PART-I

Special report issued to a business

failed to adhered with “Going concern
assumption
GOING CONCERN BASIS OF ACCOUNTING

Under the going concern basis of accounting, the

financial statements are prepared on the assumption
that the entity is a going concern and will continue its
operations for the foreseeable future.
Going concern- is an accounting term for a company
that has the resources needed to continue to operate
indefinitely until a company provides evidence to the
contrary, and this term also refers to a company's
ability to make enough money to stay afloat or avoid
bankruptcy.
RESPONSIBILITY FOR ASSESSMENT OF THE
ENTITY’S ABILITY TO CONTINUE AS A GOING
CONCERN

(IAS) 1 requires management to make an

assessment of an entity’s ability to continue as a going
concern. In other financial reporting frameworks, there
may be no explicit requirement for management to make a
specific assessment of the entity’s ability to continue as a
going concern. The going concern basis of accounting is a
fundamental principle in the preparation of financial
statements. The preparation of the financial statements
requires management to assess the entity’s ability to
continue as a going concern even if the financial reporting
framework does not include an explicit requirement to do
so.
RESPONSIBILITIES OF THE AUDITOR
The auditor’s responsibilities are to obtain sufficient
appropriate audit evidence regarding, and conclude on, the
appropriateness of management’s use of the going concern
basis of accounting in the preparation of the financial
statements, and to conclude, based on the audit evidence
obtained, whether a material uncertainty exists about the
entity’s ability to continue as a going concern.
NOTE: Accordingly, the absence of any reference to a
material uncertainty about the entity’s ability to continue as
a going concern in an auditor’s report cannot be viewed as
a guarantee as to the entity’s ability to continue as a going
concern.
PLANNING STAGE
PSA 570 requires the auditor to consider going
concern at the early stages of the audit, in particular
when performing risk assessment procedures at the
planning stage. At that point the auditor should
consider whether there are events or conditions that
may cast significant doubt about the going concern
assumption. However, the standard does not
mandate any procedures especially and solely
directed to searching for conditions or events that
would indicate a going concern problem.
REGULAR AUDITING PROCEDURES THAT MAY
IDENTIFY GOING CONCERN PROBLEM

Regular auditing procedures that may identify conditions and events that
indicate a going concern problem include the following:
1. Analytical procedures
2. Review of subsequent events
3. Review of compliance with the terms of debt and loan agreements
4. Reading of minutes
5. Inquiry of legal counsel
6. Confirmations concerning financial support.
GETTING KNOW THE INDICATIONS OF
‘GOING CONCERN’ PROBLEMS
Regular audit procedures such as those described above may reveal
conditions and events that indicate there could be substantial doubt
about the entity’s ability to continue as a going concern for a reasonable
period of time. Examples of these conditions and events (going
concern warning signs or ‘red flags’) are as follows:
1. Negative trends- (a) declining sales; (b) increasing costs; (c)
recurring operating losses; (d) working capital deficiencies; (e) negative
cash flows from operations; and (f) adverse key financial ratios.
2. Internal matters- (a) chaotic and inefficient accounting system; (b)
loss of key management or operations personnel; (c) work stoppages or
other labor difculties; (d) substantial dependence on the success of a
particular project ; (e) uneconomic long-term commitments; and (f) need
to significantly revise operations.
GETTING KNOW THE INDICATIONS OF
‘GOING CONCERN’ PROBLEMS
3. External events that have occurred- (a) legal
proceedings; (b) legislation or similar matters that might
jeopardize operating ability; (c) loss of a key franchise,
license, or patent; (d) loss of a principal customer or supplier;
(e) uninsured catastrophes such as drought, earthquake, or
flood.
4. Other indications of possible financial difficulties- are:
(a) default on loan or similar agreements; (b) arrearages in
dividends; (c) denial of usual trade credit from suppliers; (d)
noncompliance with statutory capital requirements; (e)
seeking new sources or methods of financing.
RISK ASSESSMENT PROCEDURES AND
RELATED ACTIVITIES
When performing risk assessment procedures the auditor
shall consider whether events or conditions exist that may cast
significant doubt on the entity’s ability to continue as a going
concern. In so doing, the auditor shall determine whether
management has already performed a preliminary assessment
of the entity’s ability to continue as a going concern, and:
1. If such an assessment has been performed, the auditor
shall discuss the assessment with management and
determine whether management has identified events or
conditions that, individually or collectively, may cast
significant doubt on the entity’s ability to continue as a
going concern and, if so, management’s plans to
address them; or
RISK ASSESSMENT PROCEDURES AND
RELATED ACTIVITIES

2. If such an assessment has not yet been performed,

the auditor shall discuss with management the basis for the
intended use of the going concern basis of accounting, and
inquire of management whether events or conditions exist
that, individually or collectively, may cast significant doubt
on the entity’s ability to continue as a going concern.

