Philippine Standards on Auditing

Philippine Standards on Auditing Auditor objectives according to PSA

• To obtain reasonable reassurance about whether
 Philippine Standards on Auditing the financial statements as a whole are free from
material misstatement, whether due to fraud or
 Fraud in Auditing error
• To report on the financial statements, and
 The Audit Process
communicate as required by the PSAs, in
accordance with the auditor’s findings

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Philippine Standards on Auditing Philippine Standards on Auditing

Terms in PSA objectives Terms in PSA objectives

• Applicable financial reporting framework • Professional skepticism
• Audit evidence • Reasonable assurance
• Detection risk • Risk of material misstatement
• Professional judgment Source: http:/ / cynergis tek.com

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 Philippine Standards on Auditing Fraud in Auditing

Requirements when conducting an audit Ethical principles in auditing

• Ethical requirements • Integrity
• Professional skepticism • Objectivity
• Professional judgment • Confidentiality
• Sufficient audit evidence and audit risk • Professional behavior Source: http:/ /www.coindes k.com

• Consideration of PSAs • Professional competence and due care

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Fraud in Auditing Fraud in Auditing

• Errors – Unintentional misstatements or Fraud methods

misdescriptions in the records or books of accounts
• Manipulation, falsification (including forgery), or
oPrincipal errors – Arise when principles of alteration of accounting records
accountancy are not observed
• Misrepresentation in, or intentional omission
oClerical errors – Caused by negligence of the from, the financial statements
accounting staff
• Intentional misapplication of accounting principles
 Commission
 Omission

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 Fraud in Auditing Fraud in Auditing

Detection of fraud according to PSA Detection of fraud according to PSA

• Two (2)types of intentional misstatements • The auditor should inform the management when
relevant to the auditor- misstatements resulting there is a risk of material misstatement in the
from fraudulent financial reporting and financial statements
misstatements resulting from misappropriation of
• If the auditor has identified a fraud, the auditor
assets
should communicate these matters on a timely
• Unless the auditor has reason to believe the basis to the appropriate level of management
contrary, the auditor may accept records and
documents as genuine
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Fraud in Auditing The Audit Process

Detection of fraud according to PSA Before the audit

Client acceptance /
continuance and
Preplanning
establishing the
engagement terms

Source: http:/ / www.fraud-magaz ine.com

Planning the audit

The auditor should also judge whether there is a
responsibility to report the occurrence or suspicion
of occurrence of fraud to an outside party
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 The Audit Process The Audit Process

Management assertions
• Existence/occurrence

Management • Completeness
assertions and Obtaining Ascertaining
audit evidence materiality • Rights and obligations
objectives
• Valuation/ allocation Source: http:/ / www.bus ines s growths trategies .ca

• Presentation and disclosure

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The Audit Process

• Obtaining evidence - Auditors must seek evidence

that corroborates management assertions
• Ascertaining materiality - The auditor must also
determine whether weaknesses in the internal
controls and misstatements in transactions and
account balances are material
• Communicating results - Auditor must
communicate results to interested users

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