Adoption of PSA 250 on Audit Laws and Regulations

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PRC BOARD OF ACCOUNTANCY Resolution NO. 93, S. 2002: Adoption of PSA 250 on Audit Laws and Regulations

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Title Source: Supreme Court: Adoption of PSA 250 on Audit Laws and Regulations

Law: Prc Board Of Accountancy No. 93, S. 2002

Decision Date: Oct 28, 2002

The PRC Board of Accountancy adopts Philippine Standards on Auditing (PSA) 250, emphasizing the consideration of laws and regulations in the audit of financial statements to enhance compliance and accountability.

Law Summary

Definition and Identification of Laws and Regulations

Defines laws and regulations as rules governing an entity’s activities affecting its financial statements.
Requires auditors to obtain an understanding of the legal framework applicable to the entity.
Includes various laws such as tax, environmental, labor, and corporate laws.

Auditor’s Responsibility for Compliance

Auditors are responsible for considering the legal and regulatory frameworks relevant to the audit.
Must design audit procedures to detect material misstatements due to non-compliance.
Not responsible for preventing non-compliance but for identifying material effects on financial statements.

Audit Procedures for Detecting Non-compliance

Includes inquiries of management and those charged with governance about compliance.
Reviewing correspondence with regulatory authorities.
Inspecting legal expense accounts and minutes of board meetings.
Performing other audit procedures as necessary to identify potential non-compliance.

Reporting and Communication Obligations

Auditors must evaluate identified non-compliance to determine its effect on financial statements.
Must communicate with management and those charged with governance about findings.
If management does not take appropriate action, auditors consider implications for their report.

Professional Skepticism and Judgment

Emphasizes the need for auditors to exercise professional skepticism.
Auditors should carefully assess the nature and impact of laws and regulations on audit evidence.
Requires exercising professional judgment in planning, performing, and evaluating audit procedures related to compliance.

Limitation of Auditor’s Responsibility

Clarifies that auditors do not provide legal opinions or guarantee compliance.
Responsibility is limited to material effects on financial statements, not to detect all non-compliance.

Effective Date and Adoption

Resolution adopting PSA 250 by the Professional Regulatory Board of Accountancy, dated October 28, 2002.
Implementation mandated for auditors to align with international auditing standards adapted for the Philippines.

END