Audit and Assurance

Ensuring transparency and accuracy

Audit and assurance involve an auditor coming to a conclusion that strengthens the confidence of the intended users of the audit other than the business itself. This conclusion is based on the outcome of the audit, which uses official standards to evaluate or assess a business’s financial records.

Our team of auditors systematically examines the financial records of larger businesses (i.e. companies, corporations) to determine whether those records represent a business’s financial standing fairly and accurately. Our assurance team is working with our auditors, who closely inspect business processes and operations about how these financial records are prepared.

Both teams make sure a business’ financial records comply with official accounting standards and principles

Audit: True and unbiased

Auditing involves a closer look at a business’s financial reports to spot errors as well as to detect anomalies such as fraud, misused funds, or whether any entries were misrepresented.

This process is usually carried out by the business’ in-house auditor and a third-party or independent auditor. While in-house auditors check the financial reports of a business regularly, independent auditors are called upon for an impartial assessment which is generally regarded as a fair and accurate statement of how well the business is doing.

Assurance: Right processes, right reports

Assurance involves close observation of the processes used in preparing a business’ financial reports to ensure that the process is correct and that produces the most favorable or appropriate results.

An assurance team can help businesses evaluate and enhance the quality of their financial records by providing insights into how a business collects the information that goes into these records. This process is usually performed by an independent firm, which assures the public of a business’ honesty and that their trust (particularly in the case of investors) is well-founded.

Our Audit and Assurances services include

In preparing a Financial Statements Audit, an independent CPA forms an opinion as to whether a business has represented the following fairly and accurately:

  • Financial position
  • Changes in net assets
  • Cash flows

This opinion is given to the business’ upper management team and other parties that require an audited financial statement such as the Securities and Exchange Commission (SEC).

Informing their opinions, CPAs are mandated to carry out procedures according to Generally Accepting Auditing Standards (GAAS). These Standards were prepared by the American Institute of Certified Public Accountants (AICPA) – Auditing Standards Board (ASB). GAAS is a global framework for auditing.

GAAS demands that auditors plan and perform their audit to obtain reasonable assurance (which is a high, but not absolute, level of assurance) that financial statements are free of material misstatement, whether caused by error or fraud.

Accredited CPAs, only.

Note that not all CPAs are authorized to perform or sign financial statements. To conduct a Financial Statements Audit, a CPA must be accredited by the BIR as a tax agent and the Board of Accountancy-Philippine Regulation Commission.

Businesses that submit a financial statements audit that is signed by a non-accredited CPA will be penalized, while the license of the CPA may be revoked. It is the responsibility of the business to make sure that the CPA who signs its audit is genuinely accredited.

Required and recommended.

Sole proprietorships are not required to perform a Financial Statements Audit or submit an audited financial statement to the BIR if the individual chooses to file using the Optional Standard Deduction. There are advantages, however, of having a Financial Statement Audit conducted as a sole proprietorship, which includes:

  • The correct value is placed on assets, liabilities and equities
  • In-house or outsourced bookkeeping and accounting is verified
  • Securing bank loans or making business proposals is facilitated

On the other hand, the SEC requires all corporations without exception to undergo a Financial Statements Audit and submit an audited financial statement stamped as “filed” by the BIR.

Performed by an in-house team or a third-party service provider, an Internal Audit is an autonomous and objective process carried out to improve business operations. This includes identifying and preventing fraud or errors through monitoring, conducting investigations, and addressing any issues found.

Once a business assigns tasks such as bookkeeping, accounting, payroll processing, and inventory to a team, an Internal Audit becomes necessary to ensure correct and compliant completion of these tasks.

In monitoring these tasks, Internal Auditors can add value to a business by identifying areas for improvement such as the following:

  • Corporate governance practices
  • Management
  • Expenditure control
  • Risk management
  • Operations

This helps a business foster a culture of integrity and foresight and improves overall business performance and profitability.

Using official standards

Internal Auditors are also able to assess how compliant a business is in its performance of tasks according to industry and accounting regulations, as well as official standards of ethics and accountability. They are then able to recommend solutions to the business based on its observations and assessments.

The standards used for Internal Audits include the International Professional Practices Framework(IPPF), which was put forth in 2015 by the Institute of Internal Auditors (IIA) in the US; and the International Auditing Standards for the Philippine Public Sector (IASPPS)

In using these standards, Internal Auditors also ascertain the veracity of the financial statements submitted to external auditors, who rely solely on the accuracy of the statements they receive.

Assurance and consulting

The tasks that are carried out during an Internal Audit include assurance and consulting processes such as the following:

  • Valuation of strategies and procedures
  • Operations and management audits
  • Compliance reviews
  • Advisory and council
  • In-house training
  • Conducting workshops and meetings

For these processes to be effective and reliable, Internal Auditors must have unrestricted, transparent access to a business’ records and facilities, as well as the full cooperation of its staff.


