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(2) Define (15 pts)

Auditing
The process through which an independent auditor
plans for, obtains, summarizes, and evaluates
sufficient, competent, relevant, and material
evidence on the audit objective of whether an
entitys management or employees have or have not
accepted and carried out in a fair, legal, efficient,
economical, or effective manner appropriate
standards (management or operational standards
and requirements, laws, policies, or other managerial
standards) for which they are accountable.
From the evidence on the audit objective, the
auditor comes to an opinion or conclusion, and then
reports this opinion or conclusion to a third party to
provide it with adequate assurance that the second
party has or has not carried out the appropriate
standards necessary to achieve the desired results.
(1) Four elements (4 pts)
Four qualities in order for an activity to be called an
audit:
1 An auditor, auditee, and audit recipient;
2 An accountability relationship between the
auditee (subordinate) and the audit recipient
(higher authority);
3 Independence between the auditor and auditee;
and
4 An examination and evaluation of certain of the
auditees accountable activities by the auditor for
the audit recipient
3 parties involved in an audit and their
characteristics:
1 The First Party- the auditor, provides to the third
party an acceptable level of assurance on the
accountability of the second party.
2 The Second Party- the party being audited and
accountable to the third party.
3 The Third Party- the party to whom the second
party is accountable and to whom the auditor
reports on that accountability
Financial

Complianc
e

Economy
Efficiency

Effectiven
ess

Process

analytical and systematic examination and


verification
of
financial
transactions,
accounts, and reports of any government
agency for the purpose of determining their
accuracy, integrity and authenticity
an examination intended to evaluate an
organizations compliance with applicable
laws and governmental regulations and policy
in the handling of its finances and of its
operation in general.
the review of managerial operation with the
end view of eliminating the cause/s of
wasteful operation
the review of managerial efficiency with the
end view of promoting efficient use of public
resources.
It
is
concerned
with
the
relationship between inputs (costs) and
outputs (benefits)
an examination intended to determine the
extent to which the organization, program,
project, or activity has achieved its goals or
its intended objectives.
an examination
of the surrogates/parts
instead of the goal itself considering that the
determination of how successful the goaldirected activity was carried out may not be
possible.

Elements of an audit:
1.
Criteria: an appropriate
standard or standards for management action
2.
Condition: managements
actions (or lack of actions) in regard to carrying
out those standards, and,
3.
Cause: the reason for the
condition why something happened and who or
what is responsible.
4.
Effect: the good or bad
results from following (or not following) the
appropriate standard or standards
(4) 3 phases and all the activities in each phase (20
pts)
The Audit Process:
A. Survey Phase
1.Gathering of information
2.Review of legal and policy framework
3.Preliminary testing of controls
4.Identification of audit area
5.Determination of the overall scope
6.Preparation of the audit program
(6) Elements (discuss) of an audit program (6 pts)
Contents:
(a) Scope the coverage of the audit work
(b) Objectives what the audit aims to achieve
(c) Audit procedures set forth in specific terms
the steps to be followed for each audit
objectives
(d) Staff assignment those who will carry out
each procedures
(e) Time budget the estimated time required to
carry out each audit procedures
(f) Working paper reference to facilitate cross
referencing
B. Execution Phase
1.
Carrying out the audit procedures
2.
Evaluating the evidence
3.
Finalizing the audit working papers
4.
Determining causes and effects
5.
Developing audit Findings and
Recommendations
(7) Qualities of a good audit finding (8 pts)
Findings must contain:
(a) a statement of condition a fact, booked up
by evidence and verifiable, as opposed to a
mere supposition or opinion. It may be an
actual occurrence or an existing state of
affairs
(b) a statement of criteria the standards
against which a condition is compared with
(c) a statement of effect the result, usually
adverse of the discovered condition.
(d) a statement of cause the reason for the
condition; why something happened and who
or what is responsible
(8) Qualities of a good audit recommendation (5 pts)
Recommendations:
(a) It is practical. It can be implemented readily
and economically
(b) It should eliminate the cause of the condition
(c) It should prevent the recurrence of the
condition
(d) It is clearly worded and specifies what action
should be taken and who should do it
(e) It should be in accordance with laws and
regulations
C. Reporting Phase

1.
2.
3.
4.
5.
6.

Drafting the report


Conducting the exit conference
Finalizing the audit report
Preparing the transmittal letter
Submitting the report
The follow-up

(5) Differentiate (4 pts)


Accountability v Responsibility
The main difference between responsibility and
accountability is that responsibility can be shared
while accountability cannot. Being accountable not
only means being responsible for something but also
ultimately being answerable for your actions.

