AuditingandAssuranceStandardsCouncil

PhilippineStandardonAuditing220(Redrafted)

QUALITYCONTROLFORANAUDITOFFINANCIALSTATEM
ENTS
PHILIPPINESTANDARDONAUDITING220(REDRAFTED)
QUALITYCONTROLFORANAUDITOFFINANCIALSTATEMENTS
(Effectiveforauditsoffinancialstatementsforperiodsbeginning onorafterDecember15,200
9)

CONTENTS
Paragraph
Introduction
ScopeofthisPSA...............................................................................
..................
EffectiveDate..................................................................................
.....................
Objective........................................................................................
......................
Definitions......................................................................................
.......................
Requirements
LeadershipResponsibilitiesforQualityonAudits................................
...............

14

5
6
7

RelevantEthicalRequirements.........................................................
911
....................
AcceptanceandContinuanceofClientRelationshipsandAuditEngage
1213
ments....
AssignmentofEngagementTeams...................................................
14
...................
EngagementPerformance...............................................................
1522
.....................
Monitoring......................................................................................
23
......................
Documentation...............................................................................
2425
......................
ApplicationandOtherExplanatoryMaterial
SystemofQualityControlandRoleofEngagementTeams....................
A1A2
...........
LeadershipResponsibilitiesforQualityonAudits................................
A3
..............
RelevantEthicalRequirements.........................................................
A4A7
...................
AcceptanceandContinuanceofClientRelationshipsandAuditEngage
ments..
A8A9

AssignmentofEngagementTeams....................................................
................A10A12EngagementPerformance.........................................................
..........................A13A31Monitoring.................................................................................
.........................A32A34Documentation.........................................................................
...........................A35
Acknowledgment
PhilippineStandardonAuditing(PSA)220(Redrafted),QualityContro
lforanAuditofFinancialStatementsshouldbereadinconjunctionwith
PSA200(RevisedandRedrafted),OverallObjectivesoftheIndepende
ntAuditorandtheConductofanAuditinAccordancewithPhilippineSta
ndardsonAuditing.

Introduction
ScopeofthisPSA
1.
ThisPhilippineStandardonAuditing(PSA)dealswiththespecificrespo
nsibilitiesoftheauditorregardingqualitycontrolproceduresforanaudi

toffinancialstatements.Italsoaddresses,whereapplicable,therespo
nsibilitiesoftheengagementqualitycontrolreviewer.ThisPSAistober
eadinconjunctionwithrelevantethicalrequirements.
SystemofQualityControlandRoleofEngagementTeams
2.
Qualitycontrolsystems,policiesandproceduresaretheresponsibility
oftheauditfirm.UnderPSQC1(Redrafted),thefirmhasanobligationto
establishandmaintainasystemofqualitycontroltoprovideitwithreas
onableassurancethat:

(a)

Thefirmanditspersonnelcomplywithprofessionalstandardsandreg
ulatoryandlegalrequirements;and
(b)
Thereportsissuedbythefirmorengagementpartnersareappropriate
inthe
1

circumstances.
ThisPSAispremisedonthebasisthatthefirmissubjecttoPSQC1(Redr
afted)ortonationalrequirementsthatareatleastasdemanding.
(Ref:Para.A1)

Withinthecontextofthefirmssystemofqualitycontrol,engagementt
eamshavearesponsibilitytoimplementqualitycontrolproceduresth
atareapplicabletotheauditengagementandprovidethefirmwithrele
vantinformationtoenablethefunctioningofthatpartofthefirmssyste
mofqualitycontrolrelatingtoindependence.
Engagementteamsareentitledtorelyonthefirmssystemofqualityco
ntrol,
unlessinformationprovidedbythefirmorotherpartiessuggestsothe
rwise.(Ref:Para.A2)

EffectiveDate
5.
ThisPSAiseffectiveforauditsoffinancialstatementsforperiodsbeginn
ingonorafterDecember15,2009.

Objective

6.
Theobjectiveoftheauditoristoimplementqualitycontrolproced
uresattheengagementlevelthatprovidetheauditorwithreason
ableassurancethat:
(a)
Theauditcomplieswithprofessionalstandardsandregulator
yandlegalrequirements;and
PSQC1,QualityControlforFirmsthatPerformAuditsand ReviewsofFinancialStatements,a
ndOtherAssuranceand Related ServicesEngagements,paragraph 11.

(b) Theauditorsreportissuedisappropriateinthecircumstances.

