AUDITING THEORY 3.

Academe or Education – if you are teaching

any subject given in the licensure examination
The Practice & Regulation of the Accounting
Profession General Rule: CPAs are the primary person
teaching the subject in the board exam
Republic Act 9298 (Philippine Accountancy act of
2004) Except: Lawyers may be allowed to teach business
Regulatory act of accountancy law & taxation
profession
Regulate the accountancy profession Other Technically related subject (gumagamit ng
(entrants & those who are in practice) financial information):

Scope of Practice  Finance

1. Public Practice – prestigious sector  Production Management

A specific relationship should exist
between the provider of the service &  Cost Management
the recipient
Edge: Specific Provision (Deans & Department
Client – service provider relationship Heads)

 The service provider can adopt his own  Deans – for institution offering BSA
set of policies and procedures (more under an exclusive department
than one client on a FEE BASIS)
 Department Heads – for institutions
 May specific service na irerender – any offering BSA together with other
service requiring application of business courses
accounting & auditing skills &
knowledge

Edge of CPA over non-CPA: once engaged in 4. Government – similar in Commerce & Industry
public practice magiging limitless na sila, will Sector
have wide opportunity
Employer – Government, GOCC,
2. Commerce & Industry – private sector LGU
Edge: salary, promotion in position
Part of the organization, employer-
employee relationship

 Mandated to follow the policies &

procedure of the company

 Position being hold requires application

of accounting & auditing skills &
knowledge Regulation of the Accountancy Profession

Edge: aside from salary, specific provision (for Kilalanin ung may primary task in regulating
Supervisory Level) accountancy profession
All professions are regulated by the President
 Entities with annual revenue of at
least P 10,000,000.00 and/or paid-up Republic Act 9298 (Philippine Accountancy Act of
capital of atleast P 5,000,000.00 2004)

 Incharge in reporting processes Approved May 13, 2004

is occupied by CPA Prospective Application – those who have
benefits prior to the implementation of RA, ay
hindi mawawalan ng benefits na nakuha
 Regulatory act of the practice of accountancy in
the Phil. Entrants
Supersedes Presidential Decree No. 692,
otherwise known as Revised Accountancy Law 1. Educational Institution – adhering to
requirements of CHED
Specific Objective of RA 9298: ETC – Education Technical Council
2. Syllabi – laman na topic sa board
 Standardization & regulation of  Revision should be not more than once
accounting education in every 3 years
 Examination for registration of CPA 3. Licensure Examination for CPA
 Supervision, control and regulation of 4. Oathtaking – administer conduct of the oath
the practice of accountancy 5. Certificate of Registration – primary proof of
being a CPA
Composition of PRBOA:
Practice
Chairman and 6 members to be appointed by
the president of the Phil. 1. Standards: Accounting & Auditing
 FRSC & AASC – created to give
APO (Accredited National Professional Organization of assistance to the Board
CPA) – represented by PICPA 2. Adopt a Code of Conduct/Ethics
3. Perform Quality Review
In each vacant position, APO will submit 5  Inaaudit ung auditor
nominees  Conduct an oversight over the quality of
 Submitted to PRC within 60 days prior audit of FS
to the expiration nung term nung 4. Conduct investigations
papalitan na Chairman or member 5. Take appropriate actions
 Kapag hindi nakapasa within 60 days,
the PRC should still come up with list of Has the primary function to carry out the
persons na irerecomend the President provision of RA 9298 and its IRR
From the nominees, the PRC will select 3 Adopt an official seal
recommendees (in rank) Current files are with BOA. Permanent Files are
President will select 1 appointee with PRC.
Among the members, they will be electing a Custodian of Records is the Commission
Vice Chairman for a term of 1 year (pwde mare- BOA will submit annual report to the PRC
elect) The President will decide whether to suspend or
remove any member
PICPA – provides assistance to BOA Makakakuha ng refresher course certificate, sa
Term of Office: mga educational institution offering BSA
Chairman & members of the Board shall hold program
office for a term of 3 years (1complete term=3 Kapag nag fail ng 2 complete board exam ang
years) isang candidate, madidisqualify sia na magtake
No person who has served two successive ng panibago unless may maibigay sia na
complete terms shall be eligible to refresher course certificate
reappointment until the lapse of 1 year Passed – if the general average is at least 75%,
No person shall serve the Board for more than with no grades below 65% in any given subject
12 years (maximum) Conditional – if the general average is less than
If there is a replacement of the person/member 75%, has a grade of less than 65% or both, but
who resigns, ang magiging term nlang nung has obtained 75% and above in majority of
pumalit is ung tira dun sa 3 years (ex. may subject (4 out of 6) covered in the board exam,
nagresign na member at nka 1year palang, ung itatake nia ung subject na lower than 75% within
pumalit sa knya ay may 2 years para maging two years from the preceding examination
member Copies of rosters of CPA shall be made available
 Unexpired term not considered as a to any party as may be deemed necessary (may
complete term valid basis; reasonable justification)

