Session 1 AUDITING AND ASSURANCE PRINCIPLES
Session 1 AUDITING AND ASSURANCE PRINCIPLES
UNIVERSITY
Accountancy Department
5:00 PM – 8:00 PM
AUDITING
1. Class Participation
2. Assignments
3. Quizzes
4. Long Tests
5. Major Examinations
6. Submission of
Practice Set
Grading System
• Once upon a time, the Big Four giant accountancy firms group
were known as the Big Eight. Then, through a series of
mergers, the group became the Big Five. The Big Five became
the Big Four in 2002 when the ENRON/Arthur Andersen
scandal shook the accounting world.
SOURCE: https://toughnickel.com/industries/Top-5-Accounting-Firms-in-the-Philippines-Best-Accounting-Firms
PSA 120
FRAMEWORK OF
PHILIPPINE STANDARDS ON
AUDITING
• The AASC has been authorized to issue Philippine Standards
on Auditing (PSAs). The purpose of this document is to
describe the framework within which PSAs are issued in
relation to the services which may be performed by auditors.
1. Reviews
2. Agreed-upon Procedures
3. Compilations
1) Reviews
• The objective of a review of financial statements is to
enable an auditor is to state whether, on the basis of
procedures which do not provide all the evidence
that would be required in an audit, anything has
come to the auditor's attention that causes the
auditor to believe that the financial statements are
not prepared, in all material respects, in accordance
with an identified financial reporting framework.
– A similar objective applies to the review of financial or
other information prepared in accordance with
appropriate criteria.
1) Reviews
• A review comprises inquiry and analytical procedures
which are designed to review the reliability of an
assertion that is the responsibility of one party for
use by another party.
– While a review involves the application of audit skills and
techniques and the gathering of evidence, it does not
ordinarily involve an assessment of accounting and
internal control systems, tests of records and of responses
to inquiries by obtaining corroborating evidence through
inspection, observation, confirmation and computation,
which are procedures ordinarily performed during an
audit.
1) Reviews
• Although the auditor attempts to become
aware of all significant matters, the
procedures of a review make the achievement
of this objective less likely than in an audit
engagement, thus the level of assurance
provided in a review report is correspondingly
less than that given in an audit report.
2) Agreed-upon Procedures
• In an engagement to perform agreed-upon
procedures, an auditor3 is engaged to carry out those
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.
– The recipients of the report must form their own
conclusions from the report by the auditor. 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.
3) Compilations
• In a compilation engagement, the accountant is engaged to
use accounting expertise as opposed to auditing expertise
to collect, classify and summarize financial information.
– This ordinarily entails reducing detailed data to a manageable
and understandable form without a requirement to test the
assertions underlying that information.
– The procedures employed are not designed and do not enable
the accountant to express any assurance on the financial
information.
– However, users of the compiled financial information derive
some benefit as a result of the accountant's involvement because
the service has been performed with due professional skill and
care.
Auditor Association with Financial
Information
• An auditor is associated with financial
information when the auditor attaches a
report to that information or consents to the
use of the auditor's name in a professional
connection.
• If the auditor is not associated in this manner,
third parties can assume no responsibility of
the auditor.
Auditor Association with Financial
Information
• If the auditor learns that an entity is inappropriately
using the auditor's name in association with financial
information, the auditor would require management to
cease doing so and consider what further steps, if any,
need to be taken, such as informing any known third
party users of the information of the inappropriate use
of the auditor's name in connection with the
information.
• The auditor may also believe it necessary to take other
action, for example, to seek legal advice.
ASSIGMENT
• Code of Ethics -
..\Auditing Theory\Code of Ethics.pdf
Read and Study
• Glossary of Terms
..\Auditing Theory\PSA\Glossary-of-Terms-Decem
ber-2002.pdf
• Philippine Framework for Assurance Engagement
..\Auditing Theory\PSA\Philippine-Framework-for-
Assurance-Engagements.pdf
• Preface to the International Standards and
Philippine Standards on Quality Control, Auditing,
Review, Other Assurance And Related Services
..\Auditing Theory\PSA\Preface-to-International-S
tandards-and-Philippine-Standards.pdf
SEE YOU NEXT WEEK !