Definition of Auditing
AUDITING I. Definitions * Auditing, in a accustomed sense, is a analytic and analytic appraisal of the banking position, operating systems, and after-effects of operation of an audited entity. * A analytic activity of accepting and evaluating affirmation apropos assertions about bread-and-butter accomplishments and contest to ascertain amount of accord amid those assertions and accustomed belief and communicating the after-effects to absorbed user. The analytic and analytic assay and analysis of banking transactions, operation, accounts, and letters of any government bureau for the purpose of free the accuracy, integrity, and authenticity, and acceptable the requirements of law, rules, and regulations. Accompaniment analysis relies on the accoutrement of law; its ascendancy and limitations are assigned by law and it is conducted in accordance with law. The 1987 Constitution and accompanying laws set the scope, powers, functions, and administering of government auditing. Auditing in Accessible Administration
State auditing (along with accounting) may be advised as the ascendancy and accountability basal of budgetary administering cycle. * As a ascendancy mechanism, auditing ensures the able and acknowledged appliance and administering of budgetary assets in accordance with complete banking administering principles, accounting and auditing standards, and applicative laws and regulations. * As an accountability component, it seeks to ensure that accessible admiral entrusted with functions and assets are fabricated amenable for the achievement and after-effects of operation of their office. In the Budgetary administering cycle, auditing additionally provides inputs to the abutting appearance which is planning. Analysis letters accommodate basal advice on the after-effects of operation of agencies and recommendations to advance their performance. Auditing and Accounting Accounting * Accounting is a conduct which provides banking and alternative advice capital to the able conduct and appraisal of the activities of an organization. Is anxious with amalgam from a accumulation of affairs entered into by a close or bureau during a assertive period, banking statements, after-effects of affairs (in agreement of accumulation and loss), and accustomed banking position, through the interpretation, summarization, and accumulation of information. Auditing * Is primarily anxious with allegory whether or not the banking statements analytic represent the aftereffect of the firm’s operations. II. TYPES OF AUDITING A. Timing Pre-audit - The accountant reviews a transaction (a arrangement for janitorial services, for example) alike afore such casework are rendered. The accountant additionally gives his acting approval for acquittal of the casework by the agency. * Post-audit – The accountant reviews and approves the transaction afterwards the casework accept been rendered and acquittal has been fabricated In both cases, the analysis may abide of the following: * Free whether all accordant laws, rules and regulations accept been empiric in the transaction. Physical analysis of food or equipment. * Checking whether all all-important abstracts are submitted and appropriately accomplished. * Free whether the adapted ascendancy or approval has been secured. * Checking algebraic accuracy. B. Authoritative Status of Accountant * Centralized Analysis * The centralized accountant undertakes an analytic appearance of balances appear in the banking statements to actuate that the advice absolute in the statements is constant internally, with account accounts, and with those of above-mentioned years.
He may additionally insist, in an advising capacity, in adopting basal authoritative regulations, advancing cause proposals, and advising measures to advance the structural and procedural systems of the agency. * In baby agencies, the centralized analysis is usually conducted by accounting or ambassador units * In ample organization, it is done by a abstracted centralized analysis agents which letters anon to the arch of agency, the accounts office, or accumulated lath of directors, in the case of corporations. * Alien Analysis * Is performed by accountant alien to or absolute of the audited organization. In the Philippine accompaniment analysis context, it is the analysis performed by the COA auditors. * In bartering audit, it is conducted by absolute certified accessible accountants on clandestine business organizations primarily to authentic an assessment on the fairness, consistency, and acquiescence of banking statements to about accustomed accounting principles, for acquiescence to management, government authoritative agencies, stockholders, and alternative absorbed parties. Under the Constitution, alien analysis by the COA cannot be replaced by centralized analysis (or any clandestine alien audit).
While an centralized accountant may conduct analysis of his bureau (or clandestine absolute auditors accomplish alien audit), alone COA accountant is accustomed to conduct government audit. Alien analysis as performed by the COA Includes a absolute analysis of an agency’s centralized analysis services, as allotment of its analysis activity of evaluating of bureau centralized ascendancy systems. C. Analysis Ambit * Budgetary Audit: Banking and Acquiescence Budgetary analysis is the “traditional banking audit” in government. It is the aggregate of banking analysis and acquiescence audits. Banking analysis of government affairs is conducted to actuate whether: Banking operations are conducted in accordance with applicative laws, rules and regulations, and accounting and auditing standards. * Whether an bureau banking account presents abundantly and accurately the banking position of the bureau in accordance with about accustomed accounting principles. The accountant determines whether the bureau is advancement able ascendancy over revenues, expenditures, assets and liabilities, whether banking statements are abundantly presented, and if banking letters accommodate accurate, reliable and advantageous information.
Compliance audit, on the alternative hand, is an appraisal of the admeasurement to which the bureau has complied with pertinent laws, policies, and rules, and regulations in the conduct of its operation. The accountant tests the agency’s banking affairs and specific program, activity or activity to actuate their amends or regularity. He may for instance; analysis whether the bureau has not abandoned pertinent law in incurring cogent accepted liabilities. * Achievement Audit: Efficiency, Economy, Effectiveness
A achievement analysis is a able assay and appraisal of the banking and operational achievement of an organization, program, activity or activity with the article of anecdotic opportunities for grater economy, efficiency, and capability in agency. Abridgement and ability audits determine: * Whether the bureau is managing and utilizing its assets (personnel, property, funds) economically and calmly * The causes of inefficiencies or big-ticket practices * Whether the bureau has complied with the laws and regulations apropos affairs of ability and economy
Effectiveness or “program results” analysis determines. * Whether the adapted after-effects or allowances accustomed by the assembly or alternative * Whether the bureau has advised alternatives that ability advance to adapted after-effects at lower amount Special/Other Audits * Subsidy Analysis (in the Constitution, PD1445) * Levy Analysis (in the Constitution, PD1445) III. THE AUDIT PROCESS A. The Analysis Aeon – The accompaniment analysis aeon abide of seven phases: * Appearance I. Basal analysis of the bureau or audited article The basal analysis is conducted to access a alive ability of the audited bureau and its legal, policy, and authoritative environment.
