PSA

PSA 200

OVERALL OBJECTIVES OF THE INDEPENDENT AUDITOR AND THE CONDUCT OF AN AUDIT

Overall Objectives of an Audit of Financial Statements

To obtain reasonable assurance about whether the financial statements are free of material misstatements; and

To report on the financial statements and communicate the auditor’s findings

Requirements

1. The auditor should comply with all PSA relevant to the audit

2. The auditor should comply with relevant ethical requirements

3. The auditor should plan and perform an audit with professional skepticism

4. The auditor should exercise professional judgment in planning and performing the audit

5. The auditor should obtain sufficient appropriate evidence to reduce the risk to an acceptable level

Justifiable Departure from PSA Requirement

In exceptional circumstances, the auditor may judge it necessary to depart from a relevant requirement in a PSA. In such circumstances, the auditor shall perform alternative audit procedures to achieve the objectivecof that requirement.

Responsibility of Management and Those Charged with Governance

An audit is conducted on the premise that management and, where appropriate those charged with governance are responsible:1. For the preparation of fair financial statements2. For such internal control to enable preparation of

fair financial statements; and3. For providing the auditor with access to all

information relevant to the financial statements

Auditor’s responsibility

An auditor should design and conduct the audit in accordance with PSA to provide reasonable assurance that the financial statement taken as a whole are free from material misstatements

Inherent limitations of an Audit

Human errorUse of testingReliance on management representationsNature of evidence

Financial Reporting Frameworks

Address Common needs (Gen. Purpose F/S) PFRS/PAS PFRS for SMEs Other authoritative pronouncements

Specific needs Special Purpose Financial Frameworks

PSA 240 and 250

AUDITOR’S RESPONSIBILITYRELATING TO FRAUD

DEFINITION

ERROR refers to unintentional misstatement in financial statements, including the omission of an amount or a disclosure.

FRAUD refers an intentional act by one or more individuals among management, those charged with governance, employees, involving the use of deception to obtain an unjust or illegal advantage.

NONCOMPLIANCE refers to acts of omission or commission by the entity being audited, either intentional or unintentional, which are contrary to the prevailing laws or regulations.

TWO TYPES OF FRAUD

1. FRAUDULENT FINANCIAL REPORTING

2. MISAPPROPRIATION OF ASSETS

IMPORTANCE OF THE AUDITOR’S CONSIDERATION FRAUD, ERROR AND

NONCOMPLIANCE

When planning and performing audit procedures and in evaluating and reporting the results thereof, the auditor should recognize that fraud, error and noncompliance with laws and regulations may materially affect the financial statements.

CLIENT’S RESPONSIBILITIES

MANAGEMENT- It is the responsibility of the management to establish appropriate controls to prevent and detect fraud, error and noncompliance.

THOSE CHARGED WITH GOVERNANCE- It is the responsibility of those charged with governance to oversee management to ensure that appropriate controls are in placed.

AUDITOR’S RESPONSIBILITIES

The auditor’s responsibility is to design the audit to obtain reasonable assurance that the financial statements are free from material misstatements, whether caused by error, fraud or noncompliance.

Reasons Auditors Fail to Detect Fraud

Over reliance on client representations.Lack of awareness or failure to recognize that

an observed condition may indicate a material fraud.

Lack of experience.Personal relationships with clients.

TYPES OF NONCOMPLIANCE

Direct effect noncomplianceIndirect effect noncompliance

FRAUD RISK FACTORS

Fraud risk factors that relate to misstatements resulting from fraudulent financial reporting:

Management Characteristics Industry Conditions Operating Characteristics

Fraud risk factors that relate to misstatements resulting from misappropriation of assets:

Susceptibility of assets to theft Condition of Internal Control

Considering noncompliance

The auditor should obtain a general understanding of legal and regulatory framework applicable to the entity.

The auditor should design procedures to help identify instances of noncompliance.

