AUDIT METHODOLOGY

AUDIT
DOCUMENTATION
 The auditor should prepare, on a timely basis, audit
documentation that provides:

A sufficient and appropriate record of the basis for the auditor’s report;
and

Evidence that the audit was performed in accordance with PSAs and
applicable legal and regulatory requirements.
 Preparing sufficient and appropriate audit
documentation on a timely basis helps to
enhance the quality of the audit and
facilitates the effective review and evaluation
of the audit evidence obtained and

“ conclusions reached before the auditor’s

report is finalized. Documentation prepared
at the time the work is performed is likely to
be more accurate than documentation
prepared subsequently.
The auditor should prepare the audit documentation
so as to enable an experienced auditor, having no
previous connection with the audit, to understand:

The nature, timing, and extent of the audit procedures performed to

comply with PSAs and applicable legal and regulatory requirements;

The results of the audit procedures and the audit evidence obtained; and

Significant matters arising during the audit and the conclusions reached
thereon.
CLIENT ACCEPTANCE
AND CONTINUANCE
 CONTENT
• Audit Questionnaire
• MAPS
• Time Budget
• Letter of Engagement
 AUDIT
1 QUESTIONNAIRE
WHY DO WE NEED TO SEND AN
AUDIT QUESTIONNAIRE TO THE
PROSPECTIVE CLIENT?
SAMPLE
2 MAPS
 MAPS 200
211.MPQ Client Acceptance and Independence Questionnaire

212.MPQ Client Re-evaluation and Independence Questionnaire

225.MPQ Independence Confirmation Sign Off

211.MPQ Client Acceptance and
Independence Questionnaire
Guidance for question A1
Risk factors associated with Ownership, Management and Those Charged with Governance includes:
 Irresponsible attitude towards financial reporting
 Disputes or disagreement amongst senior management and/or shareholders
 Reporting to the public, third parties, absentee owners or domineering owners
 Doubts about the integrity, ethics or business methods of senior management and/or shareholders
 High turnover of employees
 Management lacking in experience
 Dominant managers who inhibit others performance
 Entity at development phase
 Irresponsible attitude displayed towards financial advisors and regulatory authorities
 Public criticism by regulatory authority
 Use of aggressive accounting policies
 Management do not intend to prepare accountants in accordance with an appropriate accounting framework
 Use of complex transactions or innovative deals that make the determination of the financial effects difficult to assess or
highly subjective
 Intention to go public
 Operates in an unstable industry with high rate of business failures
 Known pending legislation that will adversely impact the client’s industry/sector
 General decline in clients industry/sector
 Loss of market share
 Litigious industry/sector
Guidance for question A5
Management must acknowledge its responsibility:
 For the preparation of the financial statements in accordance with the applicable financial reporting framework, including where
relevant their fair presentation
 For such internal control as management determines is necessary to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or error; and
 To provide us with:
 Access to all information of which management is aware that is relevant to the preparation of the financial statements such as
records, documentation and other matters
 Additional information that we may request from management for the purpose of the audit; and
 Unrestricted access to persons within the entity from whom we determine it necessary to obtain audit evidence.
Guidance for question B1
The following industry sectors have been
designated as high risk:
 Banks and similar Depository Financial
Institutions
 Insurance Companies
 Casinos and similar Gambling
Institutions
 Broker/Dealers
 Government Securities Dealers
 Future Commission Merchants
 Real Estate Developers; and
 Leasing and Finance Companies.
Guidance for question B2
Risk factors associated with Business
Operations includes:
 Over dependence on individual
suppliers or customers
 Regulatory investigation into client’s
products/services
 Litigation over client’s
products/services
 Significant regulatory oversight
 Involvement in high risk business
ventures
 Poor accounting systems and records
 High level of media interest in the client
or management
Guidance for question B3
Risk factors associated with cash flow,
debt and liquidity include:
 Deterioration in financial position
 Doubts concerning the client’s ability to
continue as a Going concern
 High leverage
 Breach/waiver of debt covenants
 Difficulty raising capital
 Negative operating cash flow
 Cash flow not expected to meet
obligations as they fall due
 Significant demand for new debt or
equity capital
 Significant mergers, acquisitions or
disposals planned
 High levels or growth that exceed
financial or managerial resources
212.MPQ Client Re-evaluation and
Independence Questionnaire
SAMPLE
225.MPQ Independence Confirmation Sign-Off
SAMPLE
Guidance
 
The date of confirmation should be the date prior to the beginning of the audit
engagement. The engagement team should re-evaluate their independence at the date
of completion of the audit.
3 TIME BUDGET
WHAT IS THE PURPOSE OF A
TIME BUDGET?
SAMPLE
4 LETTER OF ENGAGEMENT
 WHAT ARE THE CONTENTS OF
THE LETTER OF ENGAGEMENT?
 OBJECTIVE AND SCOPE OF THE AUDIT
 AUDITOR’S RESPONSIBILITY
 MANAGEMENT’S RESPONSIBILITY
 REPORTING AND DELIVERABLES
 PLANNING AND PERFORMANCE OF THE AUDIT
 QUALITY CONTROL
 ENGAGEMENT FEES
SAMPLE
 ANY
QUESTIONS?
“You’ll know that a man is clever by his
answers, but that he is wise by his questions.”
Thank you!
 LORAINE C. SAN PEDRO
Manager, Audit and Assurance

• lorainesanpedro@alasoplascpas.com
• 23rd floor, Philippine Axa Life Centre, Gil puyat Ave.,
Makati City.
• Phone: 759-509(0-1)