CHAPTER 1
THE DEMAND FOR AUDITING AND ASSURANCE SERVICES
Auditing-plays a valuable role in monitoring the contractual
relationships between entity, stockholders, managers, employees, and
debt holders
Public Company-selling stocks or bonds to the public, giving the
public a valid interest in the proper use of the company’s resources
Information Asymmetry-manager has more information about true
financial position and results of operations than the absentee owner
Assurance Services-designed to enhance the degree of confidence
in the information and consists of two types:


Retired
Protect employees from surprises concerning
Employees
pensions and other post-retirement benefits.
International Auditing and Assurance Standards Board-issues
pronouncements designed to foster the development of consistent
worldwide auditing standards
Auditing Standards Practice Council of the Philippines-reviews
and recommends for approval to the PRC-BOA their adoption as the
Philippine Standards on Auditing
Professional Regulatory Board of Accountancy-shall monitor the
conditions affecting the practice of accountancy and adopt such
measures to enhance and maintain high professional, ethical, and
auditing standards
CHAPTER 2
those that increase the reliability of information
those that involve putting information in a form or context
that facilitates decision making
PROFESSIONAL PRACTICE OF ACCOUNTANCY: AN
OVERVIEW
Accountancy as a Profession:
Attestation Services-provide assurance as to its reliability
1)
NOTE THAT: one of the most sought-after attestation services is the
examination or audit of historical financial statements

auditing requires the highest level of technical competence,
freedom from bias, and concern for integrity of financial
reporting process
Philosophy of an Audit: The auditor’s role is to determine whether
the reports prepared by the manager conform to the contract’s
provisions

auditor’s verification of the financial information adds
credibility to the report reduces information risk
Audit Examination-employed to establish the reliability or unreliability
of the financial statements and supporting records
2)

3)

4)
Financial Statement Audit-gathering evidence to obtain the high
level of assurance that financial statements are free of material
misstatements due to fraud or errors

The public expects auditors to:
5)
a)
b)
c)
find fraud
require accounting principles the best portray the spirit of the
concepts adopted by accounting standards setters
be independent of management
“A profession is distinguished by certain characteristics including:

Audited When Applies to Financial Statements-balance sheet and
the statements of income, retained earnings, and cash flows are
accompanied by an audit report prepared by an independent public
accountants

Users of Audited Financial Statements
USER
Management
Stockholders
Bondholders
Financial
Institutions
Taxing
Authorities
Regulatory
Agencies
Labor
Unions
Court
System
Vendors

TYPE OF DECISIONS
performance, make operational
Review
decisions.
Report results to capital markets.
Buy or sell stock.
Buy or sell bonds.
Evaluate loan decisions, considering interest
rates, terms, and risk.
Determine taxable income and tax due.
Develop regulations and monitor compliance.
Make collective bargaining decisions.
Assess the financial position of a company in
litigation
Assess credit risk.
Systematic Theory-public accounting theory consists offinancial accounting and reporting standards and practices
and auditing standards-a science of validation
Professional Authority-the professional determines what
is good or bad for the client and the client accedes to this
professional judgement
The basis for the professional accountant’s authority is his
expertise in the systematic theory of accounting and
auditing.
Community Sanction-admission to the public accounting
profession is controlled and the candidate must satisfy
government educational and experience requirements and
pass the board examination
A professional’s performance should be judged by
standards established by a profession itself.
Regulations Code-powers and privileges granted to the
public accounting profession by the community effectively
constitute a monopoly
Rules of Professional Conduct or Code of Ethics have been
promulgated and made legally binding through Accountancy
Law.
A Culture-CPA is a member of a time-honored profession
and the status of the profession and the responsibilities that
accompany this status affects his/her behavior in society
Mastery of a particular intellectual skill, acquired by
training and education;
Adherence by its members to a common code of
values and conduct established by its administering
body, including maintaining an outlook which is
essentially objective; and
Acceptance of duty to society as w hole (usually in
return for restrictions in use of a title or in the granting
of a qualification)
Professional Accountant-holds a valid certificate issued by the
Board of Accountancy


