PHILIPPINE FRAMEWORK FOR ASSURANCE

ENGAGEMENTS • Definition and objective of an assurance engagement: This

Auditing Standards and Practices Council section defines assurance engagements and identifies the
objectives of the two types of assurance engagement a
Introduction practitioner is permitted to perform. This Framework calls these
two types reasonable assurance engagements and limited
1. This Framework defines and describes the elements and assurance engagements.2
objectives of an assurance engagement, and identifies
engagements to which Philippine Standards • Scope of the Framework: This section distinguishes
on Auditing (PSAs), Philippine Standards on Review assurance engagements from other engagements, such as
Engagements (PSREs) and Philippine Standards on Assurance consulting engagements.
Engagements (PSAEs) apply. It provides a frame of reference
for: • Engagement acceptance: This section sets out
characteristics that must be exhibited before a practitioner can
(a) Professional accountants in public practice accept an assurance engagement.
(“practitioners”) when performing assurance engagements.
Professional accountants in the public sector refer to the Public • Elements of an assurance engagement: This section
Sector Perspective at the end of the Framework. Professional identifies and discusses five elements assurance engagements
accountants who are neither in public practice nor in the public performed by practitioners exhibit: a three party relationship, a
sector are encouraged to consider the Framework when subject matter, criteria, evidence and an assurance report. It
performing assurance engagements;1 explains important distinctions between reasonable assurance
(b) Others involved with assurance engagements, engagements and limited assurance engagements (also
including the intended users of outlined in the Appendix). This section also discusses, for
an assurance report and the responsible party; and example, the significant variation in the subject matters of
(c) The International Auditing and Assurance assurance engagements, the required characteristics of suitable
Standards Board (IAASB) in its development of ISAs, ISREs criteria, the role of risk and materiality in assurance
and ISAEs and, consequently, the Auditing Standards and engagements, and how conclusions are expressed in each of
Practices Council (ASPC) in its adoption of said standards for the two types of assurance engagement.
application in the Philippines.
• Inappropriate use of the practitioner’s name: This section
2. This Framework does not itself establish standards or provide discusses implications of a practitioner’s association with a
procedural requirements for the performance of assurance subject matter.
engagements. ISAs, ISREs and ISAEs and, therefore, their
counterpart PSAs, PSREs, and PSAEs, contain basic principles, Ethical Principles and Quality Control Standards
essential procedures and related guidance, consistent with the
concepts in this Framework, for the performance of assurance 4. In addition to this Framework and PSAs, PSREs and PSAEs,
engagements. The relationship between the Framework and the practitioners who perform assurance engagements are
ISAs, ISREs and ISAEs is illustrated in the “Structure of governed by:
Pronouncements Issued by the IAASB” section of the Handbook
of International Auditing, Assurance, and Ethics (a) The Code of Ethics for Professional Accountants in
Pronouncements. A counterpart document, entitled “Structure of the Philippines (the Philippine Code), which is adopted from the
Pronouncements Issued by the IAASB and the ASPC” is IFAC Code of Ethics for
presented as Appendix to the “Preface to International
Standards on Quality Control, Auditing, Review, Other 2 For assurance engagements regarding historical financial information in particular,
reasonable assurance engagements are called audits, and limited assurance engagements
Assurance and Related are called reviews.
Services and Preface to Philippine Standards on Quality
Control, Auditing, Review, Other Assurance and Related Professional Accountants, which establishes fundamental
Services.” ethical principles for professional accountants; and
1 If a professional accountant not in public practice, for example an internal auditor, applies
this Framework, and (a) this Framework, the PSAs, PSREs or PSAEs are referred to in the
(b) Philippine Standards on Quality Control (PSQCs),
professional accountant’s report; and (b) the professional accountant or other members of which are adopted from the International Standards on Quality
the assurance team and, when applicable, the professional accountant’s employer, are not Control, which establish standards and provide guidance on a
independent of the entity in respect of which the assurance engagement is being performed,
the lack of independence and the nature of the relationship(s) with the entity are prominently firm’s system of quality control.3
disclosed in the professional accountant’s report. Also, that report does not include the word
“independent” in its title, and the purpose and users of the report are restricted.
5. Part A of the Code sets out the fundamental ethical principles
that all professional accountants are required to observe,
3. The following is an overview of this Framework:
including:
• Introduction: This Framework deals with assurance
(a) Integrity;
engagements performed by practitioners. It provides a frame of
(b) Objectivity;
reference for practitioners and others involved with assurance
(c) Professional competence and due
engagements, such as those engaging a practitioner (the
care;RAMEWORK
“engaging party”).
 (d) Confidentiality; and 10. In some assurance engagements, the evaluation or
(e) Professional behavior. measurement of the subject matter is performed by the
responsible party, and the subject matter information is in the
6. Part B of the Code, which applies only to professional form of an assertion by the responsible party that is made
accountants in public practice (“practitioners”), includes a available to the intended users. These engagements are called
conceptual approach to independence that takes into account, “assertion-based engagements.” In other assurance
for each assurance engagement, threats to independence, engagements, the practitioner either directly performs the
accepted safeguards and the public interest. It requires firms evaluation or measurement of the subject matter, or obtains a
and members of assurance teams to identify and evaluate representation from the responsible party that has performed
circumstances and relationships that create threats to the evaluation or measurement that is not available to the
independence and to take appropriate action to eliminate these intended users. The subject matter information is provided to the
threats or to reduce them to an acceptable level by the intended users in the assurance report. These engagements are
application of safeguards. called “direct reporting engagements.”

Definition and Objective of an Assurance Engagement 11. Under this Framework, there are two types of assurance
engagement a practitioner is permitted to perform: a reasonable
7. “Assurance engagement” means an engagement in which a assurance engagement and a limited assurance engagement.
practitioner expresses a conclusion designed to enhance the The objective of a reasonable assurance engagement is a
degree of confidence of the intended users other than the reduction in assurance engagement risk to an acceptably low
responsible party about the outcome of the evaluation or level in the circumstances of the engagement6 as the basis for a
measurement of a subject matter against criteria. positive form of expression of the practitioner’s conclusion. The
8. The outcome of the evaluation or measurement of a subject objective of a limited assurance engagement is
matter is the information that results from applying the criteria to
the subject matter. For example: 4 “Internal Control – Integrated Framework” The Committee of Sponsoring Organizations of
the Treadway Commission.
5 “Guidance on Assessing Control – The CoCo Principles” Criteria of Control Board, The
• The recognition, measurement, presentation and Canadian Institute of Chartered Accountants.
6 Engagement circumstances include the terms of the engagement, including whether it is a
disclosure represented in the financial statements (outcome) reasonable assurance engagement or a limited assurance engagement, the characteristics
result from applying a financial reporting framework for of the subject matter, the criteria to be used, the needs of the intended users, relevant
characteristics of the responsible party and its environment, and other matters, for example
recognition, measurement, presentation and disclosure, such as events, transactions, conditions and practices, that may have a significant effect on the
engagement.
3 PSQC 1 had not been issued when this Framework was approved, but is expected to be
issued before the effective date of PSAE 3000, “Assurance Engagements Other Than a reduction in assurance engagement risk to a level that is
Audits or Reviews of Historical Financial Information.” Additional standards and guidance on
quality control procedures for specific types of assurance engagement are set out in PSAs, acceptable in the circumstances of the engagement, but where
PSREs and PSAEs. that risk is greater than for a reasonable assurance
engagement, as the basis for a negative form of expression of
Philippine Financial Reporting Standards, (criteria) to an entity’s the practitioner’s conclusion.
financial position, financial performance and cash flows (subject
matter). Scope of the Framework

• An assertion about the effectiveness of internal 12. Not all engagements performed by practitioners are
control (outcome) results from applying a framework for assurance engagements. Other frequently performed
evaluating the effectiveness of internal control, such as COSO4 engagements that do not meet the above definition (and
or CoCo5 (criteria) to internal control, a process (subject matter). therefore are not covered by this Framework) include:
In the remainder of this Framework, the term “subject matter FRAMEWORK
information” will be used to mean the outcome of the evaluation • Engagements covered by Philippine Standards for Related
or measurement of a subject matter. It is the subject matter Services, such as agreed-upon procedures engagements and
information about which the practitioner gathers sufficient compilations of financial or other information.
appropriate evidence to provide a reasonable basis for
expressing a conclusion in an assurance report. • The preparation of tax returns where no conclusion conveying
assurance is expressed.
9. Subject matter information can fail to be properly expressed • Consulting (or advisory) engagements,7 such as management
in the context of the subject matter and the criteria, and can and tax consulting.
therefore be misstated, potentially to a material extent. This
occurs when the subject matter information does not properly 13. An assurance engagement may be part of a larger
reflect the application of the criteria to the subject matter, for engagement, for example, when a business acquisition
example, when an entity’s financial statements do not present consulting engagement includes a requirement to convey
fairly, in all material respects its financial position, financial assurance regarding historical or prospective financial
performance and cash flows in accordance with Philippine information. In such circumstances, this Framework is relevant
Financial Reporting Standards, or when an entity’s assertion only to the assurance portion of the engagement.
that its internal control is effective is not fairly stated, in all
material respects, based on COSO or CoCo. 14. The following engagements, which may meet the definition
in paragraph 7, need not be performed in accordance with this
Framework:
 (a) Engagements to testify in legal proceedings (b) The engagement exhibits all of the following
regarding accounting, auditing, taxation or other matters; and characteristics:
(i) The subject matter is appropriate;
(b) Engagements that include professional opinions, (ii) The criteria to be used are suitable and
views or wording from which a user may derive some are available to the intended users;
assurance, if all of the following apply: (iii) The practitioner has access to sufficient
(i) Those opinions, views or wording are appropriate evidence to support the practitioner’s
merely incidental to the overall engagement; conclusion;
(iv) The practitioner’s conclusion, in the form
7 Consulting engagements employ a professional accountant’s technical skills, education, appropriate to either a reasonable assurance
observations, experiences, and knowledge of the consulting process. The consulting
process is an analytical process that typically involves some combination of activities engagement or a limited assurance engagement, is to
relating to: objective-setting, fact-finding, definition of problems or opportunities, evaluation be contained in a written report; and
of alternatives, development of recommendations including actions, communication of
results, and sometimes implementation and follow-up. Reports (if issued) are generally (v) The practitioner is satisfied that there is a
written in a narrative (or “long form”) style. Generally the work performed is only for the use rational purpose for the engagement. If there is a
and benefit of the client. The nature and scope of work is determined by agreement
between the professional accountant and the client. Any service that meets the definition of
significant limitation on the scope of the practitioner’s
an assurance engagement is not a consulting engagement but an assurance engagement. work (see paragraph 55), it may be unlikely that the
engagement has a rational purpose. Also, a
(ii) Any written report issued is expressly practitioner may believe the engaging party intends to
restricted for use by only the intended users specified in the associate the practitioner’s name with the subject
report; matter in an inappropriate manner (see paragraph 61).
(iii) Under a written understanding with the Specific PSAs, PSREs or PSAEs may include
specified intended users, the engagement is not additional requirements that need to be satisfied prior
intended to be an assurance engagement; and to accepting an engagement.
(iv) The engagement is not represented as 18. When a potential engagement cannot be accepted as an
an assurance engagement in the professional assurance engagement because it does not exhibit all the
accountant’s report. characteristics in the previous paragraph, the engaging party
may be able to identify a different engagement that will meet the
Reports on Non-assurance Engagements needs of intended users. For example:

