PAMANTASAN NG LUNGSOD NG PASIG

COLLEGE OF BUSINESS AND ACCOUNTANCY

12-B ALCALDE JOSE, KAPASIGAN, PASIG CITY

Educational Institutions
Group 6
Leader:
SANTOS, SOFIA ANNE P.

Members:
Alejandro, Marco B.
Medallada, Hannah Lyka
Palarpalar, Jade
Raymundo, Christine
Joyce

Auditing and Assurance:

Specialized Industries
BSA – 3A

Submitted to:
Prof. Sande Amor

May 2021

INTRODUCTION

Educational institution. means a preschool, a public or private elementary or secondary school,

an institution of undergraduate higher education, an institution of graduate high- er education, or an
institution of professional education, or an institution of vocational education, that operates a program of
scholarly research. To be in this category, a requester must show that the request is authorized by and is

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made under the auspices of a qualifying institution and that the records are not sought for commercial or
private use, but are sought to further scholarly re- search.

WHAT DO WE NEED TO AUDIT?

Financial audits
Financial audits involve:
 verifying balances reported in the school financial statements
 assessing the control environment of the school
 assessing school compliance with the policies and procedures set out by the Department
 following up the implementation of recommendations made in the most recent management letter
to the school
Topic audits
Each year the Department will identify one or more audit themes or topics for review/testing by
the auditors at a sample of schools to gain a better understanding of school processes and to identify
improvement opportunities. These schools will be a subset of the schools allocated for financial audits in
that year. Some examples of topic audit subjects include:
 purchasing card controls in schools
 school recruitment practices
 enrolment of international students.

WHO WILL CONDUCT THE AUDIT?

The audit firms are appointed on the basis of professional competence in terms of audit capability
and experience, flexibility and responsiveness, value for money and quality systems. Auditors will
conduct audits in accordance with the Department’s requirements and provide an audit opinion and a
management letter that details the findings of the audit.

Auditors will discuss findings with schools and identify opportunities for improvement as well as
highlighting good business practices to ensure that schools are well placed to meet their requirements.

WHERE WILL AUDITS BE UNDERTAKEN?

Audits will be conducted at the school premises. If a school operates multiple sites, the audit may
be conducted at the location were administrative processes and transactions typically occur. Alternatively,
a multi-site audit may be required. The school should advise the auditor of any multi-site considerations
at the time of scheduling the audit. The auditor will then advise the school of the location(s) at which the
audit will occur.

Regardless of the location of the audit, a school should permit auditor(s) to enter the school
premises to conduct audits and participate in and assist, as required, with any audit requests. This includes
making available to the auditor(s) records relevant to the audit. It is the responsibility of each school to

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ensure that all relevant files and documents are accessible throughout the audit as requested by the
auditors.

WHAT CAN SCHOOL’S EXPECT ON AUDIT DAY(S)?

The auditor(s) will arrive on the scheduled date and time and conduct an initial entry meeting
with the principal and the business manager or nominated delegate to confirm the scope and process of
the audit. Schools should permit auditor(s) to enter the premises to conduct audits, and should participate
in and assist, as required, with audits, including making records available to the auditor(s).
During the audit process, the auditor(s) may need to discuss items with relevant staff to obtain
clarification or further information. The duration of the audit will be determined by a range of factors
including the size of a school, the identified level of risk, availability of required records, and the
complexity of issues that arise during the audit. The audit will conclude with an exit meeting between the
auditor(s) and principal and the business manager or nominated delegate to discuss the preliminary
findings.

MAINTANANCE OFACCOUNTS OF EDUCATIONAL INSTITUTIONS

The purpose behind the formation of educational institutions is to spread education and not just
earn profits. The following table lists out the sources for collection of amount and also the different types
of expenses incurred by the educational institutions –
Main Source of Collection

 Admission fees, tuition fees, examination fees, fines, etc.

 Securities from students.
 Donations from public
 Grants from Government for building, prizes, maintenance, etc.
Types of Expenses / Payments

 Salary, allowances and provident fund contribution for teaching and non-teaching staff.
 Examination expenses
 Stationery & printing expenses
 Distribution of scholarships and stipends
 Purchase and repair of furniture & fixture
 Prizes
 Expenses on sports and games
 Festival and function expenses
 Library books
 Newspaper and magazines
 Medical expenses
 Audit fees and audit expenses
 Electricity expenses

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  Telephone expenses
 Laboratory running & maintenance
 Laboratory equipment
 Building Repair & maintenance

GENERAL AUDIT PROCESS

Each year the annual Risk Assessment and Audit Plan are presented to, and approved by the
School Board. Audits are selected in those areas of greatest risk and opportunity for improvement. Audit
topics are chosen based on potential for control enhancements, cost savings, and service improvements. In
addition, audit areas are selected based on School Board and management requests.

Audits are performed in phases, beginning with research to obtain an understanding of the areas
to be audited, testing of controls, issuing a report, and following up on the implementation of
management's actions. Lines of communication are open to all parties involved throughout the audit
process.

