Collections and Remittances are important in an organization. It must be properly safeguarded against losses, theft and malversation. Audit program for collections and remittances is shown below:
Audit Objectives:
1. To determine that collections and remittances are recorded properly.
2. To establish the existence and amount of unremitted collections in the
hands of collecting officers.
3. To establish the accuracy of the General Ledger account.
Audit Procedures
Analytical Review:
1. Compare reported collections of prior years with current year’s collection. Note material variances.
2. Compare targeted collections for this period with actual collections for the same period. Mark notable variances.
Test of details of balances and transactions:
3. Check entries in the Report of Collections against duplicate ORs. Verify footings and trace to subsidiary accounts. Check remittances reported against actual deposits made.
4. Get a representative sample of duplicate ORs. Confirm with the payees by sending out confirmation letters with focus on amounts paid and nature of imported cargo.
5. Examine ORs for:
-amounts and dates
-mode of payment, whether cash or check
-account distribution and fund classification
-numerical sequence
-erasures and alterations
-authenticity
6. Check numerical sequence of ORs issued against monthly report of accountable forms
7. Examine reported deposits for:
-validity
-authenticity
-fund classification
-erasures and alterations
8. Check reported deposits by confirming with the
depository bank thru the Resident Auditor
assigned thereat.
9. Trace entries in the General Ledger account to the entries in the appropriate journal. Verify footings and balance.
10. Check entries in the journals against those in the records/reports.
11. Conduct cash examination on the cash and
accounts of the collecting officers.
Showing posts with label audit techniques. Show all posts
Showing posts with label audit techniques. Show all posts
Wednesday, July 15, 2009
Audit Program for Expenses
The Audit program for examination of expenses are as follows:
Audit Objectives:
To determine whether the agency’s funds are utilized only for the purpose for which the funds were made available.
To determine whether the agency’s funds are utilized in accordance with pertinent laws, rules and regulations.
To ascertain whether the expenditures are duly accomplished and approved by the head of the agency or duly authorized representatives.
To ascertain whether the expenditures are properly supported by documents and other evidence to establish the validity, propriety and correctness of the claim.
To determine the correctness of the expense classification.
Audit Procedures
1. Collate and inventory all Disbursement Vouchers
-check timeliness of submission
2. Check completeness of submitted vouchers based
on checks issued for the month
3. Check DVs for adequacy of supporting documents.
4. Take note of lacking documents in WPs. Determine that documents are stamped “PAID” to preclude their subsequent use.
5. Take note of any deficiency in the disbursement, if
any. Verify that amounts are correctly computed.
6. Trace vouchers to entries in the cash disbursement records, noting propriety of account distribution
7. Check correctness of entries in JEV
8. Check propriety of disbursement
9. Check propriety of signatories
10. Check funds availability
11. Account for numerical sequence of check issued
12. Prove footings of disbursement records/books
13. Trace postings from appropriate books of
accounts to GL
Audit Objectives:
To determine whether the agency’s funds are utilized only for the purpose for which the funds were made available.
To determine whether the agency’s funds are utilized in accordance with pertinent laws, rules and regulations.
To ascertain whether the expenditures are duly accomplished and approved by the head of the agency or duly authorized representatives.
To ascertain whether the expenditures are properly supported by documents and other evidence to establish the validity, propriety and correctness of the claim.
To determine the correctness of the expense classification.
Audit Procedures
1. Collate and inventory all Disbursement Vouchers
-check timeliness of submission
2. Check completeness of submitted vouchers based
on checks issued for the month
3. Check DVs for adequacy of supporting documents.
4. Take note of lacking documents in WPs. Determine that documents are stamped “PAID” to preclude their subsequent use.
5. Take note of any deficiency in the disbursement, if
any. Verify that amounts are correctly computed.
