PHILIPPINE FRAMEWORK FOR ASSURANCE
ENGAGEMENTS
Auditing Standards and Practices Council
Introduction
1. This Framework defines and describes the elements and
objectives of an assurance engagement, and identifies
engagements to which Philippine Standards
on Auditing (PSAs), Philippine Standards on Review
Engagements (PSREs) and Philippine Standards on Assurance
Engagements (PSAEs) apply. It provides a frame of reference
for:
(a) Professional accountants in public practice
(“practitioners”) when performing assurance engagements.
Professional accountants in the public sector refer to the Public
Sector Perspective at the end of the Framework. Professional
accountants who are neither in public practice nor in the public
sector are encouraged to consider the Framework when
performing assurance engagements;1
(b) Others involved with assurance engagements,
including the intended users of
an assurance report and the responsible party; and
(c) The International Auditing and Assurance
Standards Board (IAASB) in its development of ISAs, ISREs
and ISAEs and, consequently, the Auditing Standards and
Practices Council (ASPC) in its adoption of said standards for
application in the Philippines.
2. This Framework does not itself establish standards or provide
procedural requirements for the performance of assurance
engagements. ISAs, ISREs and ISAEs and, therefore, their
counterpart PSAs, PSREs, and PSAEs, contain basic principles,
essential procedures and related guidance, consistent with the
concepts in this Framework, for the performance of assurance
engagements. The relationship between the Framework and the
ISAs, ISREs and ISAEs is illustrated in the “Structure of
Pronouncements Issued by the IAASB” section of the Handbook
of International Auditing, Assurance, and Ethics
Pronouncements. A counterpart document, entitled “Structure of
Pronouncements Issued by the IAASB and the ASPC” is
presented as Appendix to the “Preface to International
Standards on Quality Control, Auditing, Review, Other
Assurance and Related
Services and Preface to Philippine Standards on Quality
Control, Auditing, Review, Other Assurance and Related
Services.”
1 If a professional accountant not in public practice, for example an internal auditor, applies
this Framework, and (a) this Framework, the PSAs, PSREs or PSAEs are referred to in the
professional accountant’s report; and (b) the professional accountant or other members of
the assurance team and, when applicable, the professional accountant’s employer, are not
independent of the entity in respect of which the assurance engagement is being performed,
the lack of independence and the nature of the relationship(s) with the entity are prominently
disclosed in the professional accountant’s report. Also, that report does not include the word
“independent” in its title, and the purpose and users of the report are restricted.
3. The following is an overview of this Framework:
• Introduction: This Framework deals with assurance
engagements performed by practitioners. It provides a frame of
reference for practitioners and others involved with assurance
engagements, such as those engaging a practitioner (the
“engaging party”).
• Definition and objective of an assurance engagement: This
section defines assurance engagements and identifies the
objectives of the two types of assurance engagement a
practitioner is permitted to perform. This Framework calls these
two types reasonable assurance engagements and limited
assurance engagements.2
• Scope of the Framework: This section distinguishes
assurance engagements from other engagements, such as
consulting engagements.
• Engagement acceptance: This section sets out
characteristics that must be exhibited before a practitioner can
accept an assurance engagement.
• Elements of an assurance engagement: This section
identifies and discusses five elements assurance engagements
performed by practitioners exhibit: a three party relationship, a
subject matter, criteria, evidence and an assurance report. It
explains important distinctions between reasonable assurance
engagements and limited assurance engagements (also
outlined in the Appendix). This section also discusses, for
example, the significant variation in the subject matters of
assurance engagements, the required characteristics of suitable
criteria, the role of risk and materiality in assurance
engagements, and how conclusions are expressed in each of
the two types of assurance engagement.
• Inappropriate use of the practitioner’s name: This section
discusses implications of a practitioner’s association with a
subject matter.
Ethical Principles and Quality Control Standards
4. In addition to this Framework and PSAs, PSREs and PSAEs,
practitioners who perform assurance engagements are
governed by:
(a) The Code of Ethics for Professional Accountants in
the Philippines (the Philippine Code), which is adopted from the
IFAC Code of Ethics for
2 For assurance engagements regarding historical financial information in particular,
reasonable assurance engagements are called audits, and limited assurance engagements
are called reviews.
Professional Accountants, which establishes fundamental
ethical principles for professional accountants; and
(b) Philippine Standards on Quality Control (PSQCs),
which are adopted from the International Standards on Quality
Control, which establish standards and provide guidance on a
firm’s system of quality control.3
5. Part A of the Code sets out the fundamental ethical principles
that all professional accountants are required to observe,
including:
(a) Integrity;
(b) Objectivity;
(c) Professional competence and due
care;RAMEWORK
 (d) Confidentiality; and
(e) Professional behavior.
6. Part B of the Code, which applies only to professional
accountants in public practice (“practitioners”), includes a
conceptual approach to independence that takes into account,
for each assurance engagement, threats to independence,
accepted safeguards and the public interest. It requires firms
and members of assurance teams to identify and evaluate
circumstances and relationships that create threats to
independence and to take appropriate action to eliminate these
threats or to reduce them to an acceptable level by the
application of safeguards.
Definition and Objective of an Assurance Engagement
7. “Assurance engagement” means an engagement in which a
practitioner expresses a conclusion designed to enhance the
degree of confidence of the intended users other than the
responsible party about the outcome of the evaluation or
measurement of a subject matter against criteria.
8. The outcome of the evaluation or measurement of a subject
matter is the information that results from applying the criteria to
the subject matter. For example:
• The recognition, measurement, presentation and
disclosure represented in the financial statements (outcome)
result from applying a financial reporting framework for
recognition, measurement, presentation and disclosure, such as
3 PSQC 1 had not been issued when this Framework was approved, but is expected to be
issued before the effective date of PSAE 3000, “Assurance Engagements Other Than
Audits or Reviews of Historical Financial Information.” Additional standards and guidance on
quality control procedures for specific types of assurance engagement are set out in PSAs,
PSREs and PSAEs.
Philippine Financial Reporting Standards, (criteria) to an entity’s
financial position, financial performance and cash flows (subject
matter).
• An assertion about the effectiveness of internal
control (outcome) results from applying a framework for
evaluating the effectiveness of internal control, such as COSO4
or CoCo5 (criteria) to internal control, a process (subject matter).
In the remainder of this Framework, the term “subject matter
information” will be used to mean the outcome of the evaluation
or measurement of a subject matter. It is the subject matter
information about which the practitioner gathers sufficient
appropriate evidence to provide a reasonable basis for
expressing a conclusion in an assurance report.
9. Subject matter information can fail to be properly expressed
in the context of the subject matter and the criteria, and can
therefore be misstated, potentially to a material extent. This
occurs when the subject matter information does not properly
reflect the application of the criteria to the subject matter, for
example, when an entity’s financial statements do not present
fairly, in all material respects its financial position, financial
performance and cash flows in accordance with Philippine
Financial Reporting Standards, or when an entity’s assertion
that its internal control is effective is not fairly stated, in all
material respects, based on COSO or CoCo.
10. In some assurance engagements, the evaluation or
measurement of the subject matter is performed by the
responsible party, and the subject matter information is in the
form of an assertion by the responsible party that is made
available to the intended users. These engagements are called
“assertion-based engagements.” In other assurance
engagements, the practitioner either directly performs the
evaluation or measurement of the subject matter, or obtains a
representation from the responsible party that has performed
the evaluation or measurement that is not available to the
intended users. The subject matter information is provided to the
intended users in the assurance report. These engagements are
called “direct reporting engagements.”
11. Under this Framework, there are two types of assurance
engagement a practitioner is permitted to perform: a reasonable
assurance engagement and a limited assurance engagement.
The objective of a reasonable assurance engagement is a
reduction in assurance engagement risk to an acceptably low
level in the circumstances of the engagement6 as the basis for a
positive form of expression of the practitioner’s conclusion. The
objective of a limited assurance engagement is
4 “Internal Control – Integrated Framework” The Committee of Sponsoring Organizations of
the Treadway Commission.
5 “Guidance on Assessing Control – The CoCo Principles” Criteria of Control Board, The
Canadian Institute of Chartered Accountants.
6 Engagement circumstances include the terms of the engagement, including whether it is a
reasonable assurance engagement or a limited assurance engagement, the characteristics
of the subject matter, the criteria to be used, the needs of the intended users, relevant
characteristics of the responsible party and its environment, and other matters, for example
events, transactions, conditions and practices, that may have a significant effect on the
engagement.
a reduction in assurance engagement risk to a level that is
acceptable in the circumstances of the engagement, but where
that risk is greater than for a reasonable assurance
engagement, as the basis for a negative form of expression of
the practitioner’s conclusion.
Scope of the Framework
12. Not all engagements performed by practitioners are
assurance engagements. Other frequently performed
engagements that do not meet the above definition (and
therefore are not covered by this Framework) include:
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• Engagements covered by Philippine Standards for Related
Services, such as agreed-upon procedures engagements and
compilations of financial or other information.
• The preparation of tax returns where no conclusion conveying
assurance is expressed.
• Consulting (or advisory) engagements,7 such as management
and tax consulting.
13. An assurance engagement may be part of a larger
engagement, for example, when a business acquisition
consulting engagement includes a requirement to convey
assurance regarding historical or prospective financial
information. In such circumstances, this Framework is relevant
only to the assurance portion of the engagement.
14. The following engagements, which may meet the definition
in paragraph 7, need not be performed in accordance with this
Framework:
 (a) Engagements to testify in legal proceedings
regarding accounting, auditing, taxation or other matters; and
(b) Engagements that include professional opinions,
views or wording from which a user may derive some
assurance, if all of the following apply:
(i) Those opinions, views or wording are
merely incidental to the overall engagement;
7 Consulting engagements employ a professional accountant’s technical skills, education,
observations, experiences, and knowledge of the consulting process. The consulting
process is an analytical process that typically involves some combination of activities
relating to: objective-setting, fact-finding, definition of problems or opportunities, evaluation
of alternatives, development of recommendations including actions, communication of
results, and sometimes implementation and follow-up. Reports (if issued) are generally
written in a narrative (or “long form”) style. Generally the work performed is only for the use
and benefit of the client. The nature and scope of work is determined by agreement
between the professional accountant and the client. Any service that meets the definition of
an assurance engagement is not a consulting engagement but an assurance engagement.