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 1. Risk Assessment
Annually, conducts an independent risk assessment to evaluate the financial, operational
and reputational risks faced.  To identify and prioritize audit projects, and allocate audit
resources efficiently and effectively.  Must use a risk assessment model.  The model compares
various risk factors such as expenditures, estimated revenues, number of staff members, audit
requests, and the date and results of the last audit.
2. Planning
Planning is the phase where the auditor obtains a comprehensive understanding of the
audit topic to finalize the scope and objectives. We review written procedures, memoranda,
organization charts, regulations, and budgets. We interview program staff and collect,
summarize, and evaluate information that will be used to identify potential audit issues and
develop an audit program. A thorough planning is essential to a successful audit.
3. Execution (Fieldwork)
Execution involves testing and evaluating key controls of the functions being audited.
Auditors use a variety of review techniques including observing, interviewing, sampling,
analyzing, and verifying to determine whether controls are adequate and whether operations are
conducted in an efficient and effective manner. Sufficient evidence will be developed to support
audit findings and recommendations for improvement.
4. Reporting
Reporting begins with a written draft report. This draft report is discussed with
departmental management at an exit conference to review the observations. Departmental
management provides feedback and comments on the draft. Meanwhile, we verify that each
statement of fact in the report is supported in the audit working papers. These processes help
ensure that the report is balanced and accurate. The final audit report summarizes key issues,
findings, recommendations, and includes management's response. Audit reports are issued to the
School Board Audit Committee, the appropriate leadership team member, and departmental
management.
5. Follow-Up
Follow-Up is a periodic review in which the progress and implementation status of
agreed upon actions are assessed and validated. Upon completion of the review, we issue a
memo to the School Board Audit Committee and all recipients of the original report indicating
the status of the recommended actions.

AUDIT CONSIDERATIONS
Preliminary Audit of Educational Institutions
Following points need to be considered by an Auditor while conducting audit of educational institutions
−
 It is to be confirmed whether the letter of his appointment (the Auditor’s) is in order.
 The Auditor should obtain a list of books, documents, register and other records as maintained by
the educational institutions.
 He should examine the audit report of last year and should note down the observation and
qualification, if any.

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  He should note down the important provisions regarding to accounts and audit from the Trust
Deed, Charter of Regulations.
 He should examine the Minutes of Meetings of the Board of Trustee or the Governing Body for
important decisions regarding the sale or purchase of fixed assets, investments or delegation of
finance power.
 In case of colleges and university, the Grants Commission provides Grants to them subject to
certain conditions. The Auditor should study all the conditions concerning grants.
 The Auditor should examine the Code of State regarding grant-in-aid.
 He should be aware of all the provisions and rules of related laws concerning books of account
and audit.

Internal Control System

The Auditor should independently check the internal control system regarding authorization
procedures, record maintenance, safeguarding of assets, rotation and division of staff duty, etc. Following
are some of the important aspects that need to be considered by an Auditor to keep a check on the
internal control system −
 Whether internal control and internal check system is working, if yes, how effectively.
 Is there is any system to physically verify the fixed assets, stores and consumables at regular
interval.
 An Auditor should verify the control system concerning proper authorization, obtaining
quotations, proper maintenance of accounts and record regarding purchase of fixed assets,
purchase of material, investment, etc.
 Whether bank reconciliation statement is prepared at regular intervals and what kind of action is
taken for uncleared cheque which were pending since long.
 Whether waiver of fees is properly sanctioned by appropriate authorities.
 The person who is collecting fees and the cashier should not be the same person.
 Class wise fees receivable and the actual fees received reconcile or not.
 Whether collected fees is deposited in bank on a daily basis.
 Fee’s collection register should be maintained on a daily basis.
 Whether approved list of suppliers of sports material, stationery, lab items are readily available.
 Whether control system for payment is adequate or not.
 The system of letting out conference hall and class rooms, etc. for seminars and conventions.
 Whether fee’s structure is properly authorized along with change in fee structure if any.

Audit of Assets and Liabilities

The following points need to be considered while conducting an audit of Assets and Liabilities −

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  Verification of Assets register should be done considering grants on purchase of assets, if any
received from State Government/ University Grant Commission (UGC).
 Verification of depreciation is very important; it should be according to useful life of assets.
 If donation is received in the form of investment, an Auditor has to check all related
correspondence with the donor.
 All the applicable requirements of law should be fulfilled for the purchase of investments and
fixed assets.
 An Auditor should read and note down the state code and provisions relating to the conditions
and procedures of Grants. He should also verify the requirements of State/UGC which are to be
fulfilled by educational institutions for receiving Grants and also for continuations of Grants.

Audit of Income of Educational Institutions

 The following points need to be considered by an Auditor while conducting audit of the Income
of Educational Institutions −
 Fees and charges received on account of admission fees, tuition fees, sports fees, examination
fees etc. should be verified based on the approved fee’s structure.
 Verification of counterfoil copies of fees receipt with fees received register should be done.
 Cash book should be verified with counterfoil of receipt book and fees register.
 Fee’s receivable and actual fees received should be reconciled.
 Charges and fees received and receivable should be examined on account of hostel
accommodation, mess, housekeeping and clothing, etc.
 Investment register and cash book should be verified for income received on account of interest
on investment and dividends, etc.