The auditor should design audit procedures to obtain sufficient appropriate evidence about compliance with laws and regulations.

Auditor Responsibility for Detecting Errors, Fraud and Noncompliance

Responsible for Detection? Must Communicate Findings?

Material

Immateri

al

Material

Immaterial

Errors

Yes

No

Yes

No

Fraud

Yes

No

Yes

Yes

Non-compliance

Yes

No

Yes

Yes

PSA 560

Subsequent Events

Definition

Subsequent events - Events between the date of the financial statements and the date of the auditor’s report, and the facts that become known to the auditor after the date of the report

Two Types of Subsequent Events

1. Those that provide further evidence of conditions that existed at period end; and

2. Those that are indicative of conditions that arose subsequent to period end.

Auditor’s Responsibility- Events before the date of the Report

The auditor shall perform procedures designed to obtain sufficient appropriate audit evidence that all events occurring between the date of the financial statements and the date of the auditor’s report that may require adjustment of, or disclosure in the financial statements have been identified.

Procedures to identify Subsequent Events

1. Inquiring of management about the occurrence of subsequent events

2. Obtaining understanding of the procedures management has established to ensure that subsequent events are identified

3. Reading the minutes of meetings of board of directors and shareholders that have been held after the date of the financial statements

4. Sending a letter of inquiry to the entity’s lawyers concerning litigation and claims

5. Reading the latest available interim financial statements

Written Representations

The auditor shall request management to provide a written representation in accordance with PSA 580 that all subsequent events that would require adjustment or disclosure in the financial statements have been adjusted or disclosed

When, after the date of the report but before the financial statements are issued, the auditor becomes aware of a fact which may affect the financial statements, the auditor should

Consider whether the financial statements need amendment;

Should discuss the matter with management; and

Inquire how management intends to address the matter

Events after the Date of The Report but before FS are issued

If management amends the FS, the auditor shall

1.Carry out the audit procedures necessary to obtain satisfaction about the amendment; and

2.Consider the effect of the amendment on the auditor’s report


Events after the issuance of the financial statements

When, after the financial statements have been issued, the auditor becomes aware of a fact which existed at the date of the auditor’s report and which, if known at that date, may have caused the auditor to modify his report, the auditor shall


Should discuss the matter with management; and Inquire how management intends to address the

matter

If management amends the FS, the auditor shall1.Carry out the audit procedures necessary to

obtain satisfaction about the amendment; and2.Review the steps taken by management to

ensure that anyone in receipt of the previously issued FS is informed of the situation

3.Provide new audit report on the amended FS with Emphasis of Matter paragraph that draws the readers’ attention to the notes to FS that discuss the amendment made.


If management refuses to revise the FS in circumstances where the auditor believe they need to be amended; or if management does not take the necessary steps to ensure that users of the FS are informed of the situation, the auditor shall notify management and those charged with governance that the auditor will seek to prevent future reliance on the auditor’s report


PSA 570

Going Concern

Going Concern Assumption

Fundamental principle in the preparation of financial statements

The entity is viewed as continuing in business for the foreseeable future

Management’s Responsibility

Philippine Accounting Standards (PAS) 1 requires management to make an assessment of the entity’s ability to continue as a going concern

The management’s assessment of the entity’s ability to continue as a going concern shall cover at least 12 months from the date of the financial statements

Auditor’s Responsibility

The auditor’s responsibility is to1. Obtain sufficient appropriate evidence about the

appropriateness of the management’s use of going concern assumption in the preparation and presentation of FS

2. Conclude whether material uncertainties exist3. Determine the implications for the auditor’s report

Audit Procedures

1. Perform Risk Assessment Procedures Consider whether there are events and conditions that

may cast significant doubt on the entity’s ability to continue as a going concern

2. Evaluate Management’s Assessment Consider whether management’s assessment includes

all relevant information of which the auditor is aware of

3. Obtain sufficient appropriate evidence to determine whether or not a material uncertainty exist

Evaluate management’s plans for future actions, the feasibility of such plans and other mitigating factors

Examples of those Conditions and Events

Non-compliance with the terms of loan agreements or other statutory requirements

Pending major legal or regulatory proceedingsChanges in legislation or government policy

expected to adversely affect the entity Net liability or net current liabilitySubstantial operating lossesInability to pay creditors on due datesLoss of major market, franchise, license or

principal supplier.

