CHAPTER 2

• When auditing financial statements, an auditor assumes certain professional responsibilities. Auditor's opinion must be based on an examination conducted in accordance with professional standards. Failure to comply with these standards exposes the auditor to risks such as loss of public respect or even assessment of legal damages.
• Standards


  Measures of the quality of the auditor's performance
• Standards are established to measure the quality of performance of individuals and organizations. Standards relating to the accounting profession concern themselves with CPAs' professional qualities, the judgment exercised by the CPAs in the performance of their professional engagement, and the CPA firm's quality control policies and procedures.
• The Board of Accountancy promulgated ten generally accepted auditing standards (GAAS) that establish required level of quality for performing financial statement audits. These standards must be followed by CPAs when auditing financial statements.
• Philippine Standards on Auditing (PSAs) are issued to clarify the meaning of these ten GAAS. Auditing procedures are the means used by the auditors in attaining the quality required by the standards.
• Generally Accepted Auditing Standards (GAAS)


  • General Standards
  • Standards of Fieldwork
  • Standards of Reporting
• General Standards


  • Technical Training and Proficiency
  • Independence
  • Professional care
• Standards of Fieldwork


  • Planning
  • Internal Control Consideration
  • Evidential matter
• Standards of Reporting


  • Generally Accepted Accounting Principles
  • Inconsistency
  • Disclosure
  • Opinion
• The Auditing and Assurance Standards Council (AASC) has been given the task to promulgate auditing standards, practices and procedures which shall be generally accepted by the accounting profession in the Philippines.
• To facilitate the preparation by the AASC of its pronouncements and to attain uniformity of those pronouncements with international auditing standards, the AASC has approved the adoption of the International Standards on Auditing (ISAs), International Standards on Assurance Engagements (ISAEs), International Standards on Review Engagement (ISREs) and International Standards on Related Services (ISRSs) issued by the International Auditing and Assurance Board (IAASB) created by the International Federation of Accountants (IFAC).
• AASC Pronouncements


  • Framework for Assurance Engagement
  • Audit
  • Review
  • Other Assurance Engagements
  • Related Services
• If the public is to rely on the professional CPAs' work, it is essential that appropriate controls are put in place to ensure that their work is consistently of high quality. The need for practicing CPAs to implement and maintain quality control measures is derived from the fact that audits are usually conducted by audit teams.
• Quality controls


  Policies and procedures adopted by CPAs to provide reasonable assurance of conforming with professional standards in performing audit and related services
• Under Philippine Standards on Quality Control (PSQC) 1, a firm has an obligation to establish a system of quality control designed to provide it with reasonable assurance that the firm and its personnel comply with professional standards and regulatory and legal requirements, and that the report issued by the firm are appropriate in the circumstances.
• Elements of a System of Quality Control


  • Leadership Responsibilities for Quality on Audits
  • Ethical Requirements
  • Independence
  • Acceptance and Continuance of Client Relationships
  • Human Resources and Assignment
  • Engagement Performance
  • Monitoring
• Recognizing the importance of professional accountants' services to the society, the government has also taken steps to ensure that CPAs work to the highest standards which can reasonably be expected from them. The government thru the Professional Regulatory Board of Accountancy (BOA) has required all CPA firms and individual CPAs in public practice to obtain a certificate of accreditation to practice public accountancy.
• As a condition to the renewal of the certificate of accreditation to practice public accountancy, the Board requires individual CPAs and CPA firms to undergo a quality control review to ensure that these CPAs comply with accounting and auditing standards and practices.
• The PRC has created a Quality Review Committee (QRC) which shall conduct a quality review on applicants for registration to practice public accountancy and shall recommend the revocation of the certificate of registrations of CPAs who have not observed the quality control measures or those who have not complied with the standards of quality prescribed for the practice of public accountancy.