Professional Documents
Culture Documents
_____________________________________________________________________________________
Paragraph
Introduction
Scope of this PSA .................................................................................................................. 1-4
Effective Date ....................................................................................................................... Paragraph
5
Objectives ........................................................................................................................... 6
Introduction
Definitions ........................................................................................................................... 7–9
Scope of this PSA ..................................................................................................................
Requirements 1-4
Effective
Forming Date .......................................................................................................................
an Opinion on the Financial Statements ................................................................ 10-155
Form of Opinion ................................................................................................................... 16-19
Objectives
Auditor’s Report ...........................................................................................................................
................................................................................................................... 20-516
Definitions Information
Supplementary ...........................................................................................................................
Presented with the Financial Statements ................................ 52-537–9
Application and Other Explanatory Material
Requirements
Qualitative Aspects of the Entity’s Accounting Practices ..................................................... A1-A3
Forming an Opinion on the Financial Statements ................................................................ 10-15
Disclosure of the Effect of Material Transactions and Events on the Information Conveyed
Form of Opinion ...................................................................................................................
in the Financial Statements ...........................................................................................
16-19
A4
Auditor’s Report ...................................................................................................................
Description of the Applicable Financial Reporting Framework ............................................
20-51
A5-A10
(Effective for audits of financial statements for periods ending on or after December 15, 2016)
CONTENTS
Illustrations of Independent
Illustra?ons
Auditor’s
of
Independent
ReportsRon
Auditor’s
Financial
eports
on
FStatements
inancial
Statements
Illustration 1: An auditor’s report on financial statements of a listed entity prepared in accordance with a
fair presentation framework
Illustration 2: An auditor’s report on consolidated financial statements of a listed entity prepared in
accordance with a fair presentation framework
Illustration 3: An auditor’s report on financial statements of an entity other than a listed entity prepared in
accordance with a fair presentation framework (where reference is made to material that is located on a
website of an appropriate authority)
Illustration 4: An auditor’s report on financial statements of an entity other than a listed entity prepared in
accordance with a general purpose compliance framework
Overview
of
Forming
the
Auditor’s
Opinion
and
Report
Has
the
auditor
obtained
reasonable
assurance
F/S
Are
F/S
free
from
material
misstatements?
Consider/Evaluate Consider/Evaluate
1. This Philippine Standard on Auditing (PSA) deals with the auditor’s responsibility to form an opinion on
the financial statements. It also deals with the form and content of the auditor’s report issued as a result
of an audit of financial statements.
2. PSA 7011 deals with the auditor’s responsibility to communicate key audit matters in the auditor’s
2 3
report. PSA 705 (Revised) and PSA 706 (Revised) deal with how the form and content of the
auditor’s report are affected when the auditor expresses a modified opinion or includes an
Emphasis of Matter paragraph or an Other Matter paragraph in the auditor’s report. Other PSAs also
contain reporting requirements that are applicable when issuing an auditor’s report.
3. This PSA applies to an audit of a complete set of general purpose financial statements and is written in
4
that context. PSA 800 deals with special considerations when financial statements are prepared in
Forms
of
Scope of this PSA PSA 700 (REVISED), FORMING AN OPINION AND REPORTING ON FINANCIAL STATEMENTS
1. Introduction
This Philippine Standard on Auditing (PSA) deals with the auditor’s responsibility to form an opinion on
the financial statements. It also deals with the form and content of the auditor’s report issued as a result
of anofaudit
Scope thisofPSA
financial statements.
1
2. 1. PSAThis 701Philippine deals withStandard the auditor’s responsibility
on Auditing (PSA) deals to communicate
with the auditor’skey audit matters toin form
responsibility the auditor’s
an opinion on
2 3
the financial
report. PSA 705 (Revised) and PSA 706 (Revised) statements. It also deals with the form anddealcontent
with howof the theauditor’s
form andreport issued
content of theas a result
auditor’s of an report audit ofarefinancial affectedstatements.
when the auditor expresses a modified opinion or includes an
Emphasis of1Matter paragraph or an Other Matter paragraph in the auditor’s report. Other PSAs also
2. PSA 701 deals with the auditor’s responsibility to communicate key audit matters in the auditor’s
contain reporting requirements 2
that are applicable 3
when issuing an auditor’s report.
report. PSA 705 (Revised) and PSA 706 (Revised) deal with how the form and content of the
3. Thisauditor’s PSA applies reporttoareanaffected audit of when the auditor
a complete set ofexpresses
general purposea modified opinionstatements
financial or includesandan is written in
2
PSA
Emphasis 701:
Cofommunica%ng
Matter4 paragraph orKey
an Other
Audit
Matter paragraph
MaIers
in theIndependent
in
the
auditor’s report.AOther PSAsRalso
uditor’s
eport
that
PSA
context.
contain 705:
reporting
PSA 800requirements
Modifica%ons
deals withto
special
thatthe
are Oconsiderations
pinion
in
applicable when
the
when financial
Independent
issuing an statements
auditor’s Areport.are prepared
uditor’s
Report
in
0
5
PSA
706:
Emphasis
of
MaIer
Paragraphs
(EOM)
&
other
MaIer
Paragraphs
(OM)
1
in
the
Independent
Auditor’s
Report
with special considerations
accordance with a special purpose framework. PSA 805 deals
6
3. relevant
PSA
This720:
to anAapplies
PSA audit oftoaansingle
uditors
auditfinancial statement
of a complete
Responsibili%es
rset oforgeneral
of tao
specific
ela%ng
other
element,
purpose Ifinancial account or item
statements
nforma%on
and ofis written
a in
financial statement. This 4PSA also applies to audits for which PSA 800 or PSA 805 apply.
that context. PSA 800 deals with special considerations when financial statements are prepared in
5
accordance with a special purpose framework. PSA 805 deals with special considerations
4. Therelevant requirements to an audit of thisof PSA arefinancial
a single aimed atstatement
addressingor ofanaappropriate balance
specific element, between
account the ofneed
or item a for
consistency and comparability in auditor reporting globally and the need to increase the value of auditor
1
2. PSA 701 deals with the auditor’s responsibility to communicate key audit matters in the auditor’s
2 PSA 700 (REVISED), FORMING
3 AN OPINION AND REPORTING ON FINANCIAL STATEMENTS
report. PSA 705 (Revised) and PSA 706 (Revised) deal with how the form and content of the
auditor’s report are affected when the auditor expresses a modified opinion or includes an
Introduction
Emphasis of Matter paragraph or an Other Matter paragraph in the auditor’s report. Other PSAs also
contain reporting requirements that are applicable when issuing an auditor’s report.
Scope of this PSA
3. 1. ThisThisPSAPhilippine appliesStandard
to an auditon ofAuditing
a complete
(PSA)set dealsof general purpose responsibility
with the auditor’s financial statements to form anandopinion
is written
on in
4
thatthecontext. financialPSA 800 deals
statements. withdeals
It also special
with considerations
the form and content whenoffinancial
the auditor’sstatements are prepared
report issued as a resultin
5
accordance of an auditwith of financial
a specialstatements.
purpose framework. PSA 805 deals with special considerations
relevant to 1an audit of a single financial statement or of a specific element, account or item of a
2. PSA 701 deals with the auditor’s responsibility to communicate key audit matters in the auditor’s
financial statement.2 This PSA also applies3 to audits for which PSA 800 or PSA 805 apply.
report. PSA 705 (Revised) and PSA 706 (Revised) deal with how the form and content of the
4. PSA
Theauditor’s requirements report areof affected
this PSA when
are the auditor
aimed at expressesana modified
addressing appropriate
800:
Special
Considera%ons
–
Audits
of
F/S
Prepared
in
Accordance
with
Special
opinion or includes
balance betweenan the need for
consistency Emphasis of Matter
and paragraphinorauditor
comparability
Purpose
Framework
an Other Matter paragraph
reporting globally andin the
the auditor’s report. Other
need to increase PSAs ofalsoauditor
the value
PSA
contain 805:
Sreporting
reporting makingCrequirements
bypecial
onsidera%ons
the informationthat provided
are
–
Aapplicable
udits
of
Swhen
Accounts
or
Items
of
F/S
in theingle
issuing an auditor’s
F/S
and
auditor’s report report.
Specific
Elements,
more relevant to users. This PSA
promotes consistency in the auditor’s report, but recognizes the need for flexibility to accommodate
3. particular
This PSAcircumstances
applies to an audit of a complete
of individual set of general
jurisdictions. purposeinfinancial
Consistency statements
the auditor’s andwhen
report, is written in
the audit
4
hasthat
been conducted
context. PSA 800in accordance with PSAs,
deals with special promoteswhen
considerations credibility in thestatements
financial global marketplace
are preparedbyinmaking
5
more readily identifiable
accordance with a specialthose auditsframework.
purpose that have been conducted
PSA 805 in accordance
deals with with globally recognized
special considerations
standards.
relevant toIt also helpsof atosingle
an audit promote the user’s
financial understanding
statement andelement,
or of a specific to identify unusual
account circumstances
or item of a
3. This PSA applies to an audit of a complete set of general purpose financial statements and is written in
4
that context. PSA 800 deals PSAwith special considerations
700 (REVISED), when financial
FORMING AN OPINION statements
AND REPORTING are prepared
ON FINANCIAL in
STATEMENTS
5
accordance with a special purpose framework. PSA 805 deals with special considerations
Introduction
relevant to an audit of a single financial statement or of a specific element, account or item of a
financial statement. This PSA also applies to audits for which PSA 800 or PSA 805 apply.
Scope of this PSA
4. 1. TheThis
requirements
Philippine ofStandard
this PSAonare aimed(PSA)
Auditing at addressing
deals withantheappropriate balance between
auditor’s responsibility to formtheanneed
opinionfor on
consistency andstatements.
the financial comparability in auditor
It also reporting
deals with globally
the form and theofneed
and content to increase
the auditor’s theissued
report value ofasauditor
a result
reporting by making
of an audit the information
of financial statements.provided in the auditor’s report more relevant to users. This PSA
promotes consistency
1
in the auditor’s report, but recognizes the need for flexibility to accommodate
2. particular
PSA 701 deals with theof individual
circumstances auditor’s responsibility
jurisdictions.toConsistency
communicatein the keyauditor’s
audit matters
report,in the
whenauditor’s
the audit
2 3
hasreport.
been conducted in accordance
PSA 705 (Revised) with PSAs,
and PSA promotesdeal
706 (Revised) credibility
with howin the global
form andmarketplace
content ofbythemaking
moreauditor’s
readilyreport are affected
identifiable when the
those audits thatauditor expresses
have been a modified
conducted opinion orwith
in accordance includes
globallyanrecognized
EmphasisIt also
standards. of Matter
helpsparagraph
to promoteorthean user’s
Other Matter paragraphandin totheidentify
understanding auditor’sunusual
report.circumstances
Other PSAs also
whencontain reporting requirements that are applicable when issuing an auditor’s report.
they occur.
Effective
3. ThisDatePSA applies to an audit of a complete set of general purpose financial statements and is written in
4
that context. PSA 800 deals with special considerations when financial statements are prepared in
5. This PSA is effective for audits of financial statements for periods
5 ending on or after December 15,
accordance with a special purpose framework. PSA 805 deals with special considerations
2016.
relevant to an audit of a single financial statement or of a specific element, account or item of a
Effective Date
5. This PSA is effective for audits of financial statements for periods ending on or after December 15,
2016.
Objectives
6. The objectives of the auditor are:
(a) To form an opinion on the financial statements based on an evaluation of the conclusions drawn
from the audit evidence obtained; and
(b) To express clearly that opinion through a written report.
______________________________
1
PSA 701, Communicating Key Audit Matters in the Independent Auditor’s Report
2
PSA 705 (Revised), Modifications to the Opinion in the Independent Auditor’s Report
3
PSA 706 (Revised), Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s Report
4
PSA 800, Special Considerations—Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks
5
PSA 805, Special Considerations—Audits of Single Financial Statements and Specific Elements, Accounts or Items of a Financial
Statement
PSA 700 (REVISED), FORMING AN OPINION AND REPORTING ON FINANCIAL STATEMENTS
Definitions
7. For purposes of the PSAs, the following terms have the meanings attributed below:
(a) General purpose financial statements – Financial statements prepared in accordance with a
general purpose framework.
