Professional Documents
Culture Documents
Anilao
Student No.: A18-25446
The emergence of digital banking became a game changer shaping the future of the
industry. Technology has helped banks generate additional revenue, reduce expenses, and
manage risk exposure in a more proficient manner. But it has also opened the door for a myriad
of competitors, both large and small. However, security and money laundering risk is in
question pushing banks to adopt with an extensive security control yielding impressive results.
It is without a doubt that digital banking is the future of the industry administering remote
financial services.
Financial Reporting:
Entities are required to describe the nature and effect of initially applying the new
standards. This will involve providing the transition disclosures in IFRS 7 Financial Instruments:
Disclosures (as introduced by IFRS 9) and IFRS 15. Disclosures may differ depending on the
transition method chosen by the entity for implementing the new standards. In addition, when
entities choose not to restate comparative information, they may need to separately disclose
their significant accounting policies for previous periods presented.
Ongoing Disclosure:
Entities are required to provide new ‘business as usual’ disclosures that are included in
IFRS 7 (as amended by IFRS 9) and IFRS 15. For financial instruments, these include new or
expanded disclosures about credit risk, expected credit losses, hedge accounting, information
on investments in equity instruments designated at fair value through other comprehensive
income, and significant judgements in the application of the standard. For revenue from
contracts with customers, these include disaggregation of revenue and information on contract
balances, performance obligations and significant judgements in the application of
the standard.
Philippine Financial Reporting Standard (PFRS) 15 – Revenue from Contracts with Customers
The core principle of this standard is that the entity recognizes revenue to reflect the
transfer of goods or services measured to which amount the entity expects to be entitled. Th
The standard poses several implications on the banking industry regarding which costs to be
capitalized and how to identify and allocate revenue. The standard introduces specific criteria
on capitalizing certain costs distinguished from obtaining and fulfilling the contract. This is
significant for banking industry for these significant costs such as commissions that are only
payable if the contract was paid will be capitalized impacting operating profits. Moreover,
requires revenue from contract to be allocated to distinct goods that may impact bank industry
for services are often integrated.
REGULATORY FACTORS
Regulatory bodies such as the Bangko Sentral ng Pilipinas, Securities and Exchange
Commission, PDIC and Bureau of Internal Revenue supervise the banking industry by mandating
provisions of law to safeguard the interest of the public. Likewise serving as a basis for auditing
their financial information amidst the pandemic. Some provisions are stated below.
SEC Memorandum Circular No. 32 EREAS, the Bangko Sentral ng Pilipinas (BSP) issued a Memorandum to all
Banks1 allowing regulatory relief measures, as follows: a)Staggered booking of allowance for credit losses
over a maximum period of five years; b)Reclassification of debt securities measured at fair value to amortized
cost category; c)Exclusion of eligible loans from past due and non-performing classification until 31 December
2021; and d)Any other regulatory relief that will be issued for prudential reporting due to COVID-19
pandemic.
REPUBLIC ACT No. 3591 Section 4. Any bank or banking institution which is engaged in the business of
receiving deposits as herein defined on the effective date of this Act, or which thereafter may engage in the
business of receiving deposits, may insure its deposit liabilities with the Corporation. Before approving the
application of such bank to become an insured bank, the Board of Directors shall give consideration to the
factors enumerated in Section 5 and shall determine upon the basis of a thorough examination of such bank,
that its assets in excess of its capital requirements are adequate to enable it to meet all its liabilities to
depositors and other creditors as shown by the books of the bank.
EXTERNAL FACTORS
Financial performance of the banking sector is hampered by external factors such as
inflation, GDP and stock market performance. According to the inflation report of BSP the
inflation rate for the 2nd quarter is 4.4% higher than last years 2.3%, increased inflation rate
leads to a decrease in demand for bank loans that significantly affect the banks financial
performance. Purchasing power of money to be paid will decrease while the interest rate
increases, an undesirable situation for the borrower. On the other hand, the GDP for the 1st
quarter this year declined by 4.2% which implies that the buying power of the people decreases
consequently diminish savings and deposits to the banking sector hampering the cash inflow of
the industry.
2. At least 3 implications of item no. 1 in the conduct of audit, specify which part of the audit
process.
INDUSTRY SPECIALIZATION
There are fundamental differences in characteristics of errors and methods of error
detection in banking industry and thus, auditors who have industry specific expertise are better
equipped to detect errors or abnormalities than those auditors without such expertise. This
expertise will be quiet handful during the risk assessment stage of audit process. Low (2004),
found that auditor’s knowledge of client’s industry improves audit risk assessments, and
facilitates the refinement of the elements of audit knowledge, which in turn is expected to help
auditors anticipate potential misstatements.
3. Look for an audited financial statement (AFS) of a company under the specialized industry in
the Philippines and list down observations from audit report and the financial statements.
The AFS should be from 2019 or onwards
Ratio capital to asset
Ratio mamaintain
Notes bsp
Instructions for submission:
Remove explanatory remarks for each number (the screenshot and texts in red
font)
Turn in as “assignments” in teams with the file name: Section code SurnameFirst
name initial activity__ ex: (C122 EvangelistaF activity1)
REFERENCES:
Banking Fundamentals - Overview, How Banks Work, Types (corporatefinanceinstitute.com)
Banking Industry | Encyclopedia.com
BSP recognizes ‘digital banks’ as a new bank category | GMA News Online (gmanetwork.com)
The Future Of Banking The Growth Of Technology | S&P Global (spglobal.com)
IFRS 15 Revenue for the Banking sector - KPMG Greece (home.kpmg)
The Effects of Industry Specialization on Audit Risk Assessments and Audit‐Planning Decisions | The
Accounting Review (allenpress.com)
file (pefindo.com)
IR2qtr_2021.pdf (bsp.gov.ph)