PSA 120 and PSA 200

The title of PSA 120 is “PREFACE TO THE

PHILIPPINE STANDARDS ON AUDITING.”
PSAs need only be applied to material
matters.
In exceptional circumstances, an auditor may
judge it necessary to depart from a PSA in
order to more effectively achieve the objective
of an audit.
Engagements to undertake agreed-upon
procedures and compilations are likewise
intended to enable the auditor to express
assurance.
In a Compilation Engagement, the report
provided would be a “factual findings of
procedures.”
In a review engagement, the auditor provides a
moderate level of assurance that the
information subject to review is free of material
misstatement.
While a review involves the application of
audit skills and techniques and the
gathering of evidence, it does not ordinarily
involve an assessment of accounting and
internal control systems.
PSA 120 is exactly the same as ISA 120
which is issued by the International Auditing
Practices Committee of the IFAC.
Absolute assurance in auditing is not attainable
as a result of such factors as the need for
judgment, the use of testing, the inherent
limitations of any accounting and internal
control systems, and the fact that most of the
evidence available to the auditor is conclusive,
rather than persuasive, in nature.
The “Framework for Auditing and Related
Services” does not apply to consultancy
engagements.
Audit risk refers to the risk that the auditor
expresses an inappropriate audit opinion
when the financial statements are
materially misstated.
Inherent risk refers to the risk that the
procedures performed by the auditor to reduce
audit risk to an acceptably low level will not
detect a misstatement that exists and that
could be material, either individually or when
aggregated with other misstatements.
To obtain reasonable assurance, the auditor
shall obtain sufficient appropriate audit
evidence to reduce audit risk to an acceptably
low level and thereby enable the auditor to
draw accurate and timely conclusions on which
to base the auditor’s opinion.
A PSA is relevant to the audit when the PSA
is in effect AND the circumstances
addressed by the PSA exist.
In all cases when an objective in a relevant PSA
cannot be achieved, the auditor shall choose
between modifying the auditor’s opinion, &
withdrawing from the engagement.
In some cases, the applicable financial
reporting framework may encompass other
non-IFRS sources such as: published views of
varying authority on emerging accounting
issues issued by professional or regulatory
organizations, general and industry practices
widely recognized and prevalent, and
accounting literature.
The auditor may accept records and documents
as genuine unless the auditor has reason to
believe the contrary.
A belief that management and those charged
with governance are honest and have integrity
does not relieve the auditor of the need to
maintain professional skepticism or allow the
auditor to be satisfied with less-than
persuasive audit evidence when obtaining
reasonable assurance.
Professional judgment may be used as the
justification for decisions that are not
otherwise supported by the facts and
circumstances of the engagement or sufficient
appropriate audit evidence.
In unusual circumstances, a well-designed and
fully implemented system of internal control
can eliminate the risks of material
misstatement in the financial statements.
Under the revised format of the Independent
Auditor’s Report, the Opinion section should be
presented first, followed by the Basis for
Opinion section, unless law or regulation
prescribe otherwise.
KAM are those matters that, in the
management’s judgment, were of most
significance in the audit of the current period
financial statements.
Obtaining more audit evidence may
compensate its poor quality.
The need for the audit to be conducted within a
reasonable period of time and at a reasonable
cost is one of the INHERENT limitations of the
audit.
An external audit of financial statements is not
an official investigation into alleged
wrongdoing.