Manila * Cavite * Laguna * Cebu * Cagayan De Oro * Davao

Since 1977

AT.3220
Other Assurance Engagements SOLIMAN/UY/RICAFRENTE
and Related Services MAY 2022

References:
1. PSRE 2400, Engagements to Review Historical Financial Statements
2. PSRE 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity
3. PSAE 3000, Assurance Engagements Other than Audits or Reviews of Historical Financial Information
4. PSAE 3400, The Examination of Prospective Financial Information
5. PSAE 3402, Assurance Reports on Controls at a Service Organization
6. PSAE 3410, Assurance Engagements on Greenhouse Gas Statements
7. PSAE 3420, Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a
Prospectus
8. PSRS 4400, Engagements to Perform Agreed-Upon Procedures Regarding Financial Information
9. PSRS 4410, Compilation Engagements

LECTURE NOTES
Review Historical Financial Statements Conclusions and Reporting

Introduction The review report should contain a clear written expression

of negative assurance. The practitioner’s conclusion on the
The objective of a review of financial statements is to enable financial statements, whether unmodified or modified, shall
a practitioner to state whether, on the basis of procedures be expressed in the appropriate form. The types of modified
which do not provide all the evidence that would be required conclusions are summarized in the table below.
in an audit, anything has come to the practitioner’s attention
that causes the practitioner to believe that the FSs are not Nature of Matter Effect on the financial
prepared, in all material respects, in accordance with the statements
applicable financial reporting framework. Material but Material and
Not Pervasive Pervasive
The review of historical financial statements is a limited Financial Statements Qualified Adverse
assurance engagement. Materially Misstated Conclusion Conclusion
Inability to Obtain Qualified Disclaimer of
Relevant Review Standards Necessary Evidence Conclusion Conclusion

Under the Philippine Standards, review engagements are A sample unmodified review report on annual financial
divided into two: statements, under PSRE 2400, is presented below.

1. Review of historical financial statements, which typically INDEPENDENT PRACTITIONER’S REVIEW REPORT
covers annual reporting period (not related to audit),
under PSRE 2400; and [Appropriate Addressee]

2. Review of interim financial information in relation to Report on the Financial Statements

audit of annual financial statements of issuer of
securities to the public (i.e., those listed and deemed We have reviewed the accompanying financial statements
listed entities, as provided for in Securities Regulation of ABC Company, which comprise the statement of
Code [SRC] Rule 68, Part II of Securities and Exchange financial position as at December 31, 20X1, and the
Commission [SEC]) under PSRE 2410. statement of comprehensive income, statement of
changes in equity and statement of cash flows for the
Conduct of Review Engagement year then ended, and a summary of significant accounting
policies and other explanatory information.
The practitioner should observe the following in the conduct
of review engagement: Management’s Responsibility for the Financial Statements
• comply with the relevant ethical requirements,
practically the same as audit, including independence. Management is responsible for the preparation and fair
• conduct in accordance with relevant PSRE. presentation of these financial statements in accordance
• plan and perform with an attitude of professional with the Philippine Financial Reporting Standard for Small
skepticism. and Medium-sized Entities, and for such internal control
• agree on the terms of the engagement with the client. as management determines is necessary to enable the
• plan the work effectively perform the engagement. preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
The practitioner should apply judgment in determining the
specific nature, timing and extent of review procedures, Practitioner’s Responsibility
which are primarily through inquiry and analytical
procedures to obtain sufficient appropriate evidence and to Our responsibility is to express a conclusion on the
be able to draw conclusions. In addition, if the practitioner accompanying financial statements. We conducted our
has reason to believe that the information subject to review review in accordance with Philippine Standard on Review
may be materially misstated, the practitioner should carry Engagements (PSRE) 2400 (Revised), Engagements to
out additional. Review Historical Financial Statements. PSRE 2400

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EXCEL PROFESSIONAL SERVICES, INC.

(Revised) requires us to conclude whether anything has Independent Auditor of the Entity.” A review of interim
come to our attention that causes us to believe that the financial information consists of making inquiries,
financial statements, taken as a whole, are not prepared primarily of persons responsible for financial and
in all material respects in accordance with the applicable accounting matters, and applying analytical and other
financial reporting framework. This Standard also review procedures. A review is substantially less in scope
requires us to comply with relevant ethical requirements. than an audit conducted in accordance with Philippine
Standards on Auditing and consequently does not enable
A review of financial statements in accordance with PSRE us to obtain assurance that we would become aware of
2400 (Revised) is a limited assurance engagement. The all significant matters that might be identified in an audit.
practitioner performs procedures, primarily consisting of Accordingly, we do not express an audit opinion.
making inquiries of management and others within the
entity, as appropriate, and applying analytical Conclusion
procedures, and evaluates the evidence obtained.
Based on our review, nothing has come to our attention
The procedures performed in a review are substantially that causes us to believe that the accompanying interim
less than those performed in an audit conducted in financial information does not present fairly, in all
accordance with Philippine Standards on Auditing. material respects, the financial position of the entity as at
Accordingly, we do not express an audit opinion on these March 31, 20X1, and of its financial performance and its
financial statements. cash flows for the three month period then ended in
accordance with [applicable financial reporting
Conclusion framework, including a reference to the jurisdiction or
country of origin of the financial reporting framework
Based on our review, nothing has come to our attention when the financial reporting framework used is not
that causes us to believe that these financial statements Philippine Financial Reporting Standards].
do not present fairly, in all material respects, (or do not
give a true and fair view of) the financial position of ABC AUDITOR
Company as at December 31, 20X1, and (of) its financial
performance and cash flows for the year then ended, in Date
accordance with the Philippine Financial Reporting
Standard for Small and Medium-sized Entities. Address

