a geten ae The standard procedures for completing the aut are as follows: Analytical procedures for overall review-Ws% teesiva, & Deroy . Related party transactions review= pakica ies | Bae Mamie eee Subsequent events review ee aah een d. Assessment of going concern assumption nee ea e. Obtains management’s representation letter Se gece. w mag hca\ Sa] f. Review for commitments and contingencies cel ing papers, reviews the financial & Makes final assessment of materiality and audit risk, reviews the wor statement presentation and disclosures, and formulates audit opinion h. Communication with the client ey % Nee The second is “Post Audit Responsibilities”. It pertains to events occurring after the date of auditor's report such as the following: 2, Subsequent discovery of facts. b. Audit team debriefing. ANALYTICAL PROCEDURES FOR OVERALL REVIEW The auditor uses analytical procedures during the following stages of the audit: a. Audit Planning b. Substantive Tests Completing the Audit ‘The results of such analytical procedures may identify a previously unrecognized risk of material misstatement. Insuch circumstances, PSA 315 (Redrafted), identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment, requires the auditor to revise the auditor's assessment of the risks of material misstatement and modify the further planned audit procedures accordingly. This means potentially performing further audit procedures in relation to matters that are identified as high risk ‘The conclusion drawn from the results of analytical procedures for overall review are intended to corroborate conclusions formed during the audit of individual components or elements of the financial statements. This assists the auditor to draw reasonable conclusions on which to base the auditor’s opinion. The key issue is that, near the end of the audit, the auditor should have sufficient audit evidence to explain the issues highlighted by analytical procedures, and should therefore be able to conclude as to the overall nableness of the financial statements. woediote Tory, 4 Water PARTY TRANSACTIONS REVIEW (2) gecko Ge + OrerW’s dosdon, wasendy > Deddaterg ised and Redrafted), Related Parties and Related Party Transactions, states that many related party in the normal course of business. In such circumstances, they may carry no higher risk of ment of the financial statements than similar transactions with unrelated parties. However, lated party relationships and transactions may, in some circumstances, give rise to higher risks tatement of the financial statements than transactions with unrelated parties. are and Related Activities ty’s Related Party Relationships and Transactions 1[Page races Completing the Ault iscusion Notes of Sherwin R: Magmanive, MK, CPA or xeon seding, ethene Cibo ooratee oe COMPLETING suing» Report erst oe wok “mgorwast: se The standard procedures for completing the audit ae 3s follows: rebieotied sxoetveer 2+ Analytical procedures for overall review WS Yereig, ® Destoyiste b, Related party transactionsreview= Prdlfica Pedic Tike Mesctoner Paced Subsequent events review < ES maa d. Assessment of going concern assumption Ne trends ‘ =e @. Obtains management's representation letter nae io ole a f. Review for commitments and contingencies “ & Makes final assessment of materialty and audit risk, reviews the working papers, reviews the financial, statement presentation and cisclosures, and formulates audit opinion mae TOR ae fh. Communication with the client cate Sa Se revdhing, xara eden The second is “Post Audit Responsibiities”. It pertains to events occurring after the date of auditor's report such 2s the following: ‘2. Subsequent discovery of facts, b. Audit team debriefing. ANALYTICAL PROCEDURES FOR OVERALL REVIEW The auditor uses analytical procedures during the following stages of the audit: ‘a. Audit Planning b. Substantive Tests Completing the Audit + The results of such analytical procedures may identify @ previously unrecognized risk of material misstatement. Insuch circumstances, PSA315 (Redrafted), Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and its Environment, requires the auditor to revise the auditor’s assessment of the risks of material misstatement and modify the further planned audit procedures accordingly. This means potentially performing further audit procedures in relation to matters that are identified as high risk. The conclusion drawn from the results of analytical procedures for overall review are intended to corroborate conclusions formed during the audit of individual components or elements of the financial statements. This assists the auditor to draw reasonable conclusions on which to base the auditor’s opinion. "The key issue is that, near the end of the audit, the auditor should have sufficient audit evidence to explain the | issues highlighted by analytical procedures, and should therefore be able to conclude as to the overall easonableness of the financial statements. py OWrnediobe, Tory * Tory \deNRekion TED PARTY TRANSACTIONS REVIEW () tac\<3_ ey + fuesds Weidinny «adeeb 2 Diecowne \(Revised and Redrafted), Related Parties and Related Party Transactions, states that many related party ctions are in the normal course of business. in such circumstances, they may carry no higher risk of isstatement of the financial statements than similar transactions with unrelated parties. However, Of related party relationships and transactions