1. Briefly describe the main function of the AASC and IAASB.

Auditing and Assurance Standards Council or AASC function is to establish and

promote auditing standards in the Philippines. Those standards are mainly focused on
quality control, auditing, review and other assurance related services. On the other
hand, International Auditing Assurance and Standards Board or IAASB function is to
set a high-quality standard when it comes to auditing, assurance, and other related
areas, and by facilitating their adoption and implementation. Which their primary
goal is to promote public interest so that the public can rely to the work done by the
auditors and other professionals and can be assured that the work is done by a quality
work.

2. Restate in your own words the ten generally accepted auditing standards.

1. The person or persons should conduct or perform the audit should have trained in
accounting and auditing and have an experience in auditing.

2. In conducting an audit the auditor must be independent in a way there is no conflict

of interest and he or she should be unbiased.

3. In conducting an audit, observe proper procedures and extra ordinary diligence is

required in the preparation of the report.

4. Before conducting an audit, there should be a plan on what type of audit,

procedures and tests are you going to do.

5. Internal control should be checked because it would be the basis in which part the
company is weak and if the internal control is weak substantive tests must be
performed to determine the proper problem of the management.

6. The auditor must gather sufficient, relevant, reliable and proper evidence in order
to support the designed conclusions.

7. The auditor should make sure that in preparation of financial statement, general
accepted accounting principles must be observed.

8. If there is any inconsistency in accounting methods, audit finding must be required

because consistency must be observed.

9. All items that should be disclosed in the financial statements in accordance with
the standards should be disclosed.

10. The auditor should express an opinion whether the financial statements are fairly
stated or if there are any qualifications that leads to unclear opinion.

3.   Briefly define each of the following:

 a.   Accounting Cycles- it refers to the cycle of recording and processing transactions
that affect a group of related accounts and it has a beginning and an end. And since it
is a cycle it is repeated again and again.

b.   Audit Evidence- it refers to the reliable and relevant evidence or documents that
support the designed conclusions. 

c.   Audit Procedures- it refers to the procedures established in order to gather audit

evidence that can support the designed conclusions.

d.   Audit Documentation - it refers to the records of the audit procedures, gathered

evidence and the designed conclusions.

4.   Enumerate the financial statement assertions. Illustrate how each assertion is applied to
a particular financial statement account (identify the account and elaborate as
appropriate).

The financial statement assertions are the following:

Existence or Occurrence

It is applied in a way that the management is asserting that the particular account
that is reflected in the financial statements are actually existing and occurred as of the
particular period or balance sheet date. For instance, if the company has a accounts
receivable of 500,000. The management will assert that through the existence and
occurrence of the accounts receivable of 500,000 as of the balance sheet date the
company has 500,000 accounts receivable really exist that needs to be collected.

Completeness

It is applied in a way the management would assert that all the transactions related
to a particular account is complete and reflected in the balance sheet. For example, if
there are 500,000 accounts receivables related transactions, thus, it must reflect in the
balance sheet that the accounts receivable is total in the amount of 500,000.

Valuation or Allocation

It is applied in a way that the management would assert that all the transactions
and amounts related to a particular account is just all the inclusions and in the proper
amounts. For instance, the company has an accounts receivable of 500,000 and
25,000 of it are doubtful accounts. This assertions states that all amounts that should
be included are just the inclusions. Hence, the 500,000 should be net to 25,000 and
the amount that would be reflected into the financial statements are 475,000 accounts
receivables.
 Rights and Obligations

It is applied in a way that the management would assert that the company has the
right to collect or to pay the obligation. For example, if the company has an accounts
receivable of 500,000 and an accounts payable of 500,000. The management will
assert that the company has the right to collect the 500,000 accounts receivable and to
pay the obligation of 500,000 accounts payable in the stated period or balance sheet
date.

Presentation and Disclosure

It is applied in a way that the components of financial statements are properly

described, classified and disclosed. For instance, if the company has the accounts
receivables of 500,000 and doubtful accounts of 25,000 it should be net and properly
disclosed in the notes to financial statements. And it should also have proper
classifications such as current and non-current.

5.   State and briefly give the significance of each phase of the audit opinion formulation
process.

Making Client Acceptance and Continuance Decisions

The importance of this phase is that it is the stage where the auditor are assessing
the condition of the company and in this stage where the auditor also develop
common understanding of the engagement to the client.

Performing Risk Assessment

The significance of this phase is that, in this stage the auditor will determine
which part of the company has the involve any risks and identify any material
misstatement in the financial statements.

Obtaining Evidence about Internal Control Operating Effectiveness, if applicable

The importance of this phase is that it is the stage wherein the auditor is going to
select what kind of control he must use in order to do a substantive test and through
the tests he made, he may consider the results. This only if it is applicable.

Obtaining Substantive Evidence about Accounts, Disclosures and Assertions

 The significance of this phase is that this is the stage wherein the performing of
substantive test must occur. In order for the auditor to determine the strengths and
weaknesses of the company and to identify also if the financial statements are stated
fairly or not.

Completing the Audit and Making Reporting Decisions

The importance of this phase is that it is the stage whereas the results are
communicated in which it discuses about the issue resulted from the audit and the
possible solutions that the company can make.