Examination of Prospective Financial Information

Report on Other Legal and Regulatory
Requirements Introduction

[Form and content of this section of the practitioner’s “Prospective financial information” means financial
report will vary depending on the nature of the information based on assumptions about events that may
practitioner’s other reporting responsibilities.] occur in the future and possible actions by an entity. It is
highly subjective in nature and its preparation requires the
[Practitioner’s signature] exercise of considerable judgment. Prospective financial
information can be in the form of:
[Date of the practitioner’s report]
• a forecast,
[Practitioner’s address] • a projection or
• a combination of both, for example, a one year forecast
A sample unmodified review report on interim financial plus a five year projection.
information, under PSRE 2410, is presented below.
A “forecast” means prospective financial information
Report on Review of Interim Financial Information prepared on the basis of assumptions as to future events
which management expects to take place and the actions
(Appropriate addressee) management expects to take as of the date the information
is prepared (best-estimate assumptions).
Introduction
A “projection” means prospective financial information
We have reviewed the accompanying statement of prepared on the basis of:
financial position of ABC Entity as of March 31, 20X1 and
the related statement of comprehensive income, a) Hypothetical assumptions about future events and
statement of changes in equity and statement of cash management actions which are not necessarily expected
flows for the three-month period then ended, and a to take place, such as when some entities are in a start-
summary of significant accounting policies and other up phase or are considering a major change in the
explanatory notes. Management is responsible for the nature of operations; or
preparation and fair presentation of this interim financial
information in accordance with [indicate applicable b) A mixture of best-estimate and hypothetical
financial reporting framework]. Our responsibility is to assumptions.
express a conclusion on this interim financial information
based on our review. Such information illustrates the possible consequences as of
the date the information is prepared if the events and
Scope of Review actions were to occur (a “what-if” scenario).

We conducted our review in accordance with Philippine

Standard on Review Engagements 2410, “Review of
Interim Financial Information Performed by the

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EXCEL PROFESSIONAL SERVICES, INC.

Prospective financial information can include financial Report on Examination of Prospective Financial Information
statements or one or more elements of financial statements
and may be prepared: When the auditor believes that the presentation and
disclosure of the prospective financial information is not
a) As an internal management tool, for example, to assist adequate, the auditor should express a qualified or adverse
in evaluating a possible capital investment; or opinion in the report on the prospective financial
information, or withdraw from the engagement as
b) For distribution to third parties in, for example: appropriate. An example would be where financial
• A prospectus to provide potential investors with information fails to disclose adequately the consequences of
information about future expectations. any assumptions which are highly sensitive.
• An annual report to provide information to
shareholders, regulatory bodies and other When the examination is affected by conditions that
interested parties. preclude application of one or more procedures considered
• A document for the information of lenders which necessary in the circumstances, the auditor should either
may include, for example, cash flow forecasts. withdraw from the engagement or disclaim the opinion and
describe the scope limitation in the report on the prospective
Management is responsible for the preparation and financial information.
presentation of the prospective financial information,
including the identification and disclosure of the The following is an example of an extract from an
assumptions on which it is based. The auditor may be asked unmodified report on a forecast:
to examine and report on the prospective financial
information to enhance its credibility whether it is intended We have examined the forecast in accordance with
for use by third parties or for internal purposes. Philippine Standard on Assurance Engagements.
Management is responsible for the forecast including the
The Auditor’s Assurance assumptions set out in Note X on which it is based.

When reporting on the reasonableness of management’s Based on our examination of the evidence supporting the
assumptions the auditor provides only a moderate level of assumptions, nothing has come to our attention which
assurance. However, when in the auditor’s judgment an causes us to believe that these assumptions do not
appropriate level of satisfaction has been obtained, the provide a reasonable basis for the forecast. Further, in
auditor is not precluded from expressing positive assurance our opinion the forecast is properly prepared on the basis
regarding the assumptions. of the assumptions and is presented in accordance with
Philippine Financial Reporting Standards.
Acceptance of Engagement
Actual results are likely to be different from the forecast
Before accepting an engagement to examine prospective since anticipated events frequently do not occur as
financial information, the auditor would consider, amongst expected and the variation may be material.
other things:
• The intended use of the information; The following is an example of an extract from an
• Whether the information will be for general or limited unmodified report on a projection:
distribution;
• The nature of the assumptions, that is, whether they are We have examined the projection in accordance
best-estimate or hypothetical assumptions; Philippine Standard on Assurance Engagements.
• The elements to be included in the information; and Management is responsible for the projection including
• The period covered by the information. the assumptions set out in Note X on which it is based.

The auditor should not accept, or should withdraw from, an This projection has been prepared for (describe purpose).
engagement when the assumptions are clearly unrealistic or As the entity is in a start-up phase the projection has
when the auditor believes that the prospective financial been prepared using a set of assumptions that include
information will be inappropriate for its intended use. hypothetical assumptions about future events and
management’s actions that are not necessarily expected
The auditor and the client should agree on the terms of the to occur. Consequently, readers are cautioned that this
engagement. projection may not be appropriate for purposes other
than that described above.
Examination Procedures
Based on our examination of the evidence supporting the
When determining the nature, timing and extent of assumptions, nothing has come to our attention which
examination procedures, the auditor’s considerations should causes us to believe that these assumptions do not
include: provide a reasonable basis for the projection, assuming
that (state or refer to the hypothetical assumptions).
a) The likelihood of material misstatement; Further, in our opinion the projection is properly prepared
b) The knowledge obtained during any previous on the basis of the assumptions and is presented in
engagements; accordance with Philippine Financial Reporting Standards.
c) Management’s competence regarding the preparation of
prospective financial information; Even if the events anticipated under the hypothetical
d) The extent to which the prospective financial assumptions described above occur, actual results are
information is affected by the management’s judgment; still likely to be different from the projection since other
and anticipated events frequently do not occur as expected
e) The adequacy and reliability of the underlying data. and the variation may be material.

