AudTheo

• A letter of general inquiry is a letter that inquires about any litigation and claims that the counsel is aware of, along with an assessment of the outcome of identified litigation and claims, including an estimate of financial implications.
• Auditing Theories include a list of relevant standards such as Practice of Accountancy Profession, Fundamentals of Assurance Services, System Quality Control, Introduction to Auditing & the Audit Process, Preliminary Engagement Activities, Audit Planning, Internal Control Consideration, Transaction Cycles, Consideration of Fraud, Error & Compliance, Substantive Testing, Audit Sampling, Completing the Audit, Audit Documentation & Communication with TCWG, Audit Reporting, Auditing in an IT environment, Code of Ethics, Audit Evidence, Audit Evidence: Additional Considerations to Specific Items,
• Auditing Theories also include Philippine Standards on Auditing (PSAs), Philippine Standards on Quality Control (PSQC), Philippine Standards on Review Engagements (PSREs), Philippine Standards on Assurance Engagements (PSAE), Philippine Standards on Related Services.
• If a material inconsistency exists between Other Information and the FS and auditor’s knowledge, management is required to make necessary amendments on the FS.
• Supplementary Information in a Financial Statement (FS) are those required by laws and regulation to be disclosed in the FS but not required by the framework (PFRS).
• Approaches to reduce risk include allowing users to verify info, letting users share info risk with management, and having FS audited (Agency Theory).
• PAIBs play an important role in the reliability of information that investors, creditors, employing organizations and other business sectors, as well as the government and the general public, may rely upon.
• Management is responsible for ensuring that there are no material inconsistencies between Other Information and the FS and auditor’s knowledge.
• Examples of Supplementary Information include disclosure requirements by BIR under BIR RR 15-2010 and disclosure requirements by SEC under SEC Memo #2 Series of 2012.
• Other Information in a Financial Statement (FS) includes financial or non-financial information other than the FS and auditor’s report.
• If a material inconsistency exists between Other Information and the FS and auditor’s knowledge, management is required to make necessary amendments on Other Information.
• An auditor is required to evaluate whether Supplementary Information is an integral part of the FS.
• Management and TCWG are responsible for Financial Statements (FS) 14.
• If Supplementary Information is integral to the FS, the auditor is required to cover it in his/her opinion.
• An independent FS audit enhances stewardship and lessens the mistrust of owners towards the management.
• The auditor shall not represent compliance with PSAs in the auditor’s report unless the auditor has complied with the requirements of PSA 200 and all other PSAs relevant to the audit.
• Assurance Engagements include PFAEs, Audit Engagements include PSAs, Reviews Engagements include PSREs, and other A.
• Contributory factors to risk include remoteness of users, potential bias & motives, voluminous data, complex transactions, and others.
• Generally Accepted Auditing Standards (GAAS) are minimum auditing standards, measures the quality of auditor’s performance, determines audit procedures, and are explicitly stated.
• PSAs are relevant when circumstances addressed by PSAs exist and the auditor has complied with the requirements of PSA 200 and all other PSAs relevant to the audit.
• The need for an independent FS audit is driven by information risk stewardship theory, which states that management wants credibility and an audit enhances stewardship and lessens the mistrust of owners towards the management.
• Management is responsible for preparing and presenting financial statements in accordance with the applicable financial reporting framework, designing, implementing and maintaining internal controls, providing auditor unrestricted access to all information and records relevant to the audit, and expressing an opinion on the financial statements based on the audit.
• Auditing & Assurance Standards Council (AASC) promulgates auditing standards, practices & procedures.
• The disadvantages of PPS Sampling include that it requires special consideration if the sample includes understatement errors.
• Advocacy threat is when a PA will promote a client’s position to the point that their objectivity is compromised.
• PAIBs include PAs engaged or contracted in an executive or non-executive capacity, for example:
• Self-interest threat is when a financial or other interest will inappropriately influence a PA’s judgment or behavior.
• The conceptual framework sets out the requirements on how to appropriately deal with threats to compliance with the fundamental principles through the three-step approach.
• Intimidation threat is when a PA will be deterred from acting objectively because of pressures, including attempts to exercise undue influence over the PA.
• Self-review threat is when a PA will not appropriately evaluate the results of a previous judgment made.
• PA who identifies a breach should evaluate its significance and impact, take whatever action available to address its consequences, and determine whether to report it to relevant parties.
• Professional accountants or PAs comply with applicable technical and professional standards and apply the three-step approach in the conceptual framework.
• The three-step approach involves identifying threats, evaluating their significance and impact, and addressing those that are not at an acceptable level in one of three ways: eliminating the circumstances, applying safeguards, or accepting the risk.
• Familiarity threat is when, due to a long or close relationship with a client, a PA will be too sympathetic to their interests or too accepting of their work.
• PPS Sampling is generally useful for 'existence' assertions, as the higher the amount, the more likely it will be selected.
• PPS Sampling can be designed more easily and sample selection can begin before the population is available.
• Evaluation may overstate the allowance for sampling risk when errors are of fraud.
• If statistical, use probability-proportional-to-size sampling (PPS sampling) or classical variable techniques.
• PPS Sampling is appropriate when zero to few errors are expected and is used for testing for overstatements such as assets and income.
• The advantages of PPS Sampling include that it results in stratified samples and usually results in a smaller sample size than classical variable sampling.