Nature of State Auditing

State Audits is not an end in itself but an indespensable part of a control and accountability system
whose aim is to reveal and correct deviations from accepted standards and principles as prescribed by
law and tradition. Thus, in public administration, state audit occupies a critical role as a competent of
trhe fiscal administration cycle.

State auditing (along with accounting) may be considered as the control and accountability component
of the fiscal administration cycle. As a control mechanism, auditing ensures the proper and legal
utilization and management of fiscal resources in accordance with sound financial managemnet
principles, accounting and auditing standards, and applicable laws and regulations.

As an accountability competeent, seeks to ensure that the publuc officials entrusted with functions and
resources are made responsible for the performance of and results of operations of their office. Reports
on the financial operations of agencies and their performance are prepared by COA auditors are
submitted to the President and Congress. These are also made available to the Public.

Definition

Auditing, in a general sense, is a systematic and critical evaluation of the financial position, operating
systems, and results of operations of an audited entity

A widely accepted definitions are:

A systematic process of obtaining the evaluating evidence regarding assertations about economic
actions and events to ascertain the degree of correspondence between those assertations and
established criteria and communicating the results to interested user.

Such defenition embrace private or commercial, internal, state or governmental and other types of
audit.

State Audit is mainly defined by the constitution and law. In the Philippines, state asudit is defined by
the Government Auditing Code of the Philippines (Presidential decree No 1445) as: “the analytical and
systematic examination and verification of the financial transactions, operations, accounts and reports
of any government agency for the purpose of determioning their accuracy, integrity, and authentically,
and satisfying the requirements of law, rules and regulations”.

State audit relies on the provision of law; its authority and limitations are prescribed by law and its
conducted in accordance with law. The 1987 constitution asnd related laws set the scope, powers,
fuctions,and jurisdiction of government auditing. All such laws pertaining to government acpountingh
and auditing, as well as moderm principles of audit policy and practice have been codified into the Code
whoch took effect on August 7, 1978
Auditing in Public Administration

It is difficult to imagine a well-functioning, satisfactory systemof public administration without the

rigorous public accountability that state audit ensures. The concept and raison d’etre is inherent in
public fiscal administration as the manangement of public fund is a trust.

In the fiscal administrative cycle, auditing also provides inputs to the next phase which is planning. Audit
reports contain vital information on the results of operations of agencies and recommendations to
improve their performance. For agency officials, these information are useful in formulating
subsequenmt plans and targets. The Department of Budget and Management, which is resource control
agency refers to audit reports in reviewing budget proposed In thegeneral Appropriations Bill.

Auditing and Accounting

Auditing is closely intertwined and thus oftentimes confuse withaccounting. In fact, auditing evolved
from accountingf. In modern times, however, auditing has become a separate feld of theory and
practice. It is and independent discipline which relies upon the results of accounting data.

Accounting is a discipline which provides financial and other inormation. Essential to the efficient
conduct and evaluation of the activities of an organization.

Accounting is thus concerned withconstructing from a mass of transaction entered into by a firm ar
agency during a certain period, financial statements, rsults of transactions (in terms of profit and loss),
and current financial position through interpretation, summarization, and compilation of information.
On the other hand, auditing is primarily concerned with analyzing wheteher or not the financial
statements are reasonably represents the reults of the firm’s operation. Accounting is constructive;
auditing is analytical. While Acctg involves the creative generation of financial and other data, auditing is
a critical generation of judgemental information.

History of Auditing in the Philippines

-Before Political Independence

 Auditing under Spain

Tracing the history of auditing in the Philippines invariably start with the Spanish regime which
consolidated its rule over various scattered small kingdoms and gave the name Filipinas or
Philippines to its domain. Earliest available written records start with Spanish colonialperiod
which lasted 16th to 19th century. The first known activity in the Spanish colonial government
which can presently be described as “auditing” was in 1653 when a Royal Audencia or a high
court of justice was set up in the capital city of Manila. This later evolved into a separate and
independent fiscal control activity in 1739 with the establishment of the royal exchequer or a
national treasury. The decree creating the royal exchequer specified that the books of account
of the treasury should be certified by a contador or accountant, or by the oidor, a representative
of the Spanish crown whose duties can be conidered as forerunner of the modern auditor.
By the middle of the nineteenth century,auditing was conducted by a judicial body called the
Tribunal de Cuentas or courts of Accounts. The type of Audit activity engaged in was a large
extent comparable to a detailed post-audit of transactions.
  Auditing under the Malolos republic
An idependent Philippine republic was declared in 1896 and a constitution was drawn up,
known as Malolos constitution. Title XII of the constitution was devoted in its entirety to the
“Administration of the State”. The budget process was described in detail. Apparently budget
were subject to the public scrutinyand budget s be published.
While the Malolos Constitution itself was silent on the function of auditing, Rule No. 40 of the
degree of june 20, 1898 provided that the tax collectors should render an accounting of all
expenditures

 Auditing under the Americans

 Auditing under the commonwealth Period
 Some observations on auditingprior political independence

-The post independence period

The First Reorganization Effort: Reforms with Assistance of American Consultants

Reforms Underthe Second Reorganization Effort.

Audiiting in Public Administration