COMMISSION ON AUDIT MEMORANDUM NO. 96-054 December 2,1996

COMMISSION ON AUDIT MEMORANDUM NO. 96-054 December 2,1996

TO:All COA Assistant Commissioners, COA Directors of Central and Regional Offices, Heads of Auditing Units, Team Supervisors/Leaders of Audit Teams and all Others Concerned.

SUBJECT:Guidelines on the Conduct of Exit Audit Conferences.

1.RATIONALE

The exit audit conference, held at the end of the audit, involves the formal presentation of the audit findings and recommendation by the head of the auditing unit or team leader of the audit team to the agency head/other agency officials before the audit report is finalized.

The State Audit Manual and more recently COA Memorandum No. 93-813 (Guidelines on the Conduct and Reporting of Fraud Audits) have already dwelt on the need and the manner of conducting exit audit conferences.

It has, however, become necessary to reiterate the specific guidelines on exit audit conferences in the light of the various complaints received by the Commission from certain agency heads regarding the supposed failure of some Auditors to solicit management's comments and justifications on certain audit findings before the report is finalized and transmitted.

2.OBJECTIVES OF EXIT AUDIT CONFERENCES

Exit audit conferences serve to:

2.1ensure fair and balance reporting. Management is given the chance to present its side on the issues raised in the report.

2.2ensure correctness of the audit findings once these are finalized and reported. Management can clarify issues which the auditor may not have fully understood, with justifications and additional documentation whenever deemed necessary.

2.3facilitate acceptance and implementation of audit recommendations. Recommendations are discussed as exhaustively as possible so that their workability and adaptability to the particular work situation are ensured.

2.4avoid adverse reactions and criticism on audit findings as these are discussed openly with agency representatives, demonstrating the auditor's good intention of helping management.

3.SPECIFIC GUIDELINES

3.1Preparing for the conference

The Auditor/Team Leader shall formally invite the agency head and other officials concerned, of the scheduled conference, at least two weeks in advance. The advance invitation is intended to ensure availability of the agency officials and to allow time for any changes in schedule.

The invitation which shall be signed by the head of the auditing unit/team leader shall indicate -

-when the audit highlights will be available, and

-the agency officials, aside from the agency head, who are most affected by the audit findings and who should be present during the conference.

3.2Preparing the Audit Highlights

The Auditor/Team Leader shall prepare the audit highlights to serve as the agenda for discussion during the conference. The audit highlights is a summary of the audit findings and recommendations, and contains the following (Please see attached format):

a.Topic Sentence

Audit finding as summarized in one or two Sentences.

b.Condition (what is)

c.Cause (Why did the condition happen and what caused it)

d.Criteria (what should be)

e.Effect (what are the actual/potential results of the condition)

f.Recommendations (what should be done to eliminate the cause/s and who should do it) Deficiencies for which audit memoranda were previously issued in the course of the audit conducted, but for which management comments/justifications are not considered acceptable by the Auditor and those for which no justification has been received, shall also be included in the discussion during the exit audit conference.

3.3Timing of exit conferences and control over the audit highlights

3.3.1Exit audit conferences should be held at least two days before the scheduled field audit pull-out, in the case of audits undertaken by audit teams or at least a month before the deadline for the submission of Annual Audit Report, in the case of audits by resident auditors.

3.3.2The audit highlights should be formally sent to management thru the agency head, at least two days before the scheduled conference so that management can react properly to the audit findings. The highlights shall be marked "FOR DISCUSSION PURPOSES ONLY AND SHOULD NOT BE CONSIDERED FINAL".

3.3.3On COA's side, precautions should be undertaken to preclude any premature disclosures and information leaks before the audit report is officially released by the Commission. For this purpose -

-the Auditor should limit the circularization of the audit highlights only to the agency head who shall decide who among the agency officials noted in the invitation should attend the exit conference and should be furnished with copies of the audit highlights.

-in the case of fraudulent or very grave findings, written permission of the COA Director concerned should be obtained before the finding can be discussed in the scheduled exit audit conference. Otherwise, such findings should not be included in the audit highlights to be provided in advance to the agency head. The COA Director concerned shall decide whether or not such findings should be treated separately in accordance with paragraph 3.4 hereof.

