Psa 700 Notes and Summary

Introduction
Scope of this PSA
1. This Philippine Standard on Auditing (PSA) deals with the auditor’s responsibility
to form an opinion on the financial statements. It also deals with the form and
content of the auditor’s report issued as a result of an audit of financial statements.
2. PSA 705 (Revised and Redrafted)1
and PSA 706 (Revised and Redrafted)2
deal
with how the form and content of the auditor’s report are affected when the
auditor expresses a modified opinion or includes an Emphasis of Matter paragraph
or an Other Matter paragraph in the auditor’s report.

3. This PSA is written in the context of a complete set of general purpose financial
statements. PSA 800 (Revised and Redrafted)3
deals with special considerations
when financial statements are prepared in accordance with a special purpose
framework. PSA 805 (Revised and Redrafted)4
deals with special considerations
relevant to an audit of a single financial statement or of a specific element,
account or item of a financial statement.
4. This PSA promotes consistency in the auditor’s report. Consistency in the
auditor’s report, when the audit has been conducted in accordance with PSAs,
promotes credibility in the global marketplace by making more readily identifiable

those audits that have been conducted in accordance with globally recognized
standards. It also helps to promote the user’s understanding and to identify
unusual circumstances when they occur.
4a. This PSA, like all other PSAs, is taken from ISA700 (Redrafted) promulgated by
the International Auditing and Assurance Standards Board. Also, like in all other
PSAs, in adopting this PSA, appropriate, but non-fundamental, changes were
made in ISA 700 (Redrafted) to draw up the equivalent PSA 700 (Redrafted)
under Philippine context for better understanding and more effective
implementation in the Philippines. This PSA addresses the forming of opinion on
financial statements prepared on the basis of Philippine Financial Reporting
Standards (PFRS) adopted by the Philippine accounting standard setter, Philippine

Financial Reporting Standards Council (FRSC). This PSA also applies on
forming of opinion on financial statements prepared on the basis of International
Financial Reporting Standards and financial reporting frameworks of other 4countries, the audit
of which a Philippine auditor maybe engaged to perform.
However, this PSA does not address its application to specific situations relating
to the Philippine financial reporting framework promulgated by FRSC when
Philippine regulators make changes in that financial reporting framework by either
exempting or postponing the application of some parts of the framework for
certain group of entities. The additional guidance for these situations, specifically
on the description of the applicable Philippine financial reporting framework
when this is other than PFRS, is provided in a Philippine-specific auditing practice
statement, PAPS 1002Ph.

[This paragraph 4a is added as a Philippine-specific provision for better
understanding and more effective implementation of this PSA in the Philippines.]
Effective Date
5. This PSA is effective for audits of financial statements for periods beginning on or
after December 15, 2009.
Objectives
6. The objectives of the auditor are to:
(a) Form an opinion on the financial statements based on an evaluation of the
conclusions drawn from the audit evidence obtained; and
(b) Express clearly that opinion through a written report that also describes the
basis for the opinion.

Definitions
7. For purposes of the PSAs, the following terms have the meanings attributed
below:
(a) General purpose financial statements – Financial statements prepared in
accordance with a general purpose framework.
(b) General purpose framework – A financial reporting framework designed to
meet the common financial information needs of a wide range of users.
The financial reporting framework may be a fair presentation framework
or a compliance framework.
The term “fair presentation framework” is used to refer to a financial
reporting framework that requires compliance with the requirements of the

framework and:
(i) Acknowledges explicitly or implicitly that, to achieve fair
presentation of the financial statements, it may be necessary for
management to provide disclosures beyond those specifically
required by the framework; or
(ii) Acknowledges explicitly that it may be necessary for management
to depart from a requirement of the framework to achieve fair
presentation of the financial statements. Such departures are
expected to be necessary only in extremely rare circumstances.
The term “compliance framework” is used to refer to a financial reporting
framework that requires compliance with the requirements of the

framework, but does not contain the acknowledgements in (i) or (ii)
above.5
(c) Unmodified opinion – The opinion expressed by the auditor when the
auditor concludes that the financial statements are prepared, in all material
respects, in accordance with the applicable financial reporting framework.6
8. Reference to “financial statements” in this PSA means “a complete set of general
purpose financial statements, including the related notes.” The related notes
ordinarily comprise a summary of significant accounting policies and other
explanatory information. The requirements of the applicable financial reporting
framework determine the form and content of the financial statements, and what
constitutes a complete set of financial statements.

