Definition of Auditing

visitING I. Definitions * visiting, in a general sense, is a arrogant and unfavourable paygrade of the monetary position, operating systems, and results of operation of an canvased entity. * A systematic process of sustaining and evaluating evidence regarding assertions ab disclose economical actions and events to ascertain degree of correspondence amid those assertions and handed criteria and communicating the results to interested user. The analytic and systematic interrogation and verification of monetary transactions, operation, accounts, and make-ups of any(prenominal) political relation self-assurance for the invention of determining the accuracy, integrity, and authenticity, and satisfying the requirements of efficacious philosophy, rules, and regulations. State canvasion relies on the provisions of law its ascendence and limitations are prescribed by law and it is occupyed in accordance with law. The 1987 Constitution and think laws set the scope, powers, manipulations, and jurisdiction of government take stocking. examineing in Public AdministrationState visiting (along with business relationship) may be considered as the chequer and duty component of fiscal government activity cycle. * As a accountant mechanism, studying ensures the proper and lawful utilization and focal point of fiscal resources in accordance with vocalise monetary management principles, write up and scrutinizeing standards, and relevant laws and regulations. * As an accountability component, it seeks to ensure that universal officials entrusted with functions and resources are made responsible for the achievement and results of operation of their office. In the Fiscal administration cycle, take stocking likewise provides inputs to the next phase which is planning. analyze reports contain vital information on the results of operation of agencies and recommendations to improve their functioning. Auditing and method of accounting Ac counting * Accounting is a discipline which provides pecuniary and other information essential to the effectual mete out and evaluation of the activities of an organization. Is concerned with constructing from a mass of transactions entered into by a firm or style during a certain period, pecuniary verbalisements, results of transactions (in ground of profit and loss), and current pecuniary position, by the interpretation, summarization, and compilation of information. Auditing * Is primarily concerned with analyzing whether or not the financial enunciatements contendably hold still for the result of the firms trading operations. II. TYPES OF AUDITING A. clock Pre-audit The attendee go against intos a transaction (a attempt for janitorial operate, for example) even before such run are rendered. The hearer too gives his doubtful approval for payment of the services by the billet. * Post-audit The auditor reviews and approves the transaction after the service s have been rendered and payment has been made In both cases, the review may dwell of the following * Determining whether all germane(predicate) laws, rules and regulations have been observed in the transaction. physical inspection of supplies or equipment. * Checking whether all indispensable documents are submitted and properly accomplished. * Determining whether the call for authority or approval has been secured. * Checking numeric accuracy. B. Organizational Status of Auditor * ingrained Audit * The versed auditor undertakes an analytic view of balances disclosed in the financial statements to come up that the information contained in the statements is reconciled internally, with budget accounts, and with those of prior years.He may also insist, in an advisory capacity, in adopting staple fiber organizational regulations, preparing rationalization proposals, and recommending measures to improve the geomorphological and procedural systems of the elbow room. * In sm all agencies, the internal audit is usually conducted by accounting or reserveler units * In great(p) organization, it is done by a give out internal audit staff which reports outright to the head of sureness, the finance office, or merged board of directors, in the case of corporations. * immaterial Audit * Is performed by auditor remote to or supreme of the audited organization. In the Filipino state audit context, it is the audit performed by the COA auditors. * In commercial audit, it is conducted by independent certified everyday accountants on hidden business organizations primarily to express an faith on the fairness, consistency, and conformity of financial statements to generally accepted accounting principles, for submission to management, government regulatory agencies, stockholders, and other interested parties. infra the Constitution, orthogonal audit by the COA cannot be replaced by internal audit (or any private external audit).While an internal auditor may conduct audit of his situation (or private independent auditors perform external audit), only COA auditor is authorized to conduct government audit. External audit as performed by the COA Includes a comprehensive review of an agencys internal audit services, as part of its audit function of evaluating of agency internal defend systems. C. Audit Scope * Fiscal Audit monetary and Compliance Fiscal audit is the tralatitious financial audit in government. It is the cabal of financial audit and compliance audits. financial audit of government transactions is conducted to determine whether Financial operations are conducted in accordance with applicable laws, rules and regulations, and accounting and auditing standards. * Whether an agency financial statement presents plum and accurately the financial position of the agency in accordance with generally accepted accounting principles. The auditor determines whether the agency is maintaining in force(p) control over revenues, e xpenditures, assets and liabilities, whether financial statements are fairly presented, and if financial reports contain accurate, reliable and reusable information.Compliance audit, on the other hand, is an evaluation of the limit to which the agency has complied with disposed(p) laws, policies, and rules, and regulations in the conduct of its operation. The auditor tests the agencys financial transactions and particularized program, function or activity to determine their legality or regularity. He may for instance check whether the agency has not violated pertinent law in incurring profound unrecorded liabilities. * Performance Audit Efficiency, Economy, EffectivenessA movement audit is a constructive interrogative and evaluation of the financial and operational surgery of an organization, program, function or activity with the inclination of identifying opportunities for grater economy, qualification, and effectiveness in agency. Economy and faculty audits determine * Whether the agency is managing and utilizing its resources (personnel, property, funds) economically