(b) General purpose framework – A financial reporting framework designed to meet the common
financial information needs of a wide range of users. The financial reporting framework may be a
fair presentation framework or a compliance framework.
The term “fair presentation framework” is used to refer to a financial reporting framework that
requires compliance with the requirements of the framework and:
(i) Acknowledges explicitly or implicitly that, to achieve fair presentation of the financial
statements, it may be necessary for management to provide disclosures beyond those
specifically required by the framework; or
(ii) Acknowledges explicitly that it may be necessary for management to depart from a
requirement of the framework to achieve fair presentation of the financial statements. Such
(a) General purpose financial statements – Financial statements prepared in accordance with a
general purpose framework.
(b) General purpose framework – A financial reporting framework designed to meet the common
financial information needs of a wide range of users. The financial reporting framework may be a
fair presentation framework or a compliance framework.
The term “fair presentation framework” is used to refer to a financial reporting framework that
requires compliance with the requirements of the framework and:
(i) Acknowledges explicitly or implicitly that, to achieve fair presentation of the financial
statements, it may be necessary for management to provide disclosures beyond those
specifically required by the framework; or
(ii) Acknowledges explicitly that it may be necessary for management to depart from a
requirement of the framework to achieve fair presentation of the financial statements. Such
departures are expected to be necessary only in extremely rare circumstances.
The term “compliance framework” is used to refer to a financial reporting framework that
requires compliance with the requirements of the framework, but does not contain the
6
acknowledgements in (i) or (ii) above.
(c) Unmodified opinion – The opinion expressed by the auditor when the auditor concludes that
statements, it may be necessary for management to provide disclosures beyond those
7. For purposesspecifically
of the PSAs,required
the following
by theterms have the
framework; or meanings attributed below:
(a) General purpose financial
(ii) Acknowledges statements
explicitly that it–may
Financial statements
be necessary forprepared in accordance
management to depart with
fromaa
generalrequirement
purpose framework.
of the framework to achieve fair presentation of the financial statements. Such
(b) Generaldepartures are expected
purpose framework to be necessary
– A financial reportingonly in extremely
framework raretocircumstances.
designed meet the common
financial
The terminformation needs
“compliance of a wide range
framework” is usedoftousers.
referThe
to afinancial
financialreporting
reportingframework
frameworkmay
thatbe a
fair presentation framework or a compliance framework.
requires compliance with the requirements of the framework, but does not contain the
The term “fair presentation framework” is6 used to refer to a financial reporting framework that
acknowledgements
requires in (i)theor requirements
compliance with (ii) above. of the framework and:
(i) Acknowledges explicitly or implicitly that, to achieve fair presentation of the financial
(c) Unmodified opinion –it may
statements, The opinion
be necessaryexpressed by the auditor
for management when thedisclosures
to provide auditor concludes that
beyond those
specifically
the financial requiredare
statements by the framework;
prepared, in allormaterial respects, in accordance with the
(ii)applicable
Acknowledges explicitly that it may
financial reporting framework. be
7 necessary for management to depart from a
requirement of the framework to achieve fair presentation of the financial statements. Such
8. Reference todepartures
“financialare expected toin be
statements” thisnecessary
PSA meansonly“aincomplete
extremelysetrareof circumstances.
general purpose financial
statements,
The term including the related
“compliance notes.”isThe
framework” usedrelated
to refernotes
to a ordinarily compriseframework
financial reporting a summarythatof significant
requirespolicies
accounting compliance with explanatory
and other the requirements of the framework,
information. but doesofnotthecontain
The requirements the financial
applicable
reporting framework determine the form
acknowledgements in (i) or (ii) above. and
6 content of the financial statements, and what constitutes a
(c) Unmodified opinion – The opinion expressed by the auditor when the auditor concludes that
the financial statements are prepared, in all material respects, in accordance with the
7
applicable financial reporting framework.
8. Reference to “financial statements” in this PSA means “a complete set of general purpose financial
statements, including the related notes.” The related notes ordinarily comprise a summary of significant
accounting policies and other explanatory information. The requirements of the applicable financial
reporting framework determine the form and content of the financial statements, and what constitutes a
complete set of financial statements.
9. Reference to “Philippine Financial Reporting Standards” in this PSA means the Philippine Financial
Reporting Standards (PFRSs) issued by the Financial Reporting Standards Council.
6
acknowledgements
(c) Unmodified in (i)opinion
opinion – The or (ii) above.
expressed by the auditor when the auditor concludes that
the financial
(c) Unmodified statements
opinion are prepared,
– The opinion in allbymaterial
expressed respects,
the auditor whenintheaccordance with the that
auditor concludes
7
applicable financial reporting framework. all material respects, in accordance with the
the financial statements are prepared, in
7
applicable financial reporting framework.
8. Reference to “financial statements” in this PSA means “a complete set of general purpose financial
8. statements,
Reference toincluding
“financialthestatements”
related notes.”
in thisThePSA
related notes
means ordinarily set
“a complete comprise a summary
of general purposeoffinancial
significant
accounting
statements,policies
includingandtheother explanatory
related notes.” Theinformation. Theordinarily
related notes requirements of theaapplicable
comprise summary offinancial
significant
reporting
accountingframework determine
policies and the form andinformation.
other explanatory content of the
Thefinancial statements,
requirements of the and what constitutes
applicable financial a
complete
reporting set of financial
framework statements.
determine the form and content of the financial statements, and what constitutes a
complete set
9. Reference of financialFinancial
to “Philippine statements.
Reporting Standards” in this PSA means the Philippine Financial
9. Reporting
ReferenceStandards (PFRSs)
to “Philippine issued
Financial by the Financial
Reporting Standards”Reporting Standards
in this PSA means Council.
the Philippine Financial
Reporting Standards (PFRSs) issued by the Financial Reporting Standards Council.
PSA 700 (REVISED), FORMING AN OPINION AND REPORTING ON FINANCIAL STATEMENTS
Requirements
Forming an Opinion on the
Requirements:
Financial Statements
Forming
an
Opinion
on
Financial
Statements
10. The auditor shall form an opinion on whether the financial statements are prepared, in all material
8, 9
respects, in accordance with the applicable financial reporting framework.
11. In order to form that opinion, the auditor shall conclude as to whether the auditor has obtained
reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error. That conclusion shall take into account:
(a) The auditor’s conclusion, in accordance with PSA 330, whether sufficient appropriate audit
10
evidence has been obtained;
(b) The auditor’s conclusion, in accordance with PSA 450, whether uncorrected misstatements are
11
material, individually or in aggregate; and
(c) The evaluations required by paragraphs 12–15.
Forming an Opinion on the Financial Statements
10. The auditor shall form an opinion on whether the financial statements are prepared, in all material
8, 9
respects, in accordance
Requirements:
with the
Forming
an
applicable financial
Opinion
on
Freporting framework.
inancial
Statements
11. In order to form that opinion, the auditor shall conclude as to whether the auditor has obtained
reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error. That conclusion shall take into account:
(a) The auditor’s conclusion, in accordance with PSA 330, whether sufficient appropriate audit
10
evidence has been obtained;
(b) The auditor’s conclusion, in accordance with PSA 450, whether uncorrected misstatements are
11
material, individually or in aggregate; and
(c) The evaluations required by paragraphs 12–15.
12. The auditor shall evaluate whether the financial statements are prepared, in all material respects, in
accordance with the requirements of the applicable financial reporting framework. This evaluation shall
include consideration of the qualitative aspects of the entity’s accounting practices, including indicators
of possible bias in management’s judgments. (Ref: Para. A1–A3)
evidence has been obtained;
(b) The auditor’s conclusion, in accordance with PSA 450, whether uncorrected misstatements are
11
material, individually or in aggregate; and
(c) The evaluations requi
Fredorming
REQUIREMENTS:
by paragraphs
an
O12–15.
pinion
on
the
Financial
Statements
12. The auditor shall evaluate whether the financial statements are prepared, in all material respects, in
accordance with the requirements of the applicable financial reporting framework. This evaluation shall
include consideration of the qualitative aspects of the entity’s accounting practices, including indicators
of possible bias in management’s judgments. (Ref: Para. A1–A3)
13. Reference:
In particular, the audi
tor shall evaluate whether, in view of the requirements of the applicable financial
reporting
PSA
framework:
260
–
Communica%on
to
TCWG
PSA
540
–
Audi%ng
Accoun%ng
Es%mates,
including
FV
(a)
The
fi
n
anci
Aaccoun%ng
l statements adequately disclose&
theRelated
Es%mates
significantDaccounting policies selected and
isclosures
PSA
appl 450
ied;–
Evalua%on
of
Misstatements
Iden%fied
During
the
Audit
(b) The accounting policies selected and applied are consistent with the applicable financial reporting
framework and are appropriate;
***
A1. Management makes a number of judgments about the amounts and disclosures in the financial
statements.
A2. PSA 260 (Revised) contains a discussion of the qualitative aspects of accounting practices.17 In
considering the qualitative aspects of the entity’s accounting practices, the auditor may become aware
of possible bias in management’s judgments. The auditor may conclude that the cumulative effect of a
lack of neutrality, together with the effect of uncorrected misstatements, causes the financial statements
as a whole to be materially misstated. Indicators of a lack of neutrality that may affect the auditor’s
evaluation of whether the financial statements as a whole are materially misstated include the following:
The selective correction of misstatements brought to management’s attention during the audit
(e.g., correcting misstatements with the effect of increasing reported earnings, but not correcting
misstatements that have the effect of decreasing reported earnings).
Possible management bias in the making of accounting estimates.
***
Qualitative Aspects of the Entity’s Accounting Practices (Ref: Para. 12)
Application and Other Explanatory Material
A1. Management makes a number of judgments about the amounts and disclosures in the financial
Qualitativestatements.
Aspects of the Entity’s Accounting Practices (Ref: PSA
260:
Para. 12)
Communica?on
to
TCWG
A2. PSA 260 (Revised) contains a discussion of the qualitative aspects of accounting practices.17 In
A1. Management makes a number of judgments about the amounts and disclosures in the financial
considering the qualitative aspects of the entity’s accounting practices, the auditor may become aware
statements.
of possible bias in management’s judgments. The auditor may conclude that the cumulative 17
effect of a
A2. PSA lack
260 of(Revised)
neutrality,contains
togethera discussion
with the effectof the qualitative aspects
of uncorrected of accounting
misstatements, causespractices.
the financialIn statements
considering the qualitative
as a whole aspects
to be materially of the entity’s
misstated. accounting
Indicators of a lackpractices, the auditor
of neutrality that maymay become
affect aware
the auditor’s
of possible bias ofin whether
evaluation management’s judgments.
the financial The auditor
statements mayare
as a whole conclude
materiallythatmisstated
the cumulative
includeeffect of a
the following:
lack of neutrality, together with the effect of uncorrected misstatements, causes the financial statements
as a whole The
to beselective
materiallycorrection
misstated.of misstatements
Indicators of a lackbrought to management’s
of neutrality attention
that may affect theduring the audit
auditor’s
evaluation of(e.g., correcting
whether misstatements
the financial statements withasthea whole
effect are
of increasing
materiallyreported
misstatedearnings,
include thebutfollowing:
not correcting
misstatements that have the effect of decreasing reported earnings).
The selective correction of misstatements brought to management’s attention during the audit
(e.g.,Possible
correctingmanagement
misstatementsbiaswith
in thethemaking
effect ofofincreasing
accountingreported
estimates. earnings, but not correcting
A3. PSA misstatements that have the effect of decreasing reported earnings).
540 addresses possible management bias in making accounting estimates. Indicators of
18
possible
Possiblemanagement
managementbias biasdoinnottheconstitute
making ofmisstatements for purposes of drawing conclusions on the
accounting estimates.
reasonableness of individual accounting estimates. They may, however, affect the auditor’s evaluation
A3. PSA 540 addresses possible management bias in making accounting estimates.18 Indicators of
of whether the financial statements as a whole are free from material misstatement.