Professional
Accountant
in
Public
Practice-a
professional accountant, irrespective of functional
accountant in classification in a firm that provides
professional services
Professional Accountant in Business-commerce,
industry, service, public sector, education, not-for-profit
sector, regulatory bodies or professional bodies, or a
professional accountant contracted by such entities (subsectors: commerce and industry, education, and
government)
Scope of Practice
a)
b)
c)
d)
Practice of Public Accountancy-shall constitute a person, be
it his/her individual capacity, or as a staff member in an
accounting or auditing firm, holding out himself/herself as
one skilled in the knowledge, science and practice of
accounting, and as a qualified person to render professional
services as a certified public accountant
Practice in Commerce and Industry-shall constitute in a
person involved in decision making requiring professional
knowledge in the science of accounting, or when such
employment or position requires that the holder thereof must
be a certified public accountant.
Practice in Education/Academe- shall constitute in a person
in an educational institution which involve teaching of
accounting, auditing, management advisory services,
finance, business law, taxation and other technically related
subject
Practice in the Government-shall constitute in a person who
holds, or is appointed to, a position in an accounting
professional group in government or in a governmentowned and/or controlled corporation, including those
performing proprietary functions, where decision making
requires professional knowledge in the science of
accounting, or where a civil service eligibility as a certified
public accountant is a prerequisite
Assurance, Attest, and Auditing Services

These terms are used interchangeably because they are
related, and they encompass the same process: the
evaluation of evidence to determine whether information
has been recorded and presented in accordance with a
predetermined set of criteria, together with the issuance of
a report that indicates the degree of correspondence
Assurance Services-independent professional services that improve
the quality of information, or its context, for decision makers


allows reporting on relevance and timeliness of the
information
include almost any service provided by accounting
professional that involves capturing information, improving
its quality, or enhancing its usefulness for decision makers
Attest Services-occur when a practitioner is engaged to issue, a report
on subject matter, or an assertion about subject matter, that is
responsibility of another party


Trust Services
Reviews of Financial
Statements or Other
Information

Agreed-Upon
Procedures
Engagements
Other Assurance Services:

CPA Elder Care
Prime Plus Services

CPA
Performance
View Services

CPA Risk Advisory
Services
Types of Auditors
1)
2)


3)



The Relationship Among Assurance, Auditing, Attest, and Services
ASSURANCE SERVICES
Attestation Services:

Audits of Financial
Statements

Examination
of
Internal Control
NON-ASSURANCE
SERVICES
Tax Services
Management
Consulting
Services:

Fraud Investigations
Information
Technology
Consulting
Other Nonassurance Services:

Compilation,
Accounting and Data
Processing System
Services
External Auditors-CPA firms have as their primary
responsibility the performance of audits of published
historical financial statements of all publicly tradedcompanies and can perform operational auditing as well as
compliance as auditing part of their management
consultancy services.
Internal Auditors-perform independent appraisal activity
within the organization such as review of accounting,
financial, and other operations as a basis for service to
management
concerned with all kinds of financial and other data
generated for both internal and external users
engaged in evaluating the efficiency of resource utilization
(operational auditing), effectiveness with which entity
objectives are attained (management or performance
auditing and routine and compliance auditing)
Government Auditors:
present their financial statements fairly in accordance with
FRS and applicable laws and regulations
conduct the programs with economy and efficiency
desired results are achieved
BIR Examiners-designed to determine whether taxpayers have
complied with tax laws (compliance audits)
Regulatory Auditors-SEC, Bangko Sentral ng Pilipinas, Cooperative
Commission, Office of Insurance Commission who check on the
solvency and compliance of the various institutions and business firms
with appropriate laws and regulations
4)
Systematic Process-there should be a well-planned and
thorough approach for conducting an audit
Objectivity-auditor must search for audit evidence and
objectively evaluate the relevance and validity of the
evidence he or she finds

COA Auditors:
subset of assurance services, and auditing is a type of attest
service
Audit Services-“Auditing is a systematic process of objectively
obtaining and evaluating evidence regarding assertions about
economic actions and events to ascertain the degree of
correspondence between those assertions and established criteria
and communicating the results to interested users.”