Definitions
7.
ForpurposesofthePSAs,thefollowingtermshavethemeaningsa
ttributedbelow:

2
(a)
Engagementpartner
Thepartnerorotherpersoninthefirmwhoisresponsiblefortheauditen
gagementanditsperformance,andfortheauditorsreportthatisissue
donbehalfofthefirm,andwho,whererequired,hastheappropriateaut
horityfromaprofessional,legalorregulatorybody.
(b)
Engagementqualitycontrolreview
Aprocessdesignedtoprovideanobjectiveevaluation,onorbeforethe
dateoftheauditorsreport,ofthesignificantjudgmentstheengageme
ntteammadeandtheconclusionsitreachedinformulatingtheauditor
sreport.Theengagementqualitycontrolreviewprocessisonlyforaudi
tsoffinancialstatementsoflistedentitiesandthoseotherauditengage
ments,ifany,forwhichthefirmhasdeterminedanengagementquality
controlreviewisrequired.
(c)
Engagementqualitycontrolreviewer
Apartner,otherpersoninthefirm,suitablyqualifiedexternalperson,o
rateammadeupofsuchindividuals,noneofwhomispartoftheengage
mentteam,withsufficientandappropriateexperienceandauthorityt
oobjectivelyevaluatethesignificantjudgmentstheengagementtea
mmadeandtheconclusionsitreachedinformulatingtheauditorsrep
ort.
(d)
Engagementteam
Allpartnersandstaffperformingtheengagement,andanyindividuals
engagedbythefirmoranetworkfirmwhoperformauditproceduresont
heengagement.Thisexcludesanauditorsexternalexpert
3

engagedbythefirmoranetworkfirm.

1
2

(e)
Firm
Asolepractitioner,partnership,orotherentityofprofessionalaccount
ants.
(f)
Inspection
Inrelationtocompletedauditengagements,proceduresdesignedtop
rovideevidenceofcompliancebyengagementteamswiththefirmsq
ualitycontrolpoliciesandprocedures.
(g)
Listedentity
Anentitywhoseshares,stockordebtarequotedorlistedonarecognize
dstockexchange,oraremarketedundertheregulationsofa
*
recognizedstockexchangeorotherequivalentbody.

2
Engagementpartner,partner,and firmshould beread asreferringtotheirpublicsect
orequivalentswhererelevant.
3
PSA620(Revised and Redrafted),UsingtheWorkofan AuditorsExpert,paragraph 6(a),
definesthetermauditorsexpert.
*
In thePhilippines,thiswouldinclude,forpurposesofthisPSQC,issuersofregisteredsecuriti
essuchasissuersofdebtsecuritiesand preneedentities.

3
4
5

(h)
Monitoring
Aprocesscomprisinganongoingconsiderationandevaluationofthefi
rmssystemofqualitycontrol,includingaperiodicinspectionofaselec
tionofcompletedengagements,designedtoprovidethefirmwithreas
onableassurancethatitssystemofqualitycontrolisoperatingeffectiv
ely.
(i)
NetworkfirmAfirmorentitythatbelongstoanetwork.
1. (j) NetworkAlargerstructure:
2. (i) Thatisaimedatcooperation,and
3. (ii) Thatisclearlyaimedatprofitorcostsharingorsharescommonownership,controlormanagement,co
mmonqualitycontrolpoliciesandprocedures,commonbusinesss
trategy,theuseofacommonbrandname,orasignificantpartofpro
fessionalresources.
(k)
Partner
Anyindividualwithauthoritytobindthefirmwithrespecttotheperform
anceofaprofessionalservicesengagement.
(l)
PersonnelPartnersandstaff.
(m)
Professionalstandards
PhilippineStandardsonAuditing(PSAs)andrelevantethicalrequirem
ents.

7
8

(n)
Relevantethicalrequirements
Ethicalrequirementstowhichtheengagementteamandengagemen
tqualitycontrolrevieweraresubject,whichordinarilycomprisePartsA
andBoftheCodeofEthicsforProfessionalAccountantsinthePhilippin
es(PhilippineEthicsCode)relatedtoanauditoffinancialstatementsto
getherwithnationalrequirementsthataremorerestrictive.
(o)
Staff
Professionals,otherthanpartners,includinganyexpertsthefirmempl
oys.
(p)
Suitablyqualifiedexternalperson
Anindividualoutsidethefirmwiththecompetenceandcapabilitiestoa
ctasanengagementpartner,forexampleapartnerofanotherfirm,ora
nemployee(withappropriateexperience)ofeitheraprofessionalacco
untancybodywhosemembersmayperformauditsofhistoricalfinanci
alinformationorofanorganizationthatprovidesrelevantqualitycontr
olservices.

Requirements
LeadershipResponsibilitiesforQualityonAudits

Theengagementpartnershalltakeresponsibilityfortheoverallqualit
yoneachauditengagementtowhichthatpartnerisassigned.
(Ref:Para.A3)

Throughouttheauditengagement,theengagementpartnershallrem
ainalert,throughobservationandmakinginquiriesasnecessary,fore
videnceofnoncompliancewithrelevantethicalrequirementsbymembersoftheeng
agementteam.(Ref:Para.A4A5)
Ifmatterscometotheengagementpartnersattentionthroughthefir
mssystemofqualitycontrolorotherwisethatindicatethatmemberso
ftheengagementteamhavenotcompliedwithrelevantethicalrequire
ments,theengagementpartner,inconsultationwithothersinthefirm,
shalldeterminetheappropriateaction.(Ref:

RelevantEthicalRequirements
Para.A5)

Independence
11.
Theengagementpartnershallformaconclusiononcompliancewith
independencerequirementsthatapplytotheauditengagement.In
doingso,theengagementpartnershall:

(a)

Obtainrelevantinformationfromthefirmand,whereapplicable,netw
orkfirms,toidentifyandevaluatecircumstancesandrelationshipstha
tcreatethreatstoindependence;
(b)

Evaluateinformationonidentifiedbreaches,ifany,ofthefirmsindepe
ndencepoliciesandprocedurestodeterminewhethertheycreateathr
eattoindependencefortheauditengagement;and
(c)
Takeappropriateactiontoeliminatesuchthreatsorreducethemtoana
cceptablelevelbyapplyingsafeguards,or,ifconsideredappropriate,t
owithdrawfromtheauditengagement,wherewithdrawalispermitted
bylaworregulation.Theengagementpartnershallpromptlyreporttot
hefirmanyinabilitytoresolvethematterforappropriateaction.
(Ref:Para.A5A7)

AcceptanceandContinuanceofClientRelationshipsandAuditEngagements

Theengagementpartnershallbesatisfiedthatappropriateprocedure
sregardingtheacceptanceandcontinuanceofclientrelationshipsand
auditengagementshavebeenfollowed,andshalldeterminethatconc
lusionsreachedinthisregardareappropriate.(Ref:Para.A8A9)
Iftheengagementpartnerobtainsinformationthatwouldhavecaused
thefirmtodeclinetheauditengagementhadthatinformationbeenava
ilableearlier,theengagementpartnershallcommunicatethatinform
ationpromptlytothefirm,sothatthefirmandtheengagementpartner
cantakethenecessaryaction.(Ref:Para.
A9)

AssignmentofEngagementTeams
14.
Theengagementpartnershallbesatisfiedthattheengagementtea
m,andanyauditorsexpertswhoarenotpartoftheengagementtea
m,collectivelyhavetheappropriatecompetenceandcapabilitiesto:

(a)

Performtheauditengagementinaccordancewithprofessionalstanda
rdsandregulatoryandlegalrequirements;and
(b)
Enableanauditorsreportthatisappropriateinthecircumstancestobe
issued.(Ref:Para.A10A12)

EngagementPerformance

Direction,SupervisionandPerformance
15.

Theengagementpartnershalltakeresponsibilityfor:

(a)

Thedirection,supervisionandperformanceoftheauditengagementi
ncompliancewithprofessionalstandardsandregulatoryandlegalreq
uirements;and(Ref:Para.A13A15,A20)
(b)
Theauditorsreportbeingappropriateinthecircumstances.

Reviews

Theengagementpartnershalltakeresponsibilityforreviewsbeingper
formedinaccordancewiththefirmsreviewpoliciesandprocedures.
(Ref:Para.A16A17,A20)

Onorbeforethedateoftheauditorsreport,theengagementpartnersh
all,throughareviewoftheauditdocumentationanddiscussionwithth
eengagementteam,besatisfiedthatsufficientappropriateauditevid
encehasbeenobtainedtosupporttheconclusionsreachedandforthe
auditorsreporttobeissued.(Ref:Para.A18A20)

Consultation
18.

Theengagementpartnershall:

(a)

Takeresponsibilityfortheengagementteamundertakingappropriate
consultationondifficultorcontentiousmatters;
(b)

Besatisfiedthatmembersoftheengagementteamhaveundertakena
ppropriateconsultationduringthecourseoftheengagement,bothwit
hintheengagementteamandbetweentheengagementteamandoth
ersattheappropriatelevelwithinoroutsidethefirm;
(c)

Besatisfiedthatthenatureandscopeof,andconclusionsresultingfro
m,suchconsultationsareagreedwiththepartyconsulted;and
(d)
Determinethatconclusionsresultingfromsuchconsultationshavebe
enimplemented.(Ref:Para.A21A22)

EngagementQualityControlReview
19.

Forauditsoffinancialstatementsoflistedentities,andthoseothe
rauditengagements,ifany,forwhichthefirmhasdeterminedtha
tanengagementqualitycontrolreviewisrequired,theengagem
entpartnershall:

(a)

Determinethatanengagementqualitycontrolreviewerhasbeenapp
ointed;
(b)

Discusssignificantmattersarisingduringtheauditengagement,inclu
dingthoseidentifiedduringtheengagementqualitycontrolreview,wi
ththeengagementqualitycontrolreviewer;and
(c)
Notdatetheauditorsreportuntilthecompletionoftheengagementqu
alitycontrolreview.(Ref:Para.A23A25)

20.
Theengagementqualitycontrolreviewershallperformanobjectivee
valuationofthesignificantjudgmentsmadebytheengagementteam
,andtheconclusionsreachedinformulatingtheauditorsreport.Thise
valuationshallinvolve:

1
2

(a)
(b)

Reviewofthefinancialstatementsandtheproposedauditorsreport;
(c)

Reviewofselectedauditdocumentationrelatingtothesignificantjudg
mentstheengagementteammadeandtheconclusionsitreached;an
d
(d)

Discussionofsignificantmatterswiththeengagementpartner;

