Chapter 8 a.

Related services
1. Reviews
Harmonization- eliminating all differences 2. Agreed-upon procedures
*achieving some degree of uniformity and eliminating 3. Compilations
conflicts with at least reduce the cost of accounting for and Agreed-
auditing the financial statements of multinational companies Nature of upon
Audit Review Compilation
service procedure
PRC-BOA SEC s
Comparativ
IFAC e level of High, but
Moderate No No
assurance not
assurance assurance assurance
ISAs and IAPs provided by absolute
IAPC
auditor
Positive Negative Identification
Factual
AUDITING AND ASSURANCE STANDARDS COUNCIL Report assurance assurance of
findings of
(AASC) provided on on information
procedure
assertions assertions compiled
- Has been given the task of reviewing the existing
ISAs and IAPs to determine adoption in the
*the framework does not apply to other services provided by
Philippines and submitting to the PRC through BOA
auditors such as taxation, consultancy, and financial
for approval the final auditing standards,
accounting advice
interpretations and statements
C. LEVELS OF ASSURANCE
FRAMEWORK OF THE PHILIPPINE STANDARDS ON
AUDITING (PSA 220) Assurance- refers to the auditor’s satisfaction as to the
reliability of an assertion being made by one party for use by
Introduction
another party
1. Auditing Standards and Practices Council (ASPC)
Degree of satisfaction achieved/Level of assurance
- Has been authorized to issue PSAs
- Determined by the procedures performed and their
Purpose of this document: describe the framework within
results
which PSAs are issued in relation to the services which may
be performed by auditors. Audit engagement- high, but not absolute level of assurance
that the information subject to audit is free from material
2. Term “AUDITOR”- used throughout PSAs when
misstatement
describing both auditing and related services which
may be performed Review engagement- moderate level of assurance that the
information subject to review is free from material
*person performing related services need not be misstatement
the auditor’s of the entity’s financial statement
Agreed-upon procedures- auditor simply provides a report of
A. FINANCIAL REPORTING FRAMEWORK the actual findings, no assurance is expressed.

Financial Statements – ordinarily prepared and presented
annually and are directed toward the common information
needs of wide-ranged users
Prepared in accordance with one, or a combination of:
a. Accounting standards generally accepted in the
Philippines
b. International accounting standards
c. Another authoritative and comprehensive financial
reporting framework which has been designed for
use in financial reporting and is identified in the
financial statements
B. FRAMEWORK OF AUDITING RELATED
SERVICES
- The users of the report assess for themselves the
procedures and findings reported by the auditor
and draw their own conclusion form the auditor’s
work
Compilation engagement- the users of the compiled
information derive some benefit from the accountants, no
assurance is expressed in the reports
D. AUDIT
Objective: enable the auditor to express an opinion whether
the financial statements are prepared, in all material
respects, in accordance with an identified financial reporting
framework. “present fairly, in all material respects”
 - In forming the audit opinion, the auditor obtains
sufficient appropriate evidence to be able to draw
conclusions on which to base that opinion
- Auditor’s opinion -> enhances the credibility of the
financial statements by providing high, but not
absolute level of assurance
Factors for unattainment of absolute assurance
o Need for judgement
o Use of testing
o Inherent limitations of any accounting and internal
control system
o Most evidence available to the auditor is
persuasive, rather than conclusive, in nature
E. REVIEWS
Objective: enable the auditor to state whether, on the basis
of procedures which do not provide all the evidence that
would be required in an audit, anything has come to the
auditor’s attention that causes the auditor to believe that the
financial statements are not prepared, in all material
respects, in accordance with an identified financial reporting
framework
- Review comprises inquiry and analytical
procedures which are designed to review the
reliability of an assertion that is the responsibility of
one party for use by another party
Agreed-upon Procedures
- Is engaged to carry out those procedures of an
audit nature to which the auditor and the entity and
any appropriate third parties have agreed and to
report on factual findings
Compilations
- The accountant is engaged to use accounting
expertise as opposed to auditing expertise to
collect, classify, and summarize financial
information
- Entails reducing detailed data to a manageable and
understandable form without a requirement to test
the assertions underlying that information
F. AUDITOR ASSOCIATION WITH FINANCIAL
INFORMATION
-an auditor is associated with financial information
when the auditor attaches a report to that
information or consents to the use of the auditor’s
name in a professional connection
QUALITY CONTROL FOR AN AUDIT OF HISTORICAL
FINANCIAL INFORMATION (PSA 220)
A. QUALITY CONTROL POLICIES AND
PROCEDURES AT INDIVIDUAL AUDIT LEVEL
PSA 220 deals with the specific responsibilities of the
