AT01 – Overview of Auditing and Attestation  Government Auditor – from COA.

Services GR: Internal Auditor are not allowed to perform

FS/Compliance audit
AUDITING
Exceptions: specifically intended for internal use
 Systematic process – there is a sequence of
only.
logical steps and procedures.
 Objectively obtains and evaluating ATTESTATION ENGAGEMENT – a type of assurance
evidence about assertions – auditor needs services, which issues a written communication
to be independent that expresses a conclusion about the reliability of
 Ascertains degree of correspondence a written assertion that is a responsibility of
between assertions and established another party.
criteria
 Communicates results to interested users. 3 Categories of Attestation Services
 Audit of historical FS
Comes from Latin word “audire” means to hear.  Effectiveness of internal control over
Need for Audit financial reporting.
o Conflict of interest  Review of historical FS
o Complexity of subject matter ASSURANCE ENGAGEMENT
o Remoteness of users  an engagement in which a practitioner
o Reduce information risk expresses a conclusion designed to
o Reduce of cost capital enhance the degree of confidence of the
o Expertise of Auditor intended users other than the responsible
o Financial Consequences party about the outcome of the evaluation
or measurement of a subject matter
against criteria.
Theoretical Framework of for Auditing
o All financial data are verifiable TYPES OF ASSURANCE
o Independence 1. According to Level of Assurance.
o No long-term conflict between the auditor  Reasonable assurance engagements
and the client management  Also called audit engagements.
o Effective internal control system  Reduction of engagement risk to an
o Consistent compliance with applicable acceptably low level as the basis for
reporting framework a POSITIVE form of conclusion.
o Audit benefits the public  Provides a high, but not absolute,
level of assurance.
OBJECTIVE OF AUDIT
 to obtain reasonable assurance about Note: Absolute assurance is not attainable
whether FS are free from error or fraud. because of the ff factors:
 to express an opinion whether the FS are in o Use of judgment.
accordance with an applicable financial o Use of sampling testing.
reporting framework. o Inherent limitations of internal
control.
TYPES OF AUDIT o Most evidence available to the
practitioner is persuasive rather
1. As to assertions or data than conclusive.
 Financial Statements Audit – examination o In some cases, the characteristics of
whether the information present in FS are all in the subject matter.
accordance with an applicable financial  Limited assurance engagements
reporting framework.  Also called review engagements.
 Compliance Audit – to determine whether the  Reduction of risk to an acceptable
organization adhered to specific procedures, level as the basis for a NEGATIVE
rules, or regulations. form conclusion.
 Operational Audit – systematic review of an  Provides only a moderate or
organization’s operating activities in relation to limited, level of assurance.
specified objectives.
 Effectiveness – measure how well an
2. According to Structure.
entity or unit of entity achieves its goal
or purpose.  Assertion based engagements
 Efficiency – achieved by minimizing the  Evaluation or measurement of the
cost of accomplishing an audit objective. subject matter is performed by the
2. As to types of auditor responsible party.
 Independent External Auditor (independent) –  The subject matter information is in
performed by CPAs in public practice the form of an assertion by the
 Internal Auditor – employee of the organization
 responsible party that is made  Understandability - understandable
available to the interested users. criteria contribute to conclusions
 Direct reporting engagements that are clear, comprehensive, and
 The practitioner either directly not subject to significantly different
performs the evaluation or interpretations.
measurement of the subject matter. d) Sufficient Appropriate Evidence
 Obtains a representation from the  Professional skepticism – an attitude
responsible party that has that includes a questioning mind, being
performed the evaluation or alert to conditions which may indicate
measurement that is not available possible misstatement due to error or
to the intended users. fraud, and a critical assessment of
evidence.
ELEMENTS OF AN ASSURANCE ENGAGEMENT  Evidence – refers to the information
a) Three Party Relationship obtained by the practitioner in arriving
 Practitioner – who performs the at the conclusions on which the
assurance engagement. conclusion is based.
 Responsible party – person/s who is  Sufficiency – refers to the measure of
responsible for the subject matter or the the quantity of evidence. (the greater
assertion. the risk, the more evidence required)