(ii) Any written report issued is expressly
restricted for use by only the intended users specified in the
report;
(iii) Under a written understanding with the
specified intended users, the engagement is not
intended to be an assurance engagement; and
(iv) The engagement is not represented as
an assurance engagement in the professional
accountant’s report.
Reports on Non-assurance Engagements
15. A practitioner reporting on an engagement that is not an
assurance engagement within the scope of this Framework,
clearly distinguishes that report from an assurance report. So as
not to confuse users, a report that is not an assurance report
avoids, for example:
• Implying compliance with this Framework, PSAs, PSREs or
PSAEs.
• Inappropriately using the words “assurance,” “audit” or
“review.”
• Including a statement that could reasonably be mistaken for a
conclusion designed to enhance the degree of confidence of
intended users about the outcome of the evaluation or
measurement of a subject matter against criteria.
16. The practitioner and the responsible party may agree to
apply the principles of this Framework to an engagement when
there are no intended users other than the responsible party but
where all other requirements of the PSAs, PSREs or PSAEs are
met. In such cases, the practitioner’s report includes a
statement restricting the use of the report to the responsible
party.
Engagement Acceptance
17. A practitioner accepts an assurance engagement only where
the practitioner’s preliminary knowledge of the engagement
circumstances indicates that:
(a) Relevant ethical requirements, such as
independence and professional competence will be satisfied,
and
(b) The engagement exhibits all of the following
characteristics:
(i) The subject matter is appropriate;
(ii) The criteria to be used are suitable and
are available to the intended users;
(iii) The practitioner has access to sufficient
appropriate evidence to support the practitioner’s
conclusion;
(iv) The practitioner’s conclusion, in the form
appropriate to either a reasonable assurance
engagement or a limited assurance engagement, is to
be contained in a written report; and
(v) The practitioner is satisfied that there is a
rational purpose for the engagement. If there is a
significant limitation on the scope of the practitioner’s
work (see paragraph 55), it may be unlikely that the
engagement has a rational purpose. Also, a
practitioner may believe the engaging party intends to
associate the practitioner’s name with the subject
matter in an inappropriate manner (see paragraph 61).
Specific PSAs, PSREs or PSAEs may include
additional requirements that need to be satisfied prior
to accepting an engagement.
18. When a potential engagement cannot be accepted as an
assurance engagement because it does not exhibit all the
characteristics in the previous paragraph, the engaging party
may be able to identify a different engagement that will meet the
needs of intended users. For example:
(a) If the original criteria were not suitable, an assurance
engagement may still be performed if:
(i) The engaging party can identify an aspect
of the original subject matter for which those criteria
are suitable, and the practitioner could perform an
assurance engagement with respect to that aspect as
a subject matter in its own right. In such cases, the
assurance report makes it clear that it does not relate
to the original subject matter in its entirety; or
(ii) Alternative criteria suitable for the original
subject matter can be selected or developed.
(b) The engaging party may request an engagement that is not
an assurance engagement, such as a consulting or an agreed-
upon procedures engagement.
19. Having accepted an assurance engagement, a practitioner
may not change that engagement to a non-assurance
engagement, or from a reasonable assurance engagement to a
limited assurance engagement without reasonable justification.
A change in circumstances that affects the intended users’
requirements, or a misunderstanding concerning the nature of
the engagement, ordinarily will justify a request for a change in
the engagement. If such a change is made, the practitioner does
not disregard evidence that was obtained prior to the change.
Elements of an Assurance Engagement
20. The following elements of an assurance engagement are
discussed in this section:
 (a) A three party relationship involving a practitioner, a
responsible party, and intended users;
(b) An appropriate subject matter;
(c) Suitable criteria;
(d) Sufficient appropriate evidence; and
(e) A written assurance report in the form appropriate
to a reasonable assurance engagement or a limited assurance
engagement.
Three-Party Relationship
21. Assurance engagements involve three separate parties: a
practitioner, a responsible party and intended users.
22. The responsible party and the intended users may be from
different entities or the same entity. As an example of the latter
case, in a two-tier board structure, the supervisory board may
seek assurance about information provided by the management
board of that entity. The relationship between the responsible
party and the intended users’ needs to be viewed within the
context of a specific engagement and may differ from more
traditionally defined lines of responsibility. For example, an
entity’s senior management (an intended user) may engage a
practitioner to perform an assurance engagement on a particular
aspect of the entity’s activities that is the immediate
responsibility of a lower level of management (the responsible
party), but for which senior management is ultimately
responsible.
Practitioner
23. The term “practitioner” as used in this Framework is broader
than the term “auditor” as used in PSAs and PSREs, which
relates only to practitioners performing audit or review
engagements with respect to historical financial information.
24. A practitioner may be requested to perform assurance
engagements on a wide range of subject matters. Some subject
matters may require specialized skills and knowledge beyond
those ordinarily possessed by an individual practitioner. As
noted in paragraph 17 (a), a practitioner does not accept an
engagement if preliminary knowledge of the engagement
circumstances indicates that ethical requirements regarding
professional competence will not be satisfied. In some cases
this requirement can be satisfied by the practitioner using the
work of persons from other professional disciplines, referred to
as experts. In such cases, the practitioner is satisfied that those
persons carrying out the engagement collectively possess the
requisite skills and knowledge, and that the practitioner has an
adequate level of involvement in the engagement and
understanding of the work for which any expert is used.
Responsible Party
25. The responsible party is the person (or persons) who:
(a) In a direct reporting engagement, is responsible for
the subject matter; or
(b) In an assertion-based engagement, is responsible
for the subject matter information (the assertion), and may be
responsible for the subject matter.
An example of when the responsible party is responsible for
both the subject matter information and the subject matter, is
when an entity engages a practitioner to perform an assurance
engagement regarding a report it has prepared about its own
sustainability practices. An example of when the responsible
party is responsible for the subject matter information but not the
subject matter, is when a government organization engages a
practitioner to perform an assurance engagement regarding a
report about a private company’s sustainability practices that the
organization has prepared and is to distribute to intended users.
The responsible party may or may not be the party who
engages the practitioner (the engaging party).
26. The responsible party ordinarily provides the practitioner
with a written representation that evaluates or measures the
subject matter against the identified criteria, whether or not it is
to be made available as an assertion to the intended users. In a
direct reporting engagement, the practitioner may not be able to
obtain such a representation when the engaging party is
different from the responsible party.
Intended Users
27. The intended users are the person, persons or class of
persons for whom the practitioner prepares the assurance
report. The responsible party can be one of the intended users,
but not the only one.
28. Whenever practical, the assurance report is addressed to all
the intended users, but in some cases there may be other
intended users. The practitioner may not be able to identify all
those who will read the assurance report, particularly where
there is a large number of people who have access to it. In such
cases, particularly where possible readers are likely to have a
broad range of interests in the subject matter, intended users
may be limited to major stakeholders with significant and
common interests. Intended users may be identified in different
ways, for example, by agreement between the practitioner and
the responsible party or engaging party, or by law.
29. Whenever practical, intended users or their representatives
are involved with the practitioner and the responsible party (and
the engaging party if different) in determining the requirements
of the engagement. Regardless of the involvement of others
however, and unlike an agreed-upon procedures engagement
(which involves reporting findings based upon the procedures,
rather than a conclusion):
(a) The practitioner is responsible for determining the
nature, timing and extent of procedures; and
(b) The practitioner is required to pursue any matter
the practitioner becomes aware of that leads the practitioner to
question whether a material modification should be made to the
subject matter information.
30. In some cases, intended users (for example, bankers and
regulators) impose a requirement on, or request the responsible
party (or the engaging party if different) to arrange for, an
assurance engagement to be performed for a specific purpose.
When engagements are designed for specified intended users
or a specific purpose, the practitioner considers including a
restriction in the assurance report that limits its use to those
users or that purpose.
Subject Matter
31. The subject matter, and subject matter information, of an
assurance engagement can take many forms, such as:
• Financial performance or conditions (for example,
historical or prospective financial position, financial performance
and cash flows) for which the subject matter information may be
the recognition, measurement, presentation and disclosure
represented in financial statements.
• Non-financial performance or conditions (for
example, performance of an entity) for which the subject matter
information may be key indicators of efficiency and
effectiveness.
• Physical characteristics (for example, capacity of a
facility) for which the subject matter information may be a
specifications document.
• Systems and processes (for example, an entity’s
internal control or IT system) for which the subject matter
information may be an assertion about effectiveness.
• Behavior (for example, corporate governance,
compliance with regulation, human resource practices) for which
the subject matter information maybe a statement of compliance
or a statement of effectiveness.
32. Subject matters have different characteristics, including the
degree to which information about them is qualitative versus
quantitative, objective versus subjective, historical versus
prospective, and relates to a point in time or covers a period.
Such characteristics affect the:
(a) Precision with which the subject matter can be
evaluated or measured against criteria; and
(b) The persuasiveness of available evidence. The
assurance report notes characteristics of particular relevance to
the intended users.
33. An appropriate subject matter is:
(a) Identifiable, and capable of consistent evaluation
or measurement against the identified criteria; and
(b) Such that the information about it can be subjected
to procedures for gathering sufficient appropriate evidence to
support a reasonable assurance or limited assurance
conclusion, as appropriate.
Criteria
34. Criteria are the benchmarks used to evaluate or measure
the subject matter including, where relevant, benchmarks for
presentation and disclosure. Criteria can be formal, for example
in the preparation of financial statements, the criteria may be
Philippine Financial Reporting Standards; when reporting on
internal control, the criteria may be an established internal
control framework or individual control objectives specifically
designed for the engagement; and when reporting on
compliance, the criteria may be the applicable law, regulation or
contract. Examples of less formal criteria are an internally
developed code of conduct or an agreed level of performance
(such as the number of times a particular committee is expected
to meet in a year).