Evaluationoftheconclusionsreachedinformulatingtheauditorsrepo
rtand
considerationofwhethertheproposedauditorsreportisappro
priate.(Ref:Para.A26A27,A29A31)
21.
Forauditsoffinancialstatementsoflistedentities,theengagementqu
alitycontrolreviewer,onperforminganengagementqualitycontrolre
view,shallalsoconsiderthefollowing:

(a)

Theengagementteamsevaluationofthefirmsindependenceinrelat
iontotheauditengagement;
(b)

Whetherappropriateconsultationhastakenplaceonmattersinvolvin
gdifferencesofopinionorotherdifficultorcontentiousmatters,andth
econclusionsarisingfromthoseconsultations;and
(c)
Whetherauditdocumentationselectedforreviewreflectstheworkper
formedinrelationtothesignificantjudgmentsmadeandsupportsthec
onclusionsreached.(Ref:Para.A28A31)

DifferencesofOpinion
22.
Ifdifferencesofopinionarisewithintheengagementteam,withthosec
onsultedor,whereapplicable,betweentheengagementpartnerandt
heengagementqualitycontrolreviewer,theengagementteamshallf
ollowthefirmspoliciesandproceduresfordealingwithandresolvingdi
fferencesofopinion.
Monitoring
23.
Aneffectivesystemofqualitycontrolincludesamonitoringprocessd
esignedtoprovidethefirmwithreasonableassurancethatitspolicie
sandproceduresrelatingtothesystemofqualitycontrolarerelevant
,adequate,andoperatingeffectively.Theengagementpartnershall
considertheresultsofthefirmsmonitoringprocessasevidencedint
helatestinformationcirculatedbythefirmand,ifapplicable,otherne
tworkfirmsandwhetherdeficienciesnotedinthatinformationmaya
ffecttheauditengagement.(Ref:ParaA32A34)
Documentation
24.

Theauditorshalldocument:

(a)

Issuesidentifiedwithrespecttocompliancewithrelevantethicalrequi
rementsandhowtheywereresolved.
(b)
Conclusionsoncompliancewithindependencerequirementsthatapp

lytotheauditengagement,andanyrelevantdiscussionswiththefirmt
hatsupporttheseconclusions.
(c)

Conclusionsreachedregardingtheacceptanceandcontinuanceofcli
entrelationshipsandauditengagements.
(d)
Thenatureandscopeof,andconclusionsresultingfrom,consultations
undertakenduringthecourseoftheauditengagement. (Ref:Para.A35)

25.
Theengagementqualitycontrolreviewershalldocument,f
ortheauditengagementreviewed,that:

(a)

Theproceduresrequiredbythefirmspoliciesonengagementqualityc
ontrolreviewhavebeenperformed;
(b)

Theengagementqualitycontrolreviewhasbeencompletedonorbefo
rethedateoftheauditorsreport;and
(c)
Thereviewerisnotawareofanyunresolvedmattersthatwouldcauset
hereviewertobelievethatthesignificantjudgmentstheengagementt
eammadeandtheconclusionstheyreachedwerenotappropriate.
***

ApplicationandOtherExplanatoryMaterial
SystemofQualityControlandRoleofEngagementTeams(Ref:Para.2)
A1.PSQC1(Redrafted),ornationalrequirementsthatareatleastasdemandin
g,dealswiththefirmsresponsibilitiestoestablishandmaintainitssyst
emofqualitycontrolforauditengagements.Thesystemofqualitycont
rolincludespoliciesandproceduresthataddresseachofthefollowinge
lements:
Leadershipresponsibilitiesforqualitywithinthefirm;
Relevantethicalrequirements;
Acceptanceandcontinuanceofclientrelationshipsandspecificengag
ements;
Humanresources;
Engagementperformance;and
Monitoring.

Nationalrequirementsthatdealwiththefirmsresponsibilitiestoestab
lishandmaintainasystemofqualitycontrolareatleastasdemandinga
sPSQC1(Redrafted)whentheyaddressalltheelementsreferredtointh
isparagraphandimposeobligationsonthefirmthatachievetheaimsof
therequirementssetoutinPSQC1(Redrafted).
RelianceontheFirmsSystemofQualityControl(Ref:Para.4)
A2.Unlessinformationprovidedbythefirmorotherpartiessuggestotherwi
se,theengagementteammayrelyonthefirmssystemofqualitycon
trolinrelationto,forexample:

1
2
3
4

Competenceofpersonnelthroughtheirrecruitmentandformaltrainin
g.
Independencethroughtheaccumulationandcommunicationofrelev
antindependenceinformation.
Maintenanceofclientrelationshipsthroughacceptanceandcontinua
ncesystems.
Adherencetoregulatoryandlegalrequirementsthroughthemonitori
ngprocess.

