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INTERNAL

Lapanday Multipurpose
Cooperative
AUDIT
REPORT
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EXECUTIVE
SUMMARY

CONTENTS
Type chapter title (level 1)........................1
Type chapter title (level 2)......................2
Type chapter title (level 3) 3
Type chapter title (level 1)........................4
Type chapter title (level 2)......................5
Type chapter title (level 3) 6

Scope
As set out in our engagement letter dated February 24, 2020, the scope of our
engagement was to conduct a compliance audit to the organization, Lapanday Multi-
Purpose Cooperative for year-end 2019 and an audit of their current internal controls.
During the engagement, we direct our procedures to the following:
1. Prepare an audit on the cooperative’s compliance with the Cooperative
Development Authority’s requirements.
2. Audit the cooperative’s internal control.
3. Provide advice and recommendation in areas with identified certain internal
control weaknesses, opportunities for improvement of internal processes and
business operations, and other matters.

Overall Observation
Based on our examination on their compliance with the Cooperative Development
Authority (CDA), Lapanday Multi-Purpose Cooperative is in full compliance according to
documentations required by MC No. 2017-05, Series of 2017 and dated September 22,
2017 issued by the CDA. On the other hand, we observed some strengths and
weaknesses in their current established internal controls.

Summary of Findings
Audit of the current established internal controls of the cooperative
EXECUTIVE 2

SUMMARY

 There is no proper segregation of duties.


 No safety box for cash and cheques on hand.

Advice and recommendation in areas with identified certain internal control


weaknesses, opportunities for improvement of internal processes and business
operations, and other matters.

 If they can no longer afford to hire another employee, the cooperative must
establish mitigating control to eliminate or at least minimize business risks.
 They may opt to install a safety box for their undeposited cheques and cash on
hand to avoid loss or theft, or establish a policy requiring all cash receipts to be
deposited directly to their bank account.
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INTRODUCTION

We conducted an audit at Lapanday Multi-Purpose Cooperative from March 3, 2020


to March 5, 2020. Our audit included examination of their compliance with the CDA
for the year-end 2019 and examination of their current established internal
controls. Prior to the conduct of the audit, a memorandum was issued to the
responsible person at least 2 weeks before the conduct of the audit.

The primary objective of the audit are the following:

 To determine the conformance of the cooperative to the compliance


requirements set by the CDA
 To determine whether files are verifiable with their corresponding supporting
documents
 To determine areas of their internal controls that need improvement

Our audit of the Cooperative’s compliance and internal controls would not
necessarily disclose all significant deficiencies in these structures, because we
employed, as is customary, only tests of selected accounting records and related
data.
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AUDIT SCOPE

The audit is from objectives and scope described in our engagement letter dated
February 24, 2020, which was to conduct a compliance audit for the year-end 2019
and internal control audit to Lapanday Multi-Purpose Cooperative. During the
engagement, we direct our procedures to the following:

 To prepare an audit on the cooperative’s compliance with the Cooperative


Development Authority’s requirements.
 To audit the cooperative’s internal control.
 To provide advice and recommendation in areas with identified certain
internal control weaknesses, opportunities for improvement of internal
processes and business operations, and other matters.
APPROACH and 5

METHODOLOGY

The audit team used different procedures to arrive at a conclusion. They used the
following approaches and procedures.

 Inquiry – this was to ask clear, concise and relevant questions to the
organization using a checklist. The audit team also inquire from formal
written and informal oral inquiries. It also involves asking follow-up
questions and evaluating the responses.

 Verification - the audit team examine the records and documents


whether internal or external, in paper form or other media. This was to
ensure that the cooperative adheres or complies with the requirement
of the Cooperative Development Authority (CDA).

 Observation – this was used for checking the office for possible
weaknesses in their internal control to avoid business risks.
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RISK EXPOSURE
COOPERATIVE’s 7

RESPONSIBILITIE
S

The following are the responsibilities of the audit clients:

1. To provide the team with the necessary documents and information needed
in the audit.
2. To allow the audit team to conduct tests and procedures needed in audit.
3. To give assistance to the auditing team during their audit.
AUDITOR’s 8

RESPONSIBILITIE
S

The audit team is expected:

1. To conduct an audit in conformity with the International Standards for the


Professional Standards of Internal Auditing and Code of Ethics.
2. To express an opinion regarding the compliance of the organization with
regards to the government’s requirements based on the result of the audit.
3. To gather sufficient data during the audit procedures with utmost
confidentiality.
4. To recommend consideration for the improvement of their internal control.
FINDINGS and 9

RECOMMENDATIO
N

Summary of Findings
Audit of the current established internal controls of the cooperative

 There is no proper segregation of duties.