35. Suitable criteria are required for reasonably consistent
evaluation or measurement of a subject matter within the
context of professional judgment. Without the frame of reference
provided by suitable criteria, any conclusion is open to individual
interpretation and misunderstanding. Suitable criteria are
context sensitive, that is, relevant to the engagement
circumstances. Even for the same subject matter there can be
different criteria. For example, one responsible party might
select the number of customer complaints resolved to the
acknowledged satisfaction of the customer for the subject matter
of customer satisfaction; another responsible party might select
the number of repeat purchases in the three months following
the initial purchase.
36. Suitable criteria exhibit the following characteristics:
(a) Relevance: relevant criteria contribute to
conclusions that assist decision making by the intended users.
(b) Completeness: criteria are sufficiently complete
when relevant factors that could affect the conclusions in the
context of the engagement circumstances are not omitted.
Complete criteria include, where relevant, benchmarks for
presentation and disclosure.
(c) Reliability: reliable criteria allow reasonably
consistent evaluation or measurement of the subject matter
including, where relevant, presentation and disclosure, when
used in similar circumstances by similarly qualified practitioners.
(d) Neutrality: neutral criteria contribute to conclusions
that are free from bias.
(e) Understandability: understandable criteria
contribute to conclusions that are clear, comprehensive, and not
subject to significantly different interpretations. The evaluation or
measurement of a subject matter on the basis of the
practitioner’s own expectations, judgments and individual
experience would not constitute suitable criteria.
37. The practitioner assesses the suitability of criteria for a
particular engagement by considering whether they reflect the
above characteristics. The relative importance of each
characteristic to a particular engagement is a matter of
judgment. Criteria can either be established or specifically
developed.
Established criteria are those embodied in laws or regulations,
or issued by authorized or recognized bodies of experts that
follow a transparent due process.
Specifically developed criteria are those designed for the
purpose of the engagement. Whether criteria are established or
specifically developed affects the work that the practitioner
carries out to assess their suitability for a particular
engagement.
38. Criteria need to be available to the intended users to allow
them to understand how the subject matter has been evaluated
or measured. Criteria are made available to the intended users
in one or more of the following ways:
(a) Publicly.
(b) Through inclusion in a clear manner in the
presentation of the subject matter information.
(c) Through inclusion in a clear manner in the
assurance report.
(d) By general understanding, for example the
criterion for measuring time in hours and minutes.
Criteria may also be available only to specific intended users, for
example the terms of a contract, or criteria issued by an industry
association that are available only to those in the industry. When
identified criteria are available only to specific intended users, or
are relevant only to a specific purpose, use of the assurance
report is restricted to those users or for that purpose.8
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Evidence
39. The practitioner plans and performs an assurance
engagement with an attitude of professional skepticism to obtain
sufficient appropriate evidence about whether the subject matter
information is free of material misstatement. The practitioner
considers materiality, assurance engagement risk, and the
quantity and quality of available evidence when planning and
performing the engagement, in particular when determining the
nature, timing and extent of evidence-gathering procedures.
Professional Skepticism
40. The practitioner plans and performs an assurance
engagement with an attitude of professional skepticism
recognizing that circumstances may exist that cause the subject
matter information to be materially misstated. An attitude of
professional skepticism means the practitioner makes a critical
assessment, with a questioning mind, of the validity of evidence
obtained and is alert to evidence that contradicts or brings into
question the reliability of documents or representations by the
responsible party. For example, an attitude of professional
skepticism is necessary throughout the engagement process for
the practitioner to reduce the risk of overlooking suspicious
circumstances, of over generalizing when drawing conclusions
from observations, and of using faulty assumptions in
determining the nature, timing and extent of evidence gathering
procedures and evaluating the results thereof.
41. An assurance engagement rarely involves the authentication
of documentation, nor is the practitioner trained as or expected
to be an expert in such authentication. However, the practitioner
considers the reliability of the information to be used as
evidence, for example photocopies, facsimiles, filmed, digitized
or other electronic documents, including consideration of
controls over their preparation and maintenance where relevant.
8 While an assurance report may be restricted whenever it is intended only for specified
intended users or for a specific purpose, the absence of a restriction regarding a particular
reader or purpose, does not itself indicate that a legal responsibility is owed by the
practitioner in relation to that reader or for that purpose. Whether a legal responsibility is
owed will depend on the circumstances of each case and the relevant jurisdiction.
Sufficiency and Appropriateness of Evidence
42. Sufficiency is the measure of the quantity of evidence.
Appropriateness is the measure of the quality of evidence; that
is, its relevance and its reliability. The quantity of evidence
needed is affected by the risk of the subject matter information
being materially misstated (the greater the risk, the more
evidence is likely to be required) and also by the quality of such
evidence (the higher the quality, the less may be required).
Accordingly, the sufficiency and appropriateness of evidence
are interrelated. However, merely obtaining more evidence may
not compensate for its poor quality.
43. The reliability of evidence is influenced by its source and by
its nature, and is dependent on the individual circumstances
under which it is obtained.
Generalizations about the reliability of various kinds of evidence
can be made; however, such generalizations are subject to
important exceptions. Even when evidence is obtained from
sources external to the entity, circumstances may exist that
could affect the reliability of the information obtained. For
example, evidence obtained from an independent external
source may not be reliable if the source is not knowledgeable.
While recognizing that exceptions may exist, the following
generalizations about the reliability of evidence may be useful:
• Evidence is more reliable when it is obtained from
independent sources outside the entity.
• Evidence that is generated internally is more reliable
when the related controls are effective.
• Evidence obtained directly by the practitioner (for
example, observation of the application of a control) is more
reliable than evidence obtained indirectly or by inference (for
example, inquiry about the application of a control).
• Evidence is more reliable when it exists in
documentary form, whether paper, electronic, or other media
(for example, a contemporaneously written record of a meeting
is more reliable than a subsequent oral representation of what
was discussed).
• Evidence provided by original documents is more
reliable than evidence provided by photocopies or facsimiles.
44. The practitioner ordinarily obtains more assurance from
consistent evidence obtained from different sources or of a
different nature than from items of evidence considered
individually. In addition, obtaining evidence from different
sources or of a different nature may indicate that an individual
item of evidence is not reliable. For example, corroborating
information obtained from a source independent of the entity
may increase the assurance the practitioner obtains from a
representation from the responsible party. Conversely, when
evidence obtained from one source is inconsistent with that
obtained from another, the practitioner determines what
additional evidence-gathering procedures are necessary to
resolve the inconsistency.
45. In terms of obtaining sufficient appropriate evidence, it is
generally more difficult to obtain assurance about subject matter
information covering a period than about subject matter
information at a point in time. In addition, conclusions provided
on processes ordinarily are limited to the period covered by the
engagement; the practitioner provides no conclusion about
whether the process will continue to function in the specified
manner in the future.
46. The practitioner considers the relationship between the cost
of obtaining evidence and the usefulness of the information
obtained. However, the matter of difficulty or expense involved
is not in itself a valid basis for omitting an evidence gathering
procedure for which there is no alternative. The practitioner uses
professional judgment and exercises professional skepticism F
evaluating the quantity and quality of evidence, and thus its
sufficiency and appropriateness, to support the assurance
report.
Materiality
47. Materiality is relevant when the practitioner determines the
nature, timing and extent of evidence-gathering procedures, and
when assessing whether the subject matter information is free of
misstatement. When considering materiality, the practitioner
understands and assesses what factors might influence the
decisions of the intended users. For example, when the
identified criteria allow for variations in the presentation of the
subject matter information, the practitioner considers how the
adopted presentation might influence the decisions of the
intended users. Materiality is considered in the context of
quantitative and qualitative factors, such as relative magnitude,
the nature and extent of the effect of these factors on the
evaluation or measurement of the subject matter, and the
interests of the intended users. The assessment of materiality
and the relative importance of quantitative and qualitative
factors in a particular engagement are matters for the
practitioner’s judgment.
Assurance Engagement Risk
48. Assurance engagement risk is the risk that the practitioner
expresses an inappropriate conclusion when the subject matter
information is materially
misstated.9
In a reasonable assurance engagement, the practitioner
reduces
9 (a) This includes the risk, in those direct reporting engagements where the subject matter
information is presented only in the practitioner’s conclusion, that the practitioner
inappropriately concludes that the subject matter does, in all material respects, conform with
the criteria, for example: “In our opinion, internal control is effective, in all material respects,
based on XYZ criteria.”
(b) In addition to assurance engagement risk, the practitioner is exposed to the risk of
expressing an inappropriate conclusion when the subject matter information is not materially
misstated, and risks through loss from litigation, adverse publicity, or other events arising in
connection with a subject matter reported on. These risks are not part of assurance
engagement risk.
assurance engagement risk to an acceptably low level in the
circumstances of the engagement to obtain reasonable
assurance as the basis for a positive form of expression of the
practitioner’s conclusion. The level of assurance engagement
risk is higher in a limited assurance engagement than in a
reasonable assurance engagement because of the different
nature, timing or extent of evidence gathering procedures.
However in a limited assurance engagement, the combination of
the nature, timing and extent of evidence gathering procedures
is at least sufficient for the practitioner to obtain a meaningful
level of assurance as the basis for a negative form of
expression. To be meaningful, the level of assurance obtained
by the practitioner is likely to enhance the intended users’
confidence about the subject matter information to a degree that
is clearly more than inconsequential.
49. In general, assurance engagement risk can be represented
by the following components, although not all of these
components will necessarily be present or significant for all
assurance engagements:
(a) The risk that the subject matter information is
materially misstated, which in turn consists of:
(i) Inherent risk: the susceptibility of the
subject matter information to a material misstatement,
assuming that there are no related controls; and
(ii) Control risk: the risk that a material
misstatement that could occur will not be prevented,
or detected and corrected, on a timely basis by related
internal controls. When control risk is relevant to the
subject matter, some control risk will always exist
because of the inherent limitations of the design and
operation of internal control; and
(b) Detection risk: the risk that the practitioner will not
detect a material misstatement that exists.