LeadershipResponsibilitiesforQualityonAudits (Ref:Para.8)
A3.Theactionsoftheengagementpartnerandappropriatemessagestoth
eothermembersoftheengagementteam,intakingresponsibilityfor
theoverallqualityoneachauditengagement,emphasize:

1. (a) Theimportancetoauditqualityof:
2. (i)
Performingworkthatcomplieswithprofessionalstandardsandreg
ulatoryandlegalrequirements;
3. (ii)
Complyingwiththefirmsqualitycontrolpoliciesandproceduresa
sapplicable;
4. (iii)
Issuingauditorsreportsthatareappropriateinthecircumstances;
and
5. (iv)
Theengagementteamsabilitytoraiseconcernswithoutfearofrep
risals;and

(b)
Thefactthatqualityisessentialinperformingauditengagements.

RelevantEthicalRequirements

CompliancewithRelevantEthicalRequirements (Ref:Para.9)
A4.ThePhilippineEthicsCodeestablishesthefundamentalprinciplesofprof
essionalethics,whichinclude:

1
2
3
4
5

(a)
(b)
(c)
(d)
(e)

Integrity;
Objectivity;
Professionalcompetenceandduecare;
Confidentiality;and
Professionalbehavior.

DefinitionofFirm,NetworkandNetworkFirm(Ref:Para.911)
A5.Thedefinitionsoffirm,networkornetworkfirminrelevantet
hicalrequirementsmaydifferfromthosesetoutinthisPSA.Fore
xample,thePhilippineEthicsCodedefinesthefirmas:

1
2

(a)
(b)

Anentitythatcontrolssuchpartiesthroughownership,managemento
rothermeans;and
(c)

Asolepractitionerorpartnershipofprofessionalaccountants;

Anentitycontrolledbysuchpartiesthroughownership,management
orothermeans.
ThePhilippineEthicsCodealsoprovidesguidanceinrelationtot
hetermsnetworkandnetworkfirm.
Incomplyingwiththerequirementsinparagraphs911,thedefinitionsusedintherelevantethicalrequirementsapplyinsof
arasisnecessarytointerpretthoseethicalrequirements.
ThreatstoIndependence(Ref:Para.11(c))
A6.Theengagementpartnermayidentifyathreattoindependenceregarding
theauditengagementthatsafeguardsmaynotbeabletoeliminateorr
educetoanacceptablelevel.Inthatcase,asrequiredbyparagraph11(
c),theengagementpartnerreportstotherelevantperson(s)withinthe
firmtodetermineappropriateaction,whichmayincludeeliminatingth
eactivityorinterestthatcreatesthethreat,orwithdrawingfromtheaud
itengagement,wherewithdrawalislegallypermitted.
ConsiderationsSpecifictoPublicSectorEntities
A7.Statutorymeasuresmayprovidesafeguardsfortheindependenceofpubl
icsectorauditors.However,publicsectorauditorsorauditfirmscarryin
goutpublicsectorauditsonbehalfofthestatutoryauditormay,depend

ingonthetermsofthemandateinaparticularjurisdiction,needtoadapt
theirapproachinordertopromotecompliancewiththespiritofparagra
ph11.Thismayinclude,wherethepublicsectorauditorsmandatedoe
snotpermitwithdrawalfromtheengagement,disclosurethroughapu
blicreport,ofcircumstancesthathavearisenthatwould,iftheywereint
heprivatesector,leadtheauditortowithdraw.
AcceptanceandContinuanceofClientRelationshipsandAuditEngageme
nts(Ref:Para.12)
A8.PSQC1(Redrafted)requiresthefirmtoobtaininformationconsiderednec
essaryinthecircumstancesbeforeacceptinganengagementwithane
wclient,whendecidingwhethertocontinueanexistingengagement,a
ndwhenconsideringacceptanceofanewengagementwithanexisting
4
client.
Informationsuchasthefollowingassiststheengagementpartnerinde
terminingwhethertheconclusionsreachedregardingtheacceptance
andcontinuanceofclientrelationshipsandauditengagementsareapp
ropriate:

1
2
3
4

Theintegrityoftheprincipalowners,keymanagementandthosechar
gedwithgovernanceoftheentity;
Whethertheengagementteamiscompetenttoperformtheauditenga
gementandhasthenecessarycapabilities,includingtimeandresourc
es;
Whetherthefirmandtheengagementteamcancomplywithrelevante
thicalrequirements;and
Significantmattersthathavearisenduringthecurrentorpreviousaudi
tengagement,andtheirimplicationsforcontinuingtherelationship.

ConsiderationsSpecifictoPublicSectorEntities(Ref:Para.1213)
A9.Inthepublicsector,auditorsmaybeappointedinaccordancewithstatutor
yprocedures.Accordingly,certainoftherequirementsandconsiderati
onsregardingtheacceptanceandcontinuanceofclientrelationshipsa
ndauditengagementsassetoutinparagraphs12,13andA8maynotbe
relevant.Nonetheless,informationgatheredasaresultoftheprocessd
escribedmaybevaluabletopublicsector

PSQC1 (Redrafted),paragraph27(a).

