PD
1445
The Government Auditing Code
of the Philippines
WHAT IS
GOVERNMENT
AUDITING?
Government auditing is an
independent examination of government
activities to determine whether public
funds have been used lawfully,
efficiently, and effectively. It involves
assessing financial records, performance
measures, compliance with regulations,
and the effectiveness of internal
controls.
PD 1445, the Government Auditing Code
of the Philippines, aims to ensure that:
Government resources are managed,
expended, and utilized lawfully and
efficiently.
Public funds are safeguarded from loss or
wastage due to illegal or improper
disposition.
Government operations are conducted with
efficiency, economy, and effectiveness.
IMPORTANCE OF GOVERNMENT AUDITING
Government auditing is crucial for ensuring the
effective and efficient use of public funds. It serves
several important purposes:
■ACCOUNTABILITY AND TRANSPARENCY:
o Demonstrates the government’s commitment
to fiscal responsibility.
o Builds public trust by ensuring that public
funds are used appropriately.
o Detects and prevents fraud, corruption, and
waste.
IMPORTANCE OF GOVERNMENT
AUDITING
■EFFICIENCY AND EFFECTIVENESS:
o Identifies opportunities to improve
government operations and reduce costs.
o Evaluates the performance of
government programs and services.
o Helps in making informed decisions about
resource allocation.
IMPORTANCE OF GOVERNMENT
AUDITING
■COMPLIANCE:
o Ensures adherence to laws, regulations, and
policies.
o Protects the government from legal liabilities.
■RISK MANAGEMENT:
o Identifies potential risks and weaknesses in
internal controls.
o Recommends measures to mitigate risks.
KEY PRINCIPLES OF GOVERNMENT
AUDITING
Government auditing is guided by
several fundamental principles to ensure
its effectiveness and credibility. These
principles include:
FUNDAMENTAL PRINCIPLES
Financial transactions and operations of any
government agency shall be governed by the
fundamental principles set forth hereunder, to wit:
(1) No money shall be paid out of any public
treasury or depository except in pursuance of an
appropriation law or other specific statutory
authority.
(2) Government funds or property shall be spent or
used solely for public purposes.
(3) Trust Funds shall be available and may be spent
only for the specific purpose for which the trust
was created or the funds received.
FUNDAMENTAL PRINCIPLES
(4) Fiscal responsibility shall, to the greatest
extent, be shared by all those exercising
authority over the financial affairs,
transactions, and operations of the
government agency.
(5) Disbursements or disposition of
government funds or property shall
invariably bear the approval of the proper
officials.
(6) Claims against government funds shall be
supported with complete documentation.
FUNDAMENTAL PRINCIPLES
(7) All laws and regulations applicable to
financial transactions shall be faithfully
adhered to.
(8) Generally accepted principles and
practices of accounting as well as of
sound management and fiscal
administration shall be observed,
provided that they do not contravene
existing laws and regulations.
CORE PRINCIPLES
Independence: Auditors must be free
from any conflicts of interest or undue
influence to maintain objectivity.
Objectivity: Auditors should conduct
their work impartially and without bias.
Professional Skepticism: Auditors
should maintain a questioning mind
throughout the audit process.
CORE PRINCIPLES
Due Professional Care: Auditors must
perform their work with competence
and diligence.
Integrity: Auditors should be honest
and truthful in their work.
ADDITIONAL PRINCIPLES
Compliance with Laws and
Regulations: Auditors must ensure that
government operations adhere to
applicable laws and regulations.
Efficiency and Economy: Auditors should
assess the government’s use of resources
to maximize value for public money.
Effectiveness: Auditors should evaluate
whether government programs achieve
their intended goals.
ADDITIONAL PRINCIPLES
Accountability: Auditors should hold
government officials responsible for
their actions and decisions.
Transparency: Auditors should
communicate their findings and
recommendations clearly and openly.
SCOPE OF
GOVERNMENT
AUDITING
SCOPE OF GOVERNMENT AUDITING
The scope of government auditing is quite broad,
encompassing various aspects of public sector
operations. It generally includes:
Financial Audits
Examining financial statements for
accuracy, completeness, and compliance with
accounting standards.
Assessing the adequacy of internal controls to
safeguard assets and prevent fraud.
Verifying the legality and regularity of financial
transactions.
