Philippine Standards on Auditing (PSAs) PSA (Revised and Redrafted) - Overall Objectives of the Independent Auditor and the Conduct of an Audit in. Philippine Standard on Auditing (PSA) (Revised), Forming an Opinion and the Conduct of an Audit in Accordance with Philippine Standards on Auditing. This Philippine Standard on Auditing (PSA) deals with the independent auditor's audit designed to enable the independent auditor to meet those objectives. It.
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, resolved to adopt as part of its rules the following Philippine Standards on These are adopted from the International Standards on Auditing issued by the . January 15, - Philippines Auditing and Assurance Standards Council. New and redrafted list of Philippines Standards on Auditing. Auditing and Assurance Standards Council Philippine Standard on Auditing (Revised and Redrafted) COMMUNICATION WITH THOSE CHARGED WITH.
Evaluate Risks — Risks are everywhere natural disasters, loss of key suppliers, reputation damage, inefficient operations, fraud, lawsuits, policy violations, regulatory compliance, theft, etc. Assess Controls — Internal auditors evaluate control efficiency and effectiveness and provide management and the board assurance that the controls in place are adequate to respond to the risks that threaten the organization.
Ensure Accuracy — Internal auditors ensure financial statement accuracy. They examine the reliability and integrity of financial and operational information.
Promote Ethics — Professional internal auditors agree to abide by a Code of Ethics that upholds the principles of integrity, objectivity, confidentiality, and competency.
They raise red flags when they discover improper conduct. Review processes and Procedures — Internal auditors review operations closely and assess whether existing processes are well designed to help the organization achieve its goals.
They also offer insight into the impact that noncompliance would have on an organization and inform senior management and the board of noncompliance. Business risk is not part of engagement risk and does not affect the application of this Philippine Standard on Assurance Engagements. The concepts of sufficiency and appropriateness of evidence are interrelated, and include considering the reliability of evidence. Sufficiency is the measure of the quantity of evidence obtained and appropriateness is the measure of its quality, including its relevance to the subject matter.
The decision as to whether sufficient evidence has been obtained will be influenced by its quality. The quality of evidence available to the practitioner will be affected by the nature of the subject matter and the quality of the criteria, and also by the nature and extent of the procedures applied by the practitioner.
Determination as to the sufficiency and appropriateness of evidence is a matter of professional judgment. The practitioner collects and evaluates evidence to evaluate whether the subject matter is in conformity with the identified criteria.
The reliability of evidence is influenced by its source: internal or external, and by its nature: visual, documentary or oral. While the reliability of evidence is dependent on individual circumstances, the following generalizations will help in assessing the reliability of evidence: a evidence from external sources is more reliable than that generated internally; b evidence generated internally is more reliable when subject to appropriate controls within the entity; c evidence obtained directly by the practitioner is more likely to be reliable than that obtained from the entity; and d evidence in the form of documents and written representation is more likely to be reliable than oral representations.
Evidence is more persuasive when items of evidence from different sources or of a different nature are consistent. In these circumstances, the practitioner may obtain a cumulative degree of confidence higher than that obtained from items of evidence considered individually. Conversely, when evidence obtained from one source is inconsistent with that obtained from another, the practitioner determines what additional procedures are necessary to resolve the inconsistency.
In terms of obtaining sufficient appropriate evidence, it is generally more difficult to provide assurance on subject matter covering a period of time than subject matter covering a point in time.
In addition, conclusions provided on processes are generally limited to the period covered by the engagement and do not extend to providing any assurance that the process will continue in the future. PSA Documentation In areas involving difficult questions of principle or judgment, the documentation will include the relevant facts that were known by the practitioner at the time the conclusion was reached.
The extent of documentation is a matter of professional judgment since it is neither necessary nor practical to document every matter the practitioner considers. In assessing the extent of documentation to be prepared and retained, it may be useful for the practitioner to consider what is necessary to provide another professional accountant who has no previous experience with the engagement with an understanding of the work performed and the basis of the principal decisions taken, but not the detailed aspects of the engagement.
