College of Accountancy and Accounting Information System

AUDIT PLAN
Audit of Banks
PHILIPPINE NATIONAL BANK

(Pre 4 Auditing and Assurance: Specialized Industries)

Members:
1. Bucsit, Joshua M.
2. Albay, Jay Ann B.
3. De Leon, Maricar H.
4. Fernandez Justin Carl H.
5. Ibarra, Jennifer
6. Lumague, Eljohn
7. Luna, Annalie R.

Submitted to: Ms. Virginia Rowella Famarin

Date of Submission: March 23, 2024

 INTRODUCTION
What is an Audit Plan?
The precise guidelines that must be followed when conducting an audit are
outlined in an audit plan. It aids in the auditor's acquisition of adequate evidence relevant
to the audit's conditions, controls audit expenses, and prevents miscommunications with
the client. Establishing the overarching plan for the audit engagement is part of audit
planning, which also focuses on the methods for risk assessment and the reactions to
major misstatement risks that are identified.
An audit program, also known as an audit plan, is an action plan that specifies the
strategies that an auditor will use to ensure that a company meets compliance criteria.
The goal of an audit program is to create a clear structure that any external auditor can
understand. The report should contain the official examination findings, conclusions, and
reasons. The audit program objectives drive the preparation of the audit report and are
based on the company's rules, methods, and recommendations. These objectives may
include how the audit committee will maintain efficiency, professionalism, and an
established standard of conduct throughout the auditing process.
The process of audit planning is a crucial aspect of any auditing exercise. It involves a
series of steps that determine the overall direction of the audit, the techniques to be
employed, and the scope of the audit. This is followed by the preparation of a general plan,
which outlines the key objectives and timelines involved in the audit. The development of
a program and specific audit procedures is the final stage of the process. The quality of
the audit planning is a key factor that influences the efficiency and predictability of the
results achieved. A well-planned audit can help identify potential risks and opportunities
for improvement, while also ensuring that the audit is conducted in a timely and effective
manner.
The audit plan encompasses several key elements, including:
• Gaining a comprehensive understanding of the entity's business and governance
structure, as well as its accounting and internal control systems.
• Additionally, assessing inherent and control risks is crucial, which means
evaluating the likelihood of material misstatements occurring, as well as the
possibility of the internal control system failing to identify and correct them
promptly.
• Determining the nature, timing, and extent of the audit procedures is also critical.
It is essential to consider the entity's ability to continue operating for at least one
year after the balance sheet date when making assessments under generally
accepted accounting principles in the Philippines.
Designing the audit plan involves formulating objectives, evaluating risks, and
designing specific procedures that are appropriate for the audit. By carefully considering
these factors, the auditor can ensure a thorough and effective audit that provides valuable
insights and recommendations for the entity.
 Definition of Banks/Banking
Banks are privately held businesses that take deposits and provide loans. Money
left in an institution with the idea that it can be retrieved at any moment or at a
prearranged future date is known as a deposit. A loan is an amount of money given to a
borrower, usually with interest. The process of accepting deposits and extending credit is
known as financial intermediation. In addition to these purposes, banks also play a
significant role as tools of the government's monetary policy, which is one of the reasons
they are frequently referred to as the engine of our economy.

What are the Types of Banks/Banking?

• Central banks control a nation's money supply, set interest rates, and oversee
commercial banks to achieve monetary policy goals like stabilizing prices and
preventing economic collapse.
• Retail banks offer financial services to the public, including accounts, loans, and
insurance, accessible through physical branches or online platforms.
• Commercial banks assist both large corporations and individuals with services
like account management, borrowing, and international transactions.
• Shadow banks operate outside traditional banking regulations, raising funds
through borrowing or investments, potentially contributing to financial crises.
• Investment banks like Morgan Stanley handle securities trading, financial
advising, and capital raising for businesses and governments.
• Cooperatives, such as credit unions, operate democratically, providing banking
services with a community focus.
• Credit unions, unlike banks, are nonprofit organizations owned by members,
offering competitive rates and fees.
• Savings and loan associations specialize in mortgage lending and home financing,
historically operating as cooperative institutions now regulated by the
government.
Policy of Banks/Banking
The Bangko Sentral aligns its policies with those of the State to:
(a) safeguard the integrity of the Philippine financial system and ensure the
confidentiality of bank accounts;
(b) prevent the Philippines and its entities from being utilized for money laundering and
the funneling of proceeds from unlawful activities;
(c) protect life, liberty, and property from terrorist acts, condemn terrorism and its
supporters, and strengthen the fight against terrorism by criminalizing terrorist financing
and related offenses;
(d) acknowledge terrorism and terrorist financing as significant threats to national
security and the welfare of the people, and categorize the financing of terrorism as a crime
against the Filipino people, humanity, and international law; and
(e) uphold international commitments to combat terrorist financing, including the
International Convention for the Suppression of the Financing of Terrorism and other
relevant resolutions of the United Nations Security Council under Chapter 7 of the United
Nations Charter.