6. Trace vouchers to entries in the cash disbursement records, noting propriety of account distribution
7. Check correctness of entries in JEV
8. Check propriety of disbursement
9. Check propriety of signatories
10. Check funds availability
11. Account for numerical sequence of check issued
12. Prove footings of disbursement records/books
13. Trace postings from appropriate books of
accounts to GL
Audit Program for Accounts Payable
Accounts Payable should also be properly taken care of to ensure that they actually exist. The audit program for payables are shown below:
Audit Objectives:
To determine that all existing liabilities are properly recorded and shown in the balance sheet
To determine that all the recorded liabilities are existing liabilities of the agency as of balance sheet date
To determine that payees are valid claimants
To ascertain that transactions are duly approved and complete with supporting documents
Test of details of transactions and balances:
1. Vouch recorded accounts payable transactions to supporting documentation.
2. Vouch credits to supporting vouchers, vendor invoices, receiving reports, and purchase orders and other supporting information.
3. Vouch debits to cash disbursements or purchase returns memoranda.
4. Perform purchases cut-off test.
Select sample of recorded purchase transactions from several days before and after year-end and examine supporting vouchers, invoices, etc. to determine that purchases were recorded in the proper period.
Observe the number of the last receiving report issued on the last business day of the audit period and trace sample of lower- and higher-numbered receiving reports to related purchase documents and determine that transactions were recorded in the proper period.
Perform cash disbursements cut-off.
Observe the number of last check issued and trace to the accounting records to verify accuracy of cut-off, or trace dates of paid checks returned with year-end cut-off bank statements to dates recorded.
Confirm accounts payable. On a sample basis, send confirmation requests to vendors with large balances. Investigate and reconcile differences.
Determine that payables are properly identified and classified.
Audit Objectives:
To determine that all existing liabilities are properly recorded and shown in the balance sheet
To determine that all the recorded liabilities are existing liabilities of the agency as of balance sheet date
To determine that payees are valid claimants
To ascertain that transactions are duly approved and complete with supporting documents
Test of details of transactions and balances:
1. Vouch recorded accounts payable transactions to supporting documentation.
2. Vouch credits to supporting vouchers, vendor invoices, receiving reports, and purchase orders and other supporting information.
3. Vouch debits to cash disbursements or purchase returns memoranda.
4. Perform purchases cut-off test.
Select sample of recorded purchase transactions from several days before and after year-end and examine supporting vouchers, invoices, etc. to determine that purchases were recorded in the proper period.
Observe the number of the last receiving report issued on the last business day of the audit period and trace sample of lower- and higher-numbered receiving reports to related purchase documents and determine that transactions were recorded in the proper period.
Perform cash disbursements cut-off.
Observe the number of last check issued and trace to the accounting records to verify accuracy of cut-off, or trace dates of paid checks returned with year-end cut-off bank statements to dates recorded.
Confirm accounts payable. On a sample basis, send confirmation requests to vendors with large balances. Investigate and reconcile differences.
Determine that payables are properly identified and classified.
Audit Program for PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT (PPE) are very important assets of an organization and hereunder is an audit program in the examination of such assets:
Audit Objectives:
To establish the existence and ownership by the client of property, plant and equipment.
To ascertain that the basis at which property accounts are stated is acceptable and consistent with that of the preceding year
To determine that additions during the audit period are recorded and valued properly
To make certain that all dispositions of property whether transferred without cost or disposed have been properly authorized and recorded in the books
To ascertain that all properties in the hands of end-users are properly identified and handled or managed and corresponding Memorandum Receipts (MRs) are on file and acknowledged by them
To ascertain that totals per inventory report tally with balances appearing in the Balance Sheet
To ascertain whether all PPE are stated at cost less accumulated depreciation, and to determine whether depreciation of these assets had been properly and accurately computed.
Test of details of transactions and balances:
1. Vouch PPE additions to supporting documentation.
2. Vouch PPE disposals to supporting documentation.
3. Review entries to repairs and maintenance expenses.
4. Inspect PPE and additions thereto. Be alert to evidence of additions and disposals not included on agency’s schedules and to conditions that bear on the proper valuation and classification of the PPE.