Implication on the Auditor’s Report

Use of Going Concern Assumption is Appropriate If based on evidence obtained, the auditor concludes

that the use of going concern assumption is appropriate, the auditor may issue an Unmodified Report


Use of Going Concern Assumption is Inappropriate If based on evidence obtained, the auditor concludes

that the use of going concern assumption is inappropriate, the financial statements should be prepared on an alternative basis.

If the financial statements are prepared on a going concern basis, but the auditor believes that the going concern assumption is inappropriate, the auditor shall express an adverse opinion


Use of Going Concern Assumption is Appropriate but Material Uncertainty Exists If based on evidence obtained, the auditor concludes

that the use of going concern assumption is appropriate, but material uncertainty still exists, the auditor shall consider the adequacy of disclosure.

If disclosure is not adequate, the auditor shall express either qualified or adverse opinion because of material misstatement of financial statements

If disclosure is adequate, the auditor shall express an unmodified opinion that includes an Emphasis of Matter paragraph to draw the readers’ attention to the note in the financial statements that discloses the uncertainty.


Management Unwilling to make or extend its Assessment If management is unwilling to make or extend its

assessment when requested by the auditor to do so, the auditor shall express either qualified or disclaimer of opinion due to inability to obtain sufficient appropriate evidence regarding the use of going concern assumption

Communication with those Charged with Governance

The auditor shall communicate with those charged with governance events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern. Such communication shall include1. Whether the events or conditions constitute a

material uncertainty2. Whether the use of going concern assumption is

appropriate3. The adequacy of related disclosure

PSA 580


Primary Purpose of Obtaining Written Representations

PSA 580 requires the auditor to obtain evidence that:

1. Management acknowledges its responsibility for the fair presentation of the financial statements; and

2. Management has approved the financial statements.

The auditor can obtain this evidence by obtaining written representations from management.

Other Purposes

Serves as audit evidence to complement other evidence obtained by the auditor

Confirms oral representations made by management

Form and Content of Written Representations

1. The written representations shall be in the form of a Representation Letter

2. A representation letter shall include written representations

1. That management has fulfilled its responsibility for the preparation and presentation of FS;

2. That management has provided with all relevant information agreed in the terms of the engagement;

3. That describe management’s responsibilities as described in the terms of the engagement;

4. Other representations to support other audit evidence relevant to FS assertions

Signature and Date of Representation Letter

SignatureThe auditor shall request written

representations from management with appropriate responsibilities for the financial statements and knowledge of the matters concerned

Date The date of the written representations shall be

as near as practicable to the date of the auditor’s report

Evaluating Management Representations

When management representations relate to matters which are material to the financial statements, the auditor will need to:1. Seek other corroborative evidence;2. Evaluate whether the representations appear reasonable

and consistent with other audit evidence obtained; and3. Consider whether the individuals making the

representations is qualified to provide such information.

PSA 560

Subsequent Events

Definition

Subsequent events - Events between the date of the financial statements and the date of the auditor’s report, and the facts that become known to the auditor after the date of the report

Two Types of Subsequent Events

1. Those that provide further evidence of conditions that existed at period end; and

2. Those that are indicative of conditions that arose subsequent to period end.

Auditor’s Responsibility- Events before the date of the Report

The auditor shall perform procedures designed to obtain sufficient appropriate audit evidence that all events occurring between the date of the financial statements and the date of the auditor’s report that may require adjustment of, or disclosure in the financial statements have been identified.

