necessary

public are putting their trust Philippine

Professional skepticism
to the works of the auditors, Standards on Auditing The use of
attitude of questioning
standard increase credibility testing/Sampling Risk
mind/critical assessment
of FS

Comply with the “Code of Professional Error in application of

Ethics for Certified Public Accountant” Factors result to judgment or non-
sampling risk
that they will do everything
inherent limitation
to 0btain the loan even to Conflict of interest between Conduct an audit in accordance with Plan and Perform audit with an Reliance in
the point of presenting a
wrong financial statement. management and users Philippine Standards on Auditing attitude of professional skepticism
management
representation
Reasonable Assurance
-is the assurance that the auditor provides Inherent limitations of the
because of these inherent or the natural client’s accounting and
to verify Expertise limitation of the audit based on the internal control systems
reliability Standards on Auditing.
General principles Nature of
evidence

not able to access

governing the audit of
the information Remoteness Why need an financial statements PSAs is designed to provide only
Assurance R.A. that the FS taken are free free of error
(To properly conduct an audit of financial longer time to examine
independent statements the auditor should follow the general
principles) provided by the
from material statements.
because of inherent limitation Absolute
more costly
level of assurance is
financial
Professional skepticism NOT being provided
assurance
attitude of questioning
mind/critical assessment Financial consequences auditor
statement audit?
Level of Reasonable
moderate level of assurance
free from material misstatement
assurance assurance still a possibility of error because
sampling done to obtain a
representation
“verifiable”
Audit functions operates on the Limited
assumption that all financial data are responsible for the preparation very limited assurance
verifiable. of the financial statement that
assurance
this is done in a review
(supporting evidence to prove) is in accordance with PFRS or statement
IFRS.

AUDIT
“independence” MANAGEMENT INDEPENDENT AUDITOR
To maintain objectivity of the
Theoretical
Independent
auditor while in auditing and
preparing a report.
Framework of

(OVERVIEW)
PREPARE FINANCIAL

Auditing Financial STATEMENT

Validity of prior “no long term
information conflict” ideas that supports auditing Statement evaluated as to degree of
concepts auditor’s OPINION IF FS are in material UNAUDITED FINANCIAL EVALUATES FINANCIAL following the standards in
used as a basis for audit procedures report might be directly affected or aspects, in accordance with PFRS STATEMENT STATEMENT recording in accordance with
of the current year. the management might not cooperate the management assertion.

“Effective internal AUDITED FINANCIAL AUDIT REPORT ON

STATEMENT FINANCIAL STATEMENT audit report that will
control “ increase/decrease the
credibility of FS
reduces the possibility of errors and
fraud affecting the financial statement
basis of the users of
USERS OF FINANCIAL STATEMENT in their decision

Benefits the public Consistent GAAP or TYPES OF AUDIT making.

major source of information PFRS most common type of audit hired by the government
Definitions
for decision making external auditor CPA (hired to check if the government
fair presentation of FS (not company employee /independent) agencies , are complying with Laws and

of audit
to make a report (audit report) regulations.
FS prepared by the promiser party COA (Commission on Audit) -auditors to gov.
specifying that the FS are presented fairly BIR (Bureau of Internal Revenue.) priv.
in conformity with the standards [PFRS] Compliance
Financial audit
Statement Operational internal audits are being hired by the
audit audit company
“An audit is a systematic process of objectively obtaining check if each dep operates effectively
-To enable the auditor to express an and efficiently according to the obj. set
opinion whether the financial statements and evaluating evidence regarding assertions about by the board
are prepared, in all material respects, in economic actions and events to assertion the degree of Assertions made by the auditee recommendations/suggestions on how to
accordance with an identified financial correspondence between those assertions and established improve the operation of each dep
reporting framework. criteria and communicating the results to interested
(PSA) users.”(AAA)
org. has org.’s act.
complied with laws, are conducted
FS are fairly regulations or effectively and
presented contracts efficiently
INDEPENDENT AUDITOR
step by step process
that auditor follow.
Established criteria
FOLLOWING A
SYSTEMATIC PROCESS ways in obtaining evidence in
increase the an audit, reperformance,
reliability of the FS. recalculation, analytical
Fin. rep. Laws,
procedures, observation standards or other regulations and
Objectives set
by the board
audit without any OBJECTIVELY OBTAINS fin. rep.
framework
contracts
business has a claim regarding their reports in FS bias AND EVALUATES EVIDENCE evidences are being obtained and eval.
free of material misstatement if it supports the assertion (claim) of
FS presented in accordance with the PFRS the entity that it follows the
(CRITERIA) standards in recording economic Content of the auditor’s report
these claims /assertions will be verified by ESTABLISHES THE DEGREE OF actions and events.
the auditor if IT really follow the CORRESPONDENCE BETWEEN
standards/criteria in reporting.
opinion about whether Report on the degree of suggestions on
the FS are compliance with
users basis against which fairly presented in applicable laws, how to improve
representations made by assertions have been operations
an auditee about economic ASSERTION ESTABLISH evaluated or measured.
conformity with an
identified fin.
regulations and
contracts
actions and events. CRITERIA rep. framework

Auditors who generally perform

Intended users preferred an

audited financial statement since main objective of auditing is to External Government
COMMUNICATE THE RESULT issue an auditor’s Internal
this increase or decrease the auditors auditors auditors
credibility of the financial TO INTERESTED USERS report that intended users use
statements. making an economic decisions.