Client: Daragang Magayon Enterprises

Engagement: Financial Statement Audit

Subject: Audit Program - Prepaid Expenses
Audit Period: Year Ended December 31, 2021
Activity: Agree Procedures
Working Paper Reference: D.01

Financial Statement Assertions

C. Classification
A. Accuracy
CO. Completeness
E/O. Existence/Occurence
RO. Rights and Obligations
V. Valuation
PD. Presentation and Disclosure
CU. Cut-Off

Procedures Relevant Assertions

1. Lead Schedule C A CO E/O RO V PD CU

Obtain or prepare lead schedule and perform the following procedures:

a. Test of mathematical accuracy of the lead schedule /
b. Agree lead schedule to working trial balance and prior year audited balance /

2. Accounting Policies C A CO E/0 RO V PD CU

Confirm that the accounting policies applied to prepaid expenses comply with PFRS for SME. /
Particularly Section 2, 3 and 29 of PFRS for SME.

3. Substantive Procedues C A CO E/O RO V PD CU

Test of Details
 Amortization
1. Recompute amortization and compare with amortized and unamortized amount. /
2. Investigate differences. /

4. Presentation and Disclosure C A CO E/O RO V PD CU

Determine that all necessary disclosures regarding prepaid expenses have been made
and presented in accordance with PFRS for SME. /

5. Additional Tests C A CO E/O RO V PD CU

Consider whether additional tests are required to achieve the audit / /
objectives (specify)
Sign-off: Initials Date
Engagement Partner MAS XX 2022
Engagement Reviewer CMA XX 2022

Results of Procedure WP Reference Initials of Preparer and Date

Lead schedule is mathematically accurate D.02 RAO-XX, 2022

Lead schedule agrees D.02 RAO-XX, 2022

The company complies. D.03 MAS-XX, 2022

Recomputed and compared D.04 RAO-XX, 2022
Differences are investigated. D.04 RAO-XX, 2022

Disclsures comply with PFRSfor SME D.05 MAS- XX, 2022

No additional tests required. MAS- XX, 2022

Client: Daragang Magayon Enterprises
Engagement: Financial Statement Audit
Subject: Audit Program - Prepaid expenses
Audit Period: Year Ended December 31, 2021
Activity: Lead Schedule
Working Paper Reference: D.02

Financial Statement Assertion:

Accuracy

Audit Objectives:
To check if the lead schedule is mathematicaly accurate

Audit Procedures Performed:

Obtained the detailed listing of receivables and performed the following:
1. Tested the mathematical accuracy of the lead schedule
2. Agreed to the working trial balance and prior year audited balance.

Performance Materiality: 15,000

Clearly Trivial: 5,000

Results of Procedures Performed:

Accounts Preliminary balance Net Caje Net Paje 12.31.2021 12.31.2020

Advances to suppliers 2,500,000 - - 2,500,000 1,500,000
Prepaid rent 465,000 - -8,000 457,000 450,000
Prepaid taxes 55,000 - - 55,000 23,000
Security deposits 20,000 - - 20,000 10,000
Prepaid Insurance 3,500,000 - -250,000 3,250,000 1,000,000
Total 6,540,000 0 -258,000 6,282,000 2,983,000
Conclusion:
Lead schedule is mathematicaly accurate.
Lead schedule agrees with the working trial balance and prior year audited balance.
Prepared by: RAO Date: XX 2022
Reviewed by: MAS Date: XX 2022

WP Reference

D.04

D.04
Client: Daragang Magayon Enterprises
Engagement: Financial Statement Audit
Subject: Audit Program - Prepaid expenses
Audit Period: Year Ended December 31, 2021
Activity: Test of Compliance
Working Paper Reference: D.03

Financial Statement Assertion:

Presentation and Disclosure

Audit Objectives:
Ensure compliance of accounting policies regarding prepaid expenses with PFRS for SME, particularly Section 2, 3, and 29.

Audit Procedures Performed:

1. Inquired about the accounting policy used by the Company for Prepaid Expenses
2. Ensured compliance with the Company's policy for Prepaid Expenses to standards.
d. Document if there's any reason for noncompliance.

Results of Procedures Performe

Company Accounting Policy Requirement of PFRS for SME Remarks

Initial Recognition
An item shall be recognized (i.e., incorporated in the financial statements) if it Complied
meets the definition of an asset, liability, income or expense and satisfies the
following criteria: a) it is probable (i.e., more likely than not) that any future
economic benefit associated with the item will flow to or from the entity;
and b) the item has a cost or value that can be measured reliably

Classification An entity shall classify an asset as current when: a)it expects to realize Complied
the asset, or intends to sell or consume it, in the entity’s normal operating cycle;
b) it holds the asset primarily for the purpose of trading; c) it expects to realize
the asset within twelve months after the reporting date; or d) the asset is cash or
a cash equivalent, unless it is restricted from being exchanged or used to
 settle a liability for at least twelve months after the reporting date.
All deferred taxes are classified as noncurrent. (Section 29.)