may, in some circumstances, give rise to higher risks isstatement of the financial statements than transactions with unrelated parties,ey of oxy ante ait: AiR abi Identity, account for, and disclose related-party relationships and transactions in accordance with the applicable financial reporting framework; (2) authorize and approve significant transactions and arrangements with related partes; anc ‘ (6) authorize and approve significant transactions and arrangements outside the rormel courte of business, "Maintaining Alertness for Related Party information When Reviewing Records or Documents During the aut the auditor shall remain alert, when Inspecting records or documents, fr arrangements or ‘other information that may indicate the existence of related party relationships or transactions that as Ret Previously identified or dsclosed to the auditor. In particular, the auditor should Inspect the following for indications of the existence of related party relationships or transactions that management has not previeusy ‘identified or disclose to the auditor: {(2) bank and legal confirmations obtained as part of the auditor's procedures; (0) meetings of shareholders and of those charged with | governance; and (© such other records or documents as the auditor considers necessary in the circumstances ofthe entity, If the auditor Identifies significant transactions outside the entity's normal course of business when performing the auclt procedures, the auditor shallinquire of management about the nature of these transactions and whether related parties could be involved. ‘Sharing Related Party information with the Engagement Team ‘The auditor shal share relevantinformation obtained about the entity's related parties with the other members: of the engagement team. Relevant related party information that may be shared among the engagement team ‘members includes, for example: ‘+ Theidentity ofthe entity's related parties. ‘+The nature of the related party relationships and transaction. * Significant or complex related party relationships or transactions that may require special audt consideration, in particular transactions in which management or those charged with governance are financially involved. ‘Identification and Assessment of the Risks of Material Misstatement Associated with Related Party Relationships and Transactions Jn meeting the PSA 315 (Redrafted) requirement to identify and assess the rsks of material misstatement, the auditor shall identify and assess the risks of material misstatement assoclated with related party relationships and transactions and determine whether any of those risks are significant risks. in making this determination, the autor shall treat identified significant related party transactions outside the entity's normal course of business as {Wing rise to significant risks. The aueltor Identifies fraud risk factors (Inlucing circumstances relating to the existence of a related party with dominant influence) when performing the risk assessment procedures and related activites in connection with related parties, the aualtor shall consider such information when Identifying and assessing the risk of material misstatement due to fraud in accordance with PSA 240 (Redrafted). Responses to the Risks of Materlal Misstatement Associated with Related Party Relationships and Transactions ‘Identification of Previously Unidentified or Undisclosed Related Parties or Significant Related Party Transactions Ifthe auditor Identifies arrangements or Information that suggests the existence of related party relationships ‘or transactions that management has not previously identified or disclosed to the auditor, the auditor shall ‘determine whether the underlying circumstances confirm the exlstence of those relationships or transactions. If the auditor identifies related parties or significant related party transactions that management has not previously ‘Identified or disclosed to the auctor, the auditor shal:Parties or significant related party transactions may exist that Management | ore ‘identified or disclosed to the auditor, ind perform additional audit procedures recessary an (2) If the non-disclosure by management appears Intentional (and therefore indicative of a risk of material ‘mistatement due to fruc}evalate the plans forte Soc ‘Identified Significant Related Party Transactions outside the Entty’s Normal Course of Business shat nied significant related party transactions outside the entity's normal course of busines, the audtor (2) Inspect the underlying contracts or agreements, if any, and evaluate whether: (0, The business rationale (orlack thereof) of the transactions suggests that they may have been entered Into to engage in fraudulent financial reporting or to conceal misappropriation of assets; (i) The terms of the transactions are consistent with management's explanations; and (ii) The transactions have been appropriately accounted for and disclosed in accordance with applicable financial reporting framework; and (6) Obtain aucit evidence that the transactions have been appropriately authorized and approved. Assertions That Related Party Transactions Were Conducted on Terms Equivalent to Those Prevailing in an Arms Length Transaction ‘When management has made an assertion in the financial statements to the effect that a related party ‘transaction was conducted on terms equivalent to those prevailing in an arm's length transaction