FAR EASTERN UNIVERSITY

Institute of Accounts, Business and Finance

Business Administration Department

ADFIL SHIPMANNING AND MANAGEMENT

CORPORATION

Audit of Accounting and Crewing Department from ADFIL Shipmanning

and Management Corporation

In Partial Fulfillment of the requirement of Internal Auditing

Submitted to:
Mark Anthony Ramos, CPA,CIA,MBA

Submitted By:
TEAM JAS
Rosaroso, Richella (CAE)
Cabidoy, Judel Ariel
Ermita, Cathereene
Martorillas, Jahanna Lhee
Mendoza, Jason
Nuyad, Sharmaine
Vera, Shayna

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 FAR EASTERN UNIVERSITY
Institute of Accounts, Business and Finance
Business Administration Department

Table of Contents

I. Executive Summary…………………………………………………
II. Background of the Process…………………………………………
III. Audit Procedure………………………………………………………
IV. Engagement Objective……………………………………………..
V. Engagement Scope………………………………………………..
VI. Risk and Control Assessment………………………………….....
VII. Risk and Control Matrix…………………………………………….
VIII. RESULTS/ OBSERVATION……………………………………….
IX. CONCLUSIONS…………………………………………………….
X. RECOMMENDATIONS…………………………………………….
XI. ACTION PLAN………………………………………………………
XII. ANNEX……………………………………………………………….
Planning………………………………………………………………
Gathering of Evidence………………………………………………
Audit Program……………………………………………………….

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 FAR EASTERN UNIVERSITY
Institute of Accounts, Business and Finance
Business Administration Department

I. EXECUTIVE SUMMARY
II. BACKGROUND OF THE PROCESS

The ADFIL engagement was conducted as a strategy to provide assessment and improvement
to enhance the current internal procedures of the organization leading to effective and efficient
operations.
Adfil Shipmanning and Management Corporation (ADFIL) is an entity organized under the laws
of the Republic of the Philippines. It was granted its license to operate by the Securities and
Exchange Commission, a government organization having competent supervisory authority over the
company, on August 25, 2003. Its office is located near the place called the "Luneta", a rendezvous of
seafarers and recruiters.
 Its primary purpose is to own and operate ocean-going vessels and to provide complete marine
services to ship owners or principals.
  The company started operating with only two vessels owned by its principal, Kyowa Sansho
Co., Ltd. Since the start of operation, the chain of close relationship and mutual understanding has
continued to bind Kyowa Sansho and Adfil. For this reason and coupled with trust and confidence, the
principal entrusted the company additional vessels for manning & management.

Accounting department:
Statement of Accounts
-The total expenses that the principal will pay (salary of the crews)
Lump Sum per vessel and per crew
The principal will pay the company a certain amount of fee called manning fee which is the profit of the agency,
for each vessel assigned to them. A fee will be provided for each crew members deployed to the vessel

Preparing the statement of accounts would start from receiving the lists of the onboard crews
covering half of the month. It is also prepared every 16th of the month. By then the accounting clerk
projects each crews' salary depending if they will be completing the whole month or they will have a
broken day computation if their contract would end or start in between the SOA dates. It will be
checked and adjusted by the bookkeeper and the final approval will be done by the finance head and
noted by the president before submitting it to Japan through courier and online. The principal will then
verify and approve the statement of accounts and proceed on remitting the remittances. (It would take
a week for this to process. Usually every 28th of the month.)

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 FAR EASTERN UNIVERSITY
Institute of Accounts, Business and Finance
Business Administration Department

Home Allotments
Home allotments are based on the allocation of the seafarers regarding his pay on board and
his allottees. It is remitted every 5th of the following month. This job was done by the accounting clerk
and the bookkeeper and reviewed by the finance head and will be signed by 2 directors, the
bookkeeper, and the finance head. But before its computation, the payroll of the land based
employees will be computed first.

