C0LLEGE 0F ACC0UNTANCY

Summary of PSA
And
PSQC 1

Presented by: Butil, Marie Joy B.

Philippine Standards on Auditing (PSAs) is applicable to financial Statements. Which
contains essential procedures and basic principles in which interpreted in context and
explanatory material. To make it understandable the principles and procedures must
contain the standards of PSA if it is material. The Philippine Standards on Auditing issued
by the Auditing Standards Practices Council that are based on International Standards
on Auditing 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. Philippine Standard on
Auditing (PSA) deals with the auditor’s responsibilities in agreeing the terms of the audit
engagement with management and, where appropriate, those charged with governance
and it was started on December 15, 2009.

Standards is one of the purpose of PSA and these standards establish the
agreeing the terms of the engagement with the client and auditor's response to a request
by a client to change the terms of an engagement to one that provides a lower level of
assurance. The auditor and the client should agree on the terms of the engagement which
required the engagement letter of contract. In which PSA is intended to help the auditor
as basis and guidance in terms of conducting and auditing financial reports. However, in
other countries, the objective and scope of auditor are established by law. In addition,
auditors cannot perform audit easily without the letter of agreement that represents
engagement letter documents and confirms the auditor's acceptance of the appointment,
the objective and scope of the audit, the extent of the auditor's responsibilities to the client
and the form of any reports. In which the letter includes the objective of audit financial
statements, regulations, legislation and pronouncement of professional bodies. The
auditors may include arrangements regarding the planning of the audit. Request for the
client to confirm the terms of the engagement by acknowledging receipt of the
engagement letter. Description of any other letters or reports the auditor expects to issue
to the client. • Basis on which fees are computed and any billing arrangements.

On recurring audits, the auditor should consider whether circumstances require the terms
of the engagement to be revised and whether there is a need to remind the client of the
existing terms of the engagement. The auditor may decide not to send a new engagement
letter each period. However, the following factors may make it appropriate to send a new
letter: Any indication that the client misunderstands the objective and scope of the audit.
Any revised or special terms of the engagement. A recent change of senior management,
board of directors or ownership. A meaningful change in nature or size of the client's
business. Legal requirements and other government agencies’ pronouncements.
In terms of acceptance of a change in engagement, an auditor who, before the completion
of the engagement, is requested to change the engagement to one which provides a
lower level of assurance, should consider the appropriateness of doing so. When there is
a request from the client for the auditor to change the engagement may result from a
change in circumstances affecting the need for the service, a misunderstanding as to the
nature of an audit or related service originally requested or a restriction on the scope of
the engagement, whether imposed by management or caused by circumstances. The
auditor would consider carefully the reason given for the request, particularly the
implications of a restriction on the scope of the engagement. Change in circumstances
that affects the entity’s requirements the requested can be considered. However, before
agreeing to change an audit engagement to a related service, an auditor who was
engaged to perform an audit in accordance with PSA. If the auditor concludes, that there
is reasonable justification to change the engagement and if the audit work performed
complies with the PSAs applicable to the changed engagement, the report issued would
be that appropriate for the revised terms of engagement.
Application and Other Explanatory Material

Assurance engagements, which include audit engagements, may only be accepted when
the practitioner considers that relevant ethical requirements such as independence and
professional competence will be satisfied. This PSA deals with those matters (or
preconditions) that are within the control of the entity and upon which it is necessary for
the auditor.

Determining the Acceptability of the Financial Reporting Framework include:

The nature of the financial statements, law or regulation prescribes the applicable
financial reporting framework, The nature of the entity, The purpose of the financial
statements.
Financial statements prepared in accordance with a financial reporting framework
designed to meet the common financial information needs of a wide range of users are
referred to as general purpose financial statements. It indicates that the framework is not
acceptable may be encountered after the audit engagement has been accepted. When
use of that framework is prescribed by law or regulation.
Financial reporting frameworks prescribed by law or regulation
, law or regulation may prescribe the financial reporting framework to be used in the
preparation of general purpose financial statements for certain types of entities. In the
absence of indications to the contrary, such a financial reporting framework is presumed
to be acceptable for general purpose financial statements prepared by such entities.
Preparation of the Financial Statements
preparation of the financial statements in accordance with the financial reporting
framework includes presentation. In the case of a fair presentation framework the
importance of the reporting objective of fair presentation is such that the premise agreed
with management includes specific reference to fair presentation in accordance with the
financial reporting framework.

Agreement on Audit Engagement Terms

agreeing the terms of the audit engagement for the entity depend on the governance
structure of the entity and relevant law or regulation.
Where the terms of the engagement are changed, the auditor and the client should agree
on the additional terms. The auditor should not agree to a change of engagement where
there is no reasonable justification for doing so. If the auditor is unable to agree to a
change of the engagement and is not permitted to continue the original engagement, the
auditor should withdraw and consider whether there is any obligation, either contractual
or otherwise, to report to other parties, such as the board of directors or shareholders.
The engagement letter is your firm's contract with your client. It is the starting point, and
oftentimes the ending point, for the relationship. Most CPA firms receive a
signed engagement letter and file it away. It uses as a guide in conjunction with the
considerations outlined in this PSA and will need to be varied according to individual
requirements and circumstances. If law or regulation prescribes in sufficient detail the
terms of the audit engagement referred to in paragraph 10, the auditor need not record
them in a written agreement, except for the fact that such law or regulation applies.

