PSA 700 (Revised) - Clean

PHILIPPINE STANDARD ON AUDITING 700 (REVISED)
FORMING AN OPINION AND REPORTING ON FINANCIAL

STATEMENTS
(Effective for audits of financial statements for periods ending on or after December 15, 2016)
CONTENTS
_____________________________________________________________________________________
Paragraph
Introduction
Scope of this PSA .................................................................................................................. 1-4
Effective Date ....................................................................................................................... 5
Objectives ........................................................................................................................... 6
Definitions ........................................................................................................................... 7–9
Requirements
Forming an Opinion on the Financial Statements ................................................................ 10-15
Form of Opinion ................................................................................................................... 16-19
Auditor’s Report ................................................................................................................... 20-51
Supplementary Information Presented with the Financial Statements ................................ 52-53
Application and Other Explanatory Material
Qualitative Aspects of the Entity’s Accounting Practices ..................................................... A1-A3
Disclosure of the Effect of Material Transactions and Events on the Information Conveyed
in the Financial Statements ........................................................................................... A4
Description of the Applicable Financial Reporting Framework ............................................ A5-A10
Form of Opinion ................................................................................................................... A11-A12
Auditor’s Report ................................................................................................................... A13-A72
Supplementary Information Presented with the Financial Statements ................................ A73-A79
Appendix: Illustrations of Independent Auditor’s Reports on Financial Statements
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Philippine Standard on Auditing (PSA) 700 (Revised), Forming an Opinion and Reporting on Financial
Statements, should be read in conjunction with PSA 200, Overall Objectives of the Independent Auditor and
the Conduct of an Audit in Accordance with Philippine Standards on Auditing.
PSA 700 (REVISED), FORMING AN OPINION AND REPORTING ON FINANCIAL STATEMENTS
Introduction
Scope of this PSA
1. This Philippine Standard on Auditing (PSA) deals with the auditor’s responsibility to form an opinion on
the financial statements. It also deals with the form and content of the auditor’s report issued as a result
of an audit of financial statements.
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2. PSA 701 deals with the auditor’s responsibility to communicate key audit matters in the auditor’s
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report. PSA 705 (Revised) and PSA 706 (Revised) deal with how the form and content of the
auditor’s report are affected when the auditor expresses a modified opinion or includes an
Emphasis of Matter paragraph or an Other Matter paragraph in the auditor’s report. Other PSAs also
contain reporting requirements that are applicable when issuing an auditor’s report.
3. This PSA applies to an audit of a complete set of general purpose financial statements and is written in
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that context. PSA 800 deals with special considerations when financial statements are prepared in
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accordance with a special purpose framework. PSA 805 deals with special considerations
relevant to an audit of a single financial statement or of a specific element, account or item of a
financial statement. This PSA also applies to audits for which PSA 800 or PSA 805 apply.
4. The requirements of this PSA are aimed at addressing an appropriate balance between the need for
consistency and comparability in auditor reporting globally and the need to increase the value of auditor
reporting by making the information provided in the auditor’s report more relevant to users. This PSA
promotes consistency in the auditor’s report, but recognizes the need for flexibility to accommodate
particular circumstances of individual jurisdictions. Consistency in the auditor’s report, when the audit
has been conducted in accordance with PSAs, promotes credibility in the global marketplace by making
more readily identifiable those audits that have been conducted in accordance with globally recognized
standards. It also helps to promote the user’s understanding and to identify unusual circumstances
when they occur.
Effective Date
5. This PSA is effective for audits of financial statements for periods ending on or after December 15,
2016.
Objectives
6. The objectives of the auditor are:
(a) To form an opinion on the financial statements based on an evaluation of the conclusions drawn
from the audit evidence obtained; and
(b) To express clearly that opinion through a written report.
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PSA 701, Communicating Key Audit Matters in the Independent Auditor’s Report
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PSA 705 (Revised), Modifications to the Opinion in the Independent Auditor’s Report
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PSA 706 (Revised), Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s Report
4
PSA 800, Special Considerations—Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks
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PSA 805, Special Considerations—Audits of Single Financial Statements and Specific Elements, Accounts or Items of a Financial
Statement
Definitions
7. For purposes of the PSAs, the following terms have the meanings attributed below:
(a) General purpose financial statements – Financial statements prepared in accordance with a
general purpose framework.
(b) General purpose framework – A financial reporting framework designed to meet the common
financial information needs of a wide range of users. The financial reporting framework may be a
fair presentation framework or a compliance framework.
The term “fair presentation framework” is used to refer to a financial reporting framework that
requires compliance with the requirements of the framework and:
(i) Acknowledges explicitly or implicitly that, to achieve fair presentation of the financial
statements, it may be necessary for management to provide disclosures beyond those
specifically required by the framework; or
(ii) Acknowledges explicitly that it may be necessary for management to depart from a
requirement of the framework to achieve fair presentation of the financial statements. Such
departures are expected to be necessary only in extremely rare circumstances.
The term “compliance framework” is used to refer to a financial reporting framework that
requires compliance with the requirements of the framework, but does not contain the
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acknowledgements in (i) or (ii) above.
(c) Unmodified opinion – The opinion expressed by the auditor when the auditor concludes that
the financial statements are prepared, in all material respects, in accordance with the
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applicable financial reporting framework.
8. Reference to “financial statements” in this PSA means “a complete set of general purpose financial
statements, including the related notes.” The related notes ordinarily comprise a summary of significant
accounting policies and other explanatory information. The requirements of the applicable financial
reporting framework determine the form and content of the financial statements, and what constitutes a
complete set of financial statements.
9. Reference to “Philippine Financial Reporting Standards” in this PSA means the Philippine Financial
Reporting Standards (PFRSs) issued by the Financial Reporting Standards Council.
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PSA 200, Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Philippine
Standards on Auditing, paragraph 13(a)
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Paragraphs 25–26 deal with the phrases used to express this opinion in the case of a fair presentation framework and a compliance
framework respectively.
Requirements
Forming an Opinion on the Financial Statements
10. The auditor shall form an opinion on whether the financial statements are prepared, in all material
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respects, in accordance with the applicable financial reporting framework.
11. In order to form that opinion, the auditor shall conclude as to whether the auditor has obtained
reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error. That conclusion shall take into account:
(a) The auditor’s conclusion, in accordance with PSA 330, whether sufficient appropriate audit
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evidence has been obtained;
(b) The auditor’s conclusion, in accordance with PSA 450, whether uncorrected misstatements are
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material, individually or in aggregate; and
(c) The evaluations required by paragraphs 12–15.
12. The auditor shall evaluate whether the financial statements are prepared, in all material respects, in
accordance with the requirements of the applicable financial reporting framework. This evaluation shall
include consideration of the qualitative aspects of the entity’s accounting practices, including indicators
of possible bias in management’s judgments. (Ref: Para. A1–A3)
13. In particular, the auditor shall evaluate whether, in view of the requirements of the applicable financial
reporting framework:
(a) The financial statements adequately disclose the significant accounting policies selected and
applied;
(b) The accounting policies selected and applied are consistent with the applicable financial reporting
framework and are appropriate;
(c) The accounting estimates made by management are reasonable;
(d) The information presented in the financial statements is relevant, reliable, comparable, and
understandable;
(e) The financial statements provide adequate disclosures to enable the intended users to
understand the effect of material transactions and events on the information conveyed in the
financial statements; and (Ref: Para. A4)
(f) The terminology used in the financial statements, including the title of each financial statement, is
appropriate.
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PSA 200, paragraph 11
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Paragraphs 25–26 deal with the phrases used to express this opinion in the case of a fair presentation framework and a compliance
framework respectively.
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PSA 330, The Auditor’s Responses to Assessed Risks, paragraph 26
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PSA 450, Evaluation of Misstatements Identified during the Audit, paragraph 11
14. When the financial statements are prepared in accordance with a fair presentation framework, the
evaluation required by paragraphs 12–13 shall also include whether the financial statements achieve
fair presentation. The auditor’s evaluation as to whether the financial statements achieve fair
presentation shall include consideration of:
(a) The overall presentation, structure and content of the financial statements; and
(b) Whether the financial statements, including the related notes, represent the underlying
transactions and events in a manner that achieves fair presentation.
15. The auditor shall evaluate whether the financial statements adequately refer to or describe the
applicable financial reporting framework. (Ref: Para. A5–A10)
Form of Opinion
16. The auditor shall express an unmodified opinion when the auditor concludes that the financial
statements are prepared, in all material respects, in accordance with the applicable financial reporting
framework.
17. If the auditor:
(a) concludes that, based on the audit evidence obtained, the financial statements as a whole are not
free from material misstatement; or
(b) is unable to obtain sufficient appropriate audit evidence to conclude that the financial statements
as a whole are free from material misstatement, the auditor shall modify the opinion in the
auditor’s report in accordance with PSA 705 (Revised).
18. If financial statements prepared in accordance with the requirements of a fair presentation framework
do not achieve fair presentation, the auditor shall discuss the matter with management and, depending
on the requirements of the applicable financial reporting framework and how the matter is resolved,
shall determine whether it is necessary to modify the opinion in the auditor’s report in accordance with
PSA 705 (Revised). (Ref: Para. A11)
19. When the financial statements are prepared in accordance with a compliance framework, the auditor is
not required to evaluate whether the financial statements achieve fair presentation. However, if in
extremely rare circumstances the auditor concludes that such financial statements are misleading, the
auditor shall discuss the matter with management and, depending on how it is resolved, shall determine
whether, and how, to communicate it in the auditor’s report. (Ref: Para. A12)
Auditor’s Report
20. The auditor’s report shall be in writing. (Ref: Para. A13–A14)
Auditor’s Report for Audits Conducted in Accordance with Philippine Standards on Auditing
Title
21. The auditor’s report shall have a title that clearly indicates that it is the report of an independent auditor.
(Ref: Para. A15)
Addressee
22. The auditor’s report shall be addressed, as appropriate, based on the circumstances of the
engagement. (Ref: Para. A16)
Auditor’s Opinion
23. The first section of the auditor’s report shall include the auditor’s opinion, and shall have the heading
“Opinion.”
24. The Opinion section of the auditor’s report shall also:
(a) Identify the entity whose financial statements have been audited;
(b) State that the financial statements have been audited;
(c) Identify the title of each statement comprising the financial statements;
(d) Refer to the notes, including the summary of significant accounting policies; and
(e) Specify the date of, or period covered by, each financial statement comprising the financial
statements. (Ref: Para. A17–A18)
25. When expressing an unmodified opinion on financial statements prepared in accordance with a fair
presentation framework, the auditor’s opinion shall, unless otherwise required by law or regulation, use
the following phrase:
In our opinion, the accompanying financial statements present fairly, in all material respects, […]
in accordance with [the applicable financial reporting framework].
(Ref: Para. A19–A26)
26. When expressing an unmodified opinion on financial statements prepared in accordance with a
compliance framework, the auditor’s opinion shall be that the accompanying financial statements are
prepared, in all material respects, in accordance with [the applicable financial reporting framework].
(Ref: Para. A21–A26)
27. If the reference to the applicable financial reporting framework in the auditor’s opinion is not to PFRSs
issued by the Financial Reporting Standards Council, the auditor’s opinion shall identify the jurisdiction
of origin of the framework.
Basis for Opinion
28. The auditor’s report shall include a section, directly following the Opinion section, with the heading
“Basis for Opinion”, that: (Ref: Para. A27)
(a) States that the audit was conducted in accordance with Philippine Standards on Auditing; (Ref:
Para. A28)
(b) Refers to the section of the auditor’s report that describes the auditor’s responsibilities under the
PSAs;
(c) Includes a statement that the auditor is independent of the entity in accordance with the relevant
ethical requirements relating to the audit, and has fulfilled the auditor’s other ethical
responsibilities in accordance with these requirements. The statement shall identify the
jurisdiction of origin of the relevant ethical requirements [Code of Ethics for Professional
Accountants in the Philippines (Philippine Code of Ethics)] or refer to the International Ethics
Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code);
and (Ref: Para. A29–A34)
(d) States whether the auditor believes that the audit evidence the auditor has obtained is sufficient
and appropriate to provide a basis for the auditor’s opinion.
Going Concern
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29. Where applicable, the auditor shall report in accordance with PSA 570 (Revised).
Key Audit Matters
30. For audits of complete sets of general purpose financial statements of listed entities, the auditor shall
communicate key audit matters in the auditor’s report in accordance with PSA 701.
31. When the auditor is otherwise required by law or regulation or decides to communicate key audit
