AUDITING AND

ASSURANCE
CONCEPTS AND
APPLICATIONS
Arielle Angelique Macaraeg, CPA, CTT
AUDIT REPORT

Audit Reporting Requirements

Determining the Type of Modification to the

Auditor’s Opinion
 The auditor’s report indicates whether the
financial statements are presented in conformity

FORMING AN with applicable reporting framework

•Accounting standards generally accepted in the Philippines.

OPINION AND •International accounting standards.

•Another authoritative and comprehensive financial reporting

REPORTING framework which has been designed for use in financial

reporting framework and is identified in the financial
statements.
ON Auditors use this report to highlight any unusual
FINANCIAL aspects of the audit examination.

STATEMENTS The auditor can use the report to communicate

useful information to decision makers that may not
appear on the face of the financial statements
 ◦ When the auditor is expressing an unqualified
opinion on a complete set of general purpose
financial statements prepared in accordance
with a financial reporting framework that is
designed to achieve fair presentation, the
auditor refers to PSA 700(Redrafted), “Forming
an Opinion and Reporting on Financial
Statements.”
◦ The auditor also refers to PSA 705 and 706
Audit (Revised and Redrafted) when expressing a
modified audit opinion, including emphasis of
Reporting matter, other matter paragraph, a qualified
opinion, a disclaimer of opinion or an adverse
opinion
Requirements ◦ The auditor refers to PSA 800, 805 and 810
(Revised and Redrafted) when expressing an
opinion on:
◦ A complete set of financial statements prepared in accordance with a
special-purpose framework;
◦ A component of a complete set of general purpose or special purpose
financial statements, such as a single financial statement, specified
accounts, elements of accounts, or items in a financial statement;
◦ Summary financial statements
 The standard unqualified report is issued when
◦ The auditors have performed their
examination in accordance with generally
Standard accepted auditing standards in the
Philippines, the PSAs and PAPs;
Unqualified ◦ The financial statements, which are complete

Auditor’s
and general-purpose in nature, are prepared
in accordance with a financial reporting

Report
framework that is designed to achieve fair
presentation; and
◦ There are no circumstances requiring
modification.
The auditor’s report should be
in writing.

A written report encompasses

both reports issued in hard
copy format and those using
an electronic medium.
 ◦ 1. Title - “ Independent Auditor’s
Report”

Basic elements
of the auditor’s
unqualified
report
 The appropriate title of the report should
clearly indicate that it is the report of an
independent auditor. This is done in order
to

1. Title - “ ◦ To emphasize the independence of the

auditor with respect to the client under audit;
Independent and

Auditor’s ◦ To distinguish the auditor’s report from the

reports that might be issued by others, such
Report” as by officers of the entity, the board of
directors , or from the reports of other
auditors who may not have to abide by the
same ethical requirements as the
independent auditor
 ◦ 1. Title - “ Independent Auditor’s
Report”
◦ 2. Addressee

Basic elements
of the auditor’s
unqualified
report
 The auditor’s report on general-purpose
financial statements is addressed to those

2. Addressee for whom the report is prepared, often

either to the shareholders or those
charged with governance of the entity for
whose financial statements are being audited
 ◦ 1. Title - “ Independent Auditor’s
Report”
◦ 2. Addressee
◦ 3. Introductory Paragraph/Report on
Basic elements the Financial Statements
of the auditor’s
unqualified
report
 The introductory paragraph in the auditor’s
report should identify the entity whose
financial statements have been audited and
should state that the financial statements have
3. been audited. The introductory paragraph
should also
Introductory ◦ Identify the title of each of the financial
statements that comprise the complete set of
Paragraph/ financial statements (statement of financial
position, statement of comprehensive
Report on income, statement of changes in equity,
statement of cash flow and a summary of

the Financial significant accounting policies and other

explanatory notes);

