BAÑEZ, NICOLE P.

AC 401

PSA 300 SUMMARY PLANNING AN AUDIT OF FINANCIAL STATEMENTS

Effected on 15th of December 2009, PSA 300 deals with the auditor’s responsibility to plan an audit of
financial. It is written in the context of recurring audits. Additional considerations in an initial audit
engagement are separately identified. It involves:

a. helping the auditor

- to devote appropriate attention to important areas of the audit

- to identify and resolve potential problems on a timely basis

- to properly organize and manage the audit engagement so that it is performed in an effective
and efficient manner

b. Assisting

- in the selection of engagement team members with appropriate levels of capabilities and
competence to respond to anticipated risks, and the proper assignment of work to them

- in coordination of work done by auditors of components and experts

c. Facilitating the direction and supervision of engagement team members and the review of their work

PSA 300 is important as it ensures that the auditor plan the audit to perform it in effective manner. It
involves establishing overall strategy in order to reduce the risk to an acceptable low level, involving the
engagement partner and other key members for their own benefit from their experience to enhance the
effectiveness and efficiency of the planning process. It also ensures that the audit is resolved in a timely
basis, properly organized and manage

PSA 320 SUMMARY MATERIALITY IN PLANNING AND PERFORMING AN AUDIT

Effective on 15th of December 2009, PSA 320 deals with the auditor’s responsibility to apply the concept
of materiality in planning and performing an audit of financial PSA 450 explains how materiality is applied
in evaluating the effect of identified misstatements on the audit and of uncorrected misstatements, if any,
on the financial statements. Its objective is to apply the concept of materiality in conducting its audit of
financial statements.
WHAT IS THE DIFFERENCE BETWEEN TEST OF CONTROL AND SUBSTANTIVE TEST?

Test of controls is an audit procedure to test the effectiveness of a control used by a client entity to
prevent or detect material misstatements. Depending on the results of this test, auditors may choose to
rely upon a client's system of controls as part of their auditing activities. It is made irrespective of the
dollar amount of the underlying business transaction. The main point of the test is to see if a control
functions properly, so the dollar amount of a transaction is not of consequence to the goal of the test.

Substantive testing is an audit procedure that examines the financial statements and supporting
documentation to see if they contain errors. These tests are needed as evidence to support the assertion
that the financial records of an entity are complete, valid, and accurate. Substantive testing is likely to
include confirmation of account balances with third parties (such as confirming receivables), recalculating
calculations made by the client (such as valuing inventory), and observing transactions being performed
(such as the physical inventory count)