Crewing Department:
The process of the crewing department will start at the application of the seafarer which is
either done through walk-ins with referrals or by recruitment. Referral means that the seafarer might
know someone inside the office like the land-based employee or an onboard seafarer and they
referred him to the company. Being recruited is based upon the need of the company for a specific
position that is not available in their list of crews off the board but is needed for deployment which is
caused by a finished contract of an onboard officer and he does not want to extend his contract any
longer. After the application, the seafarer will proceed to the assistant crewing manager for screening
and the documentary officer for his documentation like checking for passports, seaman's book,
certificates of training, etc. It is then followed by a Crew Evaluation System exam that the applicant
needs to pass to proceed to the crewing manager for interview and approval that includes character
and personality checking. If the position that the applicant is applying for is vacant, he will proceed to
the accounting department. But if the position is not available, he will be asked if he can wait until
someone with the same position signs off until then he will be listed as a reserve for that current
position. While in the accounting department, the first step will start with the bookkeeper and the
accounting clerk for the applicants' financial documentation like SSS, PhilHealth, Pag-ibig numbers
and the allocation of his salary. If the applicant has any further questions regarding other financial
matters, he will then request to see the finance head. After these procedures, the applicant proceeds
to Kwoya Philippines for an interview, Video-On-Demand Exam (VOD) that he also needs to pass
and for another approval. Kyowa Philippines is a branch of the principal. The applicant will go back to
ADFIL upon the approval of Kyowa Philippines so that the crewing manager will email that principal in
Japan for the final approval. The approval procedure can be done on the same day. After receiving
the final approval, the applicant will now proceed to the liaison officer for the signing of contracts.

III. AUDIT METHODOLOGY/ AUDIT PROCEDURES

Interview: Interview of the people responsible for the oversight of the operation is key in gaining a
deeper understanding on how the established procedures related to the nature of the business. The

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 FAR EASTERN UNIVERSITY
Institute of Accounts, Business and Finance
Business Administration Department

interview was also extended to employees in the performance of their duty to confirm if employees
understood their job description
Observation and Inspection: The engagement team went to the area of business to obtain first-
hand knowledge of the Company’s actual operation and conducted a physical examination of the
company’s assets and of the existing controls to safeguard those assets
Analytical Procedures: To gain on the plausible relationship of the existing procedures of the
company compared across the same industry with different entities.

IV. AUDIT OBJECTIVE

The overall purpose of the engagement is to evaluate current internal controls and processes,
determine how the company manages its potential risks, ascertain whether the business meets
policies and regulations and to provide recommendations to enhance the company’s efficiency.

V. AUDIT SCOPE

Our Review covers the process of Accounting and Crewing department of ADFIL ship manning
and management operations.

VI. RISK AND CONTROL ASSESSMENT

Risk Identified:
Risk #1: The risk of financial fraud, due to
The Liaison’s and the Vice President’s signatures appear at one check at the same time.
No available CCTVs to detect possible fraud.
Underlying Company Policy: The Liaison and the Vice President’s signature cannot appear in one
check at the same time (authorized signatories are the President, Vice President, Liaison and the
Shareholder)

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 FAR EASTERN UNIVERSITY
Institute of Accounts, Business and Finance
Business Administration Department

Risk #2: Having only one person prepare the financial statements and audit them (This person
serves as the company’s accountant and auditor at the same time)
Risk #3: The risk of Having only one person to issue checks and vouch for them.
Risk #4: The risk of human error.
Underlying Cause: Negligence and losing company’s client
Risk #5: The risk of having one principal.
Risk #6: No Applicants or referrals that might result to no crew ship attendant.
Risk #7: Accepting unqualified applicants because of shortage of staff may lead to not meeting the
standards of the company.
Risk #8: Inadequate amount of security personnel in the office may result to jeopardize d the
safety of the employees
Risk #9: Applicants who already know someone inside may lead to biased hiring decision.
Risk #10: No Human Resource department may result to negligence of standards and meeting the
needs of the company.
Risk #11: Waiting for the availability of the position might result to the applicant looking for
another job.
Existing Control of the company:

VII. RISK AND CONTROL MATRIX

VIII. RESULTS/ OBSERVATION
IX. CONCLUSIONS
X. RECOMMENDATIONS
XI. ACTION PLAN
XII. ANNEX
Planning
Gathering of Evidence
Audit Program

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