matters in the auditor’s report, the auditor shall do so in accordance with PSA 701. (Ref: Para.
A35–A38)
Responsibilities for the Financial Statements
32. The auditor’s report shall include a section with a heading “Responsibilities of Management for the
Financial Statements.” The auditor’s report shall use the term that is appropriate in the context of the
legal framework in the particular jurisdiction and need not refer specifically to “management”. In some
jurisdictions, the appropriate reference may be to those charged with governance. (Ref: Para. A39)
33. This section of the auditor’s report shall describe management’s responsibility for: (Ref: Para.
A40–A43)
(a) Preparing the financial statements in accordance with the applicable financial reporting
framework, and for such internal control as management determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud
or error; and
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(b) Assessing the entity’s ability to continue as a going concern and whether the use of the going
concern basis of accounting is appropriate as well as disclosing, if applicable, matters relating to
going concern. The explanation of management’s responsibility for this assessment shall include
a description of when the use of the going concern basis of accounting is appropriate. (Ref: Para.
A43)
34. This section of the auditor’s report shall also identify those responsible for the oversight of the financial
reporting process, when those responsible for such oversight are different from those who fulfill the
responsibilities described in paragraph 33 above. In this case, the heading of this section shall also
refer to “Those Charged with Governance” or such term that is appropriate in the context of the legal
framework in the particular jurisdiction. (Ref: Para. A44)
35. When the financial statements are prepared in accordance with a fair presentation framework, the
description of responsibilities for the financial statements in the auditor’s report shall refer to “the
preparation and fair presentation of these financial statements”.
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PSA 570 (Revised), Going Concern, paragraphs 21–23
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PSA 570 (Revised), paragraph 2
Auditor’s Responsibilities for the Audit of the Financial Statements
36. The auditor’s report shall include a section with the heading “Auditor’s Responsibilities for the Audit of
the Financial Statements.”
37. This section of the auditor’s report shall: (Ref: Para. A45)
(a) State that the objectives of the auditor are to:
(i) Obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error; and
(ii) Issue an auditor’s report that includes the auditor’s opinion. (Ref: Para. A46)
(b) State that reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with PSAs will always detect a material misstatement when it exists;
and
(c) State that misstatements can arise from fraud or error, and either:
(i) Describe that they are considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic decisions of users taken on
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the basis of these financial statements; or
(ii) Provide a definition or description of materiality in accordance with the applicable financial
reporting framework. (Ref: Para. A47)
38. The Auditor’s Responsibilities for the Audit of the Financial Statements section of the auditor’s report
shall further: (Ref: Para. A45)
(a) State that, as part of an audit in accordance with PSAs, the auditor exercises professional
judgment and maintains professional skepticism throughout the audit; and
(b) Describe an audit by stating that the auditor’s responsibilities are:
(i) To identify and assess the risks of material misstatement of the financial statements,
whether due to fraud or error; to design and perform audit procedures responsive to those
risks; and to obtain audit evidence that is sufficient and appropriate to provide a basis for
the auditor’s opinion. The risk of not detecting a material misstatement resulting from fraud
is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
(ii) To obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the entity’s internal control. In circumstances when the
auditor also has a responsibility to express an opinion on the effectiveness of internal
control in conjunction with the audit of the financial statements, the auditor shall omit the
phrase that the auditor’s consideration of internal control is not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control.
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PSA 320, Materiality in Planning and Performing an Audit, paragraph 2
(iii) To evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by management.
(iv) To conclude on the appropriateness of management’s use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the entity’s ability to
continue as a going concern. If the auditor concludes that a material uncertainty exists, the
auditor is required to draw attention in the auditor’s report to the related disclosures in the
financial statements or, if such disclosures are inadequate, to modify the opinion. The
auditor’s conclusions are based on the audit evidence obtained up to the date of the
auditor’s report. However, future events or conditions may cause an entity to cease to
continue as a going concern.
(v) When the financial statements are prepared in accordance with a fair presentation
framework, to evaluate the overall presentation, structure and content of the financial
statements, including the disclosures, and whether the financial statements represent the
underlying transactions and events in a manner that achieves fair presentation.
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(c) When PSA 600 applies, further describe the auditor’s responsibilities in a group audit
engagement by stating that:
(i) The auditor’s responsibilities are to obtain sufficient appropriate audit evidence regarding
the financial information of the entities or business activities within the group to express an
opinion on the group financial statements;
(ii) The auditor is responsible for the direction, supervision and performance of the group
audit; and
(iii) The auditor remains solely responsible for the auditor’s opinion.
39. The Auditor’s Responsibilities for the Audit of the Financial Statements section of the auditor’s report
also shall: (Ref: Para. A45)
(a) State that the auditor communicates with those charged with governance regarding, among other
matters, the planned scope and timing of the audit and significant audit findings, including any
significant deficiencies in internal control that the auditor identifies during the audit;
(b) For audits of financial statements of listed entities, state that the auditor provides those charged
with governance with a statement that the auditor has complied with relevant ethical
requirements regarding independence and communicate with them all relationships and other
matters that may reasonably be thought to bear on the auditor’s independence, and where
applicable, related safeguards; and
(c) For audits of financial statements of listed entities and any other entities for which key audit
matters are communicated in accordance with PSA 701, state that, from the matters
communicated with those charged with governance, the auditor determines those matters that
were of most significance in the audit of the financial statements of the current period and are
therefore the key audit matters. The auditor describes these matters in the auditor’s report unless
law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, the auditor determines that a matter should not be
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PSA 600, Special Considerations—Audits of Group Financial Statements (Including the Work of Component Auditors)
communicated in the auditor’s report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication. (Ref:
Para. A48)
Location of the description of the auditor’s responsibilities for the audit of the financial statements
40. The description of the auditor’s responsibilities for the audit of the financial statements required by
paragraphs 38–39 shall be included: (Ref: Para. A49)
(a) Within the body of the auditor’s report;
(b) Within an appendix to the auditor’s report, in which case the auditor’s report shall include a
reference to the location of the appendix; or (Ref: Para. A49–A50)
(c) By a specific reference within the auditor’s report to the location of such a description on a
website of an appropriate authority, where law, regulation or national auditing standards
expressly permit the auditor to do so. (Ref: Para. A49, A51–A52)
41. When the auditor refers to a description of the auditor’s responsibilities on a website of an appropriate
authority, the auditor shall determine that such description addresses, and is not inconsistent with, the
requirements in paragraphs 38–39 of this PSA. (Ref: Para. A51)
Other Reporting Responsibilities
42. If the auditor addresses other reporting responsibilities in the auditor’s report on the financial
statements that are in addition to the auditor’s responsibilities under the PSAs, these other reporting
responsibilities shall be addressed in a separate section in the auditor’s report with a heading titled
“Report on Other Legal and Regulatory Requirements” or otherwise as appropriate to the content of the
section, unless these other reporting responsibilities address the same topics as those presented under
the reporting responsibilities required by the PSAs in which case the other reporting responsibilities
may be presented in the same section as the related report elements required by the PSAs. (Ref: Para.
A53–A55)
43. If other reporting responsibilities are presented in the same section as the related report elements
required by the PSAs, the auditor’s report shall clearly differentiate the other reporting responsibilities
from the reporting that is required by the PSAs. (Ref: Para. A55)
44. If the auditor’s report contains a separate section that addresses other reporting responsibilities, the
requirements of paragraphs 20–39 of this PSA shall be included under a section with a heading “Report
on the Audit of the Financial Statements.” The “Report on Other Legal and Regulatory Requirements”
shall follow the “Report on the Audit of the Financial Statements.” (Ref: Para. A55)
Name of the Engagement Partner
45. The name of the engagement partner shall be included in the auditor’s report for audits of complete sets
of general purpose financial statements of listed entities unless, in rare circumstances, such disclosure
is reasonably expected to lead to a significant personal security threat. In the rare circumstances that
the auditor intends not to include the name of the engagement partner in the auditor’s report, the auditor
shall discuss this intention with those charged with governance to inform the auditor’s assessment of
the likelihood and severity of a significant personal security threat. (Ref: Para. A56–A58)
Signature of the Auditor
46. The auditor’s report shall be signed. (Ref: Para. A59–A60)
Auditor’s Address
47. The auditor’s report shall name the location in the jurisdiction where the auditor practices.
Date of the Auditor’s Report
48. The auditor’s report shall be dated no earlier than the date on which the auditor has obtained sufficient
appropriate audit evidence on which to base the auditor’s opinion on the financial statements, including
evidence that: (Ref: Para. A61–A64)
(a) All the statements that comprise the financial statements, including the related notes, have been
prepared; and
(b) Those with the recognized authority have asserted that they have taken responsibility for those
financial statements.
Auditor’s Report Prescribed by Law or Regulation
49. If the auditor is required by law or regulation of a specific jurisdiction to use a specific layout, or wording
of the auditor’s report, the auditor’s report shall refer to Philippine Standards on Auditing only if the
auditor’s report includes, at a minimum, each of the following elements: (Ref: Para. A65–A66)
(a) A title.
(b) An addressee, as required by the circumstances of the engagement.
(c) An Opinion section containing an expression of opinion on the financial statements and a
reference to the applicable financial reporting framework used to prepare the financial statements
(including identifying the jurisdiction of origin of the financial reporting framework that is not
Philippine Financial Reporting Standards see paragraph 26).
(d) An identification of the entity’s financial statements that have been audited.
(e) A statement that the auditor is independent of the entity in accordance with the relevant ethical
requirements relating to the audit, and has fulfilled the auditor’s other ethical responsibilities in
accordance with these requirements. The statement shall identify the jurisdiction of origin of the
relevant ethical requirements or refer to the Philippine Code of Ethics.
(f) Where applicable, a section that addresses, and is not inconsistent with, the reporting
requirements in paragraph 22 of PSA 570 (Revised).
(g) Where applicable, a Basis for Qualified (or Adverse) Opinion section that addresses, and is not
inconsistent with, the reporting requirements in paragraph 23 of PSA 570 (Revised).
(h) Where applicable, a section that includes the information required by PSA 701, or additional
information about the audit that is prescribed by law or regulation and that addresses, and is
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not inconsistent with, the reporting requirements in that PSA. (Ref: Para. A66–A67)
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PSA 701, paragraphs 11–16
(i) A description of management’s responsibilities for the preparation of the financial statements and
an identification of those responsible for the oversight of the financial reporting process that
addresses, and is not inconsistent with, the requirements in paragraphs 32–35.
(j) A reference to Philippine Standards on Auditing and the law or regulation, and a description of the
auditor’s responsibilities for an audit of the financial statements that addresses, and is not
inconsistent with, the requirements in paragraphs 36–39. (Ref: Para. A49–A50)
(k) For audits of complete sets of general purpose financial statements of listed entities, the name of
the engagement partner unless, in rare circumstances, such disclosure is reasonably expected to
lead to a significant personal security threat.
(l) The auditor’s signature.
(m) The auditor’s address.
(n) The date of the auditor’s report.
Auditor’s Report for Audits Conducted in Accordance with Both Auditing Standards of a Specific Jurisdiction
and Philippine Standards on Auditing
50. An auditor may be required to conduct an audit in accordance with the auditing standards of a specific
jurisdiction (the national standards), and has additionally complied with the PSAs in the conduct of the
audit. If this is the case, the auditor’s report may refer to Philippine Standards on Auditing in addition to
the national auditing standards, but the auditor shall do so only if: (Ref: Para. A71–A72)
(a) There is no conflict between the requirements in the national auditing standards and those in
PSAs that would lead the auditor (i) to form a different opinion, or (ii) not to include an Emphasis
of Matter paragraph or Other Matter paragraph that, in the particular circumstances, is required
by PSAs; and
(b) The auditor’s report includes, at a minimum, each of the elements set out in paragraphs 49(a)–(n)
above when the auditor uses the layout or wording specified by the national auditing standards.
However, reference to “law or regulation” in paragraph 49(j) shall be read as reference to the
national auditing standards. The auditor’s report shall thereby identify such national auditing
standards.
51. When the auditor’s report refers to both the auditing standards and Philippine Standards on Auditing,
the auditor’s report shall identify the jurisdiction of origin of the national auditing standards.
Supplementary Information Presented with the Financial Statements (Ref: Para. A73–A79)
52. If supplementary information that is not required by the applicable financial reporting framework is
presented with the audited financial statements, the auditor shall evaluate whether, in the auditor’s
professional judgment, supplementary information is nevertheless an integral part of the financial
statements due to its nature or how it is presented. When it is an integral part of the financial
statements, the supplementary information shall be covered by the auditor’s opinion.
53. If supplementary information that is not required by the applicable financial reporting framework is not
considered an integral part of the audited financial statements, the auditor shall evaluate
whether such supplementary information is presented in a way that sufficiently and clearly
differentiates it from the audited financial statements. If this is not the case, then the auditor shall
ask management to change how the unaudited supplementary information is presented. If
management refuses to do so, the auditor shall identify the unaudited supplementary information
and explain in the auditor’s report that such supplementary information has not been audited.
***
Application and Other Explanatory Material

