At.1302 - Assurance Engagement and Framework of PSAs

Assurance Engagements
and Framework of PSAs

(AT.1302)
Leomar R. Cabarles
Reviewer, PRTC
Outline
• Philippine Framework for Assurance Engagements
• Audit vs. Review vs. Related Services
2
Philippine Framework
for Assurance
Engagements
3
Definition and Objective of an
Assurance Engagement
• Assurance engagement - a practitioner expresses a
conclusion designed to enhance the degree of
confidence of the intended users other than the
responsible party about the outcome of the
evaluation or measurement of a subject matter
against criteria.
• Two types:
• Reasonable assurance engagement (RAE) - low
level assurance risk and positive conclusion.
• Limited assurance engagement (LAE) - risk is
greater than for a RAE and negative conclusion.
4
Non-assurance Engagements
• Agreed-upon procedures and compilations

engagements
• Preparation of tax returns where no conclusion
conveying assurance is expressed
• Consulting (or advisory) engagements such as
management and tax consulting
• Engagements to testify in legal proceedings
regarding accounting, auditing, taxation or other
matters
• Engagements that include professional opinions not
intended to be an assurance report
5
Elements of an Assurance Engagement
(CREST)
• Three party relationship (RIP)
• Practitioner
• Responsible party
• Intended users
• Appropriate subject matter
• Suitable criteria
• Sufficient appropriate evidence
• Written assurance report (RAE or LAE)
6
A three party relationship
• Practitioner – broader than the term “auditor”
• Responsible party – is the person responsible for
• Direct reporting engagement – subject matter; or

• Assertion-based engagement – a subject matter
information (the assertion), and/or subject
matter.
• Intended users – whom the assurance report is

prepared. The responsible party can be one of the
intended users, but not the only one.
7
What are the forms of subject
matter/subject matter information?
• Financial performance or conditions
• Non-financial performance or conditions
• Physical characteristics
• Systems and processes
• Behavior
8
Criteria
• Benchmarks used to evaluate or measure the

subject matter
• Must be considered suitable
• Characteristics of suitable criteria (CR RUN):

• Relevance
• Completeness
• Reliability
• Neutrality
• Understandability
9
Evidence
• Obtain sufficient appropriate evidence about

whether the subject matter information is free of
material misstatement
• Exercise professional skepticism
• Considers materiality, assurance engagement risk,

and the quantity and quality of available evidence
when planning and performing the engagement, in
particular when determining the nature, timing and
extent of evidence-gathering procedures
10
Evidence
• Reducing assurance engagement risk to zero is

very rarely attainable or cost beneficial as a result
of factors such as the following:
• use of selective testing

• inherent limitations of internal control
• persuasive evidence rather than conclusive
• use of judgment
• characteristics of the subject matter
11
Assurance report
• What are the forms of an assurance report?
• RAE – positive form

• LAE – negative form
12
How is an assurance report worded?
• Assertion-based engagement, either:

• In terms of the responsible party’s assertion (for
example: “In our opinion the responsible party’s
assertion that internal control is effective, in all
material respects, based on XYZ criteria, is fairly
stated”); or
• Directly in terms of the subject matter and the
criteria (for example: “In our opinion internal
control is effective, in all material respects, based
on XYZ criteria”).
• Direct reporting engagement – directly in terms of

the subject matter and the criteria.
13
Audit vs. Review vs.
Related Services
14
Nature of
Audit Review Agreed-upon Compilation
service
15
Nature of
service
Objective
16
Nature of
service
To express
Objective an opinion
on the FS
17
Nature of
service
To enable the
CPA to report
whether
anything has
To express come to his
Objective an opinion attention that
on the FS would indicate
that the FSs
are not
presented
fairly
18
Nature of
service
To enable the
to carry out those
CPA to report
procedures of an
whether
audit nature to
anything has
which the auditor
and the entity and
any appropriate
third parties have
that the FSs
agreed and to
are not
report on factual
presented
findings.
fairly
19
Nature of
service
To enable the
to carry out those
CPA to report
procedures of an
whether
audit nature to
anything has
which the auditor To assist the
and the entity and client in the
any appropriate preparation
third parties have of the FS
that the FSs
agreed and to
are not
report on factual
presented
findings.
fairly
20
Nature of
service
To enable the
to carry out those
CPA to report
procedures of an
whether
audit nature to
anything has
that the FSs
agreed and to
are not
report on factual
presented
findings.
fairly
Level of
assurance
21
Nature of
service
To enable the
to carry out those
CPA to report
procedures of an
whether
audit nature to
anything has
that the FSs
agreed and to
are not
report on factual
presented
findings.
fairly
Level of Reasonable
assurance (High)
22
Nature of
service
To enable the
to carry out those
CPA to report
procedures of an
whether
audit nature to
anything has
that the FSs
agreed and to
are not
report on factual
presented
findings.
fairly
Level of Reasonable Limited

