Philippine Framework for Assurance Engagements
PH standards on Quality Control/ PSQCs
Introduction
This framework is made for
1. Professional accountants
 Especially in the public sector
 Those that are not are encouraged
2. Other parties involved
 Intended users
 Responsible party
3. IAASB and ASPC
This framework does not itself establish standards/ provide
procedural requirements for the performance of
assurance engagements, it is the ISAs, ISREs and ISAEs
together w/ their counterpart PSA, PSREs and PSAEs.
Structure of pronouncements section of the Handbook pf
int’l auditing, assurance, and ethics pronouncement by
IAASB
-contains the relationship of the framework and the
previously mentioned
Ethical Principles and Quality control standards
In addition to this framework, practitioners are governed
by:
1. Code of ethics for professional accountants in the
PH
-establishes fundamental ethical principles for
professional accountants
2.
-establish standards and provide guidance on a
firm’s system of quality control
Part A of the code:
Fundamental ethical principles
1. Integrity
2. Objectivity
3. Professional competence and due care
4. Confidentiality
5. Professional behavior
Part B of the code:
Conceptual approach to independence for public
practitioners only (threat to independence, action to take
and etc.)
Definition and objective of an assurance engagement
Assurance engagement
-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 /
measurement of a subject matter against criteria
The outcome of the evaluation of measurement of a
subject matter is the information that results from applying
the criteria to the subject matter
Subject matter information Conclusion:
-outcome of the evaluation/ measurement of a subject Positive form
matter
-can fail to be properly expressed potentially to a material 2. Limited assurance engagement
extent due to failure to reflect properly the application of
the criteria to the subject matter Objective:
Reduction in assurance engagement risk to a level
Assertion-based engagement that is acceptable in the circumstances of the
-evaluation/ measurement of the subject matter is engagement
performed by the responsible party
-subject matter information in the form of an assertion by Risk is > reasonable assurance engagement
the responsible party that is made available to the
intended users Conclusion:
Negative form
Direct reporting engagements
-practitioner directly perform the evaluation/ Scope of the framework
measurement of the subject matter/ obtains a
representation from the responsible party that has Not all engagements performed by practitioners are
performed the evaluation/ measurement that is not assurance engagements. (ex: p.5)
available to the intended users
-subject matter information is provided to intended users An assurance engagement may be part of larger
in the assurance report engagement (not assurance engagement)

Types of assurance engagement a practitioner is There are those that meet the definition of assurance
permitted to perform engagement but need not be performed in accordance
1. Reasonable assurance engagement with this framework. (ex: p.5-6)

Objective:
Reduction in assurance engagement risk to an
acceptably low level in the circumstances of the
engagement
Reports on non-assurance engagements:
Practitioner reporting a non-assurance engagement must
distinguish its report from an assurance report and avoids:
1. Implying complains w/ the framework
2. Inappropriately using the words assurance, audit,
review
3. Statements that could reasonably mistaken for a
conclusion designed to enhance degree of
confidence of intended users
Practitioner and responsible party may agree to use this
framework for non-assurance engagement provided that
there are no other intended users aside from the
responsible party, practitioner report includes a statement
restricting the use of the report by the responsible party to
outside parties.
Engagement acceptance
Considerations before practitioner accepts assurance
engagement
1. Relevant ethical requirements
(EX: independence and professional competence
will be satisfied)
2. Engagement exhibits the ff. characteristics:
 Subject matter is appropriate
 Criteria to be used suitable and available to
intended users
 Practitioner has access to sufficient appropriate
evidence to support conclusion
 Practitioner’s conclusion in the form
appropriate to either reasonable/ limited
assurance engagement and contained in
written report
 Practitioner is satisfied that there is rational
purpose for the engagement
-when significant limitation on the scope of
practitioner’s work: has unlikely rational
purpose/ engaging party intends to associate
practitioner’s name in an inappropriate manner
When a potential engagement can’t be accepted as an
assurance engagement due to failure in meeting
consideration no. 2, engaging party may be able to
identify a different engagement that will meet the needs
of intended users.