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EXCEL PROFESSIONAL SERVICES, INC.

Report on the Compilation of Pro Forma Financial [financial performance] [and cash flows] has been
Information Included in a Prospectus extracted by [the responsible party] from the company’s
financial statements [for the period ended [date]], on
The purpose of pro forma financial information included in a which [[an audit]/[a review] report]/[no audit or review
prospectus is solely to illustrate the impact of a significant report] has been published.
event or transaction on unadjusted financial information of
the entity as if the event had occurred or the transaction [The Responsible Party’s] Responsibility for the Pro Forma
had been undertaken at an earlier date selected for Financial Information
purposes of the illustration. This is achieved by applying pro
forma adjustments to the unadjusted financial information. [The responsible party] is responsible for compiling the
Pro forma financial information does not represent the pro forma financial information on the basis of the
entity’s actual financial position, financial performance, or [applicable criteria].
cash flows.
Practitioner’s Responsibilities
Prospectus is a document issued pursuant to legal or
regulatory requirements relating to the entity’s securities on Our responsibility is to express an opinion [, as required
which it is intended that a third party should make an by [Securities Regulation XX],] about whether the pro
investment decision. forma financial information has been compiled, in all
material respects, by [the responsible party] on the basis
The objectives of the practitioner are: of the [applicable criteria].
a) To obtain reasonable assurance about whether the pro
forma financial information has been compiled, in all We conducted our engagement in accordance with
material respects, by the responsible party on the basis International Standard on Assurance Engagements
of the applicable criteria; and (ISAE) 3420, Assurance Engagements to Report on the
b) To report in accordance with the practitioner’s findings. Compilation of Pro Forma Financial Information Included
in a Prospectus, issued by the International Auditing and
The practitioner shall express an unmodified opinion when Assurance Standards Board. This standard requires that
the practitioner concludes that the pro forma financial the practitioner comply with ethical requirements and
information has been compiled, in all material respects, by plan and perform procedures to obtain reasonable
the responsible party on the basis of the applicable criteria. assurance about whether [the responsible party] has
Otherwise, the practitioner shall express a modified opinion compiled, in all material respects, the pro forma financial
unless prohibited by relevant law or regulation to do so. information on the basis of the [applicable criteria].
Where this is the case, the practitioner shall discuss the
matter with the responsible party. If the responsible party For purposes of this engagement, we are not responsible
does not agree to make the necessary changes, the for updating or reissuing any reports or opinions on any
practitioner shall: historical financial information used in compiling the pro
a) Withhold the report; forma financial information, nor have we, in the course of
b) Withdraw from the engagement; or this engagement, performed an audit or review of the
c) Consider seeking legal advice. financial information used in compiling the pro forma
financial information.
INDEPENDENT PRACTITIONER’S ASSURANCE REPORT
ON THE COMPILATION OF PRO FORMA FINANCIAL The purpose of pro forma financial information included
INFORMATION INCLUDED IN A PROSPECTUS in a prospectus is solely to illustrate the impact of a
significant event or transaction on unadjusted financial
[Appropriate Addressee(s)] information of the entity as if the event had occurred or
the transaction had been undertaken at an earlier date
Report on the Compilation of Pro Forma Financial selected for purposes of the illustration. Accordingly, we
Information Included in a Prospectus do not provide any assurance that the actual outcome of
the event or transaction at [specify date] would have
We have completed our assurance engagement to report been as presented.
on the compilation of pro forma financial information of
ABC Company by [the responsible party]. The pro forma A reasonable assurance engagement to report on whether
financial information consists of [the pro forma net asset the pro forma financial information has been compiled, in
statement as at [date]], [the pro forma income statement all material respects, on the basis of the applicable criteria
for the period ended [date]], [the pro forma cash flow involves performing procedures to assess whether the
statement for the period ended [date],] and related notes applicable criteria used by [the responsible party] in the
[as set out on pages xx–xx of the prospectus issued by compilation of the pro forma financial information provide
the company]. The applicable criteria on the basis of a reasonable basis for presenting the significant effects
which [the responsible party] has compiled the pro forma directly attributable to the event or transaction, and to
financial information are [specified in [Securities obtain sufficient appropriate evidence about whether:
Regulation XX] and described in [Note X]]/[described in • The related pro forma adjustments give appropriate
[Note X]]. effect to those criteria; and
• The pro forma financial information reflects the
The pro forma financial information has been compiled by proper application of those adjustments to the
[the responsible party] to illustrate the impact of the unadjusted financial information.
[event or transaction] [set out in Note X] on the
[company’s financial position as at specify date] [and] The procedures selected depend on the practitioner’s
[the company’s/its financial performance [and cash judgment, having regard to the practitioner’s
flows] for the period ended specify date] as if the [event understanding of the nature of the company, the event or
or transaction] had taken place at [specify date] [and transaction in respect of which the pro forma financial
specify date respectively]. As part of this process, information has been compiled, and other relevant
information about the company’s [financial position], engagement circumstances.