Procedures to identify Subsequent Events

1. Inquiring of management about the occurrence of subsequent events

2. Obtaining understanding of the procedures management has established to ensure that subsequent events are identified

3. Reading the minutes of meetings of board of directors and shareholders that have been held after the date of the financial statements

4. Sending a letter of inquiry to the entity’s lawyers concerning litigation and claims

5. Reading the latest available interim financial statements


The auditor shall request management to provide a written representation in accordance with PSA 580 that all subsequent events that would require adjustment or disclosure in the financial statements have been adjusted or disclosed

When, after the date of the report but before the financial statements are issued, the auditor becomes aware of a fact which may affect the financial statements, the auditor should


Should discuss the matter with management; and

Inquire how management intends to address the matter


If management amends the FS, the auditor shall

1.Carry out the audit procedures necessary to obtain satisfaction about the amendment; and

2.Consider the effect of the amendment on the auditor’s report



When, after the financial statements have been issued, the auditor becomes aware of a fact which existed at the date of the auditor’s report and which, if known at that date, may have caused the auditor to modify his report, the auditor shall


Should discuss the matter with management; and Inquire how management intends to address the

matter

If management amends the FS, the auditor shall1.Carry out the audit procedures necessary to

obtain satisfaction about the amendment; and2.Review the steps taken by management to

ensure that anyone in receipt of the previously issued FS is informed of the situation

3.Provide new audit report on the amended FS with Emphasis of Matter paragraph that draws the readers’ attention to the notes to FS that discuss the amendment made.


If management refuses to revise the FS in circumstances where the auditor believe they need to be amended; or if management does not take the necessary steps to ensure that users of the FS are informed of the situation, the auditor shall notify management and those charged with governance that the auditor will seek to prevent future reliance on the auditor’s report


PSA 580


Primary Purpose of Obtaining Written Representations

PSA 580 requires the auditor to obtain evidence that:

1. Management acknowledges its responsibility for the fair presentation of the financial statements; and

2. Management has approved the financial statements.

The auditor can obtain this evidence by obtaining written representations from management.

Other Purposes

Serves as audit evidence to complement other evidence obtained by the auditor

Confirms oral representations made by management

Form and Content of Written Representations

1. The written representations shall be in the form of a Representation Letter

2. A representation letter shall include written representations

1. That management has fulfilled its responsibility for the preparation and presentation of FS;

2. That management has provided with all relevant information agreed in the terms of the engagement;

3. That describe management’s responsibilities as described in the terms of the engagement;

4. Other representations to support other audit evidence relevant to FS assertions

Signature and Date of Representation Letter

SignatureThe auditor shall request written

representations from management with appropriate responsibilities for the financial statements and knowledge of the matters concerned

Date The date of the written representations shall be

as near as practicable to the date of the auditor’s report

Evaluating Management Representations

When management representations relate to matters which are material to the financial statements, the auditor will need to:1. Seek other corroborative evidence;2. Evaluate whether the representations appear reasonable

and consistent with other audit evidence obtained; and3. Consider whether the individuals making the

representations is qualified to provide such information.

Reliability of Written Representations

The auditor shall disclaim an opinion on the financial statements when1. The auditor concludes that written

representations are not reliable; or2. Management does not provide written

representations on matters about its responsibility for the FS or the completeness information provided to the auditor

AUDIT REPORTS ONAUDIT REPORTS ONFINANCIAL FINANCIAL

STATEMENTS STATEMENTS

Forming an Opinion and Forming an Opinion and Reporting on the Financial Reporting on the Financial

StatementsStatements

PSA 700

FORMING AN OPINION

The auditor shall form am opinion on whether the financial statements are prepared, in all material respects, in accordance with the applicable financial reporting framework.