9. Reference to “International Financial Reporting Standards” (IFRS) in this PSA
means the International Financial Reporting Standards issued by the International
Accounting Standards Board (IASB), and reference to “International Public Sector
Accounting Standards” (IPSAS) means the International Public Sector Accounting
Standards issued by the International Public Sector Accounting Standards Board
(IPSASB). Reference to “Philippine Financial Reporting Standards” (PFRS)
means the Philippine Financial Reporting Standards issued by the Financial
Reporting Standards Council (FRSC).
Requirements
Forming an Opinion on the Financial Statements
10. The auditor shall form an opinion on whether the financial statements are
prepared, in all material respects, in accordance with the applicable financial
reporting framework.7 8
10

Psa 700 Notes and Summary

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Introduction

Scope of this PSA

content of the auditor’s report issued as a result of an audit of financial statements.

2. PSA 705 (Revised and Redrafted)1

and PSA 706 (Revised and Redrafted)2

auditor expresses a modified opinion or includes an Emphasis of Matter paragraph

or an Other Matter paragraph in the auditor’s report.

statements. PSA 800 (Revised and Redrafted)3

deals with special considerations

when financial statements are prepared in accordance with a special purpose

framework. PSA 805 (Revised and Redrafted)4

deals with special considerations

relevant to an audit of a single financial statement or of a specific element,

account or item of a financial statement.

4. This PSA promotes consistency in the auditor’s report. Consistency in the

promotes credibility in the global marketplace by making more readily identifiable

standards. It also helps to promote the user’s understanding and to identify

unusual circumstances when they occur.

PSAs, in adopting this PSA, appropriate, but non-fundamental, changes were

under Philippine context for better understanding and more effective

implementation in the Philippines. This PSA addresses the forming of opinion on

financial statements prepared on the basis of Philippine Financial Reporting

Standards (PFRS) adopted by the Philippine accounting standard setter, Philippine

forming of opinion on financial statements prepared on the basis of International

of which a Philippine auditor maybe engaged to perform.

to the Philippine financial reporting framework promulgated by FRSC when

Philippine regulators make changes in that financial reporting framework by either

exempting or postponing the application of some parts of the framework for

on the description of the applicable Philippine financial reporting framework

when this is other than PFRS, is provided in a Philippine-specific auditing practice

statement, PAPS 1002Ph.

understanding and more effective implementation of this PSA in the Philippines.]

after December 15, 2009.

6. The objectives of the auditor are to:

(a) Form an opinion on the financial statements based on an evaluation of the

conclusions drawn from the audit evidence obtained; and

basis for the opinion.

(a) General purpose financial statements – Financial statements prepared in

accordance with a general purpose framework.

(b) General purpose framework – A financial reporting framework designed to

meet the common financial information needs of a wide range of users.

The financial reporting framework may be a fair presentation framework

The term “fair presentation framework” is used to refer to a financial

reporting framework that requires compliance with the requirements of the

(i) Acknowledges explicitly or implicitly that, to achieve fair

presentation of the financial statements, it may be necessary for

management to provide disclosures beyond those specifically

required by the framework; or

(ii) Acknowledges explicitly that it may be necessary for management

to depart from a requirement of the framework to achieve fair

presentation of the financial statements. Such departures are

expected to be necessary only in extremely rare circumstances.

The term “compliance framework” is used to refer to a financial reporting

framework that requires compliance with the requirements of the

respects, in accordance with the applicable financial reporting framework.6

8. Reference to “financial statements” in this PSA means “a complete set of general

ordinarily comprise a summary of significant accounting policies and other

explanatory information. The requirements of the applicable financial reporting

constitutes a complete set of financial statements.

means the International Financial Reporting Standards issued by the International

Accounting Standards Board (IASB), and reference to “International Public Sector

Accounting Standards” (IPSAS) means the International Public Sector Accounting