15. A practitioner reporting on an engagement that is not an (a) If the original criteria were not suitable, an assurance
assurance engagement within the scope of this Framework, engagement may still be performed if:
clearly distinguishes that report from an assurance report. So as
not to confuse users, a report that is not an assurance report (i) The engaging party can identify an aspect
avoids, for example: of the original subject matter for which those criteria
are suitable, and the practitioner could perform an
• Implying compliance with this Framework, PSAs, PSREs or assurance engagement with respect to that aspect as
PSAEs. a subject matter in its own right. In such cases, the
• Inappropriately using the words “assurance,” “audit” or assurance report makes it clear that it does not relate
“review.” to the original subject matter in its entirety; or
• Including a statement that could reasonably be mistaken for a (ii) Alternative criteria suitable for the original
conclusion designed to enhance the degree of confidence of subject matter can be selected or developed.
intended users about the outcome of the evaluation or (b) The engaging party may request an engagement that is not
measurement of a subject matter against criteria. an assurance engagement, such as a consulting or an agreed-
upon procedures engagement.
16. The practitioner and the responsible party may agree to
apply the principles of this Framework to an engagement when 19. Having accepted an assurance engagement, a practitioner
there are no intended users other than the responsible party but may not change that engagement to a non-assurance
where all other requirements of the PSAs, PSREs or PSAEs are engagement, or from a reasonable assurance engagement to a
met. In such cases, the practitioner’s report includes a limited assurance engagement without reasonable justification.
statement restricting the use of the report to the responsible
party. A change in circumstances that affects the intended users’
requirements, or a misunderstanding concerning the nature of
Engagement Acceptance the engagement, ordinarily will justify a request for a change in
the engagement. If such a change is made, the practitioner does
17. A practitioner accepts an assurance engagement only where not disregard evidence that was obtained prior to the change.
the practitioner’s preliminary knowledge of the engagement
circumstances indicates that: Elements of an Assurance Engagement

(a) Relevant ethical requirements, such as 20. The following elements of an assurance engagement are
independence and professional competence will be satisfied, discussed in this section:
and
 (a) A three party relationship involving a practitioner, a An example of when the responsible party is responsible for
responsible party, and intended users; both the subject matter information and the subject matter, is
(b) An appropriate subject matter; when an entity engages a practitioner to perform an assurance
(c) Suitable criteria; engagement regarding a report it has prepared about its own
(d) Sufficient appropriate evidence; and sustainability practices. An example of when the responsible
(e) A written assurance report in the form appropriate party is responsible for the subject matter information but not the
to a reasonable assurance engagement or a limited assurance subject matter, is when a government organization engages a
engagement. practitioner to perform an assurance engagement regarding a
report about a private company’s sustainability practices that the
Three-Party Relationship organization has prepared and is to distribute to intended users.
The responsible party may or may not be the party who
21. Assurance engagements involve three separate parties: a engages the practitioner (the engaging party).
practitioner, a responsible party and intended users.
26. The responsible party ordinarily provides the practitioner
22. The responsible party and the intended users may be from with a written representation that evaluates or measures the
different entities or the same entity. As an example of the latter subject matter against the identified criteria, whether or not it is
case, in a two-tier board structure, the supervisory board may to be made available as an assertion to the intended users. In a
seek assurance about information provided by the management direct reporting engagement, the practitioner may not be able to
board of that entity. The relationship between the responsible obtain such a representation when the engaging party is
party and the intended users’ needs to be viewed within the different from the responsible party.
context of a specific engagement and may differ from more
traditionally defined lines of responsibility. For example, an Intended Users
entity’s senior management (an intended user) may engage a
practitioner to perform an assurance engagement on a particular 27. The intended users are the person, persons or class of
aspect of the entity’s activities that is the immediate persons for whom the practitioner prepares the assurance
responsibility of a lower level of management (the responsible report. The responsible party can be one of the intended users,
party), but for which senior management is ultimately but not the only one.
responsible.
28. Whenever practical, the assurance report is addressed to all
Practitioner the intended users, but in some cases there may be other
intended users. The practitioner may not be able to identify all
23. The term “practitioner” as used in this Framework is broader those who will read the assurance report, particularly where
than the term “auditor” as used in PSAs and PSREs, which there is a large number of people who have access to it. In such
relates only to practitioners performing audit or review cases, particularly where possible readers are likely to have a
engagements with respect to historical financial information. broad range of interests in the subject matter, intended users
may be limited to major stakeholders with significant and
24. A practitioner may be requested to perform assurance common interests. Intended users may be identified in different
engagements on a wide range of subject matters. Some subject ways, for example, by agreement between the practitioner and
matters may require specialized skills and knowledge beyond the responsible party or engaging party, or by law.
those ordinarily possessed by an individual practitioner. As
noted in paragraph 17 (a), a practitioner does not accept an 29. Whenever practical, intended users or their representatives
engagement if preliminary knowledge of the engagement are involved with the practitioner and the responsible party (and
circumstances indicates that ethical requirements regarding the engaging party if different) in determining the requirements
professional competence will not be satisfied. In some cases of the engagement. Regardless of the involvement of others
this requirement can be satisfied by the practitioner using the however, and unlike an agreed-upon procedures engagement
work of persons from other professional disciplines, referred to (which involves reporting findings based upon the procedures,
as experts. In such cases, the practitioner is satisfied that those rather than a conclusion):
persons carrying out the engagement collectively possess the
requisite skills and knowledge, and that the practitioner has an (a) The practitioner is responsible for determining the
adequate level of involvement in the engagement and nature, timing and extent of procedures; and
understanding of the work for which any expert is used.
(b) The practitioner is required to pursue any matter
Responsible Party the practitioner becomes aware of that leads the practitioner to
question whether a material modification should be made to the
25. The responsible party is the person (or persons) who: subject matter information.

(a) In a direct reporting engagement, is responsible for 30. In some cases, intended users (for example, bankers and
the subject matter; or regulators) impose a requirement on, or request the responsible
(b) In an assertion-based engagement, is responsible party (or the engaging party if different) to arrange for, an
for the subject matter information (the assertion), and may be assurance engagement to be performed for a specific purpose.
responsible for the subject matter. When engagements are designed for specified intended users
or a specific purpose, the practitioner considers including a
restriction in the assurance report that limits its use to those compliance, the criteria may be the applicable law, regulation or
users or that purpose. contract. Examples of less formal criteria are an internally
developed code of conduct or an agreed level of performance
Subject Matter (such as the number of times a particular committee is expected
to meet in a year).
31. The subject matter, and subject matter information, of an
assurance engagement can take many forms, such as: 35. Suitable criteria are required for reasonably consistent
evaluation or measurement of a subject matter within the
• Financial performance or conditions (for example, context of professional judgment. Without the frame of reference
historical or prospective financial position, financial performance provided by suitable criteria, any conclusion is open to individual
and cash flows) for which the subject matter information may be interpretation and misunderstanding. Suitable criteria are
the recognition, measurement, presentation and disclosure context sensitive, that is, relevant to the engagement
represented in financial statements. circumstances. Even for the same subject matter there can be
different criteria. For example, one responsible party might
• Non-financial performance or conditions (for select the number of customer complaints resolved to the
example, performance of an entity) for which the subject matter acknowledged satisfaction of the customer for the subject matter
information may be key indicators of efficiency and of customer satisfaction; another responsible party might select
effectiveness. the number of repeat purchases in the three months following
the initial purchase.
• Physical characteristics (for example, capacity of a
facility) for which the subject matter information may be a 36. Suitable criteria exhibit the following characteristics:
specifications document.
• Systems and processes (for example, an entity’s (a) Relevance: relevant criteria contribute to
internal control or IT system) for which the subject matter conclusions that assist decision making by the intended users.
information may be an assertion about effectiveness.
(b) Completeness: criteria are sufficiently complete
• Behavior (for example, corporate governance, when relevant factors that could affect the conclusions in the
compliance with regulation, human resource practices) for which context of the engagement circumstances are not omitted.
the subject matter information maybe a statement of compliance Complete criteria include, where relevant, benchmarks for
or a statement of effectiveness. presentation and disclosure.