The degree to which the practitioner considers each of these
components is affected by the engagement circumstances, in
particular by the nature of the subject matter and whether a
reasonable assurance or a limited assurance engagement is
being performed.
Nature, Timing and Extent of Evidence-Gathering Procedures
50. The exact nature, timing and extent of evidence-gathering
procedures will vary from one engagement to the next. In
theory, infinite variations in evidence gathering procedures are
possible. In practice, however, these are difficult to
communicate clearly and unambiguously. The practitioner
attempts to communicate them clearly and unambiguously and
uses the form appropriate to a reasonable assurance
engagement or a limited assurance engagement.10
51. “Reasonable assurance” is a concept relating to
accumulating evidence necessary for the practitioner to
conclude in relation to the subject matter information taken as a
whole. To be in a position to express a conclusion in the positive
form required in a reasonable assurance engagement, it is
necessary for the practitioner to obtain sufficient appropriate
evidence as part of an iterative, systematic engagement process
involving:
FRAMEWORK
(a) Obtaining an understanding of the subject matter
and other engagement circumstances which, depending on the
subject matter, includes obtaining an understanding of internal
control;
 (b) Based on that understanding, assessing the risks
that the subject matter information may be materially misstated;
(c) Responding to assessed risks, including
developing overall responses, and determining the nature,
timing and extent of further procedures;
(d) Performing further procedures clearly linked to the
identified risks, using a combination of inspection, observation,
confirmation, recalculation, re-performance, analytical
procedures and inquiry. Such further procedures involve
substantive procedures including, where applicable, obtaining
corroborating information from sources independent of the
responsible party, and depending on the nature of the subject
matter, tests of the operating effectiveness of controls; and
(e) Evaluating the sufficiency and appropriateness of
evidence.
52. “Reasonable assurance” is less than absolute assurance.
Reducing assurance engagement risk to zero is very rarely
attainable or cost beneficial as a result of factors such as the
following:
• The use of selective testing.
• The inherent limitations of internal control.
• The fact that much of the evidence available to the
practitioner is persuasive rather than conclusive.
• The use of judgment in gathering and evaluating
evidence and forming conclusions based on that evidence.
10 Where the subject matter information is made up of a number of aspects, separate
conclusions may be provided on each aspect.
While not all such conclusions need to relate to the same level of evidence gathering
procedures, each conclusion is expressed in the form that is appropriate to either a
reasonable assurance or a limited assurance engagement.
• In some cases, the characteristics of the subject
matter when evaluated or measured against the identified
criteria.
53. Both reasonable assurance and limited assurance
engagements require the application of assurance skills and
techniques and the gathering of sufficient appropriate evidence
as part of an iterative, systematic engagement process that
includes obtaining an understanding of the subject matter and
other engagement circumstances. The nature, timing and extent
of procedures for gathering sufficient appropriate evidence in a
limited assurance engagement are, however, deliberately limited
relative to a reasonable assurance engagement. For some
subject matters, there may be specific pronouncements to
provide guidance on procedures for gathering sufficient
appropriate evidence for a limited assurance engagement. For
example, PSA 910, “Engagements to Review Financial
Statements”11 establishes that sufficient appropriate evidence
for reviews of financial statements is obtained primarily through
analytical procedures and inquiries. In the absence of a relevant
pronouncement, the procedures for gathering sufficient
appropriate evidence will vary with the circumstances of the
engagement, in particular, the subject matter, and the needs of
the intended users and the engaging party, including relevant
time and cost constraints. For both reasonable assurance and
limited assurance engagements, if the practitioner becomes
aware of a matter that leads the practitioner to question whether
a material modification should be made to the subject matter
information, the practitioner pursues the matter by performing
other procedures sufficient to enable the practitioner to report.
Quantity and Quality of Available Evidence
54. The quantity or quality of available evidence is affected by:
(a) The characteristics of the subject matter and
subject matter information. For example, less objective evidence
might be expected when information about the subject matter is
future oriented rather than historical (see paragraph 32); and
(b) Circumstances of the engagement other than the
characteristics of the subject matter, when evidence that could
reasonably be expected to exist is not available because of, for
example, the timing of the practitioner’s appointment, an entity’s
document retention policy, or a restriction imposed by the
responsible party.
Ordinarily, available evidence will be persuasive rather than
conclusive.
11 PSA 910 will be renumbered as PSRE 2400 under the “Structure of Pronouncements
Issued by the IAASB and ASPC” (see paragraph 2) of this Framework.
55. An unqualified conclusion is not appropriate for either type of
assurance engagement in the case of a material limitation on
the scope of the practitioner’s work, that is, when:
(a) Circumstances prevent the practitioner from
obtaining evidence required to reduce assurance engagement
risk to the appropriate level; or
(b) The responsible party or the engaging party
imposes a restriction that prevents the practitioner from
obtaining evidence required to reduce assurance engagement
risk to the appropriate level.
Assurance Report
56. The practitioner provides a written report containing a
conclusion that conveys the assurance obtained about the
subject matter information. ISAs, ISREs and ISAEs establish
basic elements for assurance reports. In addition, the
practitioner considers other reporting responsibilities, including
communicating with those charged with governance when it is
appropriate to do so.
FRAMEWORK
57. In an assertion-based engagement, the practitioner’s
conclusion can be worded either:
(a) In terms of the responsible party’s assertion (for
example: “In our opinion the responsible party’s assertion that
internal control is effective, in all material respects, based on
XYZ criteria, is fairly stated”); or
(b) Directly in terms of the subject matter and the
criteria (for example: “In our opinion internal control is effective,
in all material respects, based on XYZ criteria”). In a direct
reporting engagement, the practitioner’s conclusion is worded
directly in terms of the subject matter and the criteria.
58. In a reasonable assurance engagement, the practitioner
expresses the conclusion in the positive form, for example: “In
our opinion internal control is effective, in all material respects,
based on XYZ criteria.” This form of expression conveys
“reasonable assurance.” Having performed evidence-gathering
procedures of a nature, timing and extent that were reasonable
given the characteristics of the subject matter and other relevant
engagement circumstances described in the assurance report,
the practitioner has obtained sufficient appropriate evidence to
reduce assurance engagement risk to an acceptably low level.
(ii) A qualified conclusion or a disclaimer of
conclusion depending on how material or pervasive
the matter is, in other cases. In some cases the
practitioner considers withdrawing from the
engagement.

59. In a limited assurance engagement, the practitioner Inappropriate Use of the Practitioner’s Name
expresses the conclusion in the negative form, for example,
“Based on our work described in this report, nothing has come 61. A practitioner is associated with a subject matter when the
to our attention that causes us to believe that internal control is practitioner reports on information about that subject matter or
not effective, in all material respects, based on XYZ criteria.” consents to the use of the practitioner’s name in a professional
This form of expression conveys a level of “limited assurance” connection with that subject matter. If the practitioner is not
that is proportional to the level of the practitioner’s evidence- associated in this manner, third parties can assume no
gathering procedures given the characteristics of the subject responsibility of the practitioner. If the practitioner learns that a
matter and other engagement circumstances described in the party is inappropriately using the
assurance report.
12 In those direct reporting engagements where the subject matter information is presented
only in the practitioner’s conclusion, and the practitioner concludes that the subject matter
60. A practitioner does not express an unqualified conclusion for does not, in all material respects, conform with the criteria, for example: “In our opinion,
either type of assurance engagement when the following except for […], internal control is effective, in all material respects, based on XYZ criteria,”
such a conclusion would also be considered to be qualified (or adverse as appropriate).
circumstances exist and, in the practitioner’s judgment, the
effect of the matter is or may be material:
practitioner’s name in association with a subject matter, the
practitioner requires the party to cease doing so. The
(a) There is a limitation on the scope of the
practitioner also considers what other steps may be needed,
practitioner’s work (see paragraph 55). The practitioner
such as informing any known third party users of the
expresses a qualified conclusion or a disclaimer of conclusion
inappropriate use of the practitioner’s name or seeking legal
depending on how material or pervasive the limitation is. In
advice.
some cases the practitioner considers withdrawing from the
engagement.
Effective Date
(b) In those cases where:
62. This Framework shall be effective for assurance reports
dated on or after January 1, 2005. Earlier reference is
(i) The practitioner’s conclusion is worded in
permissible.
terms of the responsible party’s assertion, and that
assertion is not fairly stated, in all material respects; or
Acknowledgment
(ii) The practitioner’s conclusion is worded
directly in terms of the subject matter and the criteria,
63. This Framework is based on the International Framework for
and the subject matter information is materially
Assurance Engagements issued by the International Auditing
misstated,12 the practitioner expresses a qualified or
and Assurance Standards Board.
adverse conclusion depending on how material or
pervasive the matter is.
64. There are no significant differences between this Framework
and the International Framework for Assurance Engagements.
(c) When it is discovered after the engagement has
been accepted, that the criteria are unsuitable or the subject
Public Sector Perspective
matter is not appropriate for an assurance engagement. The
practitioner expresses:
1. This Framework is relevant to all professional accountants in
(i) A qualified conclusion or adverse
the public sector who are independent of the entity for which
conclusion depending on how material or pervasive
they perform assurance engagements.
the matter is, when the unsuitable criteria or
Where professional accountants in the public sector are not
inappropriate subject matter is likely to mislead the
independent of the entity for which they perform an assurance
intended users; or
engagement, the guidance in footnote 1 should be adopted.
FRAMEWORK
FRAMEWORK OF PHILIPPINE STANDARDS ON AUDITING
Auditing Standards and Practices Council
Philippine Standards on Auditing (PSAs) are to be applied in the
audit of financial statements.
PSAs are also to be applied, adapted as necessary, to the audit
of other information and to related services.