Forensic Auditing specially trained in detecting,
investigating, and deterring fraud and white-collar crime\
Types of Other Audit Services
a)
Internal Audit- independent, objective assurance and
consulting activity designed to add value and improve an
organization's operations
Objective and Scope:


assist all members of management in the effective
discharge of their responsibilities, by furnishing them with
analyses, appraisal, recommendations, and pertinent
comments concerning the activities reviewed
going beyond the accounting and financial records to obtain
a full understanding of the operations under review
The attainment of this overall objectives involves such activities as:

reviewing and appraising the soundness, adequacy, and
application of accounting, financial, and other operational
controls, and promoting effective control at reasonable cost





b)

c)
d)
ascertaining the extent of compliance with established
policies, plans, and procedures
ascertaining the extent to which the company assets are
accounted for and safeguard from losses of all kinds
ascertaining the reliability of management data developed
within the organization
appraising the quality of performance in carrying out
assigned responsibilities
recommending operating improvements
Compliance Auditing-examination, audit and settlement in
accordance with law and regulation
determines the extent to which rules, policies, laws,
covenants, or government regulations are followed by the
entity being audited
Operational Auditing-future-oriented, independent, and
systematic evaluation performed by the internal auditor for
management of the operational activities controlled by top-,
middle-, and lower-level management for the purpose of
improving organizational profitability and increasing the
attainment of the other organizational objectives
Forensic Audits-detect a deter fraudulent activities
NOTE THAT: A promising new area of attestation services relates to
assertions companies make about sustainability-claimed reductions in
carbon emissions or appropriate handling of hazardous waste
Other Non-Assurance Services:



Agreed-Upon Procedures-the party engaging the
professional accountant provides a report of factual findings
as a result of undertaking those procedures (not an
assurance engagement)
Tax Preparation and Planning Services-assist clients in
preparing and filing tax returns, providing advice on tax and
estate planning, and representing clients on tax issues
before Internal Revenue Service or tax courts
Management Advisory Services-providing advice and
assistance concerning an entity’s organization, human
resources, finances, operations, IT systems, helping public
companies implement effective internal control over
financial reporting in preparation for an integrated audit
Compilation, Accounting and Data Processing System Servicesbookkeeping, payroll processing, and preparing financial statements
CHAPTER 3
THE PUBLIC ACCOUNTING PROFESSION ENVIRONMENT
Certificate of Public Accountant-a person, who after obtaining the
required education passes an extensive examination and is licensed
by practice as professional accountant
Requirements to Enter the Accountancy Profession



A.


Be a holder of a degree of BSA conferred by a school,
college or institute duly recognized and/or accredited by the
CHED or authorized government office.
Qualify as a professional accountant by passing the CPA
Licensure Board Examination administered by Professional
Regulatory Board of Accountancy.
Satisfy all other legal and regulatory requirements before
the individual takes on the role of a professional accountant.
Pre-Qualification Education Requirements
Should meet the pre-qualification education requirement
that requires possession of a BSA degree
BSA program should provide a foundation of professional
knowledge, professional skills, and professional values,
ethics, and attitudes that enable them to continue to learn
and adapt to change throughout their professional lives.
COURSES
MINIMUM UNITS
PRESCRIBED
1)
2)
3)
4)
5)
6)
General Education (GE) Courses
National Service Training Program
(NSTP)
Physical Education (PE) courses
Common
Business
and
Management Education Courses
Core
Accounting
Education
Courses
Cognates/Major/Professional
Courses
Total
Ched Memo No. 27, Series of 2017
36
6
8
6
81
36
173 units
decisions to users, manage and supervise others, and
maintain a professional personal presence.
B.
I.
II.
III.
C.
I.
II.
III.
IV.
CPA Licensure Examination
Qualification of Applicants for the Licensure Examinations
a) A Filipino citizen;
b) Is of good moral character
c) Is a holder of the degree of BSA conferred by a
school, college, academy or institute duly
recognized and/or accredited by the CHED other
authorized government offices; and
d) has not been convicted of any criminal offense
involving moral turpitude
Scope of Examination
a) FAR
b) AFAR
c) MAS
d) Auditing
e) Taxation
f)
RFBT
Rating in the Licensure Examination

Must obtain a general average of 75%, with no
grades lower than 65% in any given subject.

