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Agency: Center for International Trade Expositions and Missions (CITEM)

Audit Period: January to December 2018

Nature of Account:

This account consists of the following:

a. Office Buildings
b. Office Structures
c. Office Equipment
d. Furniture and Fixtures
e. Information and Communication Technology Equipment
f. Books
g. Communication Equipment
h. Sports Equipment
i. Motor Vehicles
j. Other Property, Plant and Equipment

1. An item is recognized as property, plant and equipment (PPE) if it meets the following
recognition criteria (1) tangible items; (2) are held for use in the production or supply of goods
and services, for rental to others, or for administrative purposes; (3) are expected to be used
during more than one reporting period; (4) it is probable that future economic benefits or service
potential associated with the item will flow to the entity; (5) the cost or fair value of the item
can be measured reliably; (6) the cost is at least P15,000.00.

2. An item recognized as PPE is initially measured at cost if it was acquired through exchange
transaction and at fair value (as of the date of acquisition) if it was acquired through non-
exchange transaction.

3. After recognition, all PPE are stated at cost less accumulated depreciation and accumulated
impairment losses.

4. When a major repair/replacement is done, its cost is recognized in the carrying amount of the
PPE as a replacement if the recognition criteria are satisfied. All other repair and maintenance
costs are recognized as expense in surplus or deficit as incurred.

5. For simplicity and to avoid proportionate computation, the depreciation is for one month if the
PPE is available for use on or before the 15th of the month. However, if the PPE is available for
use after the 15th of the month, depreciation is for the succeeding month.

6. The straight-line method of depreciation is adopted.

7. Residual value equivalent to 5 percent of the cost of PPE.

Audit Risk:

1. The risk of material misstatement because of weakness in internal control (e.g. Inadequate
involvement of management in overseeing employees with access to assets susceptible of
misappropriation; Lack of complete and timely verification and reconciliation of assets;
Inadequate physical safeguards over PPE; Misuse of entity’s assets by employee; Assets is
intentionally sold below fair market value; Using entity’s assets for personal use (e.g. using
entity’s assets as collateral for a personal loan or a loan to related party).

2. The risk that the result of the actual of the actual physical count of PPE may not be reconciled
with the recorded balances per General Ledger and Subsidiary Ledger.

3. The risk that the asset is not properly valued as of the balance sheet date due non-assessment
or erroneous assessment for any impairment thereof (or reversal of impairment) and/or its
value not properly allocated over the years of its useful life because of erroneous computation
of depreciation.

Audit Objectives and Assertions:

1. To ascertain whether the accounts are recorded in accordance with PPSAS 17 and other
applicable accounting standards. (Accuracy and Completeness)

2. To determine acquisition and disposal transactions are duly approved and in accordance with
applicable laws, rules and regulations. (Regularity and Validity)

3. To determine that properties are existing and on hand and duly supported by documents to
prove ownership. (Existence)

4. To ascertain the adequacy of allowance for depreciation (Valuation)

5. To determine whether the account is properly and consistently classified and presented in the
Financial Statements and the disclosures are complete and appropriate. (Presentation and

Audit Procedures:

ACTIVITIES W.P. Personnel Date Date

Ref. Assigned Assigned Completed

1.1. Trace beginning balance to prior year’s G.C.

audit working paper/ending balance of Magsumbol
prior year’s Financial Statements (F/S)

1.2. Trace debit and credit posting in the -do-

General Ledger to the Check
Disbursement Journal/General Journal
and to the Report of
Disbursements/Reports of checks

1.3. Foot the debit and credit entries in the -do-

General Ledger and establish the

1.4. Compare the General ledger Balance -do-

with that of balances in the Trial
Balance or Statement of Financial
Position and the Subsidiary Ledgers

1.5. Prepare proof of balance working -do-

paper/Top Schedule.

1.6. Investigate deficiencies, if any. -do-

1.7. Prepare and issue AOM if necessary -do-


2.1. Select samples from General Ledger

debits and credits for vouching and -do-
trace JEV entries of samples obtained.

2.2. For sample items representing -do-

acquisitions/purchases, verify
supporting documents for authenticity
and perform the following:

a. Verify if the proper approval exists

during the requisitions stage
b. Compare the actual cost of the item
with the prices obtained through
canvass or bidding
c. Verify evidence of inspection and
acceptance of the items upon
d. Verify payments for proper
authorization and charging of

2.3. Ascertain existence of deed of -do-

donation, purchase orders, contracts,
MOA and other related documents to
verify ownership.

2.4. Inspect/Review copies of invoices, -do-

lease agreements, insurance policies,
liens and encumbrances and other
related documents

2.5. Prepare and issue AOM, if necessary. -do-


3.1. Determine control over the issuance of -do-

the assets to the intended user, duly
supported by Property
Acknowledgment receipt.

3.2. For transfers and disposals, examine

underlying documents for authenticity,
adequacy and proper approval -do-
3.3. Take note of deficiencies, if any -do-

3.4. Prepare analysis WP. -do-

3.5. Observe the physical inventory of

equipment. -do-
a. Inspect all items within the
agency premises.

b. Confirm/inspect items located

outside the agency premises

3.6. Determine if repairs and maintenance -do-

capitalized represents major repairs that
prolong the life of the asset

3.7. Prepare and issue AOM, if necessary. -do-

3.8. Identify items which are damaged, -do-

obsolete, unserviceable or idle and
verify action taken to retire or drop
from the books.

3.9. Compare the physical inventory report -do-

with the machinery and equipment
account in the General Ledger and
Subsidiary ledger.

3.10. Take note of differences, if any. -do-

3.11. Obtain a copy of the inventory -do-

report/lapsing schedule and test check
the property to ascertain that they are
recorded at cost or other acceptable

3.12. Recalculate depreciation and compare -do-

with recorded charges in the
accumulated depreciation.

3.13. Investigate significant unusual -do-


3.14. Prepare and issue AOM, if necessary -do-

3.15. Determine that the account is properly -do-

identified and classified in the FS

3.16. Determine the appropriateness/ -do-

completeness of disclosures made in
the Notes to FS.

3.17. Prepare AOM, if necessary. -do-

Prepared by:

Audit Team Member
State Auditor II

Reviewed by:

Audit Team Leader
State Auditor IV

Approved by:

Supervising Auditor
State Auditor V