NOTE: The auditor shall remain alert throughout the audit for
audit evidence of events or conditions that may cast
significant doubt on the entity’s ability to continue as a
going concern.
INCLUDING CONSIDERATION OF
MANAGEMENT’S PLANS

If, after considering the conditions and events (going concern

warnings), the auditor believes there is substantial doubt about the
entity’s ability to continue as a ‘going-concern’ for a reasonable
period of time, he or she should consider management’s plans for
addressing these conditions and events. Management’s plans may
be classified as follows:
a. Plans to dispose of assets.
b. Plans to borrow money or restructure debt.
c. Plans to reduce or delay expenditures.
d. Plans to increase ownership equity
INCLUDING CONSIDERATION OF
MANAGEMENT’S PLANS
NOTE:
• Evaluating management’s plans for future actions in relation to its
going concern assessment, whether the outcome of these plans is
likely to improve the situation and whether management’s plans are
feasible in the circumstances
• Where the entity has prepared a cash flow forecast, and analysis of
the forecast is a significant factor in considering the future outcome of
events or conditions in the evaluation of management’s plans for
future actions:
– Evaluating the reliability of the underlying data generated to
prepare the forecast; and
– Determining whether there is adequate support for the
assumptions underlying the forecast.
INCLUDING CONSIDERATION OF
MANAGEMENT’S PLANS

• Requesting written representations from management and,

where appropriate, those charged with governance,
regarding their plans for future actions and the feasibility of
these plans.
• Where management has not yet performed an assessment
of the entity’s ability to continue as a going concern, the
auditor may request to make its assessment.
• Considering whether any additional facts or information
have become available since the date on which
management made its assessment.
EVALUATING MANAGEMENT’S ASSESSMENT

Management’s assessment of the entity’s ability to continue

as a going concern is a key part of the auditor’s consideration of
management’s use of the going concern basis of accounting.The
auditor shall cover the same period as that used by
management to make its assessment as required by the
applicable financial reporting framework, or by law or regulation if it
specifies a longer period. If management’s assessment of the
entity’s ability to continue as a going concern covers less than
twelve months from the date of the financial statements the
auditor shall request management to extend its assessment
period to at least twelve months from that date
ADDITIONAL AUDIT PROCEDURES WHEN
EVENTS OR CONDITIONS ARE IDENTIFIED:
NOTE:
• Evaluating management’s plans for future actions in relation to its going concern
assessment, whether the outcome of these plans is likely to improve the situation and
whether management’s plans are feasible in the circumstances
• Where the entity has prepared a cash flow forecast, and analysis of the forecast is a
significant factor in considering the future outcome of events or conditions in the evaluation
of management’s plans for future actions:
(i) Evaluating the reliability of the underlying data generated to prepare
the forecast; and
(ii) Determining whether there is adequate support for the assumptions
underlying the forecast.
• Requesting written representations from management and, where appropriate, those
charged with governance, regarding their plans for future actions and the feasibility of these
plans.
• Where management has not yet performed an assessment of the entity’s ability to continue
as a going concern, the auditor may request to make its assessment.
• Considering whether any additional facts or information have become available since the
date on which management made its assessment.
COMMUNICATION WITH THOSE CHARGED
WITH GOVERNANCE
Unless all those charged with governance are involved in managing the
entity, the auditor shall communicate with those charged with
governance events or conditions identified that may cast significant
doubt on the entity’s ability to continue as a going concern. Such
communication with those charged with governance shall include the
following:
• Whether the events or conditions constitute a material uncertainty;
• Whether management’s use of the going concern basis of
accounting is appropriate in the preparation of the financial
statements;
• The adequacy of related disclosures in the financial statements; and
• Where applicable, the implications for the auditor’s report.
MANAGEMENT UNWILLING TO MAKE OR
EXTEND ITS ASSESSMENT

The auditor may believe it necessary to request

management to make or extend its assessment. If management is
unwilling to do so, a qualified opinion or a disclaimer of opinion
in the auditor’s report may be appropriate, because it may not be
possible for the auditor to obtain sufficient appropriate audit
evidence regarding management’s use of the going concern basis
of accounting in the preparation of the financial statements, such
as audit evidence regarding the existence of plans management
has put in place or the existence of other mitigating factors.
SIGNIFICANT DELAY IN THE APPROVAL
OF FINANCIAL STATEMENTS

If there is significant delay in the approval of the

financial statements by management or those charged with
governance after the date of the financial statements, the
auditor shall inquire as to the reasons for the delay. If the
auditor believes that the delay could be related to events or
conditions relating to the going concern assessment, the
auditor shall perform those additional audit procedures.
GOING CONCERN ISSUE