In the event a candidate obtains the rating of 75%
and above at least majority of the subjects, he/she
shall receive a conditional credit for the subjects
passed.

If the candidate fails to obtain at least a general
average of 75% and a rating of at least 65% in
each of the subjects reexamined, he/she shall be
considered as failed in the entire examination
Other Legal and Regulatory Requirements.
Oath

All successful candidates in the examination shall
be required to take an oath of profession prior to
entering upon the practice of the profession.
Issuance of Certificates of Registration and Professional
Identification Card

COR shall be issued to examines who passed the
licensure examination subject to payment of fees
prescribed by the Commission.

COR shall bear the signature of the chairperson
of the Commission and the chairman and
members of the Board, stamped with official seal
of the Commission and of the Board.

Professional ID bearing the registration number,
date of issuance, expiry date, duly signed by the
chairperson of the Commission, shall likewise be
issued to every registrant renewable every three
years.
Indication of COR, ID, and Professional Tax Receipt

CPA shall be required to indicate his/her COR
number and date of issuance, duration of validity,
including professional Tax Receipt number on
documents he/she signs, uses, or issues in
connection with the practice of his/her profession
For CPAs in Public Practice an accreditation from the BOA
is required. Such accreditation shall be renewed every 3
years.
Developing Capabilities and Competence After Admission in the
Profession


Technical Knowledge and Expertise-auditors must
understand accounting and auditing authoritative literature,
develop industry and client-specific knowledge, develop and
apply computer skills, evaluate internal controls, and assess
and respond to fraud risk
Leadership, Teamwork, and Professional Skills-auditors
make presentations to management and audit committee
members, exercise logical reasoning, communicate
Education and Development for Acquiring and Maintaining the
Capabilities of Professional Accountants Include:
a)
b)
c)
d)
Advanced professional education pursued at academic
institutions or through the programs of professional bodies
On-the-job training and experience programs
Off-the-job training
Continuing professional development courses and activities
Core Values and Competency Requirements for CPAs in Public
Practice
Core Values-essential and enduring beliefs that it upholds overtime
and enable CPAs to reflect the foundation of the unique strengths and
qualities that will continue to drive and distinguish the profession






Integrity-integrity and honesty, holding themselves to
rigorous standards of professional ethics
Competence-demonstrate superior technical proficiency by
performing with a high level of expertise and knowledge
Lifelong Learning-highly value education beyond
certification and continually pursue new and broad skills and
knowledge
Objectivity-maintain impartiality and intellectual honesty by
remaining free of personal bias and conflicts of interest
Commitment to Excellence-deliver exemplary, high-quality
services
Relevance in the Global marketplace-enhance their value
by meeting the ever-changing needs of the world
Core Competencies-unique combination of human skills, knowledge
and technology that provides value and results to the user






Communications Skills- able to effectively exchange reliable
and meaningful information, using appropriate context and
interpersonal skills.
Leadership Skills-adept at influencing, inspiring and
motivating others to facilitate change and achieve
excellence.
Critical-Thinking and Problem-Solving Skills-skillful in
evaluating facts, challenging assumptions and applying
judgment to develop relevant solutions.
Anticipating and Serving Evolving Needs-adept in
identifying strategic directions and opportunities to meet the
evolving needs of those they serve.
Synthesizing Intelligence to Insight-expert in connecting
data, performing analysis and using business acumen to
provide astute guidance for better business decision
making.
Integration and Collaboration-effective at building strategic
alliances and working collaboratively to provide
multidisciplinary solutions to complex problems.\
Regulatory and Professional Organizations that Influence the
Profession
A.
Regulatory Government Agencies

Professional
Regulations
Commission- administers,
implements and enforces the regulatory laws and policies of
the country with respect to the regulation and licensing of
the various professions and occupations under its
jurisdiction, including the enhancement and maintenance of
professional and occupational standards and ethics and the
enforcement of the rules and regulations relative thereto
Professional Regulatory Board of Accountancy-consists of
a chairman and six members, is the agency that is
empowered to administer the Accountancy Law (the only
body that may issue and revoke CPA certificates and grant
licenses to practice)




B.

