AuditingBOOKKEEPING AND AUDITING SEMINARJPIA UEP CHAPTER14 DECEMBER 2013

ACTAccountability Credibility Transparency

Constitution of the University Student Council, Article XII, Commission on AuditSection 1. The Commission on Audit (COA) is an autonomous

Constitutional Commission which shall be composed of a Chairman and four (4) Commissioners who shall be elected in manner provided by Article VIII, section 2d.

Section 2. The President of the UEP Junior Philippine Institute of Accountants shall be the ex-officio Chairman of the Commission.

Section 3. Except for the Chairman, the Commissioners shall not hold any other office during his or her term.

Constitution of the University Student Council, Article XII, Commission on AuditSection 4. The COA shall have the following functions:

a. To audit all financial transactions affecting the various subdivisions of the USC including, but not limited to CSCs;

b. To submit to the Student Council Assembly an audited semestra;l financial report of the USC and its subdivisions not later than 30 days adter the last semestral session of the Student Council Assembly; and

c. To recommend measured deemed necessary for improving the efficiency and effectiveness of the student council’s financial management.

Constitution of the University Student Council, Article XII, Commission on AuditSection 5. The Commission shall appoint, through a majority

vote of its members, an adviser who shall be a faculty member of the UEP College of Business Administration Accountancy Department.

What is Auditing?Auditing may be defined as a systematic, integrated process of accumulating and evaluating evidence by competent, independent persons about economic information, actions and events of an entity; the purpose of which is to assess against an established criteria for the entity’s actions and reporting and communicating thereof.

Salient points:1. systematic, integrated process2. accumulating and evaluating evidence by

competent, independent persons3. economic information, actions and events of

an entity4. assess against an established criteria for the

entity’s actions5. reporting and communicating the results

thereof

Auditing involves gathering and evaluating evidence relating to organization’s assertions as reflected in the financial statements.

Assertions – representations by management, explicit or otherwise, that are embodied in the financial statements. (Phil. Standards on Auditing, December 2002)

Basic financial statement assertions

1.Existence or occurrence2.Completeness3.Rights and obligations4.Valuation or allocation5.Presentation and disclosure

Independent Audit

vs.Internal Audit

Objective of an Independent AuditPrimary - To express an opinion on the fairness with which financial statements present fairly in all material aspects, financial position, results of operations and its cash flows, in conformity with the generally accepted accounting principles.Secondary – To benefit management to detect or deter fraud, to indicate control weakness and suggest means for their corrections.

Internal AuditingAn appraisal activity established within an enityty as a service to the entity. Its functions include amongst other things examining, evaluating and monitoring the adequacy and effectiveness of the accounting and internal control systems.

Part 1. Internal Control and Audit for Cash Collections

Internal Control – comprises the plan of organization and all the coordinated methods and measures adopted to safeguard the assets of an organization, check the accuracy and reliability of its acctounting data, promote operational efficiency and encourage adherence to prescribed.

Sample Internal Control Measures and Procedures for Cash Collections1. Official receipts used and unused should be kept intact in a

locker. The same should be monitoired in a separate logbook.2. Cash collections remitted by each collector should be supported by a cash transfer slip in three (3) copies (Fig. 1). The treasurer should ensure the cash remitted by the collector through checking of official receipts and signifying on the last receipts remitted.3. The total received by the treasurer for the day should be summarized through the Cash Abstract Report (Fig. 2). The total amount stated in the Cash Abstract Report should be the same with the amount deposited on the next banking day. Note: Expenses of the organization should not be taken from the collection.

Audit Procedures for Cash Collections1. Obtain the total amount deposited by tracing

it to the passbook of the organization. Compare the amount with the cash abstract report prepared by the treasurer. For further confirmation, the auditor may:

a. Compare the Cash Abstract Report from the cash transfer slip and the official receipts.

b. Get the total number of students who paid for the fees. Note any difference.

Part 2. Internal Control and Audit Procedures for Cash Disbursements

Sample Internal Control Measures:1. In accordance with the imprest system, all cash disbursements

should be supported by a cash voucher (Fig. 3) which should be pre-numbered.

2. A petty cash fund should be established by the organization for minute expenses. All disbursements from the fund should be made through the petty cash voucher (Fig. 4) which should likewise be pre-numbered. The petty cash custodian should maintain a petty cash book stating therein the receipts and disbursements from the fund. Once the fund reaches to a minimum of 10%, the fund should be replenished by woithdrawing from the bank (supported by a cash voucher and attached are the official receipts which should be stamped as ‘PAID’ upon replenishment). Each disbursement should not exceed P500, otherwise, a cash voucher should be prepared.

3. For occasions requiring huge cash outlays (i.e., acquaintance party, Christmas party etc.), a voucher should be prepared supported by a cash advance slip (Fig. 5) subject for liquidation (Fig. 6) after the event. Any excess from the cash advance should be deposited to the bank and any deficit may be reimbursed through the petty cash fund, provided that the amount does not exceed P500.4. The treasurer should maintain a cash book (Fig 7.) showing the receipts and disbursements from the funds. Likewise, all used cash vouchers should be filed in sequence, attached are the supporting receipts of the disbursements.

Sample Internal Control Measures:

5. A General Ledger should also be maintained for the projected breakdown of the fees collected from the students. This will enable the organization to monitor the balance of the account.

Sample Internal Control Measures:

Audit Procedures for Cash Disbursements

1. Obtain the passbook from the treasurer.2. Check if all disbursements from the passbook are

supported by resolutions (if applicable) and a cash voucher. Note any difference.

3. Examine and scrutinize the cash vouchers file. Examine all the receipts; the total amount should equal the amount on the cash voucher. Ensure that the cash vouchers and supporting documents are stamped as ‘PAID’. Note any difference.

Audit Procedures for Cash Disbursements After examining cash receipts and disbursements, obtain the cash balance end of the organization. Ensure that the cash end per passbook is the same with the balance on the cash book maintained by the treasurer. With regards to the petty cash fund, the auditor may conduct a cash count (Fig. 8). The results should be documented.

After the audit process, the organization may conduct an exit reference about the findings of the auditor.

Audit Procedures for Other Assets (Properties owned by the organization)1. Obtain a list of properties owned by

the organization and compare with what is shown in the balance sheet.

2. The auditor may physically examine the properties through ocular inspection.