PHILIPPINE NATIONAL BANK (PNB)

Overview of Philippine National Bank

The Philippine National Bank (PNB) is one of the oldest and largest banks in the Philippines.
Its history dates back to its establishment on July 22, 1916, during the American colonial
period. The bank was created through Act No. 2612 by the Philippine Legislature to provide
financial services to the Philippine government and its citizens.
Early Years and Expansion
In its early years, PNB primarily served as a government bank, handling the government’s
treasury operations and providing financial support for infrastructure projects. Over time, it
expanded its services to cater to the needs of businesses and individuals, becoming a key
player in the country’s banking industry.
World War II and Reconstruction
During World War II, PNB faced significant challenges as the conflict disrupted its
operations. The bank’s assets were frozen by the Japanese occupation forces, leading to a
period of struggle and uncertainty. After the war, PNB underwent a process of reconstruction
and recovery, gradually rebuilding its operations and regaining its position in the banking
sector.
Modernization and Growth
In the post-war period, PNB focused on modernizing its services and expanding its reach
both domestically and internationally. The bank introduced new technologies, such as online
banking and mobile banking, to enhance customer experience. It also established branches
overseas to serve the needs of Filipinos abroad and facilitate international trade and
remittances.
Recent Developments
In recent years, PNB has continued to adapt to changing market conditions and regulatory
requirements. The bank has diversified its product offerings to include a wide range of
 financial services, such as loans, investments, insurance, and wealth management. PNB has
also strengthened its risk management practices to ensure stability and sustainability in a
competitive banking landscape.

PHILIPPINE NATIONAL BANK

CHART OF ACCOUNT: ASSETS

1. Cash and Other Cash Items

2. Due from Bangko Sentral ng Pilipinas
3. Due from Other Banks
4. Interbank Loans Receivable
5. Securities Held Under Agreements to Resell
6. Financial Assets at Fair Value Through Profit or Loss (FVTPL)
7. Financial Assets at Fair Value Through Other Comprehensive Income (FVOCI)
8. Investment Securities at Amortized Cost
9. Loans and Receivable
10. Property and Equipment
11. Investment in Subsidiaries and an Associate
12. Investment Properties
13. Deferred Tax Assets
14. Intangible Assets
15. Goodwill
16. Other Assets

Conclusion
The Philippine National Bank has played a significant role in the economic development
of the Philippines since its inception. From its humble beginnings as a government bank
to its current status as a leading financial institution, PNB has evolved to meet the
evolving needs of its customers and contribute to the growth of the country’s economy.
Types of Banks
Philippine National Bank is a Commercial Bank.
Commercial Bank: A commercial bank like the Philippine National Bank is a financial
institution that provides services such as accepting deposits, offering loans, and basic
financial products to individuals, businesses, and governments. Commercial banks play a
crucial role in the economy by facilitating the flow of money and credit in the system. They
are regulated by banking authorities to ensure stability and compliance with financial
regulations.
In the case of the Philippine National Bank, it operates as a commercial bank in the
Philippines, offering a wide range of banking services to its customers. These services
may include savings accounts, checking accounts, loans, credit cards, investments, and
other financial products tailored to meet the needs of individuals and businesses in the
country.
Commercial banks like Philippine National Bank generate revenue through various
means such as interest on loans, fees for services provided, and other financial activities.
They also play a vital role in promoting economic growth by providing financial resources
to support businesses and individuals in their financial endeavors.
Overall, Philippine National Bank operates as a commercial bank, serving as a key player
in the Philippine banking sector by offering essential financial services to its customers.
 Engagement Letter
Philippine National Bank
Urdaneta City, Pangasinan