*** of a lack of neutrality that may affect the auditor’s
as a whole to be materially misstated. Indicators
evaluation of whether the financial statements as a whole are materially misstated include the following:
ApplicationThe
andselective
Othercorrection of misstatements
Explanatory Material brought to management’s attention during the audit
(e.g., correcting misstatements with the effect of increasing reported earnings, but not correcting
misstatements
Qualitative Aspects that haveAccounting
of the Entity’s the effect ofPractices
decreasing reported
(Ref: earnings).
Para. 12)
Possible management bias in the making of accounting estimates.
A1.A3. Management makes a number of judgments about the amounts and disclosures in18the financial
PSA 540 addresses possible management bias in making accounting estimates. Indicators of
statements.
possible management bias do not constitute misstatements for purposes of drawing conclusions on the
17
A2. PSA
reasonableness
260 (Revised) contains a discussion of the qualitative aspects of accounting practices. Inevaluation
of individual accounting estimates. They may, however, affect the auditor’s
of whetherthe
considering thequalitative
financial statements
aspects of as
theaentity’s
whole are free frompractices,
accounting material the
misstatement.
auditor may become aware
of possibleofbias
Disclosures in management’s
the Effect of Materialjudgments.
TransactionsTheand
auditor may on
Events conclude that the cumulative
the Information Conveyedeffect of a
in the
lack ofStatements
Financial neutrality, together with the
(Ref: Para. effect of uncorrected misstatements, causes the financial statements
13(e))
as a whole to be materially misstated. Indicators of a lack of neutrality that may affect the auditor’s
A4. evaluation
It is common for financial
of whether statements
the financial prepared
statements as ainwhole
accordance with a general
are materially misstatedpurpose
includeframework to
the following:
present an entity’s financial position, financial performance and cash flows. In such circumstances, the
PSA
The 540:
selective correction
Audi?ng
of misstatements
Accoun?ng
brought
Es?mates,
to management’s
Including
attentiontoduring
FV
Accoun?ng
the audit
auditor evaluates whether the financial statements provide
Es?mates
and
Related
Disclosures
adequate disclosures enable the intended
users(e.g., correcting misstatements
to understand with thetransactions
the effect of material effect of increasing reported
and events on theearnings, but not position,
entity’s financial correcting
misstatements
financial performance thatand
havecashtheflows.
effect of decreasing reported earnings).
Possible
Description of the management bias in theReporting
Applicable Financial making ofFramework
accounting estimates.
(Ref: Para. 15)
A3.A5. As explained in PSA 200, the preparation of the financial statements by management
18 and, where
PSA 540 addresses possible management bias in making accounting estimates. Indicators of
(b) The auditor’s conclusion, in accordance with PSA 450, whether uncorrected misstatements are
11
material, individually or in aggregate; and
(c) The evaluations required by paragraphs
PSA 700 (REVISED), 12–15.
FORMING AN OPINION AND REPORTING ON FINANCIAL STATEMENTS
12. The auditor shall evaluate whether the financial statements are prepared, in all material respects, in
Requirements
accordance with the requirements of the applicable financial reporting framework. This evaluation shall
include consideration of the qualitative aspects of the entity’s accounting practices, including indicators
Forming an Opinion
of possible bias inonmanagement’s
the Financial judgments.
Statements (Ref: Para. A1–A3)
11.(a) In order
The financial statements
to form that opinion, theadequately
auditor shalldisclose theassignificant
conclude to whetheraccounting
the auditor policies selected and
has obtained
applied;assurance about whether the financial statements as a whole are free from material
reasonable
misstatement, whether due to fraud or error. That conclusion shall take into account:
(b) The accounting policies selected and applied are consistent with the applicable financial reporting
(a) framework
The auditor’s
andconclusion, in accordance with PSA 330, whether sufficient appropriate audit
are appropriate;
10
evidence has been obtained;
(c) The accounting estimates made by management are reasonable;
(b) The auditor’s conclusion, in accordance with PSA 450, whether uncorrected misstatements are
(d) The information presented in the financial11 statements is relevant, reliable, comparable, and
material, individually or in aggregate; and
understandable;
(c) The evaluations required by paragraphs 12–15.
(e) The financial statements provide adequate disclosures to enable the intended users to
12. Theunderstand
auditor shallthe
evaluate
effectwhether the financial
of material statements
transactions are prepared,
and events in all materialconveyed
on the information respects, inin the
accordance
financialwith the requirements
statements; and (Ref:of the applicable
Para. A4) financial reporting framework. This evaluation shall
reporting framework:
(a) The financial statements adequately disclose the significant accounting policies selected and
PSA 700 (REVISED), FORMING AN OPINION AND REPORTING ON FINANCIAL STATEMENTS
applied;
(b) The accounting policies selected and applied are consistent with the applicable financial reporting
Requirements
framework and are appropriate;
Forming
(c) anThe
Opinion on the estimates
accounting Financial Statements
made by management are reasonable;
10. (d) The information
The auditor shall form anpresented
opinion oninwhether
the financial statements
the financial is relevant,
statements reliable,incomparable,
are prepared, all material and
understandable;
respects, in accordance with the applicable financial reporting framework.
8, 9
A4. It is common for financial statements prepared in accordance with a general purpose framework to
present an entity’s financial position, financial performance and cash flows. In such circumstances, the
auditor evaluates whether the financial statements provide adequate disclosures to enable the intended
users to understand the effect of material transactions and events on the entity’s financial position,
financial performance and cash flows.
Description of the Applicable Financial Reporting Framework (Ref: Para. 15)
A5. As explained in PSA 200, the preparation of the financial statements by management and, where
appropriate, those charged with governance requires the inclusion of an adequate description of
19
the applicable financial reporting framework in the financial statements. That description advises
PSA 700 (REVISED), FORMING AN OPINION AND REPORTING ON FINANCIAL STATEMENTS
Requirements:
Forming
an
Opinion
on
Financial
Statements
14. When the financial statements are prepared in accordance with a fair presentation framework, the
evaluation required by paragraphs 12–13 shall also include whether the financial statements achieve
fair presentation. The auditor’s evaluation as to whether the financial statements achieve fair
presentation shall include consideration of:
(a) The overall presentation, structure and content of the financial statements; and
(b) Whether the financial statements, including the related notes, represent the underlying
transactions and events in a manner that achieves fair presentation.
15. The auditor shall evaluate whether the financial statements adequately refer to or describe the
applicable financial reporting framework. (Ref: Para. A5–A10)
Form of Opinion
16. The auditor shall express an unmodified opinion when the auditor concludes that the financial
Disclosures of the Effect of Material Transactions and Events on the Information Conveyed in the
Financial(a)Statements
The overall
(Ref:presentation,
Para. 13(e)) structure and content of the financial statements; and
(b) Whether the financial statements, including the related notes, represent the underlying
A4. It is common for financial statements prepared in accordance with a general purpose framework to
transactions and events in a manner that achieves fair presentation.
present an entity’s financial position, financial performance and cash flows. In such circumstances, the
15. auditor evaluates
The auditor shallwhether the financial
evaluate whetherstatements
the financialprovide adequateadequately
statements disclosuresrefer
to enable
to or the intended
describe the
users to understand
applicable financialthereporting
effect of material transactions
framework. andA5–A10)
(Ref: Para. events on the entity’s financial position,
financial performance and cash flows.
Form of Opinion
Description of the Applicable Financial Reporting Framework (Ref: Para. 15)
A5. As explained in PSA 200, the preparation of the financial statements by management and, where
16. appropriate,
The auditorthose
shallcharged
express an(REVISED),
PSA 700
with unmodified opinion
FORMING
governance when
AN OPINION
requires the the auditor
AND concludes
REPORTING
inclusion that STATEMENTS
ON FINANCIAL
of an adequate the financial
description of
statements are prepared, in all material respects, in accordance with
19 the applicable financial reporting
the applicable financial reporting framework in the financial statements. That description advises
framework.
users of the financial statements of the framework on which the financial statements are based.
_________________________
17.PSA
17 If the260auditor:
(Revised), Communication with Those Charged with Governance, Appendix 2
A6. A description that the financial statements are prepared in accordance with a particular applicable
18 PSA
200:
Overall
Objec?ves
of
the
Independent
Auditors
&
the
PSAfinancial 540, Auditing reporting framework
Accounting Estimates,is Including
appropriate only
Fair Value if the financial
Accounting statements
Estimates, comply
and Related with allparagraph
Disclosures, theas a21whole are not
(a) concludes that, based on the audit evidence obtained,
19
Conduct
of
an
Audit
in
Accordance
with
ISA
PSArequirements 200, paragraphsofA2–A3
the financial statements
that framework that are effective during the period covered by the financial statements.
free from material misstatement; or
A7. A description of the applicable financial reporting framework that contains imprecise qualifying or
(b) is unable to obtain sufficient appropriate audit evidence to conclude that the financial statements
limiting language (e.g., “the financial statements are in substantial compliance with Philippine Financial
Reportingas Standards”)
a whole areisfree
not anfrom materialdescription
adequate misstatement, the auditorasshall
of that framework it maymodify theusers
mislead opinion
of thein the
transactions and events in a manner that achieves fair presentation.
15. The auditor shall evaluate whether the financial statements adequately refer to or describe the
applicable financial reporting framework. (Ref: Para. A5–A10)
Requirements:
Form of Opinion
Form
of
Opinion
16. The auditor shall express an unmodified opinion when the auditor concludes that the financial
statements are prepared, in all material respects, in accordance with the applicable financial reporting
framework.
17. If the auditor:
(a) concludes that, based on the audit evidence obtained, the financial statements as a whole are not
free from material misstatement; or
(b) is unable to obtain sufficient appropriate audit evidence to conclude that the financial statements
as a whole are free from material misstatement, the auditor shall modify the opinion in the
auditor’s report in accordance with PSA 705 (Revised).
18. If financial statements prepared in accordance with the requirements of a fair presentation framework
do not achieve fair presentation, the auditor shall discuss the matter with management and, depending
on the requirements of the applicable financial reporting framework and how the matter is resolved,
shall determine whether it is necessary to modify the opinion in the auditor’s report in accordance with
16. The auditor shall express an unmodified opinion when the auditor concludes that the financial
statements are prepared, in all material respects, in accordance with the applicable financial reporting
framework.
Requirements:
Form
of
Opinion
17. If the auditor:
(a) concludes that, based on the audit evidence obtained, the financial statements as a whole are not
free from material misstatement; or
(b) is unable to obtain sufficient appropriate audit evidence to conclude that the financial statements
as a whole are free from material misstatement, the auditor shall modify the opinion in the
auditor’s report in accordance with PSA 705 (Revised).
18. If financial statements prepared in accordance with the requirements of a fair presentation framework
do not achieve fair presentation, the auditor shall discuss the matter with management and, depending
PSA
705:
Modifica?ons
to
Opinions
of
Independent
Auditor’s
Report
on the requirements of the applicable financial reporting framework and how the matter is resolved,
shall determine whether it is necessary to modify the opinion in the auditor’s report in accordance with
PSA 705 (Revised). (Ref: Para. A11)
19. When the financial statements are prepared in accordance with a compliance framework, the auditor is
(a) concludes that, based on the audit evidence obtained, the financial statements as a whole are not
free from material misstatement; or
(b) is unable to obtain sufficient appropriate audit evidence to conclude that the financial statements
as a whole are
free
Requirements:
from material
Form
misstatement,
of
Opinion
the auditor
–
Fair
shall modify theFopinion
Presenta?on
in the
ramework
auditor’s report in accordance with PSA 705 (Revised).
18. If financial statements prepared in accordance with the requirements of a fair presentation framework
do not achieve fair presentation, the auditor shall discuss the matter with management and, depending
on the requirements of the applicable financial reporting framework and how the matter is resolved,
shall determine whether it is necessary to modify the opinion in the auditor’s report in accordance with
PSA 705 (Revised). (Ref: Para. A11)
19. When the financial statements are prepared in accordance with a compliance framework, the auditor is
not required to evaluate whether the financial statements achieve fair presentation. However, if in
extremely rare circumstances the auditor concludes that such financial statements are misleading, the
auditor shall discuss the matter with management and, depending on how it is resolved, shall determine
whether, and how, to communicate it in the auditor’s report. (Ref: Para. A12)
Auditor’s Report
auditor’s report in accordance with PSA 705 (Revised).