Basic elements of the Auditor’s Report

1. Title2. Addressee3. Introductory Paragraph4. Management’s Responsibility5. Auditor’s Responsibility6. Auditor’s Opinion7. Auditor’s Signature8. Date9. Auditor’s Address

Title of the Report

The auditor’s report shall have a title that clearly indicates that it is the report of an independent auditor

Addressee

The auditor’s report shall be addressed as required by the circumstances of the engagement

Introductory Paragraph

The introductory paragraph shall identify the name of the entity whose

financial statements have been audited State that the financial statements have

been audited identify the title of each of the financial

statements audited including the date and period covered by the financial statements

refer to the summary of significant accounting policies and explanatory notes.

Management’s Responsibility for the Financial Statements

This section of the auditor’s report shall Include a section with a heading

“Management’s Responsibility for the Financial Statements”

Describe management’s responsibility for the preparation and fair presentation of the financial statements


The auditor’s report shall Include a section with a heading “Auditor’s

Responsibility” state that the responsibility of the auditor is to

express an opinion on the financial statements state that the audit was conducted in

accordance with PSA give a general description of an audit

conducted. state that the auditor believes that the audit

evidence obtained is sufficient and appropriate to provide a basis for the auditor’s opinion.

Auditor’s Opinion

The auditor’s report shall Include a section with a heading “Auditor’s

Opinion” State that the financial statements are

presented fairly, in all material respects, in accordance with the applicable financial reporting framework.

Signature of the Auditor

The report shall be signed in the name of the audit firm and/or the personal name of the auditor as appropriate.

Date of the Auditor’s Report

The report shall be dated no earlier than the date of the approval of the financial statements

Auditor’s Address

The auditor’s report shall name the location in the jurisdiction where the auditor practices

MODIFICATION TO THE MODIFICATION TO THE OPINIONOPINION

PSA 705

Scope Limitation

Material Misstatemen

tMaterialbut not

Pervasive

MaterialAnd

Pervasive

QualifiedOpinion

Adverse Opinion

Materialbut not

Pervasive

MaterialAnd

Pervasive

QualifiedOpinion

Disclaimer of Opinion

Modification to the Modification to the OpinionOpinion

Material Misstatement

1. Material Misstatement of the financial statements may arise in relation to

Inappropriate accounting policies selected Misapplication of selected accounting

policies Inadequacy of disclosure

2. Material misstatement of the financial statement will result to expression of a qualified or an adverse opinion.

Scope Limitation

1. Scope limitation may arise from Limitations imposed by management Limitations imposed by circumstances

Beyond the control of the entity Relating to the nature and timing of the audit

2. Scope limitations will result to expression of a qualified or a disclaimer of opinion.

Materiality consideration

Materiality and pervasiveness (large-scale) of effect on financial statements determine the opinion to be expressed.

Basis for Modification Paragraph

When the auditor modifies the opinion on the financial statements, the auditor shall include a separate paragraph that provides a description of the matter giving rise to the modification

This paragraph is placed immediately before the opinion paragraph

This paragraph shall have an appropriate heading

Content of the Basis for Modification Paragraph

1. Scope limitations Reason for inability to obtain sufficient appropriate

evidence

2. Material misstatement of financial statements Specific amounts in the financial statements

Description Quantification of effects if practicable

Narrative disclosure Explanation of how the disclosures are misstated

Non- disclosure Description Include the omitted disclosure if practicable

Form and Content of Qualified Opinion

Use the heading “Qualified Opinion”Qualified due to material misstatement

State that, in the auditor’s opinion, except for the effect(s) of the matters described in the Basis for Qualified Opinion paragraph, the financial statements present fairly, in all material respects in accordance with PFRS

Qualified due to scope limitation State that, in the auditor’s opinion, except for the possible

effect(s) of the matters described in the Basis for Qualified Opinion paragraph, the financial statements present fairly, in all material respects in accordance with PFRS

Form and Content of Adverse Opinion

Use the heading “Adverse Opinion”State that, in the auditor’s opinion, because

of the significance of the matter(s) described in the Basis for Adverse Opinion paragraph, the financial statements do not present fairly in accordance with PFRS