5. Examine title documents and pertinent papers.
6. Evaluate fair presentation of depreciation expense by evaluating the appropriateness of useful lives and estimated salvage values set by the Commission on Audit.
7. Determine that PPE and related expenses, gains, and losses are properly identified and classified in the financial statements.
8. Determine the appropriateness of disclosures related to the cost, book value, depreciation methods and useful lives.
Audit Objectives:
To establish the existence and ownership by the client of property, plant and equipment.
To ascertain that the basis at which property accounts are stated is acceptable and consistent with that of the preceding year
To determine that additions during the audit period are recorded and valued properly
To make certain that all dispositions of property whether transferred without cost or disposed have been properly authorized and recorded in the books
To ascertain that all properties in the hands of end-users are properly identified and handled or managed and corresponding Memorandum Receipts (MRs) are on file and acknowledged by them
To ascertain that totals per inventory report tally with balances appearing in the Balance Sheet
To ascertain whether all PPE are stated at cost less accumulated depreciation, and to determine whether depreciation of these assets had been properly and accurately computed.
Test of details of transactions and balances:
1. Vouch PPE additions to supporting documentation.
2. Vouch PPE disposals to supporting documentation.
3. Review entries to repairs and maintenance expenses.
4. Inspect PPE and additions thereto. Be alert to evidence of additions and disposals not included on agency’s schedules and to conditions that bear on the proper valuation and classification of the PPE.
5. Examine title documents and pertinent papers.
6. Evaluate fair presentation of depreciation expense by evaluating the appropriateness of useful lives and estimated salvage values set by the Commission on Audit.
7. Determine that PPE and related expenses, gains, and losses are properly identified and classified in the financial statements.
8. Determine the appropriateness of disclosures related to the cost, book value, depreciation methods and useful lives.
Audit Program for Inventories
Here is an audit program for inventories which is very useful for auditors:
Audit Objectives:
To ascertain the physical existence of the items appearing in the balance sheet and to be satisfied of the reasonable accuracy of quantities
To ascertain whether all recorded procurements and utilization occurred during the current year.
To test whether the inventories are properly valued using the moving average method of costing.
Analytical Procedure:
Compare inventory balances to anticipated need as well as to last year’s inventory balances.
Test of details of transactions:
1. Vouch entries in inventory accounts to supporting documentation (e.g. invoices, requisition and issue slips, etc.)
2. Trace data from purchases, supply card, subsidiary ledgers to inventory accounts.
3. See if the asset method of accounting is applied.
4. Test cut-off of purchases and issuances.
Test of details of balances:
5. Observe agency’s physical count and verify inventory quantities:
review the client’s inventory instructions, if any, Determine whether the procedures outlined will result in reasonably accurate inventory.
- Observe the inventory-taking and make sufficient test counts to determine whether inventory instructions are carried out, counts are accurate and properly recorded, and quality and condition of goods are considered
- Obtain proper cut-off
- Note existence of obsolete, slow-moving or damaged goods
- Test check extension and footings of Inventory List
- Check against Memorandum Receipts
- Assist in the inventory-taking personally or by representative
- Conduct inquiry/personal observation to satisfy oneself as to
effectiveness of methods of inventory-taking and as to reliability of
client’s representations
- Prepare reports as to results of inventory-taking observed
Obtain copy of final inventory lists, trace test of inventory
quantities
- compare final inventory list with the inventory balances
appearing in the Supplies Ledger cards maintained by the
Accounting Division as well as the inventory balances indicated
in the stock cards of the Supply Office. Note down differences.
6. Verify inventory valuation-test check basis of prices from
purchase orders/delivery receipts. See whether ending balances were arrived at using the moving average method of valuation.