PSAs contain the basic principles and essential procedures
lettering) together with related guidance in the form of
explanatory and other material. The basic principles and
essential procedures are to be interpreted in the context of the
explanatory and other material that provides guidance for their
application.
To understand and apply the basic principles and essential
procedures together with the related guidance, it is necessary to
consider the whole text of the PSA including explanatory and
other material contained in the PSA not just that text which is
black lettered. 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. When such a
situation arises, the auditor should be prepared to justify the
departure.
PSAs need only be applied to material matters.
The PSAs issued by the Auditing Standards Practices Council
(Council) are based on International
Standards on Auditing (ISAs) 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.
Accordingly, the Public Sector Perspective set out at the end of
an ISA has not been adopted into the PSAs.
Framework of Philippine Standards on Auditing
Introduction
1. The Auditing Standards and Practices Council has been
authorized to issue Philippine Standards on Auditing (PSAs).
The purpose of this document is to describe the framework
within which PSAs are issued in relation to the services which
may be performed by auditors.
2. For ease of reference, except where indicated, the term
“auditor” is used throughout the PSAs when describing both
auditing and related services which may be performed. Such
reference is not intended to imply that a person performing
related services need be the auditor of the entity's financial
statements.
Financial Reporting Framework
3. Financial statements are ordinarily prepared and presented
annually and are directed toward the common information needs
of a wide range of users. Many of those users rely on the
financial statements as their major source of information
because they do not have the power to obtain additional
information to meet their specific information needs. Thus,
financial statements need to be prepared in accordance with
one, or a combination of:
(a) accounting standards generally accepted in the
Philippines;
(b) International Accounting Standards; and
(c) another authoritative and comprehensive financial
reporting framework which has been designed for use in
financial reporting and is identified in the financial statements.
Framework for Auditing and Related Services
4. This Framework distinguishes audits from related services.
Related services comprise reviews, agreed-upon procedures
and compilations. As illustrated in the diagram below, audits and
reviews are designed to enable the auditor to provide high and
moderate levels of assurance respectively, such terms being
used to indicate their comparative ranking. Engagements to
undertake agreed-upon procedures and compilations are not
intended to enable the auditor to express assurance.
5. The Framework does not apply to other services provided by
auditors such as taxation, consultancy, and financial and
accounting advice.
Levels of Assurance
15. Assurance in the context of this Framework refers to the
auditor's satisfaction as to the reliability of an assertion being
made by one party for use by another party.
To provide such assurance, the auditor assesses the evidence
collected as a result of procedures conducted and expresses a
conclusion. The degree of satisfaction achieved and, therefore,
the level of assurance which may be provided is determined by
the procedures performed and their results.
16. In an audit engagement, the auditor provides a high, but not
absolute, level of assurance that the information subject to audit
is free of material misstatement. This is expressed positively in
the audit report as reasonable assurance.
17. In a review engagement, the auditor provides a moderate
level of assurance that the information subject to review is free
of material misstatement. This is expressed in the form of
negative assurance.
18. For agreed-upon procedures, as the auditor simply provides
a report of the factual findings, no assurance is expressed.
Instead, users of the report assess for themselves the
procedures and findings reported by the auditor and draw their
own conclusions from the auditor's work.
19. In a compilation engagement, although the users of the
compiled information derive some benefit from the accountant's1
involvement, no assurance is expressed in the report.
Audit
20. The objective of an audit of financial statements is to enable
the auditor to express an opinion whether the financial
statements are prepared, in all material respects, in accordance
with an identified financial reporting framework. The phrase
used to express the auditor's opinion is “present fairly, in all
material respects.” A similar objective applies to the audit of
financial or other information prepared in accordance with
appropriate criteria.
21. In forming the audit opinion, the auditor obtains sufficient
appropriate audit evidence to be able to draw conclusions on
which to base that opinion.
22. The auditor's opinion enhances the credibility of financial
statements by providing a high, but not absolute, level of
assurance. 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 persuasive, rather than conclusive, in nature.
1 To distinguish compilation engagements from audits and other related services the term
"accountant" (rather than "auditor") has been used to refer to a professional accountant in
public practice.
Related Services
Reviews
14. The objective of a review of financial statements is to enable
an auditor2 to state whether, on the basis of procedures which
do not provide all the evidence that would be required in an
audit, anything has come to the auditor's attention that causes
the auditor to believe that the financial statements are not
prepared, in all material respects, in accordance with an
identified financial reporting framework.
A similar objective applies to the review of financial or other
information prepared in accordance with appropriate criteria.
15. A review comprises inquiry and analytical procedures which
are designed to review the reliability of an assertion that is the
responsibility of one party for use by another party. 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, tests of
records and of responses to inquiries by obtaining corroborating
evidence through inspection, observation, confirmation and
computation, which are procedures ordinarily performed during
an audit.
16. Although the auditor attempts to become aware of all
significant matters, the procedures of a review make the
achievement of this objective less likely than in an audit
engagement, thus the level of assurance provided in a review
report is correspondingly less than that given in an audit report.
Agreed-upon Procedures
17. In an engagement to perform agreed-upon procedures, an
auditor3 is engaged to carry out those procedures of an audit
nature to which the auditor and the entity and any appropriate
third parties have agreed and to report on factual findings.
The recipients of the report must form their own conclusions
from the report by the auditor. The report is restricted to those
parties that have agreed to the procedures to be performed
since others, unaware of the reasons for the procedures, may
misinterpret the results.
2. As explained in paragraph 2 the term auditor is used when describing both auditing and
related services. Such reference is not intended to imply that a person performing related
services need to be the auditor of the entity’s financial statements.
3 See footnote 2.
Compilations
18. In a compilation engagement, the accountant4 is engaged to
use accounting expertise as opposed to auditing expertise to
collect, classify and summarize financial information. This
ordinarily entails reducing detailed data to a manageable and
understandable form without a requirement to test the
assertions underlying that information. The procedures
employed are not designed and do not enable the accountant to
express any assurance on the financial information.
However, users of the compiled financial information derive
some benefit as a result of the accountant's involvement
because the service has been performed with due professional
skill and care.
Auditor Association with Financial Information
19. An auditor5 is associated with financial information when the
auditor attaches a report to that information or consents to the
use of the auditor's name in a professional connection. If the
auditor is not associated in this manner, third parties can
assume no responsibility of the auditor. If the auditor learns that
an entity is inappropriately using the auditor's name in
association with financial information, the auditor would require
management to cease doing so and consider what further steps,
if any, need to be taken, such as informing any known third
party users of the information of the inappropriate use of the
auditor's name in connection with the information. The auditor
may also believe it necessary to take other action, for example,
to seek legal advice.
Acknowledgment
20. This Framework of Philippine Standards on Auditing is
based on ISA 120, Framework of International Standards on
Auditing, issued by the International Auditing Practices
Committee of the International Federation of Accountants.
21. This PSA differs from ISA 120 with respect to the deletion of
the section on Public Sector Perspective included in ISA 120.
4 See footnote 1.
5 This includes an accountant engaged to perform compilation engagements.
PREFACE TO THE INTERNATIONAL STANDARDS ON
QUALITY CONTROL, AUDITING, REVIEW, OTHER
ASSURANCE AND RELATED SERVICES
Preface
The “Preface to the International standards on Quality Control,
Auditing, Review, Other Assurance and Related Services” has
been approved by the Board of the International Federation of
Accountants in July 2003. Minor conforming amendments have
been reflected subsequent to July 2003. Further changes have
been reflected based on the proposed amendments issued in
July 2004 relating to the IAASB due process and working
procedures.
In the year 2001, the Auditing Standards and Practices Council
(ASPC) of the Philippines has decided to adopt International
Standards on Auditing (ISAs) and International Auditing Practice
Statements (IAPSs) issued by the then International Auditing
Practices Committee (IAPC), now the International Auditing and
Assurance Standards Board (IAASB) which was established by
the International Federation of Accountants (IFAC) to take over
the development and issuance of International Standards on
Quality Control, Auditing, Assurance and Related Services,
collectively referred to as IAASB’s Standards and Practice
Statements.
As part of its decision to adopt IAASB’s technical
pronouncements, the ASPC has adopted the “Preface to the
International Standards on Quality Control, Auditing, Review,
Other Assurance and Related Services” presented in this
document. At the same time, for the information of interested
parties, the ASPC has also adopted a similar Preface called
“Preface to Philippine Standards on Quality Control, Auditing,
Review, Other Assurance and Related Services” presented
starting on page 13 which supersedes the “Preface to Philippine
Standards on Auditing and Related Services” previously issued
by the ASPC.
INTRODUCTION
1. This preface to the International Standards on Quality
Control, Auditing, Review, Other Assurance and Related
Services (“International Standards” or “IAASB’s Standards”) is
issued to facilitate understanding of the objectives and operating
procedures of the International Auditing and Assurance
Standards Board (IAASB) and the scope and authority of the
pronouncements it issues, as set forth in the IAASB’s Interim
Terms of Reference.
2. The mission of the International Federation of Accountants
(IFAC), as set out in its constitution, is “the worldwide
development and enhancement of an accountancy profession
with harmonized standards, able to provide services of
consistently high quality in the public interest.” In pursuing this
mission, the IFAC Board has established the IAASB to develop
and issue, under its own authority, high quality standards on
auditing, assurance and related services engagements
(“Engagement Standards,” as defined in paragraph13), related
Practice Statements and quality control standards for use
around the world.
3. The IAASB’s pronouncements govern audit, assurance and
related services engagements that are conducted in accordance
with International Standards. They do not override the local laws
or regulations that govern the audit of historical financial
statements or assurance engagements on other information in a
particular country required to be followed in accordance with
that country’s national standards. In the event that local laws or
regulations differ from, or conflict with, the IAASB’s Standards
on a particular subject, an engagement conducted in
accordance with local laws or regulations will not automatically
comply with them. A professional accountant should not
represent compliance with the IAASB’s Engagement Standards
unless the professional accountant has complied fully with all of
those relevant to the engagement.
