 It is not necessarily rare or even unusual  They accumulate the savings of depositors and

 What makes these industries special? provide housing loans an financing for
 Examples of these ______ as well as ______ to ______ engage
 What are the characteristics of Specialized in ______, ______ and ______.
industries  Promote and expand the rural community by
 Audit Considerations mobilizing savings and extends the rural
community by mobilizing savings and
extending loans and other financial services
to ______ to help with the purchase of
 They perform critical function in the Phil.
______, ______, ______, and other ______
economy
and the ______
 They are responsible for:
 On the other hand, they are composed of
 And conversion of these funds into:
______, ______, ______, ______, ______,
 They finance the ______ which desire to raise and ______.
productive capacity by ______, ______,
 They are not allowed to ______ but may
______, ______, and ______, and ______,
encourage the general public to ______ in
______.
various ______
 It is very important for the ______ and ______
 There are several types of non-bank financial
to continue finding ways to ______ to save
institutions offering a wide variety of services
______ in various financial assets so that
such as ______, ______, ______, ______,
these resources could be ______ and ______
______, ______, ______, ______, ______,
that will finance the ______.
______, ______, ______.
 The Philippine banks are classified into 3
 ______ for term insurances, ______ to pension
types: Accepted domestic deposits and
funds, ______ or ______ in financing
offered checking account services.
companies and pawnshops.
 Had dominated the Philippines’ banking
 Is the independent central monetary authority
industry and had total deposits valued at
of the Phils. That has regulatory and
approximately ______.
supervisory power over banks and non banks.
 ______ perform the function of ______ and
 They supervises the ______.
______, ______ in the form of ______,
 Insurance companies are overseen by ______
______, ______, as well as the ______.
 Investment houses are overseen by ______
 ______ particularly the ______ and ______ are
 The main service of commercial banks are
also allowed to engage in other intermediation
______, and ______.
activities such as ______ (______ and or
______ for other firms)  Universal banks provide ______ and ______
and ______.
 The financial system is composed of 2 general
groups namely.  The most popular banks among customer with
different financial needs because of its wide
 Are allowed to collect savings and time
array of financial services.
deposits to fund loans and also performs the
function of ______ and ______.  As of ______, the value of loans granted by
______ and ______ in the Philippines
 Banking institution include:
amounted to nearly ______. Of these loans,
 Have the largest resources and offer the widest
approximately ______ have been granted for
variety of banking services outside of ______
motor vehicle loans for household
and ______. The other services include:
consumption and approximately ______
 Include ______, ______, ______, and ______
worth of loans granted for production of real
and ______
estate businesses in the country.
 Bank loans that have ______ are generally
considered ______ and can affect the banks
cash flows.
 As of ______, the ratio of nonperforming loans
to total gross loans in the Phil. was almost
______ and has significantly decreased over
the past years.
 The BSP issued the IRR for the ______ that
requires all lenders under BSP supervision to
grant a ______ or ______ without imposing
______, ______ or ______.
 BSP also relaxed the ______ for both over the
counter and electronic or online transactions.
 In expressing an opinion on the banks FS, the
auditor:
 The financial statements of banks are prepared
in the context of the ______and ______ and
______ influenced by such regulations.
 The BSP ______ may differ materially from
______.
 Banks are under attack, being subject to
______, ______, ______, and ______.
 As stated in ______ “______”, internal audit
provides ______ in promoting an ______ and
the ______.
 What are the Audit and Accounting
Considerations for banks
 Bank and Financial institution TRENDS:
 Most banks do not include ______
 They operate with very high leverage meaning
______
 is the risk of financial loss to the Group if a
counterparty to a financial instrument fails to
meet its contractual obligation
 is the current and prospective risk to earnings
or capital arising from the inability to meet its
obligations when they become due
 is the possibility of loss to future earnings, fair
values or future cash flows that may result
from changes in the price of a financial
instrument.
 Is the probability of loss to earnings or capital
arising from changes in foreign exchange
rates
 A practice whereby insurers transfer
portion of their risk portfolios to other
parties by some form of agreement.
 Financial obligations that an insurance
company owes to policyholders,
beneficiaries, and other parties.
 the ratio of underwriting expenses to
earned premiums.
 measures the profitability of an
insurance company by comparing net
income to shareholders' equity.
 compares current assets to current
liabilities, indicating the insurer’s short-
term liquidity.
 measures the proportion of debt used to
finance the insurer’s operations
compared to shareholders' equity.
 Formula of Current Ratio
 Formula of Acid test ratio
 Formula of Working Capital
 Formula of Debt ratio
 Formula of Equity ratio
 Formula of Accounts receivable
Turnover
 Formula of Average Collection Period
 Formula of gross profit margin
 Formula of Operating Profit Margin
 Formula of net profit margin
 Formula of Return on Investment on
Asset
 Formula of Return on Equity
 Formula of degree of operating leverage
 Formula of degree of financial leverage
1. the risk that a customer or counterparty
will not settle an obligation for full value,
either when due or at any time
thereafter. Credit risk, particularly from
commercial lending, may be considered
the most important risk in banking
operations. Credit risk arises from
lending to individuals, companies, banks
and governments. It also exists in assets
other than loans, such as investments,
balances due from other banks and in
off-balance sheet commitments. Credit
risk also includes country risk, transfer
risk, replacement risk and settlement
risk. Credit risk –
2. the risk of loss arising from future
movements in the exchange rates
applicable to foreign currency assets,
liabilities, rights and obligations.
