SYSTEM OF QUALITY OF CONTROL

consists of policies and procedures to provide reasonable assurance (RA) PSQC 1 (1) comply statutes, regulatory, & legal reqts
(applies to all)
objectives & goals steps taken (2) appropriate reports
to be achieved to implement & monitor
PSA 220 - Elements of QC Leadership responsibilities
(applies to
AUDIT only) vary in size nature cost benefit Ethical requirements Independence
Fundamental Principles - own decisions
Engagement Quality Control Review - Confidentiality a) Fact (actions)
- anytime provided before the issuance of the report - Objectivity b) Appearance (perceived by 3rd parties)
-required for listed companies - Professional behavior *annual confirmation
- Professional competence & due care
Current file - Integrity
Working Paper Acceptance & continuance of client relationships
-retention not Permanent file Human resources & assignment direction
more than 7years Engagement performance supervision
Monitoring review
*atleast annually

A U D I T P R O C E S S
Preliminary Audit Consideration Substantive Completing Issuing Post Audit
Engagement Planning of Internal Testing the Audit the Auditors Responsibilities
Activities Control Report
-scope
Internal Control Classes of transaction -conclusion
MANAGEMENT Assertion -Completeness -significant control
-Occurrence structure deficiencies
ASSERTIONS Financial Statement -Classification
-Accuracy
Assertions -Cutoff OPINION
Presentation & Disclosure -Unmodified
AUDIT FS level Account Balance -Completeness -Qualified
-Occurrence and Rights & obligations -Adverse
OBJECTIVES Substantive or Compliance -Classification & Understandability -Disclaimer
(Validity) (degree of compliance) -Accuracy & Valuation
General or Specific Account Balances
AUDIT (broad) (tailored) Extent -Completeness
-Existence
PROCEDURE (quantity) -Rights & obligation
-Valuation & allocation
Nature Timing
AUDIT Type Purpose Interim Year-end
EVIDENCE 1. Vouching 1. Risk Assessment Procedure - (understanding of entity & its environment)
Custody
2. Inquiry &Confirmation 2. Further Audit Procedure Authorizarion
a. Test of Controls or Compliance Tests (operating effectiveness, segregation of duties) Recording
performed only when IC is effective Execution
3. Computation & No Trail Documentary Trail
Reperformance b. Substantive Testing (detect amount / @assertion level)
4. Tracing
5. Observation Test of Details Analytical Procedures
6. Reconciliation most costly - (unusual fluctuation, irregular relationship)
7. Inspection Balances Transaction
8. Analytical procedure (BS) (I/S)
 ASSURANCE ENGAGEMENT
are those engagements in which a practitioner expresses a conclusion designed to enhance the degree of confidence that intended users can have about the
evaluation or measurement of a subject matter that is the responsibility of a party, other than the intended users or the practitioner, against criteria.
Philippines Framework for Assurance Engagement (PFAE)
-defines the elements of AE
suitable Criteria (benchmark) written Report sufficient
appropriate
Evidence Subject matter Three-party relationship
give reasonable/limited assurance -info to be evaluated vs criteria 1. Responsible Party mgt
Characteristics: unqualified/unmodified opinion quality - (should be relevant Subject Matter Information
2. Intended User BOA,
Neutrality or qualified opinion quantity & reliable) -measurements present in the SM
financial performance Shareholders
Completeness Generalizations of Reliability
Understandability Professional Skepticism 1. Independent/ External over Internal Non-financial performance 3. Practitioner - auditor
the practitioner makes a critical 2. Good over Bad Internal Control Physical Characteristics
Relevance 3. Written over Oral
Reliability assessment, w/ a questioning Systems and Processes
4. Direct over Inferential Knowledge
mind, of the validity of evidence Behavior Attestation services - a practitioner is
Classifications: 5. Original over photocopies/facsimiles
obtained
A.1. Formal engaged to issue a written communication
wide users, general TYPES OF ASSURANCE ENGAGEMENTS that expresses a conclusion about the
2. Informal reliability of a written assertion that is the
w/ author, specific Level of Assurance Structure responsibility of another party.
B. 1. Established Reasonable Assurance (positive) Assertion-based a.k.a. attestation
Set by higher authority
2. Specifically developed Limited Assurance (negative) Direct Reporting - an experts written communication of a conclusion
about the reliability of someone elses assertions.
How made available?
Publicly
Inclusion in the FS/smi
Inclusion in the assurance report
General Assessment

POINT OF DISTINCTION ASSURANCE SERVICES RELATED SERVICES

Audit Reviews Agreed-upon Procedures Compilation
Objective To express an opinion on To report whether anything has To perform audit procedures To assist the client in preparing
the fairness of financial come to the auditors attention agreed on with the client & fs by using accounting expertise
statements that causes to believe that the any appropriate third parties as opposed to auditing expertise
fs are not fair identified in the report
Evidence gathering RAP, TOC & substantive Inquiry and analytical Procedures as agreed Reading of the fs for obvious
procedures procedures procedures misstatements
Level of assurance Reasonable or high but not Moderate or limited assurance No assurance No assurance
provided absolute assurance
Report provided An audit report containing a An review report containing a A factual findings of A compilation report which
positive form of assurance negative form of assurance on procedures identify information compiled
on assertion assertion
Skills used Audit skills Audit skills Audit skills Accounting skills
Other Characteristics Audit opinion enhances the Substantially less in scope of Recipients of the report must Users derive benefit because
credibility of financial procedures than audit form their own conclusions the service has been performed
information and the report is restricted to with due professional skill and
contracting parties care

COMPARISON AMONG DIFFERENT TYPES OF AUDIT

POINT OF DISTINCTION
Objective
Assertions made by the
auditee
Established criteria
Content of the auditor's
report
Auditors who generally
perform
Users of the report
FINANCIAL STATEMENT AUDIT
To enable the auditor to express an opinion
on the fairness of fs
That the financial statements are fairly
presented
Financial reporting standards or other
financial reporting framework
An opinion about whether the fs are fairly
presented in conformity with the applicable
financial reporting framework.
External auditors
Wide variety of users both internal and
external to the auditee
COMPLIANCE AUDIT
To determine the degree of
compliance w/ established laws, rules
and regulations or contracts
That the organization has complied
with laws, regulations or contracts
Laws, regulations, specific procedures
and contracts
Reports on the degree of compliance
with applicable laws, regulations and
contracts.
Government auditors
Authoritative bodies that sets down the
regulations, rules and procedures
OPERATIONAL AUDIT
To assess the entitys performance or
operations in terms of effectiveness and
efficiency
That the organization's activities are
conducted effectively and efficiently
Objectives set by the board of directors
Reports on the assessment of performance or
operations including recommendations or
suggestions on how to improve operations.
Internal auditors
Management of the entity