Statements ◦ Refer to the summary of significant accounting

policies and explanatory notes
◦ Specify the date and period covered by
financial statements.
 ◦ 1. Title - “ Independent Auditor’s
Report”
◦ 2. Addressee
◦ 3. Introductory Paragraph/Report on
the Financial Statements
Basic elements
◦ 4. Management’s responsibility for
of the auditor’s the Financial Statements
unqualified
report
 The report should state that the management is
responsible for the preparation and fair
presentation of the financial statements in
accordance with applicable financial reporting
framework and that such responsibility includes:
◦ Designing, implementing and maintaining internal
control relevant to the fair presentation of the
4. Management’s financial statements that are free from material
misstatements, whether due to fraud or error;
responsibility for ◦ Selecting and applying appropriate accounting
the Financial policies; and
Statements ◦ Making accounting estimates that are reasonable in
the circumstances
Financial statements are the representations of
management. Management is responsible for the
preparation and fair presentation of the financial
statements in accordance with the applicable reporting
framework
 ◦ 1. Title - “ Independent Auditor’s
Report”
◦ 2. Addressee
◦ 3. Introductory Paragraph/Report on
the Financial Statements
Basic elements
◦ 4. Management’s responsibility for
of the auditor’s the Financial Statements
unqualified ◦ 5. Auditor’s responsibility
report
 State that the responsibility of the auditor is to
express an opinion on the financial statements based
on the audit

State that the audit was conducted in accordance

with Philippine Standards on Auditing (PSAs) and
that those standards require the auditor to comply with
ethical requirements and to plan and perform the audit

5. Auditor’s to obtain reasonable assurance that the financial

statements are free from material misstatement

responsibility
Give a general description of an audit conducted

State that the auditor believes that the audit evidence

obtained is sufficient and appropriate to provide a
basis for the auditor’s opinion
 ◦ 1. Title - “ Independent Auditor’s
Report”
◦ 2. Addressee
◦ 3. Introductory Paragraph/Report on
the Financial Statements
Basic elements
◦ 4. Management’s responsibility for
of the auditor’s the Financial Statements
unqualified ◦ 5. Auditor’s responsibility
report ◦ 6. Auditor’s opinion
6. Auditor’s The auditor’s opinion states that the financial statements
present fairly, in all material respects, the information that the

opinion financial statements are designed to convey (which is

determined by the financial reporting framework).
 ◦ 1. Title - “ Independent Auditor’s
Report”
◦ 2. Addressee
◦ 3. Introductory Paragraph/Report on
the Financial Statements
Basic elements ◦ 4. Management’s responsibility for
of the auditor’s the Financial Statements
unqualified ◦ 5. Auditor’s responsibility
report ◦ 6. Auditor’s opinion
◦ 7. Other Reporting Responsibilities/
Report on Other Legal and
Regulatory Requirements
 7. Other
Reporting The auditor may have additional
Responsibilities/ responsibilities to report on other matters
Report on Other that are supplementary to the auditor’s
responsibility to express an opinion on the
Legal and financial statements.
Regulatory
Requirements
 ◦ 1. Title - “ Independent Auditor’s
Report”
◦ 2. Addressee
◦ 3. Introductory Paragraph/Report on
the Financial Statements
Basic elements ◦ 4. Management’s responsibility for
of the auditor’s the Financial Statements
unqualified ◦ 5. Auditor’s responsibility
report ◦ 6. Auditor’s opinion
◦ 7. Other Reporting Responsibilities/
Report on Other Legal and
Regulatory Requirements
◦ 8. Auditor’s signature
 The auditor’s report should be signed.

8. Auditor’s The auditor’s signature is either in the name of the audit firm, the
personal name of the auditor or both, as appropriate. In addition

signature
to the auditor’s signature, the auditor may be required to
declare the auditor’s professional accountancy designation or the
fact that the auditor or firm, as appropriate, has been recognized
by the appropriate licensing authority
 ◦ 1. Title - “ Independent Auditor’s
Report”
◦ 2. Addressee
◦ 3. Introductory Paragraph/Report on
the Financial Statements
Basic elements ◦ 4. Management’s responsibility for
the Financial Statements
of the auditor’s ◦ 5. Auditor’s responsibility
unqualified ◦ 6. Auditor’s opinion
report ◦ 7. Other Reporting Responsibilities/
Report on Other Legal and
Regulatory Requirements
◦ 8. Auditor’s signature
◦ 9. Date of the Auditor’s Report
 The auditor should date the report on the
financial statements no earlier than the date on
which the auditor has obtained sufficient
appropriate audit evidence on which to base the
opinion on the financial statements. Sufficient
appropriate audit evidence should include
evidence that the entity’s financial complete
9. Date of set of financial statements has been prepared
and that those with the recognized authority have

the Auditor’s asserted that they have taken responsibility for

them.