Dear Manager (PNB),

We are writing to inform you of the upcoming audit of the Philippine National Bank
(PNB) as part of our commitment to ensuring transparency, accountability, and financial
integrity. This Audit Plan is prepared in accordance with the Philippine Standard on
Auditing PSA 260, aiming to provide you with an overview of the planned scope and timing
of the audit process.
The purpose of this document is to facilitate communication between our auditing
team and those charged with governance, namely the Audit Panel, enabling us to discuss
risk factors, materiality, and any areas requiring additional procedures. We believe that a
collaborative approach to audit planning is essential in ensuring the effectiveness and
efficiency of the audit process while also gaining a comprehensive understanding of the
Philippine National Bank (PNB) and its operating environment.
Our audit engagement is mandated by the Local Audit and Accountability Act 2014
and is guided by the Code of Practice issued by the National Audit Office (NAO) on behalf of
the Comptroller and Auditor General. Our primary responsibility under this Code is to
provide an opinion on the Philippine National Bank (PNB) financial statements, adhering
strictly to Philippine Standards on Auditing.
It is important to note that while our audit aims to provide reasonable assurance on
the accuracy of the financial statements, it does not absolve management or those charged
with governance from their responsibility for their preparation. Moreover, this report serves
to highlight matters of significance identified during our audit planning process and may
not encompass all potential risks or weaknesses in internal controls.
Please be advised that this report is intended solely for your benefit, and we do not
accept any responsibility for any loss incurred by third parties acting on its basis. Our
collaboration during the audit is crucial, and we anticipate working closely with you to
ensure a thorough and effective audit process.
Should you have any queries or require further clarification on any aspect of the
audit plan, please do not hesitate to contact me directly. We appreciate your cooperation
and look forward to a productive engagement.
Yours sincerely,
Joshua M. Bucsit
Engagement Lead
Contact Number: 09162071228
THE AUDIT TIME TABLE
The audit timeline

KEY DATES

Year end: Start: Sign off:

December 2023 January 2024 March 2024

AUDIT PHASE

Planning from Interim from

October 2023 October 2023

KEY ELEMENTS: KEY ELEMENTS:

• Planning meeting with • Document design effectiveness of
management to inform audit key accounting systems and
planning and agree audit processes.
timetable. • Review of key judgements and
• Issue audit working paper estimates.
requirements to management. • Early substantive audit testing.
• Issue letter those charged with • Issue Progress report to
governance and management to management and Audit
inform audit planning. Committee.
• Issue the Audit Plan to
management and Audit
Committee.

Final
March 2024

KEY ELEMENTS:

• Audit teams onsite to complete

detailed audit testing.
 Completion
April 2024

KEY ELEMENTS:

• Issue draft Audit Finding to

management.
• Meeting with management to
discuss Audit Findings.
• Issue draft Audit Finding to Audit
Committee.
• Audit Findings presentation to
Audit Committee.
• Finalize approval and signing of
financial statements and audit
report.

Planning an Audit for Bank: Asset Account

Asset accounts are used to hold financial data on a business's assets. Depending
on the nature of the asset and the anticipated holding periods, it may be divided into
multiple accounts. These accounts' closing balances carry over into the new balances for
the subsequent year. Examples of asset accounts under banks are as follows.
• Cash and Cash Equivalents
• Intangible Assets
• Property and Equipment
• Loans and Receivables
• Investment Property