SCOPE OF GOVERNMENT AUDITING
Performance Audits
Evaluating the efficiency,
economy, and effectiveness of
government programs and activities.
Measuring program outcomes against
established objectives.
Identifying opportunities to improve
performance and reduce costs.
SCOPE OF GOVERNMENT AUDITING
Compliance Audits
Determining whether government
entities comply with laws,
regulations, and policies.
Identifying instances of non-
compliance and recommending
corrective actions.
SCOPE OF GOVERNMENT AUDITING
Information System Audits
Evaluating the security,
reliability, and integrity of
government information systems.
Assessing the effectiveness of
internal controls over information
systems.
Ensuring compliance with data
privacy and security regulations.
SCOPE OF GOVERNMENT AUDITING
Investigative Audits
Investigating allegations of fraud,
waste, or abuse of public funds.
Gathering evidence to support
findings and recommendations.
Collaborating with law enforcement
agencies when necessary.
SCOPE OF GOVERNMENT AUDITING
In essence, government auditing seeks
to:
Ensure accountability and transparency
in government operations.
Protect public funds from loss, waste,
or misuse.
Improve the efficiency and
effectiveness of government programs.
Enhance public trust in government.
SCOPE OF
GOVERNMENT
AUDITING IN
NATIONAL
GOVERNMENT
AGENCIES
SCOPE OF GOVERNMENT AUDITING
IN NATIONAL GOVERNMENT
AGENCIES
The scope of government auditing in
national government agencies is
extensive and encompasses a wide range
of activities to ensure accountability,
transparency, and efficiency in the use of
public funds.
SCOPE OF GOVERNMENT AUDITING IN NATIONAL
GOVERNMENT AGENCIES
Core Areas of Government Auditing in National
Government Agencies
Financial Audits:
■ Examination of financial statements for accuracy,
completeness, and compliance with accounting
standards.
■ Verification of the legality and regularity of financial
transactions.
■ Assessment of internal controls to safeguard public
funds.
■ Review of revenue generation, collection, and
disbursement.
SCOPE OF GOVERNMENT AUDITING IN NATIONAL
GOVERNMENT AGENCIES
Core Areas of Government Auditing in National
Government Agencies
Performance Audits:
■ Evaluation of the efficiency, economy, and
effectiveness of government programs and activities.
■ Measurement of program outcomes against
established objectives.
■ Identification of opportunities to improve performance
and reduce costs.
■ Assessment of the impact of government programs
on the public.
SCOPE OF GOVERNMENT AUDITING IN
NATIONAL GOVERNMENT AGENCIES
Core Areas of Government Auditing in
National Government Agencies
Compliance Audits:
■ Determination of agency compliance with
laws, regulations, and policies.
■ Identification of instances of non-compliance
and recommendation of corrective actions.
■ Review of agency compliance with national
government directives and mandates.
SCOPE OF GOVERNMENT AUDITING IN
NATIONAL GOVERNMENT AGENCIES
Core Areas of Government Auditing in
National Government Agencies
IT Audits:
■ Evaluation of the security, reliability, and
integrity of agency information systems.
■ Assessment of internal controls over
information systems.
■ Ensuring compliance with data privacy and
security regulations.
SCOPE OF GOVERNMENT AUDITING IN
NATIONAL GOVERNMENT AGENCIES
Core Areas of Government Auditing in
National Government Agencies
Investigative Audits:
■ Investigation of specific allegations of fraud,
waste, or abuse of public funds.
■ Examination of high-risk areas such as
procurement, disbursement, and revenue
collection.
■ Review of specific agency programs or
projects.
SCOPE OF GOVERNMENT AUDITING IN
NATIONAL GOVERNMENT AGENCIES
Core Areas of Government Auditing in National
Government Agencies
Specific Focus Areas in National Government
Agencies
■ Auditing of government-owned and controlled
corporations (GOCCs).
■ Auditing of government financial institutions.
■ Auditing of infrastructure projects.
■ Auditing of social welfare programs.
■ Auditing of defense and security expenditures.
■ Auditing of revenue generation and tax collection.
Note: The specific scope of government
auditing may vary depending on the
agency's mandate, size, and
complexity of operations.