Report The date of the auditor’s report informs the

reader that the auditor has considered the effect
of events and transactions of which the auditor
became aware and that occurred up to that date.
The auditor’s responsibility for events and
transactions after the date of the auditor’s
report is addressed in PSA 560, “Subsequent
Events.
 ◦ 1. Title - “ Independent Auditor’s Report”
◦ 2. Addressee
◦ 3. Introductory Paragraph/Report on the
Financial Statements
◦ 4. Management’s responsibility for the
Basic elements Financial Statements

of the auditor’s ◦ 5. Auditor’s responsibility

◦ 6. Auditor’s opinion
unqualified
◦ 7. Other Reporting Responsibilities/
report Report on Other Legal and Regulatory
Requirements
◦ 8. Auditor’s signature
◦ 9. Date of the Auditor’s Report
◦ 10. Auditor’s Address
10. Auditor’s The report should name the location in the
country where the auditor practices.
Address
MODIFICATIONS TO THE INDEPENDENT
AUDITOR’S REPORT

Types of Modified Opinions

The three types of modified opinions are:

• A qualified opinion
• An adverse opinion
• A disclaimer
 The decision regarding which type of modified
opinion is appropriate depends upon:

The nature of the matter giving rise to the modification, The auditor’s judgment about the pervasiveness of the
that is, whether the financial statements are materially effects or possible effects of the matter on the financial
misstated or, in the case of an inability to obtain sufficient statements.
appropriate audit evidence, may be materially misstated; and
Circumstances
When a The auditor shall express clearly an appropriately modified
opinion on the financial statements that is necessary when:

Modification to ◦ (a) The auditor concludes that, based on the audit evidence
obtained, the financial statements as a whole are not free from

the Auditor’s material misstatement; or

◦ (b) The auditor is unable to obtain sufficient appropriate

Opinion is audit evidence to conclude that the financial statements as a

whole are free from material misstatement.

Required
 Qualified Opinion
The auditor shall express a qualified opinion
when:
Determining ◦ (a) The auditor, having obtained sufficient

the Type of appropriate audit evidence, concludes that

misstatements, individually or in the
Modification aggregate, are material, but not pervasive, to
the financial statements; or
to the ◦ (b) The auditor is unable to obtain

Auditor’s sufficient appropriate audit evidence on

which to base the opinion, but the auditor

Opinion concludes that the possible effects on the

financial statements of undetected
misstatements, if any, could be material but
not pervasive.
 Adverse Opinion
The auditor shall express an adverse opinion when the
auditor, having obtained sufficient appropriate audit evidence,
concludes that misstatements, individually or in the aggregate,

Determining are both material and pervasive to the financial statements.

Disclaimer of Opinion

the Type of The auditor shall disclaim an opinion when the auditor is unable to
obtain sufficient appropriate audit evidence on which to base the

Modification to opinion, and the auditor concludes that the possible effects
on the financial statements of undetected misstatements, if any,

the Auditor’s
could be both material and pervasive
The auditor shall disclaim an opinion when, in extremely rare

Opinion
circumstances involving multiple uncertainties, the auditor
concludes that, notwithstanding having obtained sufficient
appropriate audit evidence regarding each of the individual
uncertainties, it is not possible to form an opinion on the
financial statements due to the potential interaction of the
uncertainties and their possible cumulative effect on the financial
statements.
Consequence of
an Inability to If the auditor concludes that the possible effects on the
financial statements of undetected misstatements, if any,
Obtain Sufficient could be material but not pervasive , the auditor shall qualify
the opinion; or
Appropriate
Audit Evidence (b) If the auditor concludes that the possible effects on the
financial statements of undetected misstatements, if any,
Due to a could be both material and pervasive so that a
qualification of the opinion would be inadequate to

Management- communicate the gravity of the situation, the auditor shall:

• (i) Resign from the audit, where practicable and not prohibited by law or

Imposed regulation; or
• (ii) If resignation from the audit before issuing the auditor’s report is not
practicable or possible, disclaim an opinion on the financial statements.
Limitation after If the auditor resigns as contemplated by (b)(i), before
the Auditor Has resigning, the auditor shall communicate to those charged
with governance any matters regarding misstatements
Accepted the identified during the audit that would have given rise to a
modification of the opinion.

