COMMISSION ON AUDIT RESOLUTION NO.

95-505 July 4, 1995

SUBJECT : Re-Statement with Amendments of COA Memorandum No. 93-316D Prescribing

the Application of the Test Audit Scheme (TAS) and the Simplified Sampling
Scheme (SSS) in the Audit of Current and Prior Years Transactions and
Accounts of National and Local Government Agencies and Government Owned
and/or Controlled Corporations.

WHEREAS, the tremendous volume and complexity of transactions in the government

have made the practice of examining each and every transaction physically impossible, and in
fact has created a large volume of backlog in post-audit;

WHEREAS, it has been observed that due to the adherence to 100% audit of
transactions, backlogs in post-audit kept piling up to millions of unaudited vouchers/receipts
and other transaction documents;

WHEREAS, the existence of these backlogs cannot but raise doubt on the integrity of
the Annual Audit Reports submitted by the Auditors;

WHEREAS, external auditing as performed by other audit institutions, both in this

country and the world over, is always on test basis;

WHEREAS, detailed audit is time-consuming, costly and not necessarily more effective;

WHEREAS, the auditing staff cannot be expected to examine/review all the work of an
Accounting Department or Unit with more staff members;

WHEREAS, to facilitate audit work, this Commission has prescribed audit sampling
methodologies under COA Memorandum Nos. 84-316A, 85-316C and 93-316D;

WHEREAS, the use of sampling in audit is not without problems/difficulties particularly

during the initial stage of implementation when auditors are still in the process of internalizing
the concepts and methodologies involved;

WHEREAS, under COA Resolution No. 82-49, the Commission has adopted the policy
that in order to benefit from its use, audit sampling shall be constantly updated and modified
according to the needs of the auditor and his audit objectives in consonance with the over-all
policies and objectives of the Commission.

NOW, THEREFORE, the Commission has resolved, as it does hereby resolve, to

amend/modify and improve COA Memorandum No. 93-316D to address the
problems/difficulties encountered by the auditors in its implementation, as stated hereunder.
1.0 SIMPLIFIED SAMPLING SCHEME

1.1 DEFINITION OF TERMS

1.1.1 Batch/Population - documents consist of vouchers/receipts/JVs and

other transaction documents including their summaries and supporting
papers, usually submitted by management in batches periodically to
the Auditor for examination and audit. If one month's transactions are
few, several months may be combined and if they are voluminous one
month may be divided into several populations. In no case, however,
shall the population consists of more than four months transactions.

1.1.2 Error - is a deviation from or non-compliance with laws, rules and

regulations, or defects in the transaction that affects its validity
including inaccuracy in computations and representation of amounts.

1.1.3 High Value Items - transactions that are high in amount as determined
in accordance with the procedures prescribed and illustrated in
paragraph 1.2.1.2a hereof.

1.1.4 Key Items/Special Items - transactions and accounts that are prone to
error, subject of complaints, and other high risk transactions which in
the perception of the Auditor require detailed 100% audit such as
payment for infrastructure contracts, cancelled/ tampered ORs, bank
reconciliation statements and the like.

1.1.5 Route - direction specified for each month in the quarterly

Memorandum issued by the CASU/CRASU or its equivalent, which is
either downward or sideward.

1.1.6 Tolerable Error Rate - percentage of error in relation to the samples

selected which does not materially affect the integrity of the population
represented in the sample size.

1.1.7 Substantive Errors - when the amounts paid or collected or assessed

are illegal, invalid, inaccurate or unrecorded. These are also the
monetary inaccuracies in computation.