18. If financial statements prepared in accordance with the requirements of a fair presentation framework
do not achieve fair presentation, the auditor shall discuss the matter with management and, depending
on the requirements of the applicable financial reporting framework and how the matter is resolved,
shall determine whether
Requirements:
it isonecessary
Form
to modify
f
Opinion
–
Cthe opinion in the auditor’s
ompliance
report in accordance with
Framework
PSA 705 (Revised). (Ref: Para. A11)
19. When the financial statements are prepared in accordance with a compliance framework, the auditor is
not required to evaluate whether the financial statements achieve fair presentation. However, if in
extremely rare circumstances the auditor concludes that such financial statements are misleading, the
auditor shall discuss the matter with management and, depending on how it is resolved, shall determine
whether, and how, to communicate it in the auditor’s report. (Ref: Para. A12)
Auditor’s Report
Auditor’s Report for Audits Conducted in Accordance with Philippine Standards on Auditing
Requirements:
Form
of
Opinion
–
Compliance
Framework
not required to evaluate whether the financial statements achieve fair presentation. However, if in
extremely rare circumstances the auditor concludes that such financial statements are misleading, the
auditor shall discuss the matter with management and, depending on how it is resolved, shall determine
whether, and how, to communicate it in the auditor’s report. (Ref: Para. A12)
Auditor’s Report
Auditor’s
Report
Auditor’s Report for Audits Conducted in Accordance with Philippine Standards on Auditing
Title
21. The auditor’s report shall have a title that clearly indicates that it is the report of an independent auditor.
(Ref: Para. A15)
Auditor’s Opinion
23. The first section of the auditor’s report shall include the auditor’s opinion, and shall have the heading
Auditor’s
“Opinion.”Report
24. The Opinion section of the auditor’s report shall also:
(a) Identify the entity whose financial statements have been audited;
(b) State that the financial statements have been audited;
(c) Identify the title of each statement comprising the financial statements;
(d) Refer to the notes, including the summary of significant accounting policies; and
(e) Specify the date of, or period covered by, each financial statement comprising the financial
statements. (Ref: Para. A17–A18)
25. When expressing an unmodified opinion on financial statements prepared in accordance with a fair
presentation framework, the auditor’s opinion shall, unless otherwise required by law or regulation, use
the following phrase:
In our opinion, the accompanying financial statements present fairly, in all material respects, [ ]
(c) Identify the title of each statement comprising the financial statements;
(d) Refer to the notes, including the summary of significant accounting policies; and
(e) Specify the date of, or period covered by, each financial statement comprising the financial
Auditor’s
Report
statements. (Ref: Para. A17–A18)
25. When expressing an unmodified opinion on financial statements prepared in accordance with a fair
presentation framework, the auditor’s opinion shall, unless otherwise required by law or regulation, use
the following phrase:
In our opinion, the accompanying financial statements present fairly, in all material respects, [ ]
in accordance with [the applicable financial reporting framework].
(Ref: Para. A19–A26)
26. When expressing an unmodified opinion on financial statements prepared in accordance with a
compliance framework, the auditor’s opinion shall be that the accompanying financial statements are
prepared, in all material respects, in accordance with [the applicable financial reporting framework].
(Ref: Para. A21–A26)
27. If the reference to the applicable financial reporting framework in the auditor’s opinion is not to PFRSs
issued by the Financial Reporting Standards Council, the auditor’s opinion shall identify the jurisdiction
presentation framework, the auditor’s opinion shall, unless otherwise required by law or regulation, use
the following phrase:
In our opinion, the accompanying financial statements present fairly, in all material respects, [ ]
in accordance with [the applicable financial reporting framework].
Auditor’s
Report
(Ref: Para. A19–A26)
26. When expressing an unmodified opinion on financial statements prepared in accordance with a
compliance framework, the auditor’s opinion shall be that the accompanying financial statements are
prepared, in all material respects, in accordance with [the applicable financial reporting framework].
(Ref: Para. A21–A26)
27. If the reference to the applicable financial reporting framework in the auditor’s opinion is not to PFRSs
issued by the Financial Reporting Standards Council, the auditor’s opinion shall identify the jurisdiction
of origin of the framework.
Basis for Opinion
28. The auditor’s report shall include a section, directly following the Opinion section, with the heading
“Basis for Opinion”, that: (Ref: Para. A27)
(a) States that the audit was conducted in accordance with Philippine Standards on Auditing; (Ref:
Auditor’s
Report
Auditor’s
Report
27. If the reference to the applicable financial reporting framework in the auditor’s opinion is not to PFRSs
issued by the Financial Reporting Standards Council, the auditor’s opinion shall identify the jurisdiction
of origin of the framework.
Basis
Basis forfor
OpinionOpinion
28. The auditor’s report shall include a section, directly following the Opinion section, with the heading
“Basis for Opinion”, that: (Ref: Para. A27)
(a) States that the audit was conducted in accordance with Philippine Standards on Auditing; (Ref:
Para. A28)
(b) Refers to the section of the auditor’s report that describes the auditor’s responsibilities under the
PSAs;
(c) Includes a statement that the auditor is independent of the entity in accordance with the relevant
ethical requirements relating to the audit, and has fulfilled the auditor’s other ethical
responsibilities in accordance with these requirements. The statement shall identify the
(a) States that the audit was conducted in accordance with Philippine Standards on Auditing; (Ref:
Para. A28)
(b) Refers to the section of the auditor’s report that describes the auditor’s responsibilities under the
PSAs;
Basis
for
Opinion
(c) Includes a statement that the auditor is independent of the entity in accordance with the relevant
PSA 700 (REVISED), FORMING AN OPINION AND REPORTING ON FINANCIAL STATEMENTS
ethical requirements PSArelating to the audit,
700 (REVISED), FORMINGandANhasOPINION
fulfilledAND
theREPORTING
auditor’s other ethical STATEMENTS
ON FINANCIAL
responsibilities in accordance with these requirements. The statement shall identify the
jurisdiction of origin of the relevant ethical requirements [Code of Ethics for Professional
jurisdiction ofinorigin
Accountants of the relevant
the Philippines ethicalCode
(Philippine requirements
of Ethics)][Code of Ethics
or refer to the for Professional
International Ethics
Accountants
Standards in theforPhilippines
Board Accountants’ (Philippine
Code of Code
EthicsofforEthics)] or referAccountants
Professional to the International
(IESBAEthics
Code);
Standards
and BoardA29–A34)
(Ref: Para. for Accountants’ Code of Ethics for Professional Accountants (IESBA Code);
and (Ref:
(d) States Para.the
whether A29–A34)
auditor believes that the audit evidence the auditor has obtained is sufficient
(d) and
States whether the
appropriate auditorabelieves
to provide basis forthat
thethe audit evidence
auditor’s opinion. the auditor has obtained is sufficient
and appropriate to provide a basis for the auditor’s opinion.
Going Concern
Going Concern
12
29. Where applicable, the auditor shall report in accordance with PSA 570 (Revised). 12
29. Where applicable, the auditor shall report in accordance with PSA 570 (Revised).
Key Audit Matters
Key Audit Matters
Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Cod
andandappropriate to provide
(Ref: Para. a basis for the auditor’s opinion.
A29–A34)
(d) States whether the auditor believes that the audit evidence the auditor has obtained is suffic
Going Concern
and appropriate to provide a basis for the auditor’s opinion.
12
GoingWhere
29. Concern
applicable, the auditor shall report in accordance with PSA 570 (Revised).
Going
Concern
12
29. Where applicable, the auditor shall report in accordance with PSA 570 (Revised).
Key Audit Matters
Key
Audit
Macers
Key Audit
30. Matters
For audits of complete sets of general purpose financial statements of listed entities, the auditor shall
communicate key audit matters in the auditor’s report in accordance with PSA 701.
30. For audits of complete sets of general purpose financial statements of listed entities, the auditor s
communicate
31. When the auditorkey audit matters
is otherwise requiredinbythelawauditor’s report
or regulation in accordance
or decides with PSA
to communicate key701.
audit
31. matters
When inthetheauditor
auditor’sis report, the auditor
otherwise shallbydolaw
required so inoraccordance
regulationwith PSA 701.to(Ref:
or decides Para. key audit
communicate
A35–A38)
matters in the auditor’s report, the auditor shall do so in accordance with PSA 701. (Ref: Para.
A35–A38)
Responsibilities for the Financial Statements
Responsibilities for the Financial Statements
32. The auditor’s report shall include a section with a heading “Responsibilities of Management for the
32. Financial
The auditor’s reportThe
Statements.” shallauditor’s
includereport
a section withtheaterm
shall use heading
that is“Responsibilities of Management
appropriate in the context of the for th
Financial
legal Statements.”
framework The auditor’s
in the particular jurisdictionreport shallnotuse
and need referthespecifically
term thattois“management”.
appropriate inIn the
somecontext of
legal framework
jurisdictions, in the particular
the appropriate referencejurisdiction and charged
may be to those need notwithrefer specifically
governance. (Ref:toPara.
“management”.
A39) In s
31. When the auditor is otherwise required by law or regulation or decides to communicate key audit
matters in the auditor’s report, the auditor shall do so in accordance with PSA 701. (Ref: Para.
A35–A38)
Responsibilities for the Financial
Responsibili?es
Statements
for
the
Financial
Statements
32. The auditor’s report shall include a section with a heading “Responsibilities of Management for the
Financial Statements.” The auditor’s report shall use the term that is appropriate in the context of the
legal framework in the particular jurisdiction and need not refer specifically to “management”. In some
jurisdictions, the appropriate reference may be to those charged with governance. (Ref: Para. A39)
33. This section of the auditor’s report shall describe management’s responsibility for: (Ref: Para.
A40–A43)
(a) Preparing the financial statements in accordance with the applicable financial reporting
framework, and for such internal control as management determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud
or error; and
(b) Assessing the entity’s ability to continue as a going concern13 and whether the use of the going
32. The auditor’s report shall include a section with a heading “Responsibilities of Management for the
Financial Statements.” The auditor’s report shall use the term that is appropriate in the context of the
legal framework in the particular jurisdiction and need not refer specifically to “management”. In some
jurisdictions, the appropriate
Responsibili?es
for
the
reference may Sbetatements
Financial
to those charged with governance. (Ref: Para. A39)
33. This section of the auditor’s report shall describe management’s responsibility for: (Ref: Para.
A40–A43)
(a) Preparing the financial statements in accordance with the applicable financial reporting
framework, and for such internal control as management determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud
or error; and
(b) Assessing the entity’s ability to continue as a going concern13 and whether the use of the going
concern basis of accounting is appropriate as well as disclosing, if applicable, matters relating to
going concern. The explanation of management’s responsibility for this assessment shall include
a description of when the use of the going concern basis of accounting is appropriate. (Ref: Para.
A43)
34. This section of the auditor’s report shall also identify those responsible for the oversight of the financial
reporting process, when those responsible for such oversight are different from those who fulfill the
responsibilities described in paragraph 33 above. In this case, the heading of this section shall also
refer to “Those Charged with Governance” or such term that is appropriate in the context of the legal
or error; and
(b) Assessing the entity’s ability to continue as a going concern13 and whether the use of the going
concern basis of accounting is appropriate as well as disclosing, if applicable, matters relating to
going concern. The explanation of management’s responsibility for this assessment shall include
Responsibili?es
for
the
Financial
Statements
a description of when the use of the going concern basis of accounting is appropriate. (Ref: Para.
A43)
34. This section of the auditor’s report shall also identify those responsible for the oversight of the financial
reporting process, when those responsible for such oversight are different from those who fulfill the
responsibilities described in paragraph 33 above. In this case, the heading of this section shall also
refer to “Those Charged with Governance” or such term that is appropriate in the context of the legal
framework in the particular jurisdiction. (Ref: Para. A44)
35. When the financial statements are prepared in accordance with a fair presentation framework, the
description of responsibilities for the financial statements in the auditor’s report shall refer to “the
preparation and fair presentation of these financial statements”.
