COMMISSION ON AUDIT RESOLUTION NO. 95-505 July 4, 1995 SUBJECT : Re-Statement with Amendments of COA Memorandum No. 93-316D Prescribing the Application of the Test Audit Scheme (TAS) and the Simplified Sampling Scheme (SSS) in the Audit of Current and Prior Years Transactions and Accounts of National and Local Government Agencies and Government Owned and/or Controlled Corporations. WHEREAS, the tremendous volume and complexity of transactions in the government have made the practice of examining each and every transaction physically impossible, and in fact has created a large volume of backlog in post-audit; WHEREAS, it has been observed that due to the adherence to 100% audit of transactions, backlogs in post-audit kept piling up to millions of unaudited vouchers/receipts and other transaction documents; WHEREAS, the existence of these backlogs cannot but raise doubt on the integrity of the Annual Audit Reports submitted by the Auditors; WHEREAS, external auditing as performed by other audit institutions, both in this country and the world over, is always on test basis; WHEREAS, detailed audit is time-consuming, costly and not necessarily more effective; WHEREAS, the auditing staff cannot be expected to examine/review all the work of an Accounting Department or Unit with more staff members; WHEREAS, to facilitate audit work, this Commission has prescribed audit sampling methodologies under COA Memorandum Nos. 84-316A, 85-316C and 93-316D; WHEREAS, the use of sampling in audit is not without problems/difficulties particularly during the initial stage of implementation when auditors are still in the process of internalizing the concepts and methodologies involved; WHEREAS, under COA Resolution No. 82-49, the Commission has adopted the policy that in order to benefit from its use, audit sampling shall be constantly updated and modified according to the needs of the auditor and his audit objectives in consonance with the over-all policies and objectives of the Commission. NOW, THEREFORE, the Commission has resolved, as it does hereby resolve, to amend/modify and improve COA Memorandum No. 93-316D to address the problems/difficulties encountered by the auditors in its implementation, as stated hereunder. 1.0 SIMPLIFIED SAMPLING SCHEME 1.1 DEFINITION OF TERMS 1.1.1 Batch/Population - documents consist of vouchers/receipts/JVs and other transaction documents including their summaries and supporting papers, usually submitted by management in batches periodically to the Auditor for examination and audit. If one month's transactions are few, several months may be combined and if they are voluminous one month may be divided into several populations. In no case, however, shall the population consists of more than four months transactions. 1.1.2 Error - is a deviation from or non-compliance with laws, rules and regulations, or defects in the transaction that affects its validity including inaccuracy in computations and representation of amounts. 1.1.3 High Value Items - transactions that are high in amount as determined in accordance with the procedures prescribed and illustrated in paragraph 1.2.1.2a hereof. 1.1.4 Key Items/Special Items - transactions and accounts that are prone to error, subject of complaints, and other high risk transactions which in the perception of the Auditor require detailed 100% audit such as payment for infrastructure contracts, cancelled/ tampered ORs, bank reconciliation statements and the like. 1.1.5 Route - direction specified for each month in the quarterly Memorandum issued by the CASU/CRASU or its equivalent, which is either downward or sideward. 1.1.6 Tolerable Error Rate - percentage of error in relation to the samples selected which does not materially affect the integrity of the population represented in the sample size. 1.1.7 Substantive Errors - when the amounts paid or collected or assessed are illegal, invalid, inaccurate or unrecorded. These are also the monetary inaccuracies in computation. 1.1.8 Compliance Errors - deviations from the established system of internal control and prescribed rules and regulations including approval and other documentary requirements. 1.2 PROCEDURES 1.2.1 BASIC SAMPLING DETERMINANTS 1.2.1.1 a. Determination of Populations Official Receipts - The population in the audit of Official Receipts (ORs) may be classified in the following manner: a.1 All ORs per accountable officer; a.2 All ORs as submitted for a particular period by management and as reported by the Chief Cashier or Collecting Officer regardless of revenue classification; a.3 All ORs per revenue classification for a particular period. The population may be per month, per two (2) months or per three (3) months depending on the volume. In no case shall it exceed four (4) months. b. Disbursement Vouchers - The population in the post-audit of Disbursement Vouchers (DVs) shall include all the disbursement vouchers submitted for a particular period as reflected in the transmittal letter or Report of Disbursements/Checks Issued after separating the payrolls, liquidation of cash advances and Journal Vouchers (JVs). The payrolls, liquidation of cash advances (other than payrolls) will constitute separate populations while JVs will be audited 100%. The audit of the liquidation of cash advances (other than payrolls) shall be related to the cash examination undertaken and vice-versa. The population may be composed of one month, two months or three months transactions depending on the volume. In no case, however, shall the population exceed four months transactions. c. Payrolls - The population for the post audit of payrolls shall consist of the total number of payees or employees per period. This may be per month, per two months or per three months depending on the volume. In no case shall it exceed four months. 