Module

3
Modul

e2

Communication
Coreof
Text
Cash
Examination
Results
Module 3
AOM
Communicate Cash Examination Results
Final

Narrative
This session is on communicating cash examination results through an Audit
Cash
Observation Memorandum (AOM) and final narrative Cash Examination
Report (CER).
The Revised Cash Examination Manual provides that after the conduct of the cash
Examination
examination, the audit team is required to communicate the deficiencies
noted to
Introduction

management through the issuance of an AOM. The audit team shall then conduct an
exit conference with management on the results of its examination. When these
procedures are completed, it is imperative that the audit team prepare a Narrative
CER on the final results thereof.
This session shall cover the preparation of the AOM to communicate the
deficiencies noted during the cash examination as well as the Narrative CER
containing the three parts/components of the cash examination report, namely: the
Introduction, the Findings and Recommendations, and the Annexes, which include the
required supporting documents. It shall also discuss briefly the guidelines on the
submission, distribution and transmittal of Cash Examination Reports, as provided for
under COA Memorandum No. 2013-004 dated July 9, 2013, prescribing the use of the
Revised Cash Examination Manual.

Session Content

Learning objectives

Communication of
Cash Examination
Results
AOM
Final Narrative
Cash
Examination
Report

By the end of the session, you will be able to

prepare an AOM and a narrative CER to the extent that the AOM and the
report are in the prescribed formats and supported by appropriate
documents.

Core text
Ways of Communicating Cash Examination Results
There are two ways of communicating the results of cash examination to
management/officers concerned, as follows:
1. Audit Observation Memorandum (AOM)
Pursuant to COA Circular No. 2009-006, prescribing the COA Rules and Regulations
on the Settlement of Accounts (RRSA), the AOM is a written notification to the
agency head and concerned officer/s informing them of the deficiencies noted in
audit of accounts, operations or transactions, such as those noted during the
conduct of cash examination. It is signed by the Audit Team Leader (ATL) and the
Supervising Auditor (SA). The agency head shall ensure that appropriate actions
are taken on the deficiencies noted as contained in the AOM.
In the development/formulation of the audit observation, the auditor shall ensure
that the following elements are present:

Condition the situation prevailing in the agency at the time of the audit, the
actual practice which violated the prescribed laws, rules and regulations
and/or policies.
Criteria approved standards which may be derived from laws, rules and
regulations and/or prescribed policies.
Cause the action, inaction or inadequacy of action of management or its
employees as measured against applicable criteria.
Effect the difference between the standard/criteria and the action taken
which produce the results. In other words, it is the change that is a result or
consequence of the cause.

The above elements are contained in the first paragraph of the AOM. The first
paragraph shall also include the audit recommendation/s to correct or remedy the
deficiencies observed.
The AOM likewise contains a request to management to submit its
comments/justifications for the observations within 15 days from receipt thereof.

If the agency officials concerned fail to reply within the specified period, the
findings/deficiencies shall be deemed accepted and shall be included in the final
Narrative CER.

2. Final Narrative Cash Examination Report

The final narrative Cash Examination Report (CER) is a report prepared by the
examiner or auditor within twenty (20) days from completion of field work to
apprise the agency head and other officials concerned of how well the accountable
officer has discharged his custodial function. The report is prepared whether or
not a shortage or overage is discovered. In case of a shortage or the seriousness of
the situation demands proper action by higher officials, an interim report is
prepared while the examination is still in progress.
The final narrative report on the results of examination consists of the three parts:
I - Introduction
o This section shall contain brief statements of the following:
o Name and designation of the accountable officer, date of his assumption to
office as such, his bond or risk number and date of effectivity, and the
amount of the bond;
o Maximum cash accountability;
o Names and designations of other accountable officers under the supervision
of senior accountable officers, their bond/risk number, date of effectivity,
amount of bond, the nature of their appointments;
o Information on whether the cash count was simultaneously conducted;
o Period covered by the examination;
o Date the examination was started and completed; and
o Procedures and techniques employed in accordance with the Revised Cash
Examination Manual.
II Findings and Recommendations
The portion on findings shall disclose the significant facts gathered during the
examination, such as shortages, overages, fraud abuse, illegal acts, or
negligence in the handling of cash and accountable forms. It shall also include
any weakness in the internal control system.
The findings with the corresponding recommendations shall be presented in the
order of their significance. According to the State Audit Manual (SAM), each
finding shall be preceded by a caption or a topic sentence. Citations of laws,
rules, regulation and internal control principles violated shall be relevant to
the findings. Whenever there is a need for tables or schedules, these should

form part of the Annexes, and only cross-references shall appear in the findings
portion.
Recommendations may consist of the withholding of salaries and other monies
due the accountable officer, cancellation of fidelity bond, and the filing of
administrative charges, in case of shortage, and statements to effect
compliance with laws, regulations and/or internal control principles. Pursuant
to the SAM the recommendation shall be preceded by a caption or topic
sentence which summarizes its main point and which is generally stated in the
imperative mood. A recommendation shall immediately follow the finding
which it is meant to remedy.
The report should incorporate management comments and audit teams
rejoinder, if any.
III Annexes
The Annexes shall be identified and marked following the sequence that they
are mentioned or referred to in the report. Duplicate or photocopies of
annexes or schedules shall be properly authenticated by officials concerned.
o Supporting Statements/Documents - The final narrative report shall be
supported with the following statements and documents, which shall form
part of the Annexes:
1. Report of Cash Examination (General Form 74-A, Revised)
2. Reconciliation Statement of Accountability
3. Statement of Accountability for Accountable Forms With Money Value
4. Statement of Accountability for Accountable Forms Without Money Value
5. Bank Reconciliation Statement, as of Date of Cash Count
6. ATM Cash Count Sheet, if applicable
7. Copy of Office Order, if a special cash examination
8. Supporting Schedules
9. When there is shortage, the narrative report shall be supported with the
following:
10.Appointment or designation of the accountable officer;
11.Oath of office of the accountable officer;
12.Copy of the approved application of bonds of the accountable officer;
13.Demand letter for the production of the missing fund and reply to the
demand letter; and
14.Copies of letters addressed to the agency head informing him of the
shortage in the cash and accounts of the accountable officer (AO) and
recommending his relief.
o When there is restitution the following are also required:
1. A copy of the official receipt acknowledging the restitution;