Powers & Functions of the Board

  Kapag may gusto ba makakuha ng copy,  Individual Professionals – the
ung Board ay kelangan magprovide ng reckoning date of validity of the
copy certificate of accreditation shall be the
 Mere publication in the official gazette date of birth of the individual (same ng
will not be deemed sufficient/complaint sa Professional Identification card)
with these  Accounting Firms & Partnership – the
Certificate of Registration – proof na CPA na reckoning date of validity of certificate
ako of accreditation shall be the month of
 Validity of COR is lifetime for citizen their SEC Registration date. Also, all
CPA CPA partners, members & staff of the
 No two CPAs will have the same firm or partnership shall have valid
registration number professional identification card at the
Professional Identification Card – renewable time of application
every 3 years
 Kung kelan nagparegister, add 3 years, Ex: Individual CPA
tapos kunin ang birthday dun maeexpire
(on or before expiration need na OLD (RA 9298)
magrenew) Date of Registration: June 15, 2022
Special or Temporary Permit – certificate of Date of Expiration: December 31, 2024
registration for Foreign CPAs *Counted as 1year ung date of registration, tapos
 May certain validity date December 31
 Dapat may foreign reciprocity Date of Renewal (if Birthdate is Sept 1): on or befor
agreement between 2 countries wherein September 30, 2024
they will be allowing the citizen of the
other country to practice accounting on NEW (RA 10912)
another country Date of Registration: June 15, 2022
 There should be an essential Date of Expiration: September 1, 2025
contribution to the development of the Date of Renewal: on or before September 1, 2025
accountancy profession in the Phil.
Refusal to Issue (initial) – ung kakapasa mu  Purpose: para sabay sa pagrenew ng
palang ay may grounds for refusal hindi ka lisensya
mabibigyan
Partnership
Limitations of Practice of Public Accountancy Date of Registration: June 2022
SEC Registration: September 2022
Single Practitioners & Partnerships for the
practice of public accountancy shall be OLD: same lang sa individual
registered CPAs in the Phil. NEW RA 10912: Date of Expiration: September 2025
Firm – indicates sole proprietorship (RA 9298)
ex. Ma. Cristy Broncate & Associates, CPAs Meaningful Experience (related to public practice)
Pwde padin gamitin ung name ng partnership  Public Practice – shall include at least
kahiy may isang partner ang hndi nagpatuloy one year as audit assistant & at least
 Kapag isa nlang sa partners ang naiwan, two years as auditor in charge of audit
pwde nia lang gamitin ung name ng engagement covering full audit
partnership for a period not exceeding 2 functions of significant clients
years after becoming a sole  Commerce & Industry – include
proprietorship significant involvement in general
 Hanggat partnership pwdeng gamiting acctg., budgeting, tax administration,
ung old name internal auditing, liason with external
Bawal gumamit ng fictitious name, maglagay ng auditors, representing his/her employer
specification before government agencies on tax &
matters related to accounting or any
Certificate of Accreditation – serves as a primary proof other related functions
that you are being allowed to engage in public practice  Significant involvement –
Valid for 3 years and shall be renewed on or relate to position, supervisory
before the expiration of the validity date
 position, tenure: at least 3 years
in service Renewal of PIC – 15 Credit units
 Academe/ Education – include Exemption:
teaching for at least 3 trimesters or 2  Professional working oversees
semesters subject in either financial (OFW)
acctg., business law and tax, auditing  First renewal ng mga newly
problems, auditing theory, financial licensed professionals
management & management services. For Accreditation – 120 Credit units
Provided, that the accumulated teaching
experience on these subjects shall not be Technical Competence 30
less than 3 school years Professional Skills 5