the auditor shal obtain sufficient appropriate audit evidence about the assertion. Evaluation of the Accounting for and Disclosure of Identified Related Party Relationships and Transactions In forming an opinion on the financial statements in accordance with PSA 700 (Redrafted), the aueltor shal evaluate whether the identified related party relationships and transactions have been appropriately accounted for and disclosed in accordance with the applicable financial reporting framework; and whether the effects of the related party relationships and transactions prevent the financial statements from achieving fair presentation (for fair presentation frameworks); or cause the financial statements to be misleading (for compliance frameworks). Written Representations Where the applicable financial reporting framework establishes related party requirements, the auditor shail ‘obtain written representations from management and, where appropriate, those charged with governance: (@) They have dlsclosed to the auditor the identity of the entity's related parties and all the related party relationships and transactions of which they are aware; and (b) They have appropriately accounted for and disclosed such relationships and transactions In accordance with the requirements of the framework. ‘Communication with Those Charged with Governance and Documentation Unless all of those charged with governanceare involved in managing the entity, the aucitor shall communicate with those charged with governance significant matters arising during the audit in connection with the entities related parties. Examples of significant related party matters include: + Non-disclosure (whether intentional or not) by management to the auditor of related parties or significant related party transactions, which may alert those charged with governance to significant related pgrty relationships and transactions of which they may not have been previously aware. * The identification of significant related party transactions that have not been appropriately authoriz. approved, which may give rise to suspected fraud, * Disagreement with management regarding the accounting for and disclosure of si ‘transactions in accordance with applicable financial reporting framework. andcon requirements ther PSAS, the auditor ‘names of the Identified related parties and the nature of the eth OTHE eye yao, rears at st EVENTS REVIEW yo c Events after the date of financial statements are known as’ subsequent events period as used In PSA _ (Redrafted) Subsequent Events are events occurringbetween the cate ofthe financial statements andthe date _ Of the auditor's report, and facts that become known to the auditor after the date of the auditor's report. ‘The auditor has responsibilties to __@) Obtain sufficient appropriate audit evidence about whether events occurring between the date of the financial statements and the date of the auctor’ report that require adjustment of, or disclosure in, the financial statements are appropriately reflected in those financial statements; and (b) Respond appropriately to facts that become known to the auditor after the date of the auditor's report, that, had they been known to the auditor at that date, may have caused the auditor to amend the auditor's report. Types of Events ‘There are two types of subsequent events dented in PSA 560.2. (G) Those that provide evidence of conditions that existed atthe date ofthe financial statements; (Type 1) and (0) Those that provide evidence of conditions that arose ater the date of the Financial statements. (Type 2) Date of the financial statements Date of the Auditor's Report Financial Statement Issuance Date (December 3) (February 2, (March 5) 1 Subsequent Events aa (events after the date of financial statements) ‘Subsequent Events Period (events in this period are the auditor’s responsibility) Events Occurring Between the Date of the Financial Statements and the Date of the Auditor's Report ‘The aucitor shall take into account the aucitor’s risk assessment in determining the nature and extent of audit procedures for subsequent events, and shall include the following: (2) Obtaining an understanding of any procedures management has established to ensure that subsequent events are identified. (8) Inquiring of management and, where appropriate, those charged with governance as to whether any subsequent events have occurred which might afect the financial statements. The auditor may make specific inquires about the following matters: ‘+ Whether new commitments, borrowings or guarantees have been entered into. ‘+ Whether sales or acquisitions of assets have occurred or are planned. _* Whether there have been increases in capital or issuance of debt instruments, such as the issue of ng ie shares or debentures, or an agreement to merge or liquidate has been made or Is planned. ‘+ Whether any assets have been appropriated by government or destroyed, for example, by fire orf '¢ Whether there have been any developments regarding contingencies. ‘© Whether any unusual accounting adjustments have been made or are contemplate:+ Whether any events have occurred or are ely to occur that wl rng into questlon the appropriateness | of accounting policies used in the financial statements, as would ribs cae fr goon Tato Pe call into question the validty of the going concern assumption, © Whether any events ined . Sita NN meaner ctovermary CoozT#2 St Bre