Engagement
Other Considerations Relating to an
Adverse Opinion or Disclaimer of Opinion
When the auditor considers it necessary to express an adverse opinion
or disclaim an opinion on the financial statements, as a whole, the
auditor’s report shall not also include an unmodified opinion with
respect to the same financial reporting framework on a single financial
statement or one or more specific elements, accounts or items of a
financial statement. To include such an unmodified opinion in the same
report in these circumstances would contradict the auditor’s adverse
opinion or disclaimer of opinion on the financial statements as a whole
Form and Content of the Auditor’s Report
When the Opinion Is Modified
Basis for Modification Paragraph
If there is a material misstatement of the financial statements that relates to the non-
disclosure of information required to be disclosed, the auditor shall:
◦ Discuss the non-disclosure with those charged with governance;
◦ Describe in the basis for modification paragraph the nature of the omitted
information; and
◦ Unless prohibited by law or regulation, include the omitted disclosures, provided it
is practicable to do so and the auditor has obtained sufficient appropriate audit
evidence about the omitted information
 Opinion Paragraph
a) The financial statements present fairly, in all
material respects in accordance with the
Form and applicable financial reporting framework when
reporting in accordance with a fair presentation
Content of the framework; or

Auditor’s Report b) The financial statements have been prepared,

in all material respects, in accordance with
When the the applicable financial framework when
reporting in accordance with a compliance
Opinion Is framework.

Modified When the modification arises from an inability to

obtain sufficient appropriate audit evidence, the
auditor shall use the corresponding phrase “except
for the possible effects of the matter(s)….” for the
modified opinion
Form and Content of the Auditor’s Report
When the Opinion Is Modified
When the auditor expresses an adverse opinion, the auditor shall state in the opinion paragraph that, in the
auditor’s opinion, because of the significance of the matter(s) described in the Basis for Adverse Opinion
paragraph:
a) The financial statements do not present fairly in accordance with the applicable financial reporting framework when
reporting in accordance with a fair presentation framework; or
b) The financial statements have not been prepared, in all material respects, in accordance with applicable
financial reporting framework when reporting in accordance with a compliance framework.

When the auditor disclaims an opinion due to an inability to obtain sufficient audit evidence, the auditor shall state in the
opinion paragraph that:
a) because of the significance of the matter(s) described in the Basis for Disclaimer of Opinion paragraph, the auditor
has not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion; and,
accordingly.
b) the auditor does not express an opinion on the financial statements
Form and Content of the Auditor’s Report
When the Opinion Is Modified
Description of Auditor’s Responsibility When the Auditor Expresses a Qualified or Adverse Opinion
When the auditor expresses a qualified or adverse opinion, the auditor shall amend the description of the
auditor’s responsibility to state that the auditor believes that the audit evidence the auditor has obtained
is sufficient and appropriate to provide a basis for the auditor’s modified audit opinion.
Description of Auditor’s Responsibility When the Auditor Disclaims an Opinion
When the auditor disclaims an opinion due to an inability to obtain sufficient appropriate audit evidence, the
auditor shall amend the introductory paragraph of the auditor’s report to state that the auditor was engaged to
audit the financial statements. The auditor shall also amend the description of the auditor’s responsibility
and the description of the scope of the audit to state only the following: “Our responsibility is to express an
opinion on the financial statements based on conducting the audit in accordance with International
Standards on Auditing. Because of the matter(s) described in the Basis for Disclaimer of Opinion paragraph,
however, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.”
Communication
with Those When the auditor expects to modify the opinion in the auditor’s
report, the auditor shall communicate with those charged with

Charged with governance the circumstances that led to the expected

modification and the proposed wording of the modifications

Governance
Emphasis of Matter Paragraph and Other
Paragraphs in the Independent Auditor’s Report
PSA 706 (Revised and Redrafted) deals with additional communication in the auditors report when the auditor
considers it necessary to:
(a) Draw users’ attention to a matter or matters presented or disclosed in the financial statements that are of such
importance that they are fundamental to users’ understanding of the financial statements; or
(b) Draw users’ attention to any matter or matters other than those presented or disclosed in the financial
statements that are relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s
report.
The objective of the auditor, having formed an opinion on the financial statements, is to draw users’ attention,
when in the auditor’s judgment, it is necessary to do so, by way of clear additional communication in the auditor’s report,
to:
(a) A matter, although appropriately presented or disclosed in the financial statements, that is of such importance
that it is fundamental to users’ understanding of the financial statements; or
(b) As appropriate, any other matter that is relevant to users’ understanding of the audit, the auditor’s
responsibilities or the auditor’s report
 Examples of An uncertainty relating to the future outcome of exceptional
circumstances litigation or regulatory action.
where the
auditor may
consider it
necessary to Early application (where permitted) of a new accounting standard
include an (for example, a new Philippine Financial Reporting Standard) that

Emphasis of Emphasis of has a pervasive effect on the financial statements in advance of its
Matter effective date.
paragraph

Matter are: A major catastrophe that has had, or continues to have, a

significant effect on the entity’s financial position.