 Government – include significant Professional Values, ethics
involvement in general accounting, & attitudes 5
budgeting, tax administration, internal Flexible CPD units 80
auditing, liason with COA or any other Total 120
related functions
Old:
Use of Seal: it will make the document (public On or before 2016 – 60 credit units
document) anyone can rely from it (General) 2017 - 80 Credit units
Specific: Affixing the CPA’s seal & signature is 2018 - 100 credit units
an indication of compliance by the CPA of the requisites 2019 onwards - 120 credit units
accounting & auditing standards & rules (statement of
compliance) The required minimum units earned from each
of the previous years shall be 20 credit units
Certificate of Registration – indication of Old:
practice  60 credit units (15 credit units minimum
Seal – indication of compliance each year
 May permanently exempted: 65 years
Placed at the lower left of the paper old unless magpapa accredit for public
Working papers are confidential, privileged & practice (need mag earn ng 60 units)
property of CPA
Organizations Created thru 9298
 Foreign CPA ang may burden to prove na may
foreign reciprocity FRSC (Financial Reporting Standards Council)
 Main function is to establish generally
Penal Provision accepted accounting principles;
successor of Accounting Standards
any person who shall violate any of the Council
provisions of this act or its IRR as promulgated  Composed of 16 members (1 chairman
by the Board subject to the approval of the & 15 representative)
commission, shall upon conviction be punished  Board of Accountancy
by:  Bureau of Internal Revenues
 Fine of not less than P 50,000.00 or  Bangko Sentral ng Pilipinas
 Imprisonment for a period not exceeding  Commission on Audit
2 years  4 sectors of Practice (Public,
 Both Commerce & Industry,
Academe/ Education,
Enforcement of RA: both PRC & BOA, pero mas Government) 2 each
specific si BOA  Major user of FS (FINEX)
 Securities and Exchange
Republic Act 10912 (Continuing Professional Commission
Development Act of 2006  Insurance Commission
AASC (Auditing & Assurance Standards
CPD – way of regulators to provide assurance Council)
that the members of profession possess the skills &  an authority in establishing &
knowledge expected from a CPA promulgating auditing standards in the
 Phil. to enhance reliability, uniformity,  Shall only be 15 members (pero sa
& acceptability of FS in the country; totoong buhay 25 members)
OLD Name: Auditing Standards &
Practices Council (ASPC) PRC-CPE Council – has the primary function to
 composed of 15 members (1 chairman monitor the implementation of CPD program
& 14 representative)  Same with their term in BOA, PICPA
 Board of Accountancy and organizations
 ACPAPP
 Bangko Sentral ng Pilipinas Commission on Audit – Supreme Audit Institutions in
 Commission on Audit the Philippines
 APO  Perform operational audit, compliance
 Securities & Exchange audit ng mga GOCCs
Commission
Securities & Exchange Commission – regulates
 Per BOA Resolution No. 22 Series of partnership & corporations; nag require ng IFRS
2020, the members of AASC is
increased from 15 to 18 (1chairman & RA 8981 – PRC Modernization Act of 2000, regarding
17 representatives) licensures
 Addition from Insurance
Commission 1 Credit Unit = 1 credit hour of CPD
 Removal of Government program, activity or source
 2 from Public Practice must be
from small medium-sized RA 9298: consolidation of Senate Bill No. 2748
practitioner & House Bill No. 6678 was finally passed by the
Senate & House of Representatives on February
QRC (Quality Review Committee) 6 and February 7, 2004, respectively
 Help BOA to conduct an oversight into  Was signed and approved on May 13,
the quality of audit of FS through a 2004 by the President of the Philippines
review of the quality control measures Within 90 days after the effectivity of RA 9298,
instituted by CPAs in order to ensure the Board subject to the approval of the
compliance with accounting & auditing Commission & in coordination with the APO,
standards & practices shall adopt & promulgate such rules &