CASH AND CASH EQUIVALENTS

Audit Objectives
✓ Ensure that all cash and cash equivalents
recorded in the financial statements exist and
are complete, with no material omissions or
misstatements.
✓ To confirm that cash balances and cash
equivalents are accurately stated and properly
valued following accounting standards and
company policies.
 ✓ To verify that the entity has legal ownership rights to the cash and cash
equivalents reported in the financial statements and that there are no
restrictions or obligations that could impact their use or disposition.
✓ To confirm that the presentation and disclosure of cash and cash equivalents
in the financial statements follow applicable accounting standards and
regulatory requirements, providing users with relevant and transparent
information.
✓ To assess the effectiveness of internal controls over cash handling processes,
including segregation of duties, authorization procedures, physical safeguards,
and monitoring mechanisms, to mitigate the risk of misappropriation, fraud,
or errors in cash transactions.
Audit Procedure
A. CASH, PETTY CASH FUND, REVOLVING FUND, ETC. Done W/R
by Ref.
1. Understand and review the organization's policies and
structure of accounts related to cash management, petty
cash, revolving funds, their purposes, custodians, and
authorized users.
2. Identify and assess risks associated with cash handling,
including the risk of misappropriation, errors, and fraud.
3. Consider the adequacy of internal controls over cash, such
as segregation of duties, authorization procedures,
physical safeguards, and monitoring mechanisms.
4. Plan the audit approach, considering the size and
complexity of cash transactions and the materiality of cash
balances.
5. Determine the scope of the audit, including the frequency
and extent of testing for cash, petty cash, and revolving
funds.
6. Conduct surprise cash counts of petty cash and revolving
funds, if feasible, to minimize the risk of manipulation.
Verify cash balances by reconciling physical counts with
accounting records and documentation, ensuring accuracy
and completeness.
7. Investigate any discrepancies between physical counts and
recorded balances, documenting findings and reasons for
discrepancies.
8. Examine petty cash vouchers, receipts, and disbursement
records to verify the validity and authorization of expenses.
9. Monitor the implementation of management's corrective
actions in response to audit findings and
recommendations. Provide ongoing support and guidance
to management in enhancing controls over cash, petty cash,
and revolving funds.
B. CASH IN BANKS, TEMPORARY CASH INVESTMENT, ETC.
1. Confirmation requests will be sent promptly to all banking
institutions where the company holds accounts.
2. Upon receipt of confirmation replies, a thorough
examination will be conducted to identify any restricted or
committed funds that require disclosure in the financial
statements. To expedite the process, these requests will be
dispatched as soon as feasible following the balance sheet
date.
3. Bank reconciliation statements as of the balance sheet date
will be obtained and meticulously scrutinized. The
reconciliation amounts will be cross-checked with bank
statements, cashbooks, general ledger entries, and
confirmation replies to ensure consistency.
4. Mathematical accuracy will be rigorously verified, and paid
checks and deposit slips for the month will be compared
against previous records. Additionally, all other reconciling
items will be traced and examined against relevant bank
memos and supporting documentation.
5. Any reasons for outstanding reconciling items will be
thoroughly investigated, and necessary adjustments will be
made based on a list of unreleased checks as of the balance
sheet date. Inter-bank and inter-company fund transfers
will be traced before and after the balance sheet date to
confirm proper recording.
6. Furthermore, inquiries will be made to determine if cash
balances are restricted or if they pertain to others, with a
comprehensive review of relevant documents to ensure
proper recording and disclosure.
7. The numerical sequence of all provisional and official
receipts issued during the test period will be meticulously
accounted for. Details of provisional receipts will be traced
to official receipts on a test basis, and cash items appearing
in official receipts will be compared against corresponding
bank-validated deposit slips.
8. Total amounts and dates of official receipts will be
reconciled with cash book entries, duplicate deposit slips,
and bank statements. Additionally, official receipts will be
correlated with sales invoices where applicable, and traces
will be made to related accounts in the accounts receivable
subsidiary ledger.
9. The safe custody of both unused official and provisional
receipts will be ensured.
10. Paid checks will be arranged numerically, and all checks,
including voided ones, will be accounted for. Checks will be
examined for authorized signatures, bank perforations, and
irregular endorsements.
 11. Investigations will be conducted for checks made out to
cash, and voided and spoiled checks will be inspected to
ensure they are properly mutilated.
12. Checks will be compared against related vouchers for date,
number, amount, and payee details.
13. Canceled checks will be traced to entries in the check
register for the test period, noting relevant details.
14. Finally, the safe custody of unused checks will be accounted
for.
C. OTHER SUBSTANTIVE PROCEDURES FOR CASH AND CASH EQUIVALENTS
1. Conduct trend analysis to assess the reasonableness of
changes in cash balances over time. Compare the
company's cash balances to industry benchmarks or peer
group averages to identify any anomalies.
2. Calculate key financial ratios such as the cash ratio (cash
and cash equivalents divided by current liabilities) to
evaluate liquidity.
3. Verify the accuracy of reported cash equivalents balances
and inquire about any restrictions or commitments.
4. Evaluate the effectiveness of the company's treasury
policies and procedures related to cash management and
investment of cash equivalents.
5. Examine bank statements for any unusual or excessive
bank charges. Investigate the nature of these charges and
assess their appropriateness.
6. Conclude on the results of the work performed.