Many stakeholders including members of the

international regulatory community are of the view that a more
holistic approach of going concern is necessary. Stakeholders
have called for increased focus on the going concern matters
by the management and auditors.
HOW THE AUDITOR’S REPORT WILL ADDRESS
GOING CONCERN

The IAASB has sought to find an appropriate balance

between entity-specific information about the auditor’s findings
with respect to going concern and more standardized
language describing how the auditor approaches going
concern in an audit. The IAASB has therefore made revisions
to ISA 700, (Forming an Opinion and Reporting on Financial
Statements) to enhance the communications about going
concern in the auditor’s report, as well as certain revisions to
ISA 570, (Going Concern), regarding the auditor’s related
work effort.
ENHANCEMENT TO THE AUDITOR’S
REPORT
For all audits:
• Opinion section required to be presented first, followed by the Basis
for Opinion section, unless law or regulation prescribes otherwise.
• Enhanced auditor reporting on going concern (GC), including:
– Description of the respective responsibilities of management and
the auditor for GC; o A separate section when a material
uncertainty exists, and is adequately disclosed, under the
heading “Material Uncertainty Related to Going Concern”;
and
– New requirement to challenge adequacy of disclosures for "close
calls“ in view of the applicable financial reporting framework
when events or conditions are identified that may cast significant
doubt on an entity’s ability to continue as a GC.
ENHANCEMENT TO THE AUDITOR’S
REPORT

• Affirmative statement about the auditor’s independence and

fulfilment of relevant ethical responsibilities, with disclosure
of the jurisdiction of origin of those requirements or reference to
the International Ethics Standards Board for Accountants’ Code
of Ethics for Professional Accountants.
• Enhanced description of the responsibilities of the auditor
and key features of an audit, together with the provision that
certain components of this description may be presented in an
appendix to the auditor’s report or, where law, regulation or
national auditing standards expressly permit, by reference in the
auditor’s report to a website of an appropriate authority.
ENHANCEMENT TO THE AUDITOR’S
REPORT

Mandatory for audits of financial statements of listed entities, voluntary

application for entities other than listed entities:
• New section to communicate Key audit matters (KAM).
Key Audit Matters (KAM) are those matters that, in the auditor’s
professional judgement, were of most significance in the audit of
financial statements of the current period, these matters are selected
from matters communicated with those charged with governance.
• Matters which are discussed with those charged with governance are
then evaluated by the auditor who then determines those matters
which required significant auditor attention during the course of the
audit.
ENHANCEMENT TO THE AUDITOR’S
REPORT
• There are three matters which the ISA requires the auditor to take into
account when making this determination:
– Areas which were considered to be susceptible to higher risks of
material misstatement
– Significant auditor judgments in relation to areas of the financial
statements that involved significant management judgment. This might
include accounting estimates which have been identified by the auditor
as having a high degree of estimation uncertainty.
– The effect on the audit of significant events or transactions that have
taken place during the period.
The auditor must determine which matters are of most significance in the audit
of the financial statements and these will be regarded as KAM.
ENHANCEMENT TO THE AUDITOR’S
REPORT

NOTE: ISA 220 defines a listed entity as follows:

An entity whose shares, stock or debt are quoted or
listed on a recognized stock exchange, or are
marketed under the regulations of a recognized stock
exchange or other equivalent body.
COMMUNICATING KAM
Once the auditor has determined which matters will be
included as KAM, the auditor must ensure that each matter is
appropriately described in the auditor’s report including a
description of:
• Why the matter was determined to be one of most
significance and therefore a key audit matter, and
• How the matter was addressed in the audit (which may
include a description of the auditor’s approach, a brief
overview of procedures performed with an indication of
their outcome and any other key observations in respect of
the matter)
EMPHASIS OF MATTER AND OTHER
MATTER PARAGRAPHS