and expeditiously * The causes of inefficiencies or uneconomical practices * Whether the agency has complied with the laws and regulations concerning matters of efficiency and economyEffectiveness or program results audit determines. * Whether the coveted results or benefits established by the law-makers or other * Whether the agency has considered alternatives that efficacy lead to desired results at degrade cost Special/Other Audits * pension Audit (in the Constitution, PD1445) * Levy Audit (in the Constitution, PD1445) III. THE AUDIT PROCESS A. The Audit Cycle The state audit cycle consist of septet phases * chassis I. Preliminary stare of the agency or audited entity The preliminary lot is conducted to stimulate a working knowledge of the audited agency and its legal, policy, and administrative environment.The auditor gathers general terra firma information on the a gency and its operations after which he defines the scopes of his audit. The auditor may perform the following activities * Interviews with agency officials to apply general information * Obtain prefatorial documents on agency activities, objectives, policies, standards, procedure, etc. * physiologic inspection of agency facilities, office, etc. Ideally, the survey should provide information on * Laws, policies, and rules, and regulations applicable to the agency * Brief history and goals or purpose of the agency Agency organization, functions, staff, regional offices, and operating systems * Nature, investments and location of agency assets * worldwide objectives and policies * Operating methods and standards used in beat or evaluating agency operations and performance * Description of major, alive problems * Copies of internal agency reports, especially internal audit reports * configuration II. look into of Legal and Policy simulation The information gathered from the pr eliminary survey are reviewed in order to obtain a general knowledge of the code and policies applicable to agency objectives, policies, programs, and operating standards. shapes III. Review and valuation of Internal Control administration In this phase, the auditor reviews the procedures and practices actually utilise by the agency in touch its transactions in order to establish * The actual means and methods in carrying out operations * Appropriateness and utility of conglomerate steps in the processes * The results of operations or transactions relative to agency objectives, legal and policy requirements, and standards * The effectiveness of the internal control system and its various componentsThe review and evaluation of the agencys internal control system is to * Identify major critical areas that would warrant more detailed mental testing * To determine the type of test to be used in the closer examination of such areas later on * anatomy IV In-depth Examination of Problem Areas, Data-gatherings, Analysis, and Evaluation In this phase, the auditor concentrates on audit findings on the problem areas in foothold of * Compliance with or adherence to legal and policy mandate, prescriptions, and requirements * Goals and objectives-achievement Operational efficiency, economy, and effectiveness in the use of human, material, and financial resources and * Propriety, accuracy, reliability, and usefulness of financial records and reports, including the effectiveness of control over the latter(prenominal) In-depth examination may involve reviewing agency reports, books, files, records, and such other relevant documents and analyzing, evaluating, verify and confirming their content through enquiries, inspection, or observation.Where it becomes impossible or impractical to examine all operations and transactions, the auditor conducts reviews and tests on a selective basis, based on his professional judgment and on the sufficiency of internal control sys tems. The auditor develops the actual and documentary evidence to support his audit findings, conclusions, and recommendations. He analyzes the data gathered and determines the causes and effects of the problems, and their significance to agency operations. He also determines whether the agency needs to take tonic action and recommend the appropriate solutions.The auditor must alert agency officials on any deficiencies discovered during audit to enable management to take immediate disciplinal action. * Phase V. Preparation and Presentation of selective service Report A draft audit report is prepared based on the findings and recommendations formulated in the previous phase. The report is then presented to agency officials for their review and comments. * Phase VI. Finalization of Audit Report after the meeting, the auditor final examizes the audit report.In writing the final report, he has to observe certain principles or standards of report writing. The scope of the audit shoul d be stated distinctly and concisely in the report and any limitations should be explicitly mentioned Findings and conclusions should be adequately supported by factual documentary evidence. The recommendations should be clearly identified and should be realistic. Previous audit recommendations which have been unimplemented and the agencys reason for such should also be noted. * Phase VII. Follow-up on the Implementation of Audit RecommendationsAudit recommendations, such as suggested improvements, proposed adjustments in the accounts, field or discontinuance of malpractices, solution to existing problems, etc. should be followed-up B. world(a) Objectives, Principles and Standards * General Objectives There are many objectives of state audit and all these relate to the thought of populace accountability. Public accountability is primal to government audit as it is anchored on the tenet that public officials, as stewards of public office must give a full and public accounting o f the direction with which they utilize the powers and expend the resources entrusted to them. Establishing accountability for financial material and human resources of an agency * Establishing accountability for compliance with applicable laws. Policies, rules and regulations * The efficient, economical and effective operations of the agency * Specific Objectives The specific objectives of state auditing also include the following, as enunciated in the Lima Declaration of Guidelines on Auditing Precepts * Proper and effective use of public funds * Development of sound financial management Orderly execution of administrative activities * Communication of information to public authorities and the public through publication of audit reports * Audit Principles and Standards * Audit principles and standards serve to ask the auditor in conducting his audit with integrity, objectivity, independence, and efficiency * Audit standards deal with the quality with which the audit is performe d based on the professional and respectable qualifications of the auditor and his exercise of judgment in the course of audit.