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AT–5905
CPA REVIEW SCHOOL OF THE PHILIPPINES
M a n i l a
AUDITING THEORY
QUALITY CONTROLS AND GENERALLY ACCEPTED AUDITING STANDARDS (GAAS)
Related PSA : PSA 220
QUALITY CONTROL FOR AUDIT WORK
Audit Firm Level: The audit firm should implement quality control policies and procedures
designed to ensure that all audits are conducted in accordance with PSAs or relevant national
standards or practices.
1. Professional requirements: independence, integrity, objectivity, confidentiality and
professional behavior.
2. Skills and competence: The firm is to be staffed by personnel who have attained and
maintained the technical standards and professional competence required to enable them
to fulfill their responsibilities with due care.
3. Assignment: Audit work is to be assigned to personnel who have the degree of technical
training and proficiency required in the circumstances.
4. Delegation: There is to be sufficient direction, supervision and review of work at all levels to
provide reasonable assurance that the work performed meets appropriate standards of
quality.
5. Consultation: Whenever necessary, consultation within or outside the firm is to occur with
those who have appropriate expertise.
6. Acceptance and retention of clients: An evaluation of prospective clients and a review, on
an ongoing basis, of existing clients is to be conducted. In making a decision to accept or
retain a client, the firm’s independence and ability to serve the client properly and the
integrity of the client’s management are to be considered.
7. Monitoring: The continued adequacy and operational effectiveness of quality control
policies and procedures is to be monitored.
Individual Audit Level: The auditor should implement those quality control procedures which are,
in the context of the policies and procedures of the firm, appropriate to the individual audit.
1. Direction: Direction involves informing assistants of their responsibilities and the objectives
of the procedures they are to perform. It also involves informing them of matters, such as
the nature of the entity’s business and possible accounting or auditing problems that may
affect the nature, timing and extent of audit procedures with which they are involved.
2. Supervision: Supervision is closely related to both direction and review and may involve
elements of both. Personnel carrying out supervisory responsibilities perform the following
functions during the audit:
a. monitor the progress of the audit to consider whether (1) assistants have the
necessary skills and competence to carry out their assigned tasks; (2) assistants
understand the audit directions; and (3) the work is being carried out in accordance
with the overall audit plan and the audit program.
b. become informed of and address significant accounting and auditing questions raised
during the audit
c. resolve any differences of professional judgment between personnel and consider the
level of consultation that is appropriate.
3. Review: The work performed by each assistant needs to be reviewed by personnel of least
equal competence.
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GENERALLY ACCEPTED AUDITING STANDARDS
General standards
1. The examination is to be performed by a person or persons having adequate technical training
and proficiency as an auditor.
2. In all matters relating to the assignment, an independence in mental attitude is to be
maintained by the auditor or auditors.
3. Due professional care is to be exercised in the performance of the examination and the
preparation of the report.
Standards of Fieldwork
1. The work is to be adequately planned, and assistants, if any, are to be properly supervised.
2. There is to be a proper study and evaluation of the existing internal control as a basis for
reliance thereon and for the determination of the resultant extent of the tests to which auditing
procedures are to be restricted.
3. Sufficient, competent evidential matter is to be obtained through inspection, observation,
inquiries, and confirmations to afford a reasonable basis for an opinion regarding the financial
statements under examination.
Standards of Reporting
1. The report shall state whether the financial statements are presented in accordance with
generally accepted principles of accounting.
2. The report shall identify those circumstances in which principles have not been consistently
observed in the current period in relation to the preceding period.
3. Informative disclosures are to be regarded as reasonably adequate unless otherwise stated in