However, even then, that other professional accountant may only be able to obtain an understanding of detailed aspects of the engagement by discussing them with the practitioner who prepared the documentation.
Subsequent Events For some assurance engagements the nature of the subject matter may be such that consideration of subsequent events is not relevant to the conclusion. When an expert is used in the collection and evaluation of evidence, the practitioner and the expert should, on a combined basis, possess adequate knowledge of the subject matter and have adequate proficiency in the subject matter for the practitioner to determine that sufficient appropriate evidence has been obtained.
The subject matter and related criteria of some assurance engagements may be composed of a number of elements requiring specialized knowledge and skills in the collection and evaluation of evidence. In these situations, the practitioner may decide to use the work of persons from other professional disciplines, referred to as experts, who have the required skills and knowledge of the relevant aspects of the subject matter or criteria.
This Standard does not provide guidance on engagements where there is joint responsibility and reporting by a practitioner and one or more experts. Due care is a required professional quality for all individuals, including experts, involved in an assurance engagement. Persons involved in assurance engagements will have varying responsibilities assigned to them.
The extent of proficiency required in performing those engagements will vary with the nature of their responsibilities. While experts do not require the same proficiency as the practitioner in performing all the components of an assurance engagement, the practitioner determines that the experts have a sufficient understanding of this Standard to enable them to relate the work assigned to them to the engagement objective.
The exercise of due care requires that all persons involved in an assurance engagement comply with these Assurance Standards, including any subject matter experts who are not professional accountants. The quality control procedures adopted by the practitioner will address the responsibility of each person performing the assurance engagement to comply with this Standard in the context of their responsibilities in the engagement process.
When an expert is involved, the practitioner should have a level of involvement in the engagement and an understanding of the aspects of the subject matter for which the expert has been used, sufficient to enable the practitioner to accept responsibility for expressing a conclusion on the subject matter.
The practitioner considers the extent to which the practitioner will rely on the work of an expert in forming a conclusion on the subject matter. The practitioner is not expected to possess the same specialized knowledge and skills as the expert. However, the practitioner needs to have a reasonable understanding to: a define the objectives of the work assigned to the expert and how this work relates to the objective of the engagement; b consider the reasonableness of the assumptions, methods and source data used by the expert; and c consider the reasonableness of the findings of the expert in relation to the objective of the engagement.
When an expert is involved, the practitioner should obtain sufficient appropriate evidence that the work of the expert is adequate for the purposes of the assurance engagement. Reporting The report should express a conclusion that conveys a high level of assurance about the subject matter, based on the results of the work performed.
The report can take various forms, such as written in hard copy or electronic form , oral, or by symbolic representation. However, a written report is generally the most effective form for adequately presenting the detail required and evidencing the conclusions provided. Oral and other forms of expressing the conclusion are open to misunderstanding without the support of a written report.
For this reason, the practitioner will not ordinarily report orally without also providing a definitive written report. This Standard does not require a standardized format for reporting on all assurance engagements but rather identifies the minimum information required to be included in the report.
These minimum requirements may be tailored to the specific engagement circumstances. This will result in more engagement-specific reports to facilitate effective communication to the intended user of the conclusion expressed.
The form of conclusion to be expressed by the practitioner is determined by the nature of the subject matter and the agreed objective of the engagement and is designed to meet the needs of the intended user of the report of the practitioner.
Report Content When specific standards do not exist, the report states that the engagement was performed in accordance with this Standard. Where the engagement has more than one objective, a conclusion on each objective is expressed. Where the practitioner expresses a reservation or denial of conclusion, the report contains a clear description of all the reasons; i the report date: the date informs users that the practitioner has considered the effect on the subject matter of material events of which the practitioner became aware up to that date; and j the name of the firm or the practitioner and the place of issue of the report: the name informs the readers of the individual or firm assuming responsibility for the engagement; The practitioner may expand the report to include other information and explanations not intended as a reservation.