SCOPE OF GOVERNMENT AUDITING
IN LOCAL GOVERNMENT UNITS
(LGUs)
Government auditing in Local Government
Units (LGUs) plays a crucial role in ensuring
accountability, transparency, and efficiency in the
management of public resources. The scope of
government auditing in LGUs typically covers the
following areas:
SCOPE OF GOVERNMENT AUDITING IN
LOCAL GOVERNMENT UNITS (LGUs)
Financial Audits
■Examination of financial statements for
accuracy, completeness, and compliance with
accounting standards.
■Verification of the legality and regularity of
financial transactions.
■Assessment of internal controls to safeguard
public funds.
■Review of revenue generation, collection, and
disbursement.
SCOPE OF GOVERNMENT AUDITING IN
LOCAL GOVERNMENT UNITS (LGUs)
Performance Audits
■Evaluation of the efficiency, economy, and
effectiveness of LGU programs and services.
■Measurement of program outcomes against
established objectives.
■Identification of opportunities to improve
performance and reduce costs.
■Assessment of the impact of LGU programs
on the community.
SCOPE OF GOVERNMENT AUDITING IN
LOCAL GOVERNMENT UNITS (LGUs)
Compliance Audits
■Determination of LGU compliance with
laws, regulations, and policies.
■Identification of instances of non-
compliance and recommendation of
corrective actions.
■Review of LGU compliance with national
government directives and mandates.
SCOPE OF GOVERNMENT AUDITING IN
LOCAL GOVERNMENT UNITS (LGUs)
Special Audits
■Investigation of specific allegations of
fraud, waste, or abuse of public funds.
■Examination of high-risk areas such as
procurement, disbursement, and revenue
collection.
■Review of specific LGU programs or
projects.
SCOPE OF GOVERNMENT AUDITING IN LOCAL
GOVERNMENT UNITS (LGUs)
Key areas of focus in LGU auditing:
■Local government funds (LGF) and other revenue
sources.
■Disbursement of funds for personnel services,
maintenance and other operating expenses, and
capital outlay.
■Procurement of goods and services.
■Infrastructure projects and development programs.
■Social welfare programs and services.
■Disaster management and response efforts.
■Environmental protection and management.
SCOPE OF GOVERNMENT
AUDITING IN
GOVERNMENT-OWNED
AND CONTROLLED
CORPORATIONS
(GOCCS)
SCOPE OF GOVERNMENT AUDITING
IN GOVERNMENT-OWNED AND
CONTROLLED CORPORATIONS
(GOCCS)
The scope of government auditing in
GOCCs is extensive, encompassing
various financial and operational aspects
to ensure accountability, efficiency, and
effectiveness in the management of
public resources.
Key Areas of Government Auditing in GOCCs
Financial Audits:
■Verification of financial statements for fairness of
presentation and compliance with generally
accepted accounting principles (GAAP) and
relevant laws.
■Examination of revenue and expenditure
transactions for legality, regularity, and economy.
■Assessment of internal control systems to
prevent fraud, errors, and inefficiencies.
■Evaluation of financial performance and
adherence to budgetary allocations.
Key Areas of Government Auditing in
GOCCs
Performance Audits:
■Evaluation of the efficiency and effectiveness
of programs, activities, and operations.
■Assessment of the achievement of
organizational goals and objectives.
■Identification of opportunities for
improvement in resource utilization and cost
reduction.
■Measurement of performance against
benchmarks and industry standards.
Key Areas of Government Auditing in
GOCCs
Compliance Audits:
■Verification of adherence to laws, rules,
regulations, and contracts.
■Assessment of compliance with
government policies, procedures, and
directives.
■Identification of instances of non-
compliance and recommendations for
corrective actions.
Key Areas of Government Auditing
in GOCCs
Information Technology Audits:
■Evaluation of the effectiveness of IT
controls and security measures.
■Assessment of IT systems' reliability
and integrity.
■Verification of compliance with IT
policies and standards.
Key Areas of Government Auditing
in GOCCs
Special Audits:
■Investigations of specific allegations
of fraud, corruption, or irregularities.
■Evaluation of the implementation of
specific government programs or
projects.
■Assessment of the impact of
government policies on GOCCs.
Specific Focus Areas in GOCC Audits
Given the nature of GOCCs, government auditors
often concentrate on the following areas:
■Corporate Governance: Evaluation of board
oversight, management accountability, and
risk management practices.