 No safety box for cash and cheques on hand.

Advice and recommendation in areas with identified certain internal control


weaknesses, opportunities for improvement of internal processes and business
operations, and other matters.

 If they can no longer afford to hire another employee, the cooperative must
establish mitigating control to eliminate or at least minimize business risks.
 They may opt to install a safety box for their undeposited cheques and cash
on hand to avoid loss or theft, or establish a policy requiring all cash receipts
to be deposited directly to their bank account.
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Internal Control Checklist for Cooperatives

Organization and Human Resources Yes N NA


o
Educational qualifications and industry experience are
rigidly examined in hiring personnel
Officer, management staff, and members are given regular
trainings on cooperative operations and on trends and
innovations of the cooperative organization
Orientation program is given to new employees and
members on their responsibilities
Personnel handbook/manual are given all personnel upon
entry to the coop organization
Reward and recognition is given to the officers,
management staff, and members for their exemplary
actions
Disciplinary actions are given to erring officers,
management staff, and members
There is enough manpower to attend to the needs of the
members
A committee is set to screen and to select applicants to fill
up vacant positions
Employees are well compensated
The vision and mission statement of the cooperative is
properly posted and disseminated

Production and Operations Yes N NA


o
Services and products offered by the cooperative satisfy the
needs of the members
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Services offered by the cooperative are handled by


competent manpower/personnel
Policies on granting of loans and credits are strictly followed
and implemented
Amnesty program is given to delinquent members
Reports are regularly prepared and submitted
Financial statements are presented during meetings or
assembly
Maintenance program on physical facilities and tools
equipment is in place and implemented
Appropriate tools, equipment, and facility and the desired
specifications are purchased
Appropriation for capital expenditures are prepared and
made available when needed
Canvass and requisition slips are prepared prior to
acquisition/purchase.
Policies on credit and loan collection are strictly followed.
Furniture, fixtures, and equipment issued to employees are
covered by a memorandum receipt
Accountable officer or employee is assigned for the receipt
and maintenance of acquired property and equipment
Accountable personnel is assigned to check incoming and
outgoing inventories
All inventories and checked against delivery receipts and
invoices.
Obsolete, damaged, and slow moving items are reported to
responsible personnel
All shipments and deliveries are accompanied by invoices
and delivery receipts
Inventory count is done by a separate personnel other than
the one in charge of recording
Only the designated accountable personnel have access to
the store room
The store room is adequately secured

Marketing Yes N NA
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o
Designated personnel or officer is in charge of the
marketing program of the cooperative
Incentives are given to members and employees in relation
to the marketing efforts of the cooperative
Budget for sales promotion and marketing strategies are
approved and appropriated.
Marketing programs are regularly evaluated and properly
implemented by designated officer
Feedback mechanisms are designed to determine the level
of satisfaction of clients/members
Prices of goods and services (interest) are comparable and
can compete with the industry
Quality control measures are designated to monitor and to
check any deficiencies of services and products offered to
members.
Pricing policy on services and products offered are regularly
evaluated and properly adjusted
Products and services are undergoing innovations and
improvement
Evaluation is made on the implementation and result of the
marketing activities of the cooperative

Cash Receipts Yes N NA


o
The treasurer/cashier and other employees authorized to
handle cash are bonded
The treasurer/cashier and other employees authorized to
handle cash do not handle the books of account
All cash receipts are acknowledged with pre-numbered
official receipts
Collections during the day are deposited not later than the
next banking day.
Employees other than the treasurer/cashier authorized to
receive cash turnover daily to the latter all collections
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together with copies of the issued official receipts and the