1. Identify an aspect of original subject matter for
which criteria is suitable
2. Select/ develop alternative criteria suitable for the
original subject matter
3. Engaging party may request an engagement that
is not an assurance engagement
Having accepted an assurance engagement,
practitioner may not change engagement from non/
assurance or reasonable/ limited w/o reasonable
justification. (change in circumstances affecting intended
users’ requirements/ misunderstanding concerning the
nature of the engagement)
If changes approved, practitioner does not disregard the
evidence obtained prior to change.
Elements of an assurance engagement
Three party relationship
1. Practitioner
-encompasses more than just an auditor
-may be requested to perform assurance
engagements on a wide range of subject matters
w/c requires specialized skills and knowledge
therefore must only accept when professional
competence is attainable
Responsible party and intended users may be from
different/ same entity.
2. Responsible party
3. Intended users
-for whom the practitioner prepares the assurance
report
-responsible party can be one of the, but not the
only one
-involved in determining the requirements of the
engagement with responsible and practitioner
whenever practical but the ff. are exclusive to
practitioner:
 Determining the nature, timing and extent of
procedures
 Pursue any matter that made him/her aware
of that leads him/her to question whether a
material modification should be made to
the subject matter information

For direct reporting engagement In some cases, intended users impose/ request responsible
-the one responsible for the subject matter party for an assurance engagement with a specific
purpose, therefore, practitioner includes restriction in the
For assertion-based engagement assurance report that limits its use to those users/ purpose.
-the one responsible for the subject matter
information and may be responsible for the subject Subject matter
matter
Subject matter and subject matter information can take
Responsible party may/not be the engaging party. many forms
Subject matter Subject matter info
Responsible party ordinarily provides the Financial Recognition,
practitioner w/ written representation that performance/conditions measurement,
evaluates/ measures the subject matter against presentation, disclosure
the criteria Non-financial Key indicators of efficiency
performance/ conditions and effectiveness
physical characteristics Specific document
 Systems and processes Assertion about Compliance audit
effectiveness -applicable law,
Behavior Statement of compliance/ regulation/ contract
effectiveness
Suitable criteria are required
Subject matters have different characteristics which -for reasonably consistent evaluation/ measurement of a
affect the subject matter w/in the context of professional judgment
 Precision w/ w/c the subject matter can be -or else, conclusion is open to individual interpretation and
evaluated/ measured against criteria misunderstanding
 Persuasiveness of available evidence -context sensitive, same subject matter can have different
criteria
An appropriate subject matter is
 Identifiable and capable of consistent evaluation/ Characteristics of suitable criteria
measurement against the identified criteria 1. Relevance
 Information about it can be subjected to -contribute to conclusions that assist decision
procedures for gathering sufficient appropriate making by the intended users
evidence to support a reasonable/ limited 2. Completeness
assurance conclusion -all relevant factors that affects the conclusion are
present
Criteria 3. Reliability
-benchmarks used to evaluate/ measure the subject -allow reasonable consistent evaluation/
matter measurement of the subject matter
-can be formal or less formal 4. Neutrality
Formal Less formal -contribute to conclusions that are free from bias
FS audit Internally developed code 5. Understandability
-PFRS of conduct/ agreed level -contribute to conclusions that are clear,
of performance comprehensive, and not subject to different
Operational audit interpretations
-established internal
control framework
Practitioner assesses whether the criteria meet the above
specifically designed for
characteristics.
the engagement
Relative importance of each characteristic to a particular
engagement is a matter of judgment.
Criteria can be established/ specifically developed.
1. Established criteria
-embodied in laws/ regulations/ issued by
authorized/ recognized bodies of experts
2. Specifically developed
-designed for the purpose of engagement
Criteria need not to be available to the intended users to
allow them to understand how the subject matter has
been evaluated/ measured.