auditorsinperformingriskassessmentsandincarryingout
reportingresponsibilities.
AssignmentofEngagementTeams(Ref:Para.14)
A10.Anengagementteamalsoincludesamemberusingexpertiseinaspecia

lizedareaofaccountingorauditing,whetherengagedoremployedbyt
hefirm,ifany,whoperformsauditproceduresontheengagement.
A11.Whenconsideringtheappropriatecompetenceandcapabilitiesexpect
edoftheengagementteamasawhole,theengagementpartnermayt
akeintoconsiderationsuchmattersastheteams:
Understandingof,andpracticalexperiencewith,auditengagements
ofasimilarnatureandcomplexitythroughappropriatetrainingandpar
ticipation.
Understandingofprofessionalstandardsandregulatoryandlegalreq
uirements.
Technicalexpertise,includingexpertisewithrelevantinformationtec
hnologyandspecializedareasofaccountingorauditing.
Knowledgeofrelevantindustriesinwhichtheclientoperates.
Abilitytoapplyprofessionaljudgment.
Understandingofthefirmsqualitycontrolpoliciesandprocedures.
ConsiderationsSpecifictoPublicSectorEntities
A12.Inthepublicsector,additionalappropriatecompetencemayincludeskill
sthatarenecessarytodischargethetermsoftheauditmandateinapart
icularjurisdiction.Suchcompetencemayincludeanunderstandingoft
heapplicablereportingarrangements,includingreportingtothelegisl
atureorothergoverningbodyorinthepublicinterest.Thewiderscopeo
fapublicsectorauditmayinclude,forexample,someaspectsofperfor
manceauditingoracomprehensiveassessmentofcompliancewithle
gislativeauthoritiesandpreventinganddetectingfraudandcorruptio
n.
EngagementPerformance
Direction,SupervisionandPerformance(Ref:Para.15(a))
A13.Directionoftheengagementteaminvolvesinformingthememb
ersoftheengagementteamofmatterssuchas:
Theirresponsibilities,includingtheneedtocomplywithrelevantethic
alrequirements,andtoplanandperformanauditwithprofessionalske
5
pticismasrequiredbyPSA200(RevisedandRedrafted).
Responsibilitiesofrespectivepartnerswheremorethanonepartnerisi
nvolvedintheconductofanauditengagement.
Theobjectivesoftheworktobeperformed.
Thenatureoftheentitysbusiness.
Riskrelatedissues.
Problemsthatmayarise.
Thedetailedapproachtotheperformanceoftheengagement.
Discussionamongmembersoftheengagementteamallowslessexper

iencedteammemberstoraisequestionswithmoreexperiencedteam
memberssothatappropriatecommunicationcanoccurwithintheeng
agementteam.
A14.Appropriateteamworkandtrainingassistlessexperiencedmemb
ersoftheengagementteamtoclearlyunderstandtheobjectives
oftheassignedwork.
A15.Supervisionincludesmatterssuchas:

1
2

3
4

Trackingtheprogressoftheauditengagement.
Consideringthecompetenceandcapabilitiesofindividualmemberso
ftheengagementteam,includingwhethertheyhavesufficienttimeto
carryouttheirwork,whethertheyunderstandtheirinstructions,andw
hethertheworkisbeingcarriedoutinaccordancewiththeplannedapp
roachtotheauditengagement.
Addressingsignificantmattersarisingduringtheauditengagement,c
onsideringtheirsignificanceandmodifyingtheplannedapproachapp
ropriately.
Identifyingmattersforconsultationorconsiderationbymoreexperien
cedengagementteammembersduringtheauditengagement.

PSA200 (Revised andRedrafted),OverallObjectivesoftheIndependentAuditorand theCon

ductofan AuditinAccordancewith PhilippineStandardsonAuditing,paragraph 15.

Reviews
ReviewResponsibilities(Ref:Para.16)
A16.UnderPSQC1(Redrafted),thefirmsreviewresponsibilitypolicie
sandproceduresaredeterminedonthebasisthatworkoflessex
periencedteammembersisreviewedbymoreexperiencedtea
6
mmembers.
A17.Areviewconsistsofconsiderationwhether,forexample:

1
2
3
4
5
6
7

Theworkhasbeenperformedinaccordancewithprofessionalstandar
dsandregulatoryandlegalrequirements;
Significantmattershavebeenraisedforfurtherconsideration;
Appropriateconsultationshavetakenplaceandtheresultingconclusi
onshavebeendocumentedandimplemented;
Thereisaneedtorevisethenature,timingandextentofworkperforme
d;
Theworkperformedsupportstheconclusionsreachedandisappropri
atelydocumented;
Theevidenceobtainedissufficientandappropriatetosupporttheaudi
torsreport;and
Theobjectivesoftheengagementprocedureshavebeenachieved.

TheEngagementPartnersReviewofWorkPerformed(Ref:Para.17)

A18.Timelyreviewsofthefollowingbytheengagementpartneratappropria
testagesduringtheengagementallowsignificantmatterstoberesol
vedonatimelybasistotheengagementpartnerssatisfactiononorbe
forethedateoftheauditorsreport:

1
2
3

Criticalareasofjudgment,especiallythoserelatingtodifficultorconte
ntiousmattersidentifiedduringthecourseoftheengagement;
Significantrisks;and
Otherareastheengagementpartnerconsidersimportant.
Theengagementpartnerneednotreviewallauditdocumentation,bu
tmaydoso.However,asrequiredbyPSA230(Redrafted),thepartnerd
ocumentstheextent
7

andtimingofthereviews.
A19.Anengagementpartnertakingoveranauditduringtheengagementma
yapplythereviewproceduresasdescribedinparagraphsA18toreview
theworkperformedtothedateofachangeinordertoassumetherespon
sibilitiesofanengagementpartner.
6
PSQC1 (Redrafted),paragraph33.
7
PSA230 (Redrafted),AuditDocumentation,paragraph 9(c).

