CPALE Auditing Review: PSAs, Audit Process, Internal Control

CPALE Auditing Review: PSAs, Audit Process, Internal Control

CPALE Auditing is a 70-item, three-hour paper on the afternoon of Day 1. The items cover Philippine Standards on Auditing (PSAs), the audit process from planning through reporting, internal control evaluation, audit evidence and procedures, and special audit considerations.

For BSA graduates, Auditing is taught across 1-2 dedicated semesters. The trap is treating it as procedural memorization when many items reward judgment-based reasoning about risk and evidence.

This post is the topic-by-topic plan that the CPALE pillar guide hands off to.

Suggested practice mix

PRC doesn't publish item counts per topic. This is our suggested mix for a 70-item practice set, not an official breakdown:

Audit framework + PSAs

Drill list:

Auditing standards hierarchy:

• IFAC → IAASB → International Standards on Auditing (ISAs)
• The Auditing and Assurance Standards Council (AASC) adopts ISAs as PSAs, approved by the Board of Accountancy (numbering aligns)
• Code of Ethics for Professional Accountants in the Philippines

Major PSAs to know by number:

• PSA 200: Overall Objectives
• PSA 230: Audit Documentation
• PSA 240: Auditor's Responsibilities Relating to Fraud
• PSA 260: Communication with Those Charged with Governance
• PSA 300: Planning an Audit
• PSA 315: Identifying and Assessing Risks
• PSA 320: Materiality
• PSA 330: Auditor's Responses to Assessed Risks
• PSA 500: Audit Evidence
• PSA 530: Audit Sampling
• PSA 700: Forming an Opinion and Reporting
• PSA 705: Modifications to the Opinion
• PSA 706: Emphasis of Matter and Other Matter
• PSA 720: Auditor's Responsibilities Relating to Other Information

Questions may cite PSAs by number, so learn the core ones (240, 315, 320, 330, 500, 700, 705).

Audit planning and risk assessment

• Audit acceptance and continuance
• Engagement letter contents
• Understanding the entity and its environment
• Risk assessment procedures
• Inherent risk + control risk + detection risk = audit risk model
• Materiality: planning materiality vs performance materiality
• Significant risks identification
• Fraud risk factors

Internal control evaluation

• Five components of internal control (COSO framework):

1. Control environment 2. Risk assessment 3. Control activities 4. Information and communication 5. Monitoring activities

• Evaluate design + implementation + operating effectiveness
• Walkthrough procedures
• Tests of controls
• Control deficiencies: significant deficiency vs material weakness

Audit evidence and procedures

Audit evidence characteristics:

• Sufficient (quantity)
• Appropriate (quality: relevant + reliable)

Sources of evidence (most to least reliable):

• Auditor's direct knowledge (most reliable)
• External sources
• Internal documents
• Client representations (least reliable)

Audit procedures:

• Inspection
• Observation
• External confirmation
• Recalculation
• Reperformance
• Analytical procedures
• Inquiry

Match procedure to assertion. Existence test → external confirmation. Completeness → cutoff test.

Audit sampling

• Statistical vs non-statistical sampling
• Sampling risk vs non-sampling risk
• Sample size factors
• Tolerable misstatement vs expected misstatement
• Projection of misstatements

Substantive testing by account

Drill substantive procedures for major accounts:

Cash:

• Bank confirmations
• Bank reconciliations
• Cutoff test

Receivables:

• External confirmations (positive vs negative)
• Aging analysis
• Subsequent collections

Inventory:

• Physical observation
• Cutoff test
• NRV testing

PPE:

• Vouching additions
• Depreciation recomputation
• Impairment indicators

Liabilities:

• Search for unrecorded liabilities
• Confirmations
• Subsequent payments

Revenue:

• Cutoff test (sales recorded in correct period)
• Vouching to source documents
• Analytical procedures (gross margin)

Completing the audit

• Subsequent events review (PSA 560)
• Going concern evaluation (PSA 570)
• Management representations (PSA 580)
• Final analytical procedures
• Audit documentation completion

Audit reports

Unmodified opinion (clean opinion): conclusion that financial statements are presented fairly.

Modifications to the opinion (PSA 705):

Emphasis of matter (PSA 706) vs Other matter — drawn attention without modifying opinion.

Key Audit Matters (PSA 701) — for listed entities.

Other assurance + non-assurance services

• Reviews (PSRE 2400)
• Compilations (PSRS 4410)
• Agreed-upon procedures (PSRS 4400)

Code of Ethics

Five fundamental principles:

1. Integrity
2. Objectivity
3. Professional competence and due care
4. Confidentiality
5. Professional behavior

Threats to independence:

• Self-interest
• Self-review
• Advocacy
• Familiarity
• Intimidation

Safeguards — to mitigate threats.

A 6-week Auditing drilling plan

Where Super Tutor fits

CPALE is coming soon to Super Tutor. There's no CPALE reviewer in the app yet. You can follow the CPALE exam page or see every exam Super Tutor covers now.

What to read next

The CPALE pillar guide covers the full review. Other deep dives: FAR, Management Services, RFBT.