AUDITING & ASSURANCE

PRINCIPLES
SAN MATEO MUNICIPAL COLLEGE
COLLEGE OF BUSINESS AND ACCOUNTANCY

By:
NILO N. IGLESIAS, CPA, MBA, REA
The Professional Standards
Learning Objectives:
After studying this module, you should be able to:
 Understand and explain the generally accepted auditing standards
 Enumerate and explain the fundamental principles that must be
observed by CPAs when performing professional responsibilities
 Discuss the importance that the Auditor’s opinion must be based
on an examination conducted in accordance with professional
standards.
 Understand why standards are established to measure the quality
of performance by a CPA.
 Explain the standards relating to the accounting profession
concerning CPA’s professional qualities, the judgment exercised
by the CPAs in the performance of their professional engagement.
 Introduction
 When auditing financial statements, an auditor assumes certain
professional responsibilities.
 Auditor’s opinion must be based on an examination conducted in
accordance with professional standards.
 Failure to comply with these standards expose the auditor to risk
such as loss of public respect or even assessment of legal
damages.
 Standards are established to measure the quality of performance
of individuals and organizations.
 Standards relating to the accounting profession concern
themselves with CPA’s professional qualities, the judgment
exercised by the CPAs in the performance of their professional
engagement.
Generally Accepted Auditing Standards

The Board of accountancy promulgated ten (10)

generally accepted auditing standards (GAAS) that
establish required level of quality for performing financial
statement audits.

These standards must be followed by the CPAs when

auditing financial statements.

The Philippine Standards on Auditing (PSAs) are

issued to clarify the meaning of these ten (10) GAAS.

Auditing procedures are the means used by the

auditors in attaining the quality required by the standards.
Generally Accepted Auditing Standards

GAAS represent measures of the quality of the auditor’s

performance.

These standards should be looked at as a minimum standard of

performance that auditors should follow.

These (10) GAAS are grouped into:

1. General Standards (TIP)

2. Standards of Fieldwork (PIE)

3. Standards of Reporting (GIDO)

General Standards (TIP)
Technical Training and Proficiency

The examination is to be performed by person or persons having

adequate technical training and proficiency as an auditor

Independence

In all matters relating to an engagement, an independence in mental

attitude is to be maintained by the auditor.

Professional Care

Due professional care is to be exercised in the performance of the

audit and in the preparation of report.
Standards of Fieldwork (PIE)
Planning

The work is to be adequately planned and assistants if any, are to be

properly supervised.

Internal Control Consideration

There is to be a proper study and evaluation of existing internal control as

a basis for reliance thereon and for the determination of the resultant extent
of the test to which auditing procedures are to be restricted.

Evidential Matter

Sufficient competent evidential matter is to be obtained through inspection,

observation, inquiries and confirmations to afford a reasonable basis for an
opinion regarding the financial statements under examination.
Standards of Reporting (GIDO)
Generally Accepted Accounting Principles

The report shall state whether the financial statement are presented in accordance with
generally accepted accounting principles (PFRS).

Inconsistency

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

Disclosure

Informative disclosure are to be regarded as reasonably adequate unless otherwise stated

in the report.

Opinion

The report shall either contain an expression of opinion regarding the financial statement,
taken as a whole, or an assertion to the effect that an opinion cannot be express.
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.
Adoption of International Standards
To facilitate the preparation
The Board of accountancy promulgated ten (10) generally accepted auditing
standards (GAAS) that establish required level of quality for performing financial
statement audits.

These standards must be followed by the CPAs when auditing financial

statements.

The Philippine Standards on Auditing (PSAs) are issued to clarify the

meaning of these ten (10) GAAS.

Auditing procedures are the means used by the auditors in attaining the
quality required by the standards.
Ethical Fundamental Principles
Whenever the scope of practice, the following ethical fundamental principles
must be observed by a professional accountant in the performance of professional
responsibilities.

• Integrity

To be straight forward and honest in all professional and business

relationship.

• Objectivity

To not allow bias, conflict of interest or undue influence of others to override

professional or business judgement.

Competence and Due Care

To maintain professional knowledge and skill at the level required to ensure that a
client or an employer receives competent professional service based on current
developments in practice, legislation and techniques. The CPA should act diligently and
in accordance with applicable technical and professional standards.
Ethical Fundamental Principles
Whenever the scope of practice, the following ethical
fundamental principles must be observed by a professional accountant in the
performance of professional responsibilities.

• Confidentiality

To respect the confidentiality of the information acquired as a result of

professional and business relationship and should not be disclose any such
information to third parties without proper and specific authority unless there is
a legal or professional right or duty to disclose. Confidential information
acquired as a result of professional and business relationship should not be
used for the personal advantage of the CPA or third parties.

• Professional Behavior

To comply with relevant laws and regulations and avoid any actions
that discredits the profession.
Professional Standards
• Just as products or services are being subjected against
standards which define high quality, CPA services are also
reviewed against standards which measures the quality of
service.

• The standards are required, so that professional accountants

would have a clear idea on what a minimum standard or level of
performance is required of them.

