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CHAPTER 2:

THE PROFESSIONAL
STANDARDS
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TABLE OF CONTENTS

1. THE 3. Philippine
PROFESSIONAL Standards on
STANDARDS Auditing (PSA

2. Generally Accepted
Auditing Standards 4. System of
(GAAS) Quality Control
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How can you tell if an

auditor is a reliable and
professional?
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Professional Standards are principle-focused and

provide a framework for performing applicable
financial reporting.

Why there is a need for professional standards?

In the conduct of the audit, An auditor assumes certain Professional
Responsibilities. The auditor’s opinion is based on an examination
conducted in accordance with professional standards, and Failure to
comply with these standards, the auditor might expose himself or the
whole auditing profession the risk on losing of public respect or even
assessment of legal damages
The Board of Accountancy promulgated ten generally
accepted auditing standards (GAAS) that establish
required level of quality for performing financial statement
audits. Philippine Standards on Auditing (PSAs) are
issued to clarify the meaning
Why of these
there is a need for ten GAAS.
professional standards?
 ● Minimum ● Helps ensure
standard of Accuracy ,
performance Generally Consistency and
that auditors
should follow.
Accepted variability of the
audit.
Auditing
standards
● Represent measures (GAAS) ● Basis in evaluating
of the quality of the performance of the
auditor’s audit by the auditor.
performance,
 Generally Accepted Auditing
standards (GAAS)

General Standards of Standards of

Standards Field Work Reporting
-pertaining to the auditor -pertaining to conduct of an audit -Pertaining to process of reporting
 General Standards

Technical Independence Professional care

training and Proficiency

● the examination of the ● In all matters relating ● this is to be exercised

financial statement is to to audit, it is important by the auditor in the
be conducted by for the auditor to performance of the
person or persons having maintain its audit and the
adequate training and independence preparation of the
proficiency as an auditor. both in independence report.
in mind and in
appearance.
 Standards of Field Work

Internal Control Evidential Matter

Planning
Consideration ● Sufficient competent evidential
matter is to be obtained
● the work is to be
● the internal control is to be through inspection,
properly planned
properly studied and observation, inquiries and
and assistants, in
evaluated to check on the confirmations to afford a
any are to be
possible reliance on internal reasonable basis for an
properly supervised.
opinion regarding the financial
control.
statement under examination.
 Generally Accepted Accounting Principles
The report shall state whether the financial
statement is presented in accordance with generally
accepted accounting principles

Standards of Inconsistency
The report shall identify those circumstances in which
Reporting principles have not been consistently observed in the
current period in relation to the preceding period.

Disclosure
Opinion
The report shall either be contain an expression of Informative disclosures are to be regarded as
opinion regarding the financial statements, taken as a reasonably adequate unless otherwise stated
whole or an assertion to that effect that an opinion in the report.
cannot be expressed. Whenever, the opinion cannot be

expressed the reasons therefore should be stated.

 Philippine Standards on Auditing (PSAs)
The auditing and Assurance Standards Council (AASC) has been given the task to
promulgate auditing standards, practices and procedures which shall be
generally accepted by the accounting profession in the Philippines.
SYSTEM OF QUALITY
CONTROL
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The need for practicing CPAs to implement and maintain

quality control measures is derived from the fact that audits
are usually conducted by audit teams.

Quality controls are policies and procedures adopted by

CPAs to provide reasonable assurance of conforming with
professional standards in performing audit and related
services.
Philippine Standards on Quality Control (PSQC)

A firm has an obligation to establish a system of quality control

designed to provide it with reasonable assurance that the firm and
its personnel will comply with professional standards and
regulatory and legal requirements, and that the report issued by the
firm are appropriate in the circumstances.
ELEMENTS OF SYSTEM OF
QUALITY CONTROL
1. Leadership Responsibilities for Quality on Audits

The firm should establish policies and procedures designed

to promote an internal culture based on recognition that
quality is essential in the performance of the engagements.
2. Ethical Requirements
The firm should establish policies and procedures designed to
provide it with reasonable assurance that the firm and its personnel
comply with ethical requirements, which include:

A. Integrity;
B. Objectivity;
C. Professional competence and due care;
D. Confidentiality; and
E. Professional behavior.
3. Independence
The engagement partner should form a conclusion on
compliance with independence requirements that apply to the
audit engagement. The engagement partner should

A. Obtain relevant information

B. Evaluate information on identified breaches of the firm’s
independence policies and procedures.
C. Take appropriate safeguards to eliminate or reduce threats
D. Document conclusions on independence and the basis for
such conclusion.
4. Acceptance and Continuance of Client Relationships
Designed to provide it with reasonable assurance that it will
only undertake or continue relationships and engagement
where it:

A. Has considered the integrity of the client;

B. Is competent to perform the engagement and has the
capabilities, time, and resources to do so; and
C. Can comply with ethical requirements.
5. Human Resources and Assignment
Such policies and procedures should address issues concerning
personnel:

● Recruitment;
● Performance evaluation, compensation and promotion;
● Capabilities and competence’
● Career development; and
● Assignment of engagement teams
6. Engagement Performance
Direction

Assistance should informed of their responsibilities, that nature of the

entity’s business, potential problems that may arise and the detailed
approach to the performance of the engagement.

Supervision

This involves monitoring the progress of the audit resolving accounting and
audit issues, and considering the level of consultation appropriate for the
engagement.
6. Engagement Performance
Review

Work performed by assistants should be reviewed to consider whether the

audit procedures, evidence and documentation are appropriate to support
the conclusion reached.

Consultation

The firm should establish policies and procedures that encourage firm
personnel to seek assistance from authoritative sources either within or
outside the firm.
6. Engagement Performance
The engagement partner should:

a. Be responsible for engagement team undertaking appropriate

consultation on difficult and contentious matter

b. Be satisfied that members of the engagement team have undertaken

appropriate consultation during the course of the engagement, both within
the engagement team and others at the appropriate level within or outside
the firm
6. Engagement Performance
The engagement partner should:

c. Be satisfied that the nature and scope of, and conclusions resulting from
such consultations are documented and agreed with the party consulted.

d. Determine that conclusions resulting form consultations have been

implemented.
6. Engagement Performance

Engagement Quality Control Review

The firm should establish policies and procedures requiring an engagement

quality control review that provides an objective evaluation of the significant
judgments made and conclusions reached in formulating the auditor’s report.
6. Engagement Performance
Engagement Quality Control Review
This requires the engagement partner
a. To determine that an engagement quality control reviewer has been
appointed
b. To discuss significant matters arising during the audit engagement,
including those identified during the quality control review, with the
engagement quality control reviewer and
c. Not to issue the auditor’s report until the completion of the engagement
quality control review.
6. Engagement Performance

Difference of Opinion
The engagement team should follow the firm’s policies and procedures for
dealing with and resolving differences of opinion that arise within the
engagement team, with those consulted and, where applicable, between the
engagement partner and the engagement quality control reviewer.
7. Monitoring

The continued adequacy and operational effectiveness of quality control

policies and procedures is to be monitored. Policies and procedures must
be adopted to provide reasonable assurance that the systems of quality
control and relevant, adequate and operating effectively.
 Quality Control Review

To maintain the standards in the practice of

Auditing profession the PRC and BOA required
all the CPA in public practice to obtain
accreditation to practice public accountancy. As
condition to renewal of certificate.
Thank you.