Qualitative Aspects of the Entity’s Accounting Practices (Ref: Para. 12)
A1. Management makes a number of judgments about the amounts and disclosures in the financial
statements.
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A2. PSA 260 (Revised) contains a discussion of the qualitative aspects of accounting practices. In
considering the qualitative aspects of the entity’s accounting practices, the auditor may become aware
of possible bias in management’s judgments. The auditor may conclude that the cumulative effect of a
lack of neutrality, together with the effect of uncorrected misstatements, causes the financial statements
as a whole to be materially misstated. Indicators of a lack of neutrality that may affect the auditor’s
evaluation of whether the financial statements as a whole are materially misstated include the following:
• The selective correction of misstatements brought to management’s attention during the audit
(e.g., correcting misstatements with the effect of increasing reported earnings, but not correcting
misstatements that have the effect of decreasing reported earnings).
• Possible management bias in the making of accounting estimates.
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A3. PSA 540 addresses possible management bias in making accounting estimates. Indicators of
possible management bias do not constitute misstatements for purposes of drawing conclusions on the
reasonableness of individual accounting estimates. They may, however, affect the auditor’s evaluation
of whether the financial statements as a whole are free from material misstatement.
Disclosures of the Effect of Material Transactions and Events on the Information Conveyed in the
Financial Statements (Ref: Para. 13(e))
A4. It is common for financial statements prepared in accordance with a general purpose framework to
present an entity’s financial position, financial performance and cash flows. In such circumstances, the
auditor evaluates whether the financial statements provide adequate disclosures to enable the intended
users to understand the effect of material transactions and events on the entity’s financial position,
financial performance and cash flows.
Description of the Applicable Financial Reporting Framework (Ref: Para. 15)
A5. As explained in PSA 200, the preparation of the financial statements by management and, where
appropriate, those charged with governance requires the inclusion of an adequate description of
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the applicable financial reporting framework in the financial statements. That description advises
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17
PSA 260 (Revised), Communication with Those Charged with Governance, Appendix 2
18
PSA 540, Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures, paragraph 21
19
PSA 200, paragraphs A2–A3
users of the financial statements of the framework on which the financial statements are based.
A6. A description that the financial statements are prepared in accordance with a particular applicable
financial reporting framework is appropriate only if the financial statements comply with all the
requirements of that framework that are effective during the period covered by the financial statements.
A7. A description of the applicable financial reporting framework that contains imprecise qualifying or
limiting language (e.g., “the financial statements are in substantial compliance with Philippine Financial
Reporting Standards”) is not an adequate description of that framework as it may mislead users of the
Reference to More than One Financial Reporting Framework
A8. In some cases, the financial statements may represent that they are prepared in accordance with two
financial reporting frameworks (e.g., PFRSs, the national framework, and IFRSs). This may be because
management is required, or has chosen, to prepare the financial statements in accordance with both
frameworks, in which case both are applicable financial reporting frameworks. Such description is
appropriate only if the financial statements comply with each of the frameworks individually. To be
regarded as being prepared in accordance with both frameworks, the financial statements need to
comply with both frameworks simultaneously and without any need for reconciling statements. In
practice, simultaneous compliance is unlikely unless the jurisdiction has adopted the other framework
(e.g., IFRSs) as its own national framework, or has eliminated all barriers to compliance with it.
A9. Financial statements that are prepared in accordance with one financial reporting framework and that
contain a note or supplementary statement reconciling the results to those that would be shown under
another framework are not prepared in accordance with that other framework. This is because the
financial statements do not include all the information in the manner required by that other framework.
A10. The financial statements may, however, be prepared in accordance with one applicable financial
reporting framework and, in addition, describe in the notes to the financial statements the extent to
which the financial statements comply with another framework (e.g., financial statements prepared in
accordance with the national framework that also describe the extent to which they comply with
PFRSs). Such description may constitute supplementary financial information as discussed in
paragraph 53 and is covered by the auditor’s opinion if it cannot be clearly differentiated from the
Form of Opinion (Ref: Para. 18–19)
A11. There may be cases where the financial statements, although prepared in accordance with the
requirements of a fair presentation framework, do not achieve fair presentation. Where this is the case,
it may be possible for management to include additional disclosures in the financial statements beyond
those specifically required by the framework or, in extremely rare circumstances, to depart from a
requirement in the framework in order to achieve fair presentation of the financial statements.
A12. It will be extremely rare for the auditor to consider financial statements that are prepared in
accordance with a compliance framework to be misleading if, in accordance with PSA 210, the
20
auditor determined that the framework is acceptable.
Auditor’s Report (Ref: Para. 20)
A13. A written report encompasses reports issued in hard copy and those using an electronic medium.
A14. The Appendix to this PSA contains illustrations of auditor’s reports on financial statements,
incorporating the elements set out in paragraphs 20–48. With the exception of the Opinion and Basis for
Opinion sections, this PSA does not establish requirements for ordering the elements of the auditor’s
report. However, this PSA requires the use of specific headings, which are intended to assist in making
auditor’s reports that refer to audits that have been conducted in accordance with PSAs more
recognizable, particularly in situations where the elements of the auditor’s report are presented in an
order that differs from the illustrative auditor’s reports in the Appendix to this PSA.
Auditor’s Report for Audits Conducted in Accordance with Philippine Standards on Auditing Title (Ref: Para.
21)
A15. A title indicating the report is the report of an independent auditor, for example, “Independent Auditor’s
Report,” distinguishes the independent auditor’s report from reports issued by others.
Addressee (Ref: Para. 22)
A16. Law, regulation or the terms of the engagement may specify to whom the auditor’s report is to be
addressed in that particular jurisdiction. The auditor’s report is normally addressed to those for whom
the report is prepared, often either to the shareholders or to those charged with governance of the entity
whose financial statements are being audited.
Auditor’s Opinion (Ref. Para. 24–26)
Reference to the financial statements that have been audited
A17. The auditor’s report states, for example, that the auditor has audited the financial statements of the
entity, which comprise [state the title of each financial statement comprising the complete set of
financial statements required by the applicable financial reporting framework, specifying the date or
period covered by each financial statement] and notes to the financial statements, including a summary
of significant accounting policies.
A18. When the auditor is aware that the audited financial statements will be included in a document that
contains other information, such as an annual report, the auditor may consider, if the form of
presentation allows, identifying the page numbers on which the audited financial statements are
presented. This helps users to identify the financial statements to which the auditor’s report relates.
“Present fairly, in all material respects” or “give a true and fair view”
A19. The phrases “present fairly, in all material respects,” and “give a true and fair view” are regarded as
being equivalent. Whether the phrase “present fairly, in all material respects,” or the phrase “give a true
and fair view” is used in any particular jurisdiction is determined by the law or regulation governing the
audit of financial statements in that jurisdiction, or by generally accepted practice in that jurisdiction.
Where law or regulation requires the use of different wording, this does not affect the requirement in
paragraph 14 of this PSA for the auditor to evaluate the fair presentation of financial statements
prepared in accordance with a fair presentation framework.
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20
PSA 210, Agreeing the Terms of Audit Engagements, paragraph 6(a)
A20. When the auditor expresses an unmodified opinion, it is not appropriate to use phrases such as “with
the foregoing explanation” or “subject to” in relation to the opinion, as these suggest a conditional
opinion or a weakening or modification of opinion.
Description of the financial statements and the matters they present
A21. The auditor’s opinion covers the complete set of financial statements as defined by the applicable
financial reporting framework. For example, in the case of many general purpose frameworks, the
financial statements may include: a statement of financial position, a statement of comprehensive
income, a statement of changes in equity, a statement of cash flows, and related notes, which ordinarily
comprise a summary of significant accounting policies and other explanatory information. In some
jurisdictions, additional information may also be considered to be an integral part of the financial
statements.
A22. In the case of financial statements prepared in accordance with a fair presentation framework, the
auditor’s opinion states that the financial statements present fairly, in all material respects, or give a true
and fair view of, the matters that the financial statements are designed to present. For example, in the
case of financial statements prepared in accordance with PFRSs, these matters are the financial
position of the entity as at the end of the period and the entity’s financial performance and cash flows for
the period then ended. Consequently, the […] in paragraph 25 and elsewhere in this PSA is intended to
be replaced by the words in italics in the preceding sentence when the applicable financial reporting
framework is PFRSs or, in the case of other applicable financial reporting frameworks, be replaced with
words that describe the matters that the financial statements are designed to present.
Description of the applicable financial reporting framework and how it may affect the auditor’s opinion
A23. The identification of the applicable financial reporting framework in the auditor’s opinion is intended to
advise users of the auditor’s report of the context in which the auditor’s opinion is expressed; it is not
intended to limit the evaluation required in paragraph 14. The applicable financial reporting framework
is identified in such terms as:
“… in accordance with Philippine Financial Reporting Standards” or
“… in accordance with accounting principles generally accepted in Jurisdiction X …”
A24. When the applicable financial reporting framework encompasses financial reporting standards and
legal or regulatory requirements, the framework is identified in such terms as “… in accordance with
Philippine Financial Reporting Standards and the requirements of Jurisdiction X
Corporations Act.” PSA 210 deals with circumstances where there are conflicts between the
21
financial reporting standards and the legislative or regulatory requirements.
A25. As indicated in paragraph A8, the financial statements may be prepared in accordance with two
financial reporting frameworks, which are therefore both applicable financial reporting frameworks.
Accordingly, each framework is considered separately when forming the auditor’s opinion on the
______________________
21
financial statements, and the auditor’s opinion in accordance with paragraphs 25–27 refers to both
frameworks as follows:
(a) If the financial statements comply with each of the frameworks individually, two opinions are
expressed: that is, that the financial statements are prepared in accordance with one of the
applicable financial reporting frameworks (e.g., the national framework) and an opinion that the
financial statements are prepared in accordance with the other applicable financial reporting
framework (e.g., PFRSs). These opinions may be expressed separately or in a single sentence
(e.g., the financial statements are presented fairly, in all material respects […], in accordance with
accounting principles generally accepted in Jurisdiction X and with FRSs).
(b) If the financial statements comply with one of the frameworks but fail to comply with the other
framework, an unmodified opinion can be given that the financial statements are prepared in
accordance with the one framework (e.g., the national framework) but a modified opinion given
with regard to the other framework (e.g., IFRSs) in accordance with PSA 705 (Revised).
A26. As indicated in paragraph A10, the financial statements may represent compliance with the applicable
financial reporting framework and, in addition, disclose the extent of compliance with another financial
reporting framework. Such supplementary information is covered by the auditor’s opinion if it cannot be
clearly differentiated from the financial statements (see paragraphs 52–53 and related application
material in paragraphs A73–A79). Accordingly,
(a) If the disclosure as to the compliance with the other framework is misleading, a modified opinion
is expressed in accordance with PSA 705 (Revised).