relevant othe ensurement of estimates or provislons made : . vihetherany: ‘events have occurred that are relevant to the recoverability of assets, + ie © Reading minutes, if any, of the meetings, of the entity's own 1 fy lers, management and those char with: utetronce, thal have been has tte have ofthe roel setane al Mee soeee ate ‘dscussed at any such meetings fr which minutes are not yet avalable, Conexant ety inet subagert mar rnc ater ay entity's latest available budgets, cash flow forecasts and other related management reports periods after the date of the financial statements; t a Be (A) Inquire, or extend previous oral or written inquiries, of the entity's legal 7 counsel concerning itigation and a claims (see illustrative letter) or Bs pueda Consider whether written representations covering particular subsequent events ma w y be necessary to support other audit evidence and thereby obtain sufficient appropriate audit evidence. Written Representations The auditor shall request management and, where appropriate, those charged with governance, to provide written representation in accordance with PSA 580 (revised and Recrafted) that all events occurring subsequent to the date of the financial statements and for which the applicable financial reporting framework requires adjustment or disclosure have been adjusted or disclosed. ‘Sample Mustrative Letter of Audit Inquiry to Entity’s Legal Counsel Date Lawyer's Name Lawyer's Address Dear__ Jn connection with an audit of our financial statements at (financial statenents date) and for the (period) then tended, management of the Company has prepared, and furnished to our auditors (name and address of auditors), description and evaluation of certain contingencies, Including those set forth below Involving matters with respect to which you have been engaged and to which you have devoted substant've attention on behalf of the ‘Company in the form of legal consultation or representation. These contingencies are regarded by management of the Company as material for this purpose (management may Indicate a materalty limit if an understanding has been reached with the auditor), Your response should include matters that existed at (financial statement date) and during the period from that date to the date of your response. Pending or Threatened Litigation (excluding unasserted claims) Please furnish to our auditors such explanation, f any, that you consider necessary to supplement the foregoing information, Including an explanation of those matters as to which your views may differ from those stated and an identification of the omission of any pending or threatened Iigation, claims, and assessments or a statement that ‘the list of such matters is complete, ‘Unasserted Claims and Assessments (considered by management to be probable of assertion, and tha, IFasserted, ‘would have at least 2 reasonable possibility of an unfavorable outcome) _ [Ordinarly management's information would include the following: (1) the nature of the matter, (2) ow it Intends to respond if the claim is asserted, and (3) an evaluation of tye\ikelihood. pF an le outcome and an estimate, of one can be made, of the amount or range ofp cussion Notes of Shean MCh,eeu secs june sh i enor Paes Please furnish to our auditors such explanation, if any, that you consider necessary to supplement the foregoing Information, including an explanation of those matters as to which your views may differ from those stated, ld \We understand that whenever, in the course of performing legal services for us with respect to a matter recognized to involve an unasserted possible claim ot assessment that may cal for inanclal statement disclosure, if you have formed a professional conclusion that we should disclose or consider disclosure concerning such possible claim or assessment, as a matter of professional responsibility tous, you will so advise us and will consult with us concerning the question of such disclosure and the applicable requirements ofthe Philippine Financlal Reporting Standards on Contingencies. Please specially confirm to our auditors that our understanding Is correct. Please specifically identify the nature of and reasons for any imitation on your response, ‘Truly yours, Name of Entity ASSESMENT OF GOING CONCERN ASSUMPTION. Y In the absence of significant information to the contrary, the client's operation is viewed as continuing according to the going concern assumption and as such, assets and liabiltes are recorded on the basis that the entity will be able to realize its assets and discharge its liabilities in the normal course of business. Events or Conditions That May Cast Doubt about Going Concern Assumption The following are examples of events or conditions that, individually or collectively, may cast significant doubt about the going concer assumption. This listing Is not altinclusive nor does the existence of one or more of the items always signify that a material uncertainty exists. Financial Conditions Net lablty ornet current lability position. © Fixed-term borrowings approaching maturity without realistic prospects of renewal or repayment; or excessive reliance on short-term borrowings to finance long-term assets. Indications of withdrawal of financial support by creditors. Negative operating cash flows indicated by historical or prospective financial statements. ‘Adverse key financial ratios. Substantial operating losses or significant