Material Inconsistency

If, on reading the other information, the auditor identifies a material inconsistency, the auditor should
discuss the matter with management and determine whether:

1.The audited financial statements need to be amended;

2. The other information needs to be amended; or

3. The auditor's understanding of the entity needs to be updated.

If an amendment is necessary in the financial statements and the entity refuses to make the
amendment, the auditor should express a qualified or an adverse opinion due to material misstatement
in the financial statements.

On the other hand, if an amendment is necessary in the other information and the entity refuses to
amend the other information to eliminate the material inconsistency,the auditor should consider

1. Whether the rationale given by the management and those charged with governance for not making
the amendment raises doubt about the integrity of management or those charged with governance,
such as when the auditor suspects that there is an intention to mislead;

2. Issuing a report that contains a disclaimer of opinion on the financial statements because such refusal
casts doubt on the integrity of management and those charged with governance as to call into question
the reliability of audit evidence in general; or

3. Withdrawing from the engagement.

Material misstatement of fact

While reading the other information for the purpose of identifying material inconsistencies, the auditor
should remain alert for indications that information, not related to the financial statements, is
incorrectly stated or presented. This is called material misstatement of fact.

If the auditor becomes aware that a material misstatement of fact exists, the auditor should discuss the
matter with the entity's management and request management to consult a qualified third party to
resolve the matter.

If the auditor concludes that there is a material misstatement of fact in the other information and the
management refuses to correct the other information, the auditor should notify the audit commitee of
the auditors concern regarding the other information and if necessary, obtain legal advice.

Other Information section in the Auditor's Report

The auditor's report should include a separate section for " Other information " when at the date of the
auditors report, the auditor has obtained or, for audit of listed entities,the auditor has obtained or
expects to obtain the other information. This section should identify the other information and clearly
describe the responsibilities of the management and the auditor with respect to other information
included in the annual report. Also, if the auditor believes that the other information is materially
misstated, the auditor must state the nature of misstatement in the " Other Information " section of the
auditors report.

Audit of Group Financial Statements

When one or more audit firms participate in an audit engagement, one firm has to act as the group
auditor. A group auditor is the auditor with responsiblity for reporting on the financial statements of an
entity when those financial statements include financial informaton of one or more components audited
by another auditor.

The auditor should consider whether his own participation is sufficient to be able to act as the group
auditor who will express an opinion on group financial statements. This consideration involves
assesment of

* the materiality of the portion of the financial statement audited;

* the auditors knowledge of the overall financial statements; and

* the importance of the components audited by another auditor.

Understanding the Component Auditor

After concluding that it is appropriate to serve as the group auditor, judgement as ro whether to rely on
the work of other auditors or not should be made. For this purpose, the auditor should consider:

* Whether the component auditor understands and will comply with the ethical requiements
particularly the independence requirement;

* The component auditor's proffesional competence; and

* Whether sufficient appropriate evidence about the work of the component auditor can be obtained.

Reporting Responsibility

The group auditor is responsible for the direction, supervision and performance of the grouo audit
engagement in compliance with professional standards and regulatory and legal requirements, and
whether the auditor's report that is issued is appropriate in the circumstances. As a result, the auditor's
report on the group financial statements shall not refer to a component auditor.

Reports on Special Purpose Financial Statements

Financial statement audit is ordinarily conducted by an independent CPA to serve as a basis for the
expression of opinion regarding the fairness of the financial statements, for the consumption of the
general public. These are called general purpose financial statements and are prepared using general
purpose framework such as PFRS or PFRS for SMEs.

Some entities may be required by their contractual commitments or government regulators to present
financial statements that comply with a financial reporting framework designed to meet the needs of
specific users. Such framewok is referred to in PSA 800 as special purpose framework.

Examples of special purpose framework include:

1. Other comprehensive basis of accounting such as cash basis, modified cash basis, or other basis of
accounting that has authoritative support.

2 Financial reporting provisions establihed by government regulators such as SEC, IC, or BSP

3. Financial reporting provisions of a contract, such as bond indenture, a loan agreement or a project
grant.

As required by PSA 800, the auditors report on special purpose financial statements should include an
Emphasis of Matter paragraph to alert the readers that the financial statements are prepared in
accordance with a special purpose framework and that, as a result, the financial statements may not be
suitable for other purposes.

Audit of Single FS or Specific Element of a Financial Statement

Auditors are often engaged to audit and express opinion on a financial statements taken as a whole.
Auditors may also be requested to express an opinion on a single financial statement. This is ussually the
case for franchise agreements which require payment of royalty based on the revenue of the franchisee.
A report on revenue account is therefore necessary to have a reliable basis for computing the amount of
royalty payments.

When accepting this type of engagement

1. The auditor may need to examine other related accounts to be able to express opinion on a specific
component of a financial statement.
2. Materiality should be related to the specific account rather than to the financial statements as a
whole and accordingly, the auditor's examination will ordinarily be more extensive than if the same
component were to be audited in connection with a report on the entire financial statements.

3.The auditor's report on a component of financial statements should not accompany the financial
statements of the entity to avoid giving the user the impression that the report relates to the entire
financial statements.

PSA requires an auditor to comply with the ethical requirements and all PSAs relevant to the audit.

Reporting Responsibility

When the auditor undertakes an engagement to report on a single financial statement or on a specific
element of a financial statement in conjunction with an engagement to audit the entity's complete set of
financial statements, the auditor should express a separate opinion for each engagement.

If the opinion the auditor's report on an entity's complete set of financial statements is modified, the
auditor shall determine whether it is also necessary to modify the opinion or include an emphasis of
matter or other matter paragraph on the report on specific element of a financial statement.

If the auditor concludes that it is necesary to express an adverse opinion or disclaim an opinion on the
entity's complete set of financial statement taken as a whole but the auditor considers it appropriate to
express an unmodified opinion on that element, the auditoe shall only do so provided:

1. The auditor is not prohibited by law or regulation from doing do;

2. The report on specific element is not published together with the auditor's report on the complete
set of financial statement; and

3. The specific element does not constitute a major portion of the entity's complete set of financial
statement.

Reporting on Summary Financial Statements

The auditor may be requested to report on summary financial statements which highlight the entity's
financial position and results of operations. This type of engagement may be accepted only if the
auditors has also been engaged to express an audit opinion on the financial statements from which the
summary financial statements were derived.

The auditor's report on summary financial statements should express an opinion about whether the
summary financial statements are consistent with the audited financial statements or whether the
summary financial statements are a fair summary of the audited financial statements.

When the auditor's report on the audited financial statements contains qualified opinion, emphasis of
matter or other matter paragraph but the auditor is satisfied that the summary financial statements are
consistent, in all material aspects. With the audited financial statements, the auditor shall state this fact
on the report on summary financial statements.

When the auditor's report on the audited financial statements contains an adverse opinion or a
disclaimer of opinion, the auditor's report on the summary financial statements should state the fact
that an adverse or disclaimer of opinion was issued on the audited financial statements and, as a result,
it is inappropriate for the auditor to express an opinion on the summary financial statements.