UNIVERSITY OF THE EAST

College of Business Administration

Manila Campus
2219 C.M. Recto Ave. Manila, Philippines

BAT 411 – 1T – 1:30-4:30

INTERNAL AUDITING
SFC 321

Submitted by:
Arshier Chester T. Ching
Jovin Domingo
Chairalyn Haguisan
Shara Marciano

Submitted to:
CLAUDIO C AGSI, CPA, MBA, LLB (on progress)
Professor
October 22, 2019

1
JBC TRAVEL AND TOURS
Finance Department

Final Internal Audit Report

Petty Cash Fund Control for Finance

Department

September 26,2019

2
 TABLE OF CONTENTS

EXECUTIVE SUMMARY………………………………………………………………… 4

PURPOSE STATEMENT………………………………………………………………….5

SCOPE STATEMENT………………………………………………….………………….6

AUDIT OBSERVATION………………………………………………………………….7

AUDIT RECOMMENTDATIONS………………………………………………………8

CONCLUSION AND OPINIONS………………………………………………………9

DEPARTMENT’S ACCOMPLISHMENT……………………………….……………10

MANAGEMENT VIEWS…………………………………………………………………11

APPENDIX A……………………………………………………………………………….12

3
 EXECUTIVE SUMMARY

With the annual Audit plan prepared by the internal auditing department,

we carry out a surprise audit of the petty cash fund of JBC Travels and Tours on

September 26, 2019, located at Manila, Philippines. JBC Travel and Tours is a

fast-growing company that leads innovation and breakthrough throughout the

entire tourism industry. In the year 2019, won numerous awards and is known for

giving quality service for the customer.

The Board of Directors approved an imprest balance of P5,000 for the petty

cash fund. The Internal Auditing Department is task to audit the petty cash fund

under the Finance Department which is responsible for upholding accounting

policies and procedures, safeguarding of assets, and managing of assets

acquisition and expenditures.

4
 PURPOSE STATEMENT

Internal Audit performed surprise cash counts on a sample of the JBC

Travels and Tours’ petty cash funds. The objectives of the audit were to determine

whether the funds exist, whether internal controls over the funds are adequate

and if the department is properly implementing internal controls, whether petty

cash fund data is reliable and whether custodians are in compliance with the

company’s policies and procedures in accordance with Institute of Internal Auditor

(IIA).

Internal Auditing Department is proactive in determining and assessing risk

factors such as fraud, mistakes and material misstatements. Regularly do surprise

audits of petty cash at an interval period to detect frauds committed by the

employees, to see whether the internal controls are implemented effectively and

to see anomalies and mistakes done by the employees especially by the petty cash

custodian and the approving officer. To determine weakness in internal control

policies and to strengthen it. All of the audit to be done will be in accordance with

the standard of IIA.

5
 SCOPE STATEMENT

The Audit Scope included unmentioned amount of cash, receipts, IOU’s, foreign

currencies and petty cash vouchers.

Our audit procedures included:

1. Performing an unscheduled audit in the finance department

2. Reviewing receipts and cash on hand and comparing to fund balances

recorded in the financial statement.

3. Verifying any petty cash replenishments.

4. Reviewing fund security or safeguarding of assets.

Auditing team discovers weakness in this certain area;

1. Petty cash disbursements and reimbursements

2. Accepting of Receipts subjectable to reimbursements

3. Segregation of duties

4. Issuance of IOU’s

6
 AUDIT OBSERVATION

i. Receipts accepted lacks substantial information. (dates e.g.)

ii. Foreign currency is part of the petty cash fund.

iii. IOU’s are charged against petty cash fund.

iv. There are disbursements that are not officially authorized by the approving

officer.

v. Owner and approving officer are the same.

vi. Petty cash custodian is too lenient on disbursing and reimbursing cash using

petty cash fund.

vii. The custodian do not balance and reconcile the petty cash fund every day.

7
 AUDIT RECOMMENDATION

i. Receipts without substantial information should be charged against the

employees to prevent of making fake receipts.

ii. Foreign currency should not be part of the petty cash fund thus have its

own account whether in different areas or in bank

iii. IOU’s should not be allowed and charged in petty cash fund it should be on

the payroll (advances to employees)

iv. Disbursement shouldn’t be done without the authorization of approving

officer

v. Hire an independent approving officer that is objective and free from bias.