Currency risk –
3. the risk of loss arising from the changes
in the bank’s ability to sell or dispose of
an asset. Liquidity risk –
4. the risk associated with the
imperfections and subjectivity of
valuation models used to determine the
values of assets or liabilities. Modeling
risk –
5. the risk of direct or indirect loss resulting
from inadequate or failed internal
processes, people and systems or from
external events. Operational risk –
6. the risk of loss arising from adverse
changes in market prices, including
interest rates, foreign exchange rates,
equity and commodity prices and from
movements in the market prices of
investments. Price risk –
7. the risk of loss arising when a
counterparty’s obligation is not
denominated in the counterparty’s home
currency. The counterparty may be
unable to obtain the currency of the
obligation irrespective of the
counterparty’s particular financial
condition. Transfer
8. the risk of loss arising from failure to
comply with regulatory or legal
requirements in the relevant jurisdiction
in which the bank operates. It also
includes any loss that could arise from
changes in regulatory requirements.
Regulatory risk –
9. the risk of foreign customers and
counterparties failing to settle their
obligations because of economic,
political and social factors of the
counterparty’s home country and
external to the customer or counterparty
Country risk –
10. (sometimes called performance risk) the
risk of failure of a customer or
counterparty to perform the terms of a
contract. This failure creates the need to
replace the failed transaction with
another at the current market price. This
may result in a loss to the bank
equivalent to the difference between the
contract price and the current market
price. Replacement risk –
11. the risk of losing business because of
negative public opinion and
consequential damage to the bank’s
reputation arising from failure to properly
manage some of the above risks, or
from involvement in improper or illegal
activities by the bank or its senior
management, such as money
laundering or attempts to cover up
losses. Reputational risk –
12. the risk that one side of a transaction will
be settled without value being received
from the customer or counterparty. This
will generally result in the loss to the
 bank of the full principal amount.
Settlement risk –
13. the risk of loss arising from the
possibility of the bank not having
sufficient funds to meet its obligations,
or from the bank’s inability to access
capital markets to raise required funds.
Solvency risk –
14. the risk of loss arising from factors such
as failure to maintain safe custody or
negligence in the management of assets
on behalf of other parties. Fiduciary risk
– deduction and other approved sources of
15. the risk that contracts are documented
incorrectly or are not legally enforceable
in the relevant jurisdiction in which the
contracts are to be enforced or where
the counterparties operate. This can
include the risk that assets will turn out
to be worth lesser, liabilities will turn out
to be greater than expected because of
inadequate or incorrect legal advice or
documentation. In addition, existing laws
may fail to resolve legal issues involving
a bank; a court case involving a
particular bank may have wider
implications for the banking business
and involve costs to it and many or all
other banks; and laws affecting banks or
other commercial enterprises may
change. Banks are particularly
susceptible to legal risks when entering
into new types of transactions and when
the legal right of a counterparty to enter
into a transaction is not established.
Legal and documentary risk –
16. the risk that a movement in interest
rates would have an adverse effect on
the value of assets and liabilities or
would affect interest cash flows. Interest
rate risk –
Under the General Banking Law of 2000
(GBL), a ___________ is a commercial bank
with the additional authority to exercise the
powers of an investment house and invest in
non-allied enterprises.
refers to a banking business with objectives
and operations that do not involve interest
(riba) as prohibited by the Shari’ah and which
conducts its business transactions in
accordance with Shari’ah principles.  Shari’ah
refers to the practical divine law deduced from
its legitimate sources: the Qur’an, Sunnah,
consensus of Muslim scholars, analogical
Islamic law.  Financial contracts and servcies
are founded on risk sharing rather than
speculation in compliance with Shari’ah
principles.
The business of __________ includes
accepting drafts and issuing letters of credit;
discounting and negotiating promissory notes,
drafts, bills of exchange, and other evidences
of debt; accepting or creating demand
deposits; receiving other types of deposits and
deposit substitutes; buying and selling foreign
exchange and gold or silver bullion; acquiring
marketable bonds and other debt securities;
and extending credit, subject to such rules as
the Monetary Board of the BSP may
promulgate.
These include savings and mortgage banks,
private development banks, and stock savings
and loans associations organized under
existing laws, and any banking corporation that
may be organized for the following purposes:
These are organized for the purpose of
providing adequate credit facilities to farmers
and merchants, or to cooperatives of such
farmers and merchants and in general, the
people of the rural communities.
One organized for the primary purpose of
providing a wide range of financial services to
cooperatives and their members