ASI Flashcards
A systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and communicating the results to interested users.
Auditing
An engagement whereby a practitioner expresses a conclusion that enhances the degree of confidence of the users on a subject matter prepared by a “responsible party” when the subject matter is compared and measured against established criteria.
Assurance
specialized industry is a distinct market that has a unique way of accounting for transactions and reporting its financial results. These differences are allowed under the applicable accounting framework, such as IFRS/PFRS or GAAP.
Examples:
1. Agriculture
2. Airlines
3. Banking
4. Insurance.
Specialized Industries
Audit Considerations
-competence
-audit planning
-reliance on experts
When accepting an audit engagement involving a specialist industry, the audit firm needs to pay close attention to the competence of the audit firm to provide the service.
Competence
Identification of the risk of material misstatement in a specialized industry should be approached in the same was as in any other audit by obtaining appropriate understanding of the business and its environment.
Audit Plannin
The auditor may plan to use an auditor’s expert to obtain audit evidence. This is quite likely in a specialized industry as despite being competent to perform the engagement, the audit firm may not have the necessary specific expertise in some areas. For instance in the audit of a bank, specialists may be brought in to value complex financial instruments
Reliance on experts -
A transaction cycle is an interlocking set of business transactions. Types of Transaction cycles in Accounting
1. Revenue Receipt Transaction Cycle (sales / income and collection cycle )
2. Expenditure and Disbursements Cycle (purchasing and payment cycle )
3. Payroll Cycle
4. Production (Conversion) Cycle
5. Financing Cycle
Transaction Cycles
The Bangko Sentral ng Pilipinas (BSP) (or the Philippine Central Bank) is the central monetary authority in charge of regulating money, banking and credit in the Philippines. The BSP is an independent government-owned corporation with the primary responsibility of supervising and regulating finance companies, bank operations, non-bank financial institutions performing quasi-banking functions, and other institutions performing similar functions. The primary objective of the BSP is to promote and preserve monetary stability and the convertibility of the national currency (Philippine peso).
The BSP is governed by the Monetary Board, composed of seven members appointed by the president of the Philippines, with the governor as its chair. Through the Monetary Board, the BSP issues rules and regulations in the exercise of its regulatory powers and directs the management, operations and administration of the BSP.
Financial Services
Under the New Central Bank Act, the BSP performs the following functions, all of which relate to its status as the Philippines’ central monetary authority:
Liquidity management
Currency issue
Lender of last resort
Financial supervision
Management of foreign currency reserves
Determination of exchange rate policy
Other activities
Financial Services
The Philippine Deposit Insurance Corporation (PDIC) has the power to conduct examinations of banks with the prior approval of the Monetary Board and within terms and conditions determined by law. All banks are obligated to ensure deposit liabilities with the PDIC up to a maximum amount of PHP 500,000 or its foreign equivalent.
The Anti-Money Laundering Council has the power to conduct investigations of money laundering and other violations of Republic Act No. 9160 or the Anti-Money Laundering Act for the protection of the integrity and confidentiality of bank accounts and to prevent the Philippines from being used as a money laundering site for the proceeds of any unlawful activity. It monitors and receives covered or suspicious transaction reports from covered institutions under the law; investigates suspicious transactions and covered transactions deemed suspicious after an investigation; applies before the Court of Appeals, ex parte, for the freezing of any monetary instrument/property alleged to be proceeds of any unlawful activity; and implements such measures as may be necessary and justified to counteract money laundering.
Financial Services
No person or entity shall engage in banking operations or quasi-banking functions in the Philippines without authority from the BSP. A financial institution that has been given authority to engage in universal or commercial bank activities is also authorized to engage in quasi-banking activities. The following banking or quasi-banking activities are regulated in the Philippines:
Maintaining adequate risk-based capital
Accepting demand deposits
Granting loans or credit accommodations
Issuing foreign letters of credit and pay/accept/negotiate import and export drafts/bills of exchange
Establishing a subsidiary, regional or operating headquarters, or local branch in the Philippines by a foreign bank
Selling or relocating banks, closing banks and conservatorships
Disclosing confidential information or credit data
Insuring deposits
Borrowing from the BSP or other agencies of the government
Foreign exchange transactions
Reporting requirements
Financial Services activities require a license in your jurisdiction?
There are a large number of financial ratios that are used to analyze a bank’s financial condition and performance. While these ratios vary somewhat between banks, their basic purpose tends to remain the same, that is, to provide measures of performance in relation to prior years, to budget and to other banks. The auditor considers the ratios obtained by one bank in the context of similar ratios achieved by other banks for which the auditor has, or may obtain, sufficient information.
These ratios generally fall into the following categories:
* Asset quality;
* Liquidity;
* Earnings;
* Capital adequacy;
* Market risk; and
* Funding risk.
Financial Information, Ratios and Indicators Commonly Used in the Analysis of a Bank’s Financial Condition and Performance