LOANS AND RECEIVABLES

Audit Objectives
✓ Assessing and managing credit risk associated with the
loan portfolio by identifying potential risks, such as
defaults, delinquencies, or concentrations, and
implementing appropriate risk mitigation strategies.
✓ Verifying compliance with regulatory requirements,
internal policies, and industry standards governing the
origination, servicing, and reporting of loans. This
includes adherence to loan documentation standards, interest rate regulations,
and fair lending practices.
✓ Detecting and preventing fraudulent activities related to loans, including loan
fraud, identity theft, or other forms of financial misconduct. Auditors evaluate the
effectiveness of controls in place to prevent and detect fraudulent transactions.
✓ Analyzing the performance of the loan portfolio in terms of profitability, liquidity,
and asset quality. Auditors assess the quality of loans, repayment trends, and
overall portfolio health to identify areas for improvement or optimization.
Audit Procedure
A. LOANS Done W/R
by Ref.
1. Verify loan balances by reconciling them with the bank's
records and conducting sample testing to ensure accuracy.
2. Assess the bank's methodology for determining credit risk,
including the process for approving loans, evaluating
borrower creditworthiness, and establishing loan loss
reserves.
3. Inspect collateral-securing loans to ensure it is properly
valued and adequately protected. This may involve physical
inspections, appraisal reviews, or third-party evaluations.
4. Review interest accruals, payments, and related income to
ensure they are recorded accurately and in compliance with
accounting standards.
5. Examine non-performing loans to assess the adequacy of
loan loss provisions and determine whether appropriate
measures are being taken to mitigate credit risk.
6. Evaluate the bank's loan classification system and the
adequacy of the allowance for loan losses by testing the
methodology used and comparing it to industry standards.
7. Ensure that loans comply with regulatory requirements
such as truth in lending laws, anti-money laundering
regulations, and fair lending practices.
B. RECEIVABLES
1. Review loan agreements, credit contracts, and related
documentation to verify the accuracy of receivable records
and adherence to regulatory requirements.
2. Assess the sufficiency and valuation of collateral-securing
loans by performing physical inspections, reviewing
appraisals, and evaluating the bank's collateral
management policies and procedures.
3. Analyze delinquency reports to identify overdue
receivables and evaluate the effectiveness of the bank's
collections processes. This helps determine the adequacy of
provisions for loan losses.
4. Assess the adequacy of the allowance for loan losses by
examining historical loss experiences, economic factors,
and changes in the composition of the loan portfolio. They
also test the methodology used to estimate loan loss
reserves.
5. Send confirmation requests to borrowers to independently
verify the accuracy and existence of loan balances.
Responses from borrowers help confirm the validity of
receivables reported in the bank's financial statements.
 6. Evaluate the bank's credit risk management practices,
including credit underwriting standards, loan approval
processes, and monitoring of borrower creditworthiness.
They assess compliance with regulatory guidelines and
industry best practices.
7. Verify the accuracy of interest accruals, payments, and
related income by reconciling them with loan agreements
and supporting documents. They ensure compliance with
accounting standards and regulatory requirements.
8. Assess the impairment of receivables, such as impaired
loans and other financial assets, by examining the valuation
methodologies, assumptions, and disclosures made in the
financial statements.
9. Examine the securitization structure, asset transfer,
accounting treatment, and related disclosures to ensure
compliance with accounting standards and regulatory
guidelines.
C. OTHER SUBSTANTIVE PROCEDURES FOR LOANS AND RECEIVABLES
1. Perform a comparative analysis of current-year figures
against prior periods and industry benchmarks to discern
significant variances.
2. Conduct a meticulous review of loan agreements and
related documentation to validate terms, interest rates, and
repayment structures.
3. Assess the adequacy of provisions for doubtful accounts by
scrutinizing the aging of outstanding receivables and
evaluating their collectability.
4. Validate interest income independently through thorough
recalculations, particularly for complex financial
instruments.
5. Undertake physical inspections of collateral-securing loans
to verify their existence and condition, particularly for
asset-backed financing arrangements.