Might be okay if the approving officer are different every period of time to

prevent collusion with the custodian

vi. Custodian should be strict, prim and proper in disbursing and reimbursing

petty cash fund

vii. Custodian should balance and reconcile every day and report it to the

management to prevent material misstatement, fraud, and mistake in the

long run

8
 CONCLUSIONS AND OPINIONS

All of the audits done are in compliance and guidance with the IIA. As we

asked an external auditor (Mr. Cornelio Lugaw-an), He gave us a qualified opinion.

Upon reviewing the system of JBC in petty cash fund, he helped us find some

weaknesses that can be strengthened. The Audit team find different loopholes on

the internal control, not that big but still relevant especially in committing future

frauds. Being a proactive Auditing Team, we choose to set advance and early

detection of fraud rather than doing actions when fraud is incurred. Prevention is

better than cure as the saying goes. The internal control system is not bad but can

be improve a lot better.

Periodic balancing and reconciliation should be done to prevent material

loss. Hiring of approving officer rather than the owner itself would be beneficial

for the company. As a fast, growing company, JBC travel and tours should have

good internal control for them to have a strong and good inside foundation. Must

follow financial frameworks, internal control policies and company policies to

strengthen the company itself. We are looking forward in our next surprise audit

that the implementations of our recommendations are taken into actions.

9
 DEPARTMENT’S ACCOMPLISHMENT

The department seeks competency, objectivity, and effectiveness in our

company. As an Internal Audit Department, we embark ourselves in growing and

gaining additional and fruitful knowledge that can be used to enhance and improve

our company’s internal control. As a department we have achieved numerous

unbiased audits that are presented in the academe as an example of a good and

unbiased audit. This team keeps on improving as our world is too. We are ready

to tackle different audits may in be performance, engagement etc. and will make

sure that our objectivity will always be the same if not better.

MANAGEMENT’S VIEW

The Finance Director has agreed to work on the Petty Cash and the

implementations of our recommendations made in this report.

10
APPENDIX A

11
 MARCIANO, SHARA MAY E.
Address: 143 Quezon Avenue Quezon City
Contact no.: 0927-139-2283
Email address: smmarciano@yahoo.com

EDUCATIONAL BACKGROUND

 University of the East - Manila

C.M. Recto Avenue Sampaloc, Manila
Bachelor of Science in Accounting Technology 2008 – 2012

 Don. Alejandro Roces Sr. Science Technology High School

Don. A. Roces Brgy. Obrero
Quezon City, Metro Manila

SKILLS/ APTITUDES

 Technically proficient in Microsoft Office applications

 Basic Computer and Internet Knowledge
 Proficient in English and Filipino
 Effective at multi-tasking
 Good leadership skill

12
 HAGUISAN, CHAIRALYN V.
10 UMBER STREET, SSS VILLAGE MARIKINA CITY
0975-524-3109
ayahgsn@gmail.com
chairahaguisan@gmail.com

WORK EXPERIENCE

 University of the East

C.M. Recto Avenue Sampaloc, Manila
Student Assistant – Internal Audit Department
Time Keeper – Monitoring the time in/out of the professors;

November 2018 – March 2019

EDUCATIONAL BACKGROUND

 University of the East - Manila

C.M. Recto Avenue Sampaloc, Manila
Bachelor of Science in Accounting Technology

 Marikina High Shool

Secondary education

SKILLS/ APTITUDES

 Technically proficient in Microsoft Office applications

 Basic Computer and Internet Knowledge
 Proficient in English and Filipino
 Effective at multi-tasking
 Good leadership skill

13
 DOMINGO, JOVIN B.
10 UMBER STREET, SSS VILLAGE MARIKINA CITY
0975-524-3109

EDUCATIONAL BACKGROUND

 University of the East - Manila

C.M. Recto Avenue Sampaloc, Manila
Bachelor of Science in Accounting Technology

 Marikina High Shool

Secondary education

SKILLS/ APTITUDES

 Technically proficient in Microsoft Office applications

 Basic Computer and Internet Knowledge
 Proficient in English and Filipino
 Effective at multi-tasking
 Good leadership skill

14
 CHING, ARSHIER CHESTER T.
BLK 1 LOT 9 T.SANTIAGO ST. DULALIA EXECUTIVE VILLAGE, VALENZUELA CITY
0995-525-7093
chingarshier@gmail.com

EDUCATIONAL BACKGROUND

 University of the East - Manila

C.M. Recto Avenue Sampaloc, Manila
Bachelor of Science in Accountancy

SKILLS/ APTITUDES

 Technically proficient in Microsoft Office applications

 Basic Computer and Internet Knowledge
 Proficient in English and Filipino
 Effective at multi-tasking
 Good leadership skill

15