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PSA 570-580

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Philippine Standard on
Auditing 570 (Redrafted)
GOING CONCERN
Scope of this PSA
Deals with the auditor’s responsibility in the audit of
financial statements with respect to management’s use
of the going concern assumption in the preparation and
presentation of the financial statements.
Going Concern Assumption
• Entity is viewed as continuing in business for the foreseeable future.
• General purpose financial statements are prepared on a going concern
basis, unless management either intends to liquidate the entity or to
cease operations.
Responsibilities of the Management
• Some financial reporting frameworks contain an
explicit requirement for management to make a
specific assessment of the entity’s ability to continue
as a going concern.
Responsibilities of the Auditor
• obtain
sufficient
appropriate
audit
evidence about the appropriateness of
management’s use of the going concern
assumption in the preparation and
presentation of the financial statements.
Effective Date
This PSA is effective for audits of financial
statements for periods beginning on or after
December 15, 2009.
Objectives
The objectives of the auditor are:
(a) To obtain sufficient appropriate audit evidence about the
appropriateness of management’s use of the going concern assumption
in the preparation and presentation of the financial statements;
(b) To conclude, based on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may cast significant
doubt on the entity’s ability to continue as a going concern; and
(c) To determine the implications for the auditor’s report
REQUIREMENTS
Risk Assessment Procedures and Related Activities
• the auditor shall consider whether there are events or conditions that
may cast significant doubt on the entity’s ability to continue as a going
concern
Evaluating Management’s Assessment
• The auditor shall evaluate management’s assessment of the entity’s
ability to continue as a going concern.
• consider whether management’s assessment includes all relevant
information of which the auditor is aware as a result of the audit.
Additional Audit Procedures When Events or Conditions Are Identified
• the auditor shall obtain sufficient appropriate audit evidence to
determine whether or not a material uncertainty exists through
performing additional audit procedures, including consideration of
mitigating factors
Audit Conclusions and Reporting
• Based on the audit evidence obtained, the auditor shall conclude
whether, in the auditor’s judgment, a material uncertainty exists
related to events or conditions that, individually or collectively, may
cast significant doubt on the entity’s ability to continue as a going
concern.
Use of Going Concern Assumption Appropriate but a Material
Uncertainty Exists
• When the auditor concludes that the use of the going concern
assumption is appropriate in the circumstances but a material
uncertainty exists.
• the auditor shall express a qualified or adverse opinion, as appropriate.
The auditor shall state in the auditor’s report that there is a material
uncertainty that may cast significant doubt about the entity’s ability to
continue as a going concern
Use of Going Concern Assumption Inappropriate
If the financial statements have been prepared on a going concern basis but,
in the auditor’s judgment, management’s use of the going concern assumption
in the financial statements is inappropriate, the auditor shall express an
adverse opinion.
Management Unwilling to Make or Extend Its Assessment
If management is unwilling to make or extend its assessment when
requested to do so by the auditor, the auditor shall consider the implications
for the auditor’s report.
Philippine Standard on
Auditing 580 (Revised
and Redrafted)
WRITTEN
REPRESENTATIONS
Introduction
Scope of this PSA deals with the auditor’s responsibility
to obtain written representations from management and,
where appropriate, those charged with governance.
Written Representations as Audit Evidence
Audit evidence is all the information used by the auditor in arriving at
the conclusions on which the audit opinion is based.
• Written representations are necessary information that the auditor
requires in connection with the audit of the entity’s financial
statements. Accordingly, similar to responses to inquiries, written
representations are audit evidence.
•
Objectives
(a) To obtain written representations from management that management
believes that it has fulfilled the fundamental responsibilities that
constitute the premise on which an audit is conducted
(b) To support other audit evidence relevant to the financial statements .
(c) To respond appropriately to written representations provided by
management or if management does not provide the written
representations requested by the auditor.
Definitions
Written representation – A written statement by management provided to
the auditor to confirm certain matters or to support other audit evidence.
Written representations in this context do not include financial statements,
the assertions therein, or supporting books and records.
Requirements
Management from whom Written Representations Requested
The auditor shall request written representations from management with
appropriate responsibilities for the financial statements and knowledge of
the matters concerned.
Written Representations about Management’s Responsibilities
• The auditor shall request management to provide a written representation
that it has fulfilled its responsibility for the preparation and presentation of
FS.
• request management to provide a written representation that it has
provided the auditor with all relevant information
Date of and Period(s) Covered by Written Representations
The date of the written representations shall be as near as practicable to, but
not after, the date of the auditor’s report on the financial statements.
Form of Written Representations
The written representations shall be in the form of a representation letter
addressed to the auditor. If law or regulation requires management to make
written public statements about its responsibilities, and the auditor
determines that such statements provide some or all of the representations ,
the relevant matters covered by such statements need not be included in the
representation letter
Doubt as to the Reliability of Written Representations and Requested
Written Representations Not Provided
if written representations are inconsistent with other audit evidence,
the auditor shall perform audit procedures to attempt to resolve the
matter.
• If the matter remains unresolved, the auditor shall reconsider the
assessment of the competence, integrity, ethical values or diligence of
management, or of its commitment to or enforcement of these, and shall
determine the effect that this may have on the reliability of
representations (oral or written) and audit evidence in general.
•
If management does not provide one or more of the requested written
representations, the auditor shall:
(a) Discuss the matter with management;
(b) Reevaluate the integrity of management and evaluate the effect that
this may have on the reliability of representations (oral or written) and
audit evidence in general; and
(c) Take appropriate actions, including determining the possible effect on
the opinion in the auditor’s report.
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