PROPERTY AND EQUIPMENT

Audit Objectives
✓ Ensures that the values recorded in the financial
statements accurately reflect their true worth. This
involves verifying the existence, ownership, and
valuation of these assets to prevent
overstatement or understatement of their
value.
✓ Complies with relevant accounting standards,
such as International Financial Reporting
Standards (IFRS) or Generally Accepted
 Accounting Principles (GAAP). Compliance with these standards ensures
consistency, transparency, and comparability in financial reporting.
✓ To help identify risks related to their ownership, valuation, and potential
impairment. By assessing these risks, auditors can recommend appropriate risk
mitigation strategies to safeguard the bank's assets and financial position.
✓ To detect any indications of fraud or errors. This includes reviewing
documentation, performing physical inspections, and conducting analytical
procedures to identify irregularities or inconsistencies in asset records.
✓ Enhances stakeholder confidence in banks in financial statements. Investors,
regulators, and other stakeholders rely on audited financial information to make
informed decisions, and a credible audit assures the reliability and integrity of the
reported information.
✓ Compliance with relevant laws and regulations governing the accounting and
reporting of property and equipment. Non-compliance could result in legal
penalties, reputational damage, and financial losses for the bank.
Audit Procedure
A. PROPERTIES Done W/R
by Ref.
1. Physical inspections of properties, an inventory of
properties owned by banks, and proper accounting and
classification are conducted to ascertain the existence,
condition, and location of properties.
2. For leased properties, lease agreements are reviewed to
ensure proper classification, valuation, and disclosure in
financial statements. The accuracy of lease payments and
terms is also confirmed.
3. The valuation of properties is assessed to ensure that they
are recorded at their fair market value. This may involve
obtaining independent appraisals, reviewing recent sales
data, or using valuation models.
4. Compliance with environmental regulations for properties
owned by banks is assessed to identify any potential
environmental liabilities or risks associated with
contamination or pollution.
5. Insurance policies are reviewed to ensure that properties
are adequately insured against risks such as fire, theft, and
natural disasters. The adequacy of insurance coverage
based on property values and potential risks is also
assessed.
6. Property-related expenses such as maintenance costs,
property taxes, and insurance premiums are reviewed to
ensure that they are properly recorded and allocated to the
correct properties.
7. Procedures for authorizing capital expenditures on
property acquisitions, construction, or improvements are
reviewed to assess the approval process, ensure proper
documentation, and confirm compliance with budgetary
controls.
8. The intended usage of each property owned by banks is
analyzed to ensure that it aligns with the bank's business
objectives. The utilization of properties is verified to
generate revenue or support banking operations efficiently
and effectively.
9. Policies and procedures for managing banks property
portfolio, including protocols for leasing, maintenance,
security, and disposal, are evaluated to assess adherence to
internal controls and industry best practices.
10. Property-related documents such as deeds, titles, surveys,
zoning permits, and land use approvals are scrutinized to
verify their authenticity, completeness, and accuracy, and
compliance with regulatory requirements is confirmed.
11. Indicators of impairment for property assets such as
declines in market value, changes in economic conditions,
or obsolescence are assessed. Impairment tests are
performed as necessary, and appropriate disclosures in the
financial statements are ensured.
12. The terms of property leases are reviewed to ensure that
they are reasonable, competitive, and comply with lease
accounting standards. Banks' obligations under lease
agreements, including rent escalation clauses and renewal
options, are also assessed.
B. EQUIPMENT
1. Determine the risk of material misstatement of
equipment.
2. Examine the policies and procedures for acquiring, using,
maintaining, and disposing of equipment.
3. Examine a sample of equipment to ensure its existence,
location, and condition.
4. Examine title deeds, registration paperwork, or other
legal records to determine ownership of valuable
equipment.
5. Evaluate the procedures for evaluating equipment and
calculating depreciation.
6. Check that the equipment is properly capitalized and not
expensed inappropriately.
7. Determine whether there are any indicators of
impairment for equipment.
8. Confirm that the accounting approach for leased
equipment is by applicable accounting rules.
9. Ensure that all equipment transactions are properly
authorized and approved.
10. Examine the accounting treatment of maintenance and
repair expenses.
11. Document and test internal controls that govern the
procurement, use, and disposal of equipment.
12. Assess the appropriateness and accuracy of equipment
disclosures in the financial statements.
13. Analyze equipment-related accounts for any unexpected
trends or discrepancies.
14. Consider any following occurrences that may have an
impact on the value or classification of equipment.
C. OTHER SUBSTANTIVE PROCEDURES FOR PROPERTY AND EQUIPMENT
1. Physically inspecting significant property and equipment
to verify their existence and condition. This may involve
visiting client locations and visually examining assets to
ensure they match the descriptions in the accounting
records.
2. Reconciling the detailed property and equipment listing
to the general ledger balances. This ensures that all assets
are properly recorded, and any discrepancies are
investigated.
3. Confirming the legal ownership of property and
equipment, which may involve reviewing title deeds,
registration documents, or contracts. This is particularly
important for assets that are subject to liens or other
encumbrances.
4. Examining lease agreements for leased property and
equipment to ensure proper recognition, classification,
and disclosure in the financial statements. This includes
verifying lease terms, rental payments, and lease
incentives.
5. Reviewing the depreciation methodology applied to
property and equipment to ensure compliance with
accounting standards. This may involve recalculating
depreciation expense for selected assets and comparing
the results to the amounts recorded in the financial
statements.
INVESTMENT PROPERTIES

