THE CPA LICENSURE EXAMINATION SYLLABUS AUDITING THEORY (Effective October 2006 Examination)

This subject tests the candidates conceptual knowledge and understanding of assurance and related services performed by professional accountants. Candidates should know and understand the nature of assurance and related services particularly independent audits of financial statements, the responsibilities of professional accountants; the audit process; audit objectives, evidence, procedures, auditing standards, and the elements of the independent auditors report. In all the areas included, the candidate shall apply the Philippine Standards on Auditing (PSA) and other regulatory laws and regulations in effect at the time of examination. Each examination will contain a minimum of 80 and a maximum of 100 multiple-choice questions, equitably allocated to different subject areas, as indicated below: 1.0 FUNDAMENTALS OF AUDITING AND ASSURANCE SERVICES 1.1 Introduction to assurance engagements a. Nature, objective and elem ents b. Types of assurance engagements (audits, reviews, other assurance engagements) c. Assurance service vis--vis attestation services 1.2 Introduction to auditing a. Nature, philosophy, and objectives b. Types of audit 1. According to nature of assertion/data (FS audit, operational audit, compliance audit) 2. According to types of auditor (external independent FS audit, internal audit, government audit) 2.0 THE PROFESSIONAL PRACTICE OF PUBLIC ACCOUNTING 2.1 Public accounting profession a. Public accounting as a profession b. Organizations that affect public accounting 1. Regulatory government agencies (BOA, COA, SEC, BSP, Insurance Commission, BIR) 2. Standard-setting bodies (AASC, FRSC) c. Regulation of the public accounting practice 1. Philippine Accountancy Act of 2004 / Implementing Rules and Regulations 2. SEC rulings on financial statement presentation 2.2 The CPAs professional responsibilities a. Philippine Standards on Auditing b. Code of Ethics for Professional Accountants in the Philippines c. Quality control d. Responsibilities on fraud, error, and non-compliance 3.0 THE FINANCIAL STATEMENTS AUDIT CLIENT ACCEPTANCE, AUDIT PLANNING, SUPERVISION AND MONITORING 3.1 Overview of the audit process 3.2 Pre-engagement procedures 3.3 Scope and purposes of audit planning a. Essential planning requirements 1. Knowledge of the business 2. Preliminary analytical procedures 3. Materiality 4. Assessing and managing audit risks 5. Overall audit plan and audit program

6. Considerations of the work of others (experts, internal auditor, other independent auditors) 3.4 Direction, supervision and review 4.0 UNDERSTANDING THE ENTITY & ITS ENVIRONMENT INCLUDING ITS INTERNAL CONTROL AND ASSESSING THE RISKS OF MATERIAL MISSTATEMENT 4.1 Industry, regulatory and other external factors, including the applicable financial reporting framework a. Nature of the entity b. Objectives and strategies and related business risks c. Measurement and review of the entitys financial performance 4.2 Internal control a. Basic concepts and elements of internal control b. Consideration of accounting and internal control systems 1. Understanding and documentation 2. Assessment of control risks (a) Test of controls (b) Documentation 4.3 Assessing the risks of material misstatement a. Fraud and errors b. Risk assessment procedures c. Discussion among the engagement team d. Significant risks that require special audit consideration e. Risks for which substantive procedures alone do not provide sufficient appropriate audit evidence f. Revision of risk assessment 4.4 Communicating with those charged with governance and management 5.0 AUDIT OBJECTIVES, PROCEDURES, EVIDENCES AND DOCUMENTATION 5.1 Nature and significance 5.2 Evidential matters 5.3 Audit procedures / techniques 5.4 Audit working papers 6.0 AUDIT SAMPLING 6.1 Basic audit sampling concepts a. Nature and purpose b. Non-statistical and statistical sampling c. Attribute and variables sampling technique d. Sampling and nonsampling risk e. Testing procedures which do not involve sampling 6.2 Factors affecting sample design a. Audit objectives b. Population and its characteristics c. Risk and assurance d. Tolerable error e. Expected error in the population f. Variation in the population 6.3 Factors affecting sample size 6.4 Sample selection methods 6.5 Evaluation of sample results 7.0 COMPLETING THE AUDIT / POST-AUDIT RESPONSIBILITIES 7.1 Completing the audit and audit report preparation a. Analytical procedures for overall review b. Related party transactions