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EXCEL PROFESSIONAL SERVICES, INC.

accordance with this PSAE are capable of providing

The engagement also involves evaluating the overall appropriate evidence under PSA 402.
presentation of the pro forma financial information.
The service auditor’s opinion, expressed in the positive
We believe that the evidence we have obtained is form, on whether, in all material respects, based on suitable
sufficient and appropriate to provide a basis for our criteria:
opinion.
1. In the case of a type 2 report:
Opinion a. The description fairly presents the service
organization’s system that had been designed and
In our opinion, [the pro forma financial information has implemented throughout the specified period;
been compiled, in all material respects, on the basis of b. The controls related to the control objectives stated
the [applicable criteria]]/[the pro forma financial in the service organization’s description of its
information has been properly compiled on the basis system were suitably designed throughout the
stated]. specified period; and
c. The controls tested, which were those necessary to
Report on Other Legal or Regulatory Requirements provide reasonable assurance that the control
objectives stated in the description were achieved,
[Relevant law or regulation may require the practitioner operated effectively throughout the specified
to express an opinion on other matters. The form and period.
content of this section of the practitioner’s report will vary
with the nature of such other reporting responsibilities.] 2. In the case of a type 1 report:
a. The description fairly presents the service
[Practitioner’s signature] organization’s system that had been designed and
implemented as at the specified date; and
[Date of the practitioner’s report] b. The controls related to the control objectives stated
in the service organization’s description of its
[Practitioner’s address] system were suitably designed as at the specified
date.
Letters for Underwriters
The service auditor’s opinion shall be modified, and the
When a company wishes to issue new securities to the service auditor’s assurance report shall contain a clear
public, the underwriters of the securities will generally ask description of all the reasons for the modification if the
the company’s auditor to provide “comfort” on the financial service auditor concludes that:
and accounting data in the prospectus that is not covered a. The service organization’s description does not fairly
by an accountant’s report of some form (e.g., an audit present, in all material respects, the system as designed
report on the financial statements). In comfort letters, the and implemented;
CPAs will provide positive assurance that they are b. The controls related to the control objectives stated in
independent and that their audit followed SEC standards. the description were not suitably designed, in all
They will provide negative assurance or a summary of material respects;
findings on various types of accounting related matters such c. In the case of a type 2 report, the controls tested, which
as the following: unaudited condensed and summarized were those necessary to provide reasonable assurance
interim information, pro forma financial information, change that the control objectives stated in the service
subsequent to the balance sheet date, and on various tables organization’s description of its system were achieved,
of data. did not operate effectively, in all material respects; or
d. The service auditor is unable to obtain sufficient
Management Discussion and Analysis (MD&A) appropriate evidence,

Among other things, the MD&A provides an overview of the Trust Services
previous year of operations and how the company fared in
that time period. Management will usually also touch on the At present CPAs offer two types of trust services—WebTrust
upcoming year, outlining future goals and approaches to and SysTrust.
new projects. a. WebTrust provides assurance on electronic commerce
(including websites). The CPA is engaged to examine
MD&A is included in reports filed with the SEC and in annual both that a client complied with the Trust Services
reports sent directly to shareholders. In addition, a number criteria (e.g., the company uses procedures in
of companies that do not report to the SEC prepare such accordance with its defined policies) and that it
information. This service allows a CPA to provide assurance maintained effective controls over the system based on
(“negative assurance” for a review, and “reasonable Trust Services criteria (e.g., the company’s procedures
assurance” for an examination) on a client’s MD&A. are effective).
Although many MD&As published in practice are unaudited. b. SysTrust provides assurance on any defined electronic
system. In a SysTrust engagement the CPA is engaged
Assurance Reports on Controls at a Service to examine only that a client maintained effective
Organization controls over the system based on the Trust Services
criteria.
PSAE 3402 deals with assurance engagements undertaken
by a professional accountant in public practice to provide a Agreed-upon Procedures Engagements
report for use by user entities and their auditors on the
controls at a service organization that provides a service to Introduction
user entities that is likely to be relevant to user entities’
internal control as it relates to financial reporting. It The objective of an agreed-upon procedures engagement is
complements PSA 402 in that reports prepared in for the auditor to carry out procedures of an audit nature to

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EXCEL PROFESSIONAL SERVICES, INC.

which the auditor and the entity and any appropriate third • Inspection.
parties have agreed and to report on factual findings. • Obtaining confirmations.

An engagement to perform agreed-upon procedures may Reporting

involve the auditor in performing certain procedures
concerning individual items of financial data (for example, The report on an agreed-upon procedures engagement
accounts payable, accounts receivable, purchases from needs to describe the purpose and the agreed-upon
related parties and sales and profits of a segment of an procedures of the engagement in sufficient detail to enable
entity), a financial statement (for example, a balance sheet) the reader to understand the nature and the extent of the
or even a complete set of financial statements. work performed.

As the auditor simply provides a report of the factual Illustration of a Report of Factual Findings in
findings of agreed-upon procedures, no assurance is Connection with Accounts Payable
expressed. Instead, users of the report assess for
themselves the procedures and findings reported by the REPORT OF FACTUAL FINDINGS
auditor and draw their own conclusions from the auditor’s
work. To (those who engaged the auditor)
The report is restricted to those parties that have agreed to
the procedures to be performed since others, unaware of We have performed the procedures agreed with you and
the reasons for the procedures, may misinterpret the enumerated below with respect to the accounts payable
results. of ABC Company as at (date), set forth in the
accompanying schedules (not shown in this example).
General Principles of an Agreed-Upon Procedures Our engagement was undertaken in accordance with the
Engagement Philippine Standard on Related Services. The procedures
were performed solely to assist you in evaluating the
The auditor should comply with the Code of Ethics general validity of the accounts payable and are summarized as
principles, such as: follows:
a. Integrity; 1. We obtained and checked the addition of the trial
b. Objectivity; balance of accounts payable as at (date) prepared by
c. Professional competence and due care; ABC Company, and we compared the total to the
d. Confidentiality; and balance in the related general ledger account.
e. Professional behavior. 2. We compared the attached list (not shown in this
example) of major suppliers and the amounts owing
The auditor should conduct an agreed-upon procedures at (date) to the related names and amounts in the
engagement in accordance with this PSRS and the terms of trial balance.
the engagement. 3. We obtained suppliers’ statements or requested
suppliers to confirm balances owing at (date).
Defining the Terms of the Engagement 4. We compared such statements or confirmations to
the amounts referred to in 2. For amounts which did
Matters that would be included in the engagement letter not agree, we obtained reconciliations from ABC
include the following: Company. For reconciliations obtained, we identified
• A listing of the procedures to be performed as agreed and listed outstanding invoices, credit notes and
upon between the parties. outstanding checks, each of which was greater than
• A statement that the distribution of the report of factual Pxxx. We located and examined such invoices and
findings would be restricted to the specified parties who credit notes subsequently received and checks
have agreed to the procedures to be performed. subsequently paid and we ascertained that they
should in fact have been listed as outstanding on the
Planning reconciliations.