Ways of making criteria available to intended users:
1. Publicly
2. Inclusion in a clear manner in the presentation of
the subject matter information
3. Inclusion in a clear manner in the assurance report
4. General understanding
Evidence
Professional skepticism
-attitude used by practitioner in planning and performing
assurance engagement to obtain sufficient appropriate
evidence
-practitioner makes a critical assessment w/ a questioning
mind of the validity of evidence obtained and is alert to
evidence that contradicts/ brings into question the
reliability of documents/ representations by the
responsible party
Assurance engagement rarely involves the authentication
of documentation nor is the practitioner trained as/
expected to be an expert in such authentication but
he/she considers the info to be used as evidence anyway.
Sufficiency and appropriateness of evidence
1. Sufficiency
-measure of the QUANTITY of evidence
-affected by the:
 risk of the subject matter info. Being materially
misstated
-greater misstatement= more evidence
 Quality of evidence
-greater quality= less evidence
Merely obtaining more evidence may not
compensate for poor quality
2. Appropriateness
-measure of the QUALITY of the evidence
-relevance and reliability
Reliability of evidence
-influenced by the
1. Source
2. Nature
3. Circumstance under w/c it is obtained
Exceptions exist, generalizations about the reliability of
evidence
1. Evidence more reliable when obtained from
independent sources outside the entity
2. Evidence generated internally is more reliable
when related controls are effective
3. Evidence obtained directly by practitioner is more
reliable than evidence obtained indirectly/ by
inference
4. Evidence is more reliable when in documentary
form (paper/ electronic/ media)
5. Evidence provided by original documents is more
reliable than photocopies/ facsimiles
Practitioner ordinarily obtains more assurance from
consistent evidence obtained from different sources/
different nature that from items of evidence considered
individually.
Inconsistencies of evidence of different sources calls the
practitioner to determine additional evidence-gathering
procedures necessary to resolve it.
In terms of obtaining sufficient appropriate evidence, it is
generally more difficult to obtain assurance about subject
matter information covering a period than at a point in
time.
Conclusions provided by practitioner on processes are
ordinarily limited to the period covered. No assurance is
provided for the future.
Practitioner considers the relationship cost-benefit of
obtaining evidence however, cost is not a valid basis for
omitting an evidence gathering procedure for w/c there
is no alternative.
Professional judgment & professional skepticism
-used in evaluating the quantity and quality of evidence
& sufficiency and appropriateness to support aassurance
report
Considerations in planning and performing the
engagement particularly in determining the nature, timing
and extent of evidence-gathering procedures
1. Materiality
-relevant when:
 Practitioner determines the nature, timing and
extent of evidence-gathering procedures
 Assessing whether subject matter information is
free of misstatement
-practitioner understands and assesses what
factors might influence the decisions of the
intended users
-considered in the context of qualitative and
quantitative factors
-done w/ practitioner’s judgment
2. Assurance engagement risk
-risk that the practitioner expresses an
inappropriate conclusion when the subject matter
information is materially misstated
-practitioner reduces this to an acceptably low
level
 Reasonable assurance engagement
 Limited assurance engagement
-higher level of assurance engagement risk
compared to the previous
Difference of the 2 is due to different nature,
timing/ extent of evidence gathering
procedures.
