CORPORATE GOVERNANCE, ETHICS & SOCIAL RESPONSIBILITY

1. CORPORATE GOVERNANCE, ETHICS & SOCIAL RESPONSIBILITY by: JAYNARD S. SOLANTE

2. AUDIT, CONTROLS AND COMPLIANCE by: JAYNARD S. SOLANTE

3. Distinction Between Auditing and Accounting • Accounting • Recording, classifying, and summarizing information for decision making by management and other users • Auditing • Concerned with verifying whether recorded transactions properly reflect the economic events the occurred during the accounting period • Since accounting information is properly recorded, auditor must thoroughly understand these rules • Accumulates and interprets audit evidence by: JAYNARD S. SOLANTE

4. Distinction Between Internal and External Auditing Internal Auditing An organization control feature, which measure and evaluates the effectiveness of other organized controls. Internal auditors conduct operational audits and are compensated by their employer organizations. External Auditing In contrast independent auditing done by CPA’s is a society control external, financial information users. External auditors and audit fees are paid by the organization audited. by: JAYNARD S. SOLANTE

5. Auditing External Auditing: - the examination of financial statements by the independent auditor for the purpose of expressing opinion on the fairness with which they present financial position, results of operations, and changes in financial position in conformity with generally accepted accounting principles. by: JAYNARD S. SOLANTE

6. Auditing Internal Auditing: - an independent appraisal activity within an organization for the review of the operations as a service to management. by: JAYNARD S. SOLANTE

7. CORPORATE AUDIT DEPARTMENT CORPORATE AUDIT DEPARTMENT

8. ORGANIZATIONAL STRUCTURE AUDIT DIRECTOR REVENUE AUDIT MANAGER INTERNAL AUDIT MANAGER MANILA AUDIT TEAMLEADER HOTELS & FTRDC TEAMLEADER MOTELS , FSL, VITAL-C, MSBC TEAMLEADER IT AUDIT TEAM FINANCIAL AUDIT TEAMLEADER SYSTEMS AUDIT TEAM SPECIAL SERVICES TEAM REVENUE AUDIT STAFF INTERNAL AUDIT STAFF CORPORATE AUDIT DEPARTMENT

9. BS - ACCOUNTANCY BSC-MANAGEMENT ACCOUNTING BS – TOURISM / HRM BS – COMPUTER ENGINEERING BS – INDUSTRIAL ENGINEERING BS - INFORMATION TECHNOLOGY BS – COMPUTER SCIENCE CORPORATE AUDIT DEPARTMENT

10. General Responsibilities: • Revenue Audit Section: Responsible in ensuring that the revenue of the SBU is accounted for. • Internal Audit Section: Performs Internal Audit functions of the Company in accordance with the instructions and Audit Program Guides provided by the Corporate Audit Officers that would cover Operations, Financial, Compliance, Systems, IT and Risk-based audits. CORPORATE AUDIT DEPARTMENT

11. Objectives of Internal Auditing • Assist all members of management in the effective discharge of their responsibilities by furnishing them with analyses, appraisals, recommendation and pertinent comments concerning activities reviewed. • Internal auditors are concerned with any phase of business activity in which they may of service to management. • Goes beyond the accounting and financial records to obtained full understanding of the operations under review. -Institute of Internal Auditors Statement of Responsibilities of Internal Auditors by: JAYNARD S. SOLANTE

12. STEPS IN CONDUCTING AUDIT by: JAYNARD S. SOLANTE

13. OPERATIONS AUDITING Is a systematic process of evaluating an organization’s effectiveness, efficiency and economy of operation under management’s control and reporting to appropriate persons the results of the evaluation along with recommendations for improvements. by: JAYNARD S. SOLANTE

14. OPERATIONAL AUDIT The general objective of the operational audit is “to assist all members of management in the effective analysis, appraisals, recommendations and pertinent comments concerning the activities reviewed” in such matters as: 1. The adequacy of the control structure for which the operating department is responsible. 2. Departmental control over its operations in relation to company policies, other departments, requirements of departmental management, and financial and accounting matters. by: JAYNARD S. SOLANTE

15. OPERATIONAL AUDIT The underlying concept is that wherever we audit, and whether we use financial or operating records as basis, we audit from a management or businessman’s standpoint – the effect of activities on the company’s position – and not simply as verifiers of account, accuracy & propriety. Objectivity is “representing things as they are, unbiased by opinions or habits of thought”. The audit of any department or function comprised four basic steps such as familiarization, verification, evaluation and reporting recommendations by: JAYNARD S. SOLANTE

16. System Flow Chart A customer arrives Gallery Restaurant Member? No Enjoy service Pay for Day Card only. Pay addl bill & get Exit Pass at end of service Yes Receive Service Pass Pay Visiting Player Card Submit VPC Front Desk Swipe card Purchase service, claim consumable, submit Day Card Present Exit Pass No Pay Guest Player Card Submit GPC Locker room Register Dress up Playing Badminton? No Yes Service Desk Service Desk Service Desk Hosted by member? Service Desk Yes Return E-pass, pay charges Get E-pass & Badminton Service Pass Return towel Exit (End) Finish Badminton Remove E-pass fr slot No Member? Play Badminton E-pass slot Laundry Station Front Desk Yes Get exit pass, show to Submit SP, claim towel Put E-pass in slot Swipe card Playing Badminton? Yes submit ID card No Show ID card Exit (End)