1.1.8 Compliance Errors - deviations from the established system of internal

control and prescribed rules and regulations including approval and
other documentary requirements.
1.2 PROCEDURES

1.2.1 BASIC SAMPLING DETERMINANTS

1.2.1.1 Determination of Populations

a. Official Receipts - The population in the audit of Official

Receipts (ORs) may be classified in the following manner:

a.1 All ORs per accountable officer;

a.2 All ORs as submitted for a particular period by

management and as reported by the Chief Cashier
or Collecting Officer regardless of revenue
classification;

a.3 All ORs per revenue classification for a particular

period. The population may be per month, per two
(2) months or per three (3) months depending on the
volume. In no case shall it exceed four (4) months.

b. Disbursement Vouchers - The population in the post-audit of

Disbursement Vouchers (DVs) shall include all the
disbursement vouchers submitted for a particular period as
reflected in the transmittal letter or Report of
Disbursements/Checks Issued after separating the payrolls,
liquidation of cash advances and Journal Vouchers (JVs).
The payrolls, liquidation of cash advances (other than
payrolls) will constitute separate populations while JVs will
be audited 100%. The audit of the liquidation of cash
advances (other than payrolls) shall be related to the cash
examination undertaken and vice-versa. The population
may be composed of one month, two months or three
months transactions depending on the volume. In no case,
however, shall the population exceed four months
transactions.

c. Payrolls - The population for the post audit of payrolls shall

consist of the total number of payees or employees per
period. This may be per month, per two months or per three
months depending on the volume. In no case shall it
exceed four months.

1.2.1.2 Adjusted Population

The adjusted population is defined as the population

less High Value Items (HVIs) and Key Items (KIs). In cases
where the populations is homogeneous in terms of
amounts, as in the case of payrolls, only KIs are separated
from the population to arrive at the adjusted population.
 HVIs and KIs are to be audited 100%.

a. Determination of High Value Items - High Value Items are

determined by the use of the percentage table to define the
high value as shown below:

Percentage to Define High Value

Number of Transactions Percentage

in the Population

0 - 1,999 5%
2,000 - 4,999 2%
5,000 + 1%

Illustration:

For the month of May 1994, the accounting unit

submitted 2,030 vouchers (payrolls, liquidation of cash
advances [other than payrolls], and journal vouchers are
considered separate population and are already
segregated) to COA with a total amount of P11,000,000.00.
From the table of percentage, 2,030 falls within the range of
2,000 - 4,999 for which 2% is to be used to determine high
value. High Value (HV) = 2% x P11,000,000 = P220,000.00.
This means that any single transaction amounting to
P220,000.00 and above will be considered high value item.

1.2.1.3 Sample Size

The sample size to be used must have the right

balance between two conflicting needs - minimal sampling
uncertainty and audit economy. Sampling uncertainty can
be reduced by increasing the sample size but this would be
at the expense of audit economy.

The desired sample size from a given population shall

be determined through the use of the following table:

Determination of Sample Sizes

Number of Transactions Sample Size

in the Population

0 - 199 75
200 - 1,999 100
2,000 - 4,999 150
5,000 + 200

Sample sizes are determined based on the adjusted

population or on the unadjusted population in case there will
 be no HVIs and KIs.

Illustration:

Assuming that from the submitted 2,030 vouchers with

a total amount of P11,000,000.00, 10 vouchers are high
value items, each with amounts of P220,000.00 or more
totaling P7,000,000.00 and 40 vouchers picked as key
items amounting to P500,000.00. The adjusted population
will then be:

Total volume 2,030

Less: HV items (10)
Key items (40)
--------
Adjusted Population 1,980

The sample size for 1,980 vouchers based on the

table is 100.

Sample Interval

The sample interval is determined by dividing the

adjusted population by the desired sample size.

Example: Based on the given example

Sample Interval (SI) = 1,980 adj. population

----------------------------
100 sample size

= 19.80 or 20

This means that if the sample interval is 20, the

auditor will select one sample for every 20 vouchers.

1.2.2 SELECTION OF SAMPLES

In the selection of samples, several factors are to be considered.

