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11th and 12th tower 1

Ayala Avenue
Makati City
Philippines

REPORT OF INDEP ENDENT AUDITORS


The Board of directors
L.A.Bauzon Incorporated
San Miguel Street
Metro Manila
We have audited the management's assessment of the effectiveness of internal controls over financial
reporting. L.A. Bauzon Incorporated maintained effective internal control over financial reporting as of
December 31, 2014, based on the Int egrated Framework issued by the Committee of Sponsoring
Organizations (COS O).
Managements Re sponsi bility for the effectivene ss and asse ssment of internal control
The management of L.A Bauzon Inc orporated is responsible for maint aining effective internal control and
its assessment. Such responsibility also includes internal control which the management determines is
necessary to enable the preparation of financial statements that are free from material misstatement
whet her due to fraud or error.
Auditors Re sponsibility
Our res ponsibility is to express an opinion on management's assessment of the effectiveness of the
company 's internal control over financial reporting we conducted our audit based on Philippine St andards
on auditing (PSA ). It is the auditors responsibility to communicat e appropriately, to those charged with
governance and management, deficiencies in internal control.
The auditor is also required to obt ain an understanding of internal control relevant to the audit when
identifying and assessing the risk of material misstatement. Our audit included the following: appraise
whet her internal cont rol components are well designed and properly implement ed, evaluate whether
internal control objectives are achieved, and evaluate control effectiveness of operating systems and
support systems for a specific period or date. We believe that our audit provides a reasonable basis for
our opinion.
The company's internal control over financial reporting is a process designed to provide reasonable
assuranc e regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with Philippine Financial reporting standards.
Internal Control over Financial Reporting
A company's internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable det ail, accurately and f airly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with
PFRS, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unaut horiz ed acquisition, use, or disposition of the company 's
assets that could have a material effect on the financial statements.

The audit that we conducted can only provide reasonable assurance with regards to the effectiveness of
companys internal control and managements as sessment of internal control. There are inherent
limitations that the auditor considers which may not prevent or detect misstatements such as future
conditions that may render existing internal controls inadequate.
Auditor s Opinion
In our opinion, the management's assessment that L.A. Bauzon Inc orporated maintained effective internal
control over financial reporting as of December 31, 2014, is fairly stated, in all material respects, in
accordance with the criteria established in Internal Control Integrated Framework issued by the
Committee of Sponsoring Organizations (COSO).

Empha si s on matter paragraph


The auditor is not to ex press an opinion with regards to the efficiency of L.A Bauzon incorporateds
internal control. We have identified the following weaknesses in internal control which do have a sufficient
importance to merit management attention. (1) The auditor believes that managements petty cash control
may be compromise if PCF verification/checking are conducted by lower level personnel and (2) control
for disbursement authorization may be overridden if unexpected disbursements occur that requires
immediat e disbursement.
Recommendation
As auditors, we highly recommend that P etty Cash count must be conducted by an employee/staff with a
higher position than the assigned petty cash custodian to avoid seniority and manipulation. The
management should also continue implementing random/ rotational checking taking int o account the
preceding recommendation.
The company implements a preliminary procedure of authorization for its disbursements transactions. The
auditors take into account that such preventive measure might be overlooked in terms of unexpected
disbursements (except covered by PCF) thus recommends that L.A Bauzon incorporated should identify
and create standard procedures and automatic approval criteria for priority disbursements.

LALLAVE, TAB LANTE & Co.

By: Kevin Arellano, CPA


Partner
CPA Reg No. 1234567
TIN 123-456-789
PTR No. 1234567 January 2, 2015
Firms BOA/PRC Cert of reg 1234

February 6, 2015

Auditing and Assurance Information System (ACC19)

Professor Leandro Aian Bauzon

REPORT OF INDEPENDENT AUDITORS

Arellano, Kevin
Catalan, Jennylyn
Lallave, Cherry
Lallave, Kevin
Marquez, Valerie
Pagkalinawan, Jay
Tablante, Adam
Villanueva, Bea

February 6, 2015

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