PR105: AUDITING & ASSURANCE PRINCIPLES
ROBERT E.
REGALA
Chapter Review Discussion
CHAPTER 12:
PHASE 3 AUDIT
COMPLETION &
REPORTING
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PSAs: 450, 560, 570, 580, 700,
701, 705, & 706
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CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
1. (450) Differentiate between
“undetected” and “uncorrected”
misstatements. (2 pts)
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CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
Undetected misstatements are misstatements that the
auditor has not uncovered because of the presence of
sampling risk and non-sampling risk.
Uncorrected misstatements are misstatements that the
auditor has identified and communicated to management in
order for management to (a) understand the cause of the
identified misstatements, (b) perform procedures to
determine the amount of the actual misstatement in the
class of transactions, account balance or disclosure, and to
(c) make appropriate adjustments to the financial
statements.
PR105: AUDITING &
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ROBERT
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CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
2. (450) Prior to evaluating the
effect of uncorrected
misstatements, what does the
PSA require the auditor to do?
(2 pts)
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CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
The auditor’s determination of materiality in accordance with PSA 320 is
often based on estimates of the entity’s financial results, because the
actual financial results may not yet be known. Therefore, prior to the
auditor’s evaluation of the effect of uncorrected misstatements, it may be
necessary to revise materiality determined in accordance with PSA 320
based on the actual financial results.
Instructor
ROBERT
REGALA
PSA 320 explains that, as the audit progresses, materiality for the financial statements as a whole (and, if
applicable, the materiality level or levels for particular classes of transactions, account balances or
disclosures) is revised in the event of the auditor becoming aware of information during the audit that would
have caused the auditor to have determined a different amount (or amounts) initially. Thus, any significant
revision is likely to have been made before the auditor evaluates the effect of uncorrected misstatements.
However, if the auditor’s reassessment of materiality determined in accordance with PSA 320 (paragraph 10)
gives rise to a lower amount (or amounts), then performance materiality and the appropriateness of the
nature, timing and extent of the further audit procedures are reconsidered so as to obtain sufficient
appropriate audit evidence on which to base the audit opinion.
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CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
3. (560) What are “subsequent
events”? Give an example. (2
pts)
PR105: AUDITING &
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REGALA
CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
Subsequent Events are events
occurring between the date of the
FS and the date of the auditor’s
report, and facts that become
known to the auditor after the date
of the auditor’s report.
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ROBERT
REGALA
CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
4. (560) What are some audit
procedures that the PSA
requires the auditor to perform
related to subsequent events?
(3 pts)
PR105: AUDITING &
ASSURANCE PRINCIPLES
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Instructor
ROBERT
REGALA
CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
Some audit procedures that the PSA requires the auditor to perform related to
subsequent events are:
(a) Obtaining an understanding of any procedures management has established
to ensure that subsequent events are identified.
(b) Inquiring of management and, where appropriate, TCwG, as to whether any
subsequent events have occurred which might affect the financial statements.
(Ref: Para. A9)
(c) Reading minutes, if any, of the meetings, of the entity’s owners, management
and TCwG, that have been held after the date of the financial statements and
inquiring about matters discussed at any such meetings for which minutes are not
yet available. (Ref: Para. A10)
(d) Reading the entity’s latest subsequent interim FS, if any.
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CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
5. (560) If management does not take steps to
ensure that those who receive the previously
issued financial statements is informed of the
situation related to a significant event or fact
that warrants amendment of the FS and does
not amend the FS in circumstances where the
auditor believes they need to be amended,
what must the auditor do? (3 pts)
PR105: AUDITING &
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Instructor
ROBERT
REGALA
CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
If management does not take the necessary steps to
ensure that anyone in receipt of the previously issued
financial statements is informed of the situation and does
not amend the financial statements in circumstances where
the auditor believes they need to be amended, the auditor
shall notify management and TCwG, that the auditor will
seek to prevent future reliance on the auditor’s report. If,
despite such notification, management or those charged
with governance do not take these necessary steps, the
auditor shall take appropriate action to seek to prevent
reliance on the auditor’s report.