For one, every item in the population must have an equal or known
chance of selection. Another, the process of selecting the sample must
be unbiased. The samples will be selected on a systematic sampling
technique. This means that after getting the sample interval (SI), the
Auditor will look from the Memorandum on Random Number Start
(RNS) (Annex A) for the starting number. In the selection of the
prescribed starting number, the month of audit is the reference
month. When the prescribed number is higher than the SI, the Auditor
should refer to the prescribed route stated in the Memorandum to get
the number which is equal to or less than the SI. As in our example, 20
 is the SI and referring to the month of June in the Memorandum
(Annex A), 45 is the starting number for two (2) digits in Table 1 (Annex
B). Since 45 is higher than the SI, the auditor will go downward and
look for a number equal to or less than 20, which in this case, the
number is 15. This means that the first sample is the 15th voucher.
For the succeeding sample items, add the SI to the number of the first
sample item and every interval thereof until the desired sample size is
obtained.

1st sample item = 15th voucher

2nd sample item 15 + 20 = 35th voucher
3rd sample item 35 + 20 = 55th voucher
4th sample item 55 + 20 = 75th voucher

This process will continue until the desired sample size is

attained.

Random Number Start

A memorandum on monthly Random Number Start (RNS) will be

issued by the CASU/CRASU or its equivalent on a quarterly basis
covering three months period.

1.2.3 EVALUATION OF SAMPLES

The selected samples are post-audited and evaluated by

comparing the actual compliance and substantive errors found during
the audit of the samples with the tolerable error rates. The tolerable
error rate for compliance evaluation is 20% of the sample size while
the tolerable error rate for substantive evaluation is 8% of the total
amount of the sample size (Annex C). If the audit of the samples does
not pass compliance and/or substantive evaluation, the auditor shall
audit the whole population. In both cases, the auditor shall submit the
corresponding evaluation report.

Evaluation Working Paper

The auditor shall prepare an Evaluation Working Paper (EWP)

(Annex C). While the format is flexible, it must include the reference for
the transactions audited and the total number of compliance and
substantive errors found in the sample. A copy of the EWP shall be
attached to and submitted quarterly together with the accomplishment
report.

When error rates do not exceed the tolerable error rates.

Where the audit of the samples reveal compliance and/or

substantive error rates equal to or below 20% or 8%, respectively, but
which nevertheless resulted to suspensions, disallowances, or
charges, the transactions in the population related or similar to the
 transactions suspended, disallowed or charged in audit shall be
audited 100%. The rest of the other transactions in the population
shall be considered to have been passed in audit. The amounts
suspended, disallowed or charged shall be reflected in the CSB.

When error rates exceed the tolerable error rates.

When the audit of the samples results to a situation where either

the compliance or substantive error rate exceeds 20% or 8%,
respectively, the whole population shall be audited 100% and the
resulting suspensions, disallowances or charges shall be reflected in
the CSB/s.

1.2.4 ISSUANCE OF CERTIFICATE OF SETTLEMENT AND BALANCES

(CSB)

When sampling is applied, the CSB shall preferably be issued on

a per population basis. The certification on the face of the CSB may
be modified to include a statement to the effect that the
transactions/accounts covered by the CSB have been audited in
accordance with the Simplified Sampling Scheme procedures
prescribed under COA Resolution No. _______ dated ________.

Transactions to be stamped "Post-Audited"

Only the audited High Value Items, Key Items and the samples
selected shall be stamped post-audited although the entire population
represented by the samples shall be deemed to have been audited
and covered by the corresponding CSB or CSBs issued therefore.

1.2.5 REPORTING

The auditor shall submit to the CASU/CRASU or its equivalent

the quarterly accomplishment report (Annex D) which shall reflect the
transaction stream, the month of audit, period covered, the volume, the
sample size, the high value and key items, the total transactions
passed in audit and the number of transactions suspended, disallowed
or charged. Likewise, the audit objectives with the corresponding audit
procedures as stated in the State Audit Manual shall also be included
but only in the initial implementation of sampling.

1.2.6 AUDIT SCOPE

The audit of the samples, the High Value Items and the Key Items
shall cover the entire accounting cycle, i.e., from source documents at
the inception of a transaction up to the point when that transaction is
ultimately immersed in the agency's financial statements or vice versa.
The audit of the entire accounting cycle will generally comprise the
following stages:

1.2.6.1 The audit of source documents for receipts, disbursements

 and other sources of original entries.

