AUDITING AND
ASSURANCE PRINCIPLES
Prof. Zeus A. Aboy, CPA MBA
EDL (Candidate)
1) Commerce and Industry
2) Government
3) Academe
4) Public Practice
FIELDS OF PRACTICE FOR CPAS
Working in private companies as:
Accountant, Chief Accountant, Internal Auditor, Accounting Manager,
Controller, Treasurer and CFO.
Sector: Association of CPAs in Commerce and Industry (ACPACI)
CPAS IN COMMERCE AND INDUSTRY
Working in different government offices and government agencies such as:
BSP, BIR, DBM, COA, LGUs etc as
Accountant, Chief Accountant, Accounting Manager, Internal Auditor
Sector: Government Association of CPAs (GACPA)
CPAS IN GOVERNMENT
Working in educational institution as an educator or professor teaching
accounting, tax, consultancy and auditing.
Sector: National Association of CPAs in Education (NaCPAE)
CPAS IN ACADEME
Working in accounting or auditing firms as: Auditor, Consultants, or sole
practitioner running his own practice offering services to clients in the area of
auditing, tax, management consultancy and others.
Sector; Association of CPAs in Public Practice (ACPAPP)
CPAS IN PUBLIC PRACTICE
Audit of financial statements Agreed-upon procedures
Review of financial statements Compilation of Financial Statements (PSRS
4410, Revised)
Preparation of tax returns
Tax consulting
Management consulting
Other advisory services
UNIVERSE OF SERVICES THAT CPAS IN
PUBLIC PRACTICE CAN OFFER TO CLIENTS
The framework defines and describes the elements
and objectives of an assurance engagement and
identifies engagements to which Philippine Standards
on Auditing (PSAs), Philippine Standards on Review
Engagements (PSRE) and Philippine Standards on
Assurance Engagements (PSAE) apply.
PHILIPPINE FRAMEWORK FOR
ASSURANCE ENGAGEMENT
Assurance engagements performed by professional
accountants are intended to ENHANCE the CREDIBILITY of
information about a SUBJECT MATTER by evaluating
whether the subject matter conforms in all MATERIAL
respects with suitable criteria, thereby improving the
likelihood that the information will meet the needs of an
intended user.
WHAT IS AN ASSURANCE
ENGAGEMENT?
The level of assurance provided by professional accountant’s
conclusion conveys the degree of confidence that the intended
user may place in the credibility of the subject matter.
1) A practitioner
2) A responsible party
3) Intended users
PARTIES INVOLVED IN AN
ASSURANCE ENGAGEMENT
Practitioner – the professional accountant
Responsible Party – the one responsible for the subject
matter of an assurance engagement. (Management)
Intended User- the person or class of persons for whom the
professional accountant prepares the report for a specific
purpose.
1) A three-party relationship
2) A subject matter
3) Suitable criteria
4) Sufficient appropriate evidence
5) An assurance report
ELEMENTS OF AN ASSURANCE
ENGAGEMENT
1) Financial performance or conditions, such as historical or prospective
financial position, financial performance, and cash flows;
2) Non-financial performance or conditions, like: performance of an
entity
3) Physical characteristics like capacity of a facility
4) Systems and processes like an entity’s internal control or IT system
5) Behavior or processes as corporate governance, compliance with
regulation and human resource policies.
INCLUDED IN THE SUBJECT MATTER
IN AN ASSURANCE ENGAGEMENT
Criteria are the standards or benchmarks used to evaluate
or measure the subject matter of an assurance
engagement. These are important because they establish
and inform the intended user of the basis against which the
subject matter has been evaluated or measured in forming
the conclusion.
SUITABLE CRITERIA
1) Relevance – contribute to conclusions that assist decision –making by
the intended users.
2) Completeness
3) Reliability – Reliable criteria allow reasonably consistent evaluation or
measurement of the subject matter including, presentation and
disclosure
4) Neutrality – contribute to conclusions that are free from bias.
5) Understandability – not subject to significant different interpretations.
CHARACTERISTICS OF A SUITABLE
CRITERIA
Established criteria are embodied in laws or regulations,
or issued by authorized or recognized bodies of experts
that follow a transparent due process.
ESTABLISHED CRITERIA
1) Reasonable assurance – applies to audits of financial
statements
2) Limited assurance – applies to review of financial statements
LEVELS OF ASSURANCE IN AN
ASSURANCE ENGAGEMENT
The objective of REASONABLE ASSURANCE engagement
is the reduction in assurance engagement risk to an
acceptably low level in the circumstances of the
engagement as the basis for a POSITIVE form of
expression of the practitioner’s conclusion.
OBJECTIVE OF REASONABLE
ASSURANCE
This refers to the practitioners’ expression of an
INAPPROPRIATE conclusion.
AUDIT RISK
That the subject matter information is materially misstated:
1) Inherent risk
2) Control risk
3) Detection risk
COMPONENTS OF AUDIT RISK
The objective of limited assurance engagement is a
reduction in assurance engagement risk to a level that is
acceptable in the circumstances of the engagement, but
where the risk is greater than for a reasonable assurance
engagement, as the basis for a NEGATIVE form of
expression of the practitioner’s conclusion.
OBJECTIVE OF LIMITED ASSURANCE
A review engagement is conducted to provide limited
assurance that there are no material modifications that
should be made to the financial statements for them to be in
conformity with the financial reporting framework .
REVIEW ENGAGEMENT
A compilation engagement is a type of engagement where a
company engages an outside accountant to prepare and
present financial statements.
COMPILATION ENGAGEMENT
Audit Review of FS Compilation
Level of assurance
Reasonable Limited No assurance
Testing done Gathering of Testing is limited to No testing is done,
evidences to support analytical review The accountant uses
a conclusion procedures his accounting skills.
COMPARISON
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