Paragraphs in When the Include it immediately after the Opinion Paragraph in the

the Auditor’s
auditor auditor’s report;
includes an
Emphasis of
Matter Use the heading “Emphasis of Matter,” or other appropriate

Report paragraph in
the auditor’s
report, the
heading;

Include in the paragraph a clear reference to the matter

auditor shall: being emphasized and to where relevant disclosures that fully
describe the matter can be found in the financial statements; and

Indicate that the auditor’s opinion is not modified in respect of

the matter emphasized
 The inclusion of an Emphasis of
Matter paragraph in the auditor’s
report does not affect the auditor’s
Emphasis of opinion. An Emphasis of Matter
Matter paragraph is not a substitute for
either:
Paragraphs in • The auditor expressing a qualified opinion or
the Auditor’s an adverse opinion, or disclaiming an
opinion, when required by the circumstances
Report of a specific audit engagement (see PSA
705(Revised and Redrafted)); or
• Disclosures in the financial statements that
the applicable financial reporting
framework requires management to make.
 If the auditor considers it necessary to communicate a matter other
than those that are presented or disclosed in the financial

Other Matter statements that, in the auditor’s judgment, is relevant to users’

understanding of the audit, the auditor’s responsibilities or the

Paragraphs in auditor’s report and this is not prohibited by law or regulation, the
auditor shall do so in a paragraph in the auditor’s report, with the

the Auditor’s heading “Other Matter,” or other appropriate heading. The auditor
shall include this paragraph immediately after the Opinion

Report
paragraph and any Emphasis of Matter Paragraph, or elsewhere
in the auditor’s report if the content of the Other Matter
paragraph is relevant to the Other Reporting Responsibilities
section.
Communication
with Those If the auditor expects to include an Emphasis of Matter or an
Other Matter paragraph in the auditor’s report, the auditor shall

Charged with communicate with those charged with governance regarding

this expectation and the proposed wording of this paragraph

Governance
AS 1301: Communications with Audit
Committees
Introduction
Objectives
Appointment and Retention
Obtaining Information and Communicating the Audit Strategy
Results of the Audit
Form and Documentation of Communications
Introduction
◦ This standard requires the auditor to communicate with
the company's audit committee1 regarding certain
matters related to the conduct of an audit2 and to
obtain certain information from the audit committee
relevant to the audit. This standard also requires the
auditor to establish an understanding of the terms of the
audit engagement with the audit committee and to
record that understanding in an engagement letter.
Objectives
◦ Communicate to the audit committee the responsibilities of the auditor in relation
to the audit and establish an understanding of the terms of the audit engagement
with the audit committee;
◦ Obtain information from the audit committee relevant to the audit;
◦ Communicate to the audit committee an overview of the overall audit strategy and
timing of the audit; and
◦ Provide the audit committee with timely observations arising from the audit that are
significant to the financial reporting process.
 ◦ Significant Issues Discussed with
Management in Connection with the
Auditor's Appointment or Retention
Appointment ◦ Establish an Understanding of the Terms of
the Audit
and Retention ◦ The objective of the audit;
◦ The responsibilities of the auditor; and
◦ The responsibilities of management.
 Obtaining Information
Obtaining Relevant to the Audit
Information and
Communicating
the Audit Overall Audit Strategy,
Strategy Timing of the Audit, and
Significant Risks
Overall Audit Strategy, Timing of the Audit,
and Significant Risks
The extent to which the auditor plans to
use the work of internal auditors,
The nature and extent of specialized
The extent to which the auditor plans to company personnel (in addition to
skill or knowledge needed to perform
use the work of the company's internal internal auditors), and third parties
the planned audit procedures or
auditors in an audit of financial working under the direction of
evaluate the audit results related to
statements; management or the audit committee
significant risks;9
when performing an audit of internal
control over financial reporting;