deterioration in the value of assets used to generate cash flows ‘Arrears or discontinuance of dividends, Inability to pay creditors on due dates. Inability to comply with the terms of loan agreements. ‘Change from credit to cash-on-delivery transactions with supplies. Inability to obtain financing for essential new product development or other essential investments Operating Conditions '* Management intentions to liquidate the entity or to cease operations. Loss of key management without replacement. Loss of a major market, key customer(s) franchise, license, or principal supplies(s). Labor dificulties. ‘Shortages of important supplies. Emergence of a highly successful competitor. Other Conditions ‘© Non-compliance with capital or other statutory requirements. ‘© Pending legal or regulatory proceedings against the entity that may, if unsuccessful, result in claims that ‘the entity is unlikely to be able to satisfy. Changes inlaw or regulation or government policy expected to adversely affect the entity. * Uninsured or underinsured catastrophes when they occur. ‘Audit Procedureswhen performing riskassessment procedures the auditor shal consider whether thereare events orconeltions. that may cast significant doubt on the entity's ablty to continue as a going concern. In doing, the auditor shal determine whether management has already performed a preliminary assessment of the entity's ablity to continue Sta going concer, and shall evaluate such management's assessment. When events or conditions have been identified that may cast significant doubt on the entity's ability to continue as 8 going concern, the auditor shall obtain sufficient appropriate audit evidence to determine whether (or not material uncertainty exists through performing additional audit procedures, Including consideration of mitigating factors. These procedures shall Include: (a) When management has not yet performed an assessment of the entity's ablity to continue as a going concer, requesting management to make Its assessment. (b) Evaluating management’s plans for future actions In relation to its going concern whether management's plans are feasible in the circumstances. (©) When the entity has prepared a cash flow forecast, a considering the future outcome of events or conditions action: ind analysis of the forecast is a significant factor in. In the evaluation of management's plans for future (0) Evaluating the reliably of the underlying data generated to prepare the forecast; and (i) Determining whether there is adequate support forthe assumptions underlying the forecast. (@ Considering whether any additional facts or information have become available since the date on which management made its assessment. (@) Requesting written representations from management or, where appropriate, those charged with ‘governance, regarding the'r plans for future action and the feasibilty of these plans. ‘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 asa going concern. The possible effects of going concer Issues, in the auditor's report and ts disclosure requirement will be discussed in Chapter 8, Audit Report. ‘Communication with Those Charged with Governance Unless all those charged with governance are involved in managing the entity, the auditor shall communicate those charged with governance events or conditions identified that may cast significant doubt on the entity's ability to continue as 2 going concer. Such communication with those charged with governance shall include the following: (2) Whether the events or conditions constitute a material uncertainty; (b) Whether the use of the going concer assumption Is appropriate in the preparation and presentation of the financial statements; and (©) The adequacy of related disclosures in the financial statements. MANAGEMENT'S REPRESENTATION LETTER ~The auditor Is required to request written representations from management with appropriate responsibilities for the financial statements and knowledge of the matters concerned. PSA 580 (Revised and Redrafted), ‘written Representations, states that a written representation isa written statement by management provided to the auditor to confirm certain matters or to support other aucit evidence. Written representations in this, context do not include financial statements, the assertions therein, or supporting books and records. The objectives of the auditor as required by PSA 580 are: @) To obtain written representations from management that management believes that it has fulfled the fundamental responsiblities that constitute the premise on which an audit is conducted; (b) To support other audit evidence relevant to the financial statements or specific assertions in the financial statements by means of written representations if determined necessary by the auditor or required by other (© Fo epond appropriate to wrt ‘appropriately n representations provided by management mnaygement Frode te wtenrepeseratnsrequstedby the adtars eee © Menagemens cote Pace completing the Aust ication Noes of ‘megmenie, MIC, PA‘Thisrepresentaton letters provided in connection with your aut of year ended December 31, 20xx forthe purpose of expressing an opinion #8 the fnanlalstaterents of ABC Company for the to whether the financial statements are ‘resented fairy, In all material respects, In accordance with Philippine Financial Reporting Standards, ‘We confirm that, (to the best of our knowledge and belle, having