The accountant gathers accustomed accomplishments advice on the bureau and its operations afterwards which he defines the scopes of his audit. The accountant may accomplish the afterward activities: * Interviews with bureau admiral to access accustomed advice * Access basal abstracts on bureau activities, objectives, policies, standards, procedure, etc. * Physical analysis of bureau facilities, office, etc. Ideally, the analysis should accommodate advice on: * Laws, policies, and rules, and regulations applicative to the bureau * Brief history and goals or purpose of the bureau Bureau organization, functions, staff, bounded offices, and operating systems * Nature, investments and area of bureau assets * Accustomed objectives and behavior * Operating methods and standards acclimated in barometer or evaluating bureau operations and achievement * Description of major, absolute problems * Copies of centralized bureau reports, abnormally centralized analysis letters * Appearance II. Analysis of Acknowledged and Activity Framework The advice aggregate from the basal analysis are advised in adjustment to access a accustomed ability of the legislation and behavior applicative to bureau objectives, policies, programs, and operating standards. Phases III. Analysis and Appraisal of Centralized Ascendancy Arrangement In this phase, the accountant reviews the procedures and practices absolutely activated by the bureau in processing its affairs in adjustment to establish: * The absolute bureau and methods in accustomed out operations * Appropriateness and account of assorted accomplish in the processes * The after-effects of operations or affairs about to bureau objectives, acknowledged and activity requirements, and standards * The capability of the centralized ascendancy arrangement and its assorted components
The analysis and appraisal of the agency’s centralized ascendancy arrangement is to: * Identify above analytic areas that would accreditation added abundant assay * To actuate the blazon of analysis to be acclimated in the afterpiece assay of such areas after on * Appearance IV - In-depth Assay of Botheration Areas, Data-gatherings, Analysis, and Appraisal In this phase, the accountant concentrates on analysis allegation on the botheration areas in agreement of: * Acquiescence with or adherence to acknowledged and activity mandate, prescriptions, and requirements; * Goals and objectives-achievement Operational efficiency, economy, and capability in the use of human, material, and banking resources; and * Propriety, accuracy, reliability, and account of banking annal and reports, including the capability of ascendancy over the closing In-depth assay may absorb reviewing bureau reports, books, files, records, and such alternative accordant abstracts and analyzing, evaluating, acceptance and acknowledging their agreeable through enquiries, inspection, or observation.
Where it becomes absurd or abstract to appraise all operations and transactions, the accountant conducts reviews and tests on a careful basis, based on his able acumen and on the capability of centralized ascendancy systems. The accountant develops the absolute and documentary affirmation to abutment his analysis findings, conclusions, and recommendations. He analyzes the abstracts aggregate and determines the causes and furnishings of the problems, and their acceptation to bureau operations. He additionally determines whether the bureau needs to booty antidotal activity and acclaim the adapted solutions.
The accountant charge active bureau admiral on any deficiencies apparent during analysis to accredit administering to booty actual antidotal action. * Appearance V. Preparation and Presentation of Abstract Address A abstract analysis address is able based on the allegation and recommendations formulated in the antecedent phase. The address is again presented to bureau admiral for their analysis and comments. * Appearance VI. Finalization of Analysis Address Afterwards the meeting, the accountant finalizes the analysis report.
In autograph the final report, he has to beam assertive attempt or standards of address writing. The ambit of the analysis should be declared acutely and concisely in the address and any limitations should be absolutely mentioned Allegation and abstracts should be abundantly accurate by absolute documentary evidence. The recommendations should be acutely articular and should be realistic. Antecedent analysis recommendations which accept been unimplemented and the agency’s acumen for such should additionally be noted. * Appearance VII. Follow-up on the Implementation of Analysis Recommendations
Audit recommendations, such as appropriate improvements, proposed adjustments in the accounts, alteration or adjournment of malpractices, band-aid to absolute problems, etc. should be followed-up B. Accustomed Objectives, Attempt and Standards * Accustomed Objectives There are abounding objectives of accompaniment analysis and all these chronicle to the abstraction of accessible accountability. Accessible accountability is axial to government analysis as it is anchored on the assumption that accessible officials, as admiral of accessible appointment charge accord a abounding and accessible accounting of the address with which they advance the admiral and expend the assets entrusted to them. Establishing accountability for banking actual and animal assets of an bureau * Establishing accountability for acquiescence with applicative laws. Policies, rules and regulations * The efficient, economical and able operations of the bureau * Specific Objectives The specific objectives of accompaniment auditing additionally accommodate the following, as audible in the Lima Declaration of Guidelines on Auditing Precepts * Able and able use of accessible funds * Development of complete banking administering Orderly beheading of authoritative activities * Communication of advice to accessible authorities and the accessible through advertisement of analysis letters * Analysis Attempt and Standards * Analysis attempt and standards serve to adviser the accountant in administering his analysis with integrity, objectivity, independence, and ability * Analysis standards accord with the affection with which the analysis is performed based on the able and ethical abilities of the accountant and his exercise of acumen in the advance of audit.
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