Work Performed by Others

Work Performed by Others
To ensure the adequacy or acceptability of a work that will be reviewed by a

practitioner, sufficient and appropriate evidence must be obtained to determine
whether the assertions are free of material misstatement (departure from PFRS).
If the auditor becomes aware that information supplied by the management is
incorrect, incomplete or otherwise unsatisfactory, the accountant should consider
performing the above procedures and request management to provide additional
information. If management refuses to provide additional information, the
accountant should withdraw from engagement, informing the entity of the reasons
for the withdrawal.
If the auditor becomes aware of misstatements, the accountant should try to agree
appropriate amendments with the entity. If such amendments are not made and the
financial information is considered to be misleading, the accountant should
withdraw from the engagement.
Documentation
The practitioner should document matters which are important in providing
evidence to support the review report, and evidence that the review was carried out
in accordance with this PSRE (Philippine Standard on Review Engagements).
Procedures and Evidence

The practitioner should apply judgment in determining the specific nature, timing
and extent of review procedures. The practitioner will be guided by such matters as
the following:
• Any knowledge acquired by carrying out audits or reviews of financial statements
for prior periods.
• The practitioner’s knowledge of the business including knowledge of the
accounting principles and practices of the industry in which the entity operates.
• The entity’s accounting systems.
• The extent to which a particular item is affected by management judgment.
• The materiality of transactions and account balances
In formation of opinion, reasonable assurance must be reached by taking into

account the following:
• if sufficient evidence has been obtained
• if there are uncorrected misstatements, in which these misstatements are
material, individually or aggregate
• if financial statements are prepared, in all material aspect, in accordance with the
requirements of the applicable financial reporting framework
Four types of Opinions

1. Unmodified/Unqualified – when financial statements are presented fairly in all
material respects in accordance with the criteria. Common phrases use to describe
this type of opinion are “presents fairly, in all material respect” or “give a true and
fair view”.
2. Qualified – when financial statements
are presented fairly, but there are other items that are not fairly stated or without
sufficient appropriate evidence. Common phrases use to describe this type of
opinion is “except for”.
3. Adverse – when financial statements do not present fairly, in all material

respects. Practitioner is negating the representation by responsible party.
4. Disclaimer of opinion – no opinion is being expressed. Common phrases use to
describe this type of opinion is “we do not express a conclusion”.
Issuance of Modified Opinion

• Qualified or Disclaimer – limitation on the scope of auditor’s work. The auditor
wasn’t able to distinguish if there is a mistake or not because of lack of sufficient
appropriate evidence which leads.
• Qualified or Adverse – disagreement with management, because auditor was able
to gather sufficient appropriate evidence which enable him to conclude that the
financial statement contains material misstatements.
Other terms:
Pervasive – one misstatement makes the entire FS materially misstated, ;
FUNDAMENTAL to user’s understanding ex: GOING CONCERN assumption mismo
ung di sinunod ; HIGHLY MATERIAL
Opinion will be disclaimer
Procedures for the review of financial statements will ordinarily include the
following:
• Obtaining an understanding of the entity’s business and the industry in which it
operates.
• Inquiries concerning the entity’s accounting principles and practices
• Inquiries concerning the entity’s procedures on preparation of financial statements
• Inquiries concerning all material assertions
• Analytical procedures designed to identify relationships and individual items that
appear unusual. (Ex: in comparing of financial statements, required accounting
adjustments may arise)
• Inquiries concerning actions taken at meetings of shareholders, the board of
directors, committees of the board of directors and other meetings that may affect
the financial statements
• Obtaining reports from other practitioners, if any and if considered necessary, who
have been engaged to audit or review the financial statements of components of
the entity
• Inquiries of persons having responsibility for financial and accounting matters
concerning, for example:
- Whether all transactions have been recorded.
- Whether the financial statements have been prepared in accordance with the
basis of accounting indicated.
- Changes in the entity’s business activities and accounting principles and
practices.
- Matters as to which questions have arisen in the course of applying the foregoing
procedures.
- Obtaining written representations from management when considered
appropriate
The practitioner should inquire about events subsequent to the date of the financial
statements that may require adjustment of or disclosure in the financial statements.
The practitioner does not have any responsibility to perform procedures to identify
events occurring after the date of the review report.
If the practitioner has reason to believe that the information subject to review may
be materially misstated, the practitioner should carry out additional or more
extensive procedures as are necessary to be able to express negative assurance or
to confirm that a modified report is required.

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Work Performed by Others

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Work Performed by Others

To ensure the adequacy or acceptability of a work that will be reviewed by a

Procedures and Evidence

In formation of opinion, reasonable assurance must be reached by taking into

Four types of Opinions

3. Adverse – when financial statements do not present fairly, in all material

Issuance of Modified Opinion

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