EMPHASIS OF MATTER AND OTHER MATTER

PARAGRAPHS- have not been overridden by the new ISA
701 (Communicating Key Audit Matters in the Independent
Auditor’s Report) requirements. The IAASB have noted that in
some cases, matters which the auditor considers to be KAM
will relate to issues that are presented and/or disclosed in the
financial statements. Therefore, communicating these as KAM
under ISA 701 will serve as the most useful and meaningful
mechanism for highlighting the importance of the matter.
EMPHASIS OF MATTER AND OTHER
MATTER PARAGRAPHS
In recognition of this ISA 706 (Revised) states:
• The auditor is prohibited from using an Emphasis of Matter paragraph or
an Other Matter paragraph when the matter has been determined to be
a KAM. To that end, the IAASB has emphasised that the use of an
Emphasis of Matter paragraph is not a substitute for a description of
individual KAM.
• If a KAM is also determined to be fundamental to users’ understanding,
the auditor may present this issue more prominently in the KAM section.
Alternatively, the auditor might also include additional information in the
KAM description to indicate the importance of the matter.
• There may be a matter which is not determined to be a KAM, but which,
in the auditor’s judgement is fundamental to users’ understanding and
for which an Emphasis of Matter paragraph may be considered
necessary.
AUDITORS CONCLUSION
Adequacy of Disclosures When Events or
Conditions Have Been Identified and a Material
Uncertainty Exists
If the auditor concludes that management’s use of the going concern
basis of accounting is appropriate in the circumstances but a
material uncertainty exists, the auditor shall determine whether the
financial statements:
• Adequately disclose the principal events or conditions that may cast
significant doubt on the entity’s ability to continue as a going concern
and management’s plans to deal with these events or conditions; and
• Disclose clearly that there is a material uncertainty related to events
or conditions that may cast significant doubt on the entity’s ability to
continue as a going concern and, therefore, that it may be unable to
realize its assets and discharge its liabilities in the normal course of
business.
Adequacy of Disclosures When Events or
Conditions Have Been Identified but No Material
Uncertainty Exists
Even when no material uncertainty exists, this standard requires the auditor
to evaluate whether, in view of the requirements of the applicable financial
reporting framework, the financial statements provide adequate disclosure
about events or conditions that may cast significant doubt on the entity’s
ability to continue as a going concern. Some financial reporting frameworks
may address disclosures about:
• Principal events or conditions;
• Management’s evaluation of the significance of those events or
conditions in relation to the entity’s ability to meet its obligations;
• Management’s plans that mitigate the effect of these events or
conditions; or
• Significant judgments made by management as part of its assessment
of the entity’s ability to continue as a going concern.
IMPLICATIONS FOR THE
AUDITOR’S REPORT
Use of Going Concern Basis of Accounting Is Inappropriate- If the
financial statements have been prepared using the going concern
basis of accounting but, in the auditor’s judgment, management’s use
of the going concern basis of accounting in the preparation of the
financial statements is inappropriate, the auditor shall express an
adverse opinion applies regardless of whether or not the financial
statements include disclosure of the inappropriateness of management’s
use of the going concern basis of accounting..
• When the use of the going concern basis of accounting is not
appropriate in the circumstances, management may be required, or
may elect, to prepare the financial statements on another
basis(e.g., liquidation basis)
IMPLICATIONS FOR THE
AUDITOR’S REPORT
Use of the Going Concern Basis of Accounting Is Appropriate but a
Material Uncertainty Exists
1. Adequate Disclosure of a Material Uncertainty Is Made in the Financial
Statements- If adequate disclosure about the material uncertainty is made in
the financial statements, the auditor shall express an unmodified opinion and
the auditor’s report shall include a separate section under the heading
“Material Uncertainty Related to Going Concern”.
• The use of a separate section with a heading that includes reference to
the fact that a material uncertainty related to going concern exists alerts
users to this circumstance. o ISA 700 (Revised) also includes illustrative
wording to be included in the auditor’s report for all entities in relation to
going concern to describe the respective responsibilities of those
responsible for the financial statements and the auditor in relation to going
concern.
IMPLICATIONS FOR THE
AUDITOR’S REPORT
2. Adequate Disclosure of a Material Uncertainty Is Not Made in the
Financial Statements- If adequate disclosure about the material
uncertainty is not made in the financial statements, the auditor shall:
• a. Express a qualified opinion or adverse opinion, as appropriate,
• b. In the Basis for Qualified (Adverse) Opinion section of the auditor’s
report, state that a material uncertainty exists that may cast
significant doubt on the entity’s ability to continue as a going concern
and that the financial statements do not adequately disclose this
matter.
DISCLAIMER OF OPINION ISSUED

A disclaimer of opinion is issued when the auditor is unable to

form an opinion on the financial statements. ISA 705 states that when
the auditor expresses a disclaimer of opinion then the auditor’s report
should not include a KAM section.
In situations involving multiple uncertainties that are
significant to the financial statements as a whole, the auditor may
consider it appropriate in extremely rare cases to express a disclaimer
of opinion.
PART-II
Other services offered by a
practitioner other than financial
statement audit
OTHER SERVICES OFFERED BY A PRACTITIONER
OTHER THAN FINANCIAL STATEMENT AUDIT