ConsiderationsRelevantWhereaMemberoftheEngagementTeamwithEx
pertiseinaSpecializedAreaofAccountingorAuditingIsUsed (Ref:Para.1517)
A20.Whereamemberoftheengagementteamwithexpertiseinaspecialize
dareaofaccountingorauditingisused,direction,supervisionandrev
iewofthatengagementteammembersworkmayincludematterssu
chas:

Agreeingwiththatmemberthenature,scopeandobjectivesofthatme
mberswork;andtherespectiverolesof,andthenature,timingandext
entofcommunicationbetweenthatmemberandothermembersofthe
engagementteam.
Evaluatingtheadequacyofthatmembersworkincludingtherelevanc
eandreasonablenessofthatmembersfindingsorconclusionsandthe
irconsistencywithotherauditevidence.

Consultation(Ref:Para.18)
A21.Effectiveconsultationonsignificanttechnical,ethical,andothermatt
erswithinthefirmor,whereapplicable,outsidethefirmcanbeachie
vedwhenthoseconsulted:
Aregivenalltherelevantfactsthatwillenablethemtoprovideinformed

advice;and
Haveappropriateknowledge,seniorityandexperience.
A22.Itmaybeappropriatefortheengagementteamtoconsultoutsideth
efirm,forexample,wherethefirmlacksappropriateinternalresour
ces.Theymaytakeadvantageofadvisoryservicesprovidedbyoth
erfirms,professionalandregulatorybodies,orcommercialorgani
zationsthatproviderelevantqualitycontrolservices.
EngagementQualityControlReview
CompletionoftheEngagementQualityControlReviewbeforeDatingofthe
AuditorsReport(Ref:Para.19(c))
A23.PSA700(Redrafted)requirestheauditorsreporttobedatednoearlierth
anthedateonwhichtheauditorhasobtainedsufficientappropriateevi
denceonwhichtobasetheauditorsopiniononthefinancialstatement
8
s.
Incasesofanauditoffinancialstatementsoflistedentitiesorwhenanen
gagementmeetsthecriteriaforanengagementqualitycontrolreview,
suchareviewassiststheauditorindeterminingwhethersufficientappr
opriateevidencehasbeenobtained.
A24.Conductingtheengagementqualitycontrolreviewinatimelymannera
tappropriatestagesduringtheengagementallowssignificantmatter
stobepromptlyresolvedtotheengagementqualitycontrolreviewers
satisfactiononorbeforethedateoftheauditorsreport.

PSA700 (Redrafted),ForminganOpinionand ReportingonFinancialStatements,paragra

ph41.

A25.Completionoftheengagementqualitycontrolreviewmeansthecomple
tionbytheengagementqualitycontrolrevieweroftherequirementsin
paragraphs2021,andwhereapplicable,compliancewithparagraph22.Documentat
ionoftheengagementqualitycontrolreviewmaybecompletedafterth
edateoftheauditorsreportaspartoftheassemblyofthefinalauditfile.
PSA230(Redrafted)establishesrequirementsandprovidesguidancei
9
nthisregard.
Nature,ExtentandTimingofEngagementQualityControlReview (Ref:Para.20)
A26.Remainingalertforchangesincircumstancesallowstheengagement
partnertoidentifysituationsinwhichanengagementqualitycontro
lreviewisnecessary,eventhoughatthestartoftheengagement,su
chareviewwasnotrequired.

A27.Theextentoftheengagementqualitycontrolreviewmaydepend,amon
gotherthings,onthecomplexityoftheauditengagement,whetherthe
entityisalistedentity,andtheriskthattheauditorsreportmightnotbe
appropriateinthecircumstances.Theperformanceofanengagement
qualitycontrolreviewdoesnotreducetheresponsibilitiesoftheengag
ementpartnerfortheauditengagementanditsperformance.
EngagementQualityControlReviewofListedEntities(Ref:Para.21)
A28.Othermattersrelevanttoevaluatingthesignificantjudgmentsmadebyt
heengagementteamthatmaybeconsideredinanengagementqualit
ycontrolreviewofalistedentityinclude:

Significantrisksidentifiedduringtheengagementinaccordance
10
withPSA315(Redrafted),
andtheresponsestothoserisksinaccordancewithPSA330(Redr
11
afted), includingtheengagementteamsassessmentof,and
12

responseto,theriskoffraudinaccordancewithPSA240(Redrafted).
Judgmentsmade,particularlywithrespecttomaterialityandsignifica
ntrisks.
Thesignificanceanddispositionofcorrectedanduncorrectedmisstat
ementsidentifiedduringtheaudit.
Thematterstobecommunicatedtomanagementandthosechargedw
ithgovernanceand,whereapplicable,otherpartiessuchasregulatory
bodies.
Theseothermatters,dependingonthecircumstances,mayalsobea
pplicableforengagementqualitycontrolreviewsforauditsoffinanci
alstatementsofotherentities.