Conclusion:
The accounting policies applied by the company to Prepaid Expenses comply with
PFRS for SME.
Prepared by: MAS Date: XX 2022
Reviewed by: CMA Date: XX 2022
Client: Daragang Magayon Enterprises
Engagement: Financial Statement Audit
Subject: Audit Program - Prepaid expenses
Audit Period: Year Ended December 31, 2021
Activity: Amortization
Working Paper Reference: D.04

Financial Statement Assertion:

Valuation

Audit Objectives:
Determine propriety of balances and amortization of prepaid expenses.

Audit Procedures Performed:

1. Recompute amortization and compare with amortized and unamortized amount.
2. Invesigate differences.

Performance Materiality: 15,000

Clearly Trivial: 5,000

Results of Procedures Performed:

Period
Particulars to from No. of months
1. Prepaid rent xx/xx/xx xx/xx/xx xx
2. Prepaid rent xx/xx/xx xx/xx/xx xx
3. Prepaid rent xx/xx/xx xx/xx/xx xx
4. Prepaid rent xx/xx/xx xx/xx/xx xx
5.. Prepaid rent xx/xx/xx xx/xx/xx xx
1.Prepaid Insurance xx/xx/xx xx/xx/xx xx

Remarks

a. Differences result from unbooked expired portion of rent at year end. The following adjusting entries are proposed:

12-31 Rent Expense

Prepaid rent
To expense expired portion of rent, ___ Contract

12-31 Rent Expense

Prepaid rent
To expense expired portion of rent, ___ Contract
 12-31 Rent Expense
Prepaid rent
To expense expired portion of rent, ___ Contract

12-31 Rent Expense

Prepaid rent
To expense expired portion of rent, ___ Contract

b. Difference results from unbooked annual amortization of insurance. The following adjusting entry is proposed.

12-31 Insurance Expense

Prepaid Insurance
To expense expired portion of insurance.

Conclusion:
Balances and amortization of prepaid expenses are proper.
 Prepared by: RAO Date:
Reviewed by: MAS Date:
d expenses

Expense Prepaid
Premium/rent pAmortization per No. of months Amount No. of months Amount
xx xx xx xx xx xx
xx xx xx xx xx xx
xx xx xx xx xx xx
xx xx xx xx xx xx
xx xx xx xx xx xx
xx xx xx xx xx xx

ng entries are proposed:

2,000
2,000

2,000
2,000
 2,000
2,000

2,000
2,000

g entry is proposed.

250,000
250,000
 XX 2022
XX 2022

Prepaid
Balance per bo Diffrence Remarks
xx 2,000
xx 2,000
xx 2,000
xx 2,000 (a)
xx -
xx 250,000 (b)
Client: Daragang Magayon Enterprises
Engagement: Financial Statement Audit
Subject: Audit Program - Prepaid expenses
Audit Period: Year Ended December 31, 2021
Activity: Presentation and Disclosure
Working Paper Reference: D.05

Financial Statement Assertion:

Presentation and Disclosure

Audit Objectives:
To confirm that all necessary disclosures regarding prepaid expenses have been made and that information is appropriately presented and described.

Audit Procedures Performed:

Determined that all necessary disclosures regarding prepaid expenses have been made and presented in accordance with PFRS for SME.

Results of Procedures Performed:

Section of PFRS for SME Dislosure requirement Remarks
Section 29.31.c The amount of deferred tax expense relating to the origination and reversal of temporary diffrences. Complied

The amount of deferred tax liabilities, defrerred tax assets, and valuation allowances at the end of the Complied
Section 29.32.d.i reporting period.

Presentation

Current Assets
Prepaid expenses ₱6,227,000

Noncurrent Assets
Prepaid tax ₱55,000

Disclosures
Prepaid Expenses is composed of the following

Advances to suppliers ₱2,500,000

Prepaid rent 457,000
Security deposits 20,000
Prepaid Insurance 3,250,000
Prepaid expenses ₱6,227,000

Income Tax

Differences in tax paid and tax expense presented resulted to prepaid taxes of P55,000 at December 31, 2021. An amount of P23,000 is expensed from the reversal of prior period tax

Conclusion:
All necessary disclosures regarding prepaid expenses have been made, appropriately presented and described.
 Prepared by: MAS Date: XX 2022
Reviewed by: CMA Date: XX 2022

Remarks
Complied

Complied
eversal of prior period tax differences.