PR105: AUDITING &
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Instructor
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CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
6. (570) What are the
responsibilities of the auditor as
regards the use of the “going
concern” basis of accounting by
the entity? (2 pts)
PR105: AUDITING &
ASSURANCE PRINCIPLES
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ROBERT
REGALA
CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
The auditor’s responsibilities are to obtain sufficient appropriate
audit evidence regarding, and conclude on, the appropriateness of
management’s use of the going concern basis of accounting in the
preparation of the financial statements, and to conclude, based on
the audit evidence obtained, whether a material uncertainty exists
about the entity’s ability to continue as a going concern. These
responsibilities exist even if the financial reporting framework used
in the preparation of the financial statements does not include an
explicit requirement for management to make a specific
assessment of the entity’s ability to continue as a going concern.
PR105: AUDITING &
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CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
7. (570) What is the required
minimum period coverage of
management’s assessment of
the entity’s ability to continue as
a going concern? (2 pts)
PR105: AUDITING &
ASSURANCE PRINCIPLES
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CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
In evaluating management’s assessment of the entity’s ability to continue
as a going concern, the auditor shall cover the same period as that used
by management to make its assessment as required by the applicable
financial reporting framework, or by law or regulation if it specifies a
longer period.
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If management’s assessment of the entity’s ability to
continue as a going concern covers less than twelve
months from the date of the financial statements as
defined in PSA 560, the auditor shall request
management to extend its assessment period to at
least twelve months from that date.
PR105: AUDITING &
ASSURANCE PRINCIPLES
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CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
8. (580) What are the matters
that must be contained in a
management’s written
representation? (3 pts)
PR105: AUDITING &
ASSURANCE PRINCIPLES
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Instructor
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REGALA
CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
Written Representations about Management’s Responsibilities
include:
a. Preparation and Presentation of the Financial Statements
b. Information Provided to the Auditor
c. Description of Management’s Responsibilities in the Written
Representations
d. If the auditor determines that it is necessary to obtain one or
more written representations to support other audit evidence
relevant to the financial statements or one or more specific
assertions in the financial statements, the auditor shall request
such other written representations.
PR105: AUDITING &
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Instructor
ROBERT
REGALA
CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
9. (580) What are the conditions
related to written representation
under which the auditor must
disclaim an opinion on the FS?
(2 pts)
PR105: AUDITING &
ASSURANCE PRINCIPLES
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Instructor
ROBERT
REGALA
CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
If, as described in paragraph 20(a), the auditor
concludes that the written representations about these
matters are (a) unreliable, OR if (b) management does
not provide those written representations, the auditor is
unable to obtain sufficient appropriate audit evidence.
The possible effects on the financial statements of
such inability are not confined to specific elements,
accounts or items of the financial statements and are
hence pervasive.
PR105: AUDITING &
ASSURANCE PRINCIPLES
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Instructor
ROBERT
REGALA
CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
10. (700) What are the
conditions under which the
auditor has to modify the
opinion in the auditor’s report?
(2 pts)
PR105: AUDITING &
ASSURANCE PRINCIPLES
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Instructor
ROBERT
REGALA
CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
The auditor shall express an unmodified opinion when the auditor
concludes that the financial statements are prepared, in all
material respects, in accordance with the applicable financial
reporting framework.
If the auditor (a) concludes that, based on the audit evidence
obtained, the financial statements as a whole are not free from
material misstatement; OR (b) is unable to obtain sufficient
appropriate audit evidence to conclude that the financial
statements as a whole are free from material misstatement, the
auditor shall modify the opinion in the auditor’s report in
accordance with PSA 705.
PR105: AUDITING &
ASSURANCE PRINCIPLES
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Instructor
ROBERT
REGALA
CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
11. (700) What are the sections
of the auditor’s report that
expresses an unmodified
opinion? (3 pts)
PR105: AUDITING &
ASSURANCE PRINCIPLES
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CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
The sections of the auditor’s report that expresses an unmodified opinion
are (PSA 700 of Sep 2016; Effective for audits of financial statements for
periods ending on or after December 15, 2016, pars. 20 – 48):
Instructor
ROBERT
REGALA
I.