34. This section of the auditor’s report shall also identify those responsible for the oversight of the financial
reporting process, when those responsible for such oversight are different from those who fulfill the
responsibilities described in paragraph 33 above. In this case, the heading of this section shall also
refer to “Those Charged with Governance” or such term that is appropriate in the context of the legal
Auditor’s
framework Responsibili?es
for
the
in the particular jurisdiction. (Ref:APara.
udit
A44)
of
Financial
Statements
36. The auditor’s report shall include a section with the heading “Auditor’s Responsibilities for the Audit of
the Financial Statements.”
37. This section of the auditor’s report shall: (Ref: Para. A45)
(a) State that the objectives of the auditor are to:
(i) Obtain reasonable assurance about whether the financial statements as a whole are free
________________________
12 from materi al mi s statement, whether
PSA 570 (Revised), Going Concern, paragraphs 21–23
due to fraud or error; and
Auditor’s Responsibilities for the Audit of the Financial Statements
36. The auditor’s report shall include a section with the heading “Auditor’s Responsibilities for the Audit of
Auditor’s
Responsibili?es
the Financial Statements.” for
the
Audit
of
Financial
Statements
37. This section of the auditor’s report shall: (Ref: Para. A45)
(a) State that the objectives of the auditor are to:
(i) Obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error; and
(ii) Issue an auditor’s report that includes the auditor’s opinion. (Ref: Para. A46)
(b) State that reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with PSAs will always detect a material misstatement when it exists;
and
(c) State that misstatements can arise from fraud or error, and either:
(i) Describe that they are considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic decisions of users taken on
14
(ii) Issue an auditor’s report that includes the auditor’s opinion. (Ref: Para. A46)
(b) State that reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted
Auditor’s
in accordance with PSAs
Responsibili?es
for
will always
the
detectof
a Fmaterial
Audit
misstatement
inancial
when it exists;
Statements
and
(c) State that misstatements can arise from fraud or error, and either:
(i) Describe that they are considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic decisions of users taken on
14
the basis of these financial statements; or
(ii) Provide a definition or description of materiality in accordance with the applicable financial
reporting framework. (Ref: Para. A47)
38. The Auditor’s Responsibilities for the Audit of the Financial Statements section of the auditor’s report
shall further: (Ref: Para. A45)
(a) State that, as part of an audit in accordance with PSAs, the auditor exercises professional
judgment and maintains professional skepticism throughout the audit; and
could reasonably be expected to influence the economic decisions of users taken on
could reasonably be expected to influence the economic decisions of users taken on
14
the basis of these financial statements; or 14
the basis of these financial statements; or
(ii) Provide a definition or description of materiality in accordance with the applicable financial
(ii) Provide a definition or description of materiality in accordance with the applicable financial
reporting framework.for
Auditor’s
Responsibili?es
(Ref: Para.
the
A47) of
Financial
Statements
Audit
reporting framework. (Ref: Para. A47)
38. The
38. The Auditor’s
Auditor’s Responsibilities
Responsibilitiesfor forthe
theAudit
Auditofofthe
theFinancial
FinancialStatements
Statementssection
sectionofofthetheauditor’s
auditor’sreport
report
shall
shall further:
further: (Ref:
(Ref: Para.
Para. A45)
A45)
(a)
(a) State
State that,
that, as
as part
part ofof an
anaudit
auditininaccordance
accordancewithwithPSAs,
PSAs,the
theauditor
auditorexercises
exercisesprofessional
professional
judgment
judgment and
and maintains
maintainsprofessional
professionalskepticism
skepticismthroughout
throughoutthe
theaudit;
audit;and
and
(b)
(b) Describe
Describe anan audit
audit by
bystating
statingthat
thatthe
theauditor’s
auditor’sresponsibilities
responsibilitiesare:
are:
(i)(i) To
To identify
identify and
andassess
assessthe therisks
risksofofmaterial
materialmisstatement
misstatementofofthethefinancial
financialstatements,
statements,
whether
whether due
due totofraud
fraudororerror;
error;totodesign
designandandperform
performaudit
auditprocedures
proceduresresponsive
responsivetotothose
those
risks; and
and toto obtain
obtainaudit
auditevidence
evidencethat thatisissufficient
sufficientand
andappropriate
appropriatetotoprovide
providea abasis
basisforfor
the auditor’s
auditor’sopinion.
opinion.The
Therisk
riskofofnot
notdetecting
detectingaamaterial
materialmisstatement
misstatementresulting
resultingfrom
fromfraud
fraud
is higher
higher than
than for
forone
oneresulting
resultingfromfromerror,
error,asasfraud
fraudmay
mayinvolve
involvecollusion,
collusion,forgery,
forgery,
intentional
intentional omissions,
omissions,misrepresentations,
misrepresentations,ororthe theoverride
overrideofofinternal
internalcontrol.
control.
(ii) To obtain
obtain an
an understanding
understandingofofinternal
internalcontrol
controlrelevant
relevanttotothetheaudit
auditininorder
ordertotodesign
designaudit
audit
proceduresthat
procedures thatare
areappropriate
appropriateininthe
thecircumstances,
circumstances,butbutnotnotforforthethepurpose
purposeofofexpressing
expressing
opinion on
an opinion on the
theeffectiveness
effectivenessofofthe
theentity’s
entity’sinternal
internalcontrol.
control.InIncircumstances
circumstanceswhen whenthethe
also has
auditor also hasaaresponsibility
responsibilitytotoexpress
expressananopinion
opinionononthetheeffectiveness
effectivenessofofinternal
internal
reporting framework. (Ref: Para. A47)
38. The Auditor’s Responsibilities for the Audit of the Financial Statements section of the auditor’s report
shall further: (Ref: Para. A45)
(a) State that, as part of an audit in accordance with PSAs, the auditor exercises professional
Auditor’s
judgment Responsibili?es
for
tskepticism
and maintains professional he
Audit
of
Financial
throughout Statements
the audit; and
(b) Describe an audit by stating that the auditor’s responsibilities are:
(i) To identify and assess the risks of material misstatement of the financial statements,
whether due to fraud or error; to design and perform audit procedures responsive to those
risks; and to obtain audit evidence that is sufficient and appropriate to provide a basis for
theEauditor’s
STEPS
IN
opinion. TheMrisk
VALUATING
of not detecting a material misstatement resulting from fraud
ISSTATEMENTS
is higher than for one resulting from error, as fraud may involve collusion, forgery,
1
Iden?fy
type
of
misstatements
intentional omissions, misrepresentations, or the override of internal control.
2
Understand
&
respond
to
misstatements
3
(ii) Accumulate
To obtain an understanding of internal control relevant to the audit in order to design audit
misstatements
4
proceduresethat
Evaluate
are oappropriate
ffect
in the circumstances,
f
uncorrected
but not for the purpose of expressing
misstatements
an opinion on the effectiveness of the entity’s internal control. In circumstances when the
5
Communicate
with
Management
&
TCWG
auditor also has a responsibility to express an opinion on the effectiveness of internal
control in conjunction with the audit of the financial statements, the auditor shall omit the
phrase that the auditor’s consideration of internal control is not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control.
Auditor’s
Responsibili?es
for
the
Audit
of
Financial
Statements
STEPS
IN
EVALUATING
MISSTATEMENTS
1
Iden?fy
type
of
misstatements
Factual
–
misstatements
about
which
there
is
no
doubt
Judgmental
–
misstatements
rela%ng
to
accoun%ng
es%mates
or
accoun%ng
policies
Projected
–
auditor’s
best
es%mate
of
misstatements
in
popula%ons
involving
the
projec%on
of
sample
misstatements
to
popula%on
Uncorrected
STEPS
IN
EVALUATING
MISSTATEMENTS
2
Understand
and
respond
to
misstatements
If
the
misstatement
exists,
the
auditor
inves?gates
its
nature
and
cause
and
evaluates
its
possible
effect
on
audit
such
as:
-‐
Poten%al
indicators
of
fraud
-‐
Possible
existence,
or
uniden%fied
risk,of
other
material
misstatements
-‐
A
significant
deficiency
or
material
weakness
in
internal
control
In
cases
where
risk
of
possible
undetected
material
misstatements
(ex.
Audit
risk)
is
greater
than
the
acceptably
low,
auditor’s
responses
may
include:
-‐
Performing
addi%onal
procedures
using
a
lower
performance
materiality.
-‐
Asking
management
to
perform
further
examina%on.
3
Accumulate
Misstatements
during
the
audit
Descrip?on
Circumstances
of
Occurrence
Assets
Liabili?es
Pre-‐tax
Inc.
Equity
Tax
rate=30%
Error
in
Factual:
new
clerk
made
some
P
27,000
(P
27,000)
(P18,900)
recording
errors.
Correct
amount
=
overstated
understated
understate
inventory
P396,000,
recorded
=
P369,000
d
Prematurely
Projected:
From
sample
P22,500
P
22,500
P
15,750
recorded
misstatement
of
P4,500
(a
ra%o
overstated
overstated
overstated
sales
of
20%)
Inadequate
Judgmental:
Unreasonably
low
P
35,000
P
35,000
P
24,500
allowance
allowance
compared
to
overstated
overstated
overstated
for
loans
historical
evidence
impairment
Failure
to
Factual:
Resul%ng
from
(P7,500)
P
7,500
P
5,250
accrue
for
oversight
understated
overstated
overstated
salaries
liab.
4
Evaluate
Effect
of
Uncorrected
Misstatements
Audit
Other
Macers
to
Communicate:
Commicee
Commicee
1. Auditor’s
responsibili%es
2. Overview
of
planned
scope
&
%ming
3. Significant
audit
findings
Internal
Audit
4. Auditor’s
independence
5
Communicate
with
Management
and
TCWG
Yours, truly,
&&&&
Managing
Partner,
LRC
&
Associates,
CPA
List
of
Communica?ons
with
Management
and
Other
Par?es
Communica?ons
with
Management
•
Pre-‐condi%ons
for
an
audit
•
Control
deficiencies,
fraud,
NOCLAR,
&
misstatements
•
Going
concern
assessments
•
WriIen
representa%ons
•
Facts
discovered
a7er
the
date
of
our
audit
report
EQCR
reviewer
is
a
partner,
other
person
in
the
firm,
suitably
qualified
external
person,
or
a
team
made
up
of
such
individuals,
none
of
whom
is
part
of
the
engagement
team,
with
sufficient
and
appropriate
experience
and
authority
to
objec%vely
evaluate
the
significant
judgments
the
engagement
team
made
and
the
conclusions
it
reached
in
formula%ng
the
report.
EQCR
Examples:
(v) When the financial statements are prepared in accordance with a fair presentation
framework, to evaluate the overall presentation, structure and content of the financial
statements, including the disclosures, and whether the financial statements represent the
underlying transactions and events in a manner that achieves fair presentation.
(c) When PSA 60015 applies, further describe the auditor’s responsibilities in a group audit
engagement by stating that:
(i) The auditor’s responsibilities are to obtain sufficient appropriate audit evidence regarding
the financial information of the entities or business activities within the group to express an
opinion on the group financial statements;
(ii) The auditor is responsible for the direction, supervision and performance of the group
audit; and
(iii) The auditor remains solely responsible for the auditor’s opinion.
(v) When the financial statements are prepared in accordance with a fair presentation
framework, to evaluate the overall presentation, structure and content of the financial
statements, including the disclosures, and whether the financial statements represent the
underlying transactions
Responsibili?es
and events Sintatements
for
the
Financial
a manner that achieves fair presentation.
(c) When PSA 60015 applies, further describe the auditor’s responsibilities in a group audit
engagement by stating that:
(i) The auditor’s responsibilities are to obtain sufficient appropriate audit evidence regarding
the financial information of the entities or business activities within the group to express an
opinion on the group financial statements;
(ii) The auditor is responsible for the direction, supervision and performance of the group
audit; and
(iii) The auditor remains solely responsible for the auditor’s opinion.
