PHILIPPINE STANDARDS IN AUDITING Contents/Structure of the PSAs
 The PSAs are interpretations OF GAAS, meaning, they are intended to clarify the
meaning of "generally accepted auditing standards."
 The PSAs contains basic audit principles and essential procedures together with
related guidance in the form of explanatory and other material which the auditor
should follow when conducting financial statements audit.
 Application of PSAs: PSAs apply to independent examination of (historical)
financial statements of any entity conducted for the purpose of expressing an
opinion.
 Compliance with PSA: The auditor should conduct an audit in accordance with
PSA. Compliance with PSAs means application of basic audit principles and
performance of essential audit procedures. Compliance with relevant PSAs is
mandatory. Only in exceptional instances where departure from relevant PSA is
allowed such as when the auditor believes that the:
 Amount involved is insignificant; or
 Requirement of the PSA is impractical to perform; or
 Requirement of the PSA is impossible to perform.
An audit in accordance with PSAs includes:
a. Compliance with PSAs relevant to the audit:
1.) Compliance with all PSAs relevant to the audit (a PSA is relevant to the
audit when the PSA is in effect and the circumstances addressed by the PSA exist)
2.) Having an understanding of the entire text of a PSA (including its
application and other explanatory material) to understand its objectives and to
apply its requirements properly
3.) Prohibition from the auditor from representing compliance with PSAs in
the auditor’s report when he has not complied with the requirements of PSAs
relevant to the audit
b. The use of the objectives stated in relevant PSAs in planning and performing the
audit to achieve the overall objectives of the auditor.
 In using the objectives, the auditor is required to have regard to the
interrelationships among the PSAs. This is because the PSAs deal in some cases
with general responsibilities and in others with the application of those
responsibilities to specific topics.
c. In addition, the auditor should also consider Philippine Auditing Practice Statements
(PAPSs). PAPSs provide interpretative guidance and practical assistance to auditors in
implementing the PSAs and to promote good practice in the accountancy profession.
 Objectives – each PSA contains one or more objectives which provide a link
between the requirements and the overall objectives of the auditor
The objectives in individual PSAs serve to focus the auditor on the desired
outcome of the PSA.
 Requirements (requirements are expressed in the PSAs using “shall”) – the
requirements of the PSAs are designed to enable the auditor to achieve the
objectives specified in the PSAs, and thereby the overall objectives of the auditor
 Related guidance in the form of application and other explanatory material that
are designed to support the auditor in obtaining reasonable assurance
Application and other explanatory material:
 It provides further explanation of the requirements of a PSA and guidance for
carrying them out
 It may explain more precisely what a requirement means or is intended to cover
 It may include examples of procedures that may be appropriate in the
circumstances.
 While such guidance does not in itself impose a requirement, it is relevant to the
proper application of the requirements of an PSA.
 It may also provide background information on matters addressed in a PSA.
 It may include appendices which form part of the application and other
explanatory material.
 When appropriate, it may include additional considerations specific to audits of
smaller entities and public sector entities.
PSAs may also contain:
 Introductory material – provides context relevant to a proper understanding of the
PSA Introductory material may include, as needed, such matters as explanation
of:
a. The purpose and scope of the PSA (including how the PSA relates to other PSAs)
b. The subject matter of the PSA
c. The respective responsibilities of the auditor and others in relation to the subject
matter of the PSA
d. The context in which the PSA is set
 Definitions – a description of the meanings attributed to certain terms for
purposes of the PSAs
 Assist in the consistent application and interpretation of the PSAs
 Not intended to override definitions that may be established for other
purposes, whether in law, regulation or otherwise