4. The IAASB is committed to the goal of developing a set of
International Standards generally accepted worldwide. To
further this goal, the IAASB works cooperatively with national
standard setters, and takes a lead role in joint projects with
them, to promote convergence between national and
international standards and achieve acceptance of IAASB’s
Standards.
THE INTERNATIONAL AUDITING AND ASSURANCE
STANDARDS BOARD
5. The IAASB is a Board established by IFAC.
6. The members of the IAASB are appointed by the IFAC Board
to serve on the IAASB. The IAASB comprises eighteen
members, ten of whom are put forward by member bodies of
IFAC, five of whom are put forward by the Forum of Firms, 1 and
three public members who may be members of IFAC member
bodies but shall not be members in public practice. Candidates
for appointment as public members may be put forward by any
individual or organization. In addition, a limited number of
observers, from bodies that have an appropriate interest in
issuing or endorsing standards, may be appointed who will have
the privilege of the floor but will be entitled to vote. These
observers would be expected to possess the technical skills to
participate fully in IAASB debates and attend IAASB meetings
regularly to maintain an understanding of current issues.
Candidates put forward, including the Chair of the IAASB, are
considered for appointment by IFAC’s Nominating Committee.
The selection process is based on the principle of “the best
person for the job.” IAASB members serve for three years, with
one third of the IAASB membership rotating every year.
Continuous service by a member on the IAASB is limited to two
(2) consecutive three (3) year terms, unless that member is
appointed to serve as Chair for a further period of not more than
three years. IAASB members act in the common interest of the
public at large and the worldwide accountancy profession. This
could result in their taking a position on a matter that is not in
accordance with current practice in their country or firm or not in
accordance with the position taken by those who put them
forward for membership of the IAASB. Each IAASB member has
the right to appoint one technical advisor who may participate in
the discussions at IAASB meetings.
7. IAASB members who absent themselves from two meetings
in any twelve month period may be requested to resign from the
IAASB.
8. The IAASB may appoint task forces to assist it in the
development of materials.
These task forces may include individuals who are not members
of the IAASB.
9. IAASB meetings to discuss the development, and to approve
the issuance, of International Standards, Practice Statements or
other papers are open to the public. Agenda papers, including
minutes of the meetings of the IAASB, are published on the
IAASB’s web site.
1 The Forum of Firms is a collaboration of public accounting firms that share the common
objective to promote consistently high standards of financial reporting and auditing
worldwide in the interest of users of the profession’s services and the general public.
THE AUTHORITY ATTACHING TO INTERNATIONAL
STANDARDS ISSUED BY THE INTERNATIONAL AUDITING
AND ASSURANCE STANDARDS BOARD
10. International Standards on Auditing (ISAs) are to be applied
in the audit of historical financial information.
11. International Standards on Review Engagements (ISREs)
are to be applied in the review of historical financial information.
12. International Standards on Assurance Engagements
(ISAEs) are to be applied in assurance engagements dealing
with subject matters other than historical financial information.
13. International Standards on Related Services (ISRSs) are to
be applied to compilation engagements, engagements to apply
agreed-upon procedures to information and other related
services engagements as specified by the IAASB.
14. ISAs, ISREs, ISAEs and ISRSs are collectively referred to
as the IAASB’s Engagement Standards.
15. International Standards on Quality Control (ISQCs) are to be
applied for all services falling under the IAASB’s Engagement
Standards.
16. The IAASB’s Standards contain basic principles and
essential procedures (identified in bold type lettering) together
with related guidance in the form of explanatory and other
material, including appendices. The basic principles and
essential procedures are to be understood and applied in the
context of the explanatory and other material that provides
guidance for their application. It is therefore necessary to
consider the whole text of a Standard to understand and apply
the basic principles and essential procedures.
17. The nature of the IAASB’s Standards requires professional
accountants to exercise professional judgment in applying them.
In exceptional circumstances, a professional accountant may
judge it necessary to depart from a basic principle or essential
procedure of an Engagement Standard to achieve more
effectively the objective of the engagement. When such a
situation arises, the professional accountant should be prepared
to justify the departure.
18. Any limitation of the applicability of a specific International
Standard is made clear in the standard.
19. In circumstances where specific International Standards or
guidance contained in an International Standard are not
applicable in a public sector environment, or when additional
guidance is appropriate in such an environment, IFAC’s Public
Sector Committee so states in a Public Sector Perspective
(PSP). When no PSP is added, the International Standard is to
be applied as written to engagements in the public sector.
THE AUTHORITY ATTACHING TO PRACTICE STATEMENTS
ISSUED BY THE INTERNATIONAL AUDITING AND
ASSURANCE STANDARDS BOARD
20. International Auditing Practice Statements (IAPSs) are
issued to provide interpretive guidance and practical assistance
to professional accountants in implementing ISAs and to
promote good practice. International Review Engagement
Practice Statements (IREPSs), International Assurance
Engagement Practice Statements (IAEPSs) and International
Related Services Practice Statements (IRSPSs) are issued to
serve the same purpose for implementation of ISREs, ISAEs
and ISRSs, respectively.
21. Professional accountants should be aware of and consider
Practice Statements applicable to the engagement. A
professional accountant who does not consider and apply the
guidance included in a relevant Practice Statement should be
prepared to explain how the basic principles and essential
procedures in the
Engagement Standard(s) addressed by the Practice Statement
have been complied with.
OTHER PAPERS PUBLISHED BY THE INTERNATIONAL
AUDITING AND ASSURANCE STANDARDS BOARD
22. Other papers, for example Discussion Papers, are published
to promote discussion or debate on auditing, assurance and
related services and quality control issues affecting the
accounting profession, present findings, or describe matters of
interest relating to auditing, assurance, related services and
quality control issues affecting the accounting profession. They
do not establish any basic principles or essential procedures to
be followed in audit, assurance or related services
engagements.
IAASB DUE PROCESS AND WORKING PROCEDURES
IAASB’s Standards and Practice Statements
Project Identification, Prioritization and Approval
23. Projects to develop new, or revise existing, International
Standards or Practice Statements are identified based on
international and national developments, input from IAASB
members and their technical advisors, or recommendations
received from interested parties including, but not limited to,
audit oversight authorities, regulators, national standard setters,
the IAASB Consultative Advisory Group2 (CAG) and the Public
Interest Oversight Board3 (PIOB).

24. Based on research and appropriate consultation with the
IAASB CAG, a project proposal is prepared for consideration by
the IAASB Steering Committee.4
Project proposals are circulated to other IFAC Committees and
Task Forces,5 including the IFAC Ethics Committee, the IFAC
Transnational Auditors
Committee, the IFAC Small- and Medium-Sized Practices Task
Force and the IFAC Developing Nations Task Force, to identify
matters of possible relevance to the project.
2 The objective of the IAASB Consultative Advisory Group (CAG) is to provide a forum
where the IAASB can consult with individuals, or representatives of organizations,
interested in the development of high quality international standards on quality control,
audits, reviews, other assurance and related services designed to serve the public interest
in order to obtain: (a) views on the IAASB’s agenda and project timetable (work program),
including project priorities; (b) technical advice on projects; and (c) the views of CAG on
other matters of relevance to the activities of the IAASB. The membership, terms of
reference and operating procedures of CAG are published on the IAASB website.
3 The Public Interest Oversight Board (PIOB) oversees IFAC standard setting activities in
the areas of audit standards, independence, and other ethical standards for auditors, audit
quality control and assurance standards. It also oversees IFAC’s proposed Compliance
Program. The objective of the PIOB is to increase the confidence of investors and others
that the public interest activities of IFAC (including the setting of standards by IFAC boards
and committees) are properly responsive to the public interest. The membership, terms of
reference and operating procedures of the PIOB are published on the IFAC website.
4 The IAASB Steering Committee (Steering Committee) is a standing committee of the
IAASB. The purpose of the Steering Committee is to formulate views and advise the IAASB
on matters of strategic and operational importance to the IAASB, while also relieving the
IAASB of the need to address certain administrative matters that do not necessarily require
deliberation by the IAASB. The membership, terms of reference and operating procedures
of the Steering Committees are published on the IAASB website.
5 The membership, terms of reference and operating procedures of IFAC Committees and
Task Forces are published on the IFAC website.
25. The IAASB Steering Committee determines whether to
recommend the project proposal for approval by the IAASB. If a
project proposal is recommended to the IAASB, the IAASB
discusses the proposal in an open meeting and if it accepts the
proposal, approves the commencement of the project. The
IAASB Chair determines the priorities of approved projects in
consultation with the IAASB Steering Committee. Where the
IAASB CAG or the PIOB has recommended a project for
consideration by the IAASB, the IAASB Chair informs the IAASB
CAG and the PIOB of the decisions of the IAASB.
Research, Consultation and Debate
26. After approval of a project proposal and appropriate
consultation with the IAASB as necessary, the IAASB Steering
Committee assigns responsibility for the project to a Project
Task Force established for that purpose. The Project Task
Force will ordinarily be chaired by a member of the IAASB and
may contain participants, such as external experts who are not
members of the IAASB but have experience relevant to the
subject matter being addressed by the Project Task Force. In
addition, a separate group of experts may be established to
advise a Project Task Force. The IAASB may also conduct
projects jointly with a national standard setter(s) or others. In
such cases, the joint Project Task Force is ordinarily chaired by
a member of the IAASB, or chaired jointly.6
27. The Project Task Force has the initial responsibility for the
preparation of a draft International Standard or Practice
Statement. The Project Task Force develops its positions based
on appropriate research and consultation, which may include,
depending on the circumstances: commissioning research,
consulting with the IAASB CAG, practitioners, regulators,
national standard setters and other interested parties, as well as
reviewing professional pronouncements issued by IFAC
member bodies and other parties. Project Task Force meetings
are not open to the public.