c. Subsequent events review d. Assessment of going concern assumption e. Obtaining clients representation letter f. Evaluating findings, formulating an opinion and drafting the audit report 7.2 Post-audit responsibilities a. Subsequent discovery of facts b. Subsequent discovery of omitted procedures 8.0 REPORTS ON AUDITED FINANCIAL STATEMENTS 8.1 The unqualified auditors report 8.2 Basic elements of the unqualified auditors report 8.3 Modified auditors report a. Matters that do not affect the auditors opinion b. Matters that do affect the auditors opinion 8.4 Report on comparatives 9.0 AUDITING IN A COMPUTERIZED INFORMATION SYSTEMS (CIS) ENVIRONMENT 9.1 Internal control in a CIS environment a. Introduction b. Impact of computers on accounting and internal control systems 1. General controls 2. Application controls c. Unique characteristics of specific CIS 1. Stand alone 2. On-line 3. Database system 9.2 Basic approach to the audit of CIS environment a. Introduction b. Effects of computers on the audit process c. Computer assisted audit techniques 10.0 OTHER ASSURANCE AND NONASSURANCE SERVICES 10.1 Procedures and reports on special purpose audit engagements a. General considerations b. Audit of financial statements prepared in accordance with a comprehensive basis of accounting other than GAAP in the Philippines c. Audit of a component of financial statements d. Reports on compliance with contractual agreements e. Reports on summarized financial statements 10.2 Nonaudit engagements: procedures and reports a. Examination of prospective financial information b. Engagements to review financial statements 10.3 Nonassurance engagements a. Engagements to perform agreed-upon procedures regarding financial information b. Engagements to compile financial information

PSQC, PSA, PAPS, PSRE, PSAE, PSRS: INTRODUCTORY MATTERS: Preface to the International Standards on Quality Control, Auditing, Riew, Other Assurance and Related Services Preface to the Philippine Standards on Quality Control, Auditing, Riew, Other Assurance and Related Services Glossary of Terms (December 2002) [amended by PSA 220 (R)] PHILIPPINE STANDARDS ON QUALITY CONTROL (PSQC): 1 Quality Control for Firms That Perform Audits and Riews of Historical Financial Information, and Other Assurance and Related Services Engagements PHILIPPINE STANDARDS ON AUDITING (PSA): 120 Framework of Philippine Standards on Auditing Responsibilities: 200 Objective and General Principles Governing an Audit of Financial Statements [amended by PSA 700 (R)] 210 Terms of Audit Engagements [amended by PSA 700 (R)] 220 (R) Quality Control for Audits of Historical Financial Information 230 (R) Audit Documentation 240 (R) The Auditors Responsibility to Consider Fraud in an Audit of Financial Statements 250 Consideration of Laws & Regulation in an Audit of FS 260 Communication of Audit Matters with those Charged with Governance Planning: 300 (R) Planning an Audit of Financial Statements 315 Understanding the Entity and its Environment and Assessing the Risk of Material Misstatement 320 Audit Materiality [amended by PSA 240 (R 2005)] 330 The Auditors Procedures in Response to Assessed Risks Internal Control: 400 Risk Assessments and Internal Control 401 Auditing in a CIS Environment 402 Audit Considerations Relating to Entities Using Service Organizations 500 (R) 501 505 510 520 530 540 545 550 560 570 580 600 610 620 Audit Evidence Audit Evidence Additional Considerations on Specific Items External Confirmations Initial Engagements--Opening Balances Analytical Procedures Audit Sampling and Other Selective Testing Procedures Audit of Accounting Estimates Fair Value Measurements & Disclosures Related Parties Subsequent Events [amended by PSA 700 (R)] Goind Concern Management Representations [amended by PSA 240 (R 2005)] Using the Work of Others: Using the Work of Another Auditor Considering the Work of Internal Auditing Using the Work of an Expert Audit Conclusions & Reporting

