Auditing
Auditing
STANDARDS
When auditing financial statements, an auditor assumes certain professional
responsibilities. Auditor’s opinion must be based on an examination conducted
in accordance with professional standards. Failure to comply with these
standards exposes the auditor to risks such as loss of public respect or even
assessment of legal damages.
Standards are established to measure the quality of performance of individuals
and organizations. Standards relating to the accounting profession concern
themselves with CPAs’ professionals qualities, the judgement exercise by the
CPA firm’s quality control policies and procedures.
The Board of Accountancy promulgated ten generally accepted auditing
standards (GAAS) that establish required level of quality for performing
financial statements audits. These standards must be followed by the CPAs
when auditing financial statements.
Philippine Standards on Auditing (PSAs) are issued to clarify the meaning of
these ten GAAS. Auditing procedures are the means used by the auditors in
attaining the quality required by the standards.
Generally Accepted Auditing Standards
(GAAS)
The firm should establish policies and procedures for the acceptance and
continuance of client relationships and specific engagements, designed to
provide it with reasonable assurance that it will only undertake or continue
relationships and engagement where it:
Has considered the integrity of the client;
Is competent to perform the engagement and has the capabilities, time and
resources to do so; and
Can comply with ethical requirements.
The engagement partner should be satisfied that appropriate procedures
regarding the acceptance and continuance of client relationships and specific
audit engagement have been followed, and that conclusions reached in this
regard are appropriate and have documented.
HUMAN RESOURCES and ASSIGNMENT
The firm should establish policies and procedures designed to provide it with
reasonable assurance that it has sufficient personnel with the capabilities,
competence, and commitment to ethical principles necessary to perform the
engagement. Such policies and procedures should address issues concerning
personnel
Recruitment
Performance evaluation, compensation and promotion;
Capabilities and competence;
Career development; and
Assignment of engagement teams
The engagement partner should be satisfied that the engagement team collectively
has the appropriate capabilities, competence and time to perform the audit
engagement in accordance with professional standards, and regulatory and legal
requirements, and to enable an auditor’s report that is appropriate in the
circumstances to be issued.
ENGAGEMENT PERFORMANCE
The firm should establish policies and procedures designed
to provide it with reasonable assurance
That engagements are performed in accordance with
professional with professional standards and other
regulatory and legal requirements; and
That the audit report issued is appropriate in the
circumstances.
The engagement partner should take responsibility for the
direction, supervision, review and overall performance of
the audit engagement.
QUALITY CONTROL REVIEW
Recognizing the importance of professional accountants’ services to the society, the
government has also taken steps to ensure that CPAs work to the highest standards which
can reasonably be expected from them. The government thru the Professional Regulatory
Board of Accountancy (BOA) has required all the CPA firms and individual CPAs in public
practice to obtain a certificate of accreditation to practice public accountancy. Such
certificate is valid for three years and can be renewed after complying with the
requirements of the Board of Accountancy.
As a condition to the renewal of the certificate of accreditation to practice public
accountancy, the Board requires individual CPAs and CPA firms to undergo a quality
control review to ensure that these CPAs comply with accounting and auditing standards
and practices.
The PRC has created a Quality Review Committee (QRC) which shall conduct a quality
review on applicants for registration to practice public accountancy and shall
recommend the revocation of the certificate of registrations of CPAs who have not
observed the quality control measures or those who have not complied with the
standards of quality prescribed for the practice of public accountancy.