1.2.1.2 Adjusted Population The adjusted population is defined as the population less High Value Items (HVIs) and Key Items (KIs). In cases where the populations is homogeneous in terms of amounts, as in the case of payrolls, only KIs are separated from the population to arrive at the adjusted population. HVIs and KIs are to be audited 100%. a. Determination of High Value Items - High Value Items are determined by the use of the percentage table to define the high value as shown below: Percentage to Define High Value Number of Transactions in the Population 0 - 1,999 2,000 - 4,999 5,000 + Percentage 5% 2% 1% Illustration: For the month of May 1994, the accounting unit submitted 2,030 vouchers (payrolls, liquidation of cash advances [other than payrolls], and journal vouchers are considered separate population and are already segregated) to COA with a total amount of P11,000,000.00. From the table of percentage, 2,030 falls within the range of 2,000 4,999 for which 2% is to be used to determine high value. High Value (HV) = 2% x P11,000,000 = P220,000.00. This means that any single transaction amounting to P220,000.00 and above will be considered high value item. 1.2.1.3 Sample Size The sample size to be used must have the right balance between two conflicting needs - minimal sampling uncertainty and audit economy. Sampling uncertainty can be reduced by increasing the sample size but this would be at the expense of audit economy. The desired sample size from a given population shall be determined through the use of the following table: Determination of Sample Sizes Number of Transactions in the Population 0 200 2,000 5,000 199 - 1,999 - 4,999 + Sample Size 75 100 150 200 Sample sizes are determined based on the adjusted population or on the unadjusted population in case there will be no HVIs and KIs. Illustration: Assuming that from the submitted 2,030 vouchers with a total amount of P11,000,000.00, 10 vouchers are high value items, each with amounts of P220,000.00 or more totaling P7,000,000.00 and 40 vouchers picked as key items amounting to P500,000.00. The adjusted population will then be: Total volume Less: HV items Key items Adjusted Population 2,030 (10) (40) -------1,980 The sample size for 1,980 vouchers based on the table is 100. Sample Interval The sample interval is determined by dividing the adjusted population by the desired sample size. Example: Based on the given example Sample Interval (SI) = 1,980 adj. population ---------------------------100 sample size = 19.80 or 20 This means that if the sample interval is 20, the auditor will select one sample for every 20 vouchers. 1.2.2 SELECTION OF SAMPLES In the selection of samples, several factors are to be considered. For one, every item in the population must have an equal or known chance of selection. Another, the process of selecting the sample must be unbiased. The samples will be selected on a systematic sampling technique. This means that after getting the sample interval (SI), the Auditor will look from the Memorandum on Random Number Start (RNS) (Annex A) for the starting number. In the selection of the prescribed starting number, the month of audit is the reference month. When the prescribed number is higher than the SI, the Auditor should refer to the prescribed route stated in the Memorandum to get the number which is equal to or less than the SI. As in our example, 20 is the SI and referring to the month of June in the Memorandum (Annex A), 45 is the starting number for two (2) digits in Table 1 (Annex B). Since 45 is higher than the SI, the auditor will go downward and look for a number equal to or less than 20, which in this case, the number is 15. This means that the first sample is the 15th voucher. For the succeeding sample items, add the SI to the number of the first sample item and every interval thereof until the desired sample size is obtained. 1st sample item 2nd sample item 15 + 20 3rd sample item 35 + 20 4th sample item 55 + 20 = = = = 15th voucher 35th voucher 55th voucher 75th voucher This process will continue until the desired sample size is attained. Random Number Start A memorandum on monthly Random Number Start (RNS) will be issued by the CASU/CRASU or its equivalent on a quarterly basis covering three months period. 