COR JESU COLLEGE, INC.

COLLEGE OF ACCOUNTANCY, BUSINESS AND ENTREPRENEURSHIP

Sared Heart Avenue, Digos City, Philippines
Tel. No. (082) 553-2433 local 169-170 * Fax No.: (082) 553-2333
Website: www.cjc.edu.ph
Name: Luisito A. Tinagsa, Jr.
Certified Public Accountant

Contact Details Phone: 0995-971-9860

Email: [email protected]

Consultation MWF 9:00am to 10:00am

Schedule

Course Overview

Student Workload No. of Lecture Hours: 3 hours

No. of Tutorial Hours: 0 hours

No. of Independent Project Hours: 0 hours

No. of Expected Personal Study 0 hours

Hours:

Total No. of Workload Hours: 3 hours

Mode of Delivery  On Campus: Face to Face

 Off Campus: Online Video Conferencing/Modular

Pre-requisites Governance, Business Ethics, Risk Management, and Internal Control

Attendance  Regular attendance and punctuality in every class enrolled

Requirements are required of each student.
 A student is held responsible for the lesson assignment and
requirement for the entire content of the course; no matter
how long or for what reason his/her absence is made.
 As provided for in Article XIV, Section 73 of the Revised
Manual of Regulations for Private Schools, a student who
has incurred absences for more than 20% of the total class
hours in a given time should not be given credit for the
program or subject.
Curriculum Information

Aim/Rationale/Purpose

of Course: Upon completion of the course, the students will be able to:

Cognitive:

1. Explain the theory and philosophy of external audit by an

independent Certified Public Accountant.

2. Explain the theory and philosophy of external audit by an

independent Certified Public Accountant.

3. Differentiate the services offered and reports prepared by the

independent CPAs.

Psychomotor

4. Prepare audit program for an effective and efficient auditing

process.

5. Prepare audit report and qualify its importance and implications

to the practitioner and the public.

Affective

6. Appreciate the Code of Professional Ethics with the aim of

putting them into practice as future CPAs in order to maintain
the integrity of the practitioner.

7. Instill values and inculcate the ethical requirements of the

profession despite many challenges of ethical conflicts
and issues in the present situation.

Course Description: This course is designed to expose students both to the demand for
and the supply of the profession’s flagship service - financial
statement audits - and to the nature of the value-added assurance
services which decision makers demand in the information age.
Topics include: nature of the accounting profession, auditing and
assurance fundamentals: relationship among assurance,
attestation, and audit services; consulting vs. assurance services;
types of attestation services (agreed-upon procedures
engagement and review engagement); types of audits (internal,
external or financial statement audits, government audit, and
special purpose audits); relationship of accounting and auditing;
 other services (operational audits, compliance audits, and non-
attest services); professional standards: assurance standards and
attestation and auditing standards; public sector regulation of
accounting practice and legal liability; the framework of financial
statements auditing; reports on assurance services, attestation
services, and financial statement audits; and completing the audit.

References or Learning Salosagcol, Jekell; Tiu, Michael; Hermosilla, Roel (2016-

Materials: 2018 edition), Auditing Theory – A Guide in Understanding
the Philippine Standards on Auditing;
Type of Activity:
⎕Concept Notes ⎕Laboratory ⎕Individual ⎕Quiz ⎕Formative ⎕Summative
⎕Exercise/Drill ⎕Art/Drawing ⎕Pair/Group ⎕Others, specify_____________________________

Quarter 1 – Week 1
Topic: LESSON 1- The Professional Standards

Learning 1. Identify the Professional Standards in performing the audit;

2. Know the Structure of the Standard setting body of Assurance
engagements
3. Describe the elements of System of Quality Control
4. Know the ethical requirements in performing the audit and the
quality control

Targets:

References: Salosagcol, Jekell; Tiu, Michael; Hermosilla, Roel (2016-2018 edition),

Auditing Theory – A Guide in Understanding the Philippine Standards
on Auditing
Auditing and Assurance: Concepts and Applications
The Professional Standards

1. TO ENGAGE

The Professional Standards

When auditing financial statements, an auditor assumes certain Professional responsibilities. Auditor’s
opinion must be based on an examination conducted in accordance with professional standards.Standards are
established to measure the quality of performance of individuals and organizations.
Standards relating to the accounting profession concern themselves with CPA’s professional qualities, the
judgment exercised by the CPA’s in the performance of their professional engagement, and the CPA firm’s
quality control policies and procedures.
The Board of Accountancy promulgated ten generally accepted auditing standards (GAAS) that establish
required level of quality for performing financial statement audits. Philippines Standards on Auditing (PSAs) are
issued to clarify the meaning of these ten GAAS.

2. TO EXPLORE/EXPLAIN/ELABORATE

Generally Accepted Audit Standards

GAAS represent measures of the quality of the auditor’s performance. These standards should be looked at
as a minimum standard of performance that auditors should follow.
These Ten GAAS are grouped into general, fieldwork and reporting standards.
General Standards
1. The examination is to be performed by person or persons having adequate technical training and
proficiency as an auditor.
2. In all matters relating to an engagement, an independence in mental attitude is to be maintained by the
auditor.
3. Due professional care is to be exercised in the performance of the audit and in the preparation of the
report.

Standards of Fieldwork
1. The work is to be adequately planned and assistants, if any, are to be properly supervised.
2. There is to be proper study and evaluation of existing internal control as a basis for reliance thereon and
for the determination of the resultant extent of the tests to which auditing procedures are to be restricted.
3. Sufficient competent evidential matter is to be obtained through inspection, observation, inquiries and
confirmations to afford a reasonable basis for an opinion regarding the financial statements under
examination.