unused ones
The treasurer/cashier prepares a collection report covering
all collections during the day
Post dated checks are accepted as payment but official
receipt is issued only at the date of check.
A petty cash/revolving fund is set up for minor
disbursements consisting of day to day expenses limited to
a certain amount in accordance with the board policies.
All disbursement except those that are paid from the petty
cash fund are paid by checks.
Each check prepared is covered by a pre-numbered cash
voucher & supported by documents
All checks are issued in numerical sequence
All checks are made payable to specific person or identity
Unused check booklet are under the custody of the
accountant/accounting head.
Signing of blank checks is strictly prohibited
Bank reconciliation is done monthly
The audit committee audits all disbursement transactions
Disbursement from the petty cash are covered by a pre-
numbered petty cash voucher and supported by
documents.
A surprise audit by the audit committee of the petty cash is
done from time to time
All loan transactions are made in accordance with the duly
approved loan policy
All loan applications are approved by the credit committee
except those of the BOD members, senior officers which are
approved by the BOD en banc.
All loan disbursements are covered by a promissory note
signed by the borrower and a co-maker.
Appropriate charge slips signed by the member-purchaser
cover credit purchases from the cooperative store.
Aging of accounts receivable is periodically done.
Invoice are checked for accuracy before payment
The bookkeeper is the only person doing posting in the
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subsidiary ledger
Schedules of payables are periodically prepared
Accrued expenses are settled immediately
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Marjorie Cabatingan
Reflection

Upon doing the audit report, there is some realization that comes up to my mind. First, my
perspective in audit changed. I thought that in order for you to conduct audit is you need to be
genius in accounting but this activity proves me wrong. What is theoretically taught in school is
way more complicated than what is really practiced in real world. Second, Audit is made by
collaboration between the auditors and the auditees because without cooperation between the
two we cannot come up with a good report. Third, in making audit report it requires time, effort
and patience.
It was a though and exciting journey. As we go in our journey to make an audit report there were
some hindrances but we make sure to find ways for those hindrances. We are so glad that the
cooperative that we chose were so friendly and gave us the information that we needed. I
remembered the very first time that we met our clients none of us really knew what exactly what
we’re doing. What we did was just ask question based on what we learned from our Internal Audit
and auditing theory subject. We follow the steps and rules of conducting audit and our knowledge
helps us to get through in our first visit. But as the time goes by we finally know what the essence
of Auditing. Lastly, Teamwork. In every project there should be cooperation and exchanging of
knowledge between the people in involved and with this they will come up with successful
presentation/project and that is what we have teamwork.
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BORLASA, JOHN RAMMEL B.


Reflection

Business achievements comes with an effective and efficient financial monitoring,


internal/external controls (if any), compliance, financial reporting etc. This must be complete or
maybe check annually or when the management needed it. Auditing is necessary in every business
to make sure they achieve their company goals. Internal Auditing is also necessary in every
company especially for the decision maker or upper management as a whole. By doing internal
audit, upper management can overview their company’s doing especially their employees, lower
management or even their company’s operation. Internal Auditors can simply communicate to the
upper management about the status of their company in order for them to decide what are the
best steps to be taken to aim their target. Internal auditing may be different from external
auditing however by having this it can help company’s operation success in a long run.
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Robin Ross F. Dalumpines

Reflection

I was ecstatic to conduct an internal audit because I did not have much chance
during my internship, which involved mostly tax jobs and bookkeeping. When I learned
that we were going to audit outside the school, I honestly felt nervous because it is
something that is new to me. Bagged only with our classroom knowledge, we all had no
actual practice of internal audit, which was the reason of our wariness. Thankfully, we
have a professor who encouraged and supported us in this activity.
At first, it was a challenge not only for us, but actually for the whole class, just to be
able to find a cooperative who were willing to be audited. Thankfully, my friend knew
someone who was a member of a cooperative, and they happily accepted our request for
an audit. We sent them our engagement letter and we agreed on a date for the audit.
Then, as an audit team, we made a plan on how to conduct the audit and the things we
needed for the said activity.
Our first meeting with our clients, Lapanday Multi-Purpose Cooperative, was nerve-
wracking since we weren’t very sure on what to expect. Fortunately, the employee who
assisted us was very welcoming. The audit went off without a hitch since she answered all
our questions without any hesitation and provided us everything we asked for. During this
audit, we found out that she was the only employee on-duty these days and that their
cooperative was planning for dissolution. Therefore, we concluded that there was no
segregation of duties since she was the only one doing all kinds of tasks in the
cooperative.
The fact we were able to provide and finish the audit report was an achievement for
us as an Accounting Technology student. I learned during this activity that teamwork and
patience are essential and vital for the success of any activity.