I.
Specialized Industry
A bank industry is about financial institutions that provides a service to people to store,
manage and use their money. The said financial institution is called bank and they offer clients an
opportunity to open accounts for the purpose of investing or saving their money. Like any other
industry, banks give benefits for the developments of the economy because they provide
resources for individuals, families and organization through lending money and shares of
investments. One example of these benefits is when parents get a loan from the bank to have a
capital for their business or to have enough resources to finance their children in their education.
As of March 2022, statistics shows that the banking industry increased to Php 20.5 trillion
compared to the year 2021, a 7% increase of total assets. This asset is funded through people’s
deposits which increased to Php 15.8 trillion. The loans that are provided by the banks also
increased to Php 10.4 trillion. Ratio analysis is also provided which shows that a capital adequacy
ratio is 17.1% in the year 2020 and 2021 and Liquidity coverage ratio 196% as of June 2021.
Increase in assets and capital is seen in the reports and statistics because the people needed funds
and resources because of the effects of the pandemic. There are different types of banks in the
Philippines, they have similar services but with differ in features in some ways. First, Rural and
Coop banks provide loan for farmers and any other people in rural areas. Digital banks give their
service through digital banking or online banking. Thrift banks are for teacher’s loan, small
medium enterprise, and mortgage finance. Lastly, commercial, and universal banks which in
expanded area or internationally.
The products and services of the banks are the deposits of the people, loans, credit facilities,
treasury, and trust services like asset management, and bancassurance. Payment systems is
acquired and done through cash payments or cashless like check and electronic payments.
Customers are the any kind of business-like corporation or any people like investors and
depositors. Ranks in the banking industry is assessed through their total assets. The top 5 banks
in the Philippines are: BDO Unibank INC; Land Bank of the Philippines; Metropolitan Bank & TCO;
Bank of the Philippines Island; and Philippine National Bank. Professionals operating in the Bank
industry are bank tellers, mortgage consultant, credit analyst, asset or wealth manager, office,
and any administrative employees (Indeed Editorial Team, 2021). This industry gains their income
through services of wealth management, through interest from loans and investments, trading,
foreign exchange gains, exercising prudent spending and minimizing non-earning assets.
II.
Accounting standards applicable to the industry
As stated by the Bangko Sentral ng Pilipinas, the Philippine Financial Reporting standards
(PFRS) or Philippine Accounting standards should be applied in all banks and other financial
institutions. This accounting standards is set to promote fairness, transparency, and accuracy of
all the reports and financial statements. Consolidated statements must be present in accordance
with PAS 27. As banks assets are mostly the loan receivables, the PFRS 9 must be adapted in
provisioning potential credit losses (Bangko Sentral ng Pilipinas, n.d).
III.
Audit considerations
In auditing a banking institution, a routine procedure is designed to ensure if they are in
compliance with the laws and industry standards. An accounting specialist which is called as bank
auditors monitor the financial statements of an entity and they perform auditing procedures to
analyze these reports if they are properly valuated, completed, existing and disclosed accurately
- (Berman, 2019)
According to (Dahl, 2021), government agencies mostly favored external auditors when
monitoring banks practices and reports. Although external auditor services are frequently
expensive than the one inside the organization, it prevents the entity from making false reports
due to conflict of interests. The primary goal of the bank is to make an independent evaluation of
the bank’s activities, control and information systems through substantive test and analytical
procedures of evidence.
Risk assessments is important to auditors specially if they are auditing bank institutions.
Supervisory intensity is the result of the combined impact assessment and risk assessment. This
is in depth supervision by assessing impacts and risks in the entity that could be a driving factor
of false report or financial misstatements. Risk that can be found in the bank industry are the
credit risk, market risk, operational risk, market conduct risk, liquidity risk, interest rates risk, it
risks and money laundering.
IV.
Reflection and leaning points
To all the accounting transactions I have solved, I don’t know if I already encountered loan
receivable. I think I only had this topic in Intermediate 1 but had only a brief discussion. With the
help of this seminar, I learned where loan receivable is mostly associated to, it is in banking
industry. Loan receivable is their asset because loans are their product as it provides them benefits
and income through interest. Auditing a bank seems like an easy practice because they are a
financial institution, and they are expected to follow accounting standards and reporting. But
overseeing the inside of the industry and the difficulty of it because of involvement of high value
of money, makes it hard to find the area of possible misstatements. So, risks assessment is a must
in auditing in this kind of industry. Substantive and analytical procedures must be done along with
this risk assessment to find areas that are questionable in the reports.
References
Bangko Sentral ng Pilipinas. (n.d). Compliance with PFRS/PAS. Retrieved from https://www-bsp-govph.translate.goog/Pages/Regulations/GuidelinesOnTheEstablishmentOfBanks/Overview.aspx?_x
_tr_sl=en&_x_tr_tl=tl&_x_tr_hl=fil&_x_tr_pto=op,sc
Berman, M. (2019). Bank Audit. N Contracts. Retrieved from https://www.ncontracts.com/nsightblog/bank-audit
Dahl, D. (2021). How Valuable Are External Auditors to the Banking Industry? Federal Reserve Bank of St.
Louis. Retrieved from https://www.stlouisfed.org/publications/regional-economist/thirdquarter-2021/how-valuable-are-external-auditors-banking-industry
Indeed Editorial Team. (2021). The Banking Industry: Definition, Trends and Key Terms. Career Guide.
Retrieved from https://www.indeed.com/career-advice/career-development/banking-industry
Webinar of Specialized Industry by Aerol Paul Banal entitled Regulatory audit of Banks