GENERALLY ACCEPTED

AUDITING STANDARDS
GAAS

■ Represents measures of the quality of the auditor’s performance of the

engagement.
■ Sets as the minimum standard of performance that auditors should follow.
■ Grouped into:
– General Standards
– Fieldwork Standards
– Reporting Standards
General Standards

■ The examination is to be performed by person or persons having adequate

technical training and proficiency as an auditor.
■ In all matters relating to an engagement, an independence in mental attitude
is to be maintained by the auditor.

■ Due professional care is to be exercised in the performance of the audit and

in the preparation of the report.
FIELDWORK STANDARDS

■ The work is to be adequately planned and assistants, if any, are to be properly

supervised.

■ There is to be a proper study and evaluation of existing internal control as a

basis for reliance thereon and for the determination of the resultant extent of the
tests to which auditing procedures are to be restricted.

■ Sufficient competent evidential matter is to be obtained through inspection,

observation, inquiries and confirmations to afford reasonable basis for an opinion
regarding the financial statements under examination.
REPORTING STANDARDS
■ The report shall state whether the financial statements are presented in accordance
with generally accepted accounting principles .

■ The report shall identify those circumstances in which principles have not been
consistently observed in the current period in relation to the preceding
period.
■ Informative disclosures are to be regarded as reasonably adequate unless
otherwise stated in the report.
■ The report shall either contain an expression of opinion regarding the financial
statements, taken as a whole, or an assertion to the effect that an opinion cannot
be expressed. When an overall opinion cannot be expressed, the reasons therefore
should be stated. In all cases, where an auditor’s name is associated with the
financial statements, the report should contain a clear-cut indication of the
character of the auditor’s examination, if any, and the degree of responsibility he is
taking.
AUDIT PROCESS
 ISA 210 - AGREEING
THE TERMS OF AUDIT
ENGAGEMENTS
ATENEO DE NAGA UNIVERSITY
2nd Semester AY 2017 - 2018
PRECONDITIONS OF AN AUDIT

■ The auditor shall:

– Determine whether the financial reporting framework to be
applied in the preparation of the financial statements is
acceptable;
– Obtain the agreement of management that it acknowledges and
understands its responsibility
Agreement on audit engagement terms

■ The auditor shall agree the terms of the audit engagement with
management or those charged with governance, as appropriate.
■ The agreed terms of the audit engagement shall be recorded in an
audit engagement letter or other suitable form of written agreement.
ENGAGEMENT LETTER

A. The objective and scope of the audit of the financial statements;

B. The responsibilities of the auditor;
C. The responsibilities of management;
D. Identification of the applicable financial reporting framework for the preparation of
the financial statements; and
E. Reference to the expected form and content of any reports to be issued by the
auditor; and
F. A statement that there may be circumstances in which a report may differ from its
expected form and content.
Initial Audit

■ The auditor should request management to authorize the predecessor auditor to

respond fully to the auditor's inquiries regarding matters that will assist the auditor
in determining whether to accept the engagement
■ If management refuses to authorize the predecessor auditor to respond, or limits
the response, the auditor should inquire about the reasons and consider the
implications of that refusal in deciding whether to accept the engagement.
■ The auditor should evaluate the predecessor auditor's response, or consider the
implications if the predecessor auditor provides no response or a limited response,
in determining whether to accept the engagement.
RECURRING AUDITS

■ On recurring audits, the auditor shall assess whether

circumstances require the terms of the audit engagement to
be revised and whether there is a need to remind the entity
of the existing terms of the audit engagement.
The following factors may make it appropriate to revise the terms of
the audit engagement or to remind the entity of existing terms:
■ Any indication that the entity misunderstands the objective and
scope of the audit.
■ Any revised or special terms of the audit engagement.
■ A recent change of senior management.
■ A significant change in ownership.
■ A significant change in nature or size of the entity’s business.
■ A change in legal or regulatory requirements.
■ A change in the financial reporting framework adopted in the
preparation of the financial statements.
■ A change in other reporting requirements.
AUDIT OF COMPONENTS

■ When the auditor of a parent entity is also the auditor of a component, the factors
that may influence the decision whether to send a separate audit engagement letter
to the component include the following:
– Who appoints the component auditor;
– Whether a separate auditor’s report is to be issued on the component;
– Legal requirements in relation to audit appointments;
– Degree of ownership by parent; and
– Degree of independence of the component management from the parent
entity.
Acceptance of a Change in the Terms of
the Audit Engagement
1. The auditor shall not agree to a change in the terms of the audit engagement where there is no
reasonable justification for doing so.
2. If, prior to completing the audit engagement, the auditor is requested to change the audit
engagement to an engagement that conveys a lower level of assurance, the auditor shall
determine whether there is reasonable justification for doing so.
3. If the terms of the audit engagement are changed, the auditor and management shall agree on
and record the new terms of the engagement in an engagement letter or other suitable form of
written agreement.
4. If the auditor is unable to agree to a change of the terms of the audit engagement and is not
permitted by management to continue the original audit engagement, the auditor shall:
 Withdraw from the audit engagement where possible under applicable law or regulation; and
 Determine whether there is any obligation, either contractual or otherwise, to report the
circumstances to other parties, such as those charged with governance, owners or regulators.