■Financial Management: Assessment of
financial planning, budgeting, and cash
management.
■Procurement and Contracting: Review of
procurement processes, contract compliance,
and value for money.
Specific Focus Areas in GOCC Audits
Given the nature of GOCCs, government auditors often
concentrate on the following areas:
■Human Resources Management: Evaluation of
personnel policies, recruitment, compensation,
and performance management.
■Asset Management: Verification of asset
valuation, utilization, and disposal.
■Revenue Generation: Assessment of revenue
collection, pricing policies, and revenue
maximization.
■Debt Management: Evaluation of debt structure,
repayment capacity, and interest costs.
Role of the Commission on Audit (COA)
In the Philippines, the Commission on Audit (COA) is
the primary government auditing body responsible
for auditing GOCCs. COA's role includes:
■Conducting regular financial and performance
audits of GOCCs.
■Issuing audit reports with findings,
recommendations, and opinions.
■Following up on the implementation of audit
recommendations.
■Disclosing audit findings to the public to
promote transparency and accountability.
SCOPE OF
GOVERNMENT
AUDITING IN OTHER
GOVERNMENT
INSTRUMENTALITIES
SCOPE OF GOVERNMENT AUDITING
IN OTHER GOVERNMENT
INSTRUMENTALITIES
The scope of government auditing in
other government instrumentalities is
essentially the same as in GOCCs, with
some specific adjustments to reflect the
nature and functions of these entities.
SCOPE OF GOVERNMENT AUDITING IN OTHER
GOVERNMENT INSTRUMENTALITIES
Key Areas of Government Auditing in Other
Government Instrumentalities
■ Financial Audits: Verification of financial
statements, examination of revenue and
expenditure transactions, assessment of internal
controls, and evaluation of financial performance.
■ Performance Audits: Evaluation of program
efficiency and effectiveness, achievement of
organizational goals, identification of
improvement opportunities, and performance
measurement.
SCOPE OF GOVERNMENT AUDITING IN OTHER
GOVERNMENT INSTRUMENTALITIES
Key Areas of Government Auditing in Other
Government Instrumentalities
■ Compliance Audits: Verification of adherence to
laws, rules, regulations, and contracts, assessment of
compliance with government policies, and
identification of non-compliance instances.
■ Information Technology Audits: Evaluation of IT
controls, system reliability, and compliance with IT
policies.
■ Special Audits: Investigations of fraud, corruption,
or irregularities, evaluation of specific programs or
projects, and assessment of government policy
impacts.
SCOPE OF GOVERNMENT AUDITING IN OTHER
GOVERNMENT INSTRUMENTALITIES
Specific Focus Areas for Different Government
Instrumentalities
While the core audit areas remain consistent, the
specific focus varies depending on the nature of the
government instrumentality.
■ Executive Departments: Emphasis on policy
implementation, resource allocation, and
service delivery.
■ Local Government Units (LGUs): Focus on
revenue generation, expenditure management,
infrastructure development, and social services.
SCOPE OF GOVERNMENT AUDITING IN OTHER
GOVERNMENT INSTRUMENTALITIES
Specific Focus Areas for Different Government
Instrumentalities
■ Constitutional Commissions: Emphasis on
financial management, human resources, and
compliance with constitutional mandates.
■ Regulatory Agencies: Focus on regulatory
compliance, licensing, and permit issuance
processes.
■ State Universities and Colleges (SUCs):
Emphasis on financial management, academic
performance, infrastructure development, and
human resource management.
Role of the Commission on Audit (COA)
Similar to GOCCs, the COA is the
primary government auditing body
responsible for auditing other government
instrumentalities in the Philippines. Its role
includes conducting regular audits, issuing
audit reports, following up on
recommendations, and promoting
transparency and accountability.
Challenges in Auditing Government Instrumentalities
Auditing government instrumentalities presents unique
challenges due to:
■ Complexity of operations: Many government
instrumentalities have complex structures and
operations, making it difficult to conduct comprehensive
audits.
■ Political interference: Auditors may face pressure
from politicians to modify audit findings or conclusions.
■ Limited resources: The COA may have insufficient
resources to conduct thorough audits of all government
instrumentalities.
■ Changing legal and regulatory environment: The
dynamic nature of laws and regulations can impact audit
scope and procedures.