1.2.3 EVALUATION OF SAMPLES The selected samples are post-audited and evaluated by comparing the actual compliance and substantive errors found during the audit of the samples with the tolerable error rates. The tolerable error rate for compliance evaluation is 20% of the sample size while the tolerable error rate for substantive evaluation is 8% of the total amount of the sample size (Annex C). If the audit of the samples does not pass compliance and/or substantive evaluation, the auditor shall audit the whole population. In both cases, the auditor shall submit the corresponding evaluation report. Evaluation Working Paper The auditor shall prepare an Evaluation Working Paper (EWP) (Annex C). While the format is flexible, it must include the reference for the transactions audited and the total number of compliance and substantive errors found in the sample. A copy of the EWP shall be attached to and submitted quarterly together with the accomplishment report. When error rates do not exceed the tolerable error rates. Where the audit of the samples reveal compliance and/or substantive error rates equal to or below 20% or 8%, respectively, but which nevertheless resulted to suspensions, disallowances, or charges, the transactions in the population related or similar to the transactions suspended, disallowed or charged in audit shall be audited 100%. The rest of the other transactions in the population shall be considered to have been passed in audit. The amounts suspended, disallowed or charged shall be reflected in the CSB. When error rates exceed the tolerable error rates. When the audit of the samples results to a situation where either the compliance or substantive error rate exceeds 20% or 8%, respectively, the whole population shall be audited 100% and the resulting suspensions, disallowances or charges shall be reflected in the CSB/s. 1.2.4 ISSUANCE OF CERTIFICATE OF SETTLEMENT AND BALANCES (CSB) When sampling is applied, the CSB shall preferably be issued on a per population basis. The certification on the face of the CSB may be modified to include a statement to the effect that the transactions/accounts covered by the CSB have been audited in accordance with the Simplified Sampling Scheme procedures prescribed under COA Resolution No. _______ dated ________. Transactions to be stamped "Post-Audited" Only the audited High Value Items, Key Items and the samples selected shall be stamped post-audited although the entire population represented by the samples shall be deemed to have been audited and covered by the corresponding CSB or CSBs issued therefore. 1.2.5 REPORTING The auditor shall submit to the CASU/CRASU or its equivalent the quarterly accomplishment report (Annex D) which shall reflect the transaction stream, the month of audit, period covered, the volume, the sample size, the high value and key items, the total transactions passed in audit and the number of transactions suspended, disallowed or charged. Likewise, the audit objectives with the corresponding audit procedures as stated in the State Audit Manual shall also be included but only in the initial implementation of sampling. 1.2.6 AUDIT SCOPE The audit of the samples, the High Value Items and the Key Items shall cover the entire accounting cycle, i.e., from source documents at the inception of a transaction up to the point when that transaction is ultimately immersed in the agency's financial statements or vice versa. The audit of the entire accounting cycle will generally comprise the following stages: 1.2.6.1 The audit of source documents for receipts, disbursements and other sources of original entries. 1.2.6.2 The audit of entries in the Books of Original Entries and month-end accounts summarization. 1.2.6.3 The audit of postings from the Books of Original Entries and other sources, to the Subsidiary and General Ledgers. 1.2.6.4 The verification of the trial balance, financial statements and other financial reports. The transactions selected as samples including the High Value Items and Key Items shall be audited and considered as the basis for the audit of the accounts affected by the transactions. In case there are accounts whose transactions do not form part of the samples selected or where there are only very few transactions forming part of the samples, the auditor may select additional samples pertaining to the said accounts. In the case of payrolls, the audit may be done through sampling as herein prescribed or by using the systems-based audit approach as prescribed in Section 30.3 of the State Audit Manual. 2.0 TEST AUDIT MONTH SCHEME 2.1 DEFINITION OF TERMS 2.1.2 2.2 Test Audit Months - The months selected for audit which shall comprise at least six (6) months of the year under audit as determined in accordance with the procedures prescribed in paragraph 2.2 hereof. SELECTION OF TEST AUDIT MONTHS 2.2.1 The selection of the test audit months which shall comprise at least six (6) months of the succeeding year shall be made by the COA Director concerned. For this purpose, the Unit Auditor shall submit to the said COA Director, on or before the end of December of each year, the following information: 2.2.1.1 Nature, frequency and amount per month of suspensions, disallowances or charges for the current year and the immediately preceding two (2) years (for the initial year of implementation only). 