Audit Objectives:

✓ To evaluate the design and implementation of internal

controls over investment properties to identify weaknesses
and recommend improvements.
✓ To assess the valuation methods and techniques used
by the bank for its investment properties to ensure their
accuracy and compliance with industry standards.
✓ To examine the bank’s investment decision-making
process to confirm adherence to regulatory guidelines and risk management
policies.
✓ To identify any material misstatements or discrepancies in the financial
statements related to investment properties and provide recommendations for
correction.
✓ To assess the adequacy of disclosures related to investment properties in the
bank’s financial statements.

Audit Procedure

A. INVESTMENT PROPERTIES Done W/F

by Ref.
1. Obtain an understanding of the bank’s investment
strategy, objectives, and policies related to investment
properties. This includes reviewing relevant
documentation such as investment guidelines, risk
management policies, and board resolutions.
2. Identify all investment properties held by the bank,
including direct investments, indirect investments
through funds or joint ventures, and properties held for
sale.
3. Assess the design and operating effectiveness of
internal controls over investment properties. This
includes reviewing processes related to property
acquisition, valuation, disposal, and reporting.
4. Test the accuracy and consistency of valuation methods
used by the bank for its investment properties. This may
involve comparing valuations with independent third-
party appraisals or industry benchmarks.
5. Review investment decisions made by the bank,
including due diligence processes, risk assessments,
and return on investment analyses.
6. Evaluate the adequacy and completeness of disclosures
related to investment properties in the bank’s financial
statements.
7. Test the accuracy and completeness of transactions
related to investment properties, including purchase
and sale agreements, lease agreements, and property
maintenance expenses.
8. Perform analytical procedures to identify unusual or
unexpected trends in investment property data, such as
significant changes in valuations or increases in
maintenance expenses.

B. OTHER SUBSTANTIVE PROCEDURE FOR INVESTMENT PROPERTIES

1. Plan and assess the risks associated with its investment
properties. This involves understanding the nature of
investments, market conditions, regulatory
requirements, and internal control environment.
2. Need to value its investment properties accurately. This
may involve engaging independent valuers to
determine the fair value of the properties based on
market conditions and appraisal techniques.
3. Verify the title deeds and ownership documents of its
investment properties to ensure legal ownership and
rights over the properties.
4. Crucial to verify their existence, condition, and
compliance with regulatory standards. This may involve
site visits and inspections by qualified personnel.
5. Review lease agreements, rental income records, and
other related documents to validate the rental income
generated from investment properties.
6. Assess the depreciation charges and impairment losses
related to investment properties in accordance with
accounting standards to reflect their true value in
financial statements.
7. Ensure proper disclosure of investment property
details in its financial statements, including fair value
measurements, significant assumptions used in
valuation, and any related party transactions.
INTANGIBLE ASSET
Audit Objectives:

✓ To determine that Intangibles exist and are represented by

contractual rights, privileges or earning power owned by the
company.
✓ To determine that all transactions related to Intangibles
have been properly recorded C. To determine that the
Intangibles are owned by the company.
✓ To determine that Intangibles are stated at cost less
amortization.
✓ To determine whether presentation and disclosures concerning intangibles are
adequate and in accordance with PAS/PFRS.

Audit Procedure

A. INTANGIBLE ASSET Done W/F

by Ref.
1. Obtain an analysis of ledger accounts for Intangibles.
2. Examine documentation supporting intangibles.
3. Vouch additions to or acquisitions during the year.
4. Evaluate dispositions and write offs during the work.
5. In addition to audit procedure no. 2, perform analytical
procedures.
6. In addition to audit procedures nos. 384, evaluate
amortization policy and verify computation of
amortization.
7. Evaluate financial statement presentation and
disclosure for intangibles.