(b) If the disclosure is not misleading, but the auditor judges it to be of such importance that it is
fundamental to the users’ understanding of the financial statements, an Emphasis of Matter
paragraph is added in accordance with PSA 706 (Revised), drawing attention to the disclosure.
Basis for Opinion (Ref: Para. 28)
A27. The Basis for Opinion section provides important context about the auditor’s opinion. Accordingly, this
PSA requires the Basis for Opinion section to directly follow the Opinion section in the auditor’s report.
A28. The reference to the standards used conveys to the users of the auditor’s report that the audit has been
conducted in accordance with established standards.
Relevant ethical requirements
A29. The identification of the jurisdiction of origin of relevant ethical requirements increases transparency
about those requirements relating to the particular audit engagement. PSA 200 explains that
relevant ethical requirements ordinarily comprise Parts A and B of the Code of Ethics for Professional
Accountants in the Philippines (Philippine Code of Ethics) related to an audit of financial statements
22
together with national requirements that are more restrictive. When the relevant ethical requirements
include those of the IESBA Code, the statement may also make reference to the IESBA Code. If the
IESBA Code constitutes all of the ethical requirements relevant to the audit, the statement need not
identify a jurisdiction of origin.
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22
PSA 200, paragraph A14
A30. In some jurisdictions, relevant ethical requirements may exist in several different sources, such as the
ethical code(s) and additional rules and requirements within law and regulation. When the
independence and other relevant ethical requirements are contained in a limited number of sources, the
auditor may choose to name the relevant source(s) (e.g., the name of the code, rule or regulation
applicable in the jurisdiction), or may refer to a term that is commonly understood and that appropriately
summarizes those sources (e.g., independence requirements for audits of private entities in Jurisdiction
X).
A31. Law or regulation, national auditing standards or the terms of an audit engagement may require the
auditor to provide in the auditor’s report more specific information about the sources of the relevant
ethical requirements, including those pertaining to independence, that applied to the audit of the
A32. In determining the appropriate amount of information to include in the auditor’s report when there are
multiple sources of relevant ethical requirements relating to the audit of the financial statements, an
important consideration is balancing transparency against the risk of obscuring other useful information
in the auditor’s report.
Considerations specific to group audits
A33. In group audits when there are multiple sources of relevant ethical requirements, including those
pertaining to independence, the reference in the auditor’s report to the jurisdiction ordinarily relates to
the relevant ethical requirements that are applicable to the group engagement team. This is
because, in a group audit, component auditors are also subject to ethical requirements that are
23
relevant to the group audit.
A34. The PSAs do not establish specific independence or ethical requirements for auditors, including
component auditors, and thus do not extend, or otherwise override, the independence requirements
of the Philippine Code of Ethics or other ethical requirements to which the group
engagement team is subject, nor do the PSAs require that the component auditor in all cases to be
subject to the same specific independence requirements that are applicable to the group engagement
team. As a result, relevant ethical requirements, including those pertaining to independence, in a
24
group audit situation may be complex. PSA 600 provides guidance for auditors in performing work
on the financial information of a component for a group audit, including those situations where the
component auditor does not meet the independence requirements that are relevant to the group
audit.
Key Audit Matters (Ref: Para. 30)
A35. Law or regulation may require communication of key audit matters for audits of entities other than listed
entities, for example, entities characterized in such law or regulation as public interest entities.
A36. The auditor may also decide to communicate key audit matters for other entities, including those that
may be of significant public interest, for example because they have a large number and wide range of
stakeholders and considering the nature and size of the business. Examples of such entities may
include financial institutions (such as banks, insurance companies, and pension funds), and other
entities such as charities.
_____________________
23
24
PSA 600, paragraphs 19–20
A37. PSA 210 requires the auditor to agree the terms of the audit engagement with management and those
charged with governance, as appropriate, and explains that the roles of management and
those charged with governance in agreeing the terms of the audit engagement for the entity depend
25
on the governance arrangements of the entity and relevant law or regulation. PSA 210 also
requires the audit engagement letter or other suitable form of written agreement to include
26
reference to the expected form and content of any reports to be issued by the auditor. When the
27
auditor is not otherwise required to communicate key audit matters, PSA 210 explains that it may
be helpful for the auditor to make reference in the terms of the audit engagement to the possibility
of communicating key audit matters in the auditor’s report and, in certain jurisdictions, it may be
necessary for the auditor to include a reference to such possibility in order to retain the ability to do
so.
Considerations specific to public sector entities
A38. Listed entities are not common in the public sector. However, public sector entities may be significant
due to size, complexity or public interest aspects. In such cases, an auditor of a public sector entity may
be required by law or regulation or may otherwise decide to communicate key audit matters in the
auditor’s report.
Responsibilities for the Financial Statements (Ref: Para. 32–33)
A39. PSA 200 explains the premise, relating to the responsibilities of management and, where
appropriate, those charged with governance, on which an audit in accordance with PSAs is
28
conducted. Management and, where appropriate, those charged with governance accept
responsibility for the preparation of the financial statements in accordance with the applicable
financial reporting framework, including, where relevant, their fair presentation. Management also
accepts responsibility for such internal control as it determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud
or error. The description of management’s responsibilities in the auditor’s report includes reference
to both responsibilities as it helps to explain to users the premise on which an audit is conducted.
PSA 260 (Revised) uses the term those charged with governance to describe the person(s) or
organization(s) with responsibility for overseeing the entity, and provides a discussion about the
diversity of governance structures across jurisdictions and by entity.
A40. There may be circumstances when it is appropriate for the auditor to add to the descriptions of the
responsibilities of management and those charged with governance in paragraphs 33–34 to reflect
additional responsibilities that are relevant to the preparation of the financial statements in the context
of the particular jurisdiction or the nature of the entity.
A41. PSA 210 requires the auditor to agree management’s responsibilities in an engagement letter or other
29
suitable form of written agreement. PSA 210 provides some flexibility in doing so, by
explaining that, if law or regulation prescribes the responsibilities of management and, where
appropriate, those charged with governance in relation to financial reporting, the auditor may
________________________
25
PSA 210, paragraphs 9 and A21
26
27
PSA 210, paragraph A23a
28
PSA 200, paragraph 13(j)
29
PSA 210, paragraph 6(b)(i)–(ii)
determine that the law or regulation includes responsibilities that, in the auditor’s judgment, are
equivalent in effect to those set out in PSA 210. For such responsibilities that are equivalent, the
auditor may use the wording of the law or regulation to describe them in the engagement letter or
other suitable form of written agreement. In such cases, this wording may also be used in the
auditor’s report to describe the responsibilities as required by paragraph 33(a) of this PSA. In other
circumstances, including where the auditor decides not to use the wording of law or regulation as
incorporated in the engagement letter, the wording in paragraph 33(a) of this PSA is used. In
addition to including the description of management’s responsibilities in the auditor’s report as
required by paragraph 33, the auditor may refer to a more detailed description of these
responsibilities by including a reference to where such information may be obtained (e.g., in the
annual report of the entity or a website of an appropriate authority).
A42. In some jurisdictions, law or regulation prescribing management’s responsibilities may specifically refer
to a responsibility for the adequacy of accounting books and records, or accounting system.
As books, records and systems are an integral part of internal control (as defined in PSA 315
30
(Revised) ), the descriptions in PSA 210 and in paragraph 33 do not make specific reference to
them.
A43. The Appendix to this PSA provides illustrations of how the requirement in paragraph 33(b) would be
applied when PFRSs is the applicable financial reporting framework. If an applicable financial reporting
framework other than PFRSs is used, the illustrative statements featured in the Appendix to this PSA
may need to be adapted to reflect the application of the other financial reporting framework in the
circumstances.
Oversight of the financial reporting process (Ref: Para. 34)
A44. When some, but not all, of the individuals involved in the oversight of the financial reporting process are
also involved in preparing the financial statements, the description as required by paragraph 34 of this
PSA may need to be modified to appropriately reflect the particular circumstances of the entity. When
individuals responsible for the oversight of the financial reporting process are the same as those
responsible for the preparation of the financial statements, no reference to oversight responsibilities is
required.
Auditor’s Responsibilities for the Audit of the Financial Statements (Ref: Para. 36–39)
A45. The description of the auditor’s responsibilities as required by paragraphs 36–39 of this PSA may be
tailored to reflect the specific nature of the entity, for example, when the auditor’s report addresses
consolidated financial statements. Illustration 2 in the Appendix to this PSA includes an example of how
this may be done.
Objectives of the auditor (Ref: Para. 37(a))
A46. The auditor’s report explains that the objectives of the auditor are to obtain reasonable assurance about
whether the financial statements as a whole are free from material misstatement, whether due to fraud
or error, and to issue an auditor’s report that includes the auditor’s opinion. These are in contrast to
management’s responsibilities for the preparation for the financial statements.
_________________________
30
PSA 315 (Revised), Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its
Environment, paragraph 4(c)
Description of materiality (Ref: Para. 37(c))
A47. The Appendix to this PSA provides illustrations of how the requirement in paragraph 37(c), to provide a
description of materiality, would be applied when PFRSs is the applicable financial reporting framework.
If an applicable financial reporting framework other than PFRSs is used, the illustrative statements
presented in the Appendix to this PSA may need to be adapted to reflect the application of the other
financial reporting framework in the circumstances.
Auditor’s responsibilities relating to PSA 701 (Ref: Para. 39(c))
A48. The auditor may also consider it useful to provide additional information in the description of the
auditor’s responsibilities beyond what is required by paragraph 39(c). For example, the auditor may
make reference to the requirement in paragraph 9 of PSA 701 to determine the matters that required
significant auditor attention in performing the audit, taking into account areas of higher assessed risk of
material misstatement or significant risks identified in accordance with PSA 315 (Revised); significant
auditor judgments relating to areas in the financial statements that involved significant management
judgment, including accounting estimates that have been identified as having high estimation
uncertainty; and the effects on the audit of significant events or transactions that occurred during the
period.
Location of the description of the auditor’s responsibilities for the audit of the financial statements (Ref: Para.
40, 49(j))
A49. Including the information required by paragraphs 38–39 of this PSA in an appendix to the auditor’s
report or, when law, regulation or national auditing standards expressly permit, referring to a website of
an appropriate authority containing such information may be a useful way of streamlining the content of
the auditor’s report. However, because the description of the auditor’s responsibilities contains
information that is necessary to inform users’ expectations of an audit conducted in accordance with
PSAs, a reference is required to be included in the auditor’s report indicating where such information
can be accessed.
Location in an appendix (Ref: Para. 40(b), 49(j))
A50. Paragraph 40 permits the auditor to include the statements required by paragraphs 38–39 describing
the auditor’s responsibilities for the audit of the financial statements in an appendix to the auditor’s
report, provided that appropriate reference is made within the body of the auditor’s report to the location
of the appendix. The following is an illustration of how such a reference to an appendix could be made
in the auditor’s report:
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to fraud
or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with PSAs will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of the financial statements
is included in appendix X of this auditor’s report. This description, which is located
at [indicate page number or other specific reference to the location of the

