible light.
Skep
Profe

 Auditors want to make sure that this

portrayal is fair and accurate.

1-27
 ather tc
ing
1. Materiality
evide s that affe - the magnitude of an omission or
misstatement of accounting
information that, in the light of
nce g

surrounding circumstances, makes

r

it probable that the judgment of a

Facto

reasonable person relying on the

information would have been
changed or influenced by the
omission or misstatement.
 ather tc
ing
evide s that affe
2. Engagement Risk
nce g
- is the risk that the practitioner
expresses an inappropriate
r
Facto

conclusion when the subject matter

information is materially misstated.
 E LE M
ENT
ASSU S OF
ENG R AN
AGA CE
M EN
V. W
T
RITT
EN R
E PORT
(WH
ERE?
)
 ce
suran
1. Absolute Assurance
o f As

2. Reasonable Assurance
3. Limited Assurance
ls
Leve
 ce
suran
Reasons why absolute assurance cannot
be attained:
o f As
• Persuasive rather than conclusive
• Selective Testing
• Internal Control
ls
Leve

• Professional Judgment
 nce
1. POSITIVE ASSURANCE

ssura
Direct ➡Reasonable Assurance
Engagement ➡ AUDIT
s of A

2. NEGATIVE ASSURANCE
(-) (-) Limited ➡ Limited
Form

Assurance Engagement ➡
REVIEW AND OTHERS
 rt
Repo - issued in the form appropriate to a:
rance
1. Reasonable Assurance
Engagement; or
Assu

2. Limited Assurance Engagement

en
Writt
 nce
l
e leve
in the
t
repor
ssura
1. Reasonable Assurance Engagement
(i.e. audit)
on th
vided
geme ypes of A

ance
- the objective is a reduction in
assurance engagement risk to an
of ass nt based
e pro
assur

acceptably low level in the

circumstances of the engagement as
T

uranc

the basis for a positive form of

expression of the practitioner’s
conclusion.
Enga
 nce
l
e leve
in the
t
repor
ssura
2. Limited Assurance Engagement (i.e.
review)
on th
vided
geme ypes of A

ance - the objective is a reduction in

assurance engagement risk to a
of ass nt based
e pro

level that is acceptable in the

assur

circumstances , but where the risk

T

is greater than for a reasonable

uranc

assurance engagement, as a basis

for a negative form of expression
of the practitioner’s conclusion.
Enga
 e
vided
on th
e pro
ased
Reasonable Assurance Report:
“In my/our opinion, the internal
port b
uranc

control of BSA3 Company is

effective in accordance [cite
of ass
e n Re

criteria].”
Writt
level
 e
vided
on th Limited Assurance Report:
e pro
ased
“Based on our work described in
this report, nothing has come to our
port b
uranc

attention that causes us to believe

that the internal control is not
of ass
e n Re

effective, in all material respects,

based on [cite criteria].”
Writt
level
 1. Reasonable Assurance Engagement
(i.e. audit)

dures
👉Inquiry
Proce 👉Inspection
👉Observation
👉Analytical procedure
👉Reperformance / Recomputation
2. Limited Assurance Engagement (i.e.
review)
👉Inquiry
👉Analytical Procedures
 AUDIT VS. REVIEW
AUDIT REVIEW

WHAT? RAE (confirmation) LAE (plausibility)

WHERE? Audit Report Review Report

HOW? PSAs PSREs

FORM? ➕ ➖

LEVEL OF ⬆ ⬇
ASSURANCE
PROCEDURES AND ⬆ ⬇
EVIDENCE
AUDIT ENGAGEMENT ⬇ ⬆
RISK
NON
ASSU
ENG RAN
AGE CE
MEN
T
 nce
The following are non-assurance

nt
engagements (two-party

geme
ssura relationship):
1. Agreed – upon procedures
Enga
Non A

2. Compilation services
3. Taxation services other than tax
consultancy.
4. Consultancy including tax
consultancy.
 The following are non-assurance

nce
nt
engagements:

geme
ssura 1. Engagement covered by the PSRSs
such as agreed-upon procedures
engagement and compilations of
Enga
Non A

financial or other information.

2. The preparation of tax returns
where no conclusion conveying
assurance is expressed.
3. Consulting (or advisory)
engagements, such a management
and tax consulting.
 Assurance, Attestation,
and Non-assurance Services
 The authority attaching to
Philippine Standards issued by the AASC
STANDARDS APPLICATION TYPE REPORT
1. Philippine Standards Audit of historical financial information. Assurance ✔
in Auditing (PSAs)

2. Philippine Standards Review of historical financial information Assurance ✔

on Review
Engagements (PSREs)

3. Philippine Standards Assurance engagement dealing with Assurance ✔

on Assurance subject matters other than historical
Engagements (PSAEs) financial information

4. Philippine Standards • Compilation engagements Non-assurance ✖

on Related Services • Engagements to apply agreed-upon
(PSRSs) procedures
• Other related services engagements as
specified by the AASC.
PRES END
ENTA OF
TION