INTRODUCTION TO INTRODUCTION TO COOPERATIVE AUDITINGCOOPERATIVE AUDITING

Prepared by:Prepared by:EFFERSON P. RAMIREZEFFERSON P. RAMIREZ

Senior AuditorSenior Auditor

AuditingA critical and systematic examination of a client’s: Internal control system Accounting transaction, records and financial

statements already prepared by management and staff and other legal records and documents

Management performance

Basic Principles Auditing is a systematic and independent examination of

evidences (books of accounts, internal control systems, risk management and others) to enable expression of opinion as to the fairness of an entity’s financial statements in accordance with Philippine Accounting Standards.

It is conducted periodically It should be documented for review purposes for future

improvement

Who shall conduct the audit? Any competent persons not having direct

responsibility of the entity being audited.

Objectives To enable expression of opinion on the

fairness of the financial statements in accordance with the new Philippine Accounting Standards

Other Objectives An audit is conducted to find out whether an

organization has set of procedures and systems in place to manage risks.

1. A requirement for any business management system;

2. To verify whether risk identification systems and mitigation procedures are working;

3. Find opportunities for improvement and provide management with information for continuous improvement on risks mitigation.

Remember The audit is intended to find improvement for

the organization NOT necessarily to FIND FAULT in the way people are doing things.

Kinds of AuditAs to who will perform the audit :Internal AuditExternal Audit

As to what auditFinancial auditManagement audit

As to approach of the audit :Traditional AuditRisk Based Audit

In any kind of audit, the management and auditor would have to prepare schedules and checklist to do a site or document audit or both to get a complete picture of the organization’s state of affair.

Scope of Financial Audit Examination of the books of accounts of the

client (Cash Receipts Journal, Sales Book, General Journal, Subsidiary Ledger);

And all documents and evidences supporting the entries in the books of accounts for the year under audit.

Value Added Audit through Risk Based Approach

For now we shall at least help to start awareness and introduce management of risks on aspects like good governance, financing, marketing, production, personnel. office management and accounting controls and practices.

On Good Governance The Auditor must look into the client’s goals,

objectives, plans, programs, policies implementation, efficiency, effectiveness fairness, accountability, transparency of the board of directors, committees, and management staff and internal controls adopted by the client.

On Risk Management The Auditor must assess and help mitigate

risk management system in 5 areas:• Strategic Risk• Credit Risk• Market Risk• Liquidity Risk• Operational Risk

On FinancingThe capital build-up of the

client, its ability to make payment for prompt payables (liquidity), and with financing institutions (solvency).

On Marketing

• The ability of the client to maximize sales/services with the least amount of money involved through fast turn-over of goods/services shall be assessed.

On Production• The ability of the client to maximize

utilization of existing manpower, materials, capital, facilities, and machines in the production of goods and services shall be evaluated.

On Personnel Management• Policies and recruitment and selection,

remuneration, staff development and performance, compliance with labor welfare and laws must be evaluated.

On the Accounting Aspect• The auditor must look into how the

management has effectively utilized the financial report and decision-making. These can be determined in the policies, plans and programs, budget, and results of operations of the client.

Frequency of Auditing• The auditor shall have continuous audit on the transactions

of the client, (based on agreed upon schedules);

• Surprise cash count, confirmation of receivables and payables, pre-audit of disbursement voucher, inspection of purchases, and observation of inventory taking, physical verification of properties, plants ( fixed assets) shall be done accordingly;

• Other procedures may also be conducted.

Frequency of Audit

• Other procedures may also be conducted from time to time for continuing audit engagements.

Review of Audit Committee Report

• The audit committee shall submit the audit report to the BOD at least regularly. The external auditors should also review recommendations whether acted upon by management.

Year end Audit• The Philippine Cooperative Code of 2008

(RA9520) requires cooperative to be audited by accredited external auditor.

• BSP and SEC also require Banks and SEC registered entities to be audited by Accredited Auditors

Some competencies required for the auditors

Adequate technical training and proficiency in accounting;

Familiarity with business and legal nature of the cooperatives, banks, NGOs and other clients;

Deep sense of responsibilities;Good moral character

Qualifications…At least with mathematical ability; Capable of self learning at work and on field

work;With at least fair analytical approach;At least acceptable office and work problem

solving skills.

Qualifications… Willingness and ability to serve the Clients Willingness to continually learn Willingness and ability to be a team player Willingness to assume responsibilities and challenges Willingness to think creatively Willingness to align personal philosophy and

objectives with your office nature of services.

THANKS & GOD BLESS!!!