 Nirereview si auditor kung sumusunod regulations to carry out the provisions of RA
ba sia sa requirements/standards of PSA 9298 & which shall be effective 15 days
and applicable standards in performing following their publication in the official gazette
an audit engagement or in any major daily newspaper of general
 Composed of 7 members (1 chairman & circulation
6 representatives) The APO shall submit its nominations with
 Concept only hndi nag materialize ung complete documentations to the Commission not
creation later than 60 days prior to the expiry of the term
of an incumbent chairman or member
ETC (Education Technical Council) The death or disability of an individual CPA or
 Related to regulation in accounting the dissolution of a firm or partnership shall be
education reported to the BOA not later than 30 days from
 Composed of 7 members (1chairman & the date of such death, dissolution or liquidation
6 representatives) For doctorate degree or equivalent, additional 30
 Hndi din nagmaterialize ung creation credit units for compliance period upon
completion of post graduate degree will be
 All Four shall have a term of 3 years renewable awarded
for another term Those who failed to renew their professional
license for a period of 5 consecutive years from
PICPA – Philippine Institute of Certified Public initial registration or from last renewal shall be
Accountant declared delinquent & be dropped from rosters
of CPAs
 Represent Filipino CPAs sa national
October 2, 1975: Accreditation of PICPA (PRC
level
Accreditation No. 15)
 The Chairperson should be at least 40 years of  Master of a particular Professional
age, the other commissioner must be at least 35 Skills, acquired by training & education
years of age  Adherence by its members to a
The BSP monetary board is composed of 7 common code of values and conduct
members appointed by the President of a Phil. established by its administrating body,
for a term of 3 years including maintaining an outlook which
The Chairman & commissioners of COA must is essentially objective
have at least 10 years of work experience  Acceptance of a duty to society as a
The commission proper of COA is appointed by whole
the president of the Phil. for a term of 7 years
The BOA has the power and function to prescribe
Code of Ethics for Professional Accountant in the and/or adopt a Code of Ethics for the practice of
Philippines accountancy
PICPA become a member of IFAC (International
Ethics – simply stated, ethical ang isang Gawain kung un Federation of Accountants). It is required to follow
ung tingin mung tamang gawin (subjective); kung ikaw standards na sinusundan ni IFAC, one of it is Code
ay makakatulong kapag ginawa of Ethics.
 System of moral principles IESBA (International Ethics Standards Board for
Code of Ethics – represents a set of moral principles, Accountant) – sumulat ng Code of Ethics, which is
rules of conduct or values adopted by IFAC
PICPA recommended the adoption of these
 Prospective to the Profession – intended standards to BOA
to assist the members in understanding FRSC & AASC will be subdivided into different
the difference between right & wrong workgroups. Each workgroup will be assigned a
and in applying that understanding to particular international standard na irereview nila
their decision at ichecheck nila kung pwde iadopt sa Phil.
 Will provide guidelines, but it is the  Discussion Papers – will be used to
member’s judgment kung anu ung document the process of their review of
ultimately nila na gagawin na action international standards
 Exposure Drafts – ieexpose dun sa
There is a need of Code of Ethics: Public (stakeholders); bago maexpose sa
To emphasize the acceptance of our public magkakaroon muna ng botohan
responsibility to the society  Accounting Standards
 We are governed by very strict set of – FRSC ang
standards, value public interest (to meet magbobotohan,
public interest requirements), hindi basta majority of the council
barabara ung paggawa ng reports ng should approve the
CPA, to attain the highest level of exposure draft (atleast
