INTRODUCTION TO COOPERATIVE AUDITING

Auditing is a 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 improvement4. 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 a
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 Audit
As to who will perform the As to approach of the audit :
 Traditional Audit
 Internal Audit
 Risk Based Audit
 External Audit
As to what audit
 Financial audit
 Management audit
In any kind of audit, the management and auditor would have to prepare schedules and checklist to do a site or
document auditor 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 Financing
The 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.