2.2.1.2 Monthly volume of transactions in terms of quantity and total amount per month for the current year and the immediately preceding two (2) years (for the initial year of implementation only), categorized into collections, disbursements and other non-cash transactions. Sub-categories under each of the main categories may be presented as necessary depending on the nature of the operations of the audited agency. On the basis of the foregoing information, the COA Director concerned shall select the test audit months. The selection of the test audit months shall consider the relative impact of the suspensions, disallowances or charges in the preceding three (3) years as against the volume of transactions. However, when suspensions, disallowances or charges in the preceding years have been minimal or negligible, the peak months of the year, i.e., the months when transactions are voluminous in terms of amount and quantity, shall be selected as test audit months. 2.3 2.2.2 Except for the months of January and December which shall be considered as mandatory test audit months, the information on whether a particular month is a test or non-test audit month shall be released in writing by the COA Director to the Auditor concerned one at a time only, ten (10) days after the end of the particular month. 2.2.3 The approved test audit months shall be kept confidential and any unauthorized release of information relative thereto shall be a ground for disciplinary action. 2.2.4 The months not selected as test audit months during any year may be included as test audit month in the succeeding year provided due consideration is given to the nature, frequency and amount of suspensions, disallowances and charges in the preceding years. 2.2.5 When in the judgement of the Auditor, the six (6) test audit months can still be reduced as when the internal control system of the auditee agency has been established to be adequate or when errors, suspensions, disallowances or charges have been very minimal or negligible or when sheer volume of transactions compels further reduction of tests, the Auditor may upon proper written justification recommend to the COA Director concerned, the reduction of the six (6) audit months which in all cases shall not be less than four (4) months. The COA Director shall select the test audit months in accordance with the procedures prescribed above. AUDIT SCOPE 2.3.1 The audit of the test months shall likewise cover the entire accounting cycle as provided in paragraph 1.2.6 hereof. 2.3.2 2.4 The following shall likewise be audited in addition to the audit of the test audit months: 2.3.2.1 All infrastructure and other significant non-recurring transactions occurring in the non-test audit months. 2.3.2.2 All transactions in the non-test audit months similar to or related to those transactions suspended, disallowed or charged in the course of the audit of the six test audit months. However, when in the judgement of the Auditor, the suspensions, disallowances or charges in the test audit months are not material as to warrant the audit of the related or similar transactions in the non-test audit months, he may dispense with the audit of the latter mentioned transactions upon written authority of the COA Director concerned. 2.3.2.3 All transactions subject of complaints or adverse information whether or not such transactions are included in the test audit months. 2.3.3 In case fraud is established during the audit, a special audit report shall be prepared and submitted immediately in accordance with the guidelines embodied in COA Memorandum No. 93-813 dated July 9, 1993. 2.3.4 The Unit Auditor shall keep a permanent file of the Audit Program used in the examination of the transactions and accounts in the test audit months indicating therein among other, the names of the audit staff assigned to perform the audit. The said Audit Program shall be updated upon completion of the audit for a particular month, to reflect therein the actual audit procedures undertaken and the names of the audit staff who actually performed the audit activities embodied in the audit program. ISSUANCE OF THE CERTIFICATE OF SETTLEMENT AND BALANCES (CSB) 2.4.1 The CSBs shall be issued monthly and only for the test audit months except in the instances contemplated in paragraphs 2.3.2.1, 2.3.2.2 and 2.3.2.3 above where the particular transactions audited in the non-test audit months shall likewise be covered by the corresponding CSB. 2.4.2 Only the transactions audited shall be stamped "Post-audited". On the other hand, the unaudited transactions of the non-test audit months shall be reported in the monthly Summary Report On Post-Audit And Issuance of CSBs as indicated in Annex F hereof. 2.4.3 When the Test Audit Month Scheme is applied, the certification on the face of the CSB may be modified to include a statement to the effect that the transactions/accounts covered by the CSB have been audited in accordance with the Test Audit Month Scheme procedures prescribed under COA Resolution No. ______ dated ______. 3.0 TEST AUDIT DAY SCHEME 3.1 DEFINITION OF TERMS 3.1.1 3.2 Test Audit Days - The days selected for audit which shall comprise at least six (6) days of the month under audit as determined in accordance with the procedures prescribed in paragraph 3.2 hereof. SELECTION OF TEST DAYS 3.2.1 The sampling methodology herein authorized considers the 253 working days of the year as the population from which six (6) working days per month shall be selected as audit samples. 