• Standards also allow for a clear definition of the responsibilities

of a professional accountant with respect to a particular
engagement.

• It is a cornerstone of successful defense against allegations of

negligence in the performance of engagement.
Professional Standards
• Philippine Standards on Auditing (PSAs)
For audits of historical financial information

• Philippine Standards on Review Engagements (PSREs)

For review of historical financial information

•Philippine Standards on Assurance Engagement (PSAEs)

For assurance engagements that deal with subject
matters other than historical financial information

•Philippine Standards on Related Services (PSRSs)

For compilation engagements, engagements to apply
agreed upon procedures to information and other related
services engagements as specified by the AASC.
Professional Standards
Summary of the AASC-issued professional standards and their
corresponding practice statements.
Service Engagement Standard Practice Statement

Audits Philippine Standards on Philippine Auditing Practice

Auditing (PSAs) Statements (PAPSs)

Reviews Philippine Standards on Review Philippine Review Engagement

Engagements (PSREs) Practice Statements (PREPSs)

Other Assurance Services Philippine Standards on Philippine Assurance Engagement

Assurance Engagements (PSAEs) Practice Statements (PAEPSs)

Related Services Philippine Standards on Related Philippine Related Services Practice

Services (PSRSs) Statements (PRSPSs)
Continuing Professional Development

• CPD programs refers to a set of learning activities accredited

by the CPD Council such as seminars, workshops, technical
lectures or subject matter meeting, nongraded training
lectures and scientific meeting, among others.

• The major classification of CPD programs and activities

provided in PRC-BOA Resolution 254, Series of 2017 are as
follows:

1. Seminars and Workshops

2. Academic Track
3. Self-directed and/or Lifelong Training
4. Such other activities to be recommended
CPD Council.
Major Competency Areas of CPD Programs and Activities
Credit Units
Major Area Coverage of the Area Required

Standards applicable to professional practice which include but

not limited to the following:
a) Current and recent issuance of the respective area of practice
Technical Competence of the profession
b) International Federation of Accountants (IFAC)
pronouncements issued through IFAC member bodies 30 CU
Laws, rules, and regulations issued by PRC and PRBOA, SEC, CHED,
BIR, IC, CDA, COA, affecting professional practice.

Professional development activities that enhance the CPA’s

Professional Skills intellectual, interpersonal, communication, personal and 5 CU
organizational skills.

Code of Ethics for Professional Accountants

Quality standards based on issuance of bodies affecting the

Professional Values, professional practice 5 CU
Ethics and Attitudes
Governance principles and intervention; and
Social responsibility, principles, and interventions.
Penalties and Sanctions
Penalties and sanctions are warranted in cases where the CPA has violated
the rules prescribed by law, regulation, or the Code of Ethics.
• Suspension of CPA Certificate
The BOA shall have the power, upon notice of due hearing, suspend the
CPA’s certificate of registration and professional identification card or
suspend him from practice for any unprofessional or unethical conduct,
malpractice, and violation of any of the provision of RA 9298.
• Revocation of CPA Certificate
• The BOA has the power to revoke a CPA’s Certificate of Registration and
Professional Identification Card for the same grounds as mentioned above.
• Cancellation of Temporary or Special Permit
• This applies to foreign CPAs. Cancellation of the temporary or special
permit.
• Payment of Fines and/or Imprisonment
• Upon conviction, be punished by a fine of not less than P 50,000 or by
imprisonment for a period not exceeding 2 years or both.
Examples of Violations of the IRR to RA
9298

• Engaging in public accounting without first

registering with PRBOA and the PRC.
• Continuing to engage in the practice of public
accounting after the expiration of the registration
• Continuing to engage in the practice of public
accounting after suspension, revocation, or
withdrawal of the registration.
 Module 3 Learning Activities

1)Topic discussion and clarification during a synchronous meetings.

2)Asynchronous Learning.
This is an individual activity:
 Discuss the different AASC-issued professional standards
applicable to services of CPA.
 Discuss the fundamental principles that must be observed by
CPAs when performing professional responsibilities.
Deadline: Send your work in our canvas.instructure (Assignment
Tab) on or before September 22, 2021, at 7:00 PM.
 Module 3 – Assessment/Evaluation

I. Synchronous Test with a time limit.

A test link will be provided through our canvas.instructure.
(Quiz Tab) on September 23, 2021, at designated time.
II. Asynchronous Learning:
Using our canvas.instructure. (Discussion Forum Tab).
Submit your reflection paper regarding the topics in Module 3 in not
less than 200 words and not more than 500 words. You shall be
graded based on the content, organization and information quality.
Deadline: September 25, 2021, at 7:00 PM
 Module 3 – Learning Resources

Book/E-Book/Article:
• Audit Assurance Principles
by: Ireneo,Ireneo and James, 2018
• Auditing Theory
by: Salosagcol, Tiu and Hermosilla, 2018
• Auditing: A Risk-Based Approach
by: Cabarles, Ocampo and Valdez, 2017
Questions/Reactions………

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The System of
Quality Control