AUDIT -An Overview

Assurance Services
Deal with the audit or review of historical financial information and assurances dealing with subject matters other than historical financial information

Non- assurance Services (Related Services)

Pertain to compilation of financial information, agreed-upon procedures and other related services which do not result in the expression of a conclusion that provides a level of assurance

1.
2. 3. 4. 5.

6. 7.

Systematic process Objectivity Obtaining and evaluating evidence Assertions about economic events Degree of correspondence established criteria (closeness with which the assertions can be identified with established criteria) Communicating results Interested users

Auditor
Must have a thorough understanding of the entity and its environment (PSA 315). The final stage of audit process is preparing the Audit Report which is the communication of the auditors findings to users.

Attestation
generally refers to an experts written communication of a conclusion about the reliability of someone elses assertions. It occurs when a practitioner is engaged to issue a written communication that expresses a conclusion about the reliability of a written assertion that is the responsibility of another party. Attestation service is a type of ASSURANCE SERVICE whose subject matter (both financial and nonfinancial in nature) is the responsibility of another party. It includes audit and reviews.

Assurance Services are designed to enhance the degree of confidence of the intended users other than the responsible party about the outcome of the evaluation or measurement of a subject matter against criteria. They pertain to independent professional services designed to improve the quality of information for decision making. Broader in scope than auditing and attestation

Examples

Risk Assessment- environmental risk, business process, asset and information risks

Information system reliability

Adequacy of security over electronic transactions Effectiveness of health care performance measurement systems

Reliability and relevance of business performance measurement

ASSURANCE RELATED SERVICES (Non-Assurance) AUDIT

REVIEW

OTHERS

Financial Statements Audit Audits of Internal Control Over Financial

*Examination of Prospective Financial Information *CPA Performanc e View * CPA Risk Advisory

*Review of Financial Statements *Review of interim information

*Agreed-upon procedures *Compilation of financial or other information *Preparation of tax returns and tax consulting *Management consulting *Other advisory services

Consulting Services
Are professional services that provide advice and assistance concerning an entitys organization, personnel, finances, operations, systems or other activities.

Includes the following

1. 2. 3. 4. 5. 6.

Consultations Advisory Implementation Transactions Staff and other support Product

Assurance Services
1.

Consulting Services
Two-party contracts To recommend

Parties involved Primary purpose

Three-party contracts To improve quality of

2.

information
3.

uses for information Outcomes

Focus

Decision makers and information used for optimum decisions

4.

Outputs objective intended to improve decision makers condition indirectly through recommendations

to improve clients condition directly through findings, conclusions and recommendations

Auditing vs. Accounting

-Auditing is primarily concerned with the verification of financial statement information and its fairness, emphasizing evidence and the odds. -A financial statement is the object of auditing, is generated by the accounting system that deals with the collecting, sorting, summarizing and reporting financial measurements, plus interpreting financial information.

Types of Audit
1. 2. 3. 4. 5.

Management Audit Performance Audit Comprehensive Audit Environmental Audit Forensic Audit eg. Sales records to determine the quantum of rent owing under a lease agreement, which is the subject of litigation

Framework of Philippine Standards on Auditing

The Auditing and Assurance Standards Council (AASC), formerly the Auditing Standards and Practices Council (ASPC) established by PICPA and the Association of CPAs in Public Practice is the body authorized to establish and promulgate generally accepted auditing standards (GAAS) in the Philippines. (refer to structure of AASC Pronouncements)

Types of Assurance Engagements

Reasonable Assurance Objective- Reduction in assurance engagement risk to an acceptably low level in the circumstance of the engagement Conclusion- Positive form of expression Limited Assurance Objective- Reduction in assurance engagement risk to a level that is acceptable in the circumstance of the engagement, but where that risk is greater than for a reasonable assurance engagement as the basis for conclusion Conclusion- Negative form of expression

The Professional Standards

Standards- are established to measure the quality of performance of individuals and organizations The Board of Accountancy promulgated 10 generally accepted auditing standards (GAAS) PSAs are issued to clarify the meaning of these 10 GAAS. Auditing procedures are the means used by the auditors in attaining the quality required by the standards.

GAAS
represent measures of the quality of the auditors performance These are grouped into GENERAL, FIELDWORK, REPORTING STANDARDS.

General Standards

Technical Training and Proficiency Independence Professional Care

Standards of Fieldwork

Planning Internal Control Consideration Evidential Matter

Reporting Standards

Generally Accepted Accounting Principles Inconsistency Disclosure Opinion

System of Quality Control

It is only by implementing quality control policies and procedures that CPAs can ensure that all members of the audit teams perform the same level of quality of work.

Quality Control

These are policies and procedures adopted by CPAs to provide reasonable assurance of conforming with professional standards in performing audit and related services

Ethical Requirements

Integrity Objectivity Professional Competence and due care Confidentiality Professional Behavior