CPAR AT - Other Assurance Engagements
CPAR AT - Other Assurance Engagements
Manila
AUDITING THEORY CPA Review
2. For the purpose of expressing negative assurance in the review report, the auditor should
obtain sufficient appropriate audit evidence primarily through inquiry and analytical
procedures to be able to draw conclusions.
4. In planning a review of financial statements, the auditor should obtain or update the
knowledge of the business including consideration of the entity’s organization, accounting
systems, operating characteristics and the nature of its assets, liabilities, revenues, and
expenses.
Page 1 of 9 Pages
CPAR - MANILA AT-8712
6. If the auditor has reason to believe that the information subject to review may be materially
misstated, the auditor should carry out additional or more extensive procedures as are
necessary to be able to express negative assurance or to confirm that a modified report is
required.
We have reviewed the accompanying financial statements of ABC Company which comprise the
statement of financial position as at December 31, 20X1, and the statement of comprehensive income,
statement of changes in equity and statement of cash flows for the year then ended, and a summary of
significant accounting policies and other explanatory information.
Practitioner’s Responsibility
Our responsibility is to express a conclusion on the accompanying financial statements. We conducted
our review in accordance with Philippine Standard on Review Engagements (PSRE) 2400 (Revised),
Engagements to Review Historical Financial Statements. PSRE 2400 (Revised) requires us to conclude
whether anything has come to our attention that causes us to believe that the financial statements, taken as
a whole, are not prepared in all material respects in accordance with the applicable financial reporting
framework. This Standard also requires us to comply with relevant ethical requirements.
A review of financial statements in accordance with PSRE 2400 (Revised) is a limited assurance
engagement. The practitioner performs procedures, primarily consisting of making inquiries of
management and others within the entity, as appropriate, and applying analytical procedures, and
evaluates the evidence obtained.
We believe that the evidence we have obtained in our review is sufficient and appropriate to provide a
basis for our conclusion.
The procedures performed in a review are substantially less than those performed in an audit conducted in
accordance with Philippine Standards on Auditing. Accordingly, we do not express an audit opinion on
these financial statements.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that these financial
statements do not present fairly, in all material respects, the financial position of ABC Company as at
December 31, 20X1, and (of) its financial performance and cash flows for the year then ended, in
accordance with Philippine Financial Reporting Standards.
2. The objective of an agreed-upon procedures engagement is for the auditor to carry out
procedures of an audit nature to which the auditor and the entity and any appropriate third
parties have agreed and to report on factual findings.
Page 2 of 9 Pages
CPAR - MANILA AT-8712
3. As the auditor simply provides a report of the factual findings of agreed-upon procedures,
no assurance is expressed. Users of the report assess for themselves the procedures
and findings reported by the auditor and draw their own conclusions from the auditor’s
work.
4. The report is restricted to those parties that have agreed to the procedures to be
performed since others, unaware of the reasons for the procedures, may misinterpret the
results.
REPORTING
6. The report on an agreed-upon procedures engagement needs to describe the purpose and
the agreed-upon procedures of the engagement in sufficient detail to enable the reader to
understand the nature and the extent of the work performed.
1. The practitioner’s objectives in a compilation engagement under PSRS 4410 (Revised) are
to:
a) Apply accounting and financial reporting expertise to assist management in the
preparation and presentation of financial information in accordance with an applicable
financial reporting framework based on information provided by management; and
b) Report in accordance with the requirements of PSRS 4410 (Revised).
2. The practitioner shall obtain an understanding of the following matters sufficient to be able
to perform the compilation engagement:
a) The entity’s business and operations, including the entity’s accounting system and
accounting records; and
b) The applicable financial reporting framework, including its application in the entity’s
industry.
Page 3 of 9 Pages
CPAR - MANILA AT-8712
3. Prior to completion of the compilation, the practitioner shall read the compiled financial
information in light of the practitioner’s understanding of the entity’s business and
operations, and of the applicable financial reporting framework.
4. If the practitioner is unable to complete the engagement because management has failed to
provide records, documents, explanations or other information, including significant
judgments, as requested, the practitioner shall withdraw from the engagement and inform
management and those charged with governance of the reasons for withdrawing.
5. If the practitioner becomes aware during the course of the engagement that:
a) The compiled financial information does not adequately refer to or describe the
applicable financial reporting framework;
b) Amendments to the compiled financial information are required for the financial
information not to be materially misstated; or
c) The compiled financial information is otherwise misleading,
the practitioner shall propose the appropriate amendments to management.