Reconcile inventory report balances with balances appearing in
the balance sheet
Audit Objectives:
To ascertain the physical existence of the items appearing in the balance sheet and to be satisfied of the reasonable accuracy of quantities
To ascertain whether all recorded procurements and utilization occurred during the current year.
To test whether the inventories are properly valued using the moving average method of costing.
Analytical Procedure:
Compare inventory balances to anticipated need as well as to last year’s inventory balances.
Test of details of transactions:
1. Vouch entries in inventory accounts to supporting documentation (e.g. invoices, requisition and issue slips, etc.)
2. Trace data from purchases, supply card, subsidiary ledgers to inventory accounts.
3. See if the asset method of accounting is applied.
4. Test cut-off of purchases and issuances.
Test of details of balances:
5. Observe agency’s physical count and verify inventory quantities:
review the client’s inventory instructions, if any, Determine whether the procedures outlined will result in reasonably accurate inventory.
- Observe the inventory-taking and make sufficient test counts to determine whether inventory instructions are carried out, counts are accurate and properly recorded, and quality and condition of goods are considered
- Obtain proper cut-off
- Note existence of obsolete, slow-moving or damaged goods
- Test check extension and footings of Inventory List
- Check against Memorandum Receipts
- Assist in the inventory-taking personally or by representative
- Conduct inquiry/personal observation to satisfy oneself as to
effectiveness of methods of inventory-taking and as to reliability of
client’s representations
- Prepare reports as to results of inventory-taking observed
Obtain copy of final inventory lists, trace test of inventory
quantities
- compare final inventory list with the inventory balances
appearing in the Supplies Ledger cards maintained by the
Accounting Division as well as the inventory balances indicated
in the stock cards of the Supply Office. Note down differences.
6. Verify inventory valuation-test check basis of prices from
purchase orders/delivery receipts. See whether ending balances were arrived at using the moving average method of valuation.
Reconcile inventory report balances with balances appearing in
the balance sheet
Audit Program for Receivables
Audit Objective: To establish the validity and collectibility of the receivables and the fairness of the description and classification of these receivables in the Balance Sheet
Analytical Review:
Compare last year’s Accounts Receivable with the current period receivables. Segregating them as to kind or nature of the receivable. Take note of significant increases/decreases. Know the causes of such significant differences.
Test of Details of Balances and Transactions:
1. Obtain/prepare a schedule of receivables w/ the ff:
name
address
balance of account
age of account balance
2. Pay particular attention to Receivables in the nature of advances to employees
for traveling expenses.
3. Foot the schedule and trace totals to GL
4. Compare balances in SL and test accuracy of
aging
5. Verify collections made after balance sheet date
6. Ascertain that AR represent valid claims against
existing debtors
7. Determine validity of AR
8. Determine collectibility of AR.
9. Confirm receivables
-write positive or negative confirmation letter
-jot down details and items that need to be
clarified
10. For receivables in the nature of traveling advances, prepare demand letters for
their liquidation in accordance with pertinent regulations.
11. Make an evaluation of results of work done
12. Prepare working paper and report
Receivables are also important element in financial statements so it must be examined carefully by an auditor.
Analytical Review:
Compare last year’s Accounts Receivable with the current period receivables. Segregating them as to kind or nature of the receivable. Take note of significant increases/decreases. Know the causes of such significant differences.
Test of Details of Balances and Transactions:
1. Obtain/prepare a schedule of receivables w/ the ff:
name
address
balance of account
age of account balance
2. Pay particular attention to Receivables in the nature of advances to employees
for traveling expenses.
3. Foot the schedule and trace totals to GL
4. Compare balances in SL and test accuracy of
aging
5. Verify collections made after balance sheet date
6. Ascertain that AR represent valid claims against
existing debtors
7. Determine validity of AR
8. Determine collectibility of AR.
9. Confirm receivables
-write positive or negative confirmation letter
-jot down details and items that need to be
clarified
10. For receivables in the nature of traveling advances, prepare demand letters for
their liquidation in accordance with pertinent regulations.