The auditor should plan the work so that an effective We report our findings below:
engagement will be performed. a) With respect to item 1 we found the addition to be
correct and the total amount to be in agreement.
Documentation b) With respect to item 2 we found the amounts
compared to be in agreement.
The auditor should document matters which are important c) With respect to item 3 we found there were suppliers’
in providing evidence to support the report of factual statements for all such suppliers.
findings, and evidence that the engagement was carried out d) With respect to item 4 we found the amounts agreed,
in accordance with this PSRS and the terms of the or with respect to amounts which did not agree, we
engagement. found ABC Company had prepared reconciliations and
that the credit notes, invoices and outstanding checks
Procedures and Evidence over Pxxx were appropriately listed as reconciling
items with the following exceptions:
The auditor should carry out the procedures agreed upon
and use the evidence obtained as the basis for the report of (Detail the exceptions)
factual findings.
Because the above procedures do not constitute either an
The procedures applied in an engagement to perform audit or a review made in accordance with Philippine
agreed-upon procedures may include the following: Standards on Auditing, we do not express any assurance
• Inquiry and analysis. on the accounts payable as of (date).
• Recomputation, comparison and other clerical accuracy
checks. Had we performed additional procedures or had we
• Observation. performed an audit or review of the financial statements

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EXCEL PROFESSIONAL SERVICES, INC.

in accordance with Philippine Standards on Auditing, financial information is to be presented through experience
other matters might have come to our attention that with the entity or inquiry of the entity's personnel.
would have been reported to you.
If the accountant becomes aware that information supplied
Our report is solely for the purpose set forth in the first by management is incorrect, incomplete, or otherwise
paragraph of this report and for your information and is unsatisfactory, the accountant should consider performing
not to be used for any other purpose or to be distributed the above procedures and request management to provide
to any other parties. This report relates only to the additional information or if the accountant becomes aware
accounts and items specified above and does not extend of material misstatements, the accountant should try to
to any financial statements of ABC Company, taken as a agree appropriate amendments with the entity. If such
whole. additional information or amendments are not made and the
financial information is considered to be misleading, the
AUDITOR
accountant should withdraw from the engagement.
Date
Address Responsibility of Management

The accountant should obtain an acknowledgment from

Compilation Engagements
management of its responsibility for the appropriate
Introduction presentation of the financial information and of its approval
of the financial information.
A compilation engagement would ordinarily include the
preparation of financial statements (which may or may not Reporting on a Compilation Engagement
be a complete set of financial statements) but may also
include the collection, classification and summarization of The financial information compiled by the accountant should
other financial information. contain a reference such as "Unaudited," "Compiled without
Audit or Review" or "Refer to Compilation Report" on each
The objective of a compilation engagement is for the page of the financial information or on the front of the
accountant to use accounting expertise, as opposed to complete set of financial statements.
auditing expertise, to collect, classify and summarize
financial information. This ordinarily entails reducing PRACTITIONER’S COMPILATION REPORT
detailed data to a manageable and understandable form
without a requirement to test the assertions underlying that [To Management of ABC Company]
information. The procedures employed are not designed and We have compiled the accompanying financial statements
do not enable the accountant to express any assurance on of ABC Company based on information you have
the financial information. However, users of the compiled provided. These financial statements comprise the
financial information derive some benefit as a result of the statement of financial position of ABC Company as at
accountant's involvement because the service has been December 31, 20X1, the statement of comprehensive
performed with professional competence and due care. income, statement of changes in equity and statement of
cash flows for the year then ended, and a summary of
General Principles of a Compilation Engagement significant accounting policies and other explanatory
information.
The accountant should comply with the Code of Professional
We performed this compilation engagement in
Ethics general principles, such as:
accordance with International Standard on Related
a) integrity;
Services 4410 (Revised), Compilation Engagements.
b) objectivity;
c) professional competence and due care; We have applied our expertise in accounting and financial
d) confidentiality; and reporting to assist you in the preparation and
e) professional behavior. presentation of these financial statements in accordance
with Philippine Financial Reporting Standards for Small-
Defining the Terms of the Engagement and Medium-sized Entities (PFRS for SMEs). We have
complied with relevant ethical requirements, including
An engagement letter confirms the accountant's acceptance
principles of integrity, objectivity, professional
of the appointment and helps avoid misunderstanding
competence and due care.
regarding such matters as the objectives and scope of the
engagement, the extent of the accountant's responsibilities These financial statements and the accuracy and
and the form of reports to be issued. completeness of the information used to compile them
are your responsibility.
Planning
Since a compilation engagement is not an assurance
The accountant should plan the work so that an effective
engagement, we are not required to verify the accuracy
engagement will be performed.
or completeness of the information you provided to us to
Documentation compile these financial statements. Accordingly, we do
The accountant should document matters which are not express an audit opinion or a review conclusion on
important in providing evidence that the engagement was whether these financial statements are prepared in
carried out in accordance with this PSA and the terms of the accordance with PFRS for SMEs.
engagement.
[Practitioner’s signature]
Procedures
[Date of practitioner’s report]
The accountant requires a general understanding of the
nature of the entity's business transactions, the form of its [Practitioner’s address]
accounting records and the accounting basis on which the

