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Auditing
The process through which an independent auditor
plans for, obtains, summarizes, and evaluates
sufficient, competent, relevant, and material
evidence on the audit objective of whether an
entitys management or employees have or have not
accepted and carried out in a fair, legal, efficient,
economical, or effective manner appropriate
standards (management or operational standards
and requirements, laws, policies, or other managerial
standards) for which they are accountable.
From the evidence on the audit objective, the
auditor comes to an opinion or conclusion, and then
reports this opinion or conclusion to a third party to
provide it with adequate assurance that the second
party has or has not carried out the appropriate
standards necessary to achieve the desired results.
(1) Four elements (4 pts)
Four qualities in order for an activity to be called an
audit:
1 An auditor, auditee, and audit recipient;
2 An accountability relationship between the
auditee (subordinate) and the audit recipient
(higher authority);
3 Independence between the auditor and auditee;
and
4 An examination and evaluation of certain of the
auditees accountable activities by the auditor for
the audit recipient
3 parties involved in an audit and their
characteristics:
1 The First Party- the auditor, provides to the third
party an acceptable level of assurance on the
accountability of the second party.
2 The Second Party- the party being audited and
accountable to the third party.
3 The Third Party- the party to whom the second
party is accountable and to whom the auditor
reports on that accountability
Financial
Complianc
e
Economy
Efficiency
Effectiven
ess
Process
Elements of an audit:
1.
Criteria: an appropriate
standard or standards for management action
2.
Condition: managements
actions (or lack of actions) in regard to carrying
out those standards, and,
3.
Cause: the reason for the
condition why something happened and who or
what is responsible.
4.
Effect: the good or bad
results from following (or not following) the
appropriate standard or standards
(4) 3 phases and all the activities in each phase (20
pts)
The Audit Process:
A. Survey Phase
1.Gathering of information
2.Review of legal and policy framework
3.Preliminary testing of controls
4.Identification of audit area
5.Determination of the overall scope
6.Preparation of the audit program
(6) Elements (discuss) of an audit program (6 pts)
Contents:
(a) Scope the coverage of the audit work
(b) Objectives what the audit aims to achieve
(c) Audit procedures set forth in specific terms
the steps to be followed for each audit
objectives
(d) Staff assignment those who will carry out
each procedures
(e) Time budget the estimated time required to
carry out each audit procedures
(f) Working paper reference to facilitate cross
referencing
B. Execution Phase
1.
Carrying out the audit procedures
2.
Evaluating the evidence
3.
Finalizing the audit working papers
4.
Determining causes and effects
5.
Developing audit Findings and
Recommendations
(7) Qualities of a good audit finding (8 pts)
Findings must contain:
(a) a statement of condition a fact, booked up
by evidence and verifiable, as opposed to a
mere supposition or opinion. It may be an
actual occurrence or an existing state of
affairs
(b) a statement of criteria the standards
against which a condition is compared with
(c) a statement of effect the result, usually
adverse of the discovered condition.
(d) a statement of cause the reason for the
condition; why something happened and who
or what is responsible
(8) Qualities of a good audit recommendation (5 pts)
Recommendations:
(a) It is practical. It can be implemented readily
and economically
(b) It should eliminate the cause of the condition
(c) It should prevent the recurrence of the
condition
(d) It is clearly worded and specifies what action
should be taken and who should do it
(e) It should be in accordance with laws and
regulations
C. Reporting Phase
1.
2.
3.
4.
5.
6.
Period
Spanish Period
Set-up
Judicial-type Court of Accounts
Legislative-type
As Commonwealth
Post Independence:
Early Period
The 50s
Early 70s
Late 70s (Tantuicos term)
Early-mid 80s
1986-1994 (Guingona)
Type of Audit
Detailed post-audit of
transactions
Post-audit of all transactions
Independent Constitutional
Body
-do-
Change to Commission-type of
organization
Commission-type of
organization
Commission-type of
organization
Commission-type of
organization
1994-1995 (Banaria)
Commission-type of
organization
1995-2000 (Gangan)
Commission-type of
organization
Commission-type of
organization
Commission-type of
organization
Commission-type of
organization
Commission-type of
organization
4.
The must
be
assured
that
public
monies
are spent
the
It
and
and
that
state
call
office
were
and
new
and
study