9
PSA230 (Redrafted),paragraphs1416and A21A24.
10

PSA315(Redrafted),Identifying andAssessingtheRisksofMaterialMisstatementThrough
Understanding theEntityandItsEnvironment.
11

PSA330(Redrafted),TheAuditorsResponsestoAssessed Risks.
12

PSA240(Redrafted),TheAuditorsResponsibilitiesRelatingto FraudinanAuditofFinancial
Statements.
ConsiderationsSpecifictoSmallerEntities(Ref:Para.2021)

A29.Inadditiontotheauditsoffinancialstatementsoflistedentities,anengag
ementqualitycontrolreviewisrequiredforauditengagementsthatme
etthecriteriaestablishedbythefirmthatsubjectsengagementstoane
ngagementqualitycontrolreview.Insomecases,noneofthefirmsaud
itengagementsmaymeetthecriteriathatwouldsubjectthemtosucha
review.
ConsiderationsSpecifictoPublicSectorEntities(Ref:Para.2021)
A30.Inthepublicsector,astatutorilyappointedauditor(forexample,anAudit
orGeneral,orothersuitablyqualifiedpersonappointedonbehalfofthe
AuditorGeneral),mayactinaroleequivalenttothatofengagementpar
tnerwithoverallresponsibilityforpublicsectoraudits.Insuchcircumst
ances,whereapplicable,theselectionoftheengagementqualitycontr
olreviewerincludesconsiderationoftheneedforindependencefromt
heauditedentityandtheabilityoftheengagementqualitycontrolrevie
wertoprovideanobjectiveevaluation.
A31.Listedentitiesasreferredtoinparagraphs21andA28arenotcommonint
hepublicsector.However,theremaybeotherpublicsectorentitiesthat
aresignificantduetosize,complexityorpublicinterestaspects,andwh
ichconsequentlyhaveawiderangeofstakeholders.Examplesinclude
stateownedcorporationsandpublicutilities.Ongoingtransformation
swithinthepublicsectormayalsogiverisetonewtypesofsignificanten
tities.Therearenofixedobjectivecriteriaonwhichthedeterminationof
significanceisbased.Nonetheless,publicsectorauditorsevaluatewhi
chentitiesmaybeofsufficientsignificancetowarrantperformanceofa
nengagementqualitycontrolreview.
Monitoring(Ref:Para.23)
A32.PSQC1(Redrafted)requiresthefirmtoestablishamonitoringprocessde
signedtoprovideitwithreasonableassurancethatthepoliciesandpro
ceduresrelatingtothesystemofqualitycontrolisrelevant,adequatea
13
ndoperatingeffectively.
A33.Inconsideringdeficienciesthatmayaffecttheauditengagement,thee
ngagementpartnermayhaveregardtomeasuresthefirmtooktorecti
fythesituationthattheengagementpartnerconsidersaresufficientin
thecontextofthataudit.
A34.Adeficiencyinthefirmssystemofqualitycontroldoesnotnecessarilyin
dicatethataparticularauditengagementwasnotperformedinaccord
ancewithprofessionalstandardsandregulatoryandlegalrequireme
nts,orthattheauditorsreportwasnotappropriate.

PSQC1 (Redrafted),paragraph 48.

Documentation
DocumentationofConsultations(Ref:Para.24(d))
A35.Documentationofconsultationswithotherprofessionalsthatinvolvedi
fficultorcontentiousmattersthatissufficientlycompleteanddetailed
contributestoanunderstandingof:

1
2

Theissueonwhichconsultationwassought;and
Theresultsoftheconsultation,includinganydecisionstaken,thebasis
forthosedecisionsandhowtheywereimplemented.

Acknowledgment
ThisPSAisbasedonInternationalStandardonAuditing220(Redrafted),Qu
alityControlforanAuditofFinancialStatements,issuedbytheInternational
AuditingandAssuranceStandardsBoard.
TherearenosignificantdifferencesbetweenthisPSA220(Redrafted)andI
SA220(Redrafted).
ThisPSA220(Redrafted),QualityControlforanAuditofFinancialStatements
,wasunanimouslyapprovedforadoptiononJanuary12,2009bythemember
softheAuditingandAssuranceStandardsCouncil.

BenjaminR.Punongbayan,Chairman

FelicidadA.Abad

AntonioP.Acyatan

ErwinVincentG.Alcala

FroilanG.Ampil

DavidL.Balangue

Ma.GraciaF.CasalsDiaz

EliseoA.Fernandez

JaimeP.Naranjo

Ma.CeciliaF.Ortiz

NestorioC.Roraldo

JoaquinP.Tolentino

EdithaO.Tuason

JaimeE.Ysmael