28. Agenda papers, including issues papers and draft
International Standards or Practices Statements prepared by
Project Task Forces, for the IAASB’s review and debate are
published on the IAASB website in advance of each IAASB
meeting.7
IAASB meetings to discuss the development, and to approve
the
6 Joint projects are subject to the due process described in this paper. If exposed
separately both internationally and by the national standard setter with whom the project is
being jointly developed, IAASB may additionally have regard to comments received by the
national standard setter, where they may be relevant internationally. The final document
approved by IAASB becomes an International Standard or Practice Statement in the normal
way. It may differ from the corresponding document, if any, approved by the collaborating
national standard setter.
7. Historical copies of agenda papers are retained on the IAASB website and highlights of
each meeting and updated project summaries are posted to the website after each meeting.
issuance, of International Standards and Practice Statements
are open to the public.8
The meetings and agenda papers are in English which is the
official working language of IFAC. Minutes of the immediately
preceding meeting of the IAASB are published on the IAASB
website in advance of each IAASB meeting.
29. The Project Task Force recommends, and the IAASB
specifically considers, whether there is a need to hold a public
forum or roundtable, or issue a consultation paper, soliciting
views on a matter under consideration at any stage, whether
before or after a draft International Standard or Practice
Statement is issued for public exposure. Web cast technology
may be used to conduct a public forum or roundtable in an
economic and efficient manner. In deciding upon the need to
hold a public forum or roundtable or to issue a consultation
paper, the IAASB considers whether the subject of the
International Standard or Practice Statement, the level of
interest, the need for additional information in order to further
the IAASB’s deliberative process, or some other reason
indicates that wider or further consultation would be appropriate.
Public Exposure
30. When approved, the IAASB exposes proposed International
Standards for public comment, and ordinarily exposes proposed
Practice Statements for public comment.
31. Each exposure draft is accompanied by an explanatory
memorandum that highlights the objective(s) of, and the
significant proposals contained in, the draft International
Standard or Practice Statement. The explanatory memorandum
may also direct respondents to aspects of the draft International
Standard or Practice Statement on which specific feedback is
sought.
32. Exposure drafts are placed on the IAASB’s website where
they can be accessed free of charge and are widely distributed
to member bodies of IFAC, regulatory bodies, organizations that
have an interest in quality control, auditing, review, other
assurance and related services standards and practice
statements, and the general public. To allow adequate time for
due consideration and comment from all interested parties, the
exposure period will ordinarily be 90 days.
8 Matters of a general administrative nature or with privacy implications may be dealt with in
closed sessions.
Responses to Exposure Drafts and Consideration of
Respondents’ Comments
33. An acknowledgement of receipt is sent to every respondent
to an exposure draft. Respondents’ comments are considered a
matter of public record and are posted in a readily accessible
format on the IAASB website after the end of the exposure
period. IAASB members, their technical advisers and task force
members who are not members of the IAASB are notified when
comment letters have been made available on the IAASB
website. A number of printed copies of the exposure draft and
comment letters are also made available for the reference
purpose of IAASB members at the IAASB meeting in which the
project is scheduled for discussion. Task Force members may
request such printed copies at any time if they prefer to work
with this format rather than electronic copies.
34. The comments and suggestions received within the
exposure period as a result of public exposure are read and
considered by the Project Task Force.9 To facilitate the
deliberative process the IAASB is ordinarily provided with a
revised proposed
International Standard or Practice Statement and an Issues
Paper that analyzes the comments received, summarizes the
main issues raised and outlines the recommendations of the
Project Task Force.
The Issues Paper also includes the rationale of the Project Task
Force in arriving at its conclusions and, as considered
appropriate by the Task Force, the reason(s) why significant
changes recommended by a respondent(s) were or were not
accepted. In addition to careful study of the Issues Paper,
IAASB members make themselves aware of key points made by
respondents within the context of the response letters.
35. Before a final International Standard or Practice Statement
is issued, the IAASB gives due consideration to comments
received.9
The IAASB deliberates significant matters raised in comment
letters received, with significant decisions made by the IAASB
recorded in the minutes of the meeting of the IAASB. The
IAASB may decide to discuss with respondents their letters of
comment or to explain to them the reason(s) for not having
accepted their proposals. It is expected that this will be regular
practice for comments received from members of the Monitoring
Group.10
The nature and outcome of such discussions are
9 The Project Task Force, and thereby the IAASB, may not be able to give full consideration
to comments received after the end of an exposure period.
10 The Monitoring Group includes representatives of the International Organization of
Securities
Commissions, the Basel Committee on Banking Supervision, the Financial Stability Forum,
the European Commission, the International Association of Insurance Supervisors and the
World Bank. The Monitoring Group’s responsibilities include briefing the PIOB regarding
significant events in the regulatory environment, and among other things, acting as the
vehicle for dialogue between regulators and the international accountancy profession. The
membership, terms of reference and operating procedures of the Monitoring Group are
published on the IFAC website.
reported and recorded in the minutes of the IAASB meeting at
which the related project is discussed.
36. Project agenda papers contain a cumulative summary of the
significant decisions made by the IAASB on matters relating to
the project, including its position on the main points raised in
comment letters. In circumstances where several iterations of
significant changes to an exposure draft are made, and where
practicable, a summary comparative analysis of the proposed
revised final
International Standard or Practice Statement to the exposure
draft is provided to the IAASB.
Re-exposure
37. The Project Task Force recommends to the IAASB whether
re-exposure is necessary, and explains the basis for the
recommendation. The IAASB formally votes whether re-
exposure is required, subject to the same voting requirements
as the publication of an exposure draft or the issuance of a final
International Standard or Practice Statement.
38. In determining the need to re-expose an International
Standard or Practice Statement, the IAASB assesses whether,
as a result of the comments received on exposure, there has
been substantial change to the exposed International Standard
or Practice Statement and, if so, whether those changes warrant
the need to re-expose.
Situations that constitute potential grounds for a decision to re-
expose may include, for example, substantial change to a
proposal arising from matters not previously deliberated by the
IAASB or aired in the exposure draft, or substantial change to
the substance of an International Standard or Practice
Statement.
Final International Standard or Practice Statement
39. At the point of approval of a final International Standard or
Practice Statement, the IAASB Technical Director confirms to
the IAASB that the IAASB’s stated due process has been
followed.
40. When the revised draft is approved, it is issued as a
definitive International Standard or Practice Statement. The
IAASB will set an effective date for the application of its
International Standards. The IAASB will set a date from which
professional accountants should be aware of and consider a
relevant Practice Statement.
41. The features and transparency of IAASB’s due process
ordinarily obviate the need for the IAASB to issue a separate
document explaining its basis for conclusions. In the rare
circumstance where the IAASB decides that additional
communication is necessary, however, such a document may
be issued.
Other Papers Published by the International Auditing and
Assurance Standards Board
42. For other papers, the IAASB Chair will appoint a review
group of four IAASB members to consider whether a draft paper
has sufficient merit to be added to the IAASB’s assurance and
auditing literature. The draft paper may come from any source
and the IAASB need not have specifically commissioned it. If the
review group believes that the paper has sufficient merit it
recommends to the IAASB that the paper be published and
added to its literature.
Voting
43. Each IAASB meeting requires the presence, in person or by
simultaneous telecommunication link, of at least twelve
appointed members.
44. The affirmative votes of at least two thirds of the members
present at a meeting in person or by simultaneous
telecommunications link or by proxy, but not less than twelve, is
required to approve exposure drafts, re-exposure drafts,
International Standards and Practice Statements. Dissenting
votes, including the reason(s) therefore, will be included in the
minutes of the meeting.
45. Each member of the IAASB has the right to one vote. A
member has the right to appoint a proxy in writing. The proxy
may be the member’s technical advisor or another IAASB
member. The appointment of a proxy is disclosed at an IAASB
meeting and recorded in the minutes of the meeting.
46. The IAASB may also use ballots where exposure drafts or
final International
Standards and Practices Statements are discussed at an IAASB
meeting and a final draft is distributed and approved
electronically subsequent to the meeting.
Ballots may also be used where final discussion of the exposure
draft or final International Standard or Practice Statement yields
a significant number of changes and additional time for further
consideration is considered necessary.
Other Matters
47. IAASB’s annual report describes the manner in which the
IAASB has complied with its due process during the period.
Matters of Due Process
48. If an issue over due process is raised with IAASB, whether
by a third party or otherwise, the IAASB Steering Committee
assesses the matter and, should it agree to pursue it, obtains
relevant information from all parties concerned. If, based on the
information so obtained, the Steering Committee concludes that
there was a breach of the IAASB’s stated due process, an
appropriate resolution thereof is sought and communicated to
the party raising the matter.
LANGUAGE
49. The sole authoritative text of an exposure draft, International
Standard, Practice Statement or other paper is that published by
the IAASB in the English language.
PREFACE TO PHILIPPINE STANDARDS
ON QUALITY CONTROL, AUDITING, REVIEW,
OTHER ASSURANCE AND RELATED SERVICES
INTRODUCTION
1. This Preface to Philippine Standards on Quality Control,
Auditing, Other Assurance and Related Services is issued to
facilitate understanding of the objectives and operating
procedures of the Auditing Standards and Practices Council
(hereinafter referred to as “ASPC” or “Council”) and the scope
and authority of the documents issued by the Council.
2. The mission of the ASPC as set out in its Rules of
Procedures is “the promulgation of auditing standards,
practices and procedures which shall be generally accepted by
the accounting profession in the Philippines.”
3. It is the stated policy of the ASPC to make the International
Standards and Practice Statements issued by the IAASB the
applicable standards and practice statements in the Philippines.
In this connection, to facilitate their implementation in the
Philippines, the International Standards and Practice
Statements are made Philippine-specific and are described as
Philippine standards and practice statements as presented in
paragraph 4. This process involves making Philippine-specific
those paragraphs or sections in International Standards and
Practice Statements that are addressed in broad terms to the
international community as a whole to make them clearly
applicable in the Philippines. It also involves providing additional
information in certain paragraphs or sections, whenever
necessary, to facilitate and clearly establish the application in
the Philippines of the International Standards and Practice
Statements. There are currently no fundamental differences
between the IAASB International pronouncements and the
equivalent ASPC Philippine pronouncements and no such
differences are expected in the future.
