INTEGRATED REVIEW IN AUDITING ASSURANCE (AUD REV)| BSA 4 | A.Y.
2024 – 2025 | Module 3 RTCANLAS
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THE AUDITOR’S REPORT ON FS
Objective of the traditional FS audit is for the auditor to express an opinion on the fairness of the FS, and in
accordance with PFRS (explicitly stated in auditor’s responsibility section)
Independent auditor for objectivity
Enhances degree of confidence of intended users on the FS
To distinguish it from other reports, it should have an appropriate title (“Independent Auditor’s Report”)
Report is addressed to the shareholders or BOD of the entity
A. Unmodified opinion
FS are prepared, in all material aspects, in accordance with applicable framework
Audit report date on such is the last day of the auditor’s responsibility for the review of significant events
occurring after the end of the reporting period
Emphasis of matter may be added when there is substantial doubt of the entity to continue as going
concern
B. Modified opinion
FS as a whole is not free from material misstatements
Unable to obtain sufficient appropriate evidence to conclude that they are free from such misstatements
1. Qualified opinion
When there are material misstatements (or possible ones) but they are not pervasive to the FS
You have evidence
Not prepared in accordance with framework?
Describe the matter in a different section placed after the opinion section
Auditor believes the FS are presented fairly except for a specific item
Does not include subject to and with the foregoing explanation
If the entity does not disclose something the auditor thinks should
“except for the omission of the information discussed in the basis for qualified opinion section “
2. Adverse opinion
FS, having obtained sufficient evidence, are materially and pervasively misstated, and not prepared in
accordance with the applicable framework/s
Opinion section should include direct reference to a separate section disclosing the basis for the opinion
3. Disclaimer of opinion
Auditor cannot obtain sufficient evidence to base the opinion
Effects of the undetected misstatements could be both material and pervasive
When the entity will not permit inquiry of outside legal counsel
Pervasive effects:
Are not confined to specific elements, accounts or items on the financial statements
If so confined, represent or could represent a substantial proportion of the financial statements, or
In relation to disclosures, are fundamental to user’s understanding of the financial statements
Two broad financial reporting frameworks for comparatives:
1. Corresponding figures – integral part of the current period FS, not presented as complete FS of standing
alone; auditor’s report only refers to current period FS
2. Comparative FS – are not part of the current FS, separate FS; the auditor’s report refers to each period that
the FS are presented
Auditor would least likely refer to corresponding figures when the report on the prior period included
a modified opinion and this has been resolved
When the prior period FS are not audited, the auditor should mention such fact and perform
necessary audit procedures for the opening balances
When comparative FS are presented, the auditor’s opinion shall refer to each period presented
Auditor should mention the kind opinion the predecessor auditor issued and reasons
Other matter paragraph – in an audit report, includes matters other than those presented or disclosed
in the FS that for the auditor’s judgement are relevant to the user’s understanding of the audit, his
responsibilities and opinion
Emphasis of matter paragraph – refers to a matter of appropriately presented/disclosed in the financial
statements that, in the auditors judgment, is of such importance but it is fundamental to users understanding
of the financial statements
Other information section –; more on responsibilities and the other information prior to the date of auditor’s
report
Opinion section – identify the entity whose FS have been audited
Basis for opinion section – after the opinion section and states that the audit was conducted in accordance
with PSAs
Compliance framework – refer to a financial reporting framework that requires compliance with the
requirements of the framework
Fair presentation framework – refer to a financial reporting framework that requires compliance with the
requirements of the framework and acknowledges that to achieve fair presentation management may need
disclose beyond requirement of the framework or even depart from such
INTEGRATED REVIEW IN AUDITING ASSURANCE (AUD REV)| BSA 4 | A.Y. 2024 – 2025 | Module 3 RTCANLAS
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Key Audit Matters (KAM)
required only for listed entities along with statement of the name of the engagement partner
not a substitute for other things
not permitted when issuing a disclaimer of opinion
Other Notes:
The auditor is not required to express an opinion regarding the effectiveness of the entity’s internal
control system
Date of the report is always later than the date of FS
The auditor may refer to the audit expert’s work in the report if a qualified or adverse
opinion on that work was expressed by the auditor
The auditor may refer to the work of an appraiser if an adverse opinion is expressed based on the difference of
opinion between the client and the outside appraiser is the value of certain assets
Inadequate disclosure is not a scope limitation
If the client refuses to make necessary revision, issue a qualified or adverse opinion
SUBSEQUENT EVENTS (BASED ON PSA 560)
1. The auditor should consider the effect of subsequent events on the financial statements and on auditor’s report.
Events occurring up to the date of the auditor’s report
2. The auditor should perform procedures designed to obtain sufficient appropriate audit evidence that all events up
to date of the auditor’s report that may require adjustment of, or disclosure in, the financial statements have been
identified.
