CONSIDERING THE RISKS OF FRAUD
Internal controls related to accounting system are
POLICIES AND PROCEDURES TO
PREVENT MONEY LAUNDERING
• A requirement to obtain customer identification
(”know your client” of KYC procedures).
• Staff screening.
• A requirement to know the purpose for which an
account is to be used.
• The maintenance of transaction records.
• The reporting to the authorities of suspicious
transactions or of all transactions of a particular type,
for example, cash transactions over a certain
amount.
• The education of staff to assist them in identifying
suspicious transactions.
DEVELOPMENT OF AN OVERALL AUDIT
PLAN
• The complexity of transactions undertaken.
• The extent to which any core activities are provided
by service organizations.
• Contingent liabilities and off balance sheet items.
• Regulatory considerations
• The extent of IT and other systems
• Expected assessment of inherent and control risks
• The work of internal auditing
• Materiality
• Management’s representations
• Involvement of other auditors
• Coordinating the work to be performed
• Related party transactions
• Going concern considerations
INTERNAL CONTROL CONSIDERATIONS
concerned with achieving objectives such as the
following:
• Transactions are executed in accordance with
management’s general or specific authorization.
• All transactions and other events are promptly
recorded at the correct amount, in the appropriate
accounts and in the proper accounting period so as
to permit preparation of financial statements in
accordance with accepted principles generally
accepted in the PH.
• Access to assets is permitted only in accordance with
management’s authorization.
• Recorded assets are compared with the existing
assets at reasonable intervals and appropriate action
is taken regarding any differences.
INEHRENT LIMITATIONS OF INTERNAL
CONTROL
• The assessed levels of inherent and control risks
cannot be sufficiently low to eliminate the need for
the auditor to perform any substantive procedures.
• Irrespective of the assessed levels of inherent and
control risks, the auditor performs some substantive
procedures for material account balances and classes
of transactions.
ENVIRONMENTAL FACTORS
• The organizational structure of the bank and the
manner in which it provides for the delegation of
authority and responsibilities.
• The quality of management supervision.
• The extent and effectiveness of internal auditing.
• The extent and effectiveness of the risk management
and compliance systems.
• The skills, competence, and integrity of key
personnel.
PERFORMING SUBSTANTIVE
PROCEDURES
• The auditor determines the nature, timing, and
extent of the substantive tests.
• Results of internal control considerations.
• Consider significant risks.
• Emphasis on test of completeness.
AUDIT EVIDENCE AND PROCEDURES
To address the assertions of management, the auditor
may perform the following procedures:
• Inspection
• Observation
• Inquiry and confirmation
• Computation
• Analytical procedures

AUDIT EVIDENCE AND PROCEDURES

• Physical existence of material negotiable assets.
• Obtain understanding of terms and conditions of
agreements.
• Inspect:
- Securities
- Loan agreements
- Collaterals
- Commitment agreements
• Consider assets held on behalf of third parties

INQUIRY AND CONFIRMATION

Examples of areas for which the auditor may use
confirmation are:

• Collateral
• Verifying or obtaining confirmation of, the value of
assets and liabilities that are not traded or are traded
only on the over-the-counter markets.

COMPUTATION
• Check mathematical accuracy of schedules provided
by client.
• Checking consistent application of valuation models.
• Use of computer assisted tools and techniques
(CAATS).

ANALYTICAL PROCEDURES