performance 60 days)
Four Basic Requirements (CPCQ)  Auditing Standards –
 Credibility – we should be able to AASC ang
establish that there is a need for magbobotohan,
credibility of information systems majority din dapat ang
 Professionalism – requires that there mag approve (90 days
should be individuals na acknowledge period); the public is
by the stakeholders to be an expert on expected to provide
this field comments suggestions
 Confidence – users of the report of PA or recommendations
should feel confident, magiging basehan  Final Drafts (wala pang approval) –
in making economic decision will then be submitted to BOA for
 Quality of the Service – services to be approval; bago marelease ung final draft
rendered by those PA will have quality may botohan din (Accounting Standards
– majority; Auduting Standards – atleast
Inherent Characteristics of Profession (an activity to 10 members of the council)
be recognized as professional dapat may Code of Ethics
 The Professional Accountants should consider information) you allow your name to be
the ethical requirements as the BASIC associated with the information
PRINCIPLE which we should follow in  Information without integrity: if the
performing our work information is recklessly furnished,
intended to mislead, contains
Fundamental Principles (COBID) misstatement
2. Objectivity – exercise of professional or
1. Confidentiality business judgment should be without bias,
2. Objectivity conflict of interest or undue influence of others
3. Professional Behavior 3. Professional Competence & due care – attain
4. Integrity & maintain professional knowledge & skills to
5. Professional Competence and Due Care perform a particular function (yung example na
kaya mung gawin ay kaya mung gawin)
Conceptual Framework (Threats)  Pwedeng tanggapin ung performance ng
particular function kahit wala pa
1. Identify the threats maxado knowledge & skills provided
2. Evaluate the threats you will acquire the necessary skills &
3. Address the safeguards for the threats knowledge as you perform the services
 Kapag hndi naacquire ung skilss during
International Independence Standards – the performance it’s better to withdraw
Assurance Services from the engagement and may refer
another PA to perform it
Code of Ethics – approval of adaptation is December  Experts – any person with knowledge
2021 other than accounting & auditing
 All members of the accountancy
General Rule: All Professional Accountants in the Phil. profession are professionally competent
shall comply with the code 2 Stages of Professional Competence (alam
dapat ung technical/ professional standards)
Conflicting Requirements of 2 Countries: apply the  Attainment of professional competence –
code which will require more strict provision between process of acquiring the necessary skills &
2 countries knowledge (education, training, OJT)
 Maintenance of Professional Competence –
Conflict with Local Laws: everytime na may conflict
continuing awareness of what you had
ang international standards with a local law or national
acquired
statutory requirements, as far as the local country is
concerned, ung mas specific sa kanya ang iaapply which
 To act diligently and in accordance with
is the Local Law (local law shall always prevail)
applicable technical & professional
standards
Breaches of the Code
 Due Care – applying technical/
The Professional Accountant who identifies a breach of professional standards, best support of
any other provision of the code shall (EAR): our claim that we had followed the
standards
 Evaluate the significance & impact of the breach
4. Confidentiality – respect the confidentiality of
 Take whatever actions might be available
information acquired
immediately to address the consequences
 Not allowed to disclose information
 Determine whether to Report the breach to the
which we acquired all throughout the
relevant parties
engagement except, acting with
appropriate consent & required legally
Fundamental Principles
by law
5. Professional Behavior – should never engage in