Securities and Exchange Commission-regulates the
registration and operations of corporations, partnership, and
other forms of associations in the Philippines
Commission on Audit-audits or determines whether
government units handle their funds according to existing
laws and whether their program are being conducted
efficiently and economically
Bureau of Internal Revenue-responsible for the enforcement
of the tax laws, rules and regulations
Professional Regulations
Philippine Institute of Certified Public Accountantsaccredited national professional organization of CPAs.
Publishes the accountants journal that contains technical
and formal papers, bulletins and pronouncements released
by FRSC and AASC
Sectoral Organizations-other professional organizations that
complements PICPA’s objectives and provide specific
professional development and other requirements of CPAs:

CPA’S Legal Liability


C.

Association of CPAs in Public Practice (ACPAPP)
Association of CPAs in Education (ACPAE)
Association of CPAs in Commerce and Industry
(ACPACI)
 Government Association of CPAs (GACPA)
Standard-Setting Bodies
International Federation of Accountants
 IFAC’s mission is the development and enhancement
of the profession to enable it to provide services of
consistently high quality in the public interest
 Non-profit,
non-governmental,
non-political
international organization of accountancy bodies
 Membership in IFAC automatically includes
membership in IASB and is open to accountancy
bodies recognized by law or general consensus within
their countries
The work programs of the Council are implemented primarily by
smaller working groups, or standing technical committee which
include:



 Education
 Ethics
 Financial and Management Accounting
 Information Technology
 International Auditing Practices
 Membership
 Public Sector
International Accounting Standards Board-funded by
contributions from the major accounting firms, private
financial institutions and industrial companies throughout
the world
 consists of 14 members (12 of whom are full-time)
reside in 9 countries
 the board cooperates with national accounting
standard-setters to achieve convergence in
accounting standards around the world
Financial Reporting Standards Council-assist the board in
carrying out its powers and functions particularly the
adoption of IFRS in the Philippines
International Auditing Practices Committee-standing
committee of the council of IFAC and is responsible for the
development and issuance on behalf of the council,
standards and statements on a variety of audit and attests
functions
 Issues the International Standards on Auditing
that are to be applied in the International
Standards on Auditing that are to be applied in the
audit of financial statements and other information
related services
Audit professionals have a responsibility under common law
to fulfill expressed and implied contracts with clients
Liable to clients for negligence and/or breach of contracts
should they fail to provide the services not exercise due care
in their performance
Usual Misstatements in the Financial Statements
a)
b)
Improper or inadequate disclosure
Inappropriate valuation
Typical Lawsuits Brought by Clients Against CPA Firms
a)



Auditing and Assurance Standards Council-assigned to
assist the Board in carrying out its powers and functions
particularly the adoption of auditing and assurance
standards in the Philippines
b)
c)
Did not discover an employee defalcation as a result of
negligence in conduct of audit
Did not complete the audit on the agreed date
Inappropriate withdrawal from an audit
Legal Concepts Related to Auditor’s Liability
1)
2)
3)
Due Professional Care-auditor is not a guarantor of the
statement’s accuracy but expected to exercise the same
reasonable care
 Prudent Person Concept-standard of due care to
which auditor is expected to held
Sources of Responsibility-stablished by common law or
statutory law
 Common
Laws-developed
through
court
decisions
 Statutory Laws-body of laws passed by legislative
bodies such as Congress
Degree of Wrongdoing:
 Ordinary Negligence-absence of reasonable care
that can be expected of a person in a set of
circumstances
 Gross Negligence-consistently fail to follow the
standards of the profession on an engagement
Auditing-systematic process of objectively obtaining and evaluating
evidence regarding assertions about economic actions and events to
ascertain the degree of correspondence between these assertions and
established criteria and communicating the results to intended users
Commission on Audit-recognized as Supreme Audit Institution in
the Philippines