Other examples include findings relating to particular aspects of the engagement and recommendations of the practitioner or references to the inherent limitations of the subject matter. When considering whether to include any such information, the practitioner assesses the significance of that information in the context of the objective of the engagement.
Additional information is not to be worded in such a manner to affect the PSA conclusion of the practitioner. The practitioner considers the use of appropriate headings to identify the principal sections of the report as a means of improving communication.
Reservation or Denial of Conclusion Where the practitioner expresses a reservation about the subject matter, the nature and expression of that reservation is determined by the materiality of the matter giving rise to the reservation, for example, whether it relates to some or all aspects of the subject matter not conforming to the criteria disagreement , or the inability of the practitioner to obtain sufficient appropriate evidence on some or all aspects of the subject matter limitation of scope.
When the practitioner expresses a reservation of conclusion or a denial of conclusion, the report discloses all significant facts and reasons relating to the reservation or denial. Effective Date This PSAE is effective for assurance engagements intended to provide a high level of assurance where the report is dated on or after December 31, Earlier application is encouraged.
Aknowledgment Punongbayan, Chairman Antonio P. Acyatan, Vice Chairman Felicidad A. Abad David L. Balangue Eliseo A. Fernandez Nestorio C.
Roraldo Editha O. Tuason Joaquin P.
Tolentino Joycelyn J. Villaflores Carlito B.
Dimar Froilan G. Ampil Camilo C. Tierro Horace F. Dumlao Isagani O. Santiago Eugene T. Mateo Flerida V. Creencia Jesus E. Corporate Governance 6. Environmental Management System 2. Statistical 7. Corporate Governance 3.
Environment 8. Compliance 4. Internal Control 9. Human Resource Practices 5. Corporate Governance Shaded boxes represent existing Standards and Statements. PSA Appendix 2 B.
Chronology 1. This initiative recognized the increasing demand for information on a broad range of subject matters to meet the needs of decision-makers, and the consequent need in both the private and public sectors for services that enhance the credibility of that information.
The exposure draft introduced the concept of a continuum of levels of assurance that could be provided, with the level of assurance provided in a particular engagement being dependant upon the interrelationship of four variables.
The IAPC received strong support for the aims of the exposure draft. The vast majority of respondents agreed with the concept of a continuum of levels of assurance. However, many respondents believed that the concept would be difficult to apply in practice, and in particular that it would be difficult to ensure that any report would convey the level of assurance with the necessary precision.
This kept the concept of the continuum, but restricted the levels of assurance being provided to two levels: a high level and a moderate level. PSA Appendix 2 4. The exposure period for the exposure draft ended in July , and the IAPC has examined the issues raised in those responses. The responses to the exposure draft continued to support the underlying concepts in the document. There was agreement on how the concepts would be applied to assurance engagements intended to provide a high level of assurance.
However, there was disagreement as to how the concepts would be applied to assurance engagements intended to provide a moderate level of assurance. A number of respondents believed that the model did not provide sufficient guidance as it did not explain adequately the interaction of the variables and how they result in a moderate level of assurance.
In addition, there was not consensus on how the moderate level of assurance is best communicated. Two alternative models for the moderate level of assurance were identified: one based in the interaction of the variables and the other based on work effort. In a compilation engagement, the accountant4 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 auditor5 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. 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. Acknowledgment Punongbayan, Chairman Antonio P. Acyatan, Vice Chairman Felicidad A.
Abad David L. Balangue Eliseo A. Fernandez Nestorio C. Roraldo Arturo G. San Gabriel Joaquin P. Tolentino Joycelyn J.
Villaflores Carlito B. Dimar Froilan G. Ampil Jose T. Valencia Horace F. Dumlao Isagani O. Santiago Eugene T. Mateo Emma M.