6. If management declines, or does not permit the practitioner to make the proposed
amendments to the compiled financial information, the practitioner shall withdraw from
the engagement and inform management and those charged with governance of the
reasons for withdrawing.
7. The practitioner shall obtain an acknowledgement from management or those charged with
governance, as appropriate, that they have taken responsibility for the final version of the
compiled financial information.
We have compiled the accompanying financial statements of ABC Company based on information you
have provided. These financial statements comprise the statement of financial position of ABC Company
as at December 31, 20X1, the statement of comprehensive income, statement of changes in equity and
statement of cash flows for the year then ended, and a summary of significant accounting policies and
other explanatory information.
We performed this compilation engagement in accordance with Philippine Standard on Related Services
4410 (Revised), Compilation Engagements.
We have applied our expertise in accounting and financial reporting to assist you in the preparation and
presentation of these financial statements in accordance with Philippine Financial Reporting Standards for
Small-and Medium-sized Entities (PFRS for SMEs). We have complied with relevant ethical
requirements, including principles of integrity, objectivity, professional competence and due care.
These financial statements and the accuracy and completeness of the information used to compile them
are your responsibility.
Since a compilation engagement is not an assurance engagement, we are not required to verify the
accuracy or completeness of the information you provided to us to compile these financial statements.
Accordingly, we do not express an audit opinion or a review conclusion on whether these financial
statements are prepared in accordance with PFRS for SMEs.
Page 4 of 9 Pages
CPAR - MANILA AT-8712
can be in the form of a forecast, a projection, or a combination of both, for example, a one
year forecast plus a five year projection.
2. A “FORECAST” means prospective financial information prepared on the basis of
assumptions as to future events which management expects to take place and the actions
management expects to take as of the date the information is prepared (best-estimate
assumptions).
4. Prospective financial information can include financial statements or one or more elements
of financial statements and may be prepared:
• as an internal management tool, for example, to assist in evaluating a possible capital
investment; or
• for distribution to third parties.
5. Management is responsible for the preparation and presentation of the prospective financial
information, including the identification and disclosure of the assumptions on which it is
based.
7. The auditor should not express any opinion as to whether the results shown in the
prospective financial information will be achieved.
9. The auditor should not accept, or should withdraw from, an engagement when the
assumptions are clearly unrealistic or when the auditor believes that the prospective
financial information will be inappropriate for its intended use.
10. The auditor should obtain written representations from management regarding the intended
use of the prospective financial information, the completeness of significant management
assumptions and management’s acceptance of its responsibility for the prospective financial
information.
We have examined the forecast (include name of the entity, the period covered by the forecast and
provide suitable identification, such as by reference to page numbers or by identifying the individual
statements) in accordance with Philippine Standard on Assurance Engagements applicable to the
examination of prospective financial information. Management is responsible for the forecast including
the assumptions set out in Note X on which it is based.
Page 5 of 9 Pages
CPAR - MANILA AT-8712
Based on our examination of the evidence supporting the assumptions, nothing has come to our attention
which causes us to believe that these assumptions do not provide a reasonable basis for the forecast.
Further, in our opinion the forecast is properly prepared on the basis of the assumptions and is presented
in accordance with Philippine Financial Reporting Standards.
Actual results are likely to be different from the forecast since anticipated events frequently do not occur
as expected and the variation may be material.
We have examined the projection (include name of the entity, the period covered by the forecast and
provide suitable identification, such as by reference to page numbers or by identifying the individual
statements) in accordance with Philippine Standard on Assurance Engagements applicable to the
examination of prospective financial information. Management is responsible for the projection including
the assumptions set out in Note X on which it is based.
This projection has been prepared for (describe purpose). As the entity is in a start-up phase the
projection has been prepared using a set of assumptions that include hypothetical assumptions about
future events and management’s actions that are not necessarily expected to occur. Consequently, readers
are cautioned that this projection may not be appropriate for purposes other than that described above.
Based on our examination of the evidence supporting the assumptions, nothing has come to our attention
which causes us to believe that these assumptions do not provide a reasonable basis for the projection,
assuming that (state or refer to the hypothetical assumptions). Further, in our opinion the projection is
properly prepared on the basis of the assumptions and is presented in accordance with Philippine
Financial Reporting Standards.
Even if the events anticipated under the hypothetical assumptions described above occur, actual results
are still likely to be different from the projection since other anticipated events frequently do not occur as
expected and the variation may be material.
• When the auditor believes that the presentation and disclosure of the prospective
information is not adequate, the auditor should express a qualified or adverse opinion or
withdraw from the engagement as appropriate.