Form and Content of Disclaimer of Opinion

Use the heading “Disclaimer of Opinion”State that because of the significance of the

matter(s) described in the Basis for Disclaimer of Opinion paragraph, the auditor has not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion and, accordingly, the auditor does not express an opinion on the financial statements

Effect on Auditor’s Responsibility of Modification of Opinion

Qualified or Adverse Opinion Amend the last sentence to state that the audit

evidence obtained is sufficient and appropriate to provide a basis for the auditor’s modified opinion

Disclaimer of Opinion Amend the introductory paragraph Amend the auditor’s responsibility to state that

The auditor’s responsibility is to express an opinion Because of the matter(s) described in the Basis for

Disclaimer of Opinion paragraph, the auditor was not able to obtain sufficient appropriate evidence to provide a basis for an audit opinion

Communication with Those Charged with Governance

When the auditor expects to modify the opinion, the auditor shall communicate with those charged with governance Circumstances that led to the expected modification;

and The proposed wording of the modification

Piecemeal Opinion

When the auditor’s report contains an adverse opinion or a disclaimer of opinion on the financial statements taken as a whole, the auditor’s report shall not include an unmodified opinion on a single financial statement or on a specific element of a financial statement

Different opinion on Complete Set of FS

The expression of a disclaimer of opinion regarding the results of operations and cash flows, and unmodified opinion regarding the financial position is not prohibited since the disclaimer of opinion is being issued in respect of the results of operations and cash flows and not in respect of the financial statements taken as a whole

PSA 706

Emphasis of Matter and Other Matter Paragraphs

Objective of additional paragraph

To draw the readers’ attention to

A matter included in the financial statements that is essential to users’ understanding of the financial statements; or

Other matter, not included in the financial statements, that is relevant to users’ understanding of the audit conducted

Circumstances that require Emphasis of Matter Paragraph

1. Uncertainty relating to the future outcome of exceptional litigation or regulatory action

2. Early application of new accounting standard

3. A major catastrophe with significant effect on the entity’s financial position

4. Going concern uncertainty (PSA 570)5. Financial statements prepared using Special

Purpose Financial Reporting Frameworks (PSA 800)

Emphasis of Matter Paragraph

Early application of a

new accounting standardGoing Concern and Other Significant

Uncertainties

Major Catastrophes

Adequately

disclosed

in the notes to financial statemen

ts

Emphasis of Matter Paragrap

h in the

Auditor’s Report

Special Purpose Financial

Framework

Emphasis of Matter Paragraph

Use the heading “Emphasis of Matter”Presented immediately after the Opinion

paragraphInclude a clear reference to the matter being

emphasizedIndicate that the auditor’s report is not

modified in respect to the matter emphasized

Circumstances that require Other Matter Paragraph

1. Reporting on comparatives (PSA 710)2. Material inconsistency exists between other

information and the audited financial statements (PSA720)

3. Restriction on distribution or use of the auditor’s report (PSA 800, 805 and 810)

4. Reporting on financial statements prepared using more than one financial reporting frameworks

Other Matter Paragraph

Use the heading “Other Matter”Presented immediately after the Opinion

paragraph and any Emphasis of Matter paragraph

Communication with Those Charged with Governance

When the auditor expects to include an Emphasis of Matter or an Other Matter paragraph in the auditor’s report, the auditor shall communicate this expectations with those charged with governance and the proposed wording of this paragraph

Comparative Information Comparative Information

PSA 710

Financial Reporting Frameworks for Comparative Information

Corresponding Figures Amounts and disclosures for the prior period are

included as an integral part of the current period FS Intended to be read only in relation to the amounts

and other disclosure relating to the current period The level of detail presented is dictated primarily by

its relevance to the current period figures

Comparative Financial Statements Amounts and other disclosures for the prior period are

included for comparison with the current period FS They do not form part of the current period FS The level of information included is comparable with

that of the current period FS

Reporting on Corresponding Figures

1. Prior year’s FS audited by Continuing Auditor

The auditor’s opinion shall not refer to the corresponding figures except when the report on the prior year’s FS is modified and the matter that gave rise to modification is unresolved