1. Integrity – must be straightforward & honest in
any activity that would discredit the profession
all professional & business relationship
 Should avoid people without integrity, Conceptual Framework – primarily intended to
avoid information that lacks integrity provide safeguard dun sa fundamental principles
(magiging associated sa information
kapag we are the one who prepares the
Circumstances that can threaten the Fundamental Anchoring Bias – kung anu ung una
Principles (IFASS): niang natanggap un na ung basehan nia,
may tendency na hindi na papansin ung
Self Interest Threat – the threat that a financial ibang information
or other interest will inappropriately influence a Automation Bias – generally mas
PA’s judgment or behavior naniniwala sa information generated by
 Balikan ung reason kung bakit nagging automated system kesa sa manual
CPA, para kumita (financial or any information
monetary benefits) Availability Bias – kung anu ung
Self-Review Threat – a previous judgment available un na ung paniniwalaan
made by PA will be re-evaluated by himself Confirmation Bias – may paniniwala na
Advocacy Threat – promoting the entity to the even before makatanggap ng
point that the accountant’s objectivity is information at may nagconfirm neto
compromised Groupthink Bias
Familiarity Threat – PA will be too Overconfidence Bias – over estimate
sympathetic to their interest or too accepting of one’s own ability to make accurate
their work because of close personal or business assessment
relationship Representation Bias – pattern of
 Example: from firm to client – experience that is assumed to be
familiarity representative
 From client to firm – self-review Selective Bias – iba ibang tao, iba iba
Intimidation Threat – being prohibited to din ang judgment
exercise your judgment freely by threat
Other Threats – if the circumstances cannot be Professional Accountants in Business (PAIB) –
identified by the five threats employed in an organization as a professional accountant
 Identify who are the parties involved
Three Steps Approach of Conceptual Framework kapag nag rerender ng tasks, identify the
(IEA) activities, & its implications to these
parties to avoid conflict of interest
Identify the Threats – identify circumstances  Kapag may conflict of interest, required
that could possibly threaten fundamental idisclose ung conflict of interest to have
principles appropriate safeguards
Evaluate the Threats – assess the significance Inducement – preferential treatment; best safeguard is to
of threats & the likelihood of occurrence of such not accept gift & hospitality
threats  You can accept if the value is clearly
 Other than clearly insignificant – insignificant
magiging concern kasi significant ung
threat Basic Requirement for PAIB if there are
 Clearly insignificant – okay lang inducements:
maexpose kasi insihnificant nman ung a. Would it influence the judgment?
threat  YES – better not to accept it
Address the Threats – eliminating or reducing  NO – we can accept it
them to an acceptable level (appropriate b. PAIB should not also offer inducements if he has
safeguard), declining the engagement intention of influencing the judgment of another
 Eliminating the threat – not engaging to person inappropriately
the circusmtances  We should not allow ourselves to be
exposed in circumstances that will lead
When applying the conceptual framework, the PA us to violating our fundamental
shall: principles
Have an inquiring mind Communication Requirements: those in charge of
Exercise professional judgment governance
Use the reasonable & informed third- a. Nature and importance of circumstances
party test b. Matter to be communicated
c. If a PA communicated with individuals who
BIAS – because of this our judgment becomes clouded, have both management & governance
hindi ganon ka objective responsibility, the PA shall be satisfied that
 communication with those individual  Commission – not allowed to give or
adequately informs all of those in receive commissions without
governance role performing procedures