4. The pronouncements of the ASPC shall be in the form of:
Philippine Standards on Quality Control (PSQCs)
Philippine Standards on Auditing (PSAs)
Philippine Standards on Review Engagements (PSREs)
Philippine Standards on Assurance Engagements (PSAEs)
Philippine Standards on Related Services (PSRSs)
Philippine Auditing Practice Statements (PAPSs)
Philippine Review Engagement Practice Statements (PREPSs)
Philippine Assurance Engagement Practice Statements
(PAEPSs)
Philippine Related Services Practice Statements (PRSPSs)
THE AUDITING STANDARDS AND PRACTICES COUNCIL
5. The ASPC was established by the Philippine Institute of
CPAs (PICPA) and the Association of CPAs in Public Practice
(ACPAPP).
6. The Council has 17 regular members coming from the
following:
No. of Members
Independent auditing firms 7 essential procedures are to be understood and applied in the
PICPA 5 context of the explanatory and other material that provide
ACPAPP 2 guidance for their application. It is therefore necessary to
Board of Accountancy 1 consider the whole text of a Standard to understand and apply
Securities and Exchange Commission 1
Commission on Audit 1
Whenever there is a PICPA representative to the International
Auditing and Assurance Standards Board (the then International
Auditing Practices Committee), such PICPA representative
becomes an ex-officio member of the Council.
7. The Council members from PICPA represent the following
sectors (one representative each):
Academe
Commerce and Industry
Public Practice:
Luzon
Visayas
Mindanao
THE AUTHORITY ATTACHING TO PHILIPPINE STANDARDS
ISSUED BY THE ASPC
8. As set forth in the ASPC’s Rules of Procedures,
“pronouncements on generally accepted auditing standards,
interpretations, and opinions issued by the ASPC apply
whenever an independent examination of financial statements of
any entity, whether profit-oriented or not, and irrespective of size
or legal form, when such examination is conducted for the
purpose of expressing an opinion thereon. They may also have
application, as appropriate, to other related activities of
auditors.”
9. Philippine Standards on Auditing (PSAs) are to be applied, as
appropriate, in the audit of historical financial information.
10. Philippine Standards on Review Engagements (PSREs) are
to be applied in the review of historical financial information.
11. Philippine Standards on Assurance Engagements (PSAEs)
are to be applied in assurance engagements dealing with
subject matters other than historical financial information.
12. Philippine Standards on Related Services (PSRSs) are to be
applied to compilation engagements, engagements to apply
agreed-upon procedures to information and other related
services engagements as specified by the ASPC.
13. PSAs, PSREs, PSAEs and PSRSs are collectively referred
to as the ASPC’s Engagement Standards.
14. Philippine Standards on Quality Control (PSQCs) are to be
applied for all services falling under the ASPC’s Engagement
Standards.
15. The ASPC’s Standards contain basic principles and
essential procedures (identified in bold type lettering) together
with related guidance in the form of explanatory and other
material, including appendices. The basic principles and
the basic principles and essential procedures.
16. The nature of the Philippine Standards issued by the ASPC
requires professional accountants to exercise professional
judgment in applying them. In exceptional circumstances, a
professional accountant may judge it necessary to depart from a
basic principle or essential procedure of an Engagement
Standard to achieve more effectively the objective of the
engagement. When such a situation arises, the professional
accountant should be prepared to justify the departure.
17. Any limitation of the applicability of a specific Philippine
Standard is made clear in the standard.
18. With respect to International Standards, in circumstances
where specific International Standards or guidance contained in
an International Standard are not applicable in a public sector
environment, or when additional guidance is appropriate in such
an environment, IFAC’s Public Sector Committee so states in a
Public Sector Perspective (PSP). When no PSP is added, the
International Standard is to be applied as written to
engagements in the public sector. With respect to Philippine
Standards, this guidance is also applicable. Hence, Philippine
Standards are to be applied as written to engagements in public
sector, unless so stated that they do not apply in a public sector
environment or they are not appropriate in such an environment.
THE AUTHORITY ATTACHING TO PRACTICE STATEMENTS
ISSUED BY THE ASPC
19. Philippine Auditing Practice Statements (PAPSs) are issued
to provide interpretive guidance and practical assistance to
professional accountants in implementing PSAs and to promote
good practice. Philippine Review
Engagement Practice Statements (PREPSs), Philippine
Assurance Engagement Practice Statements (PAEPSs), and
Philippine Related Services Practice Statements (PRSPSs) are
issued to serve the same purpose for implementation of PSREs,
PSAEs and PSRSs, respectively.
20. Professional accountants should be aware of and consider
Practice Statements applicable to the engagement. A
professional accountant who does not consider and apply the
guidance included in a relevant Practice Statement should be
prepared to explain how the basic principles and essential
procedures in the Engagement Standard(s) addressed by the
Practice Statement have been complied with.
OTHER PAPERS PUBLISHED BY THE ASPC
21. Other papers, for example Discussion Papers, are published
to promote discussion or debate on auditing, assurance and
related services and quality control issues affecting the
accounting profession, present findings, or describe matters of
interest relating to auditing, assurance, related services and
quality control issues affecting the accounting profession. They
do not establish any basic principles or essential procedures to
be followed in audit, assurance or related services
engagements.
ADOPTION OF PHILIPPINE STANDARDS AND PRACTICE
STATEMENTS BY THE ASPC
Approach
22. To facilitate the implementation in the Philippines of
International Standards and Practice Statements, the ASPC
undertakes a review of the existing International
pronouncements and those that may be issued in the future to
make them Philippine-specific as stated in paragraph 3 of this
Preface. When changes are made to the original International
pronouncements to make them Philippine specific, these
changes are shown clearly in the ASPC exposure drafts referred
to in paragraph 26 of this Preface, such that deletions are
stricken through with one line and additions are italicized and
underlined. In addition, any significant changes to the
International pronouncements are explained both in the ASPC
exposure drafts and final Philippine Standards or Practice
Statements. The markings for the changes in the exposure
drafts are cleaned after the exposure drafts are finally adopted
as Philippine Standards or Practice Statements.
23. To keep in step with the phase of the IAASB’s issuance of
pronouncements, the ASPC shall endeavor to review IAASB’s
exposure drafts once released and will issue the same, after
appropriate review in accordance with the ASPC’s working
procedures, as ASPC’s EDs. However, to ensure that the
changes made in the finalization of the IAASB’s EDs are
reflected in the final ASPC pronouncements, finalization of the
ASPC’s EDs shall be made only after the IAASB shall have
issued the related final pronouncements.
24. Once adopted, a Philippine Standard or Practice Statement
will supersede or amend the specified ASPC Standards and
Practice Statements previously adopted by the Council (or any
Statement of Auditing Standards of the Philippines (SASP), the
previous pronouncements of the ASPC). An effective date is set
for the application of each Philippine Standard and Practice
Statement adopted and any amendments to ASPC
pronouncements, and until such effective date, the superseded
pronouncement being superseded or amended continues to be
applicable.
25. Other Philippine Standards or Practice Statements may be
issued when deemed necessary by the ASPC to address any
unique requirements imposed by Philippine law or practice. The
reason for the issuance of such pronouncements shall be clearly
indicated in the Philippine Standards or Practice Statements.
Working Procedures
26. To facilitate the initial work in adopting the existing
International Standards and Practice Statements, the ASPC
members have been assigned to workgroups, each with a
designated group leader. Each workgroup is assigned specific
International Standards and Practice Statements, or IAASB’s
exposure drafts, to review and has the initial responsibility for
the preparation and drafting the exposure draft on the proposed
Philippine Standard or Practice Statement for consideration by
the ASPC en banc. If approved by the ASPC, the exposure draft
is widely distributed to interested organizations and persons for
comment. The exposure draft shall also be published in the
PICPA Accounting Times and ACPAPP Bulletin to give it further
exposure. Adequate time is allowed (generally not shorter than
90 days) for each exposure draft to be considered by the
organizations and persons to whom it is sent for comment.
Interested parties may send their comments direct to IAASB,
with a copy to ASPC, on exposure drafts which are still under
exposure by the IAASB. Interpretations, if issued by the ASPC,
need not be exposed for comment, except when it is deemed
desirable, in which case the exposure period will normally be the
same as that of a proposed Philippine Standard or Practice
Statement.
27. The development of additional auditing standards or
statements to address the unique requirements of Philippine law
or practice shall likewise undergo the same process and
procedures described above.
28. The comments and suggestions received as a result of the
exposure of proposed auditing standards or statements are then
considered by ASPC and the exposure draft is revised as
appropriate. If necessary and under applicable circumstances,
the comments and suggestions may also be passed on to
IAASB for its consideration. When the revised draft is approved
by the ASPC, it is issued as a final Philippine Standard or
Practice Statement.
29. Issuance of exposure drafts requires approval by a majority
of the members of the
Council; issuance of final Philippine Standards and Practice
Statements, as well as interpretations, requires approval of at
least ten members.
30. Each final Philippine Standard and Practice Statement, as
well as interpretations, if deemed appropriate, shall be
submitted to the Professional Regulation Commission through
the Board of Accountancy for approval after which the
pronouncements shall be published in the Official Gazette. After
publication, the ASPC pronouncement becomes operative from
the effective date stated therein.
NUMBERING OF PHILIPPINE STANDARDS AND PRACTICE
STATEMENTS
31. Philippine Standards and Practice Statements adopted from
International pronouncements will use the same numbers as
their counterpart International pronouncements. Philippine
Standards and Practice Statements that are
Philippine specific and are not adopted from International
pronouncements will be numbered consecutively with suffix “Ph”
as follows:
a. For Philippine Standards – starting from 100Ph
b. For Philippine Practice Statements – starting from
1000Ph