32. Subject matters have different characteristics, including the (c) Reliability: reliable criteria allow reasonably
degree to which information about them is qualitative versus consistent evaluation or measurement of the subject matter
quantitative, objective versus subjective, historical versus including, where relevant, presentation and disclosure, when
prospective, and relates to a point in time or covers a period. used in similar circumstances by similarly qualified practitioners.
Such characteristics affect the:
(d) Neutrality: neutral criteria contribute to conclusions
(a) Precision with which the subject matter can be that are free from bias.
evaluated or measured against criteria; and
(b) The persuasiveness of available evidence. The (e) Understandability: understandable criteria
assurance report notes characteristics of particular relevance to contribute to conclusions that are clear, comprehensive, and not
the intended users. subject to significantly different interpretations. The evaluation or
measurement of a subject matter on the basis of the
33. An appropriate subject matter is: practitioner’s own expectations, judgments and individual
experience would not constitute suitable criteria.
(a) Identifiable, and capable of consistent evaluation
or measurement against the identified criteria; and 37. The practitioner assesses the suitability of criteria for a
(b) Such that the information about it can be subjected particular engagement by considering whether they reflect the
to procedures for gathering sufficient appropriate evidence to above characteristics. The relative importance of each
support a reasonable assurance or limited assurance characteristic to a particular engagement is a matter of
conclusion, as appropriate. judgment. Criteria can either be established or specifically
developed.
Criteria Established criteria are those embodied in laws or regulations,
or issued by authorized or recognized bodies of experts that
34. Criteria are the benchmarks used to evaluate or measure follow a transparent due process.
the subject matter including, where relevant, benchmarks for Specifically developed criteria are those designed for the
presentation and disclosure. Criteria can be formal, for example purpose of the engagement. Whether criteria are established or
in the preparation of financial statements, the criteria may be specifically developed affects the work that the practitioner
Philippine Financial Reporting Standards; when reporting on carries out to assess their suitability for a particular
internal control, the criteria may be an established internal engagement.
control framework or individual control objectives specifically
designed for the engagement; and when reporting on
38. Criteria need to be available to the intended users to allow Sufficiency and Appropriateness of Evidence
them to understand how the subject matter has been evaluated
or measured. Criteria are made available to the intended users 42. Sufficiency is the measure of the quantity of evidence.
in one or more of the following ways: Appropriateness is the measure of the quality of evidence; that
is, its relevance and its reliability. The quantity of evidence
(a) Publicly. needed is affected by the risk of the subject matter information
(b) Through inclusion in a clear manner in the being materially misstated (the greater the risk, the more
presentation of the subject matter information. evidence is likely to be required) and also by the quality of such
(c) Through inclusion in a clear manner in the evidence (the higher the quality, the less may be required).
assurance report. Accordingly, the sufficiency and appropriateness of evidence
(d) By general understanding, for example the are interrelated. However, merely obtaining more evidence may
criterion for measuring time in hours and minutes. not compensate for its poor quality.

Criteria may also be available only to specific intended users, for 43. The reliability of evidence is influenced by its source and by
example the terms of a contract, or criteria issued by an industry its nature, and is dependent on the individual circumstances
association that are available only to those in the industry. When under which it is obtained.
identified criteria are available only to specific intended users, or Generalizations about the reliability of various kinds of evidence
are relevant only to a specific purpose, use of the assurance can be made; however, such generalizations are subject to
report is restricted to those users or for that purpose.8 important exceptions. Even when evidence is obtained from
AMEWORK sources external to the entity, circumstances may exist that
Evidence could affect the reliability of the information obtained. For
example, evidence obtained from an independent external
39. The practitioner plans and performs an assurance source may not be reliable if the source is not knowledgeable.
engagement with an attitude of professional skepticism to obtain While recognizing that exceptions may exist, the following
sufficient appropriate evidence about whether the subject matter generalizations about the reliability of evidence may be useful:
information is free of material misstatement. The practitioner
considers materiality, assurance engagement risk, and the • Evidence is more reliable when it is obtained from
quantity and quality of available evidence when planning and independent sources outside the entity.
performing the engagement, in particular when determining the
nature, timing and extent of evidence-gathering procedures. • Evidence that is generated internally is more reliable
when the related controls are effective.
Professional Skepticism
• Evidence obtained directly by the practitioner (for
40. The practitioner plans and performs an assurance example, observation of the application of a control) is more
engagement with an attitude of professional skepticism reliable than evidence obtained indirectly or by inference (for
recognizing that circumstances may exist that cause the subject example, inquiry about the application of a control).
matter information to be materially misstated. An attitude of
professional skepticism means the practitioner makes a critical • Evidence is more reliable when it exists in
assessment, with a questioning mind, of the validity of evidence documentary form, whether paper, electronic, or other media
obtained and is alert to evidence that contradicts or brings into (for example, a contemporaneously written record of a meeting
question the reliability of documents or representations by the is more reliable than a subsequent oral representation of what
responsible party. For example, an attitude of professional was discussed).
skepticism is necessary throughout the engagement process for
the practitioner to reduce the risk of overlooking suspicious • Evidence provided by original documents is more
circumstances, of over generalizing when drawing conclusions reliable than evidence provided by photocopies or facsimiles.
from observations, and of using faulty assumptions in
determining the nature, timing and extent of evidence gathering 44. The practitioner ordinarily obtains more assurance from
procedures and evaluating the results thereof. consistent evidence obtained from different sources or of a
different nature than from items of evidence considered
41. An assurance engagement rarely involves the authentication individually. In addition, obtaining evidence from different
of documentation, nor is the practitioner trained as or expected sources or of a different nature may indicate that an individual
to be an expert in such authentication. However, the practitioner item of evidence is not reliable. For example, corroborating
considers the reliability of the information to be used as information obtained from a source independent of the entity
evidence, for example photocopies, facsimiles, filmed, digitized may increase the assurance the practitioner obtains from a
or other electronic documents, including consideration of representation from the responsible party. Conversely, when
controls over their preparation and maintenance where relevant. evidence obtained from one source is inconsistent with that
obtained from another, the practitioner determines what
8 While an assurance report may be restricted whenever it is intended only for specified additional evidence-gathering procedures are necessary to
intended users or for a specific purpose, the absence of a restriction regarding a particular
reader or purpose, does not itself indicate that a legal responsibility is owed by the resolve the inconsistency.
practitioner in relation to that reader or for that purpose. Whether a legal responsibility is
owed will depend on the circumstances of each case and the relevant jurisdiction.
45. In terms of obtaining sufficient appropriate evidence, it is
generally more difficult to obtain assurance about subject matter
information covering a period than about subject matter the nature, timing and extent of evidence gathering procedures
information at a point in time. In addition, conclusions provided is at least sufficient for the practitioner to obtain a meaningful
on processes ordinarily are limited to the period covered by the level of assurance as the basis for a negative form of
engagement; the practitioner provides no conclusion about expression. To be meaningful, the level of assurance obtained
whether the process will continue to function in the specified by the practitioner is likely to enhance the intended users’
manner in the future. confidence about the subject matter information to a degree that
is clearly more than inconsequential.
46. The practitioner considers the relationship between the cost
of obtaining evidence and the usefulness of the information 49. In general, assurance engagement risk can be represented
obtained. However, the matter of difficulty or expense involved by the following components, although not all of these
is not in itself a valid basis for omitting an evidence gathering components will necessarily be present or significant for all
procedure for which there is no alternative. The practitioner uses assurance engagements:
professional judgment and exercises professional skepticism F
evaluating the quantity and quality of evidence, and thus its (a) The risk that the subject matter information is
sufficiency and appropriateness, to support the assurance materially misstated, which in turn consists of:
report.
(i) Inherent risk: the susceptibility of the
Materiality subject matter information to a material misstatement,
assuming that there are no related controls; and
47. Materiality is relevant when the practitioner determines the (ii) Control risk: the risk that a material
nature, timing and extent of evidence-gathering procedures, and misstatement that could occur will not be prevented,
when assessing whether the subject matter information is free of or detected and corrected, on a timely basis by related
misstatement. When considering materiality, the practitioner internal controls. When control risk is relevant to the
understands and assesses what factors might influence the subject matter, some control risk will always exist
decisions of the intended users. For example, when the because of the inherent limitations of the design and
identified criteria allow for variations in the presentation of the operation of internal control; and
subject matter information, the practitioner considers how the
adopted presentation might influence the decisions of the (b) Detection risk: the risk that the practitioner will not
intended users. Materiality is considered in the context of detect a material misstatement that exists.
quantitative and qualitative factors, such as relative magnitude,
the nature and extent of the effect of these factors on the The degree to which the practitioner considers each of these
evaluation or measurement of the subject matter, and the components is affected by the engagement circumstances, in
interests of the intended users. The assessment of materiality particular by the nature of the subject matter and whether a
and the relative importance of quantitative and qualitative reasonable assurance or a limited assurance engagement is
factors in a particular engagement are matters for the being performed.
practitioner’s judgment.
Nature, Timing and Extent of Evidence-Gathering Procedures
Assurance Engagement Risk
50. The exact nature, timing and extent of evidence-gathering
48. Assurance engagement risk is the risk that the practitioner procedures will vary from one engagement to the next. In
expresses an inappropriate conclusion when the subject matter theory, infinite variations in evidence gathering procedures are
information is materially possible. In practice, however, these are difficult to
misstated.9 communicate clearly and unambiguously. The practitioner
In a reasonable assurance engagement, the practitioner attempts to communicate them clearly and unambiguously and
reduces uses the form appropriate to a reasonable assurance
engagement or a limited assurance engagement.10
9 (a) This includes the risk, in those direct reporting engagements where the subject matter
information is presented only in the practitioner’s conclusion, that the practitioner
inappropriately concludes that the subject matter does, in all material respects, conform with 51. “Reasonable assurance” is a concept relating to
the criteria, for example: “In our opinion, internal control is effective, in all material respects, accumulating evidence necessary for the practitioner to
based on XYZ criteria.”
(b) In addition to assurance engagement risk, the practitioner is exposed to the risk of conclude in relation to the subject matter information taken as a
expressing an inappropriate conclusion when the subject matter information is not materially whole. To be in a position to express a conclusion in the positive
misstated, and risks through loss from litigation, adverse publicity, or other events arising in
connection with a subject matter reported on. These risks are not part of assurance
form required in a reasonable assurance engagement, it is
engagement risk. necessary for the practitioner to obtain sufficient appropriate
evidence as part of an iterative, systematic engagement process
assurance engagement risk to an acceptably low level in the involving:
circumstances of the engagement to obtain reasonable FRAMEWORK
assurance as the basis for a positive form of expression of the (a) Obtaining an understanding of the subject matter
practitioner’s conclusion. The level of assurance engagement and other engagement circumstances which, depending on the
risk is higher in a limited assurance engagement than in a subject matter, includes obtaining an understanding of internal
reasonable assurance engagement because of the different control;
nature, timing or extent of evidence gathering procedures.
However in a limited assurance engagement, the combination of
 (b) Based on that understanding, assessing the risks a material modification should be made to the subject matter
that the subject matter information may be materially misstated; information, the practitioner pursues the matter by performing
other procedures sufficient to enable the practitioner to report.
(c) Responding to assessed risks, including
developing overall responses, and determining the nature, Quantity and Quality of Available Evidence
timing and extent of further procedures;
54. The quantity or quality of available evidence is affected by:
(d) Performing further procedures clearly linked to the
identified risks, using a combination of inspection, observation, (a) The characteristics of the subject matter and
confirmation, recalculation, re-performance, analytical subject matter information. For example, less objective evidence
procedures and inquiry. Such further procedures involve might be expected when information about the subject matter is
substantive procedures including, where applicable, obtaining future oriented rather than historical (see paragraph 32); and
corroborating information from sources independent of the (b) Circumstances of the engagement other than the
responsible party, and depending on the nature of the subject characteristics of the subject matter, when evidence that could
matter, tests of the operating effectiveness of controls; and reasonably be expected to exist is not available because of, for
example, the timing of the practitioner’s appointment, an entity’s
(e) Evaluating the sufficiency and appropriateness of document retention policy, or a restriction imposed by the
evidence. responsible party.