2. A copy of the Remittance Advice remitting the amount to the agencys

depository bank or to the Bureau of Treasury/National Treasury,
indicating therein that this is a restitution of the missing fund. The
Remittance Advice shall be separate from those covering other
remittances that will be remitted after the cash count;
3. A copy of the deposit slip when the amount restituted was deposited
with the depository bank, if the officer involved is a city or provincial
treasurer;
4. A copy of the official receipt issued by the Provincial Treasurer
acknowledging his receipt of the amount deposited, if the official
involved is a municipal treasurer; and
o Other relevant schedules.

Guidelines on the Submission, Distribution and Transmittal of the Final

Narrative Cash Examination Reports
COA Memorandum No. 2013-004 dated July 9, 2013, which prescribes the use of the
Revised Cash Examination Manual, provides the guidelines for, among others, the
submission, distribution and transmittal of the final Narrative CER, as follows:
1. The report shall be submitted to the SA or Cluster/Regional Director (C/RD) within
twenty (20) days from completion of field work.
2. The final report shall be distributed to the following:
a. Accountable Officer
b. Head of the Agency
c. Supervising Auditor
d. Auditors file
3. Auditors, before conducting cash examinations in the regions/field with no books
of accounts, should coordinate with the SAs/ATLs of the Head Office/Regional
Office auditees, where books of accounts are kept, to obtain data on the
accountabilities of the AO such as accountable forms issued/latest Monthly
Statement of Accountability on Accountable Forms submitted, audited or booked
remittances, cash advances granted and liquidated from the latest cash
examination or outstanding unliquidated cash advances, among others.

The auditors should furnish a copy of their CERs to the SAs/ATLs of Head
Office/Regional
Office
auditees
where
the
cash
advances
and
liquidations/collections and remittances being cash examined are booked. The
CER furnished shall be utilized by these SAs/ATLs to reconcile the Statement of
Accountability of the AO in the CER against the ledgers/books of accounts of their
auditees where the transactions of the AO are booked.
4. Where the shortage necessitates the filing of an administrative and/or criminal
action, the auditor shall submit the final report together with the lettercomplaint, sworn statements of witnesses and other supporting documents to the
Cluster/Regional Director thru the SA for review and evaluation.
5.

The C/RD shall transmit the report together with the documents mentioned in
No.3 above to the Office of the Ombudsman for the filing of administrative
and/or criminal action against the defaulting AO, furnishing the auditor
concerned a copy of the transmittal letter.
A copy of the report as well as information of its referral to the Office of the
Ombudsman shall be furnished the head and the chief accountant of the agency
concerned, the COA Legal Services Sector, and if the defaulting officer is a
treasurer of a local government unit, to the Bureau of Local Government Finance.
If the shortage is material, the C/RD concerned shall recommend to the
Chairperson, thru the Assistant Commissioner concerned to request the issuance
of a hold departure order against the erring AO by the appropriate government
agency.
In case of cash examination conducted by a special audit team coming from other
offices of the Commission, the team shall submit the report on the examination
to the Director having supervision of the special audit team, with final copies
thereof duly furnished to the AO, the Head of the Agency, the Auditor, and the SA
of the agency concerned.
Where the report indicates a shortage which necessitates the initiation of
appropriate action against the AO, the Director shall transmit a copy of the report
together with the supporting documents to the Office of the Ombudsman
following the procedures outlined in the preceding paragraph.
The submission of the report to the SA or C/RD in case of regular cash
examination, or to the Director having supervision of the special audit team in
case of cash examination conducted by a special audit team coming from other
offices of the Commission, is usually covered by a memorandum. This
memorandum shall contain statements concerning the following:
o Authority to conduct the cash examination

o Name and designation of the accountable officer and the agency where
assigned
o Period covered by the examination
o Date the examination was started and completed
o Procedures and techniques employed
o Constraints/difficulties encountered during the examination
o Reactions of management regarding the discussion of findings and
recommendations
o Acknowledgement of the cooperation extended to the team by agency officials
and the unit auditor and his staff.

Summary
In this session, we have discussed the preparation and issuance by the
auditor/examiner of the AOM and the final Narrative CER, as means of communicating
cash examination results to management. The AOM is issued to inform the agency
head and officer/s concerned of the deficiencies noted during the cash examination,
and to request them to submit their comments/justifications therefor within 15 days
from receipt thereof. Deficiencies that are not justified shall be included in the final
Narrative CER. The final Narrative CER, which consists of three parts, namely: the
Introduction, the Findings and Recommendations, and the Annexes, shall be issued to
communicate to the agency head and other officials concerned how well the
accountable officer discharged his custodial function. The report is prepared whether
or not a shortage or overage is discovered. It shall be submitted, transmitted and
distributed following the guidelines in the Revised Cash Examination Manual provided
under COA Memorandum No. 2013-004 dated July 9, 2013 and related issuances.

References:
1. State Audit Manual
2. Revised Cash Examination Manual
3. COA Rules and Regulations on the Settlement of Accounts