17. PETER’S MATRIX FINDING/S ROOT CAUSE/S RISK/S RECOMMENDATION/S ACTION TAKEN by: JAYNARD S. SOLANTE

18. OPERATIONAL AUDIT In general, internal operational audits are conducted for any one on more of six different purpose. . Appraisal . Compliance . Protection of assets . Verification . Appraisal of performance . Recommendation by: JAYNARD S. SOLANTE

19. OPERATIONAL AUDIT In general, internal operational audits are conducted for any one on more of six different purpose. . Appraisal The internal auditor should determine whether controls are sound & adequate in light of organization for which they are designed. by: JAYNARD S. SOLANTE

20. OPERATIONAL AUDIT In general, internal operational audits are conducted for any one on more of six different purpose. . Appraisal . Compliance • Instituting controls is meaningless unless controls are complied with. • Purpose of compliance audit is to determine whether specific control policies, programs, or procedure are operating satisfactorily. • Focus not so much on effects of non compliance, but preventing future non-compliance. by: JAYNARD S. SOLANTE

21. OPERATIONAL AUDIT In general, internal operational audits are conducted for any one on more of six different purpose. . Appraisal . Compliance . Protection of assets Purpose of reviews is to determine whether assets are properly accounted for and safeguarded from losses. by: JAYNARD S. SOLANTE

22. OPERATIONAL AUDIT In general, internal operational audits are conducted for any one on more of six different purpose. . Appraisal . Compliance . Protection of assets . Verification Operational audits are designed to verify accuracy are reliability of internal management reports. Focus is not necessarily to respond to result of inaccurate or unreliable data, but on the critical issue of promoting accuracy and reliability. by: JAYNARD S. SOLANTE

23. OPERATIONAL AUDIT In general, internal operational audits are conducted for any one on more of six different purpose. . Appraisal . Compliance . Protection of assets . Verification . Appraisal of performance As a major operational control over organization effectiveness, internal auditors are frequently called upon to appraise employee performance. Employee-performance reviews can represent the one operational audit activity least consistent with the boundaries of an internal auditor’s professional expertise. by: JAYNARD S. SOLANTE

24. OPERATIONAL AUDIT In general, internal operational audits are conducted for any one on more of six different purpose. . Appraisal . Compliance . Protection of assets . Verification . Appraisal of performance . Recommendation Although not an audit activity, recommending operating improvements is the most significant by-product of the internal auditor’s professional role. by: JAYNARD S. SOLANTE

25. FRAUD AUDIT • Integrity Risk: • Management Fraud • - fraud committed for the benefit of the company • Employee Fraud • fraud committed for the benefit of another person / employee and to the detriment of the company. • Illegal Acts • Unauthorized use • Reputation by: JAYNARD S. SOLANTE

26. THE FRAUD TRIANGLE Why good people do wrong? Pressure (Real or perceived) Opportunities, Consequences Rationalization and Likelihood of Detection (Real or Perceived) by: JAYNARD S. SOLANTE

27. MOTIVES OF FRAUD Personal Cure financial problems Enhance lifestyle Revenge against company Conceal illegal acts Cure perceived injustice Ego—“beat the system” Personal ambition Meet incentive awards by: JAYNARD S. SOLANTE

28. MOTIVES OF FRAUD Corporate Reach or exceed quotas or goals Increase popularity and reputation Maintain ability to borrow Manipulate stock price / value Meet regulatory requirements by: JAYNARD S. SOLANTE

29. FRAUD DETECTION & DETERRENCE by: JAYNARD S. SOLANTE

30. FRAUD DETECTION & DETERRENCE • The Three Principal Lines of Defense: • First Line – Code of conduct and business ethics policies and procedures • Based on an assessment of the possible risks facing the company, an understandable written employee code of conduct and business ethics document should be in place. • Second Line – Internal control and Management control structure • An effective internal control and management organization structure provides both prevention and detection elements, but not significant deterrence! • Third Line – Internal Audit activities • Based on risk assessment of fraud and illegal acts, internal audit evaluates the 1st and 2nd line of defense mitigators. by: JAYNARD S. SOLANTE

31. Internal Audit is responsible for: • Ensuring the existence of control w/ systems designed to prevent or deter the forms of fraud. • Identifying areas of risks where theft or manipulation may be likely to occur. • Ensuring adequacy and effectiveness of controls in financial accounting and other areas subject to theft, fraud or embezzlement. • Exercising the care and skill of a reasonably prudent and competent professional. by: JAYNARD S. SOLANTE

32. The distinction between an Honest Mistake and Fraud is the underlying INTENTION behind the ACTION. by: JAYNARD S. SOLANTE