700 (R) The Independent Auditors Report on a Complete Set of General Purpose Financial Statements 710 Comparatives 720 Other Information in Documents Containing Audited Financial Statements 800 The Independent Auditors Report on Special Purpose Audit Engagements [amended by PSA 700 (R)] INT'L & PHIL. AUDITING PRACTICE STATEMENTS (IAPS & PAPS) 1000 Inter-Bank Confirmation Procedures 1000ph Audit Evidence Practical Problems in an Audit of Financial Statements 1001 CIS Environment: Stand-Alone Personal Computers 1002 CIS Environment: Online Computer Systems 1003 CIS Environment: Database Systems 1004 The Relationship Between Bangko Sentral ng Pilipinas (BSP) and Banks External Auditors 1005 (R) The Special Consideration in the Audit of Small Entities 1006 Audits of the Financial Statements of Banks 1008 CIS Characteristics & Considerations 1009 Computer-Assisted Audit Techniques 1010 The Consideration of Environmental Matters in the Audit of Financial Statements 1012 Auditing Derivative Financial Instruments [amended by PSA 220 (R)] 1013 Electronic Commerce Effect on the Audit of Financial Statements 1014 Reporting by Auditors on Compliance with International Financial Reporting Standards PHILIPPINE STANDARDS ON RIEW ENGAGEMENTS (PSRE) 2400 Engagements to Review Financial Statements (previously PSA 910) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity PHILIPPINE STANDARDS ON ASSURANCE ENGAGEMENTS (PSAE): 3000 (R) Assurance Engagements Other than Audit and Review of Historical FS 3400 Examination of Prospective Financial Information (previously PSA 810) PHILIPPINE STANDARDS ON RELATED SERVICES (PSRS): 4400 Agree-Upon Procedures (previously PSA 920) 4410 Compilation of Financial Information (previously PSA 930) Accountancy Act and its Implementing Rules & Regulations Revised Code of Ethics for Professional Accountants in the Philippines (effective June 30, 2008)* Rules on Advertising and Promotion for the Practice of Accountancy in the Philippines (effective August 9, 2008) Rules and Regulations for the Accreditation of Accounting Teachers (effective June 20, 2008)

Tentative Schedule (PSA): 11/05/09 11/09/09 11/12/09 11/16/09 11/19/09 11/23/09 11/26/09 11/30/09 12/03/09 12/07/09 12/10/09 12/12/09 12/14/09 12/17/09 01/07/10 01/11/10 01/14/10 01/18/10 01/21/10 01/25/10 01/28/10 02/01/10 02/04/10 02/08/10 02/11/10 02/13/10 02/15/10 02/18/10 02/22/10 02/25/10 03/01/10 03/04/10 03/08/10 03/11/10 03/13/10 Thursday Monday Session Thursday Session Monday Session Thursday Session Monday Session Thursday Session Monday Session Thursday Session Monday Session Thursday Session Saturday Session Monday Session Thursday Session Thursday Session Monday Session Thursday Session Monday Session Thursday Session Monday Session Thursday Session Monday Session Thursday Session Monday Session Thursday Session Saturday Session Monday Session Thursday Session Monday Session Thursday Session Monday Session Thursday Session Monday Session Thursday Session Saturday Session 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 First Day (Introduction, Success Motto & Expectations) Preface, Glossary, PSQC 1 PSA 120 - 220 PSA 230 - 260 LONG QUIZ - Responsibilities Code of Ethics Accountancy Law & IRR LONG QUIZ COE & LAW PSA 300 - 330 PSA 400 & 402, supplements LONG QUIZ Planning & Internal Control PRELIM EXAMINATION Check & Review of Exam PSA 500 - 520 PSA 530 - 545 PSA 550 - 580 LONG QUIZ - Audit Evidence PSA 600 - 620 PSA 700 Follow-Up QUIZ PSA 710 - 800 Follow-Up QUIZ LONG QUIZ - Reporting MID-TERM EXAMINATION Check & Review of Exam PAPS 1000, 1004, 1006 (Group 1) PAPS 1000ph, 1005, 1010 (Group 2) PAPS 1012, 1013, 1014 (Group 3) LONG QUIZ PAPS 1 PSRE 2400 & 2410 (Group 4) PSAE 3000 & 3400 (Group 5) PSRS 4400 & 4410 (Group 6) LONG QUIZ PAPS 2 FINAL EXAMINATION

Tentative Schedule (EDP):