3.2.2 The first and last working days of the year and the last working day of each month shall be considered as mandatory test days to assure among others that the account balances carried forward including reversing entries, if any, at the beginning of the year and the adjusting entries at the end of the year are duly audited, as well as to establish the reliability of the monthly trial balance/ financial reports. 3.2.3 Transactions in the non-test days similar to or related to the transactions suspended, charged or disallowed in the course of the audit of test days shall be audited. 3.2.4 The total number of samples (test days) in a year is seventy two (72) days consist of thirteen (13) mandatory test days (first and last working day of January and last working day of each of the test of the months) and fifty nine (59) sample test days. 3.2.5 The sample test days shall be selected by the auditor based on the Memorandum of Random Number Start (RNS) which in this case shall be issued by the CASU or CRASU monthly (Annex E) and Table I of the Random Number Tables (Annex B). The sample selection process is illustrated as follows: a. From the Memorandum of Random Number Start for the month of March 1995 (Test Audit Day Scheme), the location of the RNS using Table I is column 5, row 9 and the RNS is 40. b. Since the average number of working days in a month is 22 days, the numbers in Table I that should correspond to the sample test days should be any number or numbers no less or greater than 1 to 22. c. In the example above, the RNS is 40 which is greater than 22. Further, the route or direction given in the Memorandum of Random Number Start is going down. Following this direction, the numbers following the RNS 40 are 20, 21, 04, 17, 26, 19, 44, etc. Thus, the numbers that should be selected are those that are no less nor greater than 1 to 22 which are 20, 21, 04, 17, and 19. This means that the test audit days for the month of March 1995 are the 20th, 21st, 4th, 17th, 19th and last working day of the month. d. 3.3 Where the RNS is equal to or between the number 1 to 22, the RNS becomes the first sample test day. 3.2.6 All accounts and transactions in the sample test days shall be audited on hundred percent (100%) and evaluated by comparing the actual compliance and substantive errors found in the course of the audit with the tolerable error rates. The tolerable error rate for substantive evaluation is 8% of the total amount of the transactions of all the test days in a month while the tolerable error rate for compliance evaluation is 20% of the total number of transactions in all the test days of the month. If the audit of the test days does not pass compliance and/or substantive evaluation, the auditor may select another six (6) days of the month as additional samples. If the percentage of the sum of the errors found in the first and second samples in relation to the double size sample still exceeds the tolerable error rate for either substantive and/or compliance error, the auditor shall audit the transactions of the entire month. 3.2.7 The auditor shall prepare an Evaluation Working Paper (EWP) in accordance with the requirements and procedures prescribed under paragraph 1.2.3 hereof. AUDIT SCOPE AND PROCEDURES 3.3.1 The audit of the test days, including the transactions enumerated in paragraphs 3.2.4 and 3.3.2 hereof shall likewise cover the entire accounting cycle as provided in paragraph 1.2.6 of this Resolution. 3.3.2 The following shall likewise be audited in addition to the audit of the test days: 3.3.2.1 All infrastructure and other significant transactions occurring in the non-test days. non-recurring 3.3.2.2 All transactions in the non-test days similar to or related to those transactions suspended, disallowed or charged in the course of the audit of the test days. 3.3.2.3 3.4 4.0 All transactions subject of complaints or adverse information whether or not such transactions are included in the test audit days. 3.3.3 In case fraud is established during the audit, a special audit report shall be prepared and submitted immediately in accordance with the guidelines embodied in COA Memorandum No. 93-813 dated July 9, 1993. 3.3.4 Unit Auditor shall keep a permanent file of the Audit Program used in the examination of the transactions and accounts in the test days indicating therein among others, the names of the audit staff assigned to perform the audit. The Audit Program shall be updated upon completion of the audit for a particular month to reflect the actual audit procedures undertaken, the actual time spent for each activity and the names of the audit staff who actually performed the audit activities embodied in the audit program. ISSUANCE OF THE CERTIFICATE OF SETTLEMENT AND BALANCES (CSB) 3.4.1 The CSB shall be issued monthly with the certification on the face thereof modified to include a statement to the effect that the transactions/accounts covered by the CSB(s) have been audited in accordance with the Test Audit Day Scheme prescribed under COA Resolution No. _________ dated ________. 