52. “Reasonable assurance” is less than absolute assurance. Ordinarily, available evidence will be persuasive rather than
Reducing assurance engagement risk to zero is very rarely conclusive.
attainable or cost beneficial as a result of factors such as the
11 PSA 910 will be renumbered as PSRE 2400 under the “Structure of Pronouncements
following: Issued by the IAASB and ASPC” (see paragraph 2) of this Framework.

• The use of selective testing. 55. An unqualified conclusion is not appropriate for either type of
• The inherent limitations of internal control. assurance engagement in the case of a material limitation on
• The fact that much of the evidence available to the the scope of the practitioner’s work, that is, when:
practitioner is persuasive rather than conclusive.
• The use of judgment in gathering and evaluating (a) Circumstances prevent the practitioner from
evidence and forming conclusions based on that evidence. obtaining evidence required to reduce assurance engagement
risk to the appropriate level; or
10 Where the subject matter information is made up of a number of aspects, separate
conclusions may be provided on each aspect.
(b) The responsible party or the engaging party
While not all such conclusions need to relate to the same level of evidence gathering imposes a restriction that prevents the practitioner from
procedures, each conclusion is expressed in the form that is appropriate to either a obtaining evidence required to reduce assurance engagement
reasonable assurance or a limited assurance engagement.
risk to the appropriate level.
• In some cases, the characteristics of the subject
matter when evaluated or measured against the identified Assurance Report
criteria.
56. The practitioner provides a written report containing a
53. Both reasonable assurance and limited assurance conclusion that conveys the assurance obtained about the
engagements require the application of assurance skills and subject matter information. ISAs, ISREs and ISAEs establish
techniques and the gathering of sufficient appropriate evidence basic elements for assurance reports. In addition, the
as part of an iterative, systematic engagement process that practitioner considers other reporting responsibilities, including
includes obtaining an understanding of the subject matter and communicating with those charged with governance when it is
other engagement circumstances. The nature, timing and extent appropriate to do so.
of procedures for gathering sufficient appropriate evidence in a FRAMEWORK
limited assurance engagement are, however, deliberately limited 57. In an assertion-based engagement, the practitioner’s
relative to a reasonable assurance engagement. For some conclusion can be worded either:
subject matters, there may be specific pronouncements to
provide guidance on procedures for gathering sufficient (a) In terms of the responsible party’s assertion (for
appropriate evidence for a limited assurance engagement. For example: “In our opinion the responsible party’s assertion that
example, PSA 910, “Engagements to Review Financial internal control is effective, in all material respects, based on
Statements”11 establishes that sufficient appropriate evidence XYZ criteria, is fairly stated”); or
for reviews of financial statements is obtained primarily through
analytical procedures and inquiries. In the absence of a relevant (b) Directly in terms of the subject matter and the
pronouncement, the procedures for gathering sufficient criteria (for example: “In our opinion internal control is effective,
appropriate evidence will vary with the circumstances of the in all material respects, based on XYZ criteria”). In a direct
engagement, in particular, the subject matter, and the needs of reporting engagement, the practitioner’s conclusion is worded
the intended users and the engaging party, including relevant directly in terms of the subject matter and the criteria.
time and cost constraints. For both reasonable assurance and
limited assurance engagements, if the practitioner becomes 58. In a reasonable assurance engagement, the practitioner
aware of a matter that leads the practitioner to question whether expresses the conclusion in the positive form, for example: “In
our opinion internal control is effective, in all material respects, (ii) A qualified conclusion or a disclaimer of
based on XYZ criteria.” This form of expression conveys conclusion depending on how material or pervasive
“reasonable assurance.” Having performed evidence-gathering the matter is, in other cases. In some cases the
procedures of a nature, timing and extent that were reasonable practitioner considers withdrawing from the
given the characteristics of the subject matter and other relevant engagement.
engagement circumstances described in the assurance report,
the practitioner has obtained sufficient appropriate evidence to
reduce assurance engagement risk to an acceptably low level.

59. In a limited assurance engagement, the practitioner Inappropriate Use of the Practitioner’s Name
expresses the conclusion in the negative form, for example,
“Based on our work described in this report, nothing has come 61. A practitioner is associated with a subject matter when the
to our attention that causes us to believe that internal control is practitioner reports on information about that subject matter or
not effective, in all material respects, based on XYZ criteria.” consents to the use of the practitioner’s name in a professional
This form of expression conveys a level of “limited assurance” connection with that subject matter. If the practitioner is not
that is proportional to the level of the practitioner’s evidence- associated in this manner, third parties can assume no
gathering procedures given the characteristics of the subject responsibility of the practitioner. If the practitioner learns that a
matter and other engagement circumstances described in the party is inappropriately using the
assurance report.
12 In those direct reporting engagements where the subject matter information is presented
only in the practitioner’s conclusion, and the practitioner concludes that the subject matter
60. A practitioner does not express an unqualified conclusion for does not, in all material respects, conform with the criteria, for example: “In our opinion,
either type of assurance engagement when the following except for […], internal control is effective, in all material respects, based on XYZ criteria,”
such a conclusion would also be considered to be qualified (or adverse as appropriate).
circumstances exist and, in the practitioner’s judgment, the
effect of the matter is or may be material:
practitioner’s name in association with a subject matter, the
practitioner requires the party to cease doing so. The
(a) There is a limitation on the scope of the
practitioner also considers what other steps may be needed,
practitioner’s work (see paragraph 55). The practitioner
such as informing any known third party users of the
expresses a qualified conclusion or a disclaimer of conclusion
inappropriate use of the practitioner’s name or seeking legal
depending on how material or pervasive the limitation is. In
advice.
some cases the practitioner considers withdrawing from the
engagement.
Effective Date
(b) In those cases where:
62. This Framework shall be effective for assurance reports
dated on or after January 1, 2005. Earlier reference is
(i) The practitioner’s conclusion is worded in
permissible.
terms of the responsible party’s assertion, and that
assertion is not fairly stated, in all material respects; or
Acknowledgment
(ii) The practitioner’s conclusion is worded
directly in terms of the subject matter and the criteria,
63. This Framework is based on the International Framework for
and the subject matter information is materially
Assurance Engagements issued by the International Auditing
misstated,12 the practitioner expresses a qualified or
and Assurance Standards Board.
adverse conclusion depending on how material or
pervasive the matter is.
64. There are no significant differences between this Framework
and the International Framework for Assurance Engagements.
(c) When it is discovered after the engagement has
been accepted, that the criteria are unsuitable or the subject
Public Sector Perspective
matter is not appropriate for an assurance engagement. The
practitioner expresses:
1. This Framework is relevant to all professional accountants in
(i) A qualified conclusion or adverse
the public sector who are independent of the entity for which
conclusion depending on how material or pervasive
they perform assurance engagements.
the matter is, when the unsuitable criteria or
Where professional accountants in the public sector are not
inappropriate subject matter is likely to mislead the
independent of the entity for which they perform an assurance
intended users; or
engagement, the guidance in footnote 1 should be adopted.
FRAMEWORK
FRAMEWORK OF PHILIPPINE STANDARDS ON AUDITING because they do not have the power to obtain additional
Auditing Standards and Practices Council information to meet their specific information needs. Thus,
financial statements need to be prepared in accordance with
Philippine Standards on Auditing (PSAs) are to be applied in the one, or a combination of:
audit of financial statements.
PSAs are also to be applied, adapted as necessary, to the audit (a) accounting standards generally accepted in the
of other information and to related services. Philippines;
PSAs contain the basic principles and essential procedures (b) International Accounting Standards; and
lettering) together with related guidance in the form of (c) another authoritative and comprehensive financial
explanatory and other material. The basic principles and reporting framework which has been designed for use in
essential procedures are to be interpreted in the context of the financial reporting and is identified in the financial statements.
explanatory and other material that provides guidance for their
application. Framework for Auditing and Related Services

To understand and apply the basic principles and essential 4. This Framework distinguishes audits from related services.
procedures together with the related guidance, it is necessary to Related services comprise reviews, agreed-upon procedures
consider the whole text of the PSA including explanatory and and compilations. As illustrated in the diagram below, audits and
other material contained in the PSA not just that text which is reviews are designed to enable the auditor to provide high and
black lettered. In exceptional circumstances, an auditor may moderate levels of assurance respectively, such terms being
judge it necessary to depart from a PSA in order to more used to indicate their comparative ranking. Engagements to
effectively achieve the objective of an audit. When such a undertake agreed-upon procedures and compilations are not
situation arises, the auditor should be prepared to justify the intended to enable the auditor to express assurance.
departure.
PSAs need only be applied to material matters.