B. OTHER SUBSTANTIVE PROCEDURE FOR INVESTMENT PROPERTIES

1. The auditor may begin with the substantiation of
intangible assets with the analysis of the ledger
accounts for these assets. The balance should be traced
to the general ledger.
2. The auditor should examine legal documents that
supporting intangibles such as certificate of patent
registration, franchise and merger agreements or
corporate articles of incorporation to prove existence of
rights and economic advantages.
3. Audit traces debits to evidence like registration
certificates and payment records. For internally
developed intangible assets, debits are traced to cost
documents for materials, labor, and overhead.
 4. Credits are independently calculated and reconciled
with the client’s amortization plan. Write-offs are traced
to authorized sources like directors’ meeting minutes.
Auditors also inquire about any changes in estimated
asset benefit periods.
5. Auditors should analyze Research and Development
expenses by comparing them with prior year and
budgeted amounts, investigating significant changes or
variances. They should review intangible accounts
analytically, examining: Current and prior year
amortization costs. Ratio of amortization costs to
unamortized balances for both years. These
comparisons help detect incorrectly recorded
purchases, write-offs, or amortization errors. Auditors
also assess if current events justify revisions.
6. The auditor should evaluate appropriateness of
amortization policy and amortization period and
recalculate amortization on a test basis.
7. The auditor should evaluate future economic benefit by
relating assets to revenues produced by them. He
should also inquire of management and legal counsel as
to possible contingencies relating to intangible assets
(e.g. patent infringement suits). PAS/PFRS require that
the intangibles be shown at their amortized cost and
disclosure of the amortization policy should be made.

DEFERRED TAX ASSETS

Audit Objectives:
✓ To ensure that deferred tax assets are accurately recognized
and measured in accordance with relevant accounting
standards (e.g., IFRS or GAAP) and that they reflect the
company's legitimate expectations of future taxable profits
against which the assets can be utilized.
✓ To assess the appropriateness of the valuation of deferred tax
assets, including the application of relevant tax rates, assumptions about future
profitability, and the likelihood of realization, ensuring compliance with
accounting principles and regulatory requirements.
✓ To verify the adequacy and completeness of disclosures related to deferred tax
assets in the financial statements, including the nature, carrying amount, and
significant judgments and estimates made in determining their recognition and
measurement, ensuring transparency and compliance with regulatory
requirements.
Audit Procedure

A. DEFERRED TAX ASSETS Done W/F

by Ref.
1. Review management's documentation of the
computation of deferred tax assets, including the
analysis of temporary differences and the application of
tax rates.
2. Assess the reasonableness of management's
assumptions regarding future taxable profits and the
likelihood of utilizing deferred tax assets.
3. Test the accuracy of the deferred tax asset balance by
recalculating it based on known tax rates and the
company's financial data.
4. Evaluate the adequacy of the valuation allowance
against deferred tax assets by examining the rationale
and support for its establishment.
5. Perform analytical procedures to compare historical
trends in deferred tax assets to changes in the
company's financial performance and tax planning
strategies.
6. Scrutinize tax planning strategies and forecasts to
determine their impact on the recognition and
measurement of deferred tax assets.
7. Verify the appropriateness of deferred tax asset
disclosures in the financial statements, ensuring
compliance with relevant accounting standards and
regulatory requirements.
8. Test the classification of deferred tax assets as current
or non-current based on the timing of expected
reversals of temporary differences.
9. Assess the potential impact of changes in tax laws or
regulations on the valuation and realizability of
deferred tax assets.
10. Obtain written representations from management
regarding the completeness and accuracy of
information provided in relation to deferred tax assets
and related disclosures.

B. OTHER SUBSTANTIVE PROCEDURE FOR INVESTMENT PROPERTIES

1. Review management's assessment of the likelihood of
realizing deferred tax assets by evaluating historical
profitability, future projections, and any potential tax
planning strategies.
2. Analyze the composition of deferred tax assets,
ensuring that they are appropriately classified and
 supported by sufficient evidence, such as carryforward
balances and tax law changes.
3. Test the valuation allowance recorded against deferred
tax assets by assessing the reasonableness of
management's estimates and considering any changes
in circumstances that may impact their recoverability.
4. Perform a comparison of deferred tax assets with
current and historical tax returns to identify any
discrepancies or inconsistencies in the reporting of
temporary differences.
5. Assess the adequacy of disclosures related to deferred 6. 7.
tax assets in the financial statements, ensuring
compliance with relevant accounting standards and
providing transparency to users of the financial
statements.