3.4.2 Only the transactions audited including those mentioned under paragraph 3.3.2 hereof shall be stamped "Post-audited". SAMPLING SUPPORT ORGANIZATION Creation and Functions of the CASU/CRASU There shall be a COA Audit Sampling Unit (CASU) and COA Regional Audit Sampling Unit (CRASU) or its equivalent in each central operating office and regional office, respectively, that will assist the respective COA Directors in the following activities: 4.1 Monitoring and supervision over the implementation of audit sampling by the auditing units; 4.2 Conduct of in-house training on sampling; 4.3 Selection of the test audit months for those applying the Test Audit Month Scheme; 4.4 Issuance of the Random Number Start (RNS): 4.5 5.0 4.4.1 RNS covering three months period (Annex A) - one month before the beginning of the quarter for those applying either the Pareto Sampling Scheme, the CSCM or the SSS; and 4.4.2 RNS covering one month period (Annex E) - ten (10) days before the beginning of the month for those applying the Test Audit Day Scheme. Such other functions/duties as may be assigned from time to time by the Chairman or the Director concerned. AUDITORIAL JUDGEMENT/USE OF OTHER AUDIT TOOLS AND TECHNIQUES As an audit tool, sampling shall not be substituted for good auditorial judgement. As such, the auditor is not precluded from using other means or tools in accomplishing his audit objectives. The application of sampling enables the auditor to form a conclusion on the state of compliance with applicable laws, rules and regulations not only on the sample transactions but also on the population of transactions subjected to sampling selection, and therefor provides the auditor with an achievable target and manageable audit scope in the post-audit of transactions. However, samplings inherent limitation is that it is merely an audit technique and may not provide all the answers to the problems that may be encountered in the conduct of the audit. Thus, to ensure that the standard of "sufficient, relevant and competent evidence" needed by the auditor to arrive at a conclusion on the regularity, efficiency, economy or effectiveness of operations or to express an audit opinion on the financial statements, is adequately met, it will be necessary for the auditor, to employ, in addition to the procedures applied to the sample transactions, other audit tools and techniques such as but not limited to the following: 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9 6.0 Inspection / physical count Confirmation Observation Analysis Interview / inquiry / questionnaire Recomputations Review of reconciliation procedures Modeling Flowcharting / validation POST-AUDIT OF BACKLOGS The up-dating of post-audit backlogs shall be carried out in accordance with the procedures prescribed. However, in view of the Annual Audit Reports that have been rendered in the previous years, the audit of the corresponding accounts need not be disturbed except when the same is relevant to and affects the balances of accountabilities reflected in the books of accounts. As a general rule therefore, the audit of backlogs shall be limited to the determination of regularity or validity of transactions except when balances of accountabilities are affected as a result of the issuance of CSBs or other pertinent special audit reports. 7.0 TRANSMITTAL OF ACCOUNTS/RECORDS BY THE AUDITEE-AGENCY In cases where the agency's reporting/accounting system does not indicate the details of the transactions nor provide for reports such as Report of Collections or Report Disbursements / Checks Issued or other similar reports indicating the details of the transactions, the submission of the accounts/records to the auditor must be accompanied by a Transmittal Form listing down all the transactions by official receipt numbers or check. The Transmittal Form shall contain columns for Item Number, Official Receipt/Check Number, Voucher Number and Amount. Furthermore, the Item Number column shall show the total of the transactions in a batch. 8.0 CONTINUATION OF THE SAMPLING SCHEMES PRESENTLY EMPLOYED The existing sampling schemes, i.e., the COA Sampling Card Methodology (CSCM) and the Pareto's Principle of Distribution shall still be continued. The auditor shall have the option to choose which scheme is best suited to their particular auditeeagency. The selection of the appropriate sampling scheme(s) best suited to the transactions/accounts of the auditee-agency shall be reported in writing by the unit auditor to the COA Director concerned for monitoring purposes. Thereafter, no changes in sampling methodology shall be effected by the auditor without the prior approval of the Director concerned. 