Practitioner- refers to a CPA in public practice as used in the Philippine

Framework for Assurance Engagement
The AASC has been given the task to promulgate auditing
standards, practices and procedures which shall be generally
accepted by the accounting profession in the Philippines. The AASC
has approved the adoption of International Standards on Auditing
(ISAs), International Standards on Assurance Engagements (ISAEs),
International Standards on Review Engagement (ISREs) and
International Standards on Related Services (ISRSs) issued by IAASB
created by IFAC.
THE MOST SOUGHT- AFTER SERVICES AMONG
PROFESSIONAL ACCOUNTANTS

• ASSURANCE SERVICES
– Independent financial statement audit
– Reviews
– Other Assurance Services (e.g. CPA Web Trust, Business Performance
Measurement Services
• NON-ASSURANCE SERVICES
– Agreed-upon procedures
– Compilation
– Tax
– Management Consultancy/Advisory Services
– Accounting and data processing
– Other non-assurance services (e.g. IT system services)
THE AUTHORITY ATTACHING TO PHILIPPINE
STANDARDS ISSUED BY THE AASC

1. PSAs, PSREs, PSAEs and PSRSs are collectively

referred to as the AASC’s Engagement Standards.
2. Philippine standards on Quality Control (PSQC)
are to be applied for all services falling under the
AASC’s engagement standards.
3. Philippine Standards are applicable to
engagements in the Public sector.
STANDARDS APPLICATION

1. Philippine Standards on Auditing (PSAs)  Audit of historical financial information

2. Philippine Standards on Review

 Review of historical financial information
Engagements (PSREs)

 Assurance engagements dealing with

3. Philippine Standards on Assurance
subject matters other than historical
Engagements (PSAEs)
financial information

 Compilation engagements
 Engagements to apply agreed-upon
4. Philippine Standards on Related Services
procedures to information
(PSRSs)
 Other related services engagements as
specified by the AASC
INTERNATIONAL ETHICS STANDARDS BOARD FOR ACCOUNTANTS (IESBA) CODE OF ETHICS
FOR PROFESSIONAL ACCOUNTANTS

ENGAGEMENT NOT
ENGAGEMENT GOVERNED BY GOVERNED BY IAASB
IAASB

CONSULTING/ADVISORY

AUDIT AND REVIEW OF

HISTORICAL FINANCIAL
STATEMENT TAX

OTHER ASSURANCE
ENGAGEMENTS

OTHER SERVICES
RELATED SERVICES
ENGAGEMENT

COMPILATION

AGREED UPON
PROCEDURES
ASSURANCE ENGAGEMENTS
“Assurance engagement” performed by a professional
accountant is intended to enhance the credibility of information
about subject matter by evaluating whether the subject matter
conforms in all material respects with suitable criteria, thereby
improving the likelihood that the information will meet the
needs of an intended user.
OBJECTIVE: to evaluate the subject matter that is
responsibility of another party against identified suitable
criteria, and to express a conclusion that provides the intended
user with a level of assurance about that subject matter.
TYPES OF ASSURANCE ENGAGEMENT

1. Either a reasonable assurance engagement or a

limited assurance engagement:
• Reasonable assurance engagement – the objective is a reduction
in assurance engagement risk to an acceptably low level in the
circumstances of the engagement as the basis for a positive form
of expression of the practitioner’s conclusion.
• Limited assurance engagement – the objective is a reduction in
assurance engagement risk to a level that is acceptable in the
circumstances of the engagement, but where the risk is greater
than for a reasonable assurance engagement, as a basis for a
negative form of expression of the practitioner’s conclusion.
TYPES OF ASSURANCE ENGAGEMENT
2. Either attestation or direct engagement:
• Attestation engagement- an assurance engagement in which a
party other than a practitioner measures or evaluate the
underlying subject matter against the criteria.
• Direct engagement- an assurance engagement in which a
practitioner measures or evaluates the underlying subject amtter
against the applicable criteria and the practitioner presents the
resulting subject matter informationas part of, or accompanying ,
the assurance report.
3. Other assurance services- In addition to audits and reviews,
other assurance services that may be provided by the
professional accountant include CPA Web Trust, Eldercare Plus,
Business Performance Measurement Services, Information
Reliability Services.
ELEMENTS OF AN ASSUARANCE
ENGAGEMENT