description], forms part of our auditor’s report.
Reference to a website of an appropriate authority (Ref: Para. 40(c), 41)
A51. Paragraph 40 explains that the auditor may refer to a description of the auditor’s responsibilities located
on a website of an appropriate authority, only if expressly permitted by law, regulation or national
auditing standards. The information on the website that is incorporated in the auditor’s report by way of
a specific reference to the website location where such information can be found may describe the
auditor’s work, or the audit in accordance with PSAs more broadly, but it cannot be inconsistent with the
description required in paragraphs 38–39 of this PSA. This means that the wording of the description of
the auditor’s responsibilities on the website may be more detailed, or may address other matters
relating to an audit of financial statements, provided that such wording reflects and does not contradict
the matters addressed in paragraphs 38–39.
A52. An appropriate authority could be a national auditing standard setter, regulator, or an audit oversight
body. Such organizations are well-placed to ensure the accuracy, completeness and continued
availability of the standardized information. It would not be appropriate for the auditor to maintain such a
website. The following is an illustration of how such a reference to a website could be made in the
auditor’s report:
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to fraud
or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with PSAs will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of the financial statements
is located at [Organization’s] website at: [website address]. This description forms
part of our auditor’s report.
Other Reporting Responsibilities (Ref: Para. 42–44)
A53. In some jurisdictions, the auditor may have additional responsibilities to report on other matters that are
supplementary to the auditor’s responsibilities under the PSAs. For example, the auditor may be asked
to report certain matters if they come to the auditor’s attention during the course of the audit of the
financial statements. Alternatively, the auditor may be asked to perform and report on additional
specified procedures, or to express an opinion on specific matters, such as the adequacy of accounting
books and records, internal control over financial reporting or other information. Auditing standards in
the specific jurisdiction often provide guidance on the auditor’s responsibilities with respect to specific
additional reporting responsibilities in that jurisdiction.
A54. In some cases, the relevant law or regulation may require or permit the auditor to report on these other
responsibilities as part of their auditor’s report on the financial statements. In other cases, the auditor
may be required or permitted to report on them in a separate report.
A55. Paragraphs 42–44 of this PSA permit combined presentation of other reporting responsibilities and the
auditor’s responsibilities under the PSAs only when they address the same topics and the wording of
the auditor’s report clearly differentiates the other reporting responsibilities from those under the PSAs.
Such clear differentiation may make it necessary for the auditor’s report to refer to the source of the
other reporting responsibilities and to state that such responsibilities are beyond those required under
the PSAs. Otherwise, other reporting responsibilities are required to be addressed in a separate section
in the auditor’s report with a heading “Report on Other Legal and Regulatory Requirements,” or
otherwise as appropriate to the content of the section. In such cases, paragraph 44 requires the auditor
to include reporting responsibilities under the PSAs under a heading titled “Report on the Audit of the
Financial Statements.”
Name of the Engagement Partner (Ref: Para. 45)
A56. PSQC 131 requires that the firm establish policies and procedures to provide reasonable assurance that
engagements are performed in accordance with professional standards and applicable legal and
regulatory requirements. Notwithstanding these PSQC 1 requirements, naming the engagement
partner in the auditor’s report is intended to provide further transparency to the users of the auditor’s
report of a complete set of general purpose financial statements of a listed entity.
A57. Law, regulation or national auditing standards may require that the auditor’s report include the name of
the engagement partner responsible for audits other than those of complete sets of general purpose
financial statements of listed entities. The auditor may also be required by law, regulation or national
auditing standards, or may decide to include additional information beyond the engagement partner’s
name in the auditor’s report to further identify the engagement partner, for example, the engagement
partner’s professional license number that is relevant to the jurisdiction where the auditor practices.
A58. In rare circumstances, the auditor may identify information or be subject to experiences that indicate the
likelihood of a personal security threat that, if the identity of the engagement partner is made public,
may result in physical harm to the engagement partner, other engagement team members or other
closely related individuals. However, such a threat does not include, for example, threats of legal liability
or legal, regulatory or professional sanctions. Discussions with those charged with governance about
circumstances that may result in physical harm may provide additional information about the likelihood
or severity of the significant personal security threat. Law, regulation or national auditing standards may
establish further requirements that are relevant to determining whether the disclosure of the name of
the engagement partner may be omitted.
Signature of the Auditor (Ref: Para. 46)
A59. The auditor’s signature is either in the name of the audit firm, the personal name of the auditor or both,
as appropriate for the particular jurisdiction. In addition to the auditor’s signature, in certain jurisdictions,
the auditor may be required to declare in the auditor’s report the auditor’s professional accountancy
designation or the fact that the auditor or firm, as appropriate, has been recognized by the appropriate
licensing authority in that jurisdiction.*
A60. In some cases, law or regulation may allow for the use of electronic signatures in the auditor’s report.
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31
PSQC 1, Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related
Services Engagements, paragraph 32
* In the Philippines, SRC Rule 68, As Amended, of the Securities and Exchange Commission prescribes the manner of signing the
auditor’s report and requires the indication of related auditor registration / accreditation / licensing information.
Date of the Auditor’s Report (Ref: Para. 48)
A61. The date of the auditor’s report informs the user of the auditor’s report that the auditor has considered
the effect of events and transactions of which the auditor became aware and that
occurred up to that date. The auditor’s responsibility for events and transactions after the date of
32
the auditor’s report is addressed in PSA 560.
A62. Since the auditor’s opinion is provided on the financial statements and the financial statements are the
responsibility of management, the auditor is not in a position to conclude that sufficient appropriate audit
evidence has been obtained until evidence is obtained that all the statements that comprise the
financial statements, including the related notes, have been prepared and management has accepted
responsibility for them.
A63. In some jurisdictions, law or regulation identifies the individuals or bodies (e.g., the directors) that are
responsible for concluding that all the statements that comprise the financial statements, including the
related notes, have been prepared, and specifies the necessary approval process. In such cases,
evidence is obtained of that approval before dating the report on the financial statements. In other
jurisdictions, however, the approval process is not prescribed in law or regulation. In such cases, the
procedures the entity follows in preparing and finalizing its financial statements in view of its
management and governance structures are considered in order to identify the individuals or body with
the authority to conclude that all the statements that comprise the financial statements, including the
related notes, have been prepared. In some cases, law or regulation identifies the point in the financial
statement reporting process at which the audit is expected to be complete.
A64. In some jurisdictions, final approval of the financial statements by shareholders is required before the
financial statements are issued publicly. In these jurisdictions, final approval by shareholders is not
necessary for the auditor to conclude that sufficient appropriate audit evidence has been obtained. The
date of approval of the financial statements for purposes of PSAs is the earlier date on which those with
the recognized authority determine that all the statements that comprise the financial statements,
including the related notes, have been prepared and that those with the recognized authority have
asserted that they have taken responsibility for them.
Auditor’s Report Prescribed by Law or Regulation (Ref: Para. 49)
A65. PSA 200 explains that the auditor may be required to comply with legal or regulatory requirements in
33
addition to PSAs. When the differences between the legal or regulatory requirements and PSAs
relate only to the layout and wording of the auditor’s report, the requirements in paragraph 49(a)–
(n) set out the minimum elements to be included in the auditor’s report to enable a reference to the
Philippine Standards on Auditing. In those circumstances, the requirements in paragraphs 21–48
that are not included in paragraph 49(a)–(n) do not need to be applied including, for example, the
required ordering of the Opinion and Basis for Opinion sections.
A66. Where specific requirements in a particular jurisdiction do not conflict with PSAs, the layout and wording
required by paragraphs 21–48 of this PSA assist users of the auditor’s report in more readily
recognizing the auditor’s report as a report of an audit conducted in accordance with PSAs.
_______________________________
32
PSA 560, Subsequent Events, paragraphs 10–17
33
Information Required by PSA 701 (Ref: Para. 49(h))
A67. Law or regulation may require the auditor to provide additional information about the audit that was
performed, which may include information that is consistent with the objectives of PSA 701, or may
prescribe the nature and extent of communication about such matters.
A68. The PSAs do not override law or regulation that governs an audit of financial statements. When PSA
701 is applicable, reference can only be made to PSAs in the auditor’s report if, in applying the law or
regulation, the section required by paragraph 49(h) of this PSA is not inconsistent with the reporting
requirements in PSA 701. In such circumstances, the auditor may need to tailor certain aspects of the
communication of key audit matters in the auditor’s report required by PSA 701, for example by:
• Modifying the heading “Key Audit Matters”, if law or regulation prescribes a specific heading;
• Explaining why the information required by law or regulation is being provided in the auditor’s
report, for example by making a reference to the relevant law or regulation and describing how
that information relates to the key audit matters;
• Where law or regulation prescribes the nature and extent of the description, supplementing the
prescribed information to achieve an overall description of each key audit matter that is
consistent with the requirement in paragraph 13 of PSA 701.
A69. PSA 210 deals with circumstances where law or regulation of the relevant jurisdiction prescribes the
layout or wording of the auditor’s report in terms that are significantly different from the requirements of
PSAs, which in particular includes the auditor’s opinion. In these circumstances, PSA 210 requires the
auditor to evaluate:
(a) Whether users might misunderstand the assurance obtained from the audit of the financial
statements and, if so,
(b) Whether additional explanation in the auditor’s report can mitigate possible
misunderstanding.
If the auditor concludes that additional explanation in the auditor’s report cannot mitigate possible
misunderstanding, PSA 210 requires the auditor not to accept the audit engagement, unless
required by law or regulation to do so. In accordance with PSA 210, an audit conducted in
accordance with such law or regulation does not comply with PSAs. Accordingly, the auditor does
not include any reference in the auditor’s report to the audit having been conducted in accordance
34
with Philippine Standards on Auditing.
Considerations specific to public sector entities
A70. Auditors of public sector entities may also have the ability pursuant to law or regulation to report publicly
on certain matters, either in the auditor’s report or in a supplementary report, which may include
information that is consistent with the objectives of PSA 701. In such circumstances, the auditor may
need to tailor certain aspects of the communication of key audit matters in the auditor’s report required
by PSA 701 or include a reference in the auditor’s report to a description of the matter in the
supplementary report.
___________________________
34
Auditor’s Report for Audits Conducted in Accordance with Both Auditing Standards of a Specific Jurisdiction
and Philippine Standards on Auditing (Ref: Para. 50)
A71. The auditor may refer in the auditor’s report to the audit having been conducted in accordance with both
Philippine Standards on Auditing as well as the national auditing standards when, in
addition to complying with the relevant national auditing standards, the auditor complies with each
35
of the PSAs relevant to the audit.
A72. A reference to both Philippine Standards on Auditing and the national auditing standards is not
appropriate if there is a conflict between the requirements in PSAs and those in the national auditing
standards that would lead the auditor to form a different opinion or not to include an Emphasis of Matter
or Other Matter paragraph that, in the particular circumstances, is required by PSAs. In such a case, the
auditor’s report refers only to the auditing standards (either Philippine Standards on Auditing or the
national auditing standards) in accordance with which the auditor’s report has been prepared.
Supplementary Information Presented with the Financial Statements (Ref: Para. 52–53)
A73. In some circumstances, the entity may be required by law, regulation or standards, or may voluntarily
choose, to present together with the financial statements supplementary information that is not required
by the applicable financial reporting framework. For example, supplementary information might be
presented to enhance a user’s understanding of the applicable financial reporting framework or to
provide further explanation of specific financial statement items. Such information is normally presented
in either supplementary schedules or as additional notes.
A74. Paragraph 52 of this PSA explains that the auditor’s opinion covers supplementary information that is
an integral part of the financial statements because of its nature or how it is presented. This evaluation
is a matter of professional judgment. To illustrate:
• When the notes to the financial statements include an explanation or the reconciliation of the
extent to which the financial statements comply with another financial reporting framework, the
auditor may consider this to be supplementary information that cannot be clearly differentiated
from the financial statements. The auditor’s opinion would also cover notes or supplementary
schedules that are cross-referenced from the financial statements.
• When an additional profit and loss account that discloses specific items of expenditure is
disclosed as a separate schedule included as an Appendix to the financial statements, the
auditor may consider this to be supplementary information that can be clearly differentiated from
the financial statements.
A75. Supplementary information that is covered by the auditor’s opinion does not need to be specifically
referred to in the auditor’s report when the reference to the notes in the description of the statements
that comprise the financial statements in the auditor’s report is sufficient.
A76. Law or regulation may not require that the supplementary information be audited, and management
may decide to ask the auditor not to include the supplementary information within the scope of the audit
of the financial statements.
A77. The auditor’s evaluation whether unaudited supplementary information is presented in a manner that
could be construed as being covered by the auditor’s opinion includes, for example, where that
__________________________
35
information is presented in relation to the financial statements and any audited supplementary
information, and whether it is clearly labeled as “unaudited.”
A78. Management could change the presentation of unaudited supplementary information that could be
construed as being covered by the auditor’s opinion, for example, by:
• Removing any cross-references from the financial statements to unaudited supplementary
schedules or unaudited notes so that the demarcation between the audited and unaudited
information is sufficiently clear.
• Placing the unaudited supplementary information outside of the financial statements or, if that is
not possible in the circumstances, at a minimum placing the unaudited notes together at the end
of the required notes to the financial statements and clearly labeling them as unaudited.
Unaudited notes that are intermingled with the audited notes can be misinterpreted as being
audited.
A79. The fact that supplementary information is unaudited does not relieve the auditor of the responsibilities
36
described in [proposed] PSA 720 (Revised).
__________________________
36
[Proposed] PSA 720 (Revised), The Auditor’s Responsibilities Relating to Other Information
Appendix
(Ref: Para. A14)
Illustrations of Independent Auditor’s Reports on Financial Statements