• When the auditor believes that one or more significant assumptions do not provide a
reasonable basis for the prospective financial information, the auditor should either express
an adverse opinion or withdraw from the engagement as appropriate.
• When the examination is affected by conditions that preclude application of one or more
procedures considered necessary in the circumstances, the auditor should either withdraw
from the engagement or disclaim the opinion describe the scope limitation in the report on
the prospective financial information.
B. Obtained reasonable assurance about whether the financial statements are free of
material misstatements.
C. Examined evidence, on a test basis, supporting the amounts and disclosures in the
financial statements.
D. Conducted the review in accordance with the Philippine Standard on Review
Engagements.
4. A practitioner who reviews the financial statements of an entity should issue a report
stating that a review
A. Provides negative assurance that internal control is functioning as designed.
B. Provides only limited assurance that the financial statements are fairly presented.
C. Is substantially more in scope than a compilation.
D. Is a limited assurance engagement.
5. If the practitioner determines that the financial statements are materially misstated,
he/she shall express a/an
A. Unmodified conclusion.
B. Qualified conclusion when the practitioner concludes that the effects of the matter(s)
giving rise to the modification are material, but not pervasive to the financial
statements.
C. Adverse conclusion if the practitioner concludes that the possible effects on the
financial statements could be both material and pervasive.
D. Disclaimer of conclusion when the effects of the matter giving rise to the modification
are both material and pervasive to the financial statements.
6. What conclusion is appropriate when the practitioner has obtained limited assurance to be
able to conclude that nothing has come to the practitioner’s attention that causes the
practitioner to believe that the financial statements are not prepared, in all material
respects, in accordance with the applicable financial reporting framework?
A. Unmodified conclusion. C. Disclaimer of conclusion.
B. Modified conclusion. D. Qualified conclusion.
9. Which of the following should not be included in an accountant’s report based upon the
compilation of an entity’s financial statements?
Page 7 of 9 Pages
CPAR - MANILA AT-8712
10. Negative assurance may be expressed when an accountant is requested to report agreed-
upon procedures to specified
Elements of a Accounts of a
Financial Statement Financial Statement
A. Yes Yes
B. Yes No
C. No No
D. No Yes
11. An accountant may accept an engagement to apply agreed-upon procedures that are not
sufficient to express an opinion on one or more specified accounts or items of a financial
statement provided that
A. The accountant’s report does not enumerate the procedures performed.
B. The financial statements are prepared in accordance with a comprehensive basis of
accounting other than generally accepted accounting principles.
C. Distribution of the accountant’s report is restricted.
D. The accountant is also the entity’s continuing auditor.
12. Given one or more hypothetical assumptions, a responsible party may prepare, to the best
of its knowledge and belief, an entity’s expected financial position, results of operations,
and cash flows. Such prospective financial statements are known as
A. Pro forma financial statements C. Partial presentations
B. Financial projections D. Financial forecasts.
13. A financial forecast consists of prospective financial statements that present an entity’s
expected financial position, results of operations, and cash flows. A forecast
A. Is based on the most conservative estimates.
B. Present estimates given one or more hypothetical assumptions.
C. Unlike a projection, may contain a range.
D. Is based on assumptions reflecting conditions expected to exist and courses of action
expected to be taken.
14. When an accountant examines prospective financial statements, the accountant’s report
should include a separate paragraph that
A. Contains an opinion as to whether the prospective financial statements are properly
prepared on the basis of the assumptions and are presented in accordance with
generally accepted accounting principles in the Philippines.
B. Provides an explanation of the differences between an examination and an audit.
C. States that the accountant is responsible for events and circumstances up to 1 year
after the report’s date.
D. Disclaims an opinion on whether the assumptions provide a reasonable basis for the
prospective financial statements.
15. The following statements relate to the examination of prospective financial information.
Which is false?
A. The auditor should express an opinion as to whether the results shown in the
prospective financial information will be achieved.
B. Before accepting an engagement to examine prospective financial information, the
auditor should consider the intended use of the information.
C. The auditor should not accept, or should withdraw from, an engagement to examine
prospective financial information when the assumptions are clearly unrealistic.
Page 8 of 9 Pages
CPAR - MANILA AT-8712
D. When in the auditor’s judgment an appropriate level of satisfaction has been obtained,
the auditor is not precluded from expressing positive assurance regarding the
assumptions.
16. Which of the following is a prospective financial information for general use upon which an
accountant may appropriately report?
A. Financial projection C. Pro forma financial statement
B. Partial presentation D. Financial forecast
--- END ---
Page 9 of 9 Pages