1. A three-party relationship involving:

 A practitioner;
 A responsible party; and
 Intended users.
2. An appropriate subject matter;
3. Suitable criteria;
4. Sufficient appropriate evidence; and
5. A written assurance report in the form appropriate to a reasonable
assurance engagement or a limited assurance engagement.
ENGAGEMENTS TO REVIEW FINANCIAL
STATEMENTS
a. The objective of a review of financial statements is to enable a
practitioner to state whether, on the basis of procedures which
do not provide all the evidence that would be require in an
audit, anything has come to the practitioner’s attention that
causes the practitioner to believe that the financial statements
are not prepared, in all material respects, in accordance with
an identified financial reporting framework (negative
assurance)
b. 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.
ENGAGEMENTS TO REVIEW FINANCIAL
STATEMENTS
c. A review 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.
d. The level of assurance provided in a review report is less
that that given in an audit report.
OTHER REVIEW ENGAGEMENTS
There are other engagement in which a practitioner is engaged
to issue or does issue a written a written communication that expresses
a conclusion with respsct to the reliability of written assertion that is the
responsibility of another party. A number od assurance services are
natural extension of the audit of historical financial statements as users
seek independent assurances about other types of information. For
example, a financial instution may require debtors to engage CPA’s to
provide assurance about the debtors compliance with the certain
covenant provisions stated in the loan agreement. CPA’s may also
provide assurance about the effectiveness of a client’s internal controls
over financial reporting. Other examples are review of investment
performance statistics for the organizations such as mutual funds and
computer software review.
OTHER ASSURANCE SERVICES (PSAE
3000 Revised)

Assurance Services on Information Technology

The growth of the Internet and electonic commerce
has extensively affected the demand for the other assurance
services. Concerns over privacy, security of information and
the reliability of processes generating information transacted
electronically. CPAs can help provide assurance about these
functions. Example of assurance services related to
information technology are assurance over website, controls,
assurance about the information system reliability and
electronic commerce assurance services.
OTHER ASSURANCE SERVICES (PSAE
3000 Revised)

CPA Web Trust Service

Some CPA firms are licensed to perform this service to
provide assurance to users of web sites in the internet. The
CPA’s electronic Web Trust seal is affixed to the website.
This seal assures the users that the web site owner has not
established criteria related to business practices, transaction
integrity and information processes. Web Trustb is an
attestation service and the Web Trust seal is a symbolic
representation of the CPA’s report on management assertion
about its disclosure of electronic commerce practices.
OTHER ASSURANCE SERVICES (PSAE
3000 Revised)
Information System Reliability Service
In these engagement, CPA’s provide assurance that an
information system has been designed and operated to produce
reliable data including tests of the system to determine whether
ths system to determine whether the system protects against
potential causes of data defects. Whereas, the Web Trust
assurance service is primarily designed to provide assurance to
third-party users of a web site, information systems reliability
services might be performed by CPA’s to provide assurance to
management the board of directors, or third parties about the
reliability of information systems used to generate real-time
information.
ASSURANCE SERVICES ON OTHER TYPES OF
INFORMATION

The special Committee on Assurance Services of the

AICPA has developed other assurance services
designed to enhance the relevance of information.
Examples of these services are:
– Business Performance Measurement
– Health Care Performance Measurement
– Risk Assessments
– Eldecare Plus
BUSINESS PERFORMANCE
MEASUREMENTS SERVICES

A CPA can provide assurance about whether

financial and nonfinancial information being reported
from the entity’s performance measurement
system(e.g., balanced scorecard) is reliable and
whether the performance measures being used are
accurately leading the entity toward meeting its
strategic goals and objectives.
HEALTH CARE PERFORMANCE
MEASUREMENT

Assurance service involves evaluation of the

quality of health care, medical services and outcome.
It looks into the health care delivery system, the
medical services provided, and the quality attributes
associated with those services.
HEALTH CARE PERFORMANCE
MEASUREMENT

Assurance service involves evaluation of the

quality of health care, medical services and outcome.
It looks into the health care delivery system, the
medical services provided, and the quality attributes
associated with those services.
RISK ASSESSMENT
Assurance on risk assessment identifies a set
of risks that affects identifies a set of risks that affect
the organization. It also involves the study of the link
between risks and organizations mission, vission,
objectives and strategies and development of new
and relevant measures.
ELDERCARE PLUS
This assurance service focuses on the needs of
the elderly and whether caregives are providing
services that meet specified objectives or at an
acceptable level. This service might include periodic
reporting to family members about the degree to
which caregivers are complying with the contracted
level of care as supervising the investment and
accounting for the elderly individual’s estate.
NON-ASSURANCE ENGAGEMENTS
Not all engagement performed by professional accountants
are assurance engagements. This does not mean that professional
accountants do not undertake such engagements, only that these
engagements are not covered by the Philippine Framework on
Assurance Engagement(PFAE). Other engagements frequently
performed by professional accountants that are not assurance
engagement include the following:
• Agreed-upon procedures
• Compilation of financial or other information
• Preparation of tax returns wher no conclusion is expressed, and
tax consulting.
• Management consulting
• Other advisory services
ENGAGEMENTS TO PERFORM AGREED-UPON
PROCEDURES REGARDING FINANCIAL INFORMATION
(PSRS 4400)