• Illustration 1: An auditor’s report on financial statements of a listed entity prepared in accordance with a
fair presentation framework
• Illustration 2: An auditor’s report on consolidated financial statements of a listed entity prepared in
accordance with a fair presentation framework
• Illustration 3: An auditor’s report on financial statements of an entity other than a listed entity prepared in
accordance with a fair presentation framework (where reference is made to material that is located on a
website of an appropriate authority)
• Illustration 4: An auditor’s report on financial statements of an entity other than a listed entity prepared in
accordance with a general purpose compliance framework
Illustration 1 – Auditor’s Report on Financial Statements of a Listed Entity Prepared in Accordance

with a Fair Presentation Framework
For purposes of this illustrative auditor’s report, the following circumstances are assumed:
• Audit of a complete set of financial statements of a listed entity using a fair presentation framework.
The audit is not a group audit (i.e., PSA 600 does not apply).
• The financial statements are prepared by management of the entity in accordance with PFRSs (a
general purpose framework).
• The terms of the audit engagement reflect the description of management’s responsibility for the
financial statements in PSA 210.
• The auditor has concluded an unmodified (i.e., “clean”) opinion is appropriate based on the audit
evidence obtained.
• The relevant ethical requirements that apply to the audit comprise the International Ethics Standards
Board for Accountants’ Code of Ethics for Professional Accountants together with the ethical
requirements relating to the audit in the jurisdiction, the Code of Ethics for Professional Accountants in
the Philippines, and the auditor refers to both.
• Based on the audit evidence obtained, the auditor has concluded that a material uncertainty does not
exist related to events or conditions that may cast significant doubt on the entity’s ability to continue as
a going concern in accordance with PSA 570 (Revised).
• Key audit matters have been communicated in accordance with PSA 701.
• Those responsible for oversight of the financial statements differ from those responsible for the
preparation of the financial statements.
• In addition to the audit of the financial statements, the auditor has other reporting responsibilities
required under local law.
INDEPENDENT AUDITOR’S REPORT

