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Rather fail with honor than succeed by fraud

Sophocles

The Auditors Challenge


The auditor has a responsibility to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud.

Fraud Definition
In general, fraud may be defined as the voluntary execution of a wrongful act, or a willful omission, knowing and intending the effects which naturally and necessarily arise from such act or omission (Legaspi Oil Co., Inc., vs. CA, G.R. No. 96505, July 1, 1993)

Reasons People Commit Frauds


Desperate need for money Job Frustration Everybody-does-it

syndrome Enjoy beating the system


Internal controls are lax Low probability of detection Low probability of prosecution

Top two reasons why fraud

possible Poor internal controls Management override of internal controls Most prominent red flag financial pressure

Most costly and/or common

types of frauds False financial statements overpricing Ghost employees/payroll fraud Bid rigging/ price fixing Ghost deliveries

Sandiganbayan case: Criminal Case No. 20185; November 4, 2011

A. Ghost deliveries of combat clothing & individual equipment amounting to P38 million; B. Splitting of POs (80 Pos of not more than P500,000 each; and C. Charged against Personal Services

Illegal Expenditures
1. For contracts awarded under an alternative mode of procurement for items that should have undergone complete public bidding process and eventually resulted in overpricing (Venancio R.

Nava vs. Rodolfo G. Palattao, et al., G.R. No. 160211 dated August 28, 2006)

Illegal Expenditures
Payment of benefits in direct contravention of the prohibition in the administrative order issued by the President (Dr. Emmanuel T. Velasco, et al. vs. COA, et al., G.R. No. 189774 dated September 18, 2012.

Preventing Fraud: A Best Practices Approach


Management Commitment to create a culture of Integrity Fraud Risk Assessment Fraud Deterrence Plan

Challenges

The challenge of promoting integrity and ethics is greater in an agency that exercises power such as the Commission on Audit.

COAs commitment to create a culture of integrity


COA Circular No. 2011-001 dated July 5, 2011: Reiteration of items constituting support to audit groups/teams and of the prohibition against receipt by personnel of the COA of honorarium, allowance, bonus or other emoluments as a form of fringe benefits or additional compensation COA Resolution No. 2012-013 dated October 29, 2012: Upholding the integrity and credibility of recruitment process by prohibiting the recruitment of relatives of COA officials and employees COA Resolution No. 2012-012 dated October 29, 2012: Internal guidelines on the confidentiality of the deliberations during Commission Proper Meetings, and the release of its decisions and actions

Commitment to toe the lines of accountability


COA Circular No. 2011-002 dated July 22, 2011 COA Circular No. 2012-002 dated Sept. 12, 2012 COA Resolution No. 2011-014 dated Dec. 13, 2011

Lifting of Preaudit of Government Transactions

Accounting and Reporting Guidelines for the LDRRMF of LGUs, NDRRMF given to LGUs and Receipts from other sources.

Audit of the Leagues of LGUs and the Leagues and Federation of Elective Officials

Commitment to toe the lines of accountability

COA Circular No. 2012-003 dated October 29, 2012: Updated guidelines for the prevention of irregular, unnecessary, excessive, extravagant and unconscionable expenditures

COA Circular No. 2012-011 dated October 15, 2012: Requirement of certification from the concerned government agency on non-payment of money claim as additional supporting document to the petition filed before this Commission

Participatory Audit

Opening up to the citizenry for the conduct of participatory audit

Thank you!