The PSAs issued by the Auditing Standards Practices Council

(Council) are based on International
Standards on Auditing (ISAs) issued by the International
Auditing Practices Committee of the International Federation of
Accountants.

The ISAs on which the PSAs are based are generally applicable
to the public sector, including government business enterprises.
However, the applicability of the equivalent PSAs on Philippine
public sector entities has not been addressed by the Council. It
is the understanding of the Council that this matter will be
addressed by the Commission on Audit itself in due course. 5. The Framework does not apply to other services provided by
Accordingly, the Public Sector Perspective set out at the end of auditors such as taxation, consultancy, and financial and
an ISA has not been adopted into the PSAs. accounting advice.

Framework of Philippine Standards on Auditing Levels of Assurance

Introduction 15. Assurance in the context of this Framework refers to the

auditor's satisfaction as to the reliability of an assertion being
1. The Auditing Standards and Practices Council has been made by one party for use by another party.
authorized to issue Philippine Standards on Auditing (PSAs).
The purpose of this document is to describe the framework To provide such assurance, the auditor assesses the evidence
within which PSAs are issued in relation to the services which collected as a result of procedures conducted and expresses a
may be performed by auditors. conclusion. The degree of satisfaction achieved and, therefore,
the level of assurance which may be provided is determined by
2. For ease of reference, except where indicated, the term the procedures performed and their results.
“auditor” is used throughout the PSAs when describing both
auditing and related services which may be performed. Such 16. In an audit engagement, the auditor provides a high, but not
reference is not intended to imply that a person performing absolute, level of assurance that the information subject to audit
related services need be the auditor of the entity's financial is free of material misstatement. This is expressed positively in
statements. the audit report as reasonable assurance.
Financial Reporting Framework
17. In a review engagement, the auditor provides a moderate
3. Financial statements are ordinarily prepared and presented level of assurance that the information subject to review is free
annually and are directed toward the common information needs of material misstatement. This is expressed in the form of
of a wide range of users. Many of those users rely on the negative assurance.
financial statements as their major source of information
18. For agreed-upon procedures, as the auditor simply provides 16. Although the auditor attempts to become aware of all
a report of the factual findings, no assurance is expressed. significant matters, the procedures of a review make the
Instead, users of the report assess for themselves the achievement of this objective less likely than in an audit
procedures and findings reported by the auditor and draw their engagement, thus the level of assurance provided in a review
own conclusions from the auditor's work. report is correspondingly less than that given in an audit report.

19. In a compilation engagement, although the users of the Agreed-upon Procedures

compiled information derive some benefit from the accountant's1
involvement, no assurance is expressed in the report. 17. In an engagement to perform agreed-upon procedures, an
auditor3 is engaged to carry out those procedures of an audit
Audit nature to which the auditor and the entity and any appropriate
third parties have agreed and to report on factual findings.
20. The objective of an audit of financial statements is to enable The recipients of the report must form their own conclusions
the auditor to express an opinion whether the financial from the report by the auditor. The report is restricted to those
statements are prepared, in all material respects, in accordance parties that have agreed to the procedures to be performed
with an identified financial reporting framework. The phrase since others, unaware of the reasons for the procedures, may
used to express the auditor's opinion is “present fairly, in all misinterpret the results.
material respects.” A similar objective applies to the audit of
financial or other information prepared in accordance with 2. As explained in paragraph 2 the term auditor is used when describing both auditing and
related services. Such reference is not intended to imply that a person performing related
appropriate criteria. services need to be the auditor of the entity’s financial statements.
3 See footnote 2.
21. In forming the audit opinion, the auditor obtains sufficient
appropriate audit evidence to be able to draw conclusions on Compilations
which to base that opinion.
18. In a compilation engagement, the accountant4 is engaged to
22. The auditor's opinion enhances the credibility of financial use accounting expertise as opposed to auditing expertise to
statements by providing a high, but not absolute, level of collect, classify and summarize financial information. This
assurance. Absolute assurance in auditing is not attainable as a ordinarily entails reducing detailed data to a manageable and
result of such factors as the need for judgment, the use of understandable form without a requirement to test the
testing, the inherent limitations of any accounting and internal assertions underlying that information. The procedures
control systems and the fact that most of the evidence available employed are not designed and do not enable the accountant to
to the auditor is persuasive, rather than conclusive, in nature. express any assurance on the financial information.
However, users of the compiled financial information derive
1 To distinguish compilation engagements from audits and other related services the term some benefit as a result of the accountant's involvement
"accountant" (rather than "auditor") has been used to refer to a professional accountant in
public practice.
because the service has been performed with due professional
skill and care.
Related Services
Auditor Association with Financial Information
Reviews
19. An auditor5 is associated with financial information when the
14. The objective of a review of financial statements is to enable auditor attaches a report to that information or consents to the
an auditor2 to state whether, on the basis of procedures which use of the auditor's name in a professional connection. If the
do not provide all the evidence that would be required in an auditor is not associated in this manner, third parties can
audit, anything has come to the auditor's attention that causes assume no responsibility of the auditor. If the auditor learns that
the auditor to believe that the financial statements are not an entity is inappropriately using the auditor's name in
prepared, in all material respects, in accordance with an association with financial information, the auditor would require
identified financial reporting framework. management to cease doing so and consider what further steps,
A similar objective applies to the review of financial or other if any, need to be taken, such as informing any known third
information prepared in accordance with appropriate criteria. party users of the information of the inappropriate use of the
auditor's name in connection with the information. The auditor
15. A review comprises inquiry and analytical procedures which may also believe it necessary to take other action, for example,
are designed to review the reliability of an assertion that is the to seek legal advice.
responsibility of one party for use by another party. While a
review involves the application of audit skills and techniques and Acknowledgment
the gathering of evidence, it does not ordinarily involve an
assessment of accounting and internal control systems, tests of 20. This Framework of Philippine Standards on Auditing is
records and of responses to inquiries by obtaining corroborating based on ISA 120, Framework of International Standards on
evidence through inspection, observation, confirmation and Auditing, issued by the International Auditing Practices
computation, which are procedures ordinarily performed during Committee of the International Federation of Accountants.
an audit. 21. This PSA differs from ISA 120 with respect to the deletion of
the section on Public Sector Perspective included in ISA 120.
4 See footnote 1.
5 This includes an accountant engaged to perform compilation engagements.
PREFACE TO THE INTERNATIONAL STANDARDS ON 3. The IAASB’s pronouncements govern audit, assurance and
QUALITY CONTROL, AUDITING, REVIEW, OTHER related services engagements that are conducted in accordance
ASSURANCE AND RELATED SERVICES with International Standards. They do not override the local laws
or regulations that govern the audit of historical financial
Preface statements or assurance engagements on other information in a
particular country required to be followed in accordance with
The “Preface to the International standards on Quality Control, that country’s national standards. In the event that local laws or
Auditing, Review, Other Assurance and Related Services” has regulations differ from, or conflict with, the IAASB’s Standards
been approved by the Board of the International Federation of on a particular subject, an engagement conducted in
Accountants in July 2003. Minor conforming amendments have accordance with local laws or regulations will not automatically
been reflected subsequent to July 2003. Further changes have comply with them. A professional accountant should not
been reflected based on the proposed amendments issued in represent compliance with the IAASB’s Engagement Standards
July 2004 relating to the IAASB due process and working unless the professional accountant has complied fully with all of
procedures. those relevant to the engagement.
In the year 2001, the Auditing Standards and Practices Council
(ASPC) of the Philippines has decided to adopt International 4. The IAASB is committed to the goal of developing a set of
Standards on Auditing (ISAs) and International Auditing Practice International Standards generally accepted worldwide. To
Statements (IAPSs) issued by the then International Auditing further this goal, the IAASB works cooperatively with national
Practices Committee (IAPC), now the International Auditing and standard setters, and takes a lead role in joint projects with
Assurance Standards Board (IAASB) which was established by them, to promote convergence between national and
the International Federation of Accountants (IFAC) to take over international standards and achieve acceptance of IAASB’s
the development and issuance of International Standards on Standards.
Quality Control, Auditing, Assurance and Related Services,
collectively referred to as IAASB’s Standards and Practice THE INTERNATIONAL AUDITING AND ASSURANCE
Statements. STANDARDS BOARD

