FINANCIAL STATEMENTS AUDIT involves the examination of the financial statements of a

particular entity to determine whether or not they are presented in accordance with a specified criterion.
Thus, financial statements need to be prepared in accordance with one, or a combination of:

a. Accounting standards generally accepted in the Philippines (Philippine Financial Reporting Standards -
PFRSs);
b. Internationally accepted accounting standards (International Financial Reporting Standards - IFRSs);
and
c. Another authoritative and comprehensive financial reporting framework which has been designed for
use in financial reporting and is identified in the financial statements.

Objective of financial statements audit

PSA 200 (Revised and Redrafted) states that "in conducting an audit of financial statements, the overall
objectives of the auditor are:

a. To obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, thereby enabling the auditor to express an opinion
on whether the financial statements are prepared, in all material respects, in accordance with an applicable
financial reporting framework; and

b. To report on the financial statements, and communicate as required by the PSAs, in accordance with
the auditor's findings.

Key phrases;
Expression of an opinion. The ultimate objective of a financial statements audit is for the auditor to
express an opinion regarding the fairness of preparation and presentation of the financial statements. In
forming the audit opinion, the auditor obtains sufficient appropriate audit evidence to be able to draw
conclusions on which to base that opinion.

Financial statements are taken as a whole. The opinion expressed by the auditor applies to the complete
set of financial statements prepared and presented by the entity.

Reasonable assurance. Though the auditor's opinion enhances the credibility of the financial statements,
the user cannot assume that the opinion is a guarantee or an assurance that the presented information is
free from any misstatements.

In all material respects. In rendering a financial statement audit, the auditor is required to adhere to the
requirements of Philippine Standards on Auditing. This set of standards applies only to material matters.

Presence of criteria. The financial statements shall be prepared in "accordance with an applicable
financial reporting framework.

Communication of the results. Again, the ultimate objective of an audit engagement is the communication
of the results to various interested users.

General principles of a financial statements audit

1. Comply with the Code of Ethics for Professional Accountants
2. Conduct an audit in accordance with the Philippine Standards on Audit
3. Maintain an attitude of professional skepticism
4. Exercise professional judgement
5. Obtain sufficient and appropriate evidence

Theoretical Framework of Financial Statements Audit (Mnemonic: VIC BpI)

1. All financial data are verifiable through the existence of supporting documents and records.
2. The auditor should always maintain independence.
3. No long-term conflict between the auditor and the client's management should exist.
4. The audit benefits the public.
5. Effective internal control system reduces the possibility of errors and fraud.