The names, locations, and planned

The basis for the auditor's
responsibilities12 of other independent
determination that the auditor can
public accounting firms or other
serve as principal auditor, if significant
persons, who are not employed by the
parts of the audit are to be performed
auditor, that perform audit procedures
by other auditors.13
in the current period audit; and
 Date of the management
representation shall be as near as
practicable to the date of the
Date of the auditor’s report

Management
Representation Auditor may request a written
representation on the specific
matter during the course of an audit
(example of a bank branch audit
Results of the Audit

Accounting Policies and Practices, Estimates, and Significant

Unusual Transactions
• Significant accounting policies and practices.
• Management's initial selection of, or changes in, significant accounting
policies or the application of such policies in the current period; and
• The effect on financial statements or disclosures of significant
accounting policies in (i) controversial areas or (ii) areas for which there
is a lack of authoritative guidance or consensus, or diversity in practice.
Results of the Audit

Accounting Policies and Practices, Estimates, and

Significant Unusual Transactions
• Critical accounting policies and practices. All critical accounting
policies and practices to be used, including:
• The reasons certain policies and practices are considered critical;
and
• How current and anticipated future events might affect the
determination of whether certain policies and practices are
considered critical.
Results of the Audit

Accounting Policies and Practices, Estimates, and Significant

Unusual Transactions
• Critical accounting estimates.
• A description of the process management used to develop critical accounting
estimates;
• Management's significant assumptions used in critical accounting estimates
that have a high degree of subjectivity;
• Any significant changes management made to the processes used to develop
critical accounting estimates or significant assumptions, a description of
management's reasons for the changes, and the effects of the changes on the
financial statements.
Results of the Audit

Accounting Policies and Practices, Estimates, and

Significant Unusual Transactions
• Significant unusual transactions.
• Significant transactions that are outside the normal course
of business for the company or that otherwise appear to be
unusual due to their timing, size, or nature;
• The policies and practices management used to account for
significant unusual transactions.
Auditor's Evaluation of the Quality of the
Company's Financial Reporting
◦ Qualitative aspects of significant accounting policies and practices.
◦ The results of the auditor's evaluation of, and conclusions about, the
qualitative aspects of the company's significant accounting policies and
practices, including situations in which the auditor identified bias in
management's judgments about the amounts and disclosures in the financial
statements;
◦ The results of the auditor's evaluation of the differences between (i) estimates
best supported by the audit evidence and (ii) estimates included in the
financial statements, which are individually reasonable, that indicate a possible
bias on the part of the company's management.
 Assessment of critical accounting policies
and practices. The auditor's assessment of
management's disclosures related to the
Auditor's critical accounting policies and practices,
along with any significant modifications to
Evaluation of the disclosure of those policies and practices
proposed by the auditor that management
the Quality of did not make.

the Company's Conclusions regarding critical accounting

estimates. The basis for the auditor's
Financial conclusions regarding the reasonableness of
the critical accounting estimates.
Reporting
 Significant unusual transactions. The auditor's understanding
of the business purpose (or the lack thereof) of significant
unusual transactions.

Auditor's
Evaluation of
the Quality of
the Company's Financial statement presentation. The results of the auditor's
evaluation of whether the presentation of the financial

Financial statements and the related disclosures are in conformity with

the applicable financial reporting framework, including the

Reporting
auditor's consideration of the form, arrangement, and content
of the financial statements (including the accompanying
notes), encompassing matters such as the terminology used,
the amount of detail given, the classification of items, and the
bases of amounts set forth
 New accounting pronouncements. Situations in
which, as a result of the auditor's procedures, the

Auditor's auditor identified a concern regarding

management's anticipated application of
accounting pronouncements that have been
Evaluation of issued but are not yet effective and might have a
significant effect on future financial reporting.
the Quality of
the Company's Alternative accounting treatments. All alternative
treatments permissible under the applicable
Financial financial reporting framework for policies and
practices related to material items that have been
Reporting discussed with management, including the
ramifications of the use of such alternative
disclosures and treatments and the treatment
preferred by the auditor.
 When other information is
Other presented in documents
Information in containing audited financial
statements, the auditor should
Documents communicate to the audit
Containing committee the auditor's
responsibility under PCAOB
Audited rules and standards for such
Financial information, any related
Statements procedures performed, and
the results of such procedures
Difficult or Contentious Matters for which
the Auditor Consulted