Everybody makes mistakes, but when it comes to fraud, not everybody deliberately makes mistakes to achieve a goal other than those of the business. Fraud Examination is all about finding these intentional errors through a careful inspection of a business’s financial records, putting measures in place to prevent these errors from happening again, and helping to make it easier to recover lost resources.

Anti-fraud professionals or fraud examiners are usually engaged after an error is suspected, and it’s up to them to resolve the issue by tracing it from its very beginnings. This process usually involves tasks such as:

  • Collecting evidence
  • Preparing reports
  • Confirming findings
  • Detecting fraud
  • Preventing future errors

Fraud Examination is closely linked to forensic accounting, which combines elements of accounting, auditing, and detective work when taking a closer look at a business’ books. In taking this closer look, forensic accountants consider the financial records in light of the current circumstances of the business to come up with findings that may be used in a court of law.

Do note, however, that while Fraud Examination involves forensic accounting processes, not all forensic accounting is used for Fraud Examination purposes.

Anti-fraud expertise

More and more businesses around the world recognize the need for Fraud Examination. CPAs involved in it need years of experience in the field to develop the necessary expertise, as Fraud Examination as a specialization in itself is rarely offered in universities. This expertise includes sufficient knowledge of the relevant legal codes covering aspects such as what constitutes admissible and complete evidence, and whether there really was malicious intent.

A fraud examiner also needs to know how to gather evidence, as the inspection of financial records must be augmented by skills such as deductive reasoning, problem-solving, and conducting effective interviews. Auditing skills are also a must, as well as high ethical and moral standards.

Examiners must also be able to keep abreast of technological developments, as fraudsters continue to come up with more sophisticated ways for circumventing regulations using digital means.

Financial Detectives

There are many ways in which errors may be suspected or discovered at a business leading to a Fraud Examination, such as an audit, routine monitoring, or a whistleblower from within or outside the organization. When acting on a tip from such informants, Fraud Examiners need to know how to assess the informants’ motives and know the best ways for acting on the provided information, especially since the actual details have yet to be uncovered.

Examiners follow a framework that outlines consistent, lawful methods which begin with a general analysis of the evidence and end by zeroing in on the fine details. They also work with the assumption that there are adequate grounds for an investigation and that legal proceedings will follow the examination process.

Businesses, as well as their Fraud Examiners, might be held liable for conducting an Examination without sufficient evidence. This doesn’t mean, however, that other methods such as fraud risk assessments may not be used if there is no serious basis for an Examination.

Businesses looking to transact with overseas entities or expand their global footprint will need to adhere to International Financial Reporting Standards (IFRS), the financial reporting language commonly used worldwide.

Complying with the IFRS makes it easier to prepare financial statements that comply with ever-changing requirements for the likes of leasing and revenue recognition, particularly for businesses that operate in multiple countries and for larger, publicly listed companies.

It can be challenging to find accountants who are well-versed in IFRS as well as standards of their country of origin. Yet, there are advantages to complying with both, as both sets of standards encourage the kind of transparency that potential investors look for. Business owners or key decision-makers will also find it easier to prepare their financial blueprints and optimize their earning potential.

Our team prepares the following in compliance with the IFRS:

  • Asset reevaluation
  • Balance sheets
  • Cash flow statements
  • Financial statements (individual and consolidated)
  • Inventory valuation
  • Management reports
  • Profit and loss statements
  • Statement of changes in equity

All over the world.

IFRS are used in 166 countries worldwide, including the Philippines as well as all G20 member countries, which are committed to upholding a uniform set of world-class accounting standards. Of the 166 countries, 144, including the Philippines, require companies to comply with IFRS.

The level of compliance varies between countries as required by their respective regulatory environments. Some countries, for example, only require certain types of companies, such as local, foreign-owned, or publicly traded to adhere to them. A separate set of IFRS applies to SMEs, which has been adopted by five G20 countries.

In mandating IFRS compliance, the various governments aim to facilitate international trade, as separate standards per country greatly complicated such exchanges for businesses working toward global expansion. While the global community has yet to achieve compliance as a whole, the world’s governments continue to work toward a universal alignment of accounting standards.

Beneficial for businesses.

More than half of the companies listed on the world’s most important stock exchanges are using IFRS. Investors are attracted to companies that use IFRS because they appreciate transparent and consistent business practices which help them make better-informed decisions about whether they should invest in a company or not.

In complying with IFRS, a business has to submit all the necessary reports such as the balance sheet and cash flow statements, as well as a condensed version of its accounting guidelines. These reports are often compared to those of the previous financial period and can lower capital and international reporting costs.

SMEs that use the IFRS specific to SMEs may find them easier to comply with than the full IFRS or their local accounting standards, as well as enhance the quality of their financial reports.

Frameworks are essential to financial reporting because they ensure quality and consistency for all businesses regardless of size or industry. They also minimize the chances of misinterpreting anything included in a financial statement. Without frameworks, financial statements and other such documents would be prepared in a disorderly manner, and be open to any interpretation according to the intent or the bias of those who prepared them.

