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National Audit Authority

The Evolution of
Auditing

Prepared and Presented by: Danilo V. Cabug, Consultant


Rationale and Objectives
Why is there a shift to Risk-Based Audit Approach?
The RBA will:

- align the audit process more closely with the government’s


needs to improve the governance structure of the auditee
particularly in the area of financial reporting;

- provide users of the financial statements a higher level of


assurance that the auditee’s processes are designed and
operating effectively;

- enable the performance of a comprehensive audit of accounts


and use of funds and property;
Prepared and Presented by: Danilo V. Cabug, Consultant
Rationale and Objectives
Why is there a shift to Risk-Based Audit Approach?
– enable auditors to check compliance of auditees on laws,
circulars and regulations, and will determine whether
related compliance risk is properly addressed;

– strengthen accountability in the auditees;

– recommend numerous value-added deliverables and


measures to improve the efficiency and effectiveness of
government operations noted in the course of the
financial audit.

Prepared and Presented by: Danilo V. Cabug, Consultant


Evolution of Auditing
• External Influences

Stricter regulatory
Greater environment risks environment

Corporate Governance
Rapid changes in
Provisions/Requirements Audit
economy

Technological Greater assurance for


Advances investors and the
Capital markets

Prepared and Presented by: Danilo V. Cabug, Consultant


Evolution of Auditing
• Internal Influences

• Rising constituent issues and need


for assistance

•Increasing management and stakeholders


expectations for:
Audit •better value
•greater risk coverage
•alignment with auditees’ objectives, and
•strengthening accountability
• Need for greater assurance on controls and
improvements

Prepared and Presented by: Danilo V. Cabug, Consultant


Evolution of Auditing
Increasing expectations of the audit
function
External Drivers Effective Increased
Change Agent Flexibility

Auditee
Requires Audit to
Risk/Process/ Provide World Class
Add More
Financial Services Value
Focus

Internal Drivers Deeper Skill Expertise In


Sets Technology

Prepared and Presented by: Danilo V. Cabug, Consultant


Evolution of Auditing
1st Generation 2nd Generation 3rd Generation 4th Generation
(Pre-1980) (1980s) (1990s) (2000 - ?)
Controls Control Frameworks Risks Enterprise-wide
Risk Management

Start with existing Start with financial/ Start with a


processes, compliance risks. thorough Start with an
procedures and understanding of understanding of
control activities. Determine controls that the organization and the organization and
should be in place. the various agency the various auditee
Audit for risks. risks.
compliance Audit for design, Determine the Risk
operational Determine controls Management
effectiveness and that should be in Process (RMP) that
compliance. place. should be in place
to effectively
Audit for design, manage the key
operational risks.
effectiveness and
compliance. Audit for design,
operational
effectiveness and
compliance within
each of the RMP
components.
Prepared and Presented by: Danilo V. Cabug, Consultant
Evolution of Auditing

Comparison of Key Concepts


Previous Auditor Roles New Auditor Roles

• appraisal function
• assurance and advisory activity
• examines and evaluates its activities as a
service to the organization • to add value and improve an
organization’s operation
• assists members of the organization in
the effective discharge of their • helps an organization accomplish its
responsibilities objectives

• provides analysis, appraisals, • brings a systematic, disciplined


recommendations, counsel and approach to evaluate and improve the
information concerning the activities effectiveness of risk management,
reviewed control and governance processes

• promotes effective control at reasonable


cost

Prepared and Presented by: Danilo V. Cabug, Consultant


Evolution of Auditing
Challenges to meeting higher audit expectations
Challenges
Difficulty Positioning Obtaining
Audit in More Management
CHALLENGES

Progressive Role Broad Scope, “Buy-In”


Limited Audit Plan
Resources Completion
Need for a More Structured Compliance with Standards
and Systematic and Governance
Methodology
Need for Soft
& Consulting
Skills Clear understanding of
Challenges Overcoming Role in Risk Management
Need
Management’s Traditional for Tools
View of Audit and Frameworks

HIGHER EXPECTATIONS FROM AUDIT

Prepared and Presented by: Danilo V. Cabug, Consultant


Evolution of Auditing
Audit Competencies to Meet Today’s Challenges
Technical Skills
•Knowledge of Risk-based audit approach and methodology
•Skills on computer-based audit procedures and techniques
•Familiarity with tools and frameworks (ex. COSO, process mapping,
control self-assessment, risk assessment)
•Analytical and critical thinking

Soft Skills
•Interviewing
•Facilitation and presentation skills
•Written communication and effective reporting
•Interpersonal skills
• Project management

Prepared and Presented by: Danilo V. Cabug, Consultant


Prepared and Presented by: Danilo V. Cabug, Consultant

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