The additional Considerations in Engagement Acceptance the auditor shall determine

whether there are any conflicts between the financial reporting standards and the
additional requirements. If financial reporting standards established by an authorized or
recognized standard. If conflicts exist, the auditor shall require disclosure in financial
statements. Law or regulation may prescribe that the wording of the auditor’s opinion use
the phrases “present fairly, in all material respects” in a case where the auditor concludes
that the applicable financial reporting framework prescribed by law or regulation would
otherwise have been unacceptable.
Recurring Audits
auditor may decide not to send a new audit engagement letter or other written
agreement each period.
Any revised or special terms of the audit engagement.
• A recent change of senior management.
• A significant change in ownership.
• A significant change in nature or size of the entity’s business.

Acceptance of a Change in the Terms of the Audit Engagement

A request from the entity for the auditor to change the terms of the audit engagement may
result from a change in circumstances affecting the need for the service.
A change in circumstances that affects the entity’s requirements or a misunderstanding
concerning the nature of the service originally requested may be considered a reasonable
basis. A change may not be considered reasonable if it appears that the change relates
to information that is incorrect, incomplete or otherwise unsatisfactory.

Additional Considerations in Engagement Acceptance

Financial Reporting Standards Supplemented by Law or Regulation
Law or regulation may supplement the financial reporting standards established by an
authorized or recognized standard setting organization with additional requirements
relating to the preparation of financial statements.
Financial Reporting Framework Prescribed by Law or Regulation—Other Matters
Affecting Acceptance.
Law or regulation may prescribe that the wording of the auditor’s opinion use the
phrases “present fairly, in all material respects” in a case where the auditor concludes
that the applicable financial reporting framework prescribed by law or regulation would
otherwise have been unacceptable.
 PHILIPPINE STANDARD ON QUALITY CONTROL
The quality control for firms that perform audits and reviews of financial statements, and
other assurance and related services engagements. Must recognize PSA 200 which states the
overall objective of the independent auditor and conduct audit with the accordance with the
Philippine standards auditing. The purpose of this Philippine Standard on Quality Control
(PSQC) is to establish basic principles and essential procedures and to provide guidance
regarding a firm’s responsibilities for its system of quality control for audits and reviews
of historical financial information, and for other assurance and related services
engagements. This PSQC is to be read in conjunction with Parts A and B of the Code of
Ethics for Professional Accountants in the Philippines

SCOPE PSQC
The Philippine Standard on Quality Control deals with the firms which bears
responsibilities for system of quality control for audits and reviews of financial statements.
The pronouncement of auditing and assurance standards council set additional standards
that guide responsibilities of a firm. A system of quality control consist of policies
designed to achieve the objective implemented and monitor compliance and policies.
AUTHORITY
PSQC is applicable to all firms of professional accountants with respects of audits an reviews of
financial statements. The nature of the policies and procedures developed by individual to comply
with PSQC will be dependent to the characteristic of the firm.

OBJECTIVE
The firm comply personal standards and legal requirements, reports issued by the firm are
appropriate.

Date of report must be selected by the practitioner. The engagement document must obtain of
the records work or performed. Wherein engagement partner are responsible for the audit. In
addition quality control reviewer are part of the engagement team who has the authority to
evaluate the significant judgment made by auditors report. The function of engagement team are
all partners and staff performing the engagement, and any individuals engaged by the firm
or a network firm who perform audit procedures on the engagement; excludes external
experts engaged by the firm or network firm. However, a firm is known as practitioner or
partnership. A monitoring designed to provide the firm with reasonable assurance that its
system of quality control is operating effectively.
RELEVANT ETHICAL REQUIREMENTS
The firm shall establish policies and procedures designed to provide it with reasonable
assurance that the firm and its personnel comply with relevant ethical requirements.
shall establish policies and procedures designed to provide it with reasonable assurance
that the firm
The firm shall establish policies and procedures designed to provide it with reasonable
assurance that it is notified of breaches of independence requirements, and to enable it
to take appropriate actions to resolve such situations

shall obtain written confirmation of compliance with its policies and procedures on
independence from all firm personnel.
Acceptance and Continuance of Client Relationships and Specific Engagements
The firm shall establish policies and procedures for the acceptance and continuance of
client relationships and specific engagements, designed to provide the firm with
reasonable assurance that it will only undertake or continue relationships and
engagements. Can comply with relevant ethical requirements. And Has considered the
integrity of the client and does not have information that would lead it to conclude that the
client lacks integrity. The firm shall establish policies and procedures on continuing an
engagement and the client relationship, addressing the circumstances where the firm
obtains information.
Human Resources -The firm shall establish policies and procedures designed to provide
it with reasonable assurance that it has sufficient personnel with the competence,
capabilities, and commitment to ethical principles necessary to perform the audit
engagement in accordance with professional standards and regulatory and legal
requirements and enable the firm or engagement partners to issue reports that are
appropriate in the circumstances.
Engagement Performance
The firm shall establish policies and procedures designed to provide it with reasonable
assurance that engagements are performed in accordance with professional standards
and regulatory and legal requirements, and that the firm or the engagement partner issue
reports that are appropriate in the circumstances .Consultation - The firm shall establish
policies and procedures designed to provide it with reasonable assurance that are
appropriate consultation takes place on difficult or contentious matters sufficient
resources are available to enable appropriate consultation to take place, the nature and
scope of, and conclusions resulting from, such consultations are documented and are
agreed by both the individual seeking consultation.