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Historical Financial Statements (FSs) Engagements: Audit, Review, and Related Services Comparison
Nature of service Audit Review Agreed-upon Compilation
Objective To enable the auditor To enable a practitioner to To enable the To enable the
obtain reasonable state whether anything has auditor carry out accountant to use
assurance about come to the practitioner’s procedures of an accounting
whether the financial attention that causes the audit nature to expertise, as
statements, as a practitioner to believe that which the auditor opposed to auditing
whole, are free from the financial statements and the entity and expertise, to collect,
material are not prepared, in all any appropriate classify and
misstatement, material respects, in third parties have summarize financial
whether due to fraud accordance with the agreed and to information.
or error, and to applicable financial report on factual
express an opinion reporting framework findings.
thereon
Level of Reasonable Limited None None
assurance (High) (Moderate)
Type of report Positive assurance Negative assurance Description of Identification of
procedures information compiled
performed and
factual findings
Basic procedures Primarily, among Primarily inquiry and As agreed (Audit Reading the financial
others, risks analytical procedures nature) statements for
assessment obvious
procedures, tests of misstatements
controls and
substantive
procedures
Independence Required Required Not required Not required

DISCUSSION QUESTIONS
Review of Historical Financial Statements 4. The Review Report include the following:
a. b. c. d.
1. The objective of a review engagement Reference to PSRE Yes No Yes No
a. Is to enable the auditor to express an opinion A statement that a
whether the financial statements are prepared in review is limited to
all material respects, in accordance with an inquiries and analytical Yes Yes Yes No
identified financial reporting framework procedures
b. Is to enable the practitioner to state whether, on Specific description of
the basis of procedures which do not provide all the procedures that have
evidence that would be required in an audit, been performed by the
anything has come to the practitioner’s attention auditor No Yes Yes Yes
that causes the practitioner to believe that the A statement that an audit
financial statements are not prepared in all material has not been Yes Yes Yes Yes
respects, in accordance with an identified financial performed
reporting framework.
c. Is to carry out those procedures of an audit nature 5. In a review engagement, if there has been a material
to which the auditor and the entity and any scope limitation, the auditor should describe the
appropriate third parties have agreed and to report limitation in the review report and either
on factual findings. a. Express a qualification of the negative assurance or
d. Is to use accounting expertise as opposed to not provide any assurance.
auditing expertise to collect, classify and summarize b. Express a qualification of the negative assurance
financial information. provided or issue an adverse statement that the
2. A review engagement differs in scope as compared to financial statement are not presented fairly.
an audit due to: c. Express an adverse statement that the financial
a. the subject matter of the service statements are not presented fairly or the auditor
b. the quantity and type of evidence obtained not issue any assurance.
c. ethical requirements with respect to independence d. Not modify the negative assurance or not issue an
d. the users of the financial statements assurance.

3. Which of the following is least likely to be a procedure 6. A modification of the CPA’s report on a review of the
included in an accountant’s review of interim financial interim financial statements of a publicly held company
information of a public entity? would be necessitated by which of the following?
a. Compare disaggregated revenue data by month to a. An uncertainty.
that of the previous interim period. b. Lack of consistency.
b. Read available minutes of meetings of stockholders. c. Reference to another accountant.
c. Observe counting of physical inventory. d. Inadequate disclosure.
d. Inquire of management concerning significant
journal entries and other adjustments.

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Examination of Prospective Financial Information b. Limiting the distribution of the accountant's report
to management and the board of directors.
7. Financial information based on assumptions about c. Assuming responsibility to update management on
events that may occur in the future and possible actions key events for one year after the report's date.
by an entity. d. Evaluating the preparation of a financial forecast
a. Historical financial information and the support underlying management's
b. Prospective financial information assumptions.
c. Pro forma financial information
d. Budgeted financial information 14. When an accountant examines a financial forecast that
fails to disclose several significant assumptions used to
8. What is meant by a financial forecast? prepare the forecast, the accountant should describe
a. A prospective financial statement that predicts an the assumptions in the accountant's report and issue
entity’s expected financial position, results of a(n)
operations, and cash flows a. "Except for" qualified opinion.
b. A prospective financial statement that presents an b. "Subject to" qualified opinion.
entity’s expected financial position, results of c. Unqualified opinion with a separate explanatory
operations, and cash flows paragraph.
c. A prospective financial statement that predicts an d. Adverse opinion.
entity’s expected financial position, results of
operations, and cash flows based on one or more Assurance Reports on Controls at a Service
hypothetical assumptions Organization
d. A prospective financial statement that presents an
entity’s expected financial position, results of 15. Raegan, CPA, is auditing the financial statements of Taft
operations, and cash flows based on one or more Co. Taft uses Quick Service Center (QSC) to process its
hypothetical assumptions payroll. Price, CPA, is expressing an opinion on a
description of the controls implemented at QSC
9. Given one or more hypothetical assumptions, a regarding the processing of its customers' payroll
responsible party may prepare, to the best of its transactions. Raegan expects to consider the effects of
knowledge and belief, an entity’s expected financial Price's report on the Taft engagement. Price's report
position, results of operations, and cash flows. Such should contain a(n)
prospective financial statements are known as a. Description of the scope and nature of Price's
a. Pro forma financial statements procedures.
b. Financial projections b. Statement that Raegan may assess control risk
c. Partial presentations based on Price's report.
d. Financial forecasts c. Assertion that Price assumes no responsibility to
determine whether QSC's controls are suitably
10. A financial forecast consists of prospective financial designed.
statements that present an entity’s expected financial d. Opinion on the operating effectiveness of QSC's
position, results of operations, and cash flows. A internal controls.
forecast
a. Is based on the most conservative estimates. 16. The auditor who audits the processing of transactions
b. Presents estimates given one or more hypothetical by a service organization may issue a report on controls
assumptions. Implemented Operating effectiveness
c. Unlike a projection, may contain a range. a. Yes Yes
d. Is based on assumptions reflecting conditions b. Yes No
expected to exist and courses of action expected to c. No Yes
be taken. d. No No

