SEC approves revised auditing standards

The Securities and Exchange Commission (SEC) has approved the adoption of a revised set of auditing standards that aims to provide stricter guidelines on how to better combat fraud in financial reporting. Following an en banc meeting last week, the commission decided to adopt the revised auditing standards for compliance of companies and other entities under its authority. The revised rules have already been earlier approved by the Auditing and Assurance Standards Council, the Board of Accountancy, and the Professional Regulation Commission. The said agencies oversee the implementation of auditing rules in the country. The revised rules are scheduled to be effective for auditor’s reports with the latest dated on or after Dec. 31, 2006. "For the new and revised standards to be implemented properly in the Philippines, the auditing firms need lead time before its effective date to provide necessary training to their audit personnel," the commission said in a report released after the en banc meeting. RULES Among the auditing rules that were revised was the Philippine Standards for Accounting (PSA) 240 or the rule on the auditor’s responsibility to consider fraud in an audit of financial statements. Under the revised rule, auditors are urged to exercise "professional skepticism" to always question the integrity and honesty of management despite past experience with the said entity. The rule is to ensure auditors would always be on guard against fraud, or any intentional act which result to material misstatement of financial statements. The commission has also adopted the revisions on PSA 700, which is the rule on the independent auditor’s report on a complete set of general purpose financial statements. Under the revised rule, auditors are required to provide "better explanation of the respective responsibilities of management and the auditor, updated description of the audit process to reflect the new audit risk standards’, clarification of the auditor’s responsibilities with respect to internal control." The PSA was adopted starting last year from the International Standards on Auditing, set by the New York-based International Federation of Accountants (IFAC). IFAC is a worldwide organization comprised of over 160 member bodies in 120 countries which establish a set of at least 28 internationally accepted auditing standards. BusinessWorld tried to contact officials of the Philippine Institute for Certified Public Accountants for comment but they were unavailable Sunday. PICPA is the largest organization of accountants, and auditors in the country with about 70,000 members. — Jeffrey O. Valisno/BusinessWorld