3. When the auditor becomes aware of events which materially affect the financial statements, the auditor should
consider whether such events are properly accounted for and adequately disclosed in the financial statements.
Facts discovered after the date of the auditor’s report but before the financial statements are issued
4. During the period from the date of the auditor’s report to the date the financial statements are issued:
The responsibility to inform the auditor of facts which may affect the financial statements rests with
management.
When the auditor becomes aware of the facts that will materially affect the financial statements, the auditor
should:
Consider whether the financial statements needed amendment
Discuss the matter with the management
Take the action appropriate in the circumstances
5. When the management amends the financial statements, the auditor would carry out the procedures necessary in
the circumstances and would provide management with a new report on the amended financial statements.
6. The new auditor’s report would be dated not earlier than the date the amended financial statements are signed or
approved and, accordingly, the procedures to identify subsequent events would be extended to the date of the new
auditor’s report.
7. When management does not amend the financial statements but the auditor believes they need to be amended and
the auditor’s report has not been released to the entity, the auditor should express a qualified opinion or an adverse
opinion.
Facts discovered after the financial statements have been issued
8. After the financial statements have been issued, the auditor has no obligation to make any inquiry regarding such
financial statements.
9. When, after the financial statements have been issued, the auditor becomes aware of a fact which existed at the
date of the auditor’s report and which, if known at date, may have caused the auditor to modify the auditor’s
report, the auditor should:
Consider whether the financial statements need revision
Discuss the matter with management
Take the appropriate action in the circumstances
10. When management revises the financial statements, the auditor would:
Carry out the audit procedures necessary in the circumstances
Review the steps taken by management to ensure that anyone in receipt of the previously issued financial
statements together with the auditor’s report thereon is informed of the situation.
Issue a new report on the revised financial statements:
Include an emphasis of a matter paragraph.
Would be dated earlier than the date the revised financial statements are approved
The auditor is permitted to restrict the audit procedures regarding the revised financial statements to
effects of the subsequent event that necessitated the revision.
11. It may not be necessary to revise the financial statements and issue a new auditor’s report when issue of the
financial statements for the following period is imminent, provided appropriate disclosures are to be made in such
statements
USING THE WORK OF ANOTHER AUDITOR (BASED ON PSA 600)
1. The principal auditor is the auditor with responsibility for reporting on the financial statements of an entity when
those financial statements include financial information of one or more components audited by another auditor
INTEGRATED REVIEW IN AUDITING ASSURANCE (AUD REV)| BSA 4 | A.Y. 2024 – 2025 | Module 3 RTCANLAS
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2. The auditor should consider whether the auditor’s own participation is sufficient to be able to act as principal
auditor. The following would be considered:
The materiality of the portion of the financial statements which the principal auditor audits
The principal auditor’s degree of knowledge regarding the business of the components
The risk of material misstatements in the financial statements of the components audited by the other auditor
The performance of additional procedures as set out in PSA 600 regarding the components audited by other
auditor resulting in the principal auditor having significant participation in such audit
3. When planning to use the work of another auditor, the principal auditor should:
Consider the professional competence of the other auditor in the context of specific assignment
Perform procedures to obtain sufficient appropriate audit evidence that the work of the other auditor is
adequate for the principal auditor’s purposes in the context of the specific assignment
Consider the significant findings of the other auditor
4. Reporting conclusions
When the principal auditor concludes that the work of the other cannot be used and the principal auditor has
not been able to perform sufficient additional procedures regarding financial information of the component
audited by the other auditor, the principal auditor should express a qualified or a disclaimer of opinion because
of a scope of limitation.
If the auditor issues or intend to issue, a modified auditor’s report, the principal auditor would consider whether
the subject of modification is of such a nature and significance, in relation to the financial statements of the
entity on which the principal auditor is reporting that a modification on the principal auditor’s report is required.
5. Division of responsibility
When the principal auditor bases the audit opinion on the financial statements taken as a whole solely upon
the report of another auditor regarding the audit of one or more components, the principal auditor’s report
should state this fact clearly and should indicate the magnitude of the portion of the financial statements
audited by the other auditor.