• In an engagement to perform agreed-upon procedures, an auditor 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 conclusion from the
report of 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.
• There must be a clear understanding regarding the agreed upon
procudeures and conitions of the engagaement.
PROCEDURES APPLIED IN AN ENGAGEMENT TO
PERFORM AGREED-UPON PROCEDURES MAY
INCLUDE:
1. Inquiry
2. Recomputation, comparison, and other clerical accuracy checks
3. Observation
4. Inspection
5. Obtaining confirmations
Matters that would be included in the engagement letter include the
following:
• A listing of procedures to be performed as agreed upon between two
parties.
• A statement that the distribution of factual findings would be restricted
to the specified parties who have agreed to the procedures to be
performed.
ENGAGEMENTS TO COMPILE
FINANCIAL INFORMATION
1. In a compilation engagement, the accountant is engaged to
use accounting expertise as opposed to auditing expertise
to collect, classify, and summarized financial information.
2. It ordinarily entails reducing detailed data to manageable
and understandable form without a requirement to test the
assertions underlying that information.
3. The procedures performed are not designed and do not
enable the accountant to express any assurance on the
financial information.
ENGAGEMENTS TO COMPILE
FINANCIAL INFORMATION
Users of compiled financial information derived some benefit as
a result of the accountant’s involvement because the service
has been performed with due professional skill and care.
The accountant is not ordinarily required to:
1. Make any inquiries of management to assess the reliability
and completeness of the information provided;
2. Assess internal controls
3. Verify any matters; or
4. Verify explanations
RULES AND REGULATION RELATIVE
TO COMPILATION SERVICE OF A CPA
• PRBOA issued Resolution NO.3 Series of 2016
which took effect on Feb. 8, 2016 entitled
“Requirement for Submission of Certificate by the
Responsible Certified Public Accountants on the
Compilation Services for the preparation of Financial
Statements and Notes.
• PRBOA Resolution No. 68, Series of 2016 which
amended some provisions in Resolution No. 3. This
resolution took effect on April 8,2016.
RESOLUTION NO. 3, SERIES OF 2016

Section 1: Preparation of the Financial Statements and Notes

to FS
Section2: Prohibitionn for CPA’s Handling the Attest Services
to Prepare or assist in the Preparation of FS and Notes to
the FS
Section3: Certificate of the Compilation Services for the
Preparation of FS and Notes to the FS.
Section4: Accreditation by the Board
Section5: Penalties
RESOLUTION NO. 68, SERIES OF 2016

NOW THEREFORE, it is hereby RESOLVED to amend certain

provisions of Board Resolution 2016-03 and to clarify its
implementation, as follows:
• 1 . The deadline for the filing of the application for
accreditation by CPAs in Commerce and Industry (C&l) shall
be extended to April 30, 2016.
• 2. CPAs who are hired after the April 30, 2016 deadline by
organizations/persons as defined in Section 3 of Resolution
No. 2016-03 shall apply within one (1) month after the date of
their hiring.
RESOLUTION NO. 68, SERIES OF 2016

3. Applicants for accreditation who fail to comply with the Continuing

Professional Development ("CPD") credit units mandated under
Board Resolution 2012-59 and PRC Resolution 2013-774 shall
execute an Affidavit of Undertaking in the form and manner as
prescribed in Board Resolution 2016-03.
Applicants with valid accreditation in public practice or as
accounting teachers may apply the CPD credit units earned within
the last three (3) years for purposes of their applications for
accreditation in commerce and industry practice.
4. Certificates of Accreditation of applicants with undertaking to
comply with the CPD requirement until June 30, 2016 shall not be
released until proof of compliance therewith has been submitted
RESOLUTION NO. 68, SERIES OF 2016

5. For initial applications to be filed in year 2016, the Board shall

issue a supplemental Resolution streamlining the accreditation
requirements for CPAs in commerce and industry practice.
6. If a CPA in commerce and industry practice shall retire, resign
or be dismissed or separated from current employment, the CPA
shall notify the Standards and Inspection Division (SID) of the
Professional Regulation Commission (PRC) of this matter within
one (1) month from the severance of employment. The SID shall
then duly note this in the database. If subsequently employed by
another organization/person, the CPA shall apply for accreditation
in commerce and industry under the new employer within one (1)
month from the date of hiring.
RESOLUTION NO. 68, SERIES OF 2016

7. Only Financial Statements (FS) of the

organizations/persons ending June 30, 2016 and
subsequent periods are mandatorily covered by
Resolution No. 2016-03 on the submission of the
Certificate of Compilation Services for the preparation of
FS (the "Certificate"). For FS ending December 31 ,
2015 and subsequent periods ending May 30, 2016, the
submission of the Certificate will be optional but is
encouraged. FS which end prior to December 31 , 2015
are not covered by this requirement
RESOLUTION NO. 68, SERIES OF 2016