auditor regarding quality control procedures for an audit of
financial statements
Engagement teams have the responsibility to:
a. Implement quality control procedures that are
applicable to the audit engagement
b. Provide the firm with relevant information to enable
functioning of that part of the firm’s system of
quality control relating to independence
c. Are entitled to rely on the firm’s system unless
information provided by the firm or other partied
suggest otherwise
B. LEADERSHIP RESPONSIBILITIES FOR QUALITY
ON AUDITS
The actions of the engagement partner and appropriate
messages to the other members of the engagement team,
in taking responsibility for the overall quality on each audit
engagement, emphasize:
a. The importance of:
i. Performing work that complies with
professional standards and regulatory
and legal requirements
ii. complying with the firms quality control
policies and procedures as applicable
iii. issuing auditor’s reports that are
appropriate in the circumstances
b. The fact that quality is essential in
performing audit engagements
C. ETHICAL REQUIREMENTS
Fundamental principles of professional ethics
Integrity
Objectivity
Professional competence and due care
Confidentiality
Professional behaviour
The engagement partner shall form a conclusion on
compliance with independence requirements that apply to
the audit engagement. In doing so, the engagement partner
should:
a. Obtain relevant information from the firm and,
where applicable, network firms, to identify and
evaluate circumstances and relationships that
create threats to independence
b. Evaluate information on identified breaches, if any,
of the firm’s independence policies and procedures
 to determine whether they create a threat to
independence for the audit engagement
c. Take appropriate action to eliminate such threats or
reduce them to an acceptable level by applying
safeguards, or, if considered appropriate, to
withdraw from the audit engagement, where
withdrawal is permitted by law or regulation
D. ACCEPTANCE AND CONTINUANCE OF CLIENT
RELATIONSHIPS AND SPECIFIC AUDIT
ENGAGEMENTS
The engagement partner should be satisfied that
appropriate procedures regarding the acceptance
and continuance of client relationships and specific
audit engagements have been followed and that
conclusions reached in this regard are appropriate
and have been documented
E. ASSIGNMENT OF ENGAGEMENT TEAMS
The engagement partner shall be satisfied that the
engagement team, and any auditor’s experts who
are not part of the engagement team, collectively
have the appropriate competence and capabilities
to:
a. Perform the audit engagement in
accordance with professional standards
and legal requirements
b. Enable an auditor’s report that is
appropriate in the circumstances to be
issued
F. ENGAGEMENT PERFORMANCE
The engagement partner shall take responsibility
for:
a. The direction, supervision and
performance of the audit engagement in
compliance with professional standards
and regulatory and legal requirements
b. The auditor’s report being appropriate in
the circumstances
On or before the date of the auditor’s report, the
engagement partner shall, through a review of the audit
documentation and discussion with the engagement team,
be satisfied that sufficient appropriate audit evidence has
been obtained to support the conclusions reached for the
auditor’s report to be issued
G. CONSULTATION
The engagement partner shall:
a. Take responsibility for the engagement
team undertaking appropriate consultation
on difficult or contentious matters
b. Be satisfied that members of the
engagement team have undertaken
appropriate consultation during the course
of the engagement, both within the
engagement team and between the
engagement team and others at the
appropriate level within or outside the firm
c. Be satisfied that the nature and scope of,
and conclusions resulting from, such
consultations are agreed with the party
consulted
d. Determine that conclusions resulting from
such consultations have been
implemented
H. ENGAGEMENT QUALITY CONTROL REVIEW
For audits of financial statements of listed entities, the
engagement partner should
a. Determine that an engagement quality
control reviewer has been appointed
b. Discuss significant matters arising during
the engagement, including those identified
during the engagement quality control
review, with the engagement quality
control reviewer
c. Not issue the auditor’s report until the
completion of the engagement quality
control review
An engagement quality control review should include an
objective evaluation of:
a. The significant judgements made by the
engagement team
b. The conclusions reached in formulating auditor’s
report
I. DIFFERENCES IN OPINION
-the engagement team shall follow the firm’s
policies and procedures for dealing with and
resolving differences of opinion
J. MONITORING
The engagement partner considers:
a. Whether deficiencies noted in that
information may affect the audit
engagement
b. Whether the measures the firm took rectify
the situation are sufficient in the context of
that audit
A deficiency in the firm’s system of quality control does not
indicate that a particular audit engagement was not
performed in accordance with professional standards and
regulatory legal requirements