OTHER REPORTING RESPONSIBILITIES
PSA 800 Special Considerations – Audits of FS Prepared in Accordance with Special Purpose Frameworks
Special purpose financial statements are financial statements prepared in accordance with this framework
and are designed to meet the financial information needs of specific users
For general purpose FS:
IFRS by IASB
IPSAs
PFRS by FRSC
No requirement to express an opinion as to whether the basis of accounting used is appropriate under
the circumstances
When an auditor reports on financial statements prepared on an entity’s income tax basis, the auditor’s report
should state the basis of presentation of the FS
PSA 805 Special Considerations – Audits of Single Financial Statements and Specific Elements, Accounts or
Items on a Financial Statement
An audit engagement to express an opinion on one or more components of a financial statement may be
undertaken as a separate engagement or in conjunction with an audit of the entity’s financial statements
Examples: audit of schedule of AR, schedule of profit participation
Different opinions can be expressed with this and with the complete FS (as long as the reports are presented
separately)
Materiality can also be different
PSA 810 Engagements to Report on Summary Fs
An auditor may report on summary financial statements that are derived from complete audited financial
statements if he indicates whether the information in the summary is consistent with the statement from which
it was derived
It should also indicate that the CPA has audited and expressed an opinion on the complete financial statements
PSRE 2400 REVISED Engagements to Review FS
Consists primarily of inquiries and analytical procedures
The practitioner shall request management to provide a written representation that they have fulfilled the
responsibilities described in the agreed terms of engagement
Least likely to observe the safeguards over assets and records
Does not include the following:
Updating an understanding of internal control or assessing control risk
Testing accounting records or responses to increase by obtaining corroborating evidence
Other tests ordinarily performed in an audit
In accordance with the PSREs
The date of the review report should not be earlier than the date on which the financial statements were
approved by management
If the client will not revise what should be revised, the practitioner should express a qualification of the
negative assurance provided or give an adverse statement
Is there has been a significant limitation on the review, the practitioner should describe the limitation and do
either of the following:
INTEGRATED REVIEW IN AUDITING ASSURANCE (AUD REV)| BSA 4 | A.Y. 2024 – 2025 | Module 3 RTCANLAS
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Express a qualification of the negative assurance
Provide no assurance
Obtain evidence primarily through inquiry and analytical procedures
If something comes to the attention of the practitioner and it is materially misstated, the practitioner should
carry out additional or more expensive procedures that are necessary to achieve limited insurance
PSRE 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity
PSRS 4410 addresses engagements where the practitioner assists management in the preparation and
presentation of:
Historical financial information
Other financial information (prospective, etc.)
Non-financial information
Read the minutes of the board of director’s meeting
tests of accounting records through inspection, observation, or confirmation are usually not done
Procedures are limited to making inquiries and applying analytical procedures
Independence needed
PSRS 4400 Engagements on Agreed-upon Procedures
The report is restricted only to the partners that have agreed to the procedures
It should contain the identification of the purpose for which the procedures were performed
May involve doing procedures for individual items, a financial statement, a complete set of FS
The auditor does not provide negative or other forms of assurance
No independence needed
PSRS 4410 Engagements to Compile Financial Information
Compilation of historical financial information, perspective financial information, non- financial information
The practitioner should obtain an understanding of the following matters:
The entity’s business and operations including their accounting system and accounting records
The applicable financial reporting framework, including its application in the entity’s industry
No independence needed
The objective of a compilation engagement is for the practitioner to apply accounting and financial reporting
expertise to assist management in the preparation and presentation of their financial information
He should obtain acknowledgment from management of their responsibilities
PSRS/ it’s a related service
If management refuses to provide information to correct deficiencies and they refuse to do so, he should
withdraw
PSAE 3400 The Examination of Prospective Financial Information
Forecast – prospective financial information prepared on the basis of assumptions as to future events which
management expects to take place and actions management expects to take as of the date information is
prepared (best-estimate assumptions)
Projection – prospective financial information prepared on the basis of:
Hypothetical assumptions about future events management actions which are not necessarily expected
to take place
A mixture of best-estimate and hypothetical assumptions
Management of client is responsible for assumptions identified in the preparation of prospective financial
statements
An examination of a financial forecast is a professional service that involves evaluating the preparation of a
financial forecast and the supporting underlying management assumptions
The accountant should not accept or withdraw is the assumptions are unrealistic or he believes the perspective
information is inappropriate for its intended use
If the accountant believes that the presentation and disclosure of the prospective financial information
is not adequate he should either express a qualified or adverse opinion or withdraw from the engagement
Before accepting, the auditor should consider: the intended use of the information, the nature of the
assumptions, and the period covered by the information
he auditor should also obtain written representation from management
"Don't hate me for pushing you to study and be the best version of yourself. I do it because
I care. The world outside is far more complicated, and preparing for the board exam is
even tougher. I just want you to be ready for it." - RTCanlas