8. CPAs in commerce and industry employed by

organizations/persons which/who also concurrently perform
compilation services for the preparation of the FS of other
related companies/persons shall file only an application for
accreditation as a CPA in commerce and industry for the
employer organization/person. In such case, the CPA shall
indicate in the Detailed Description of Work the following: (a)
names of the other companies in which the CPA is also doing
Compilation Services; and (2) that the preparation of the FS of
such companies are also the responsibility and duty of the CPA.
RESOLUTION NO. 68, SERIES OF 2016

9. If an organization/person has more than one (1) CPA

authorized to prepare the FS and sign the Certificate, all of them
shall individually apply for accreditation as CPA in commerce
and industry.
10. The Certificate of Compilation shall be prepared only for
organizations/persons with gross sales or revenue of more than
Ten Million Pesos.
The preparation of FS for all organizations/persons
required to submit annual reports to regulatory offices shall be
done only by CPAs with appropriate accreditation from the
Board and the Commission.
RESOLUTION NO. 68, SERIES OF 2016

11. In case the FS has been completed for filing in the

appropriate regulatory offices, but the CPA Certificate of
Accreditation is yet to be released, the CPA shall be
allowed to sign the Certificate that will be attached to
the audited FS. The Certificate shall bear the inscription
"CPA accreditation filed on still in process" on the space
allotted for the Accreditation No. in the Certificate
RESOLUTION NO. 68, SERIES OF 2016

12. CPAs shall complete the preparation of the FS and notes

thereto for presentation to the external auditor/s not later than
two (2) months after the end of the accounting period or year of
the organization/person. This deadline is required to give ample
time for the completion of the subsequent audit work of the
external auditor and the submission of the statutory report
before the set deadlines.
For the FS for calendar year ending December 31, 2015,
the FS shall be completed not later than March 15, 2016.
RESOLUTION NO. 68, SERIES OF 2016

13. The external auditors of all organizations/persons shall bring

to the attention of the management of their audit clients any
instance of omission or noncompliance with the provisions of
this Resolution and Board Resolution 032016, including failure
of the audit client to engage a duly accredited CPA who is
responsible for preparing the FS, the non-attachment of the
Certificate in the annual statutory FS, and any other violations of
the aforementioned Resolutions and any amendatory
resolutions that may be issued by the Board and the
Commission in the future. The external auditor shall notify the
Board of these matters within one (1) month from the conclusion
of the audit engagement.
RESOLUTION NO. 68, SERIES OF 2016

14. Violations or non-compliance such as (1) failure to attach

the Certificate of Compilation to the FS by an
organization/person, whenever required; (2) failure to comply
with the accreditation requirements, despite notice and without
justifiable reason, after the FS has been issued; (3) requiring
and/or allowing an external auditor to do the compilation
services for the preparation of the FS and notes thereto and to
audit the same; (4) failure of the external auditor to comply with
Section 13 of this Resolution; and (5) commission of any other
violation or breach of the aforementioned Resolutions shall be
meted with the appropriate sanctions as provided herein or such
other applicable laws/regulations.
RESOLUTION NO. 68, SERIES OF 2016

15. Subject to due process, the Commission and the

Board may impose such sanctions which shall include
but not be limited to the following:
– Reprimand, suspension, or revocation of CPA License;
and/or
– Filing of appropriate legal action/s against
organizations/persons as may be warranted by pertinent
laws and regulations
TAX SERVICES
A CPA is considered qualified to prepare corporate and
individual tax returns for both audit and non-audit clients. CPA
render two primary types of tax services:
1. Tax compliance- includes the preparation of tax returns for
individual, corporations, estates, and trusts, and other.
2. Tax planning-determines the tax consequences of planned
or potential transactions and suggests the desirable course
of action to minimize the tax liability while achieving the
client’s objectives.
MANAGEMENT CONSULTING/ADVISORY
SERVICES
Consulting services are professional services that employ the
practitioner’s technical skills, education, observations,
experiences, and knowledge of analytical approach and
procedures used in a consulting engagement.
Examples:
• Design and installation of accounting system
• Computer risk management
• Corporate finance
• Tax services
• E-business, etc.
MANAGEMENT CONSULTING/ADVISORY
SERVICES
Notes:
• A pervasive characteristic of a CPA role in consulting service
engagement is that of being an OBJECTIVE ADVISOR.
• The performance of consulting services for audit clients does
not, in and of itself, impair the auditor’s independence. Most
CPA, including those provide audit and tax services also
provide consulting services to their client.
• The form of communication with a client in a consulting
services engagement should be either written or oral.
• Generally, the work performed is only for the use and benefit
of the client.