39. The PSA
Auditor’s 600:
Responsibilities for the Audit of the–
Financial
Special
Considera%ons
Audits
oStatements
f
Group
section
F/S
of the auditor’s report
also
shall:
(including
the
Work
of
Component
Auditors)
(Ref: Para. A45)
(a) State that the auditor communicates with those charged with governance regarding, among other
matters, the planned scope and timing of the audit and significant audit findings, including any
significant deficiencies in internal control that the auditor identifies during the audit;
opinion on the group financial statements;
(ii) The auditor is responsible for the direction, supervision and performance of the group
audit; and
(iii) The auditor
Responsibili?es
for
remains solely responsible
the
Financial
for the auditor’s opinion.
Statements
39. The Auditor’s Responsibilities for the Audit of the Financial Statements section of the auditor’s report
also shall: (Ref: Para. A45)
(a) State that the auditor communicates with those charged with governance regarding, among other
matters, the planned scope and timing of the audit and significant audit findings, including any
significant deficiencies in internal control that the auditor identifies during the audit;
(b) For audits of financial statements of listed entities, state that the auditor provides those charged
with governance with a statement that the auditor has complied with relevant ethical
requirements regarding independence and communicate with them all relationships and other
matters that may reasonably be thought to bear on the auditor’s independence, and where
applicable, related safeguards; and
(c) For audits of financial statements of listed entities and any other entities for which key audit
matters are communicated in accordance with PSA 701, state that, from the matters
communicated with those charged with governance, the auditor determines those matters that
were of most significance in the audit of the financial statements of the current period and are
(b) For audits of financial statements of listed entities, state that the auditor provides those charged
with governance with a statement that the auditor has complied with relevant ethical
requirements regarding independence and communicate with them all relationships and other
matters that may reasonably be thought to bear on the auditor’s independence, and where
applicable, relatedfor
Responsibili?es
safeguards; and
the
Financial
Statements
(c) For audits of financial statements of listed entities and any other entities for which key audit
matters are communicated in accordance with PSA 701, state that, from the matters
communicated with those charged with governance, the auditor determines those matters that
were of most significance in the audit of the financial statements of the current period and are
therefore the key audit matters. The auditor describes these matters in the auditor’s report unless
law or regulation precludes public disclosure
PSA 700 (REVISED), FORMING AN about the matter
OPINION or when, inON FINANCIAL STATEMENTS
AND REPORTING
extremely rare circumstances, the auditor determines that a matter should not be
communicated in the auditor’s report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication. (Ref:
Para. A48)
______________________
15
PSA 600,
Location ofSpecial
PSA
Considerations—Audits
the701:
of Group
Communica%ng
description Financial
Key
of the auditor’s Audit
Statements
for(Including
MaIers
responsibilities he
Ithe
in
taudit
the ofWork
the offinancial
Component
ndependent
Auditors) Report
Astatements
uditor’s
40. The description of the auditor’s responsibilities for the audit of the financial statements required by
paragraphs 38–39 shall be included: (Ref: Para. A49)
(a) Within the body of the auditor’s report;
communicated in the auditor’s report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication. (Ref:
Para. A48)
42. If the auditor addresses other reporting responsibilities in the auditor’s report on the financial
statements that are in addition to the auditor’s responsibilities under the PSAs, these other reporting
responsibilities shall be addressed in a separate section in the auditor’s report with a heading titled
“Report on Other Legal and Regulatory Requirements” or otherwise as appropriate to the content of the
section, unless these other reporting responsibilities address the same topics as those presented under
the reporting responsibilities required by the PSAs in which case the other reporting responsibilities
may be presented in the same section as the related report elements required by the PSAs. (Ref: Para.
41. When the auditor refers to a description of the auditor’s responsibilities on a website of an appropriate
authority, the auditor shall determine that such description addresses, and is not inconsistent with, the
requirements in paragraphs 38–39 of this PSA. (Ref: Para. A51)
Other Reporting
Other
Responsibilities
Repor?ng
Responsibili?es
42. If the auditor addresses other reporting responsibilities in the auditor’s report on the financial
statements that are in addition to the auditor’s responsibilities under the PSAs, these other reporting
responsibilities shall be addressed in a separate section in the auditor’s report with a heading titled
“Report on Other Legal and Regulatory Requirements” or otherwise as appropriate to the content of the
section, unless these other reporting responsibilities address the same topics as those presented under
the reporting responsibilities required by the PSAs in which case the other reporting responsibilities
may be presented in the same section as the related report elements required by the PSAs. (Ref: Para.
A53–A55)
43. If other reporting responsibilities are presented in the same section as the related report elements
required by the PSAs, the auditor’s report shall clearly differentiate the other reporting responsibilities
from the reporting that is required by the PSAs. (Ref: Para. A55)
44. If the auditor’s report contains a separate section that addresses other reporting responsibilities, the
requirements of paragraphs 20–39 of this PSA shall be included under a section with a heading “Report
on the Audit of the Financial Statements.” The “Report on Other Legal and Regulatory Requirements”
“Report on Other Legal and Regulatory Requirements” or otherwise as appropriate to the content of the
section, unless these other reporting responsibilities address the same topics as those presented under
the reporting responsibilities required by the PSAs in which case the other reporting responsibilities
may be presented in the same section as the related report elements required by the PSAs. (Ref: Para.
Other
Repor?ng
Responsibili?es
A53–A55)
43. If other reporting responsibilities are presented in the same section as the related report elements
required by the PSAs, the auditor’s report shall clearly differentiate the other reporting responsibilities
from the reporting that is required by the PSAs. (Ref: Para. A55)
44. If the auditor’s report contains a separate section that addresses other reporting responsibilities, the
requirements of paragraphs 20–39 of this PSA shall be included under a section with a heading “Report
on the Audit of the Financial Statements.” The “Report on Other Legal and Regulatory Requirements”
shall follow the “Report on the Audit of the Financial Statements.” (Ref: Para. A55)
Name of the Engagement Partner
45. The name of the engagement partner shall be included in the auditor’s report for audits of complete sets
of general purpose financial statements of listed entities unless, in rare circumstances, such disclosure
is reasonably expected to lead to a significant personal security threat. In the rare circumstances that
the auditor intends not to include the name of the engagement partner in the auditor’s report, the auditor
A53–A55)
may be presented in the same section as the related report elements required by the PSAs. (Ref: Para.
43. IfA53–A55)
other reporting responsibilities are presented in the same section as the related report elements
43. required by the PSAs,
If other reporting the auditor’sarereport
responsibilities shall clearly
presented differentiate
in the same sectiontheasother reporting
the related responsibilities
report elements
from the reporting
required that istherequired
by the PSAs, auditor’sbyreport
the PSAs.
shall(Ref:
clearlyPara. A55) the other reporting responsibilities
differentiate
Name
from othe
f
treporting
he
Engagement
that is requiredPbyartner
the section
PSAs. (Ref: Para. A55)other reporting responsibilities, the
44. If the auditor’s report contains a separate that addresses
44. requirements
If the auditor’sof report
paragraphs
contains20–39 of this PSA
a separate shallthat
section be included
addressesunder othera section
reportingwith a heading “Report
responsibilities, the
onrequirements
the Audit ofoftheparagraphs
Financial Statements.”
20–39 of this The
PSA“Report
shall beonincluded
Other Legal
underand Regulatory
a section with aRequirements”
heading “Report
shall
on thefollow
Audittheof“Report on theStatements.”
the Financial Audit of the Financial
The “Report Statements.”
on Other Legal(Ref: Para. A55) Requirements”
and Regulatory
Name ofshall
thefollow the “Report
Engagement on the Audit of the Financial Statements.” (Ref: Para. A55)
Partner
Name of the Engagement Partner
45. The name of the engagement partner shall be included in the auditor’s report for audits of complete sets
45. ofThegeneral
namepurpose financial statements
of the engagement of listed
partner shall entities inunless,
be included in rare circumstances,
the auditor’s report for auditssuch disclosure
of complete sets
isofreasonably expected
general purpose to leadstatements
financial to a significant personal
of listed entitiessecurity
unless,threat.
in rareIncircumstances,
the rare circumstances that
such disclosure
the auditor intends
is reasonably not to toinclude
expected lead tothea name of thepersonal
significant engagement partner
security in the
threat. auditor’s
In the report, the auditor
rare circumstances that
shall discussintends
the auditor this intention with those
not to include charged
the name withengagement
of the governancepartner
to informin thethe auditor’s
auditor’s report,
assessment of
the auditor
the
shalllikelihood
discussand this severity
intentionofwitha significant personal
those charged withsecurity
governancethreat.to(Ref:
informPara. A56–A58)assessment of
the auditor’s
the likelihood and severity of a significant personal security threat. (Ref: Para. A56–A58)
PSA 700 (REVISED), FORMING AN OPINION AND REPORTING ON FINANCIAL STATEME
PSA 700 (REVISED), FORMING AN OPINION AND R
Signature
Signature
Signature
oof
f
tthe
ofAuditor
he
Athe Auditor
uditor
46. TheThe
46. auditor’s
auditor’s report
report shall shall
be signed. bePara.
(Ref: signed. (Ref: Para. A59–A60)
A59–A60)
Auditor’s Address
Auditor’s Address
Signature
47. The of
the
Auditor
report shall name the location in the jurisdiction where
auditor’s
47. The auditor’s report shall name the location in the jurisdiction where the auditor practices.
Date of the Auditor’s Report
Date
48. of the
TheAuditor’s Report report shall be dated no earlier than the date on which
auditor’s
appropriate audit evidence on which to base the auditor’s opinion on
48. Theevidence that:
auditor’s report shall(Ref: Para.
be dated A61–A64)
no earlier than the date on which the auditor has obtained suffic
appropriate
(a) All auditthe
evidence on which tothat
statements base the auditor’s opinion
comprise on the financial
the financial statements, includ
statements, inc
prepared;
evidence that: and
(Ref: Para. A61–A64)
(b) Those with the recognized authority have asserted that they
(a) All thefinancial
statements statements.
that comprise the financial statements, including the related notes, have b
Auditor’s Address
47. The auditor’s report shall name the location in the jurisdiction where the auditor practices.
48. The auditor’s report shall be dated no earlier than the date on which the auditor has obtained sufficient
appropriate audit evidence on which to base the auditor’s opinion on the financial statements, including
evidence that: (Ref: Para. A61–A64)
(a) All the statements that comprise the financial statements, including the related notes, have been
prepared; and
(b) Those with the recognized authority have asserted that they have taken responsibility for those
financial statements.
Auditor’s Report Prescribed by Law or Regulation
49. If the auditor is required by law or regulation of a specific jurisdiction to use a specific layout, or wording
of the auditor’s report, the auditor’s report shall refer to Philippine Standards on Auditing only if the
auditor’s report includes, at a minimum, each of the following elements: (Ref: Para. A65–A66)
(a) A title.
(b) An addressee, as required by the circumstances of the engagement.
prepared; and
(b) Those with the recognized authority have asserted that they have taken responsibility for those
financial statements.
Auditor’s ReportRPrescribed
Auditor’s
by Law or Regulation
eport
Prescribed
by
Law
or
Regula?on
49. If the auditor is required by law or regulation of a specific jurisdiction to use a specific layout, or wording
of the auditor’s report, the auditor’s report shall refer to Philippine Standards on Auditing only if the
auditor’s report includes, at a minimum, each of the following elements: (Ref: Para. A65–A66)
(a) A title.
(b) An addressee, as required by the circumstances of the engagement.
(c) An Opinion section containing an expression of opinion on the financial statements and a
reference to the applicable financial reporting framework used to prepare the financial statements
(including identifying the jurisdiction of origin of the financial reporting framework that is not
Philippine Financial Reporting Standards see paragraph 26).
(d) An identification of the entity’s financial statements that have been audited.
(e) A statement that the auditor is independent of the entity in accordance with the relevant ethical
requirements relating to the audit, and has fulfilled the auditor’s other ethical responsibilities in
accordance with these requirements. The statement shall identify the jurisdiction of origin of the
relevant ethical requirements or refer to the Philippine Code of Ethics.
prepared; and
(b) Those with the recognized authority have asserted that they have taken responsibility for those
financial statements.
Auditor’s ReportRPrescribed
Auditor’s
by Law or Regulation
eport
Prescribed
by
Law
or
Regula?on
49. If the auditor is required by law or regulation of a specific jurisdiction to use a specific layout, or wording
of the auditor’s report, the auditor’s report shall refer to Philippine Standards on Auditing only if the
auditor’s report includes, at a minimum, each of the following elements: (Ref: Para. A65–A66)
(a) A title.