Audit of Expenses of Educational Institutions

The following points need to be considered by an Auditor while conducting audit of Expenses of
Educational Institutions −
 Electricity expenses, telephone expenses, water charges, stationery and printing, purchase of
sports items should be properly verified with quotation, purchase bills, inward register and Bills
received from service providers, etc. All purchases should be authorized by appropriate person.
 In case where hostels purchase food items, provisions, clothing, etc. should be properly verified.
 Verification of Tax Deducted at Source, Employee State Insurance and Provident Fund should be
checked. It is also very important that all deducted amount should be deposited in appropriate
Government accounts well within time without any default. These can be verified from relevant
bank challans.
 Payment made on account of salary should be verified from terms of appointment and increment
policy. Auditor should verify the computation of salary and check whether all required
deductions are made out of it or not like advance salary, loan installment, absence from duty,
SSS, PHILhealth, etc. The Net Salary Payable amount will be verified from cash book and bank
pass book for salary paid.

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  Terms and conditions, cash book, voucher and receipts should be the basis for the verification of
scholarship paid.
 Appropriate provision should be made on account of outstanding payments.

OVERALL AUDIT RATING DEFINITION

Auditors will assign overall audit ratings to schools based on their overall audit results. The
following table provides definitions of these overall audit ratings.

Audit Rating Definition

Design - Design of controls is ineffective in

addressing the key risks (i.e. does not address key
risks)
Documentation and communication - Non-
existent documentation and/or communication of
controls/policies/procedures
Operation/implementation - Controls are not in
operation or have not yet been implemented
Compliance - Significant breaches of legislative
requirements and/or departmental policies and
guidelines
Unsatisfactory Risk management - Risks are not being
managed
Efficiency, economy and effectiveness - School
runs significantly over budget and does not
achieve any of the expected outcomes and/or
school programs are not run in a cost-effective
manner and/or school finances are not effectively
managed
Findings/deficiencies - Most findings were rated
as critical and/or high and urgent corrective
actions are necessary

Design - Design of controls only partially

addresses the key risks
Documentation and communication -
Documentation and/or communication of
controls/policies/procedures is incomplete,
unclear, inconsistent or outdated
Operation/implementation - Controls are not

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 operating consistently and/or effectively or have
not been implemented in full
Compliance - Breaches of legislative
requirements and/or departmental policies and
guidelines have occurred
Risk management - Risks are not being
effectively managed which could result in failure
to ensure school objectives are met
Efficiency, economy and effectiveness - School
Needs improvement runs over budget and achieves minimal expected
outcomes and/or school programs are not run in a
cost-effective manner and/or school finances are
not effectively managed
Findings/deficiencies - Some high-rated and/or
medium-rated findings were identified

Design - Design of controls is largely adequate

and effective in addressing the key risks
Documentation and communication -
Controls/policies/procedures have been formally
documented and are up-to-date but are not
proactively communicated to relevant
stakeholders
Operation/implementation - Controls are
largely operating in a satisfactory manner and are
providing some level of assurance
Compliance - No known breaches of legislative
requirements and/or departmental policies and
guidelines have occurred
Risk management - Risks are largely being
effectively managed
Acceptable
Efficiency, economy and effectiveness - School
runs within budget and achieves key expected
outcomes and/or school programs are run in a
cost-effective manner and/or school finances are
effectively managed
Findings/deficiencies - No critical or high-rated
findings identified

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 Design - Design of controls is adequate and
effective in addressing the key risks
Documentation and communication -
Controls/policies/procedures have been formally
documented and are up-to-date and proactively
communicated to relevant stakeholders
Operation/implementation - Controls are
Good operating effectively
Compliance - No known breaches of legislative
requirements and/or departmental policies and
guidelines have occurred. A comprehensive
compliance framework is in place
Risk management - Good risk management
practices are in place
Efficiency, economy and effectiveness - School
runs within budget and achieves all expected
outcomes and/or school programs are run in a
cost effective manner and/or school finances are
effectively managed
Findings/deficiencies - Any findings are minor -
no critical, high or medium-rated findings
identified

AUDIT FEEDBACK AND REPORTING

At the completion of each audit, the auditor(s) will issue an audit report expressing their
professional opinion as to whether the school’s financial reports present fairly, in all material respects,
the school’s financial position and financial performance in accordance with the Department’s financial
reporting requirements.
In addition to the audit report the auditors will also prepare a management letter that details the
findings of the audit, including opportunities for improvement and recommended actions to address the
findings, where relevant. Auditors will seek the principal’s management comments that will describe
specific actions to be undertaken by the school to address the audit findings and include the name of the
individual or team responsible for the action and the agreed date for implementation.

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 The auditor(s) will review any management comments provided for adequacy and
appropriateness. All management comments submitted by the school will be included in the final
management letter submitted to the school (principal), school council president and the Department. The
auditors will follow-up implementation of the recommendations made in the management letter in the
following audit of the school

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