assurance (High) (Moderate)
23
Nature of
service
To enable the
to carry out those
CPA to report
procedures of an
whether
audit nature to
anything has
that the FSs
agreed and to
are not
report on factual
presented
findings.
fairly

None
24
Nature of
service
To enable the
to carry out those
CPA to report
procedures of an
whether
audit nature to
anything has
that the FSs
agreed and to
are not
report on factual
presented
findings.
fairly

None None
25
Nature of Agreed-
Audit Review Compilation
service upon
26
Nature of Agreed-
service upon
Type of report
27
Nature of Agreed-
service upon
Positive
Type of report
assurance
28
Nature of Agreed-
service upon
Positive Negative
Type of report
assurance assurance
29
Nature of Agreed-
service upon
Description of
procedures
Positive Negative
Type of report performed
assurance assurance
and factual
findings
30
Nature of Agreed-
service upon
Description of
procedures Identification
Positive Negative
Type of report performed of information
assurance assurance
and factual compiled
findings
31
Nature of Agreed-
service upon
Description of
Positive Negative
assurance assurance
findings
Basic
Procedures
32
Nature of Agreed-
service upon
Description of
Positive Negative
assurance assurance
findings
Basic RAP, TOC

Procedures and SP
33
Nature of Agreed-
service upon
Description of
Positive Negative
assurance assurance
findings
Inquiry and
Basic RAP, TOC
analytical
Procedures and SP
procedures
34
Nature of Agreed-
service upon
Description of
Positive Negative
assurance assurance
findings
Inquiry and
Basic RAP, TOC As agreed
analytical
Procedures and SP (Audit nature)
procedures
35
Nature of Agreed-
service upon
Description of
Positive Negative
assurance assurance
findings
Inquiry and Reading the

analytical FS for obvious
procedures misstatements
36
Nature of Agreed-
service upon
Description of
Positive Negative
assurance assurance
findings

Independence
requirement
37
Nature of Agreed-
service upon
Description of
Positive Negative
assurance assurance
findings

Independence
Required
requirement
38
Nature of Agreed-
service upon
Description of
Positive Negative
assurance assurance
findings

Independence
Required Required
requirement
39
Nature of Agreed-
service upon
Description of
Positive Negative
assurance assurance
findings

Independence
Required Required Not required
requirement
40
Nature of Agreed-
service upon
Description of
Positive Negative
assurance assurance
findings

Independence
Required Required Not required Not required
requirement
41
Questions?
42
Thank you!!!
43

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Assurance Engagements

and Framework of PSAs

• Philippine Framework for Assurance Engagements

• Audit vs. Review vs. Related Services

• Agreed-upon procedures and compilations

• Appropriate subject matter

• Sufficient appropriate evidence

• Written assurance report (RAE or LAE)

• Practitioner – broader than the term “auditor”

• Responsible party – is the person responsible for

• Direct reporting engagement – subject matter; or

• Intended users – whom the assurance report is

• Non-financial performance or conditions

• Systems and processes

• Benchmarks used to evaluate or measure the

• Must be considered suitable

• Characteristics of suitable criteria (CR RUN):

• Obtain sufficient appropriate evidence about

• Exercise professional skepticism

• Considers materiality, assurance engagement risk,

• Reducing assurance engagement risk to zero is

• use of selective testing

• What are the forms of an assurance report?

• RAE – positive form

• Assertion-based engagement, either:

• Direct reporting engagement – directly in terms of

Level of Reasonable Limited

Level of Reasonable Limited

Level of Reasonable Limited

Basic RAP, TOC

Inquiry and Reading the

Inquiry and Reading the

Inquiry and Reading the

Inquiry and Reading the

Inquiry and Reading the

Inquiry and Reading the

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