9.0 LEGAL AUTHORITY VIS-A-VIS LIABILITY The provisions of the Constitution grant the Commission exclusive authority to define the scope of its audit and to establish the methods and techniques required therefor. This Constitutional prerogative is amplified in Section 43(3) of PD No. 1445, otherwise known as the Government Auditing Code of the Philippines and in Section 28(3), Subtitle B, Book V, of the Administrative Code of 1987 (EO No. 292), which contain the basic proviso that justifies the promulgation by the Commission of auditing procedures and techniques to wit: "In the performance of their respective audit function as herein specified, the auditors shall employ such auditing procedures and techniques as are determined by the Commission under regulations that it may promulgate." When the auditor employs the sampling techniques authorized by the Commission and as long as he apply the technique in good faith and with due care, he does not incur any civil, criminal or administrative liability arising in any way from his use of such audit technique. The sampling procedures herein prescribed should be applied only in instances where the volume of transactions is physically impossible to audit 100%. When the volume of transactions does not warrant the application of sampling technique, the auditor may perform a 100% audit. BE IT FURTHER RESOLVED, to authorize the Chairman of this Commission to make changes or modifications, on a case to case basis, in the application of certain provisions of this Resolution as may be warranted to suit the actual conditions obtaining in the audited agency. BE IT FINALLY RESOLVED, that the Directors/Officers-In-Charge of COA Central Operating Offices and Regional Offices shall be responsible for the proper implementation of this Resolution. This Commission shall take effect immediately and shall supersede COA Memorandum No. 93-316D dated November 11, 1993. Quezon City, July 4, 1995. (SGD.) CELSO D. GAÑGAN, Chairman (SGD.) ROGELIO B. ESPIRITU, Commissioner (SGD.) SOFRONIO B. URSAL, Commissioner ANNEX A REPUBLIC OF THE PHILIPPINES Commission on Audit Quezon City March 8, 1993 MEMORANDUM To : ALL AUDITING UNIT HEADS CONCERNED Subject: Random Number Start for the Second Quarter, 1993 Pursuant to COA Memorandum No. 85-316-C dated September 19, 1985 which prescribes the adoption of the COA-Sampling-Card Methodology (CSCM) in addition to the existing Pareto Sampling Scheme for the post-audit of government transactions, we are furnishing you the following information regarding the starting numbers for the second quarter of 1993. A. B. Pareto Sampling Scheme Reporting Month Table Number April '93 May '93 June '93 6-8 6-7 6-2 Location Column Row 3 5 3 Starting Number Route 431 341 63 97311 82320 20738 -down-down-down- COA-Sampling-Card Methodology April '93 Table I, 4 digits Table II, 3 digits Table III, 2 digits Table IV, 4 digits Table V, 2 digits 5 5 6 1 2 21 36 10 48 9 8930 023 06 0008 18 -down-down-down-down-down- May '93 Table I, 4 digits Table II, 3 digits Table III, 2 digits Table IV, 4 digits Table V, 2 digits 6 2 4 5 1 57 104 25 64 11 8231 554 19 0415 11 -down-down-down-down-down- June '93 Table I, 4 digits Table II,3 digits Table III, 2 digits Table IV, 4 digits Table V, 2 digits 6 1 3 3 5 73 24 15 100 15 7276 926 16 1570 19 -down-down-down-down-down- Additional guidelines on the use of the random number table are: C. 1. When one-digit number is required - drop the left-hand digit of the two-digit random number selected. 2. When more than four-digit numbers are required - add to the selected 4 - digit number the required additional number of the digits from the next adjacent column to the right. In case the selected number falls under the last column, use the first column of the same row. Simplified Sampling Scheme Column Row Starting Number Route April '93 Table I Table II Table III 1 4 3 5 20 35 16 32 805 -down-down-down- May '93 Table I Table II Table III 4 2 4 20 19 1 04 36 108 -down-down-down- June '93 Table I Table II Table III 1 6 4 1 30 77 45 37 193 -down-down-down- Please give this information to the auditors under your jurisdiction who may wish to apply either scheme. COA Director Concerned ANNEX B COA RANDOM NUMBER TABLE I TWO DIGITS FOR NUMBERS 01 TO 50 01 02 03 04 05 06 (01) (02) (03) (04) (05) 45 15 14 24 16 41 03 25 03 19 29 47 37 28 20 12 24 50 13 35 15 20 31 10 13 03 10 38 17 27 (06) (07) (08) (09) (10) 06 14 46 01 05 46 37 18 18 21 46 47 15 22 49 39 46 07 14 16 17 20 44 40 20 14 04 19 40 08 (11) (12) (13) (14) (15) 11 17 19 19 01 48 06 12 29 19 18 19 09 33 12 27 43 20 03 15 21 04 17 26 19 36 33 32 01 01 (16) (17) (18) (19) (20) 26 13 43 35 09 02 22 41 26 37 28 21 35 33 35 19 23 32 34 04 44 28 02 26 42 24 28 21 44 43 (21) (22) (23) (24) (25) 48 19 50 26 26 14 05 41 41 11 06 26 17 04 13 37 15 17 21 48 21 28 26 06 24 13 31 32 17 38 (26) (27) (28) (29) (30) 12 27 42 25 11 35 01 23 13 43 42 24 23 48 19 43 09 17 26 12 11 14 14 16 36 17 20 05 25 41 Table I will be used if the sample interval is from 01 to 50. COA RANDOM NUMBER TABLE II TWO DIGITS FOR NUMBERS 01 TO 99 01 02 03 04 05 06 01 02 03 04 05 94 15 07 05 14 92 57 14 58 58 45 03 59 82 87 62 92 47 66 25 41 89 24 49 37 80 89 20 90 50 06 07 08 09 10 51 03 24 84 18 69 28 62 08 18 69 52 20 86 50 81 13 55 97 41 43 10 97 39 97 19 17 82 82 06 11 12 13 14 15 17 70 58 24 19 71 50 75 73 76 86 14 20 20 16 14 37 94 87 39 85 68 04 46 49 93 47 95 18 56 16 17 18 19 20 40 21 16 74 21 06 49 69 36 78 40 81 70 50 36 29 62 11 41 32 72 06 65 40 57 70 67 48 87 45 21 22 23 24 25 19 58 23 92 47 64 59 52 67 87 30 71 19 01 01 43 20 29 56 19 31 96 59 91 12 34 82 85 12 61 26 27 28 29 30 55 72 13 51 22 50 81 22 76 92 06 94 72 22 16 99 42 12 59 64 80 49 32 27 12 80 41 86 74 37 Table II will be used if the sample interval is from 51 to 99. COA RANDOM NUMBER TABLE III THREE DIGITS FOR NUMBERS 001 TO 999 001 002 003 004 005 006 001 002 003 004 005 949 155 071 055 145 245 703 459 882 887 624 928 472 664 253 180 989 420 990 750 552 