2. Prior year’s FS audited by a Predecessor Auditor or Prior year’s FS Unaudited

Include an Other Matter paragraph to make reference to the Predecessor auditor’s report or to state that the prior year’s FS were not audited

Reporting on Comparative Financial Statements

Prior year’s FS audited by Continuing Auditor

Make reference to the comparative FS Update the prior year’s audit report If the prior year’s report is changed, the auditor

shall include an Other Matter paragraph to disclose the substantive reasons for the change


Prior year’s FS audited by a Predecessor Auditor

Ask the client to request the predecessor auditor to reissue the report on the prior year’s FS; or

The successor auditor’s report on the current year’s FS shall include an Other Matter paragraph that states

The fact that the prior year’s FS were audited by another auditor

The date of the predecessor auditor’s report The type of opinion expressed ( If modified, indicate

also the reason for modification)


Prior year’s FS unaudited The successor auditor’s report on the current year’s

FS shall include an Other Matter paragraph that states that the prior year’s FS are unaudited

Auditor’s Responsibility in Auditor’s Responsibility in relation to Other relation to Other

InformationInformation

PSA 720PSA 720

Definition

Other information- financial and non-financial information which is included in a document containing audited financial statements

Inconsistency- other information that contradicts information contained in the audited financial statements

Misstatement of fact- Other information that is unrelated to matters appearing in the audited financial statements that is incorrectly stated or presented


The auditor shall read the other information to identify material inconsistencies with the audited financial statements.

This shall be done prior to the date of the report or if not possible, as soon as practicable

Material Inconsistencies

Audited FS need revision Request the client to revise the FS; otherwise the

auditor shall modify the opinion

Other information needs revision Request the client to revise the other information;

otherwise the auditor shall communicate the matter to those charged with governance; and Describe the material inconsistency in an Other Matter

paragraph; or Withhold the auditor’s report; or Withdraw from engagement

Material Misstatement of Fact

When an auditor becomes aware of an apparent material misstatement of fact, the auditor shall Discuss the matter with those charged with

governance Request management to consult qualified third party

PSA 800

Audit of FS prepared in accordance with Special Purpose

Frameworks

Special Purpose Framework

A financial reporting framework designed to meet the financial information needs of specific users like Cash receipts and disbursement basis of accounting; Tax basis of accounting; or Financial reporting provisions established by

contractual agreement or regulatory requirements


When auditing special purpose financial statements, the auditor shall Consider the acceptability of the financial reporting

framework Comply with ethical requirements and PSAs relevant

to the engagement in planning and performing the audit

Reporting Responsibility

When forming an opinion and reporting on special purpose financial statements, the auditor shall apply the requirements in PSA 700. The auditor’s report shall Describe the purpose for which the FS are prepared

and the intended users; Refer to a note in the special purpose framework that

contains that information Include an Emphasis of Matter paragraph to alert the

readers that the FS are prepared in accordance with a special purpose framework

Consider the need to restrict the distribution or use of the auditor’s report

PSA 805

Audit of Single FS and Specific Elements,

Accounts or Items of a Financial Statement


When auditing a single FS or specific account of a FS, the auditor shall Consider the acceptability of the financial reporting

framework Comply with ethical requirements and PSAs relevant

to the engagement in planning and performing the audit

If the auditor has not audited the complete set of FS, the auditor shall determine whether it is practicable to accept this type of engagement

Additional Consideration when Auditing a Single FS or Specific

Element

Perform additional procedures related to single FS or specific account

Materiality must be related to specific account and not on the financial statements taken as a whole

The auditor may need to perform procedures to other related accounts


Comply with the requirements of PSA 700, adapted as necessary in the circumstances

Express a separate opinion for each engagement Determine the effect of the modification of the report

on the complete set of FS on the auditor’s report on a single FS or specific element

Consider the need to add an Emphasis of Matter or an Other Matter paragraph


When an auditor has expressed an adverse or disclaimer of opinion on the entity’s complete set of FS, PSA 705 does not permit the auditor to express an unmodified opinion on a single FS or specific element of a FS.