Part 2 Entire table (45 pts)

Period
Spanish Period

Set-up
Judicial-type Court of Accounts

First Filipino Republic


American Regime:
As Colony

Legislative-type

As Commonwealth
Post Independence:
Early Period
The 50s
Early 70s
Late 70s (Tantuicos term)
Early-mid 80s
1986-1994 (Guingona)

Type of Audit
Detailed post-audit of
transactions
Post-audit of all transactions

Bureau under the GovernorGeneral


Independent Constitutional
Body

Pre-audit of all transactions

Independent Constitutional
Body
-do-

Pre-audit of all transactions

Pre-audit of all transactions

Change to Commission-type of
organization
Commission-type of
organization
Commission-type of
organization
Commission-type of
organization

1994-1995 (Banaria)

Commission-type of
organization

1995-2000 (Gangan)

Commission-type of
organization

2001-1st Qtr of 2008 (Carague)

Commission-type of
organization

2nd Qtr 2008- 1st Qtr 2010

Commission-type of
organization

2nd Qtr 2010- 1st Qtr 2015

Commission-type of
organization

1st Qtr 2015- Present (M.


Aguinaldo)

Commission-type of
organization

(9) Why is it that a democratic form of government


needs to have a system of accountability? (5 pts)
(a) Our Republic is founded on the democratic tenet
that sovereignty resides in the people and all
government authority emanates from them.
(b) The credibility, stability and effectiveness of
government depend on the peoples faith and
confidence in their government its managers,
officials and employees.
(c) This trust relationship even becomes more
critical in a parliamentary system.
(10) Elements essential in promoting peoples faith
and confidence in the government (4 pts)
1. The knowledge and conviction that the revenues
they pay are channeled back to them in form of
services or facilities.
2. The belief that the money taxed from them is
plowed back into socio-economic mainstream.
3. The assurance that public funds and properties
are used for authorized and legitimate
government programs geared towards the public
well-being and not diverted to unauthorized uses
and purposes.

Partial lifting of pre-audit


Start of limited program audit
Further lifting of pre-audit
Expansion of program audit
Introduction of 3Es of audit
Gradual shift to post audit
Implementation of 3Es
Post audit
Financial and Compliance and
Introduction of Fraud Audit
Post audit
Effort was made to reclaim the
primacy of value-for-money
audit
Post audit
Value-for-money audit received
fair attention
Post audit
Financial and Compliance
Introduction of NGAS and RBAA
Post-audit/Pre-audit
Introduction of the idea to shift
once again to pre-audit
Final lifting of pre-audit on all
government transactions
Post audit reclaimed its
dominance
Post audit on all government
transactions
Continuation of reforms under
Pulido-Tans administration
prudently.

4.

The must
be
assured
that
public
monies
are spent

(11) Four types of accountability, discuss briefly (4


pts)
1 Traditional Accountability- focuses on the regularity
of fiscal transactions and the faithful compliance
as well as

adherence to legal requirements and


administrative policies.
2 Managerial Accountability- concerns itself with
efficiency and economy in the use of public
funds, property, manpower and other resources
3 Program Accountability- concerned with the results
of government operations

4 Process Accountability- implies emphasizes


procedures and methods of operation
(12) How could state auditing, as a component of
public administration, influence good governance?
(15 pts)
State audit as a component of public fiscal
administration is tasked to perform this assurance
function.
Part III

(1) 3 Major events during the Commonwealth era


which influenced Philippine auditing (6 pts)
a. the drawing of the 1935 Constitution provided for an independent General Auditing
Office
b. the passage of Commonwealth Act No. 320 combined both the accounting and auditing
functions under the GAO
c. the passage of Commonwealth Act No. 325 conferred on the GAO the function of auditing
public service enterprises

(2) Discuss briefly 3 major shifts in audit


thoughts during consultancy period (12 pts)
a. First major shift was to link auditing with
process of national development; auditing
ceased to be considered an end in itself.
was considered as a vital part of the total
administrative effort to attain specific
development goals
b. The second major shift in auditing thought
practice: recognition of the need to
withdraw from the practice of pre-audit
to establish a system of post-audit.
c. The third major shift in auditing thought
during this period: the shift in thinking
towards post-audit led to the realization
instead of object of expenditure,
programs themselves should be
evaluated and audited in terms of results.
(3) Discuss briefly major changes that
happened during the 1970s, concerning
auditing (12 pts)
a. The Purge- President Marcoss explicit
for a reorganization of the auditing
after study showed that some auditors
involved as masterminds in anomalies
other irregularities, such as influencepeddling and bribe-taking.
b. Chairman Tantuico was appointed; the
Chairman immediately went to work
mobilized his handpicks experts to
the state of the COA and to make the
necessary recommendations for the
change and reform. He institutionalized
performance audit.

(3) Types of audit, and 1 objective (10 pts)

the
It

and
and

that

state
call
office
were
and
new
and
study