Professional Accountants in Public Practice – kahit Custody of Client’s Asset: Generally, we are not
anong service ung nirerender (assurance or non- allowed to take custody of our client’s assets, except
assurance); engage in public practice when we are required by law;
 Pwdeng individual CPA, sole If we are the custodian of client’s assets
proprietorship or partnership  At any given point in time, there should
Professional Appointments – focus on client’s be a complete separation of your assets
acceptance (integrity), engagement acceptance from your client’s assets – identify
(professional competence & due care) and which is yours and which is your client’s
change in professional appointment assets
 If there is a request for a change in  There should be a complete accounting
professional appointment, and there is of your client’s assets
reasonable justification for the request  You are not allowed to use your client’s
we can agree to it. If there is no asset without appropriate consent
reasonable justification, better not to
accept it, insist on continuing the Responding to NOCLAR in Audits of Financial
original appointment Statement
Basic Requirement for withdrawal from engagement: 1. Becoming aware of the matter
consider the necessity of communicating your reason 2. Obtaining understanding of the matter
why you are withdrawing from the engagement 3. Addressing the matter
4. Communicate with respect to groups
Second Opinion Engagement – nangyayari kapag may 5. Determining whether further action is needed
existing accountant na pero ung client hindi naniniwala 6. Determining whether to disclose to appropriate
sa opinion nung existing PA, manghihingi sia ng opinion authority
sa iba  Kung may effect sa FS, request to adjust
the FS, kung ayaw communicate to
Factors to consider when determining the amount of those charged w/ governance, if ayaw pa
fees to be charged to our clients: din modify the auditor’s report
7. Documentation Requirement
Relative size (kung magkano) – level of skills,  Procedure na pinerform, information
knowledge, training, time to be spent, degree of obtained & conclusion reached
responsibility
 When you determine the amount of fee Independence is required for assurance engagement –
to be charge to your client, it should not composed of independence of mind and independence in
be substantially higher or substantially appearance
lower than the amount to be determined
by another PA if they are the one to be Independence of mind (independence in fact) – the
performing it state of mind that permits the expression of a conclusion
 Substantially Higher – perceives as if without being affected by influences that compromise
communicating to your clients that your professional judgment, thereby allowing an individual to
services are of higher quality (Price is act with integrity & exercise objectivity & professional
indicator of Quality) skepticism
 Substantially Low – could lead to lacks  Evaluation ni auditor sa sarili nia
of procedure, walang basis ung opinion
na inexpress Independence in appearance (independence by
 We are not allowed to determine the appearance) – the avoidance of facts & circumstances
amount to be charge to our client based that are significant that a reasonable & informed 3 rd party
on contingency or future event would be likely to conclude that a firm or an audit or
 Overdue Fees – prior to the issuance of assurance team member’s integrity, objectivity or
current year’s report dapat bayaran na professional skepticism has been compromised
muna ung overdue fees  Evaluation of knowledgeable informed
3rd party as to the independence of the
practitioner
 Both items should be present para masabi na  Not a Public Interest Entity – firm shall
independent ung auditor (if ever only one is determine an appropriate period to address the
present, ultimately si PA ang magdedecide if threats, judgment ng firm
may independence sia)
If a breach of independence has been identified, the firm
Period during which independence is required shall (International Independence Standards):
 All throughout the engagement period a. End, suspend or eliminate the interest or
dapat independent si auditor (from time relationship
na nagsimula sia ng procedure up to b. Consider whether any legal or
the issuance of of the report kasama regulatory requirements apply to the
ung period covered by FS under breach
audit) c. Promptly communicate the breach in
 Applicable for both audit & review accordance with its policies &
Person involved in engagement that should be procedures
independent: d. Evaluate the significance of the breach
 Engagement team & its impact on the firm’s objectivity to
 Other members of the firm who will issue an audit report
have a participation in rendering of e. Depending on the significance of breach
service determine whether;
 Network firms 1. To end the audit
engagement
Financial Interest – Direct Financial Interest, regardless 2. It is possible to take
of materiality, independence is impaired, as long as nag actions that addresses
eexist ang direct financial interest hindi dapat tanggapin the consequences
ang engagement, to accept it you need to dispose direct  If the assurance engagement is expexted to
financial interest recur, the period of the assurance engagement
Indirect Financial Interest – impaired ang end with the notification by either party that the
independence kapag material, kapag immaterial pwde professional relationship has terminated or the
iaccept issuance of final assurance report, whichever is
Later.
Loans & Gurantees:
 If bank ang nagpautang, normal business, check
if it was made under normal lending procedure,
if YES, the amount involved should be
immaterial to both parties then acceptable, kapag
material need appropriate safeguards
 Hindi bank ang nagpautang, immaterial ung
amount both parties, acceptable

Rotation Period
 Public Interest Entity – 7-year time on period –
key audit partner roles are not allowed for a
period more than 7 cumulative years
o on the 8th year dapat palitan na
o After the 7-year time on period, the
individual shall serve a cooling off
period as follows:
 5-year cooling off – engagement
partner
 3-year cooling off – engagement
quality control reviewer
(EQCR)
 2-year cooling off – other KAP
role