Auditing Theory: Chapter 1

Philippine Framework for Assurance Engagement (PFAE) – provides a frame of reference for
practitioners and others involved in assurance engagement

Services offered:

 Assurance engagement
 Non-assurance engagement

Assurance engagement

 There are three party involved. Namely, the practitioner, a responsible party and the intended
user.
 The subject matter of an assertion is the financial statements
 Criteria is under PFRS
 The evidence is the basis in arriving the conclusions and written assurance report expressing
practitioners conclusion

Practitioner

 Uses pertinent criteria in the evaluation and measurement of the subject matter
 Express a conclusion designed to enhance the degree of confidence that the intended user may
have the subject matter.

Assertions-based engagement – assurance engagement performed by the practitioner for a responsible

party on a subject matter. Where in the outcome would be submitted to the responsible party and also
made available for the intended users.

Direct-reporting engagement – assurance engagement performed by the practitioner for responsible

party. Where in the outcome would be directly provided to the intended user.

Types of assurance engagement – audit, reviews, attestations and other assurance services.

 Audit – high level of assurance

 Review – limited examination with limited assurance where in used negative expression
 Assurance services and attestation services – like in audits it is based on independent
verification. Customized to the intended users and are highly useful in more limited
circumstances

Other assurance services.

 Assurance on risk assessment – identifies the risk that affects the entity
 Information system reliability service – assurance that the information system generate reliable
information
 Assurance on sales personnel-customer interaction – performs anonymous shopping to observe
and assess actual procedures
 Annual environmental audit – ensures that the entitys policies effectively comply with the
environmental standards.
Non-assurance engagement – agreed upon procedures, compilation of financial or other information,
tax services, management consulting and advisory services, accounting and data processing or
information system services.

 Agreed upon procedures – submits factual findings of the results of his examination. Then the
intended users draw his own conclusions based on the findings
 Compilation of financial or other information - internal reports compilation
 Tax services – more on tax related works
 Management consulting and advisory services – management services needed.
 Accounting and data processing or information system services - outsourcing