made such inquiries as we considered necessary for ‘the purpose of appropriately informing ourselves): Financial Staternents We have fulfilled our responsibities for the preparation and presentation ofthe financial statements as set out Inthe terms of the audit engagement dated {Insert date] and, in particular, the financial statements are falry presented in accordance with Philippine Financial Reporting Standards. jounting estimates, including those measured at fair value, are ‘Significant assumptions used by us In making acct reasonable. (PSA 540 (Revised and Redrafted)) c_Related party relationships and transactions have been appropriately accounted for and alsclosed in accordance withthe requlrements of Phlppine Financial Reporting Standards. (PSA 550 (Revised and Redrafted)) 1d. All events subsequent to the date of the financial statements and for which Philippine Financial Reporting Standerds required adjustment or disclosure have been acjusted or disclosed. (P5A 560 (Recrafted)) fe. The effects of uncorrected misstatements are immaterlal, both indvidually and in the aggregate, tothe financial statements 35 a whole. A list of the uncorrected misstatements Is attached to the representation letter. ((Proposed] PSA 450 (Revised and Redrafted)) {f. [Anyother matters thatthe auditor may consider appropriate (see paragraph Ar2 of thiée PSA) Information Provided ‘a. Wehave provided you with: © Allinformation, such as records and documentation, and other matters that are relevant to the preparation ‘and presentation of the financial statements: ‘© Adcitional information that you have requested from us; and © Unrestricted access to those within the entity. b. Alltransactions have been recorded in the accounting records and are reflected inthe financial statements. 1c. Wehave disclosedto youtheresults of our assessment of theriskthat the financial statements may bematerialy risstatedas a result of fraud. (PSA 240 (Redrafted)) 4d. Weave disclosed to you all information in relation to fraud or suspected fraud that we are aware of and that affects the entity and involves: © Management: ‘© Employees who have significant roles in the internal control; or © Others where the fraud could have a matertal effect on the financial statements. (PSA 240 (Redrafted)) fe. We have dlsclosed to you all information in relation to allegations of fraud, or suspected fraud, affecting the entky’s financial statements communicated by employees, former employees, analysts, regulators or others. (PSA 240 (Redrafted)) PSA 580 (Revised and Redratted) {We have disclosed to you all known instances of non-compliance or suspected non-compliance with laws and regulations whose effects should be considered when preparing financial statements. (PSA 250 (Redrafted)) 1g We have disclosed to you the identi of the entty’s related parties and al the related party relationships and transactions of which we are aware. (PSA'550 (Revised and Redrafted) h. [Any other matters that the auditor may consider necessary (see paragraph A13 of this PSA),] Chief Executive Officer Chief Financial Officer B|Pace —consetng he uate; ‘of Witten Representations . Ter _ The written representations must be addressed to the auditor, contain specific information, appropriately dated sein _ Date of and period(s) covered. The date of the written representations shall be as near as practicable but not after, the date of the auditor's report on the financial statements. The written representations shall _____ be forall financial statements and period(s) referred to in the auditor's report. __ 3. Management from whom written representations requested. Written representations are requested from those responsible for the preparation and presentation of the financial statements. Those individuals may vary depending on the governance structure of the entity, and relevant law or regulation; however, management (rather than those charged with governance) is often the responsible party. written representations may therefore be requested from the entity’ chlef executive officer and chief financial officer, or other equivalent persons in entities that do not use such titles. In some circumstances, however, other parties, such as those charged with governance, are also responsible for the preparation and presentation of the financial statements, 3. Information Provided to the Auditor. The auditor shall request management to provide @ written representation that thas provided the auditor with allrelevant information agreed in the terms ofthe audit engagement, and that all transactions have been recorded and are reflected in the financial statements. 