As part of its decision to adopt IAASB’s technical 5. The IAASB is a Board established by IFAC.
pronouncements, the ASPC has adopted the “Preface to the
International Standards on Quality Control, Auditing, Review, 6. The members of the IAASB are appointed by the IFAC Board
Other Assurance and Related Services” presented in this to serve on the IAASB. The IAASB comprises eighteen
document. At the same time, for the information of interested members, ten of whom are put forward by member bodies of
parties, the ASPC has also adopted a similar Preface called IFAC, five of whom are put forward by the Forum of Firms, 1 and
“Preface to Philippine Standards on Quality Control, Auditing, three public members who may be members of IFAC member
Review, Other Assurance and Related Services” presented bodies but shall not be members in public practice. Candidates
starting on page 13 which supersedes the “Preface to Philippine for appointment as public members may be put forward by any
Standards on Auditing and Related Services” previously issued individual or organization. In addition, a limited number of
by the ASPC. observers, from bodies that have an appropriate interest in
issuing or endorsing standards, may be appointed who will have
the privilege of the floor but will be entitled to vote. These
INTRODUCTION observers would be expected to possess the technical skills to
participate fully in IAASB debates and attend IAASB meetings
1. This preface to the International Standards on Quality regularly to maintain an understanding of current issues.
Control, Auditing, Review, Other Assurance and Related
Services (“International Standards” or “IAASB’s Standards”) is Candidates put forward, including the Chair of the IAASB, are
issued to facilitate understanding of the objectives and operating considered for appointment by IFAC’s Nominating Committee.
procedures of the International Auditing and Assurance The selection process is based on the principle of “the best
Standards Board (IAASB) and the scope and authority of the person for the job.” IAASB members serve for three years, with
pronouncements it issues, as set forth in the IAASB’s Interim one third of the IAASB membership rotating every year.
Terms of Reference. Continuous service by a member on the IAASB is limited to two
(2) consecutive three (3) year terms, unless that member is
2. The mission of the International Federation of Accountants appointed to serve as Chair for a further period of not more than
(IFAC), as set out in its constitution, is “the worldwide three years. IAASB members act in the common interest of the
development and enhancement of an accountancy profession public at large and the worldwide accountancy profession. This
with harmonized standards, able to provide services of could result in their taking a position on a matter that is not in
consistently high quality in the public interest.” In pursuing this accordance with current practice in their country or firm or not in
mission, the IFAC Board has established the IAASB to develop accordance with the position taken by those who put them
and issue, under its own authority, high quality standards on forward for membership of the IAASB. Each IAASB member has
auditing, assurance and related services engagements the right to appoint one technical advisor who may participate in
(“Engagement Standards,” as defined in paragraph13), related the discussions at IAASB meetings.
Practice Statements and quality control standards for use
around the world.
7. IAASB members who absent themselves from two meetings 18. Any limitation of the applicability of a specific International
in any twelve month period may be requested to resign from the Standard is made clear in the standard.
IAASB.
19. In circumstances where specific International Standards or
8. The IAASB may appoint task forces to assist it in the guidance contained in an International Standard are not
development of materials. applicable in a public sector environment, or when additional
guidance is appropriate in such an environment, IFAC’s Public
These task forces may include individuals who are not members Sector Committee so states in a Public Sector Perspective
of the IAASB. (PSP). When no PSP is added, the International Standard is to
be applied as written to engagements in the public sector.
9. IAASB meetings to discuss the development, and to approve
the issuance, of International Standards, Practice Statements or
other papers are open to the public. Agenda papers, including THE AUTHORITY ATTACHING TO PRACTICE STATEMENTS
minutes of the meetings of the IAASB, are published on the ISSUED BY THE INTERNATIONAL AUDITING AND
IAASB’s web site. ASSURANCE STANDARDS BOARD

1 The Forum of Firms is a collaboration of public accounting firms that share the common 20. International Auditing Practice Statements (IAPSs) are
objective to promote consistently high standards of financial reporting and auditing
worldwide in the interest of users of the profession’s services and the general public. issued to provide interpretive guidance and practical assistance
to professional accountants in implementing ISAs and to
THE AUTHORITY ATTACHING TO INTERNATIONAL promote good practice. International Review Engagement
STANDARDS ISSUED BY THE INTERNATIONAL AUDITING Practice Statements (IREPSs), International Assurance
AND ASSURANCE STANDARDS BOARD Engagement Practice Statements (IAEPSs) and International
Related Services Practice Statements (IRSPSs) are issued to
10. International Standards on Auditing (ISAs) are to be applied serve the same purpose for implementation of ISREs, ISAEs
in the audit of historical financial information. and ISRSs, respectively.

11. International Standards on Review Engagements (ISREs) 21. Professional accountants should be aware of and consider
are to be applied in the review of historical financial information. Practice Statements applicable to the engagement. A
professional accountant who does not consider and apply the
12. International Standards on Assurance Engagements guidance included in a relevant Practice Statement should be
(ISAEs) are to be applied in assurance engagements dealing prepared to explain how the basic principles and essential
with subject matters other than historical financial information. procedures in the
13. International Standards on Related Services (ISRSs) are to Engagement Standard(s) addressed by the Practice Statement
be applied to compilation engagements, engagements to apply have been complied with.
agreed-upon procedures to information and other related
services engagements as specified by the IAASB. OTHER PAPERS PUBLISHED BY THE INTERNATIONAL
AUDITING AND ASSURANCE STANDARDS BOARD
14. ISAs, ISREs, ISAEs and ISRSs are collectively referred to
as the IAASB’s Engagement Standards. 22. Other papers, for example Discussion Papers, are published
to promote discussion or debate on auditing, assurance and
15. International Standards on Quality Control (ISQCs) are to be related services and quality control issues affecting the
applied for all services falling under the IAASB’s Engagement accounting profession, present findings, or describe matters of
Standards. interest relating to auditing, assurance, related services and
quality control issues affecting the accounting profession. They
16. The IAASB’s Standards contain basic principles and do not establish any basic principles or essential procedures to
essential procedures (identified in bold type lettering) together be followed in audit, assurance or related services
with related guidance in the form of explanatory and other engagements.
material, including appendices. The basic principles and
essential procedures are to be understood and applied in the IAASB DUE PROCESS AND WORKING PROCEDURES
context of the explanatory and other material that provides
guidance for their application. It is therefore necessary to IAASB’s Standards and Practice Statements
consider the whole text of a Standard to understand and apply
the basic principles and essential procedures. Project Identification, Prioritization and Approval

17. The nature of the IAASB’s Standards requires professional 23. Projects to develop new, or revise existing, International
accountants to exercise professional judgment in applying them. Standards or Practice Statements are identified based on
In exceptional circumstances, a professional accountant may international and national developments, input from IAASB
judge it necessary to depart from a basic principle or essential members and their technical advisors, or recommendations
procedure of an Engagement Standard to achieve more received from interested parties including, but not limited to,
effectively the objective of the engagement. When such a audit oversight authorities, regulators, national standard setters,
situation arises, the professional accountant should be prepared the IAASB Consultative Advisory Group2 (CAG) and the Public
to justify the departure. Interest Oversight Board3 (PIOB).
 consulting with the IAASB CAG, practitioners, regulators,
24. Based on research and appropriate consultation with the national standard setters and other interested parties, as well as
IAASB CAG, a project proposal is prepared for consideration by reviewing professional pronouncements issued by IFAC
the IAASB Steering Committee.4 member bodies and other parties. Project Task Force meetings
Project proposals are circulated to other IFAC Committees and are not open to the public.
Task Forces,5 including the IFAC Ethics Committee, the IFAC
Transnational Auditors 28. Agenda papers, including issues papers and draft
Committee, the IFAC Small- and Medium-Sized Practices Task International Standards or Practices Statements prepared by
Force and the IFAC Developing Nations Task Force, to identify Project Task Forces, for the IAASB’s review and debate are
matters of possible relevance to the project. published on the IAASB website in advance of each IAASB
meeting.7
2 The objective of the IAASB Consultative Advisory Group (CAG) is to provide a forum
where the IAASB can consult with individuals, or representatives of organizations,
interested in the development of high quality international standards on quality control, IAASB meetings to discuss the development, and to approve
audits, reviews, other assurance and related services designed to serve the public interest the
in order to obtain: (a) views on the IAASB’s agenda and project timetable (work program),
including project priorities; (b) technical advice on projects; and (c) the views of CAG on
other matters of relevance to the activities of the IAASB. The membership, terms of 6 Joint projects are subject to the due process described in this paper. If exposed
reference and operating procedures of CAG are published on the IAASB website. separately both internationally and by the national standard setter with whom the project is
being jointly developed, IAASB may additionally have regard to comments received by the
3 The Public Interest Oversight Board (PIOB) oversees IFAC standard setting activities in national standard setter, where they may be relevant internationally. The final document
the areas of audit standards, independence, and other ethical standards for auditors, audit approved by IAASB becomes an International Standard or Practice Statement in the normal
quality control and assurance standards. It also oversees IFAC’s proposed Compliance way. It may differ from the corresponding document, if any, approved by the collaborating
Program. The objective of the PIOB is to increase the confidence of investors and others national standard setter.
that the public interest activities of IFAC (including the setting of standards by IFAC boards 7. Historical copies of agenda papers are retained on the IAASB website and highlights of
and committees) are properly responsive to the public interest. The membership, terms of each meeting and updated project summaries are posted to the website after each meeting.
reference and operating procedures of the PIOB are published on the IFAC website.

