Auditing and
Assurance
OBJECTIVES
 Describe assurance services and distinguish audit
services from other assurance and non-assurance
services provided by the CPA.
 Discuss the demand for financial statement audit
 Explain the framework of Philippine standards on
auditing
 Describe the primary types of audit and related
services
 Discuss the framework of assurance engagements
 Types of Auditors
AUDITING
 A systematic process of objectively obtaining and
evaluating evidence regarding selected assertions
about economic action and events to ascertain the
degree of correspondence between those assertion and
established criteria and communicating the results to
interested users.
ASSURANCE
 Are designed to enhance the degree of confidence of
the intended users other than the responsible party
about the outcome of the evaluation or measurement
of a subject matter against criteria.
ASSURANCE
SERVICES(ENGAGEMENT)
AUDIT
OTHERS
REVIEW
RELATED SERVICES
(Non – Assurance)
Agreed Upon
Procedure
Compilation of FS
Management
Consulting
Preparation of tax
returns & tax consulting
Other advisory
Services
Related
Services(Non
-Assurance)
ASSURANCE
AUDIT
•Financial
statement audit
•Audits of
Internal Control
over Financial
Reporting
OTHERS
•Examination of
Prospective
financial
information(PSAE
3400)
•CPA Performance
Review
•CPA Risk
Advisory
REVIEW
•Agreed –upon
Procedures
•Compilation of
financial
Statements
•Review of Financial
Statements
•Review of Interim
Information
•Preparation of
tax Returns &
Tax Consulting
•Management
Consulting
•Other Advisory
Services
COMPARISON
Nature of
Service
Comparative
level of
assurance
provided by
auditor
Report
Provided
AUDIT
High but not
absolute
assurance
Positive
assurance on
assertion
REVIEW
Moderate
Negative
Assurance on
Assertions
AGREED UPON
PROCEDURE
COMPILATION
None
None
Factual
Findings
Procedures
Identificatio
n of
information
complied
Demand for Audit & Assurance Services




There is a potential conflict of interest between
those who prepare information & those who use
information. This potential conflict can result to
biased information
Information can have substantial economic
consequences for a decision maker.
Expertise is often required for preparing & verifying
information
Users of information frequently are prevented from
directly assessing the quality of information.
TWO TYPES OF ASSURANCE ENGAGEMENT
TYPE
Reasonable
Assurance
(audit)
Limited
Assurance
(review)
OBJECTIVE
Reduction in
assurance
engagement risk to
acceptably low level
in the circumstances
of the engagement.
Reduction in assurance
engagement risk to level
that acceptable in the
circumstances of the
engagement, but where that
risk is greater that for a
reasonable assurance
engagement, as the basis for
a practitioner conclusion
EVIDENCE
GATHERRING
PROCEDURE
•Obtain an
understanding of the
engagement
circumstances;
• Assess risks
•Respond to assessed
risks
•Perform further
procedures
Obtain an
understanding of the
subject matter and
other engagement
circumstances(proce
dure are deliberately
limiter)
CONCLUSION
Positive form of
expression of the
practitioner’s
conclusion
Negative form of
expression of the
practitioner’s
conclusion
Elements of Assurance Engagement
 A three party relationship
 A subject matter
 Criteria
 Evidence
 Assurance Report
Elements of Assurance Engagement
A three party relationship
Assurance Engagement involves three separate parties
 An independent and competent professional
accountant who adhere the fundamental principle
required by Code of ethics
 The party responsible for the subject matter of
assurance engagement.
 The intended users to whom the professional
accountant usually addresses the reports.
Elements of Assurance Engagement
Subject Matter
The subject matter of an assurance engagement may
take in many forms such as:
• Data (for example, financial and non-financial
information)
• Systems and processes (for example, internal controls)
• Behavior (For example, entity’s compliance with laws
and regulations)
• Physical characteristics ( for example, capacity of
plant facility)
Elements of Assurance Engagement
Evidence
• The practitioner should plan and perform the
engagement to obtain sufficient appropriate
evidence to determine whether the assertions are free
from material misstatements.
Elements of Assurance Engagement
Suitable Criteria Criteria are the benchmarks used to evaluate or measure the subject
matter including where relevant, benchmarks for presentation and
disclosure. They need to available to intended user to allow them to
understand how the subject matter has been evaluated or measured.
*Characteristics of Suitable Criteria*
Relevance:
Completeness
Reliability
Neutrality
Understandability
2/25/2021
Elements of Assurance Engagement
Assurance Reports
 The professional accountant expresses a conclusion
that provides a level of assurance as to whether the
subject matter conforms in all material respects with
identifiable suitable criteria. The professional
accountant’s conclusion provides either high or
moderate level of assurance about the subject
matter.
KEY NOTES
PSA 120 – Framework of Philippine standards on
auditing
PSRE 2400 – Engagement to Review Financial
Statements
PSAE 3000(REV.) Assurance engagements other than
audits or Reviews of historical fS
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