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CORPORATE GOVERNANCE, ETHICS & SOCIAL RESPONSIBILITY. AUDIT, CONTROLS AND COMPLIANCE. Distinction Between Auditing and Accounting Accounting Recording, classifying, and summarizing information for decision making by management and other users Auditing - PowerPoint PPT Presentation
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CORPORATE GOVERNANCE,
ETHICS & SOCIAL
RESPONSIBILITY
04/21/23 by: JAYNARD S. SOLANTE
04/21/23 by: JAYNARD S. SOLANTE
AUDIT, CONTROLS
AND COMPLIANCE
04/21/23 by: JAYNARD S. SOLANTE
Distinction Between Auditing and Accounting
Accounting Recording, classifying, and summarizing information for decision making by management and other users
Auditing•Concerned with verifying whether recorded transactions properly reflect the economic events the occurred during the accounting period
•Since accounting information is properly recorded, auditor must thoroughly understand these rules
•Accumulates and interprets audit evidence
04/21/23 by: JAYNARD S. SOLANTE
Distinction Between Internal and External Auditing
Internal Auditing An organization control feature, which measure and evaluates the effectiveness of other organized controls. Internal auditors conduct operational audits and are compensated by their employer organizations.
External AuditingIn contrast independent auditing done by CPA’s is a society control external, financial information users. External auditors and audit fees are paid by the organization audited.
04/21/23 by: JAYNARD S. SOLANTE
Auditing
External Auditing:
- the examination of financial statements by the independent auditor for the purpose of expressing opinion on the fairness with which they present financial position, results of operations, and changes in financial position in conformity with generally accepted accounting principles.
04/21/23 by: JAYNARD S. SOLANTE
Auditing
Internal Auditing:
- an independent appraisal activity within an organization for the review of the operations as a service to management.
F TUENTE RIANGLER E A L T Y D E V E L O P M E N T
CORPORATE AUDIT
DEPARTMENT
04/21/23 CORPORATE AUDIT DEPARTMENT 7
AUDIT DIRECTOR
HOTELS & FTRDC
TEAMLEADER
FINANCIAL AUDIT TEAMLEADER
SPECIAL SERVICES TEAM
SYSTEMS AUDIT TEAM
MANILA AUDIT TEAMLEADER
MOTELS , FSL, VITAL-C, MSBC TEAMLEADER
REVENUE AUDIT STAFF INTERNAL AUDIT STAFF
04/21/23 CORPORATE AUDIT DEPARTMENT 8
REVENUE AUDIT MANAGER
INTERNAL AUDIT MANAGER
ORGANIZATIONAL STRUCTURE
IT AUDIT TEAM
04/21/23 CORPORATE AUDIT DEPARTMENT 9
BS - ACCOUNTANCY
BSC-MANAGEMENT ACCOUNTING
BS – COMPUTER ENGINEERING
BS - INFORMATION TECHNOLOGY BS – COMPUTER SCIENCE
BS – TOURISM / HRM
BS – INDUSTRIAL ENGINEERING
General Responsibilities:
• Revenue Audit Section:Responsible in ensuring that the revenue of the SBU is accounted for.
• Internal Audit Section:Performs Internal Audit functions of the Company in accordance with the instructions and Audit Program Guides provided by the Corporate Audit Officers that would cover Operations, Financial, Compliance, Systems, IT and Risk-based audits.
04/21/23 CORPORATE AUDIT DEPARTMENT 10
04/21/23 by: JAYNARD S. SOLANTE
04/21/23 by: JAYNARD S. SOLANTE
STEPS IN CONDUCTING AUDIT
04/21/23 by: JAYNARD S. SOLANTE
OPERATIONS AUDITING
Is a systematic process of evaluating an organization’s effectiveness, efficiency and economy of operation under management’s control and reporting to appropriate persons the results of the evaluation along with recommendations for improvements.
04/21/23 by: JAYNARD S. SOLANTE
OPERATIONAL AUDIT
The general objective of the operational audit is “to assist all members of management in the effective analysis, appraisals, recommendations and pertinent comments concerning the activities reviewed” in such matters as: 1. The adequacy of the control structure for which the operating department is responsible. 2. Departmental control over its operations in relation to company policies, other departments, requirements of departmental management, and financial and accounting matters.
04/21/23 by: JAYNARD S. SOLANTE
OPERATIONAL AUDIT
The underlying concept is that wherever we audit, and whether we use financial or operating records as basis, we audit from a management or businessman’s standpoint – the effect of activities on the company’s position – and not simply as verifiers of account, accuracy & propriety.
Objectivity is “representing things as they are, unbiased by opinions or habits of thought”.
The audit of any department or function comprised four basic steps such as familiarization, verification, evaluation and reporting recommendations
A customer arrives
Front Desk
Playing Badminton?
Yes
No
Hosted by member?
Yes
No
Pay for Day Card only.
Gallery Restaurant
Service Desk
Purchase service, claim
consumable, submit Day
Card
Receive Service Pass
Enjoy service
Pay addl bill & get Exit
Pass at end of service
Present Exit Pass
Exit (End)
Member?
Yes
No
Swipe card
Pay Visiting Player Card
Pay Guest Player Card
Submit VPC
Submit GPC
Playing Badminton?