Standards of Reporting
1. The report shall state whether the financial statements are presented in accordance with generally
accepted accounting principles.
2. The report shall identify those circumstances in which principles have not been consistently observed in
the current period in relation to the preceding period.
3. Informative disclosures are to be regarded as reasonably adequate unless otherwise stated in the
report.
4. The report shall either contain an expression of opinion regarding the financial statements, taken as a
whole, or an assertion to the effect that an opinion can not be expressed. When an overall opinion can
not be expressed, the reasons therefore should be stated.

System of Quality of Control

Engagement teams:
 Implement quality control procedures that are applicable to audit engagement;
 Provide the firm with relevant information to enabling the functioning of that part of the firm’s
system of quality control relating to independence; and
 Are entitled to rely on the firm’s system unless information provided by the firm of other parties
suggest otherwise.

Philippine Standards on Auditing

The Auditing and Assurance Standards Council (AASC) has been given the task to promulgate auditing
standards, practices and procedures which shall be generally accepted by the accounting profession in the
Philippines.
Adoption of International Standards

To facilitate the preparation by the AASC of its pronouncements and to attain uniformity of those
pronouncements with international auditing standards, the AASC has approved the adoption of the International
Standards on Auditing (ISA’s),International Standards on Assurance Engagement (ISAEs), International
Standards on Review Engagement (ISREs), and International Standards on Related Services (ISRSs) issued
by the International Auditing and Assurance Board (IAASB) created by the International Federation o
Accountants (IFAC).

Elements of a System of Quality Control

PSA 220 states that audit firm should implement policies and procedures designed to ensure that all audits
are conducted accordance with PSAs. The quality control policies and procedures adopted by audit firms vary
depending on the firm’s size and nature of its practice, cost benefit considerations and other factors. PSA 220
has identified the following quality control policies that may serve as a guide to audit firms in establishing their
own quality control system.
A) Leadership responsibilities for quality within the firm.
B) Relevant ethical requirements.
C) Acceptance and continuance of client relationships and specific engagements.
D) Human resources.
E) Engagement performance.
F) Monitoring.
Leadership Responsibilities for Quality on Audits
The engagement partner should take responsibility for the overall quality on each audit engagement to
which the partner is assigned. The engagement partner should set example regarding the quality of audit by
emphasizing through actions and messages the importance of performing work that complies with professional
standards, complying with the firm’s quality control policies and procedures, and issuing appropriate audit
reports.

Ethical Requirements
a. Integrity
b. Objectivity
c. Professional competence and due care;
d. Confidentiality; and
e. Professional behavior

Independence
The engagement partner should form a conclusion on compliance with independence requirements that
apply to the audit engagement. The engagement partner should:
a. Obtain relevant information to identify circumstances and relationships that create threats to
independence.
b. Evaluate information on identified breaches of the firm’s independence policies and procedures to
determine whether they create a threat to independence.
c. Take appropriate safeguards to eliminate such threat or reduce them to an acceptable level; and
d. Document conclusions on independence and the basis for such conclusion.

Acceptable and Continuance of Client Relationship

a. Has considered the integrity of the client;
b. Is competent to perform the engagement and has the capabilities time and resources to do so; and
c. Can comply with ethical requirements.

Human Resources and Assignment

The firm should establish policies and procedures designed to provide it with reasonable assurance that it
has sufficient personnel with capabilities, competence and commitment to ethical principles necessary to
perform the engagement. Such policies and procedures should address issues concerning personnel
 Recruitment
 Performance evaluation, compensation and promotion;
 Capabilities and competence;
 Career development; and
 Assignment of engagement teams
Engagement Performance
The firm should establish policies and procedures designed to provide it with reasonable assurance that
engagements are performed in accordance with professional standards and regulatory and legal requirements,
and for the auditor’s report that is issued to be appropriate in the circumstances.
The engagement partner should take responsibility for the:
 Direction
 Supervision
 Review
 Consultation

Consultation
The engagement partner should:
a. Be responsible for the engagement team undertaking appropriate consultation on difficult and
contentious matters;
b. Be satisfied that members of the engagement team have undertaken appropriate consultation during
the course of the engagement, both within the engagement team and others at the appropriate level
within or outside the firm;
c. Be satisfied that the nature and scope of, and conclusions resulting from such consultations are
documented and agreed with the party consulted;
d. Determine the conclusions resulting from consultations have been implemented.

Engagement Quality Control Review

This requires the engagement partner:
a. To determine that an engagement quality control reviewer has been appointed;
b. To discuss significant matters arising during the audit engagement, including those identified during the
quality control review, with the engagement quality control reviewer; and
c. Not to issue the auditor’s report until the completion of the engagement quality control review.

Differences of Opinion
The engagement partner should inform the members of the engagement team to bring matters involving
differences of opinion to the attention of the engagement partner other within the firm as appropriate without
fear of reprisals. The audit report should not be issued until matter involving differences of opinion is resolved.

Monitoring
The continued adequacy and operational effectiveness of quality control policies and procedures is to be
monitored. Policies and procedures must be adopted to provide reasonable assurance that the systems of
quality control are relevant, adequate and operating effectively.
Quality Control Review
Recognizing the importance of professional accountant’s services to the society, the government has also
taken steps to ensure that CPAs work to the highest standards which can reasonably be expected from them.
The government thru the Professional Regulatory Board of Accountancy (BOA) has required all CPA firms and
individual CPAs in public practice to obtain a certificate of accreditation to practice public accountancy.
As a condition to the renewal of the certificate of accreditation to practice public accountancy, the Board
requires individual CPAs and CPA firms to undergo a quality control review to ensure that these CPAs comply
with accounting and auditing standards and practices of public accountancy.