To the Shareholders of ABC Company [or Other Appropriate Addressee]
1
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of ABC Company (the Company), which comprise the statement of
financial position as at December 31, 20X1, and the statement of comprehensive income, statement of
changes in equity and statement of cash flows for the year then ended, and notes to the financial statements,
including a summary of significant accounting policies.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial
position of the Company as at December 31, 20X1, and its financial performance and its cash flows for the
year then ended in accordance with Philippine Financial Reporting Standards (PFRSs).
Basis for Opinion
We conducted our audit in accordance with Philippine Standards on Auditing (PSAs). Our responsibilities
______________________
1
The sub-title “Report on the Audit of the Financial Statements” is unnecessary in circumstances when the second sub-title
“Report on Other Legal and Regulatory Requirements” is not applicable.
under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Statements section of our report. We are independent of the Company in accordance with the International
Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) together
with the ethical requirements that are relevant to our audit of the financial statements in the Philippines, the
Code of Ethics for Professional Accountants in the Philippines (Philippine Code of Ethics), and we have
fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit
of the financial statements of the current period. These matters were addressed in the context of our audit of
the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
[Description of each key audit matter in accordance with PSA 701.]
2
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance
3
with PFRSs, and for such internal control as management determines is necessary to enable the preparation
of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless management either intends to liquidate the Company or to cease
operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with PSAs will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
Paragraph 40(b) of this PSA explains that the shaded material below can be located in an Appendix to the auditor’s report. Paragraph
40(c) explains that when law, regulation or national auditing standards expressly permit, reference can be made to a website of an
appropriate authority that contains the description of the auditor’s responsibilities, rather than including this material in
______________________
2
Throughout these illustrative auditor’s reports, the terms management and those charged with governance may need to be
replaced by another term that is appropriate in the context of the legal framework in the particular jurisdiction.
3
Where management’s responsibility is to prepare financial statements that give a true and fair view, this may read: “Management is
responsible for the preparation of financial statements that give a true and fair view in accordance with Philippine Financial
Reporting Standards, and for such ...”
the auditor’s report, provided that the description on the website addresses, and is not inconsistent with, the description of the auditor’s
responsibilities below.
As part of an audit in accordance with PSAs, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that
is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
4
effectiveness of the Company’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to
the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were
of most significance in the audit of the financial statements of the current period and are therefore the key
audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not
be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements

[The form and content of this section of the auditor’s report would vary depending on the nature of the
auditor’s other reporting responsibilities prescribed by local law, regulation, or national auditing standards.
The matters
_______________________
4
This sentence would be modified, as appropriate, in circumstanZces when the auditor also has a responsibility to issue an
opinion on the effectiveness of internal control in conjunction with the audit of the financial statements.
addressed by other law, regulation or national auditing standards (referred to as “other reporting
responsibilities”) shall be addressed within this section unless the other reporting responsibilities address the
same topics as those presented under the reporting responsibilities required by the PSAs as part of the
Report on the Audit of the Financial Statements section. The reporting of other reporting responsibilities that
address the same topics as those required by the PSAs may be combined (i.e., included in the Report on the
Audit of the Financial Statements section under the appropriate subheadings) provided that the wording in the
auditor’s report clearly differentiates the other reporting responsibilities from the reporting that is required by
the PSAs where such a difference exists.
The engagement partner on the audit resulting in this independent auditor’s report is [name].
[Signature in the name of the audit firm, the personal name of the auditor, or both, as appropriate for the
particular jurisdiction]
[Auditor Address]
[Date]
Illustration 2 – Auditor’s Report on Consolidated Financial Statements of a Listed Entity Prepared

in Accordance with a Fair Presentation Framework
• Audit of a complete set of consolidated financial statements of a listed entity using a fair presentation
framework. The audit is a group audit of an entity with subsidiaries (i.e., PSA 600 applies).
• The consolidated financial statements are prepared by management of the entity in accordance with
PFRSs (a general purpose framework).
consolidated financial statements in PSA 210.
evidence obtained.
• The International Ethics Standards Board for Accountants’ Code of Ethics for Professional
Accountants comprises all of the relevant ethical requirements that apply to the audit.
• Key audit matters have been communicated in accordance with PSA 701.
• Those responsible for oversight of the consolidated financial statements differ from those responsible
for the preparation of the consolidated financial statements.
• In addition to the audit of the consolidated financial statements, the auditor has other reporting
responsibilities required under local law.