1.2.6.2 The audit of entries in the Books of Original Entries and

month-end accounts summarization.

1.2.6.3 The audit of postings from the Books of Original Entries and
other sources, to the Subsidiary and General Ledgers.

1.2.6.4 The verification of the trial balance, financial statements and

other financial reports.

The transactions selected as samples including the High Value

Items and Key Items shall be audited and considered as the basis for
the audit of the accounts affected by the transactions. In case there
are accounts whose transactions do not form part of the samples
selected or where there are only very few transactions forming part of
the samples, the auditor may select additional samples pertaining to
the said accounts.

In the case of payrolls, the audit may be done through sampling

as herein prescribed or by using the systems-based audit approach as
prescribed in Section 30.3 of the State Audit Manual.

2.0 TEST AUDIT MONTH SCHEME

2.1 DEFINITION OF TERMS

2.1.2 Test Audit Months - The months selected for audit which shall comprise
at least six (6) months of the year under audit as determined in
accordance with the procedures prescribed in paragraph 2.2 hereof.

2.2 SELECTION OF TEST AUDIT MONTHS

2.2.1 The selection of the test audit months which shall comprise at least six
(6) months of the succeeding year shall be made by the COA Director
concerned. For this purpose, the Unit Auditor shall submit to the said
COA Director, on or before the end of December of each year, the
following information:

2.2.1.1 Nature, frequency and amount per month of suspensions,

disallowances or charges for the current year and the
immediately preceding two (2) years (for the initial year of
implementation only).

2.2.1.2 Monthly volume of transactions in terms of quantity and total

amount per month for the current year and the immediately
preceding two (2) years (for the initial year of
implementation only), categorized into collections,
 disbursements and other non-cash transactions. Sub-
categories under each of the main categories may be
presented as necessary depending on the nature of the
operations of the audited agency.

On the basis of the foregoing information, the COA Director concerned

shall select the test audit months. The selection of the test audit months shall
consider the relative impact of the suspensions, disallowances or charges in the
preceding three (3) years as against the volume of transactions. However,
when suspensions, disallowances or charges in the preceding years have been
minimal or negligible, the peak months of the year, i.e., the months when
transactions are voluminous in terms of amount and quantity, shall be selected
as test audit months.

2.2.2 Except for the months of January and December which shall be
considered as mandatory test audit months, the information on
whether a particular month is a test or non-test audit month shall be
released in writing by the COA Director to the Auditor concerned one at
a time only, ten (10) days after the end of the particular month.

2.2.3 The approved test audit months shall be kept confidential and any
unauthorized release of information relative thereto shall be a ground
for disciplinary action.

2.2.4 The months not selected as test audit months during any year may be
included as test audit month in the succeeding year provided due
consideration is given to the nature, frequency and amount of
suspensions, disallowances and charges in the preceding years.

2.2.5 When in the judgement of the Auditor, the six (6) test audit months can
still be reduced as when the internal control system of the auditee
agency has been established to be adequate or when errors,
suspensions, disallowances or charges have been very minimal or
negligible or when sheer volume of transactions compels further
reduction of tests, the Auditor may upon proper written justification
recommend to the COA Director concerned, the reduction of the six (6)
audit months which in all cases shall not be less than four (4) months.
The COA Director shall select the test audit months in accordance with
the procedures prescribed above.

2.3 AUDIT SCOPE

2.3.1 The audit of the test months shall likewise cover the entire accounting
cycle as provided in paragraph 1.2.6 hereof.

2.3.2 The following shall likewise be audited in addition to the audit of the
test audit months:

2.3.2.1 All infrastructure and other significant non-recurring

transactions occurring in the non-test audit months.
 2.3.2.2 All transactions in the non-test audit months similar to or
related to those transactions suspended, disallowed or
charged in the course of the audit of the six test audit
months. However, when in the judgement of the Auditor, the
suspensions, disallowances or charges in the test audit
months are not material as to warrant the audit of the
related or similar transactions in the non-test audit months,
he may dispense with the audit of the latter mentioned
transactions upon written authority of the COA Director
concerned.