Accounting vs Auditing
Accounting
Provide accounting information
about economic entities that is
useful in making economic
decisions
Auditing
Accumulating
evidence
to
determine if the recorded
accounting information properly
reflects the economic events
that occurred during the period
Assurance vs. Auditing
Assurance

Broader than auditing

Encompasses
assertion-based
engagements
and
assertion-based
engagements
encompass audits
Types of Audit


Auditing
Narrower
than
assurance
Auditing is under the
umbrella
of
endurance services
rendered by CPAs
Financial Statements Audit-expression of an opinion on the
financial statements of an entity after the CPA is satisfied as to the
fairness of such financial statements, in all material respects, in
accordance with applicable financial reporting framework



fair presentation in accordance with GAAP
auditor determines the scope of audit in accordance with the
requirements of legislation, regulations and relevant
professional bodies
auditor uses his professional judgement to determining audit
procedures to be performed in accordance with PSA


Information Risk-information is misstated or misleading



Operations Audit-systematic review of an organization’s activity in
relation to specified objectives for the purpose of assessing
performance



Focus: Efficiency and effectiveness of operations
Efficiency-management audit
Effectiveness-program results audit
Remoteness of users from provider of information
Inherent bias of information providers
Voluminous and complex transaction data
Reducing Information Risk
a)
b)
c)
Allow users to verify information
Users shares information risk with management
Have the financial statements audited
Auditor’s Report-communicates the opinion of the auditor to users

Unqualified auditor’s report
Limitations of an Audit:




Integrated Audit-fair presentation of financial statements and
effectiveness of internal control over financial reporting
Forensic Audit-deter and /or detect fraud
Authority is embodied in the Constitution
Composed of 1 chairman and 2 commissioners called
“Commission Proper”
Members must be CPAs or Lawyers and must not be from
one profession only
Appointed by the President of the Philippines with
consent of Commission on Appointment for a term of 7
years
Nature of financial reporting
Nature of audit procedures
The need for the audit to be conducted within a reasonable
period of time and at a reasonable cost
Auditor does not express an opinion on matters such as:
future viability of the entity, compliance with all laws
and regulations, and effectiveness or efficiency of
management
Relationship Among Types of Audits
Audit
Auditor
Compliance Audit-determination of whether a person or entity has
adhered to laws, regulation, or contracts
Reliability
of
Financial
Reports
Financial
Statements Audit
-External Auditor
-Government
Auditor
-Internal Auditor
(internal use)
Effective
and
Efficient
Operations
Operations Audit
Compliance
with Laws and
Regulations
Compliance Audit
-Government
Auditor
-Internal Auditor
-External Auditor
(outsourced)
-Government
Auditor
-Internal Auditor
-External Auditor
(outsourced)
Types of Audit As to Auditors:
1)
2)



3)

External Audit-performed by auditors who are
independent of the organizations whose assertions are
being audited (called independent or external auditors)
Internal Audit-objective and independent assurance and
consulting activity designed to add value to the organization
Goes beyond the financial aspect of an entity and include
areas in governance process, risk management, and
control
Cannot reach the same level of independence of external
auditors
Independence can be maximized if internal auditors report
to senior personnel not directly involved in managing the
organization
Government Audits-determination of whether government
funds are being handled properly and in compliance with
existing laws
Whether the government programs of a particular agency
are being conducted efficiently and economically
Internal Audits-checks the accountability and quality of an
organization and its productions and aims to improve its quality and
reliability
NOTE THAT: Audits cover organizations such as corporate
governance structures, risk management, operational effectiveness,
and general legal compliance
Benefits of Internal Audits




Will boost the reputation of the company
Will demonstrate businesses’ commitment to ethical
management, transparent business decisions, and goodwill
Will unlikely uncover inefficient processes that slow downs
tasks, duties and deliverables
Keeps a check on employees’ misuse of resources and ca
create a monitoring tool to track internal decisions
Outcomes of a Successful Audit