If the auditor who has expressed an adverse or disclaimer of opinion on the financial statements taken as a whole concludes that it is necessary to express an unmodified report on a specific element of a FS, the auditor shall only do so if:

1. The auditor is not prohibited by law or regulation;2. That report on specific element is not published together

with the auditor’s report on FS taken as a whole; and3. The specific element does not constitute a major portion

of the entity’s complete set of FS

PSA 810

Engagement to Report on Summary FS

Definition

Summary FS- Historical financial information that is derived form financial statements but contains less detail than the financial statements, while still providing structured representation consistent with audited FS

Applied Criteria- The criteria applied by management in the preparation of the summary FS


Before accepting an engagement to report on Summary FS, the auditor shall Determine whether it is appropriate to accept the

engagement Determine the acceptability of applied criteria Obtain agreement from management that it

acknowledges and understands its responsibility Agree with management the form of opinion to be

expressed

Nature of procedures

1. Evaluate whether the summary FS adequately disclose

Applied criteria Their summarized nature and identify the audited FS From whom and where the audited FS are available, if

not included, as well as the law or regulation that specifies that audited FS need not be presented

2. Agree the summary FS with the audited FS3. Evaluate whether the summary FS are

Prepared in accordance with the applied criteria Appropriately presented and not misleading Audited FS are available to the users without undue

difficulty

Auditor’s Report on Summary FS

Unmodified opinion on summary FS shall state that

1.The summary FS are consistent, in all material respects, with the audited FS….; or

2.The summary FS are a fair summary of the audited FS….

Qualified Opinion or Additional Paragraph on the Audited FS

When auditor’s report on the audited FS contains qualified, emphasis of matter or other matter paragraph, the auditor shall1. State this fact2. Describe the basis for qualified or the matter being

emphasized; and3. Describe the effect on the summary FS, if any.

Adverse or Disclaimer of Opinion on the Audited FS

When auditor’s report on the audited FS contains an adverse or disclaimer of opinion, the auditor shall1. State this fact2. Describe the basis for adverse or disclaimer of

opinion; and3. State that it is inappropriate to express an opinion

on the summary FS

Modified Opinion on Summary FS

If the summary FS are not consistent, in all material respect with the audited FS, and management does not agree to make the necessary revision, the auditor shall express an adverse opinion on the summary FS.

PSA 600

Audits of Group Financial Statements

Definition

Component – An entity or business activity for which group or component management prepares financial information that should be included in the group FS.

Group – All the components whose financial information is included in the group FS.

Significant component – A component identified by the group engagement team 1. that is of individual financial significance to the group,

or 2. that, due to its specific nature, is likely to include

significant risks of material misstatement of the group FS.

Responsibility for Audit

The group engagement partner is responsible for the direction, supervision and performance of the group audit engagement in compliance with professional standards and whether the auditor’s report that is issued is appropriate in the circumstances.

Conclusion

The auditor’s report on the group financial statements shall not refer to a component auditor

Acceptance and Continuance

The group auditor shall determine whether sufficient appropriate audit evidence can reasonably be expected to be obtained in relation to the consolidation process and the financial information of the components on which to base the group audit opinion.

Establish the terms of engagement

Requirement

The group engagement team shall establish an overall group audit strategy and shall develop a group audit plan1. Understand the group, its components and their

environment2. Understand the component auditors3. Determine the materiality level for the group FS as a

whole as well as the component materialityThe group auditor shall obtain sufficient appropriate

audit evidence in relation to the consolidation process and the financial information of the components to be able to express a group opinion

Thank You!

PSA

Documents

Transcript of PSA