11. Make an evaluation of results of work done
12. Prepare working paper and report
Receivables are also important element in financial statements so it must be examined carefully by an auditor.
AUDIT PROGRAM for Cash Receipts Transactions and Cash Balances
Hereunder is a useful audit program for auditing Cash Receipts Transactions and Cash Balances:
Audit Objective: To determine whether cash balances at month-end/year-end are valid and actually exist.
Analytical Procedures:
1. Compare cash accounts with those of prior years and investigate additions or deletions of accounts;
2. Compare cash receipts from miscellaneous sources with those of prior year and account for major changes.
Other Procedures:
3. Count and list cash on hand at year-end and trace to cash receipts record and bank statement.
4. Vouch significant cash receipts from sources other than customers and trace to deposit slips and bank statements on a test basis.
5. Confirm bank balances directly with bank and BTr. Compare replies and investigate differences, if any.
6. Reconcile bank accounts as of year-end.
7. Obtain cutoff bank statement(s) directly from banks and trace reconciling items from bank reconciliation to cut-off statement.
8. Inquire as to status of inactive bank accounts.
9. Review GL account balances and trace postings from the underlying receipts and supporting documents to the reports and journals.
10. Prepare/obtain schedule of collections and deposits per bank account as of month-end/year-end.
11. Compare schedule with SL accounts. Examine the schedule footings and compare totals with the GL.
12. Review/verify bank reconciliation statements.
13. Note differences between bank and book balances and verify whether reconciling items are properly recorded in the books of accounts.
14. Prepare draft AO and discuss with management officials concerned before issuance.
Audit Objective: To determine whether cash balances at month-end/year-end are valid and actually exist.
Analytical Procedures:
1. Compare cash accounts with those of prior years and investigate additions or deletions of accounts;
2. Compare cash receipts from miscellaneous sources with those of prior year and account for major changes.
Other Procedures:
3. Count and list cash on hand at year-end and trace to cash receipts record and bank statement.
4. Vouch significant cash receipts from sources other than customers and trace to deposit slips and bank statements on a test basis.
5. Confirm bank balances directly with bank and BTr. Compare replies and investigate differences, if any.
6. Reconcile bank accounts as of year-end.
7. Obtain cutoff bank statement(s) directly from banks and trace reconciling items from bank reconciliation to cut-off statement.
8. Inquire as to status of inactive bank accounts.
9. Review GL account balances and trace postings from the underlying receipts and supporting documents to the reports and journals.
10. Prepare/obtain schedule of collections and deposits per bank account as of month-end/year-end.
11. Compare schedule with SL accounts. Examine the schedule footings and compare totals with the GL.
12. Review/verify bank reconciliation statements.
13. Note differences between bank and book balances and verify whether reconciling items are properly recorded in the books of accounts.
14. Prepare draft AO and discuss with management officials concerned before issuance.
Saturday, July 11, 2009
Strategic Audits
Strategic audits are examinations and evaluations of strategic management processes including measuring corporate performance against the corporate strategy. Whenever a deficiency is noted or performance of an organization is sub-par, the organization may elect to perform a strategic audit. This may be done with in-house auditors, or an audit firm may be contracted to perform the audit.
The auditors will audit performance of the organization against the current corporate strategy and seek to identify problems within the current strategy that may be tied or can be traced to poor performance. Upon completion of the audit, a report will be created regarding the auditing firm or group’s findings and submit the report with recommended remedies to the management of the organization. The organization will then seek to implement the proposed remedies with hopes of increasing organizational performance.
source
In government auditing, strategic audits refers to performance audit or value for money audit.
The auditors will audit performance of the organization against the current corporate strategy and seek to identify problems within the current strategy that may be tied or can be traced to poor performance. Upon completion of the audit, a report will be created regarding the auditing firm or group’s findings and submit the report with recommended remedies to the management of the organization. The organization will then seek to implement the proposed remedies with hopes of increasing organizational performance.
source
In government auditing, strategic audits refers to performance audit or value for money audit.