689 621 895 313 572 810 038 474 824 006 007 008 009 010 516 032 246 840 481 969 852 220 886 850 814 131 559 973 419 319 017 782 982 706 336 524 421 822 464 994 888 334 876 639 011 012 013 014 015 117 705 587 247 197 186 014 520 320 616 148 376 940 874 394 593 847 495 618 956 093 467 321 150 901 020 991 356 744 182 016 017 018 019 020 400 214 116 743 217 640 981 970 650 836 297 620 116 414 325 270 667 548 087 745 802 082 586 164 222 774 573 183 772 817 021 022 023 024 025 196 585 235 926 478 430 971 219 701 701 433 209 295 596 191 134 682 985 112 261 893 017 330 278 591 310 324 395 322 702 026 027 028 029 030 555 728 132 517 229 016 194 272 622 216 998 424 128 592 641 080 942 286 776 237 115 104 288 364 251 262 105 697 136 800 031 032 033 034 035 693 853 435 633 225 582 854 106 783 718 653 938 910 199 805 393 003 595 135 269 426 784 228 961 962 844 004 648 189 589 Table number III will be used if the sample interval is from 100 to 999. 001 002 003 004 005 006 036 037 038 039 040 831 171 651 172 578 995 788 993 826 857 260 532 482 086 247 819 652 026 423 388 023 932 418 671 521 875 771 042 113 889 041 042 043 044 045 749 151 049 723 224 505 916 328 584 083 470 899 580 387 037 227 576 820 680 165 118 720 712 724 911 813 741 428 130 935 046 047 048 049 050 453 642 008 063 987 967 877 721 039 044 347 248 662 335 997 315 348 762 571 427 913 417 331 146 618 890 797 698 725 863 051 052 053 054 055 968 386 880 791 629 583 040 757 259 661 206 764 803 600 785 758 318 736 821 009 266 759 431 219 412 957 223 203 894 100 056 057 058 059 060 547 374 855 883 779 958 059 449 848 657 631 686 786 838 302 249 483 959 285 314 469 730 218 377 466 781 823 405 471 872 061 062 063 064 065 092 561 543 590 264 076 209 659 613 226 765 681 233 152 339 903 265 780 685 329 161 103 528 415 768 920 365 289 129 126 066 067 068 069 070 935 028 149 705 065 173 627 646 326 729 731 792 706 884 437 084 943 707 891 147 047 521 054 025 441 338 549 462 933 368 071 072 073 074 075 755 436 769 272 367 332 125 404 108 239 515 923 438 873 488 333 951 604 312 221 337 159 931 740 004 311 496 727 902 292 076 077 078 079 080 921 859 510 398 598 045 704 925 362 397 075 127 747 295 439 167 193 546 737 211 950 980 615 605 046 463 168 442 860 029 081 082 083 084 085 121 047 734 048 361 271 597 865 181 522 446 733 024 342 663 596 862 162 501 804 732 019 301 643 948 861 143 491 695 089 086 087 088 089 090 682 983 303 683 030 827 122 492 828 172 963 273 644 964 304 101 452 796 102 494 241 601 930 243 649 401 742 062 402 798 091 092 093 094 095 382 808 290 870 503 545 960 473 056 692 709 109 655 235 846 845 286 829 383 031 984 461 986 565 205 174 632 184 748 384 096 097 098 099 100 091 753 455 238 188 274 938 665 406 369 479 114 878 670 570 656 296 057 898 700 830 530 236 095 066 988 710 403 275 252 101 102 103 104 105 190 207 253 349 531 370 389 457 554 739 574 602 696 760 099 832 907 976 097 350 096 176 208 280 557 279 345 390 508 909 106 107 108 109 110 979 575 672 375 539 240 939 120 833 192 509 351 507 353 550 699 558 716 673 256 100 912 254 255 300 392 352 537 608 609 111 408 510 611 674 834 035 112 113 114 115 072 512 518 420 359 619 077 766 380 676 751 369 416 837 218 996 410 360 377 263 511 514 659 918 ANNEX C SAMPLING EVALUATION WORKING PAPER _____________________________________ Agency Name 1 2 3 4 5 6 7 8 9 Total SUBSTANTIVE EVALUATION A B C D RefeBook Audit Absolute rence Value Value Error 6th 1,000 900 100 27th 2,000 1,900 700 29th 5,000 3,300 3,000 58th 3,000 0 2,000 68th 25,000 23,000 500 79th 3,500 3,000 4th 6,000 / 12th 4,600 / P 2,000,000.00 % for Subs. Error = COMPLIANCE EVALUATION I II X III X 1 x x 1 1 1 X P6,400.00 6,400 ------------- = .0032% 2,000,000 Total 4 % for Compliance error = 4 ----- = 4% 100 Maximum number of errors that may be detected per COA Simplified Sampling Scheme. 8% ====== 20% ======= Did samples selected pass sampling test? Yes ====== Yes/No yes ======= Yes/No * Place a check mark (/) if the same as book value. ** Compliance errors : I - No OR II - No Inspection Report III - No canvass papers The samples above were taken from an adjusted population of 1,980 wherein the auditor selected 100 samples. After auditing and evaluating the samples, it was found out that errors were below the tolerable error rate for both substantive and compliance test. All the transactions in the population passed in audit. Likewise, errors detected will be noted in the CSB. ANNEX E April 7, 1995 MEMORANDUM to: All Heads of Auditing Units Concerned SUBJECT: Random Number Start for the Month of March 1995 applicable to the Test Day Audit Scheme Pursuant to COA Memorandum No. 95-_____ dated _______ 1995 prescribing the adoption among others of the Test Day Audit Scheme in addition to the other audit sampling schemes already prescribed by this Commission, you are furnished herewith the following information regarding the random number start for the month of March 1995 for use in the application of the Test Day Audit Scheme: Auditing Unit/Agency Table I Location Column Row Starting Number Route "AA" Auditing Unit 01-50 5 9 40 down "BB" Auditing Unit 01-50 1 7 14 down "CC" Auditing Unit 01-50 3 10 49 down "x x x x x x x x" 01-50 xx xx xx down "x x x x x x x x" 01-50 xx xx xx down ____________________ Director