5
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of ABC Company and its subsidiaries (the Group),
which comprise the consolidated statement of financial position as at December 31, 20X1, and the
consolidated statement of comprehensive income, consolidated statement of changes in equity and
consolidated statement of cash flows for the year then ended, and notes to the consolidated financial
statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the consolidated financial position of the Group as at December 31, 20X1, and (of) its consolidated financial
performance and its consolidated cash flows for the year then ended in accordance with Philippine Financial
Reporting Standards (PFRSs).
_____________________
5
The sub-title “Report on the Audit of the Consolidated Financial Statements” is unnecessary in circumstances when the second
sub-title “Report on Other Legal and Regulatory Requirements” is not applicable.
Basis for Opinion
under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated
Financial Statements section of our report. We are independent of the Group in accordance with the
International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA
Code), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit
of the consolidated financial statements of the current period. These matters were addressed in the context of
our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters.
[Description of each key audit matter in accordance with PSA 701.]
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial
6
Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements
7
in accordance with PFRSs, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless management either intends to liquidate the Group or to cease
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with PSAs will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated
________________________
6
Or other terms that are appropriate in the context of the legal framework of the particular jurisdiction
7
Paragraph 40(b) of this PSA explains that the shaded material below can be located in an Appendix to the auditor’s report. Paragraph
40(c) explains that when law, regulation or national auditing standards expressly permit, reference can be made to a website of an
appropriate authority that contains the description of the auditor’s responsibilities, rather than including this material in the auditor’s
report, provided that the description on the website addresses, and is not inconsistent with, the description of the auditor’s responsibilities
below.
Identify and assess the risks of material misstatement of the consolidated financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
8
effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we
the related disclosures in the consolidated financial statements or, if such disclosures are inadequate,
to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Group to cease to continue as a
going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial statements. We
are responsible for the direction, supervision and performance of the group audit. We remain solely
responsible for our audit opinion.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were
of most significance in the audit of the consolidated financial statements of the current period and are
therefore the key audit matters. We describe these matters in our auditor’s report unless law or
_________________________
8
This sentence would be modified, as appropriate, in circumstances when the auditor also has a responsibility to issue an
opinion on the effectiveness of internal control in conjunction with the audit of the consolidated financial statements.
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements

[The form and content of this section of the auditor’s report would vary depending on the nature of the
auditor’s other reporting responsibilities prescribed by local law, regulation, or national auditing standards.
The matters addressed by other law, regulation or national auditing standards (referred to as “other reporting
responsibilities”) shall be addressed within this section unless the other reporting responsibilities address the
same topics as those presented under the reporting responsibilities required by the PSAs as part of the
Report on the Audit of the Consolidated Financial Statements section. The reporting of other reporting
responsibilities that address the same topics as those required by the PSAs may be combined (i.e., included
in the Report on the Audit of the Consolidated Financial Statements section under the appropriate
subheadings) provided that the wording in the auditor’s report clearly differentiates the other reporting
responsibilities from the reporting that is required by the PSAs where such a difference exists.]
The engagement partner on the audit resulting in this independent auditor’s report is [name].
[Auditor Address]
[Date]
Illustration 3 – Auditor’s Report on Financial Statements of an Entity Other than a Listed Entity
Prepared in Accordance with a Fair Presentation Framework
• Audit of a complete set of financial statements of an entity other than a listed entity using a fair
presentation framework. The audit is not a group audit (i.e., PSA 600 does not apply).
• The financial statements are prepared by management of the entity in accordance with PFRSs (a
general purpose framework).
evidence obtained.
• The relevant ethical requirements that apply to the audit are those of the jurisdiction, the Code of
Ethics for Professional Accountants in the Philippines.
• The auditor is not required, and has otherwise not decided, to communicate key audit matters in
accordance with PSA 701.
• The auditor has no other reporting responsibilities required under local law.
• The auditor elects to refer to the description of the auditor’s responsibility included on a website of an
appropriate authority.

Opinion
We have audited the financial statements of ABC Company (the Company), which comprise the statement of
financial position as at December 31, 20X1, and the statement of comprehensive income, statement of
changes in equity and statement of cash flows for the year then ended, and notes to the financial statements,
including a summary of significant accounting policies.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial
position of the Company as at December 31, 20X1, and (of) its financial performance and its cash flows for the
year then ended in accordance with Philippine Financial Reporting Standards (PFRSs).
Basis for Opinion
Statements section of our report. We are independent of the Company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the Philippines, the Code of Ethics for
Professional Accountants in the Philippines, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
9
Management is responsible for the preparation and fair presentation of the financial statements in accordance
10
with PFRSs, and for such internal control as management determines is necessary to
enable the preparation of financial statements that are free from material misstatement, whether due to fraud
or error.
A further description of the auditor’s responsibilities for the audit of the financial is located at [Organization’s]
website at: [website link].This description forms part of our auditor’s report.
[Auditor Address]
[Date]
________________________
9
10
Illustration 4 – Auditor’s Report on Financial Statements of an Entity Other than a Listed Entity
Prepared in Accordance with a General Purpose Compliance Framework
• Audit of a complete set of financial statements of an entity other than a listed entity required by law or
regulation. The audit is not a group audit (i.e., PSA 600 does not apply).
• The financial statements are prepared by management of the entity in accordance with the Financial
Reporting Framework (XYZ Law) of Jurisdiction X (that is, a financial reporting framework,
encompassing law or regulation, designed to meet the common financial information needs of a wide
range of users, but which is not a fair presentation framework).
evidence obtained.
• The relevant ethical requirements that apply to the audit are those of the jurisdiction, the Code of
Ethics for Professional Accountants in the Philippines.
• The auditor is not required, and has otherwise not decided, to communicate key audit matters in
accordance with PSA 701.
• The auditor has no other reporting responsibilities required under local law.

[Appropriate Addressee]
Opinion
We have audited the financial statements of ABC Company (the Company), which comprise the balance
sheet as at December 31, 20X1, and the income statement, statement of changes in equity and cash flow
statement for the year then ended, and notes to the financial statements, including a summary of significant
accounting policies.
In our opinion, the accompanying financial statements of the Company are prepared, in all material respects,
in accordance with XYZ Law of Jurisdiction X.
Basis for Opinion
Statements section of our report. We are independent of the Company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the Philippines, the Code of Ethics for
Professional Accountants in the Philippines, and we have fulfilled our other responsibilities in accordance with
these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
11
Management is responsible for the preparation of the financial statements in accordance with XYZ Law of
12
Jurisdiction X, and for such internal control as management determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Paragraph 40(b) of this SA explains that the shaded material below can be located in an Appendix to the auditor’s report. Paragraph 40(c)
explains that when law, regulation or national auditing standards expressly permit, reference can be made to a website of an appropriate
authority that contains the description of the auditor’s responsibilities, rather than including this material in the auditor’s report, provided
that the description on the website addresses, and is not inconsistent with, the description of the auditor’s responsibilities below.
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that
is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures
13
effectiveness of the Company’s internal control.
_________________________
11
12
13
This sentence would be modified, as appropriate, in circumstances when the auditor also has responsibility to issue an opinion on
the effectiveness of internal control in conjunction with the audit of the financial statements.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we
the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Company to cease to continue as a going concern.
[Auditor Address]
[Date]

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PHILIPPINE STANDARD ON AUDITING 700 (REVISED)

FORMING AN OPINION AND REPORTING ON FINANCIAL

20. The auditor’s report shall be in writing. (Ref: Para. A13–A14)

Key Audit Matters

Auditor’s Responsibilities for the Audit of the Financial Statements

Signature of the Auditor

46. The auditor’s report shall be signed. (Ref: Para. A59–A60)

Date of the Auditor’s Report

Application and Other Explanatory Material

Form of Opinion (Ref: Para. 18–19)

Auditor’s Report (Ref: Para. 20)

Reference to the financial statements that have been audited

“… in accordance with accounting principles generally accepted in Jurisdiction X …”

Considerations specific to public sector entities

Responsibilities for the Financial Statements (Ref: Para. 32–33)

Description of materiality (Ref: Para. 37(c))

at [indicate page number or other specific reference to the location of the

Reference to a website of an appropriate authority (Ref: Para. 40(c), 41)

Other Reporting Responsibilities (Ref: Para. 42–44)

Signature of the Auditor (Ref: Para. 46)

Date of the Auditor’s Report (Ref: Para. 48)

Information Required by PSA 701 (Ref: Para. 49(h))

Considerations specific to public sector entities

Illustrations of Independent Auditor’s Reports on Financial Statements

Illustration 1 – Auditor’s Report on Financial Statements of a Listed Entity Prepared in Accordance

INDEPENDENT AUDITOR’S REPORT

Basis for Opinion

Key Audit Matters

[Description of each key audit matter in accordance with PSA 701.]

Auditor’s Responsibilities for the Audit of the Financial Statements

Report on Other Legal and Regulatory Requirements

Illustration 2 – Auditor’s Report on Consolidated Financial Statements of a Listed Entity Prepared

INDEPENDENT AUDITOR’S REPORT

Basis for Opinion

Key Audit Matters

[Description of each key audit matter in accordance with PSA 701.]

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Report on Other Legal and Regulatory Requirements

INDEPENDENT AUDITOR’S REPORT

Basis for Opinion

Auditor’s Responsibilities for the Audit of the Financial Statements

INDEPENDENT AUDITOR’S REPORT

Basis for Opinion

Auditor’s Responsibilities for the Audit of the Financial Statements

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