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Part I:

1. Define risk assessment as an audit procedure

i. Risk assessment as an audit procedure is the process of determining the
risk of misstatement on accounts, projects or programs of the audited
agency.

2. Discuss briefly how you applied risk assessment in the audit of your respective
agencies
i. We use risk assessment in determining the degree of susceptibility of
the accounts, programs or projects on misstatement and
misappropriations, e.g in our conduct of audit on the accountability on
accountable forms, we first determine the possible risk that some
accountable forms might not be properly reported, and whether or not
there was a shortage or overage of these accountable forms likewise
the impact to the agency if these accountable forms were not properly
accounted.

Part II:

1. What is the correct bank balance as of December 31, 2018?

Bank Balance 12/31/2018 PHP 518,800.00

Add: Deposit in Transit PHP 5,760.00
bank error 1,200.00 6,960.00

Less: Outstanding Check 41,760.00

Adjusted Bank Balance 12/31/2018 PHP 484,000.00

2. How much is the cash shortage/ overage as of December 31, 2018?

Book Balance 12/31/2018

Cash per ledger PHP 491,200.00
Petty Cash Fund 1,200.00
Unadjusted Cash Balance 12/31/2018 492,400.00
Improperly recorded collections
received from COA PHP 3,200.00
received from CHED 2,400.00
unrecorded cash received during 2018 5,840.00
Unrecorded interest 160.00
replace check ( error in issuance) 400.00 12,000.00
Adjusted Cash Balance per Book 12/31/2018 504,400.00
Cash Balance
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Per Bank PHP 503,200.00

Petty Cash Fund 1,200.00 504,400.00
Shortage/ Overage PHP -

3. How much is the cash shortage/ overage for the period January 1-10, 2019?

Cash Collections January 1-10, 2019 PHP 68,800.00

Add: Unrecorded Collections
Checks receive from NGA PHP 3,360.00
Collection in PCF 6,800.00 10,160.00
Adjusted Collections for Jan.2-10, 2019 78,960.00
Less: Deposits 60,800.00
Total Accountability for Jan.2-10, 2019 18,160.00
Less: Cash Accounted
Currency and coins PHP 3,080.00
Expense vouchers (paid) 160.00 3,240.00
Shortage PHP 14,920.00

4. Prepare an Audit Observation Memorandum (AOM) for the audit exceptions

noted in the problem.
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Republic of the Philippines

Commission on Audit
Regional Office No. 02
Audit Group A
DBM Regional Office No. 02

AOM No. : 2019-001(18)

Date : January 21, 2019

AUDIT OBSERVATION MEMORANDUM

For : Regional Director

DBM Regional Office No. 02
Regional Government Center
Carig Sur, Tuguegarao City

Attention : Regional Accountant

DBM Regional Office No. 02

We have audited the cash and accounts of DBM Regional Office No. 02 for the period
covered January 1-10, 2019 and observe the following;

Collections made for the period covered January 1-10, 2019 amounting to P
78,960.00 were not deposited intact contrary to rules and regulations as prescribed
under COA Memorandum 2014-003, Revised Cash Examination Manual.

As prescribed under COA Memorandum 2014-003, Revised Cash Examination

Manual, it clearly states that collections should be deposited intact in the Authorized
Government Depository Bank.

In the conduct of audit, it was observe that collections were not deposited intact in the
Authorized Depository Bank, for the period covered January 1-10, 2019, a total of P
68,800.00 were reported as collections of which only P60,800.00 were deposited. Likewise, it
was noted that collections receive from other NGA and collections made in Petty Cash Fund
amounting to P3,360.00 and P 6,800.00 respectively, were not properly recorded. With this
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practice in place, accumulation of cash on the custody of the Collecting Officer could result
to possible misappropriation or loss through theft.

We recommend that the Management to instruct the Collection Officer to strictly

adhere on the rules and regulation on the handling of cash collections and to regularly deposit
intact any collections made by the Collection Officer as to avoid any possible loss of
collections thru misappropriation or thru theft.

May we have you comments from the above mentioned audit observation within
fifteen (15) calendar days from receipt hereof.

SGD.
Juan A. Dela Cruz
Audit Team Leader

SGD.
Juana A. Dela Cruz
Supervising Auditor

Proof of receipt
Name Signature Date

Regional Director
DBM R02 ______________ ___________

Regional Accountant
DBM R02 ______________ ___________