Objective and Conduct

of Audit of Financial
Statements
(AT.1305)

Leomar R. Cabarles
Reviewer, PRTC
Outline

• Relevant Standard

• Introduction

• Overall Objectives of the Auditor

• Requirements of the Standard

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 Relevant Standard

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Relevant Standard

• PSA 200 – Overall Objectives of the Independent

Auditor and the Conduct of an audit in accordance
with PSA

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 Introduction

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Introduction

• Scope of PSA 200

• An Audit of Financial Statements

• Effective Date

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Scope

• This Standard establishes the independent auditor’s

overall responsibilities when conducting an audit
of financial statements (FSs) in accordance with
PSAs, with respect to:

• objectives
• nature and scope of an audit

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An Audit of Financial Statements

• Enhances the degree of confidence of intended

users in the FSs.

• Does not relieve management’s responsibilities to

prepare and present the FSs with oversight from
TCWG’s.

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Preparation of the Financial
Statements
• An audit is conducted on the premise that
management and, where appropriate, TCWG have
responsibility:

• For the preparation and presentation of the FSs

in accordance with the applicable FRF
• The design, implementation and maintenance of
internal control (IC); and
• To provide the auditor all relevant information
and unrestricted access to obtain audit evidence.

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Auditor’s Responsibilities

• The auditor shall obtain reasonable assurance

about whether the FSs as a whole are free from
material misstatement, whether due to fraud or
error.

• Obtained when the auditor has sufficient

appropriate audit evidence (SAAE) to reduce audit
risk to an acceptably low level, subject to inherent
limitations of an audit.

• Audit risk - the risk that the auditor expresses an

inappropriate opinion when the FSs are materially
misstated

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Conduct of an Audit of Financial
Statements
• Auditor shall exercise professional judgment and
maintain professional skepticism throughout the
planning and performance of the audit in:

• Identifying and assessing risks of material

misstatement (ROMM).
• Obtaining SAAE through designing and
implementing appropriate responses to the
assessed risks.
• Forming an opinion on the FSs.

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Effective Date

• This Standard is effective for audits of financial

statements for periods beginning on or after
December 15, 2009.

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 Overall Objectives of
the Auditor

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Overall Objectives of the Auditor

• In conducting an audit of FSs, the overall objectives

of the auditor are:

• To obtain reasonable assurance whether the FSs

are free from material misstatement, whether
due to fraud or error, to enable the auditor to
express an opinion on whether the FSs are
prepared, in all material respects, in accordance
with an applicable FRF; and
• To report on the FSs, and communicate as
required by the PSAs, in accordance with the
auditor’s findings.

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Overall Objectives of the Auditor
(Cont’d)
• In all cases when reasonable assurance cannot be
obtained:

• Provide a qualified audit opinion

• If still insufficient for intended users:

• disclaim an opinion; or
• withdraw from the engagement, is legally
permissible.

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 Requirements of the
Standard

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Requirements of the Standard

• Ethical Requirements Relating to an Audit of FSs

• Professional Skepticism

• Professional Judgment

• Sufficient Appropriate Audit Evidence and Audit

Risk

• Conduct of an Audit in accordance with PSAs

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Requirements of the Standard

• Ethical Requirements Relating to an Audit of FSs

• Professional Skepticism

• Professional Judgment

• Sufficient Appropriate Audit Evidence and Audit

Risk

• Conduct of an Audit in accordance with PSAs

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Ethical Requirements Relating to an
Audit of FSs
• Comply with relevant ethical requirements,
including those pertaining to independence, relating
to FSs audit engagements.

• Relevant ethical requirements ordinarily comprise

Parts A and B of the Code of Ethics and national
requirements that are more restrictive.

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Requirements of the Standard

• Ethical Requirements Relating to an Audit of FSs

• Professional Skepticism

• Professional Judgment

• Sufficient Appropriate Audit Evidence and Audit

Risk

• Conduct of an Audit in accordance with PSAs

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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.

• Plan and perform an audit with professional

skepticism recognizing that circumstances may
exist that cause the FSs to be materially misstated.

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Application of Professional Skepticism

• Audit evidence that contradicts other audit

evidence obtained

• Information that brings into question the reliability

of documents and responses to inquiries to be used
as audit evidence

• Conditions that may indicate possible fraud

• Circumstances that suggest the need for audit

procedures in addition to requirements of PSAs

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Requirements of the Standard

• Ethical Requirements Relating to an Audit of FSs

• Professional Skepticism

• Professional Judgment

• Sufficient Appropriate Audit Evidence and Audit

Risk

• Conduct of an Audit in accordance with PSAs

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Professional Judgment

• The application of relevant training, knowledge and

experience, within the context provided by
auditing, accounting and ethical standards, in
making informed decisions about the courses of
action that are appropriate in the circumstances of
the audit engagement

• Enables proper interpretation of:

• Relevant ethical requirements
• PSAs
• Informed decisions

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Examples of Application of
Professional Judgment in an Audit
• Materiality and audit risk

• Nature, timing, and extent of audit procedures

• Evaluating whether SAAE has been obtained

• Evaluating management’s judgments in applying

the applicable FRF

• Drawing of conclusions, for example, assessing the

reasonableness of the management’s estimates

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Requirements of the Standard

• Ethical Requirements Relating to an Audit of FSs

• Professional Skepticism

• Professional Judgment

• Sufficient Appropriate Audit Evidence and Audit

Risk

• Conduct of an Audit in accordance with PSAs

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 Audit Evidence

Sufficient Appropriate

Quantity Quality

ROMM Quality Relevance Reliability

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 Inverse

Audit Risk ROMM Detection Risk

FS Level

Overall Audit Assertion Level

Risk

Inherent

Control

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Reasonable (not absolute) Assurance

• Inherent limitations of audit:

• The use of selective testing

• The inherent limitations of internal control
• Persuasive evidence rather than conclusive
• The use of judgment
• The characteristics of the subject matter

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Requirements of the Standard

• Ethical Requirements Relating to an Audit of FSs

• Professional Skepticism

• Professional Judgment

• Sufficient Appropriate Audit Evidence and Audit

Risk

• Conduct of an Audit in accordance with PSAs

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Conduct of an Audit in Accordance
with PSAs
• Comply with all PSAs relevant to the audit

• Not represent compliance with PSAs unless

complied all the requirements of PSAs relevant

• If the auditor cannot achieve its overall objectives,

requires modification to the auditor’s opinion or
withdraw from the engagement

• Failure to achieve an objective represents a

significant matter requiring documentation

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Questions?

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Thank you!!!

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