3.4Venue for the exit audit conferences

Exit audit conferences shall ordinarily be held in the business premises of the auditee agency. However, where it is not advisable to hold the conference in the business premises of the auditee or anywhere within the locality, owing to the sensitiveness of the issues involved or when the security and safety of the auditing unit or the audit team is in danger, the conference may be held in the COA Regional Office or Central Office whichever is deemed appropriate.

3.5Attendance in the exit audit conference

3.5.1as stated in paragraph 3.3.2 hereof, the agency head shall decide who and which management officials shall represent their side in the exit audit conference.

3.5.2The head of the auditing unit shall preside over the exit audit conference for audits performed by his unit.

3.5.3The Team Supervisor shall preside over the exit audit conference for audits undertaken by audit teams under his supervision.

3.5.4The COA Director concerned or his assistant shall preside over the exit audit conference if so requested by the Auditor, and if:

oin the opinion of the Director, the rank of the agency head necessitates that the conference be presided over by a higher ranking COA official.

othe gravity of the findings necessitates the presence of the COA Director or his authorized representative to show support by the Commission to the Auditor's findings and recommendations.

It is understood that in this case, the audit findings and recommendations have been reviewed and challenged by the COA Director and that he concurs with the Auditor's findings and recommendations.

The Auditor shall furnish the COA Director with a copy of the audit highlights at least one week before the scheduled conference.

3.6Conduct of the exit audit conference

3.6.1During the conference the following points should be emphasized:

othat the findings are not considered final and that management is expected to challenge the findings with documentation furnished the auditor where necessary.

othat the management rejoinders should be furnished to the auditor within two weeks from the date of the exit audit conference, unless a written request for extension is submitted and relayed to the COA Director concerned thru the Auditor who shall recommend the action to be taken on the request. For purposes of the management's rejoinder, the portion of the audit highlights below the caption "Management's Comments" may be used (See Annex A hereto attached).

othat failure to submit the rejoinders after two weeks from the date of the exit audit conference or after the lapse of the period of extension granted, shall mean that the findings and recommendations can be finalized based on the reactions and comments given by management during the conference.

othat information leaks should be avoided by management and that COA has already taken precautionary measures to avoid the same.

3.6.2The Auditors should be prepared to get adverse reactions and criticism from agency officials. No matter what happens, the Auditor's shall always maintain the decorum and conduct befitting public officials.

3.6.3The Auditor/Team Leader shall assign a staff who shall take notes of the proceeding and prepare the minutes of the conference.

3.7Evaluating management's reactions/comments

3.7.1If management's rejoinders and responses are justified the findings may be dropped or revised in the light of the additional evidences presented.

3.7.2The auditor shall ensure that his action is supported by proper documentation particularly in cases where the findings are retained in the final audit report despite the rejoinders/comments of management.

4.FAILURE OF THE MANAGEMENT TO ATTEND THE EXIT AUDIT CONFERENCE

In the unlikely event that no exit audit conference can be held due to the failure of the management to honor the invitation of the auditor, the auditor shall immediately inform the head of the agency of the following:

4.1the fact of failure of the management to honor the invitation of the auditor to the exit audit conference despite the advance notice given;

4.2that interview of time constraint/proximity of the deadline for the submission of the audit report, the management is requested to submit immediately its rejoinders to the audit findings and recommendations contained in the audit highlights previously furnished the head of the agency; and

4.3that failure to submit the rejoinders after two weeks from receipt of this communication shall mean that the findings and recommendations can already be finalized.

The foregoing, however, shall not apply in instances where there is a request from the agency head for the postponement/resetting of the date of the exit audit conference. A copy of such request shall be forwarded by the auditor to the COA Director concerned for the latter's information.

5.REPEALING CLAUSE

Any provision of existing Memoranda/issuances of the Commission inconsistent herewith are hereby repealed or modified accordingly.

6.EFFECTIVITY

This Memorandum shall take effect immediately.

(SGD.) CELSO D. GAGAN Chairman

ANNEX A

Name of Agency

Audit Highlights

(FOR DISCUSSION PURPOSES ONLY AND SHOULD

NOT BE CONSIDERED AS FINAL)

AUDIT OBSERVATIONS

MANAGEMENT COMMENT