Compliance with an acceptable financial reporting framework, such as the IFRS, is what auditors look for during Reviews of financial statements. They keep an eye out for anything that might suggest that the statement was prepared in a manner that was not under the specified framework, by following procedures which do not provide information normally required during an audit. That said, reviews cost much less than an audit, but cost more than a simple compilation of financial statements.

In reviewing a financial statement, our audit team considers several criteria, including:

  • The industry of the business
  • The value of the business
  • The profitability and risk of the business
  • How the business differentiates itself from competitors
  • The structure and quality of the financial statement
  • Financial statement forecasts

Getting ready for a review

Financial statement reviews generally go hand in hand with audit season which, in the Philippines, is usually in April—although, for certain types of businesses, the season varies according to the end of their financial year.

Reviews help to make sure that the financial statements submitted by a business during this time to the BIR or the SEC are properly prepared, and it helps to be prepared for the review and the audit season, as a whole. Preparation involves keeping all books, records, and other financial documents to ensure a smooth review.

On top of the financial statements themselves, the auditor will be asking the business for supporting documents such as historical financial information to facilitate the review. Note that collecting these documents is one of the most time-consuming review-related tasks, so it helps to start having them on hand as early as possible. Having upper management review the statements before passing them to the auditor may also help to streamline the review process.

Conducting the review.

Auditors use a checklist to make sure that no major changes will have to be made so that the financial statement complies with the required framework.

They make sure disclosures made on the statement were clear and consistent and check whether there were any words or phrases that aren’t normally used in financial statements, especially where opinions are expressed. These words or phrases will have to be cross-referenced with supporting documents along with any additional reports attached to the statement.

Auditors then make sure all the numbers, such as assets, equity, and liabilities, add up, and that they all agree on each of the documents, e.g. whether the balance sheet agrees with the cash flow statement. They also inquire after the accounting processes used in recording transactions, as well as significant events toward the end of, or after the accounting period that may have affected the reports.

There are times when audit-related procedures are requested to make sure that certain processes carried out by a business comply with the required ethical or legal standards. In such cases, the business agrees with an auditor and any third parties to have the audit-related procedures, or an Agreed-Upon Audit conducted. All parties must agree to the terms of the Agreed-Upon Audit for the engagement to be binding.

However, Agreed-Upon Audits—also known as Agreed-Upon Procedures do not contain any conclusions, opinions, or assurance, as it will be up to the recipients of the audit report to form their own. Only those who agreed to have the audit conducted are privy to the report, as it is prone, because of its highly specific nature, to be misinterpreted by those who don’t know why the audit was conducted, to begin with.

Also note that the auditor or audit team, in this case, may not perform any procedures that were not agreed upon by the business or the third parties involved, and may not perform Agreed-Upon Audits on any processes or tests that were likewise not specified in the original request. Should the audit team conduct any procedures that weren’t agreed upon, they may face charges for breach of contract.

Examples of Agreed-Upon Audit procedures include:

  • Checking accounts receivable and payable
  • Due diligence for the purchase or sale of a business
  • Ensuring compliance in purchasing and royalty agreements
  • Inspection of control and management systems
  • Loan portfolio reviews
  • Payroll audits
  • Reviewing income tax provisions
  • Verifying cash or security balances

The situation calls for it.

Agreed-Upon Audits may be requested for several reasons. Examples include determining the causes behind operational inefficiencies, banking requirements, validating accounts payable, managing risk in financial or non-financial information, or a larger company that wants to know more about a smaller business it wants to buy.

Agreed-Upon Audits may also vary according to the end-user of the reports that are generated, whether it’s the business that will be using it for private use or a third party. Private reports are ideal for businesses that aren’t required to submit a formal audit because they cost less and maybe augmented by an expert’s opinion.

If a third party is the end-user of the report, the audit team will need to know why the party wants to use it so that the appropriate terms and conditions may be specified before the report is submitted. This Agreed-Upon Audit may also reassure the party of the business’s compliance with regulations.

Agreeable advantages.

Agreed-Upon Audits benefit businesses in several ways, mainly by defining the investigative limits of the auditor or audit team. In so doing, a business will be able to get more accurate results, as well as protect sensitive or confidential information from being collected indiscreetly.

The auditor can help the business and the third parties to define these limits if need be, although it will be up to them to make sure that the audit-related procedures specified in the agreement will meet their objectives.

An Agreed-Upon Audit is also more flexible than a Financial Statements Audit or Internal Audit, making it ideal for specific needs such as investigating a particular business process. Agreed-Upon Audits may also be able to cover certain processes that formal audits do not, such as items that aren’t included in Financial Statements, contracts, and the regulatory requirements of a particular industry such as banking or healthcare.

Because there are no opinions or conclusions involved, an Agreed-Upon Audit is generally a lower cost option than a formal audit.