May uncover gap in internal tools that can be mended and
transformed to create efficiency and clarity within the
business
Requires an evaluation of business practices and policies a
Provide guidelines towards increasing and standardizing
accountability and mechanisms towards stakeholders such
as employees, clients, community, and partners
Will improve business of any size to improve its decision
making and governance structures in a manner that will
yield the most fruitful outcomes
Will give the businesses the information and space to
reevaluate risk factors
It creates a future-facing proactive model of business and to
work on the work on their weaknesses and improve their
strength to create a strategic growth and success
5)
organization, as needed to respond to and
support meeting requirements and expectations
Monitoring Activities -evaluations used to ascertain
whether components of internal control are present and
functioning

On-Going Evaluations-built into business
processes and provide timely information

Separate Evaluations-conducted periodically;
vary in scope and frequency depending on risk
assessment,
effectiveness
of
on-going
evaluations
and
other
management
considerations
Internal Controls-organizational plan and all related measures to
safeguard assets, ensure the accuracy, and reliability of accounting
records, promote operational efficiency, and encourage adherence to
prescribed managerial policies
Committee of Sponsoring Organizations of the Treadway
Commission (COSO)-developed model for evaluating internal
controls


The model has been adopted as the generally accepted
framework for internal control
Widely recognized as the definitive standard against which
organizations measure the effectiveness of their systems of
internal control
Public Practice Services:
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Assurance-enhance the degree of confidence
Attestation-assurance as to reliability
 Audit
 Review
 Other assurance engagements
Non-Assurance-useful for the client
Related Services:
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Agreed Upon Services
Compilation
Not Related
COSO Model-defines internal control as “a process, effected by an
entity’s board of directors, management, and other personnel,”
designed to provide reasonable assurance of the achievement of
objectives:
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Effectiveness and efficiency of operations
Reliability of financial reporting
Compliance with applicable laws and regulations
5 Components of the COSO Framework
1)
2)
3)
4)
Control Environment-set of standards, processes, and
structures that provide the basis for carrying out internal
control across the organization “tone at the top”
Risk Assessment-dynamic and repetitive process for
identifying and assessing risks (forms the basis of risk
management)
Control Activities-actions (preventive or detective)
established through policies and procedures that help
ensure that risks are minimized
Information and Communication-information is obtained
by management from both internal and external sources in
order to support internal control components
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Communications-based on internal and external
sources is used to disseminate important
information throughout and outside of the
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Tax
Management Consulting
Accounting
Litigation Support
Audit-high reasonable level of assurance about the management’s
assertion of subject matter’s compliance to a suitable criterion, in a
form of positive assurance
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Provide sufficient appropriate evidence
“Present fairy, in all material respects”
NOTE THAT: Audit is not absolute assurance mainly because it is
based on judgement, selective testing, inherent limitations, and most
evidence are persuasive, rather than conclusive
Review-moderate/limited level of assurance about the management’s
assertion of a subject matter’s compliance to a suitable criterion, in a
form of negative assurance
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Evidence and procedures are substantially less than audit
“Nothing has come to our attention that causes us to believe
that the financial statements is not presented fairly in all
material respects”
Limited to inquiry and analytical procedures (plausible
relationships)
Procedures Nor Performed During Review:
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Assessment of an accounting and internal control
Test of records
Corroborating evidence
Agreed-Upon Procedures of an audit nature and entity and any
appropriate third parties have agreed and to report on factual things
No Assurance-recipients must form their own conclusions (report is
restricted)
Compilations-uses accounting expertise to collect, classify, and
summarize financial information without the assertions underlying that
information
Industry Specialization
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Public accounting firms have long recognize the value of
industry specialization
Firms believe that such organizational structure leads to
higher-quality integrated services
Career Levels
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Staff Auditors-entry level, perform tasks assigned by
senior auditors
Senior Auditors-supervises some aspect of audit
Managers-supervises the audit engagement
Partners-responsible for performance of audit in
accordance with standards
Senior/Managing Partner-responsible for developing
form’s policies, planning activities, and day-to-day
management
Audit Season-busy season from December through April