II.
III.
IV.
V.
VI.
VII.
VIII.
IX.
X.
XI.
XII.
XIII.
XIV.
XV.
TITLE
ADDRESSEE
AUDITOR’S OPINION
BASIS FOR OPINION
GOING CONCERN, WHERE APPLICABLE
KEY AUDIT MATTERS (NOT APPLICABLE TO PUBLIC ENTITIES)
EMPHASIS OF MATTER OR OTHER MATTER, IF ANY
RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF FINANCIAL STATEMENTS
LOCATION OF THE DESCRIPTION OF THE AUDITOR’S RESPONSIBILITIES
OTHER REPORTING RESPONSIBILITIES, IF ANY
NAME OF ENGAGEMENT PARTNER OR PERSONAL NAME OF AUDITOR
SIGNATURE IN THE NAME OF THE AUDIT FIRM OR OF THE AUDITOR
AUDITOR’S ADDRESS
DATE OF THE AUDITOR’S REPORT
PR105: AUDITING &
ASSURANCE PRINCIPLES
CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
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Chapter Review Discussion
PSA 700 Appendix: Illustrative Examples of Unmodified Independent
Auditor’s Report on Financial Statements):
2019 Independent Auditor’s
Report (COA) on Land
Bank of the Philippines FS
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ROBERT
REGALA
PR105: AUDITING &
ASSURANCE PRINCIPLES
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Instructor
ROBERT
REGALA
CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
12. (705) What are the 3 types
of modified auditor’s opinion?
What are the conditions under
which the auditor may express a
“Disclaimer of Opinion”? (3 pts)
PR105: AUDITING &
ASSURANCE PRINCIPLES
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Instructor
ROBERT
REGALA
CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
The 3 types of modified auditor’s opinion are:
1. Qualified Opinion = misstatements are material, but not pervasive to the FS,
OR the auditor is unable to obtain sufficient appropriate audit evidence on which to
base the opinion, but the auditor concludes that the possible effects undetected
misstatements could be material but not pervasive.
2. Adverse Opinion = misstatements are both material and pervasive to the
financial statements.
3. Disclaimer of Opinion = auditor is unable to obtain sufficient appropriate audit
evidence on which to base the opinion, and the auditor concludes that the possible
effects on the financial statements of undetected misstatements, if any, could be
both material and pervasive. (The auditor shall also disclaim an opinion when, in extremely rare
circumstances involving multiple uncertainties, the auditor concludes that, notwithstanding having obtained
sufficient appropriate audit evidence regarding each of the individual uncertainties, it is not possible to form an
opinion on the financial statements due to the potential interaction of the uncertainties and their possible
cumulative effect on the financial statements.)