11. Which of the following statements concerning 17. In accordance with PSAE 3402, Assurance Reports on
prospective financial statements is correct? Controls at a Service Organization, an auditor’s
a. Only a financial forecast would normally be modified opinion may be
appropriate for limited use. a. Qualified.
b. Only a financial projection would normally be b. Adverse.
appropriate for general use. c. Disclaimer.
c. Any type of prospective financial statements would d. Any of the above.
normally be appropriate for limited use.
d. Any type of prospective financial statements would Engagements on Greenhouse Gas (GHG) Statements
normally be appropriate for general use.
18. GHG statement is statement setting out constituent
12. The party responsible for assumptions identified in the elements and quantifying an entity’s GHG emissions for
preparation of prospective financial statements is a period and, where applicable, comparative
usually information and explanatory notes including a summary
a. A third-party lending institution. of significant quantification and reporting policies. A
b. The client’s management. GHG statement is sometimes known as?
c. The reporting accountant. a. Emissions inventory.
d. The client’s independent auditor. b. Greenhouse gases.
c. Purchased offset.
13. An examination of a financial forecast is a professional d. Emissions factor.
service that involves
a. Compiling or assembling a financial forecast that is
based on management's assumptions.

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19. Given the link between greenhouse gas (GHG) performed in accordance with PSAE 3420, the level of
emissions and climate change, many entities are assurance conveyed is
quantifying their GHG emissions for internal a. Absolute c. Limited
management purposes. Which of the following may also b. Reasonable d. None
be a reason for preparing a GHG statement?
a. A regulatory disclosure regime. 26. An accountant's report on an examination of pro forma
b. An emissions trading scheme. financial information should include a
c. To inform investors and others on a voluntary basis a. Statement that the entity's internal control was not
that may be part of a sustainability report or in an relied on in the review.
entity’s annual report. b. Disclaimer of opinion on the financial statements
d. All of the above. from which the pro forma financial information is
derived.
20. The Philippine Framework for Assurance Engagements c. Caveat that it is uncertain whether the transaction
(the Assurance Framework) notes that an assurance or event reflected in the pro forma financial
engagement may be either an attestation engagement information will ever occur.
or a direct engagement. PSAE 3410 deals only with d. Reference to the financial statements from which
which assurance engagement? the historical financial information is derived.
a. Attestation
b. Direct Letters for Underwriters
c. Both a and b
d. None of the above 27. In connection with a public offering of first mortgage
bonds by Good Corp., the bond underwriter has asked
21. According to PSAE 3410 which of the following Good’s CPA to furnish him with a comfort letter giving
assurance levels may be provided on GHG statement? as much assurance as possible relative to Good’s
a. Reasonable unaudited financial statements for the three months
b. Limited ended March 31, 2020.
c. Both a and b
d. None of the above The CPA had expressed an unqualified opinion on
Good’s financial statements for the year ended
Report on the Compilation of Pro Forma Financial December 31, 2019 and he has performed a limited
Information Included in a Prospectus review of Good’s financial statements for the three
months ended March 31, 2020. Nothing has come to his
22. Pro forma financial information is attention that would indicate that the March 31, 2020
a. Financial information shown together with statements are not properly presented. Under these
adjustments to illustrate the impact of an event or circumstances, the CPA’s response to the underwriter’s
transaction on unadjusted financial information as if request should be to:
the event had occurred or the transaction had been a. furnish to the underwriters an opinion that the
undertaken at an earlier date selected for purposes March 31, 2020 statements are fairly presented
of the illustration. subject to year-end audit adjustments.
b. Adjustments to unadjusted financial information b. give negative assurance as to the March 31, 2020
that illustrate the impact of a significant event or financial statements but disclaim an opinion on
transaction (“event” or “transaction”) as if the event these statements.
had occurred or the transaction had been c. inform the underwriters that no comfort letter is
undertaken at an earlier date selected for purposes possible without an audit of the financial statements
of the illustration. [Pro forma adjustments] for the three months ended March 31, 2020.
c. A document issued pursuant to legal or regulatory d. Furnish to the underwriters an adverse opinion
requirements relating to the entity’s securities on covering financial statements for the three months
which it is intended that a third party should make ended March 31, 2020.
an investment decision. [Prospectus]
d. Financial information of the entity to which pro 28. Which of the following statements is correct concerning
forma adjustments are applied by the responsible letters for underwriters, commonly referred to as
party. [Unadjusted financial information] comfort letters?
a. Letters for underwriters are required by the SEC the
23. In accordance with PSAE 3420, it is presumed that pro initial public sale of registered securities.
forma financial information is presented in columnar b. Letters for underwriters typically give negative
format consisting of the following except assurance on unaudited interim financial
a. Unadjusted financial information. information.
b. Pro forma adjustments. c. Letters for underwriters usually are included in the
c. Resulting pro forma column. registration statement accompanying a prospectus.
d. Prospective financial information. d. Letters for underwriters ordinarily update auditors'
opinions on the prior year's financial statements.
24. In accordance with PSAE 3420, which of the following 29. Comfort letters ordinarily are addressed to
performs compilation of pro forma financial a. Creditor financial institutions.
information? b. The client's audit committee.
a. The practitioner. c. The Securities and Exchange Commission.
b. The responsible party. d. Underwriters of securities.
c. The intended users.
d. All of the above. 30. Comfort letters ordinarily are signed by the client's
a. Independent auditor.
25. In an engagement to report on the compilation of pro b. Underwriter of securities.
forma financial information included in a prospectus c. Audit committee.
d. Senior management.