Components of assurance engagement risk
(presence of all not necessary)
 Risk that the subject matter information is
materially misstated
 Inherent risk
-susceptibility of the subject
matter information to a material
misstatement assuming no related
controls
 Control risk
-risk that a material misstatement
will not be prevented/ detected/
corrected on a timely by related
internal controls
-caused by inherent limitations of
the design and operation of
internal control
 Detection risk
-risk that the practitioner will not detect a
material misstatement that exists
Degree of consideration by practitioner of the said
components is affected by:
 Engagement circumstances
 Nature of subject matter
 Reasonable/ limited assurance
Nature, timing and extent of evidence-gathering
Procedures
-varies from one engagement to the other
-in theory, infinite variations in evidence gathering
is possible but difficult to communicate clearly and
unambiguously in practice
-practitioner attempts to communicate it clearly
and uses the appropriate form to reasonable/
limited assurance engagement
Reasonable assurance
-assurance provided in reasonable assurance
engagement w/c entails accumulating sufficient
appropriate and necessary evidence
-systematic engagement process in obtaining
sufficient appropriate evidence
Reasonable assurance is less than absolute
assurance due to:
 Use of selective testing
 Inherent limitations of internal control
 Available evidence is persuasive rather than
conclusive
 Use of judgment in gathering and
evaluating evidence and forming
conclusions
 Characteristics of the subject matter against
the criteria
Both reasonable assurance and limited assurance
engagements require the application of assurance
skills and techniques and the gathering of sufficient
appropriate evidence.
Nature, timing, and extent of procedures for
gathering sufficient appropriate evidence in a
limited assurance engagement is deliberately
limited relative to reasonable AE and for some
subject matter, specific pronouncements is
provided as guidance. In the absence of relevant
pronouncement, procedures will vary w/ the
circumstances (subject matter, need of intended
users, time, cost)
For both reasonable assurance and limited
assurance engagements, if practitioner finds the
need to materially modify subject matter
information, sufficient procedures are pursued.
3. Quantity and quality of available evidence
Affected by:
 Characteristic of the subject matter and subject
matter information
 Circumstances of the engagement other than
the characteristics of the subject matter
Ordinarily, available evidence will be persuasive
rather than conclusive
An unqualified conclusion is not appropriate for
either type of assurance engagement, this
happens when:
 Circumstances prevent the practitioner from
obtaining evidence required to reduce risk to
the appropriate level
 Responsible/ engaging party restricts
practitioner from obtaining evidence required
to reduce risk to appropriate level
Assurance report
-written report containing a conclusion that conveys the
assurance obtained about the subject matter information
-elements provided by ISAs, ISREs, ISAEs
For assertion-based engagement, practitioners
conclusion can be worded either:
-In terms of responsible party’s assertion
For direct-reporting engagement
-In terms of the subject matter and criteria
For reasonable assurance engagement
-conclusion in positive form
For limited assurance engagement
-conclusion in negative form
Practitioner does not express an unqualified conclusion for
either type of assurance engagement in the ff.
circumstances (material effect):
1. Limitation on the scope of practitioner’s work
-practitioner expresses a qualified conclusion/
disclosure depending on how material/ pervasive
the limitation is/ in some cases w/draw from the
engagement
2. Practitioner’s conclusion is worded in terms of the
responsible party’s assertion w/c is not fairly stated
in all material respects
-practitioner expresses a qualified/ adverse
conclusion depending on how material/ pervasive
the matter is
3. Practitioner’s conclusion worded directly ion terms
of the subject matter and the criteria and the
subject matter information is materially misstated
-practitioner expresses a qualified/ adverse
conclusion depending on how material/ pervasive
the matter is
4. Discovery of unsuitable criteria/ inappropriate
subject after the acceptance of the engagement
-practitioner expresses a qualified/ adverse
conclusion depending on how material/ pervasive
the matter is or
-practitioner expresses a qualified conclusion/
disclosure depending on how material/ pervasive
the limitation is/ in some cases w/draw from the
engagement
Inappropriate use of the practitioner’s name
1. Third parties can assume no responsibility of the
practitioner
2. If practitioner becomes aware of it, he/she may
require the party to cease doing so and may also
consider other steps needed (legal)
Effectivity date
-on/ after January 1, 2005
Acknowledgment
-this framework is based on the int’l framework for
assurance engagement by the IAASB.
Public sector perspective
-this framework is relevant to all professional accountants
in the public sector for w/c they are independent tio the
entity under engagement