4. Form of Written Representations. The written representations shall be in the form of a representation letter addressed to the auditor. Doubt as to the Reliability of Written Representations and Requested Written Representations Not Provided If the auditor has concems about the competence, integrity, ethical values or dligence of management, or ‘about its commitment to or enforcement of these, the aucitor shall determine the effect that such concerns may have on the reliability of representations (oral or written) and audit evidence in general. If the auditor concludes that the written representations are not rellable, the aucitor shall take appropriate actions, including determining the possible effect on the opinion in the auditor's report. If management does not provide one or more of the requested written representations, the aucitor shall discuss the matter with management, reevaluate the integrity of management: evaluate the effect that this may have on the reliability of representations (oral or written) and aucit evidence in general; and take appropriate ‘actions, including determining the possible effect on the opinion in the auditor’s report. REVIEW FOR COMMITMENTS AND CONTINGENCIES ¥ The auditor must perform procedures to identify and evaluate material commitments and contingencies. The requirements for either disclosure or adjustment, or both by the Philippine Financial Reporting Standards for ‘commitments and contingencies should be considered byu the auditor during the completion stage. ‘The most commonly used audit procedures used to search contingent liabilities are as follows: 2. Inquiry and discussion with management about its policies and procedures for identifying, evaluating, and accounting for contingenttiabilties. b. Examine documents in the entity’s records such as correspondence and invoices from attorneys for ending or threatened lawsuits. € Obtain alegal letter that describes end evaluates any litigation, claims, or assessments. ‘d._ Review the minutes of meetings of the Board of Directors and shareholders for indications of lawsuits or other contingencies. fe. Obtain written representation from management that all litigation, asserted and unasserted claims, and assessments have been disclosed. Long-term commitments are usually Identfied through inquiry of cllent personnel during the audit of the revenue and purchasing processes. In most cases, such commitments are disclosed in a note to the financial statements.the audit ting seek Pear aalied averse opthion would be expressed by the auctor depending on the ratty ou ine effect of ristterens. 54450 (Revd and Racafed)Evlton of Misstatements Identified During the Aud, states that iis the autor respons to evaluate te effect of enti msstatemern the audit and of uncorrected misseatements,f ary, onthe fnancll statements, PSA 700 (Rested) dens Wf) responsbity, In forming an opinion on the financial statements to conclude whether reasonable assurance has been obtained about whether the financial statements as a whole are free from material misstatement, Review of the Working Papers Tyco he ouddow ‘Working papers provide the primary support for the auditor's opinion and therefore are very significant assuch ‘they must be carefully reviewed. The work of associate auditors are reviewed by the senior auditors whose work are in turn reviewed by the managers. At the completion stage, the reviewer (usually the manager) checks ifthe ‘approved PAJEs have been properly posted and the adjusted balances are properly supported. Before the formulation of audit opinion, the manager and the partner of the audit engagement conduct a final review to ‘ascertain that sufficient and appropriate evidence were obtained, provision of auciting standards and engagement letter were complied, and the conclusions reached were appropriate Formulation of an Opinion and Preparation of the Audit Report in an audit engagement, the members ofthe audit team are assigned with related transactions and accounts to examine. At the audit completion, the separate findings form each auditor are summarized and evaluated to provide a dear picture ofthe overall standing of the cients financial statements. Also to help nthe formulation oF Ph opinion, the audltor generally set a conference with the clent to discuss in the findings that resulted to PAJEs/and or disclosures and the discussion of possible unresolved issues. ‘Communication with Client PSA 260 (Revised and Redrafted) - Communication with Those Charged with Governance and PSA 265 (New) = Communicating Deficienciesin Internal Control to Those Charged with Governance and Management address tis requirement of the audit. POST AUDIT RESPONSIBILITIES FOR SUBSEQUENT EVENTS: Facts which become known to the Auditor after the date of the Auditor's Report but before the date the Financial Statements are Issued PsA 960 (Redrafted), Subsequent Events, state that the duditor has no obligation to perform any aucit procedures regarding the financial statements after the dat ofthe auctor’ report, However, when ater the este oehe auditor's report ut before the date the financial statements ae issued, a fact becomes known to the auditor that, ha itbeen known to the auditor atthe date of the auctor’ report, may have caused the auditor to amend the auditor's report the auditor shall discuss the matter with management and, where appropriate, those charged with governance and take the necessary procedures which will depend on whether or not the management amends the financial statements, = fmanagement amend the financial statements, the auditor shall: (a) Extend the audit procedures to the date of the new auditor's report; and (©) Provide a new aucltor’s report on the amended financial statements. The new aucitor’s report shall not be dated earlier than the date of approval of the amended financial statements. © However, when management does not amend the financial statements In circumstances where ‘auditor believes they need to be amended, then: (a) Ifthe auditor's report has not yet been provided to the entity, proved the auditor's report; or \ hed of Weoted - Ha a ate Wlrase neo ratea,- Seen rage wedSicotion the auditor shall modify the opinion and then“Facts which become