2.3.2.3 All transactions subject of complaints or adverse information

whether or not such transactions are included in the test
audit months.

2.3.3 In case fraud is established during the audit, a special audit report shall
be prepared and submitted immediately in accordance with the
guidelines embodied in COA Memorandum No. 93-813 dated July 9,
1993.

2.3.4 The Unit Auditor shall keep a permanent file of the Audit Program used
in the examination of the transactions and accounts in the test audit
months indicating therein among other, the names of the audit staff
assigned to perform the audit. The said Audit Program shall be up-
dated upon completion of the audit for a particular month, to reflect
therein the actual audit procedures undertaken and the names of the
audit staff who actually performed the audit activities embodied in the
audit program.

2.4 ISSUANCE OF THE CERTIFICATE OF SETTLEMENT AND BALANCES (CSB)

2.4.1 The CSBs shall be issued monthly and only for the test audit months
except in the instances contemplated in paragraphs 2.3.2.1, 2.3.2.2
and 2.3.2.3 above where the particular transactions audited in the non-
test audit months shall likewise be covered by the corresponding CSB.

2.4.2 Only the transactions audited shall be stamped "Post-audited". On the

other hand, the unaudited transactions of the non-test audit months
shall be reported in the monthly Summary Report On Post-Audit And
Issuance of CSBs as indicated in Annex F hereof.

2.4.3 When the Test Audit Month Scheme is applied, the certification on the
face of the CSB may be modified to include a statement to the effect
that the transactions/accounts covered by the CSB have been audited
in accordance with the Test Audit Month Scheme procedures
prescribed under COA Resolution No. ______ dated ______.
3.0 TEST AUDIT DAY SCHEME

3.1 DEFINITION OF TERMS

3.1.1 Test Audit Days - The days selected for audit which shall comprise at
least six (6) days of the month under audit as determined in
accordance with the procedures prescribed in paragraph 3.2 hereof.

3.2 SELECTION OF TEST DAYS

3.2.1 The sampling methodology herein authorized considers the 253

working days of the year as the population from which six (6) working
days per month shall be selected as audit samples.

3.2.2 The first and last working days of the year and the last working day of
each month shall be considered as mandatory test days to assure
among others that the account balances carried forward including
reversing entries, if any, at the beginning of the year and the adjusting
entries at the end of the year are duly audited, as well as to establish
the reliability of the monthly trial balance/ financial reports.

3.2.3 Transactions in the non-test days similar to or related to the

transactions suspended, charged or disallowed in the course of the
audit of test days shall be audited.

3.2.4 The total number of samples (test days) in a year is seventy two (72)
days consist of thirteen (13) mandatory test days (first and last working
day of January and last working day of each of the test of the months)
and fifty nine (59) sample test days.

3.2.5 The sample test days shall be selected by the auditor based on the
Memorandum of Random Number Start (RNS) which in this case shall
be issued by the CASU or CRASU monthly (Annex E) and Table I of
the Random Number Tables (Annex B). The sample selection process
is illustrated as follows:

a. From the Memorandum of Random Number Start for the month

of March 1995 (Test Audit Day Scheme), the location of the
RNS using Table I is column 5, row 9 and the RNS is 40.

b. Since the average number of working days in a month is 22

days, the numbers in Table I that should correspond to the
sample test days should be any number or numbers no less or
greater than 1 to 22.

c. In the example above, the RNS is 40 which is greater than 22.

Further, the route or direction given in the Memorandum of
Random Number Start is going down.
 Following this direction, the numbers following the RNS 40 are
20, 21, 04, 17, 26, 19, 44, etc. Thus, the numbers that should
be selected are those that are no less nor greater than 1 to 22
which are 20, 21, 04, 17, and 19. This means that the test
audit days for the month of March 1995 are the 20th, 21st, 4th,
17th, 19th and last working day of the month.

d. Where the RNS is equal to or between the number 1 to 22, the

RNS becomes the first sample test day.