(b) An addressee, as required by the circumstances of the engagement.
(c) An Opinion section containing an expression of opinion on the financial statements and a
reference to the applicable financial reporting framework used to prepare the financial statements
(including identifying the jurisdiction of origin of the financial reporting framework that is not
Philippine Financial Reporting Standards see paragraph 26).
(d) An identification of the entity’s financial statements that have been audited.
(e) A statement that the auditor is independent of the entity in accordance with the relevant ethical
requirements relating to the audit, and has fulfilled the auditor’s other ethical responsibilities in
accordance with these requirements. The statement shall identify the jurisdiction of origin of the
(b)
(b) An
Anaddressee,
addressee,asasrequired
requiredbybythethecircumstances
circumstancesof ofthethe
engagement.
engagement.
(c) An
AnOpinion
Opinionsection
sectioncontaining
containingananexpression
expressionof ofopinion opinion on on
thethe
financial statements
financial and and
statements a a
reference
referencetotothe
theapplicable
applicablefinancial
financialreporting
reportingframework
framework usedused
to prepare the the
to prepare financial statements
financial statements
(includingidentifying
(including identifyingthethejurisdiction
jurisdictionofoforigin
originof ofthethefinancial
financial reporting
reporting framework
framework thatthat
is notis not
Auditor’s
Report
Philippine
Philippine PReporting
Financial
Financial rescribed
ReportingStandardsby
Lsee
Standards aw
oparagraph
r
Regula?on
seeparagraph 26).26).
(d) An
(d) Anidentification
identificationofofthetheentity’s
entity’sfinancial
financialstatements
statementsthatthat
havehave
beenbeen audited.
audited.
(e) AAstatement
(e) statementthat
thatthetheauditor
auditorisisindependent
independentof ofthetheentity entity in accordance
in accordance withwith
the the relevant
relevant ethical
ethical
requirementsrelating
requirements relatingtotothetheaudit,
audit,andandhashasfulfilled
fulfilledthethe auditor’s
auditor’s otherother ethical
ethical responsibilities
responsibilities in in
accordance with these requirements. The statement shall identify the jurisdiction of origin of the
accordance with these requirements. The statement shall identify the jurisdiction of origin of the
relevant ethical requirements or refer to the Philippine Code of Ethics.
relevant ethical requirements or refer to the Philippine Code of Ethics.
(f) Where applicable, a section that addresses, and is not inconsistent with, the reporting
(f) Where applicable,
requirements a section that
in paragraph 22 ofaddresses,
PSA 570 and is not inconsistent with, the reporting
(Revised).
requirements in paragraph 22 of PSA 570 (Revised).
(g) Where applicable, a Basis for Qualified (or Adverse) Opinion section that addresses, and is not
(g) Where applicable,
inconsistent with, atheBasis for Qualified
reporting (or Adverse)
requirements Opinion section
in paragraph that570
23 of PSA addresses, and is not
(Revised).
inconsistent with, the reporting requirements in paragraph 23 of PSA 570 (Revised).
(h) Where applicable, a section that includes the information required by PSA 701, or additional
(h) Where applicable,
information aboutathe
section
auditthat
thatincludes the information
is prescribed by law or required
regulationbyand
PSAthat
701,addresses,
or additionaland is
information about the audit that is prescribed by law or regulation16 and that addresses, and is
not inconsistent with, the reporting requirements in that PSA. (Ref: Para. A66–A67)
16
not inconsistent with, the reporting requirements in that PSA. (Ref: Para. A66–A67)
relevant ethical requirements or refer to the Philippine Code of Ethics.
(f) Where applicable, a section that addresses, and is not inconsistent with, the reporting
requirements in paragraph 22 of PSA 570 (Revised).
(g) Where applicable, a Basis for Qualified (or Adverse) Opinion section that addresses, and is not
Auditor’s
Report
inconsistent with,Pthe
rescribed
by
Law
oinr
paragraph
reporting requirements Regula?on
23 of PSA 570 (Revised).
(h) Where applicable, a section that includes the information required by PSA 701, or additional
information about the audit that is prescribed by law or regulation and that addresses, and is
PSA 700 (REVISED), FORMING AN OPINION AND REPORTING
16
ON FINANCIAL STATEMENTS
not inconsistent with, the reporting requirements in that PSA. (Ref: Para. A66–A67)
(i) A description of management’s responsibilities for the preparation of the financial statements and
an identification of those responsible for the oversight of the financial reporting process that
addresses, and is not inconsistent with, the requirements in paragraphs 32–35.
_____________________
(j) A reference to Philippine Standards on Auditing and the law or regulation, and a description of the
16
auditor’s11–16
PSA 701, paragraphs responsibilities for an audit of the financial statements that addresses, and is not
inconsistent with, the requirements in paragraphs 36–39. (Ref: Para. A49–A50)
(k) For audits of complete sets of general purpose financial statements of listed entities, the name of
the engagement partner unless, in rare circumstances, such disclosure is reasonably expected to
lead to a significant personal security threat.
(l) The auditor’s signature.
(m) The auditor’s address.
(n) The date of the auditor’s report.
an identification of those responsible for the oversight of the financial reporting process that
addresses, and is not inconsistent with, the requirements in paragraphs 32–35.
(j)A reference to Philippine Standards on Auditing and the law or regulation, and a description of the
auditor’s responsibilities for an audit of the financial statements that addresses, and is not
Auditor’s
Report
Prescribed
by
Law
or
Regula?on
inconsistent with, the requirements in paragraphs 36–39. (Ref: Para. A49–A50)
(k) For audits of complete sets of general purpose financial statements of listed entities, the name of
the engagement partner unless, in rare circumstances, such disclosure is reasonably expected to
lead to a significant personal security threat.
(l) The auditor’s signature.
(m) The auditor’s address.
(n) The date of the auditor’s report.
Auditor’s Report for Audits Conducted in Accordance with Both Auditing Standards of a Specific Jurisdiction
and Philippine Standards on Auditing
50. An auditor may be required to conduct an audit in accordance with the auditing standards of a specific
jurisdiction (the national standards), and has additionally complied with the PSAs in the conduct of the
audit. If this is the case, the auditor’s report may refer to Philippine Standards on Auditing in addition to
the national auditing standards, but the auditor shall do so only if: (Ref: Para. A71–A72)
(a) There is no conflict between the requirements in the national auditing standards and those in
(l) The auditor’s signature.
(m) The auditor’s address.
(n) The date of the auditor’s report.
Auditor’s Report for Audits Conducted in Accordance with Both Auditing Standards of a Specific Jurisdiction
Auditor’s
Report
for
Audits
Conducted
in
Accordance
with
both
and Philippine Standards on Auditing
AS
of
a
Specific
Jurisdic?on
and
PSA
50. An auditor may be required to conduct an audit in accordance with the auditing standards of a specific
jurisdiction (the national standards), and has additionally complied with the PSAs in the conduct of the
audit. If this is the case, the auditor’s report may refer to Philippine Standards on Auditing in addition to
the national auditing standards, but the auditor shall do so only if: (Ref: Para. A71–A72)
(a) There is no conflict between the requirements in the national auditing standards and those in
PSAs that would lead the auditor (i) to form a different opinion, or (ii) not to include an Emphasis
of Matter paragraph or Other Matter paragraph that, in the particular circumstances, is required
by PSAs; and
(b) The auditor’s report includes, at a minimum, each of the elements set out in paragraphs 49(a)–(n)
above when the auditor uses the layout or wording specified by the national auditing standards.
However, reference to “law or regulation” in paragraph 49(j) shall be read as reference to the
national auditing standards. The auditor’s report shall thereby identify such national auditing
standards.
the national auditing standards, but the auditor shall do so only if: (Ref: Para. A71–A72)
(a) There is no conflict between the requirements in the national auditing standards and those in
PSAs that would lead the auditor (i) to form a different opinion, or (ii) not to include an Emphasis
Auditor’s
ofRMatter
eport
for
Audits
paragraph or OtherCMatter
onducted
paragraphin
that,
Accordance
in the particularw ith
both
is required
circumstances,
AS
of
a
Specific
by PSAs; Jand
urisdic?on
and
PSA
(b) The auditor’s report includes, at a minimum, each of the elements set out in paragraphs 49(a)–(n)
above when the auditor uses the layout or wording specified by the national auditing standards.
However, reference to “law or regulation” in paragraph 49(j) shall be read as reference to the
national auditing standards. The auditor’s report shall thereby identify such national auditing
standards.
51. When the auditor’s report refers to both the auditing standards and Philippine Standards on Auditing,
the auditor’s report shall identify the jurisdiction of origin of the national auditing standards.
Supplementary Information Presented with the Financial Statements (Ref: Para. A73–A79)
52. If supplementary information that is not required by the applicable financial reporting framework is
presented with the audited financial statements, the auditor shall evaluate whether, in the auditor’s
professional judgment, supplementary information is nevertheless an integral part of the financial
statements due to its nature or how it is presented. When it is an integral part of the financial
51. When the auditor’s report refers to both the auditing standards and Philippine Standards on Auditing,
the auditor’s report shall identify the jurisdiction of origin of the national auditing standards.
Supplementary Information Presented with the Financial Statements (Ref: Para. A73–A79)
Supplementary
Informa?on
Presented
with
the
F/S
52. If supplementary information that is not required by the applicable financial reporting framework is
presented with the audited financial statements, the auditor shall evaluate whether, in the auditor’s
professional judgment, supplementary information is nevertheless an integral part of the financial
statements due to its nature or how it is presented. When it is an integral part of the financial
statements, the supplementary information shall be covered by the auditor’s opinion.
53. If supplementary information that is not required by the applicable financial reporting framework is not
considered an integral part of the audited financial statements, the auditor shall evaluate
52. If supplementary information that is not required by the applicable financial reporting framework is
presented with the audited financial statements, the auditor shall evaluate whether, in the auditor’s
professional judgment, supplementary information is nevertheless an integral part of the financial
statements due to its nature or how it is presented. When it is an integral part of the financial
statements, the supplementary
Supplementary
Informa?on
information shall be covered
Presented
with
tby theF/S
he
auditor’s opinion.
53. If supplementary information that(REVISED),
PSA 700 is not required by AN
FORMING theOPINION
applicable
ANDfinancial reporting
REPORTING framework
ON FINANCIAL is not
STATEMENTS
considered an integral part of the audited financial statements, the auditor shall evaluate
whether such supplementary information is presented in a way that sufficiently and clearly
differentiates it from the audited financial statements. If this is not the case, then the auditor shall
ask management to change how the unaudited supplementary information is presented. If
management refuses to do so, the auditor shall identify the unaudited supplementary information
and explain in the auditor’s report that such supplementary information has not been audited.
***
A1. Management makes a number of judgments about the amounts and disclosures in the financial
True
or
false
1. The
most
important
tasks
of
the
auditor
are
to
form
an
appropriate
opinion
and
to
express
the
opinion
in
a
appropriately
worded
report.
2.
PSA
701
promotes
consistency
in
the
auditor’s
report,
but
recognizes
the
need
for
flexibility
to
accommodate
par%cular
circumstances
of
individual
jurisdic%ons.
3.
PSA
700
deals
with
the
form
and
content
of
the
auditor’s
report
issued
as
a
result
of
an
audit
of
financial
statements.
4.
Consistency
in
the
auditor’s
report
promotes
credibility
in
the
global
marketplace
by
making
more
readily
iden%fiable
those
audits
that
have
been
conducted
in
accordance
with
globally
recognized
standards
and
in
accordance
with
PSAs.
5.
Modified
opinion
expressed
by
the
auditor
when
the
auditor
concludes
that
the
F/S
are
prepared,
in
all
material
respects,
in
accordance
with
the
applicable
financial
repor%ng
framework.
6.
The
objec%ve
of
the
auditor
in
PSA
701
is
to
form
an
opinion
on
the
financial
statements
based
on
an
evalua%on
of
the
conclusions
drawn
from
the
audit
evidence
obtained.
7.