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Management Discussion and Analysis (MD&A) parries have agreed and to report on factual
findings.
31. Which of the following is not an objective of a CPA's c. Carry out procedures of a review nature and to
examination of a client's management discussion and express limited assurance based on those agreed
analysis (MD&A) prepared pursuant to Securities and procedures.
Exchange Commission rules and regulations? d. Carry out procedures of an audit nature and is
a. The historical amounts have been accurately express limited assurance.
derived, in all material respects, from the entity's
financial statements. 38. Which of the following is incorrect about agreed-upon
b. The underlying information, determinations, procedures engagement?
estimates and assumptions of the entity provide a a. An engagement to perform agreed-upon procedures
reasonable basis for the disclosures contained may involve the auditor in performing certain
herein. procedures concerning individual items of financial
c. The presentation includes the required elements of data.
MD&A. b. Users of the agreed-upon procedures report assess
d. The presentation is in conformity with rules and for themselves the procedures and findings
regulations adopted by the Securities and Exchange reported by the auditor and draw their conclusion
Commission. from the auditor’s work.
c. The auditor should be independent of the financial
32. Which of the following is an assertion embodied in data or financial statements where agreed
management's discussion and analysis (MD&A)? procedures have to be applied.
a. Valuation. d. The report is restricted to those parties that have
b. Reliability. agreed to the procedures to be preformed.
c. Consistency with the financial statements.
d. Rights and obligations. 39. Matters to be agreed in an agreed-upon procedures
engagement include the following, except:
Trust Services a. Stated purpose of the engagement
b. Limitations on distribution of the report of factual
33. The WebTrust seal of assurance relates most directly to findings.
a. Financial statements maintained on the Internet. c. Anticipated form of the report and the level of
b. Health care facilities. assurance to be provided
c. Risk assurance procedures. d. Nature, timing and extent of the specific procedures
d. Web sites. to be applied.

34. A CPA's examination report relating to a WebTrust 40. An accountant may accept an engagement to apply
engagement is most likely to include agreed-upon procedures that are not sufficient to
a. An opinion on whether the site is "hackproof." express an opinion on one or more specified accounts
b. An opinion on whether the site meets the WebTrust or items of a financial statement provided that
criteria. a. The accountant’s report does not enumerate the
c. Negative assurance on whether the site is procedures performed
electronically secure. b. The financial statements are prepared in accordance
d. No opinion or other assurance, but a summary of with a comprehensive basis of accounting other
findings relating to the Web site. than PFRSs
c. Distribution of the accountant’s report is restricted
35. An engagement in which a CPA considers security, d. The accountant is also the entity’s continuing
availability, processing integrity, online privacy, and/or auditor
confidentiality over any type of defined electronic
system is most likely to considered which of the Compilation Engagements
following types of engagements?
a. Internal control over financial reporting. 41. The objective of a compilation engagement
b. SysTrust. a. Is to enable the auditor to express an opinion
c. Web siteAssociate. whether the financial statements are prepared in
d. Web Trust. all material respects, in accordance with an
identified financial reporting framework
36. A client's refusal to provide a written assertion in a Trust b. Is to enable the auditor to state whether, on the
Services engagement is most likely to result in which of basis of procedures which do not provide all the
the following types of opinions? evidence that would be required in an audit,
a. Adverse. anything has come to the auditor’s attention that
b. Disclaimer. causes the auditor to believe that the financial
c. Qualified. statements are not prepared in all material
d. Unqualified with explanatory language. respects, in accordance with an identified financial
reporting framework.
Agreed-upon Procedures Engagements c. Is to carry out those procedures of an audit nature
to which the auditor and the entity and any
37. The objective of an agreed upon-procedures appropriate third parties have agreed and to report
engagement is for the auditor to: on factual findings.
a. Carry out procedures of an audit nature to which the d. Is to use accounting expertise as opposed to
auditor and the entity and any appropriate third auditing expertise to collect, classify and summarize
parties have agreed and to report on factual financial information.
findings.
b. Carry out procedures of a review nature to which
the auditor and the entity and any appropriate third

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42. When associated with financial statements of a

nonpublic entity, the procedures and report issued differ
based on whether an auditor has performed a
compilation, a review, or an audit. Which of following
statements normally relate to compilation?
a. Includes inquiry of client’s legal counsel.
b. The auditor who lacks independence may perform
this service.
c. Includes obtaining an understanding of internal
control.
d. Includes assessing control risk.

43. Which of the following procedures does an auditor in a

compilation engagement of a nonpublic entity ordinarily
perform?
a. Reading the financial statements to consider
whether they are free of obvious mistakes in the
application of accounting principles.
b. Obtaining written representations from
management indicating that the compiled financial
statements will not be used to obtain credit.
c. Making inquiries of management concerning actions
taken at meetings of the stockholders and the board
of directors.
d. Applying analytical procedures designed to
corroborate management's assertions that are
embodied in the financial statement components.

44. An accountant’s compilation report should be dated as

of the date of
a. Completion of field work
b. Completion of compilation
c. Transmittal of the compilation report
d. The latest subsequent event referred to in the
notes to financial statements

Historical Financial Statements (FSs) Engagements:

Audit, Review, and Related Services Comparison

45. Indicate the level of assurance provided by audit, review

and related services (agreed-upon procedures and
compilation)
a. b. c. d.
Audit High High Low Reasonable
Review High Low Low Reasonable
Agreed-upon None None None Low
Compilation None None None None

End of AT.3220

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