Question & AnswerQ&A (PRC STATEMENT OF AUDITING STANDARDS OF THE PHILIPPINES NO. 9)
The primary requirement under SASP No. 2 is that the work must be adequately planned and assistants, if any, are to be properly supervised.
The term 'auditor' refers to the auditor with final responsibility for the audit.
The term 'assistants' refers to the personnel involved in an individual audit other than the auditor.
Adequate audit planning ensures appropriate attention to important areas, helps promptly identify potential problems, ensures expeditious completion of work, assists in proper utilization of assistants, and coordinates work done by other auditors and experts.
The auditor should obtain a level of knowledge that enables planning and performance of the examination according to generally accepted auditing standards, including understanding events, transactions, and practices that may significantly affect the financial statements.
It helps in identifying special consideration areas, assessing accounting data processing conditions, evaluating reasonableness of estimates and management representations, and judging the appropriateness of accounting principles and disclosures.
Matters such as type of business, products and services, capital structure, related parties, locations, production, distribution, compensation methods, economic conditions, government regulations, changes in technology, common accounting practices, competitive conditions, and financial trends and ratios.
Sources include client’s annual reports, prospectuses, advertising literature, minutes of meetings, internal financial reports, prior audits, non-audit firm personnel, client management discussions, policy manuals, trade journals, economic considerations, and site visits.
It should consider the entity’s business and industry, accounting policies, accounting information processing methods, reliance on internal controls, judgments on materiality, financial statement items needing adjustment, conditions affecting audit tests, expected reports, significant audit areas, rotation of audit focus, and involvement of other auditors or assistants.
An audit program sets forth in reasonable detail the audit procedures necessary to accomplish the examination's objectives and serves to instruct assistants on the work to be done.
The auditor evaluates the understanding of the accounting system and internal controls and may decide to rely on certain controls to determine the nature, timing, and extent of audit procedures if it is effective and efficient, or may choose other methods if more practical.
Supervision includes coordinating staff assignments, assigning work, reviewing fieldwork, conducting on-the-job training, resolving accounting and auditing issues, and ensuring the engagement objectives are accomplished.
Assistants should be informed of their responsibilities, objectives of procedures, matters affecting the nature, extent, and timing of procedures, including relevant business knowledge and possible accounting and auditing problems.
It became effective upon approval by the Board of Accountancy and the Professional Regulation Commission, following its approval on December 15, 1989.