Financial
repor%ng
framework
is
a
financial
repor%ng
framework
designed
to
meet
the
common
financial
informa%on
needs
of
a
wide
range
of
users.
The
financial
repor%ng
framework
may
be
a
fair
presenta%on
framework
or
a
compliance
framework.
8.
PSA
700
refers
to
“financial
statements”
as
“a
complete
set
of
general
purpose
F/S,
including
the
related
notes.”
The
requirements
of
the
applicable
financial
repor%ng
framework
determine
the
form
and
content
of
the
F/S,
and
what
cons%tutes
a
complete
set
of
F/S.
9.
The
auditor
shall
form
an
opinion
on
whether
the
financial
statements
are
prepared,
in
all
material
respects,
in
accordance
with
the
applicable
financial
repor%ng
framework.
10.
In
some
jurisdic%ons,
relevant
ethical
requirements
may
exist
in
several
different
sources,
such
as
the
ethical
codes
&
addi%onal
rules
&
requirements
within
the
law
&
regula%on.
11. In
preparing
the
F/S
in
accordance
with
the
applicable
financial
repor%ng
framework,
&
for
such
internal
control
as
management
determines
is
necessary
to
enable
the
prepara%on
of
F/S
that
are
free
from
material
misstatement,
whether
due
to
fraud
or
error.
12. ‘Responsibili%es
of
Management
for
the
F/S”
sec%on
describes
the
en%ty’s
ability
to
con%nue
as
going
concern
under
PSA
570
&
whether
the
use
of
the
going
concern
basis
of
accoun%ng
is
not
appropriate
as
well
as
disclosing
maIers
rela%ng
to
going
concern.
13. When
the
F/S
are
prepared
in
accordance
with
a
fair
presenta%on
framework,
the
descrip%on
of
responsibili%es
for
the
F/S
in
the
auditor’s
report
shall
refer
to
“the
prepara%on
of
the
compliance
framework”.
14. The
auditor’s
report
shall
include
a
sec%on
with
the
heading
“Auditor’s
Responsibili%es
for
the
Audit
of
the
Financial
Statements.”
15.
A
descrip%on
that
the
F/S
are
prepared
in
accordance
with
a
par%cular
applicable
financial
repor%ng
framework
is
appropriate
only
if
the
F/S
comply
with
all
the
requirements
of
that
framework
that
are
effec%ve
during
the
period
covered
by
the
F/S.
16.
The
auditor’s
report
shall
state
that
misstatements
can
arise
from
fraud
or
error,
&
describe
that
they
are
considered
material
if,
individually
or
in
the
aggregate,
they
could
reasonably
be
expected
to
influence
the
economic
decisions
of
users
taken
on
the
basis
of
these
F/S.
17.
When
F/S
are
prepared
in
accordance
with
a
compliance
framework,
the
auditor
is
not
required
to
evaluate
whether
the
F/S
achieve
fair
presenta%on.
18.
If
the
reference
to
the
applicable
financial
repor%ng
framework
in
the
auditor’s
opinion
is
not
the
PFRSs,
issued
by
the
Financial
Repor%ng
Standards
Council,
the
auditor’s
opinion
shall
iden%fy
the
jurisdic%on
of
origin
of
the
framework.
19.
The
Opinion
Sec?on
of
auditor’s
report
shall
state
whether
the
auditor
believes
that
the
audit
evidence
that
has
been
obtained
is
sufficient
and
appropriate
to
provide
a
basis
for
the
auditor’s
opinion.
20.
When
the
auditor
is
otherwise
required
by
law
or
regula%on,
or
decides
to
communicate
key
audit
maIers
in
the
auditor’s
report,
the
auditor
shall
do
so
in
accordance
with
PSA
701.
21.
The
auditor’s
report
shall
use
the
term
that
is
appropriate
in
the
context
of
the
legal
framework
in
the
par%cular
jurisdic%on
and
need
not
refer
specifically
to
“management”.
21. In
par%cular,
the
auditor
shall
evaluate
whether,
in
view
of
the
requirements
of
the
applicable
financial
repor%ng
framework
the
financial
statements
adequately
disclose
the
significant
accoun%ng
policies
selected
and
applied.
23.
The
auditor
shall
evaluate
whether
the
F/S
adequately
refer
to
or
describe
the
applicable
general
purpose
framework.
24.
The
auditor
shall
express
a
modified
opinion
when
the
auditor
concludes
that
the
F/S
are
prepared,
in
all
material
respects,
in
accordance
with
the
applicable
compliance
framework.
25.
If
F/S
prepared
in
accordance
with
the
requirements
of
a
fair
presenta%on
framework
do
not
achieve
fair
presenta%on,
the
auditor
shall
discuss
the
maIer
with
mgt
&,
depending
on
the
requirements
of
the
applicable
financial
repor%ng
framework
&
how
the
maIer
is
resolved,
shall
determine
whether
it
is
necessary
to
modify
the
opinion
in
the
auditor’s
report
in
accordance
with
PSA
705
26.
In
par%cular,
the
auditor
shall
evaluate
whether,
in
view
of
the
requirements
of
the
applicable
financial
repor%ng
framework
the
terminology
used
in
the
financial
statements,
including
the
%tle
of
each
financial
statement,
is
appropriate.
MULTIPLE
CHOICES
1.
Why
must
audit
documenta%on
be
reviewed?
a. To
ensure
that
the
audit
meets
the
CPA
firms’
standard
of
performance
b. To
evaluate
the
performance
of
inexperienced
personnel.
c. To
counteract
bias
that
o7en
enters
into
the
auditor’s
judgment
d. All
of
the
above
are
reasons
for
review
of
audit
documenta%on.
2.
Which
of
the
following
is
not
a
misstatement
of
the
F/S?
a. The
client
uses
different
inventory
accoun%ng
methods
for
internal
&
external
repor%ng
b. A
departure
from
GAAP
c. The
footnote
for
pensions
is
omiIed
d. A
clerk
incorrectly
based
the
allowance
for
doubtul
accounts
on
31%
of
sales
as
opposed
to
13%
of
sales
as
determined
by
the
controller.
3.
Misstatements
detected
during
the
audit
that
were
ini%ally
deemed
to
be
immaterial
must
be
summarized
to
determine
their
a. Control
b. Quan%ta%ve
effect
c. Aggregate
effects
d. Nature
of
misstatement
4.
At
the
end
of
the
audit
the
auditor
is
supposed
to
accumulate
and
evaluate
the
need
for
adjustment
of
a. Known
uncorrected
errors
b. Unknown
projected
errors
c. Carry
over
of
prior
year
errors
d. All
of
the
above
5.
The
adjustments
arising
from
audit
that
were
considered
to
be
material
should
be
informed
by
the
auditor
to
the:
a. Audit
staff
b. Audit
commiIee
c. SEC
d. Internal
auditors
6.
Reference
to
F/S
in
PSA
700
means
a. A
complete
set
of
general
purpose
F/S
including
the
related
notes
b. A
complete
set
of
F/S
prepared
to
mee%ng
the
financial
informa%on
needs
of
specific
users
c. A
complete
set
of
F/S
prepared
in
accordance
with
special
purpose
framework
d. A
complete
set
of
F/S
prepared
in
accordance
with
either
a
general
or
special
purpose
framework.
7. Which
of
the
following
F/S
best
describes
a
Compliance
Framework
(CF)?
a. A
CF
requires
compliance
with
the
requirements
of
the
framework
&
acknowledges
explicitly
or
implicity,
that,
to
achieve
fair
presenta%on
of
the
F/S.
b. A
CF
requires
compliance
w/
requirements
of
the
framework
&
acknowledges
explicitly
that
it
may
be
necessary
for
management
to
be
part
from
a
requirement
of
the
framework.
c. A
CF
only
requires
compliance
with
the
requirements
of
the
framework.
d. A
CF
refers
to
a
financial
repor%ng
framework
designed
to
meet
the
financial
informa%on
needs
of
specific
users.
8.
Which
of
the
following
should
be
considered
when
forming
an
opinion
on
the
audited
F/S?
I. Whether
sufficient
appropriate
audit
evidence
has
been
obtained.
II. Whether
uncorrected
misstatements
are
material,
individually
or
in
aggregate
III. The
qualita%ve
aspects
of
the
en%ty’s
accoun%ng
prac%ces,
including
indicators
of
possible
bias
in
management’s
judgments.
a. I
only
c.
I
and
II
only
b. I
&
III
only
d.
I,
II
and
III
9.
When
repor%ng
on
F/S
prepared
in
accordance
with
a
compliance
framework,
the
auditor
shall
evaluate
A
B
C
D
a. The
overall
presenta%on,
structure
&
no
yes
no
yes
content
of
the
F/S
b. Whether
the
F/S,
including
the
related
no
yes
yes
no
notes,
represent
the
underlying
transac%ons
&
events
in
a
manner
that
achieves
fair
presenta%on.
10.
An
audit
client’s
descrip%on
that
its
F/S
are
prepared
in
accordance
with
a
par%cular
applicable
financial
repor%ng
framework
is
appropriate
only
if:
a. The
F/S
comply
with
all
the
requirements
of
that
framework
that
are
effec%ve
during
the
period
covered
by
the
F/S
b. The
F/S
are
in
substan%al
compliance
with
that
framework.
c. The
F/S
adequately
disclose
the
significant
accoun%ng
policies
selected
&
applied.
d. The
terminology
used
in
the
F/S,
including
the
%tle
of
each
F/S,
is
appropriate.
11.
Which
of
the
following
is
not
a
required
communica%on
with
the
audit
commiIee?
a. Auditor’s
responsibility
under
PSAs,
including
independence
b. Analy%cal
review
c. Overview
of
planned
audit
scope
and
%ming
d. Significant
audit
findings.
team.
12.
Management
es%mates
the
company’s
allowance
for
doubtul
accounts
as
P200,000
and
the
auditors
develop
an
es%mate
that
suggests
that
the
amount
should
be
between
P230,000
&
P250,000.
The
factual
misstatement
in
this
situa%on
is:
a. P0
b. P40,000
c. P30,000
d. P50,000
13.
Mr.
Co
an
external
auditor
of
ABC
Co.
Based
the
ABC’s
past
results
&
last
year’s
sales,
Mr.
Co
es%mates
that
the
company
will
have
warranty
expense
of
P400,000
for
2018.
ABC
however
has
es%mated
only
P350,000.
Mr.
Co
knew
that
materiality
for
the
audit
is
much
larger
than
the
difference
in
their
es%mates.
The
audit
is
not
complete
yet,
so
it
is
possible
that
other
misstatements
may
be
be
found.
What
should
Mr.
Co
do
in
this
case?
a. Advise
the
client
that
a
qualified
opinion
will
be
required
unless
the
client
revises
its
es%mate.
b. Record
the
P50,000
difference
as
an
unadjusted
item
&
consider
all
unadjusted
items
together
at
the
end
of
the
audit.
c. Ignore
the
P50,000
as
it
is
below
materiality.
d. Ignore
the
P50,000
difference
as
it
is
only
an
es%mate.
14.
Auditors
are
responsible
for
determining
whether
F/S
are
materially
misstated,
so
upon
discovering
a
material
misstatement
they
must
bring
it
to
the
aIen%on
of:
a. The
client’s
management
b. Regulators
c. Audit
firm
managing
partner
d. No
one
in
par%cular
15.
When
F/S
are
audited
by
an
accoun%ng
firm,
the
partner-‐in
charge
of
engagement
ordinarily
signs
in
the
name
of
the
firm
because:
a. The
partner-‐in-‐charge
of
engagement
should
be
relieved
of
any
responsibility
regarding
the
opinion
issued.
b. It
is
required
by
repor%ng
standards.
c. The
firm
assumes
responsibility
for
the
audit
d. The
opinion
becomes
more
credible
if
signed
in
the
name
of
the
firm.
16.
The
discrip%on
of
the
auditor’s
responsibili%es
for
the
audit
of
the
F/S
shall
be
included:
I. Within
the
body
of
the
auditor’s
report
II. Within
the
appendix
of
the
auditor’s
report
III. By
a
specific
reference
within
the
auditor’s
report
to
the
loca%on
of
such
a
descrip%on
on
a
website
of
an
appropriate
authority.