What is Auditing Technique?
Auditing technique is defined as any technique used by auditors to determine deviations from actual accounting and controls established by a business or organization as well as uncovering problems in established processes and controls. Auditing techniques can be used to aid organizations by uncovering errors in business practices and providing a means of correction. Some businesses have used irregular accounting methods to hide certain monetary transactions and non-compliant behavior which has been uncovered by the use of varied auditing techniques. Other businesses have found new ways to save money and streamline business practices through various auditing techniques which have found waste in certain processes.
Auditing techniques can be used to uncover these issues in order to ensure ethical business practices and to minimize waste or possible oversights within an organization. The applied techniques can determine if any income is hidden or improperly categorized or reported; transactions are being completed between the organization and regulated or prohibited persons, groups, or countries; uncovering of environmental waste discrepancies; finding of data inconsistencies; or any other business practice that can be considered as a process error, oversight, or violation of ethics, regulations, and laws.
source
Auditing techniques are important to auditors in uncovering fraud in an organization.
Auditing techniques can be used to uncover these issues in order to ensure ethical business practices and to minimize waste or possible oversights within an organization. The applied techniques can determine if any income is hidden or improperly categorized or reported; transactions are being completed between the organization and regulated or prohibited persons, groups, or countries; uncovering of environmental waste discrepancies; finding of data inconsistencies; or any other business practice that can be considered as a process error, oversight, or violation of ethics, regulations, and laws.
source
Auditing techniques are important to auditors in uncovering fraud in an organization.
Monday, June 22, 2009
COA Reinstitutes Selective Pre-audit
The reinstitution of selective pre-auditing effective July 1 is seen to curb anomalies in government transactions, according to the director of the Commission on Audit-Regional Office 13. Lawyer Roy Ursula said that the COA will implement a selective pre-audit on government transactions nationwide based on COA Circular 2009-002 dated May 18 of this year as there have been “documented cases that have proven to be weak in internal control.”The pre-audit is an examination of documents supporting a transaction or series of transactions before these are paid for and put on records, such as cash advances, payments of salaries and terminal leave benefits, payments for infrastructure projects, payments for road right-of-way, payments for procurement of capital assets, goods, and services; payments made through automatic debit advice, releases of funds to non-government organizations/people’s organizations; transfers of funds between government agencies, disbursements from trust funds of local government units and disposal of real property and unserviceable property.It was further learned from Ursula that selective pre-auditing was already practiced then but was lifted in 1995 because at that time, studies showed there was good governance then. But currently, there have been several cases where COA found anomalies in, he said. — Barbara Anne B. Ocaba, STC Masscom intern/MEEV (THE FREEMAN)
I believe that selective reinstitution of pre-audit is necessary to prevent further occurence of anomalies in the government. Checking of documents and inspection of projects before payment is done should really pass by COA's examination to ensure that what is being paid for is reasonable, regular and in accordance with rules and regulations.
Selective Pre-audit
I believe that selective reinstitution of pre-audit is necessary to prevent further occurence of anomalies in the government. Checking of documents and inspection of projects before payment is done should really pass by COA's examination to ensure that what is being paid for is reasonable, regular and in accordance with rules and regulations.
Selective Pre-audit
Selective Pre-audit on Government Transactions
Starting July 1, 2009, the Commission on Audit through COA Circular no. 2009-002 dated May 18, 2009, is reinstituting selective pre-audit on government transactions. This is because of recent developments which gave rise to incidents of irregular, illegal, wasteful and anomalous disbursements of huge amounts of public funds and disposal of public property. Indeed corruption is everywhere nowadays, you can see or hear it in the news everyday pointing to the need to consider restoring pre-audit as a deterrent against resurgence of the observed maladies. For a full text of COA Circular no. 2009-002, please click below:
COA Circular No. 2009-002
COA Circular No. 2009-002
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