SEE TABLE ON NEXT PAGE
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PR105: AUDITING &
ASSURANCE PRINCIPLES
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Instructor
ROBERT
REGALA
CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
PR105: AUDITING &
ASSURANCE PRINCIPLES
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Instructor
ROBERT
REGALA
CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
13. What section(s) of the
auditor’s report shall the auditor
amend when he expresses a
any of the modified opinion? (2
pts)
PR105: AUDITING &
ASSURANCE PRINCIPLES
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Instructor
ROBERT
REGALA
CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
The sections that the auditor amends when a
modified opinion is expressed are the:
1. Opinion paragraph accordingly (for all types)
2. description of the Auditor’s Responsibility
(for Qualified or Adverse opinion)
3. description of the Auditor’s Responsibility,
and scope of the audit in the Auditor’s
Responsibility par. (for Disclaimer of opinion)
SEE TABLE ON NEXT PAGE ☞
PR105: AUDITING &
ASSURANCE PRINCIPLES
CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
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Instructor
ROBERT
REGALA
Chapter Review Discussion
Amend Par
Reference
Qua Adv
Dis
Opinion
PSA 705,
pars. 22 – 25
✔
✔
None
description of the Auditor’s
Responsibility
PSA 705,
pars. 26 – 27
✔
✔
✔
scope of the audit (in Auditor’s
Responsibility par)
PSA 705,
par. 27
🗶
🗶
✔
PR105: AUDITING &
ASSURANCE PRINCIPLES
CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
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Chapter Review Discussion
PSA 705 Appendix: Illustrative Examples of Modified Independent
Auditor’s Report on Financial Statements):
2017 Independent Auditor’s
Report (COA) on Dev’t
Bank of the Philippines FS
Instructor
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REGALA
PR105: AUDITING &
ASSURANCE PRINCIPLES
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REGALA
CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
14. (701) What are “Key Audit
Matters”? What are the factors
that the auditor considers in
determining KAM? (2 pts)
PR105: AUDITING &
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CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
Key Audit Matters (KAM) are those matters that, in the auditor’s
professional judgment, were of most significance in the audit of the
financial statements of the current period. Key audit matters are selected
from matters communicated with those charged with governance. In
determining what the KAM are, the auditor shall take into account the
following:
(a) Areas of higher assessed RMM, or significant risks identified
(b) Significant auditor judgments relating to areas in the financial
statements that involved significant management judgment, including
accounting estimates that have been identified as having high estimation
uncertainty.
(c) The effect on the audit of significant events or transactions that
occurred during the period.
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PR105: AUDITING &
ASSURANCE PRINCIPLES
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CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
Examples of Key Audit Matters (KAM)
Instructor
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REGALA
•
•
•
•
•
•
•
•
Significant estimates
Significant unusual transactions
Revenue
Goodwill
Intangibles
Income taxes
Contingencies
Implementation of new IT systems that have a significant
impact on financial reporting
• Areas with audit adjustments and/or internal control deficiencies
Source: https://dailybrewedcoffee.wordpress.com/tag/sample-new-audit-report/
PR105: AUDITING &
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CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
15. (706) Differentiate between
“Emphasis of Matter” paragraph and
“Other Matter” paragraph. (2 pts)
Instructor
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PR105: AUDITING &
ASSURANCE PRINCIPLES
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Instructor
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REGALA
CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
Emphasis of Matter paragraph is a paragraph included in the
auditor’s report that refers to a matter appropriately presented or
disclosed in the FS that, in the auditor’s judgment, is of such
importance that it is fundamental to users’ understanding of the
financial statements.
Other Matter paragraph is a paragraph included in the auditor’s
report that refers to a matter other than those presented or
disclosed in the FS that, in the auditor’s judgment, is relevant to
users’ understanding of the audit, the auditor’s responsibilities or
the auditor’s report.
PR105: AUDITING &
ASSURANCE PRINCIPLES
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Instructor
ROBERT
REGALA
CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
15. (240) If a KAM is also
fundamental to user’s
understanding of the FS, how
should the auditor highlight or draw
further attention to its relative
importance? (2 pts)
PR105: AUDITING &
ASSURANCE PRINCIPLES
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Instructor
ROBERT
REGALA
CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
Chapter Review Discussion
If a KAM is also fundamental to user’s understanding
of the FS, the auditor highlight or draw further attention
to its relative importance by (a) presenting the matter
more prominently than other matters in the Key Audit
Matters section (e.g., as the first matter) or by (b)
including additional information in the description of the
key audit matter to indicate the importance of the
matter to users’ understanding of the financial
statements. The auditor should not highlight the KAM
in an “Emphasis of Matter” paragraph.
PR105: AUDITING &
ASSURANCE PRINCIPLES
CH13 AUDIT COMPLETION & REPORTING PSAs:
450, 560, 570, 580, 700, 701, 705, & 706
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END OF CHAPTER REVIEW
References:
Instructor
https://aasc.org
https://landbank.com
https://dbp.ph
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PSAs:
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REGALA
501, 505, 510, 520, 530, 540, 610 &
620