Ma. Blessilda Trinidad T.

Balio

February 9, 2015

BSA III 01
Philippine Standard on Auditing 700
FORMING AN OPINION AND REPORTING ON
FINANCIAL STATEMENTS
Engagement as defined by Merriam Webster is an agreement or a promise to meet or
be present at a particular place and time or it is a job or period of employment, on the other
hand Financial Statements are meant to present the financial information of the entity in
question as clearly and concisely as possible for both the entity and for readers. Combining
these two terms creates the Philippine Standard on Auditing called PSA 810, which is all about:
Engagement and Financial Statements. In other words, as an auditor there is work job
processes that must be followed before the auditor penetrate the financial statements of the
company and form an actual audit opinion, this process begins with a permission of an auditing
standard alone. Based on the auditors judgement, if the engagement is allowable then that
would finally the moment in time wherein the auditor can step to the next processes which are
the recognition of agreement by the management and acceptance of the auditors obligation.
This is necessary because the summary of financial statements must be first audited before it
will be available to the aimed users for the reason that, an audited financial statements will help
and guide the users about how financially capable or not the company and what would be the
effect of it to them. In continuation, when the engagement between the management and
auditor has been initiated, the auditor will then peruse the financial statements to determine
what kind of an audit opinion, it must state.
Audit opinion formulation process is just another component of PSA 810. This process is
the actual center job of an auditor owing to the fact that it is the key to open the genuine
messages hidden on the books and financial statements of the company. Thus, the auditor as
an independent in fact and appearance has the duty to evaluate the overall economic health
condition and status of the company and this can be done once again through a deep study of
companys financial statements. It is a deep study in a way that the auditor checks if the
summary of the financial statements are presented and disclosed accordingly with an applied
criteria and it is available to the intended users. Hence, when the summary of financial
statements are found to be presented and disclosed in accordance for the intended users, the
auditor will now form an audit opinion however, the auditor must exercise care in making an
opinion so that the users will understand the opinion stated. The auditor will be able to exercise
care if it states the following elements in an audits report: (1) title (2) addressee (3) introductory
paragraph (4) description of managements responsibility (5) paragraph of opinion (4) auditors
signature (6) date of auditors report and (7) auditors address. Moreover, the stated elements
are the general one in audits report, there are also specific elements required on each kind of
audit opinion stated, in comparatives, unaudited supplementary information and other
necessary information in documents. These elements, procedures and considerations must be
followed and referred in accordance with the Philippine Standard on Auditing, so that when an
auditor is in doubt, he or she will be guided by the conceptual framework of the auditing itself.
Once the process in engagements to report on summary of financial statements, the intended
users can finally access and assess the audited financial statements of the company.
In conclusion, I learned and realized that the job of an auditor is not that simple. It takes
a lot of steps, procedures and stages just to form an audit opinion. Also, the job of an auditor is

indeed probably a labyrinth journey because all the intended users rely on this person like a
guardian angel. Therefore, the auditor must really exercise a care in forming an audit opinion
because it is just like saying: you do not judge the book by its cover, you look at the content.
For me, this is one of the quotes that an auditor must always remember, although he or she
must also be skeptical all the time but this person must not let himself or herself to be blinded by
his or her instinct and feeling, the auditor must still first gather enough evidence to prove what
he or she believes in, because after all the auditor has the duty to protect the intended users
from any harm that they may get from the company. With Philippine Standard in Auditing 810, I
realized and understand as well the reason why accountancy is the second most difficult course
in the country because in reality, it is indeed crucial and complex to handle huge and well-known
companies with many intended users to protect. This fact proves how much an independent
auditor must be fully trained and skilled to his or her job but beside that, knowledge and skills
would be nothing without integrity and professionalism. These two must always go hand-inhand. An auditor who possesses these qualities is worth saluting and keeping in the company
for.