known Be After the: avant a to the Auditor after the Financial Statements have been Issued regarding such franca ments have been Issued the auctor has no obligation to perform any audit procedures Decomes known to the eearents: However, when, after the fnancal statements have been issued) 2 fact management ard verre eucto® t© amend the aucltor’s report, the auctor shall discuss the matter with Mareeemens and Perform procedures which will depend on whether the menagement revises the flancal * | Ifmanagement amends the financial statements, the auditor shall: (@) Garry out the audit procedures necessary in the circumstances on the amendment. (b) Review the steps taken by management to ensure that anyone in receipt of the previously issued financial statements together with the auditor's report thereon Is informed of the situation. (c) Extend the audit procedures to the date of the new auditor's report, and date the new auditor's report no ‘earlier than the date of approval of the amended financial statements; and (@) Provide @ new auditor's report on the amended financial statements (with emphasis of a matter or other rmatter(s) paragraph). = ifmanagement does not take the necessary steps to ensure that anyone in receipt of the previously issued financial statements Is informed of the situation and does not amend the financial statements in circumstances where the auditor believes they need to be amended, (2) Notify management and, unless all of those charged with governance are Involved in managing the entity, those charged with governance, that the auditor will seek to prevent future reliance on the auditor's report (©) IF, despite such notification, management or those charged with governance do not take these necessary steps, the auditor shall take appropriate action to seek to prevent reliance on the auditor's report. DEBRIEFING Debriefing Is an important tool to learn from previous performances, maintain best practices and improve in the future. fits done property, debriefing can provide valuable information about how to conduct quality services and help an organization to be competitive and overcome challenges. Upon completion of an audi, the audit tearm partner wil lead the discussion and provide feedback on aucit execution and provide recommendations to even get better. WRAP-UP EXERCISES: 4. The purpose of management representation letter Is to reduce The possibilty of a misunderstanding concerning management's responsibility for the financial statements. bb. The scope of an auditors procedures concerning related party transactions and subsequent events. Audit risk to an aggregate level of misstatement that could be considered material 4d. Anauditor's responsiblity to detect material misstatements only to the extent that the letter is relied on. ‘The written representation shall be In the form of a representation letter addressed to the a. Entity’s management Auditor %_ Entity’s chief executive officer d, Entity’s chief financial officer '3. The primary reason an auditor requests that Itters of inquiry be sent toa client's attorneys is to provide the auditor with {2 Adescription and evaluation of Ikigation, claims, and assessments that existed at the balance sheet dats b. The attomeys opinions of the client's historical experiences in recent similar litigation © Corroboration of the information furnished by management about litigation, claims, a ‘d._ The probable outcome of asserted claims and pending or threatened Iigation.Significant rel d. Research da Party transactions are pervasive development projects are postponed. 5. Which of th Minster potowing procedures should an auditor ordinarly perform regarding subsequent events? om sements for several months after the yearend Serpare the nck favatle tein fharcia statemares wih eran waters audited | cond requests to the clon’ customers who faled 19 respond to intial accounts recelvable a, Ennfrmation requests Communicate material weaknesses in nteral control tothe cllent’s auc committee, in sufficient appropriate audit evidence to 6. The auditor is required to perform procedures designed to obta ‘the financial statements up to the Identity all events that may require adjustment of, or disclosure In, Date of the auditor's report Date of approval of the financial statements © Date of the financial statements are issued d, Date of the financial statements 7: Which of the folewing auet: procedures Is most lly t0 asian autor in Identiiing relate PS transactions? 3 rapecting communications with aw fms for evidence of unreported contingent lables BS eneninesccounting records fr nonrecurring transactions recognized near the balance eet date. @_ Retesting ineffective controls previously reported to the audit committee, 4. Sending second requests for unanswered positive confirmations of accounts re ble by the auditor to determine the completeness of 8. Which of the following procedures should be performed management identifying the names ofall known information provided by those charged with governance an related partes? $i: Review prior year's working papers for names of known related partes Shumnguire sto the afflation of those charged with governance and officers with other entitles $5: Review minutes ofthe meetings of shareholders and those charged with governance Allstatements are true 2statements ae true Only sstatementis true T2)Pace comaieag the Ava Discussion Notes of Sharan) togmenies, MIC, CPA