The auditor should communicate to the audit

committee matters that are difficult or contentious
for which the auditor consulted outside the
engagement team and that the auditor reasonably
determined are relevant to the audit committee's
oversight of the financial reporting process.
Management
Consultation with Other
Accountants
When the auditor is aware that
management consulted with other
accountants about significant auditing or
accounting matters and the auditor has
identified a concern regarding such
matters, the auditor should communicate
to the audit committee his or her views
about such matters that were the subject
of such consultation.
 Going Concern

If the auditor concludes, after

If the auditor believes there is consideration of management's plans,
substantial doubt about the company's that substantial doubt about the If the auditor concludes, after
ability to continue as a going concern company's ability to continue as a consideration of management's plans,
for a reasonable period of time, the going concern is alleviated, the basis that substantial doubt about the
conditions and events that the auditor for the auditor's conclusion, including company's ability to continue as a
identified that, when considered in the elements the auditor identified within going concern for a reasonable period
aggregate, indicate that there is management's plans that are significant of time remains:31
substantial doubt;29 to overcoming the adverse effects of
the conditions and events;30

The effects, if any, on the financial

statements and the adequacy of the The effects on the auditor's report.
related disclosure;32 and
Uncorrected and Corrected Misstatements
The auditor should provide the audit committee with the schedule of uncorrected
misstatements related to accounts and disclosures that the auditor presented to
management. The auditor should discuss with the audit committee, or determine that
management has adequately discussed with the audit committee, the basis for the
determination that the uncorrected misstatements were immaterial, including the qualitative
factors considered. The auditor also should communicate that uncorrected misstatements or
matters underlying those uncorrected misstatements could potentially cause future-period
financial statements to be materially misstated, even if the auditor has concluded that the
uncorrected misstatements are immaterial to the financial statements under audit.

The auditor should communicate to the audit committee those corrected misstatements,
other than those that are clearly trivial,37 related to accounts and disclosures that might not
have been detected except through the auditing procedures performed, and discuss with the
audit committee the implications that such corrected misstatements might have on the
company's financial reporting process.
 ◦The auditor should
communicate to the audit
Material Written committee other material
Communications written communications
between the auditor and
management.
 ◦ The auditor should provide to
The Auditor's and discuss with the audit
Report committee a draft of the
auditor's report.
 ◦ The auditor should communicate to the audit
committee any disagreements with
management about matters, whether or not
satisfactorily resolved, that individually or in the
Disagreements aggregate could be significant to the company's

with financial statements or the auditor's report.

Disagreements with management do not
Management include differences of opinion based on
incomplete facts or preliminary information that
are later resolved by the auditor obtaining
additional relevant facts or information prior to
the issuance of the auditor's report.
 The auditor should communicate to the audit
committee any significant difficulties
encountered during the audit. Significant
difficulties encountered during the audit
include, but are not limited to:
Difficulties • Significant delays by management, the unavailability of
Encountered in company personnel, or an unwillingness by management
to provide information needed for the auditor to perform

Performing the
his or her audit procedures;
• An unreasonably brief time within which to complete the
audit;
Audit • Unexpected extensive effort required by the auditor to
obtain sufficient appropriate audit evidence;
• Unreasonable management restrictions encountered by
the auditor on the conduct of the audit; and
• Management's unwillingness to make or extend its
assessment of the company's ability to continue as a
going concern when requested by the auditor.
Other Matters
◦ The auditor should communicate to the
audit committee other matters arising
from the audit that are significant to the
oversight of the company's financial
reporting process. This communication
includes, among other matters,
complaints or concerns regarding
accounting or auditing matters that
have come to the auditor's attention
during the audit and the results of the
auditor's procedures regarding such
matters.
 ◦ The auditor should communicate
to the audit committee the matters
in this standard, either orally or in
Form and
writing, unless otherwise specified
Documentation
in this standard. The auditor must
of document the communications in
Communications the work papers, whether such
communications took place orally
or in writing
 ◦ All audit committee communications
required by this standard should be made in
a timely manner and prior to the issuance of
the auditor's report. The appropriate timing
of a particular communication to the audit
Timing committee depends on factors such as the
significance of the matters to be
communicated and corrective or follow-up
action needed, unless other timing
requirements are specified by PCAOB rules
or standards or the securities laws.