No
Show ID card
Yes
submit ID card
Service Desk
Get E-pass & Badminton
Service Pass
Locker room
Laundry Station
Submit SP, claim towel
Dress up
E-pass slot
Put E-pass in slot
Service Desk
Play Badminton
Finish Badminton
Remove E-pass fr slot
Return E-pass, pay charges
Return towel
Get exit pass,
show to
Register
Service Desk
Member?
Yes
No
Front Desk
Swipe card
Exit (End)
System Flow Chart
04/21/23 by: JAYNARD S. SOLANTE
PETER’S MATRIX
FINDING/S ROOT CAUSE/S RISK/S RECOMMENDATION/S ACTION TAKEN
04/21/23 by: JAYNARD S. SOLANTE
OPERATIONAL AUDIT
In general, internal operational audits are conducted for any one on more of six different purpose.
. Appraisal
. Compliance
. Protection of assets
. Verification
. Appraisal of performance
. Recommendation
04/21/23 by: JAYNARD S. SOLANTE
OPERATIONAL AUDIT
In general, internal operational audits are conducted for any one on more of six different purpose.
. Appraisal
The internal auditor should determine whether controls are sound & adequate in light of organization for which they are designed.
04/21/23 by: JAYNARD S. SOLANTE
OPERATIONAL AUDIT
In general, internal operational audits are conducted for any one on more of six different purpose.
. Appraisal
. ComplianceInstituting controls is meaningless unless controls are complied with. Purpose of compliance audit is to determine whether specific control policies, programs, or procedure are operating satisfactorily. Focus not so much on effects of non compliance, but preventing future non-compliance.
04/21/23 by: JAYNARD S. SOLANTE
OPERATIONAL AUDIT
In general, internal operational audits are conducted for any one on more of six different purpose.
. Appraisal
. Compliance
. Protection of assets
Purpose of reviews is to determine whether assets are properly accounted for and safeguarded from losses.
04/21/23 by: JAYNARD S. SOLANTE
OPERATIONAL AUDIT
In general, internal operational audits are conducted for any one on more of six different purpose.
. Appraisal
. Compliance
. Protection of assets
. Verification
Operational audits are designed to verify accuracy are reliability of internal management reports.
Focus is not necessarily to respond to result of inaccurate or unreliable data, but on the critical issue of promoting accuracy and reliability.
04/21/23 by: JAYNARD S. SOLANTE
OPERATIONAL AUDIT
In general, internal operational audits are conducted for any one on more of six different purpose.
. Appraisal
. Compliance
. Protection of assets
. Verification
. Appraisal of performance As a major operational control over organization effectiveness, internal auditors are frequently called upon to appraise employee performance.
Employee-performance reviews can represent the one operational audit activity least consistent with the boundaries of an internal auditor’s professional expertise.
04/21/23 by: JAYNARD S. SOLANTE
OPERATIONAL AUDIT
In general, internal operational audits are conducted for any one on more of six different purpose.
. Appraisal
. Compliance
. Protection of assets
. Verification
. Appraisal of performance
. Recommendation
Although not an audit activity, recommending operating improvements is the most significant by-product of the internal auditor’s professional role.
04/21/23 by: JAYNARD S. SOLANTE
FRAUD AUDIT
Integrity Risk:
• Management Fraud- fraud committed for the benefit of the company
• Employee Fraud-fraud committed for the benefit of another person / employee and to the detriment of the company.
• Illegal Acts• Unauthorized use• Reputation
04/21/23 by: JAYNARD S. SOLANTE
THE FRAUD TRIANGLE Why good people do wrong?
Pressure (Real or perceived)
Opportunities, Consequences Rationalizationand Likelihood of Detection(Real or Perceived)
04/21/23 by: JAYNARD S. SOLANTE
MOTIVES OF FRAUD
Personal Cure financial problems
Enhance lifestyle
Revenge against company
Conceal illegal acts
Cure perceived injustice
Ego—“beat the system”
Personal ambition
Meet incentive awards
04/21/23 by: JAYNARD S. SOLANTE
MOTIVES OF FRAUD
Corporate Reach or exceed quotas or goals
Increase popularity and reputation
Maintain ability to borrow
Manipulate stock price / value
Meet regulatory requirements
04/21/23 by: JAYNARD S. SOLANTE
FRAUD DETECTION & DETERRENCE
04/21/23 by: JAYNARD S. SOLANTE
FRAUD DETECTION & DETERRENCE
The Three Principal Lines of Defense: First Line – Code of conduct and business ethics policies and procedures
Based on an assessment of the possible risks facing the company, an understandable written employee code of conduct and business ethics document should be in place.
Second Line – Internal control and Management control structure
An effective internal control and management organization structure provides both prevention and detection elements, but not significant deterrence!
Third Line – Internal Audit activitiesBased on risk assessment of fraud and illegal acts, internal audit evaluates the 1st and 2nd line of defense mitigators.
04/21/23 by: JAYNARD S. SOLANTE
Internal Audit is responsible for: Ensuring the existence of control w/ systems designed to prevent or deter the forms of fraud. Identifying areas of risks where theft or manipulation may be likely to occur. Ensuring adequacy and effectiveness of controls in financial accounting and other areas subject to theft, fraud or embezzlement. Exercising the care and skill of a reasonably prudent and competent professional.
04/21/23 by: JAYNARD S. SOLANTE
The distinction between an Honest Mistake and Fraud is the underlying INTENTION behind the
ACTION.