 Intended user/s – person, persons or  Appropriateness – refers to the measure
class of persons for whom the of the quality of evidence. (the higher
practitioner prepares the assurance the quality, the less evidence required)
report. e) Written Assurance Report
b) Appropriate Subject Matter  should be in the form appropriate to a
Subject matter - information to be reasonable assurance engagement or a
evaluated or measured against the criteria. limited assurance engagement.
Subject matter information - outcome of NON-ASSURANCE ENGAGEMENTS
the evaluation or measurement of a subject
 those that do not result in the practitioner’s
matter
expression of a conclusion that provides a
Elements of Subject Matter
level of assurance, whether negative
 Identifiable
assurance or other form of assurance.
 Consistent evaluation and
measurement against suitable Examples of non-assurance engagements:
criteria  Agreed-upon procedures
 Subjected to procedures for  Objectives: To carry out procedures of an
gathering evidence to support that audit nature as agreed by the auditor and
the entity and any appropriate third parties
evaluation or measurement.
and to report on factual findings.
Forms of Subject Matter
 Recipients form their own conclusion.
 Financial performance or conditions  Report is restricted to those parties that
 Non-financial performance or have agreed to the procedures to be
conditions performed
 Physical characteristics  Compilations of financial statements
 Systems and processes  Objectives: To use accounting expertise to
 Behavior collect, classify and summarize financial
c) Suitable Criteria information.
Criteria - standard or benchmark used to  Tax services
evaluate or measure the subject matter of o Tax compliance – preparation of tax returns
an assurance engagement. and acting as client’s representative to tax
Five characteristics of suitable criteria authorities or in tax litigations.
 Relevance – contribute to o Tax planning – determination of the tax
conclusions that assist decision- consequences of planned or potential
making by the intended users. transactions and followed by making
suggestions on the most desirable course of
 Completeness – factors that affect
action.
the conclusions in the context of the
 Consulting
engagement circumstances are not
 Objective: To provide professional
omitted. advisory (consulting) services for the
 Reliability – allow consistent purpose of improving client’s use of its
evaluation or measurement of the capabilities and resources to achieve the
subject matter when used in similar objectives of the organization.
circumstances by similarly qualified
practitioners. Related
Standards Applications Practice
 Neutrality - contribute to
Statements
conclusions that are free from bias.
Philippine FS audit Philippine
 Auditing In addition to the Framework and
Standards on Practice PSAs, PSREs and PSAEs, practitioners
engagements
Auditing (PSAs) Statements who perform assurance engagements
(PAPSs) are governed by:
Philippine  The Code of Ethics for
Philippine
Review
Standards on Professional Accountants in the
Review Engagement
Review Philippines.
engagements Practice
Engagements  The Philippine Standards on
Statements
(PSREs) Quality Control (PSQCs).
(PREPSs)
Other The Framework does not
assurance
Philippine itself establish standards or provide
Philippine engagements
Assurance procedural requirements for the
Standards on dealing with
Engagement performance of assurance
Assurance subject matters
Practice engagements.
Engagements other than
Statements
(PSAEs) historical
(PAEPSs)
financial
information
Philippine
Philippine
Related Services
Standards on
Related services Practice
Related Services
Statements
(PSRSs)
(PRSPSs)

Other pronouncements:
 Philippine Standards on Quality Control
(PSQCs) – to be applied for all services that
fall under the AASC’s engagement
standards, namely, audit, review, other
assurance, and related services.
 Philippine Framework for Assurance
Engagements – to be applied for assurance
engagements.
Philippine Framework for Assurance
Engagements:
o Defines and describes the elements and
objectives of an assurance engagement.
o Identifies engagements to which
assurance engagement standards (PSAs,
PSREs, and PSAEs) apply.
o Provides frame of reference for:
 Practitioners who perform
assurance engagements (such as
audit and review engagements).
 Others involved with assurance
engagements (such as the
intended users and the
responsible party).
 The International Auditing and
Assurance Standards Board
(IAASB) in its development of
assurance engagement
standards which will be adopted
by the AASC for application in
the Philippines.
o Distinguishes assurance engagements
and non-assurance engagements (non-
assurance engagements are not covered
by the Framework).
o Sets out characteristics that must be
exhibited before a practitioner can
accept an assurance engagement.