4 The IAASB Steering Committee (Steering Committee) is a standing committee of the

issuance, of International Standards and Practice Statements
IAASB. The purpose of the Steering Committee is to formulate views and advise the IAASB are open to the public.8
on matters of strategic and operational importance to the IAASB, while also relieving the The meetings and agenda papers are in English which is the
IAASB of the need to address certain administrative matters that do not necessarily require
deliberation by the IAASB. The membership, terms of reference and operating procedures official working language of IFAC. Minutes of the immediately
of the Steering Committees are published on the IAASB website. preceding meeting of the IAASB are published on the IAASB
5 The membership, terms of reference and operating procedures of IFAC Committees and website in advance of each IAASB meeting.
Task Forces are published on the IFAC website.
29. The Project Task Force recommends, and the IAASB
25. The IAASB Steering Committee determines whether to specifically considers, whether there is a need to hold a public
recommend the project proposal for approval by the IAASB. If a forum or roundtable, or issue a consultation paper, soliciting
project proposal is recommended to the IAASB, the IAASB views on a matter under consideration at any stage, whether
discusses the proposal in an open meeting and if it accepts the before or after a draft International Standard or Practice
proposal, approves the commencement of the project. The Statement is issued for public exposure. Web cast technology
IAASB Chair determines the priorities of approved projects in may be used to conduct a public forum or roundtable in an
consultation with the IAASB Steering Committee. Where the economic and efficient manner. In deciding upon the need to
IAASB CAG or the PIOB has recommended a project for hold a public forum or roundtable or to issue a consultation
consideration by the IAASB, the IAASB Chair informs the IAASB paper, the IAASB considers whether the subject of the
CAG and the PIOB of the decisions of the IAASB. International Standard or Practice Statement, the level of
interest, the need for additional information in order to further
Research, Consultation and Debate the IAASB’s deliberative process, or some other reason
indicates that wider or further consultation would be appropriate.
26. After approval of a project proposal and appropriate
consultation with the IAASB as necessary, the IAASB Steering Public Exposure
Committee assigns responsibility for the project to a Project
Task Force established for that purpose. The Project Task 30. When approved, the IAASB exposes proposed International
Force will ordinarily be chaired by a member of the IAASB and Standards for public comment, and ordinarily exposes proposed
may contain participants, such as external experts who are not Practice Statements for public comment.
members of the IAASB but have experience relevant to the
subject matter being addressed by the Project Task Force. In 31. Each exposure draft is accompanied by an explanatory
addition, a separate group of experts may be established to memorandum that highlights the objective(s) of, and the
advise a Project Task Force. The IAASB may also conduct significant proposals contained in, the draft International
projects jointly with a national standard setter(s) or others. In Standard or Practice Statement. The explanatory memorandum
such cases, the joint Project Task Force is ordinarily chaired by may also direct respondents to aspects of the draft International
a member of the IAASB, or chaired jointly.6 Standard or Practice Statement on which specific feedback is
sought.
27. The Project Task Force has the initial responsibility for the
preparation of a draft International Standard or Practice 32. Exposure drafts are placed on the IAASB’s website where
Statement. The Project Task Force develops its positions based they can be accessed free of charge and are widely distributed
on appropriate research and consultation, which may include, to member bodies of IFAC, regulatory bodies, organizations that
depending on the circumstances: commissioning research, have an interest in quality control, auditing, review, other
assurance and related services standards and practice vehicle for dialogue between regulators and the international accountancy profession. The
membership, terms of reference and operating procedures of the Monitoring Group are
statements, and the general public. To allow adequate time for published on the IFAC website.
due consideration and comment from all interested parties, the
exposure period will ordinarily be 90 days. reported and recorded in the minutes of the IAASB meeting at
which the related project is discussed.
8 Matters of a general administrative nature or with privacy implications may be dealt with in
closed sessions.
36. Project agenda papers contain a cumulative summary of the
Responses to Exposure Drafts and Consideration of significant decisions made by the IAASB on matters relating to
Respondents’ Comments the project, including its position on the main points raised in
comment letters. In circumstances where several iterations of
33. An acknowledgement of receipt is sent to every respondent significant changes to an exposure draft are made, and where
to an exposure draft. Respondents’ comments are considered a practicable, a summary comparative analysis of the proposed
matter of public record and are posted in a readily accessible revised final
format on the IAASB website after the end of the exposure International Standard or Practice Statement to the exposure
period. IAASB members, their technical advisers and task force draft is provided to the IAASB.
members who are not members of the IAASB are notified when
comment letters have been made available on the IAASB Re-exposure
website. A number of printed copies of the exposure draft and
comment letters are also made available for the reference 37. The Project Task Force recommends to the IAASB whether
purpose of IAASB members at the IAASB meeting in which the re-exposure is necessary, and explains the basis for the
project is scheduled for discussion. Task Force members may recommendation. The IAASB formally votes whether re-
request such printed copies at any time if they prefer to work exposure is required, subject to the same voting requirements
with this format rather than electronic copies. as the publication of an exposure draft or the issuance of a final
International Standard or Practice Statement.
34. The comments and suggestions received within the
exposure period as a result of public exposure are read and 38. In determining the need to re-expose an International
considered by the Project Task Force.9 To facilitate the Standard or Practice Statement, the IAASB assesses whether,
deliberative process the IAASB is ordinarily provided with a as a result of the comments received on exposure, there has
revised proposed been substantial change to the exposed International Standard
International Standard or Practice Statement and an Issues or Practice Statement and, if so, whether those changes warrant
Paper that analyzes the comments received, summarizes the the need to re-expose.
main issues raised and outlines the recommendations of the Situations that constitute potential grounds for a decision to re-
Project Task Force. expose may include, for example, substantial change to a
proposal arising from matters not previously deliberated by the
The Issues Paper also includes the rationale of the Project Task IAASB or aired in the exposure draft, or substantial change to
Force in arriving at its conclusions and, as considered the substance of an International Standard or Practice
appropriate by the Task Force, the reason(s) why significant Statement.
changes recommended by a respondent(s) were or were not
accepted. In addition to careful study of the Issues Paper, Final International Standard or Practice Statement
IAASB members make themselves aware of key points made by
respondents within the context of the response letters. 39. At the point of approval of a final International Standard or
Practice Statement, the IAASB Technical Director confirms to
35. Before a final International Standard or Practice Statement the IAASB that the IAASB’s stated due process has been
is issued, the IAASB gives due consideration to comments followed.
received.9
The IAASB deliberates significant matters raised in comment 40. When the revised draft is approved, it is issued as a
letters received, with significant decisions made by the IAASB definitive International Standard or Practice Statement. The
recorded in the minutes of the meeting of the IAASB. The IAASB will set an effective date for the application of its
IAASB may decide to discuss with respondents their letters of International Standards. The IAASB will set a date from which
comment or to explain to them the reason(s) for not having professional accountants should be aware of and consider a
accepted their proposals. It is expected that this will be regular relevant Practice Statement.
practice for comments received from members of the Monitoring
Group.10 41. The features and transparency of IAASB’s due process
ordinarily obviate the need for the IAASB to issue a separate
The nature and outcome of such discussions are document explaining its basis for conclusions. In the rare
circumstance where the IAASB decides that additional
9 The Project Task Force, and thereby the IAASB, may not be able to give full consideration communication is necessary, however, such a document may
to comments received after the end of an exposure period.
be issued.
10 The Monitoring Group includes representatives of the International Organization of
Securities
Commissions, the Basel Committee on Banking Supervision, the Financial Stability Forum,
the European Commission, the International Association of Insurance Supervisors and the
World Bank. The Monitoring Group’s responsibilities include briefing the PIOB regarding
significant events in the regulatory environment, and among other things, acting as the
Other Papers Published by the International Auditing and PREFACE TO PHILIPPINE STANDARDS
Assurance Standards Board ON QUALITY CONTROL, AUDITING, REVIEW,
OTHER ASSURANCE AND RELATED SERVICES
42. For other papers, the IAASB Chair will appoint a review
group of four IAASB members to consider whether a draft paper INTRODUCTION
has sufficient merit to be added to the IAASB’s assurance and
auditing literature. The draft paper may come from any source 1. This Preface to Philippine Standards on Quality Control,
and the IAASB need not have specifically commissioned it. If the Auditing, Other Assurance and Related Services is issued to
review group believes that the paper has sufficient merit it facilitate understanding of the objectives and operating
recommends to the IAASB that the paper be published and procedures of the Auditing Standards and Practices Council
added to its literature. (hereinafter referred to as “ASPC” or “Council”) and the scope
and authority of the documents issued by the Council.
Voting
2. The mission of the ASPC as set out in its Rules of
43. Each IAASB meeting requires the presence, in person or by Procedures is “the promulgation of auditing standards,
simultaneous telecommunication link, of at least twelve practices and procedures which shall be generally accepted by
appointed members. the accounting profession in the Philippines.”

44. The affirmative votes of at least two thirds of the members 3. It is the stated policy of the ASPC to make the International
present at a meeting in person or by simultaneous Standards and Practice Statements issued by the IAASB the
telecommunications link or by proxy, but not less than twelve, is applicable standards and practice statements in the Philippines.
required to approve exposure drafts, re-exposure drafts, In this connection, to facilitate their implementation in the
International Standards and Practice Statements. Dissenting Philippines, the International Standards and Practice
votes, including the reason(s) therefore, will be included in the Statements are made Philippine-specific and are described as
minutes of the meeting. Philippine standards and practice statements as presented in
paragraph 4. This process involves making Philippine-specific
45. Each member of the IAASB has the right to one vote. A those paragraphs or sections in International Standards and
member has the right to appoint a proxy in writing. The proxy Practice Statements that are addressed in broad terms to the
may be the member’s technical advisor or another IAASB international community as a whole to make them clearly
member. The appointment of a proxy is disclosed at an IAASB applicable in the Philippines. It also involves providing additional
meeting and recorded in the minutes of the meeting. information in certain paragraphs or sections, whenever
necessary, to facilitate and clearly establish the application in
46. The IAASB may also use ballots where exposure drafts or the Philippines of the International Standards and Practice
final International Statements. There are currently no fundamental differences
Standards and Practices Statements are discussed at an IAASB between the IAASB International pronouncements and the
meeting and a final draft is distributed and approved equivalent ASPC Philippine pronouncements and no such
electronically subsequent to the meeting. differences are expected in the future.
Ballots may also be used where final discussion of the exposure
draft or final International Standard or Practice Statement yields 4. The pronouncements of the ASPC shall be in the form of:
a significant number of changes and additional time for further Philippine Standards on Quality Control (PSQCs)
consideration is considered necessary. Philippine Standards on Auditing (PSAs)
Philippine Standards on Review Engagements (PSREs)
Other Matters Philippine Standards on Assurance Engagements (PSAEs)
Philippine Standards on Related Services (PSRSs)
47. IAASB’s annual report describes the manner in which the Philippine Auditing Practice Statements (PAPSs)
IAASB has complied with its due process during the period. Philippine Review Engagement Practice Statements (PREPSs)
Philippine Assurance Engagement Practice Statements
Matters of Due Process (PAEPSs)
Philippine Related Services Practice Statements (PRSPSs)
48. If an issue over due process is raised with IAASB, whether
by a third party or otherwise, the IAASB Steering Committee THE AUDITING STANDARDS AND PRACTICES COUNCIL
assesses the matter and, should it agree to pursue it, obtains
relevant information from all parties concerned. If, based on the 5. The ASPC was established by the Philippine Institute of
information so obtained, the Steering Committee concludes that CPAs (PICPA) and the Association of CPAs in Public Practice
there was a breach of the IAASB’s stated due process, an (ACPAPP).
appropriate resolution thereof is sought and communicated to
the party raising the matter.

