SERVICES OF A PROFESSIONAL ACCOUNTANT IN PUBLIC PRACTICE

ASSURANCE SERVICES

I - Independent FS audit

R - Reviews

O - Other assurance services (CPA Web Trust, Business Performance Measurement Service)

NON-ASSURANCE SERVICES

A - Agreed-upon Procedures

C - Compilation
 T - Tax

M - Mngt. Consultancy/Advisory Services

A - Accounting & Data Processing

O - other non-assurance services (IT System Services)

Assurance

 Auditor’s satisfaction as to reliability of an assertion being made by one party for use by another party.

 Auditor assesses the evidence collected as a result of procedures conducted & expresses a conclusion.

 The degree of satisfaction achieved and the level of assurance which may be provided is determined by the
procedures performed and their results.
Assurance Engagements

 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 against criteria.

 OBJECTIVE: For a professional accountant to evaluate or measure a subject matter against identified suitable criteria,
& to express a conclusion that provides the intended users with a level of assurance about the subject matter.

 Intended to enhance the credibility of information about a subject matter by evaluating whether the subject matter
conforms in all material respects with suitable criteria.
Elements of an Assurance Engagements

T - Three Party Relationship

Practitioner

Responsible Party

Intended Users

A - Appropriate Subject Matter

S - Suitable Criteria

S - Sufficient Appropriate Evidence

A - Assurance Report
Degree of loyalty of employees to their employers is least likely a subject matter of an assurance engagements.

Responsible Party

 can be one of the intended users, but not the only one.

 Responsible Party & the intended users will often but NOT necessarily be from separate organizations.

Suitable Criteria

 Benchmarks used to evaluate or measure the subject matter including benchmark for presentation & disclosure.

 Characteristics of Suitable Criteria

C - Completeness
  relevant factors are not omitted

 include benchmarks for presentation and disclosure

R - Relevance

 Contribute to conclusion

 Assist decision-making by intended users

R - Reliability

 Allow reasonably consistent evaluation or measurement of the subject matter

U - Understandability

 Clear, comprehensive and not subject to significantly different interpretation.

N - Neutrality

 Free from bias

Things to be considered in planning an assurance engagement:

1. Criteria to be used

2. Nature and extent of involvement of the experts

3. Possible sources of evidence

4. Preliminary judgment about materiality and engagement risk

2 Types of Assurance Engagement

1. Reasonable Assurance Engagement

  Aim to reduce the assurance engagement risk to an acceptably low level

 Positive form of expression

2. Limited Assurance Engagement

 Aim to reduce the assurance engagement risk to a level that is acceptable

 Risk is greater than for a reasonable assurance engagement

 Basis for Negative form of Expression

INDEPENDENT FINANCIAL STATEMENT AUDIT (EXTERNAL AUDIT)

 Most predominant type of assurance

 Provide a high level of assurance that FS are free of material misstatements.

 Objective: Enable the auditor to express an opinion whether the FS are prepares, in all material respects, in
accordance with an identified financial reporting framework.

 Auditor’s opinion enhances the credibility of FS by providing a high, but NOT absolute level of assurance.

 Absolute Assurance is NOT attainable because of:

T - The use of Testing

I - Inherent Limitations

N - Need for Judgment

E - Evidence available is persuasive, rather than conclusive.

 Primary Purpose: Provide users with an unbiased opinion about the fairness of information presented in the FS.
REVIEW

 Involves limited investigation of much narrower scope than audit

 Undertaken for the purpose of providing limited (negative) assurance

 FS may be historical or prospective (forecast & projections)

 Objective: Enable an auditor to state whether on the basis of procedures which do not provide all the evidence
required in an audit, nothing has come to the auditor’s attention that causes the auditor to believe that the FS are
not presented in accordance with an identified financial reporting framework.
  Evidence supports a moderate level of assurance that the information subject to review is free of material
misstatements.

 Focuses on providing limited assurance on FS of a private company.

TAX SERVICES

 A CPA is considered qualified to prepare corporate and individual tax returns for both audit & non-audit client.

 Tax Compliance - include the preparation of tax returns for individuals, corporations, estate and trusts,and others
  Tax Planning determined the tax consequences of planned or potential transactions and suggest desirable course of
action to minimize the tax liability while achieving the client’s objectives.

Agreed-Upon Procedures Services

 The management determines the procedures to be performed

 The profession accountant provides a report or factual findings as a result of undertaking those procedures.

 Not intended to provide, nor does the professional accountant express, a conclusion that provides a level of
assurance.

 Intended users assesses the procedures & findings and draws his or her own conclusions.
COMPILATION

 Presenting in the form of FS that is the representation of mngt. without undertaking to express any assurance on the
statements.

 Objective: For the CPA to use accounting expertise to collect, classify and summarize financial information.

 Improves the quality of information by displaying in the Financial Accounting & Reporting Standards format & the
practitioner’s identification of obvious error.

 It falls within the definition of an assurance service despite the fact that no assurance is explicit in the practitioner’s
report.
Management Consulting/Advisory Services

 Professional services that employ the practitioner’s technical skills, education, observations, experiences, and
knowledge of the analytical approach and procedures used in a consulting engagement.

 Involve determining the client’s objectives, fact-finding, definition of problems & opportunities, evaluation of
alternatives, formulation of proposed action, communication of results, implementation and follow-up.

Reports on Non-Assurance Engagements

 So not to confuse users, it should avoid:

a. Implying compliance with this Framework: PSAs, PSREs or PSAEs

b. Inappropriately using the words “assurance”, “audit” or “review”.

 c. Including a statement that could reasonably be mistaken for a conclusion designed to enhance the
degree of confidence of intended users about the outcome of the evaluation or measurement of a
subject matter against criteria.

 Having accepted an assurance engagement, a practitioner may not change that engagement to a non-assurance
engagement, or from a reasonable assurance engagement to a limited assurance engagement without reasonable
justification.

 A change in circumstances that affects the intended user’s requirements, or a misunderstanding concerning the
nature of the engagement, ordinarily will justify a request for change in the engagement.

 If such a change is made, the practitioner does not disregard evidence that was obtained prior to the change.
NOTE:(not related to non-assurance)

 A draft of statement, studies or standards should be discussed by the Council en banc. A MAJORITY members of
AASC are required to approve the draft for exposure.

 At least 10 members of AASC are needed to approve the exposed draft as Philippines Standards on Auditing

 AASC to make statements of PSA operative, the final statement shall be submitted to the Board of Accountancy for
Approval.