LANGUAGE
49. The sole authoritative text of an exposure draft, International
Standard, Practice Statement or other paper is that published by
the IAASB in the English language.
6. The Council has 17 regular members coming from the 15. The ASPC’s Standards contain basic principles and
following: essential procedures (identified in bold type lettering) together
with related guidance in the form of explanatory and other
No. of Members material, including appendices. The basic principles and
Independent auditing firms 7 essential procedures are to be understood and applied in the
PICPA 5 context of the explanatory and other material that provide
ACPAPP 2 guidance for their application. It is therefore necessary to
Board of Accountancy 1 consider the whole text of a Standard to understand and apply
Securities and Exchange Commission 1 the basic principles and essential procedures.
Commission on Audit 1
16. The nature of the Philippine Standards issued by the ASPC
Whenever there is a PICPA representative to the International requires professional accountants to exercise professional
Auditing and Assurance Standards Board (the then International judgment in applying them. In exceptional circumstances, a
Auditing Practices Committee), such PICPA representative professional accountant may judge it necessary to depart from a
becomes an ex-officio member of the Council. basic principle or essential procedure of an Engagement
Standard to achieve more effectively the objective of the
7. The Council members from PICPA represent the following engagement. When such a situation arises, the professional
sectors (one representative each): accountant should be prepared to justify the departure.

Academe 17. Any limitation of the applicability of a specific Philippine

Commerce and Industry Standard is made clear in the standard.
Public Practice:
Luzon 18. With respect to International Standards, in circumstances
Visayas where specific International Standards or guidance contained in
Mindanao an International Standard are not applicable in a public sector
environment, or when additional guidance is appropriate in such
THE AUTHORITY ATTACHING TO PHILIPPINE STANDARDS an environment, IFAC’s Public Sector Committee so states in a
ISSUED BY THE ASPC Public Sector Perspective (PSP). When no PSP is added, the
International Standard is to be applied as written to
8. As set forth in the ASPC’s Rules of Procedures, engagements in the public sector. With respect to Philippine
“pronouncements on generally accepted auditing standards, Standards, this guidance is also applicable. Hence, Philippine
interpretations, and opinions issued by the ASPC apply Standards are to be applied as written to engagements in public
whenever an independent examination of financial statements of sector, unless so stated that they do not apply in a public sector
any entity, whether profit-oriented or not, and irrespective of size environment or they are not appropriate in such an environment.
or legal form, when such examination is conducted for the
purpose of expressing an opinion thereon. They may also have THE AUTHORITY ATTACHING TO PRACTICE STATEMENTS
application, as appropriate, to other related activities of ISSUED BY THE ASPC
auditors.”
19. Philippine Auditing Practice Statements (PAPSs) are issued
9. Philippine Standards on Auditing (PSAs) are to be applied, as to provide interpretive guidance and practical assistance to
appropriate, in the audit of historical financial information. professional accountants in implementing PSAs and to promote
good practice. Philippine Review
10. Philippine Standards on Review Engagements (PSREs) are Engagement Practice Statements (PREPSs), Philippine
to be applied in the review of historical financial information. Assurance Engagement Practice Statements (PAEPSs), and
Philippine Related Services Practice Statements (PRSPSs) are
11. Philippine Standards on Assurance Engagements (PSAEs) issued to serve the same purpose for implementation of PSREs,
are to be applied in assurance engagements dealing with PSAEs and PSRSs, respectively.
subject matters other than historical financial information.
20. Professional accountants should be aware of and consider
12. Philippine Standards on Related Services (PSRSs) are to be Practice Statements applicable to the engagement. A
applied to compilation engagements, engagements to apply professional accountant who does not consider and apply the
agreed-upon procedures to information and other related guidance included in a relevant Practice Statement should be
services engagements as specified by the ASPC. prepared to explain how the basic principles and essential
procedures in the Engagement Standard(s) addressed by the
13. PSAs, PSREs, PSAEs and PSRSs are collectively referred Practice Statement have been complied with.
to as the ASPC’s Engagement Standards.
OTHER PAPERS PUBLISHED BY THE ASPC
14. Philippine Standards on Quality Control (PSQCs) are to be
applied for all services falling under the ASPC’s Engagement 21. Other papers, for example Discussion Papers, are published
Standards. to promote discussion or debate on auditing, assurance and
related services and quality control issues affecting the
accounting profession, present findings, or describe matters of
interest relating to auditing, assurance, related services and exposure drafts, to review and has the initial responsibility for
quality control issues affecting the accounting profession. They the preparation and drafting the exposure draft on the proposed
do not establish any basic principles or essential procedures to Philippine Standard or Practice Statement for consideration by
be followed in audit, assurance or related services the ASPC en banc. If approved by the ASPC, the exposure draft
engagements. is widely distributed to interested organizations and persons for
comment. The exposure draft shall also be published in the
ADOPTION OF PHILIPPINE STANDARDS AND PRACTICE PICPA Accounting Times and ACPAPP Bulletin to give it further
STATEMENTS BY THE ASPC exposure. Adequate time is allowed (generally not shorter than
90 days) for each exposure draft to be considered by the
Approach organizations and persons to whom it is sent for comment.
Interested parties may send their comments direct to IAASB,
22. To facilitate the implementation in the Philippines of with a copy to ASPC, on exposure drafts which are still under
International Standards and Practice Statements, the ASPC exposure by the IAASB. Interpretations, if issued by the ASPC,
undertakes a review of the existing International need not be exposed for comment, except when it is deemed
pronouncements and those that may be issued in the future to desirable, in which case the exposure period will normally be the
make them Philippine-specific as stated in paragraph 3 of this same as that of a proposed Philippine Standard or Practice
Preface. When changes are made to the original International Statement.
pronouncements to make them Philippine specific, these
changes are shown clearly in the ASPC exposure drafts referred 27. The development of additional auditing standards or
to in paragraph 26 of this Preface, such that deletions are statements to address the unique requirements of Philippine law
stricken through with one line and additions are italicized and or practice shall likewise undergo the same process and
underlined. In addition, any significant changes to the procedures described above.
International pronouncements are explained both in the ASPC
exposure drafts and final Philippine Standards or Practice 28. The comments and suggestions received as a result of the
Statements. The markings for the changes in the exposure exposure of proposed auditing standards or statements are then
drafts are cleaned after the exposure drafts are finally adopted considered by ASPC and the exposure draft is revised as
as Philippine Standards or Practice Statements. appropriate. If necessary and under applicable circumstances,
the comments and suggestions may also be passed on to
23. To keep in step with the phase of the IAASB’s issuance of IAASB for its consideration. When the revised draft is approved
pronouncements, the ASPC shall endeavor to review IAASB’s by the ASPC, it is issued as a final Philippine Standard or
exposure drafts once released and will issue the same, after Practice Statement.
appropriate review in accordance with the ASPC’s working
procedures, as ASPC’s EDs. However, to ensure that the 29. Issuance of exposure drafts requires approval by a majority
changes made in the finalization of the IAASB’s EDs are of the members of the
reflected in the final ASPC pronouncements, finalization of the Council; issuance of final Philippine Standards and Practice
ASPC’s EDs shall be made only after the IAASB shall have Statements, as well as interpretations, requires approval of at
issued the related final pronouncements. least ten members.

24. Once adopted, a Philippine Standard or Practice Statement 30. Each final Philippine Standard and Practice Statement, as
will supersede or amend the specified ASPC Standards and well as interpretations, if deemed appropriate, shall be
Practice Statements previously adopted by the Council (or any submitted to the Professional Regulation Commission through
Statement of Auditing Standards of the Philippines (SASP), the the Board of Accountancy for approval after which the
previous pronouncements of the ASPC). An effective date is set pronouncements shall be published in the Official Gazette. After
for the application of each Philippine Standard and Practice publication, the ASPC pronouncement becomes operative from
Statement adopted and any amendments to ASPC the effective date stated therein.
pronouncements, and until such effective date, the superseded
pronouncement being superseded or amended continues to be NUMBERING OF PHILIPPINE STANDARDS AND PRACTICE
applicable. STATEMENTS

25. Other Philippine Standards or Practice Statements may be 31. Philippine Standards and Practice Statements adopted from
issued when deemed necessary by the ASPC to address any International pronouncements will use the same numbers as
unique requirements imposed by Philippine law or practice. The their counterpart International pronouncements. Philippine
reason for the issuance of such pronouncements shall be clearly Standards and Practice Statements that are
indicated in the Philippine Standards or Practice Statements. Philippine specific and are not adopted from International
pronouncements will be numbered consecutively with suffix “Ph”
Working Procedures as follows:

26. To facilitate the initial work in adopting the existing a. For Philippine Standards – starting from 100Ph
International Standards and Practice Statements, the ASPC
members have been assigned to workgroups, each with a b. For Philippine Practice Statements – starting from
designated group leader. Each workgroup is assigned specific 1000Ph
International Standards and Practice Statements, or IAASB’s