3.2.6 All accounts and transactions in the sample test days shall be audited
on hundred percent (100%) and evaluated by comparing the actual
compliance and substantive errors found in the course of the audit with
the tolerable error rates. The tolerable error rate for substantive
evaluation is 8% of the total amount of the transactions of all the test
days in a month while the tolerable error rate for compliance evaluation
is 20% of the total number of transactions in all the test days of the
month. If the audit of the test days does not pass compliance and/or
substantive evaluation, the auditor may select another six (6) days of
the month as additional samples. If the percentage of the sum of the
errors found in the first and second samples in relation to the double
size sample still exceeds the tolerable error rate for either substantive
and/or compliance error, the auditor shall audit the transactions of the
entire month.

3.2.7 The auditor shall prepare an Evaluation Working Paper (EWP) in

accordance with the requirements and procedures prescribed under
paragraph 1.2.3 hereof.

3.3 AUDIT SCOPE AND PROCEDURES

3.3.1 The audit of the test days, including the transactions enumerated in
paragraphs 3.2.4 and 3.3.2 hereof shall likewise cover the entire
accounting cycle as provided in paragraph 1.2.6 of this Resolution.

3.3.2 The following shall likewise be audited in addition to the audit of the
test days:

3.3.2.1 All infrastructure and other significant non-recurring

transactions occurring in the non-test days.

3.3.2.2 All transactions in the non-test days similar to or related to

those transactions suspended, disallowed or charged in the
course of the audit of the test days.

3.3.2.3 All transactions subject of complaints or adverse information

whether or not such transactions are included in the test
audit days.

3.3.3 In case fraud is established during the audit, a special audit report shall
be prepared and submitted immediately in accordance with the
 guidelines embodied in COA Memorandum No. 93-813 dated July 9,
1993.

3.3.4 Unit Auditor shall keep a permanent file of the Audit Program used in
the examination of the transactions and accounts in the test days
indicating therein among others, the names of the audit staff assigned
to perform the audit. The Audit Program shall be updated upon
completion of the audit for a particular month to reflect the actual audit
procedures undertaken, the actual time spent for each activity and the
names of the audit staff who actually performed the audit activities
embodied in the audit program.

3.4 ISSUANCE OF THE CERTIFICATE OF SETTLEMENT AND BALANCES (CSB)

3.4.1 The CSB shall be issued monthly with the certification on the face
thereof modified to include a statement to the effect that the
transactions/accounts covered by the CSB(s) have been audited in
accordance with the Test Audit Day Scheme prescribed under COA
Resolution No. _________ dated ________.

3.4.2 Only the transactions audited including those mentioned under

paragraph 3.3.2 hereof shall be stamped "Post-audited".

4.0 SAMPLING SUPPORT ORGANIZATION

Creation and Functions of the CASU/CRASU

There shall be a COA Audit Sampling Unit (CASU) and COA Regional Audit
Sampling Unit (CRASU) or its equivalent in each central operating office and regional
office, respectively, that will assist the respective COA Directors in the following
activities:

4.1 Monitoring and supervision over the implementation of audit sampling by the
auditing units;

4.2 Conduct of in-house training on sampling;

4.3 Selection of the test audit months for those applying the Test Audit Month
Scheme;

4.4 Issuance of the Random Number Start (RNS):

4.4.1 RNS covering three months period (Annex A) - one month before the
beginning of the quarter for those applying either the Pareto Sampling
Scheme, the CSCM or the SSS; and

4.4.2 RNS covering one month period (Annex E) - ten (10) days before the
beginning of the month for those applying the Test Audit Day Scheme.

4.5 Such other functions/duties as may be assigned from time to time by the
 Chairman or the Director concerned.

5.0 AUDITORIAL JUDGEMENT/USE OF OTHER AUDIT TOOLS AND TECHNIQUES

As an audit tool, sampling shall not be substituted for good auditorial judgement.
As such, the auditor is not precluded from using other means or tools in accomplishing
his audit objectives.

The application of sampling enables the auditor to form a conclusion on the

state of compliance with applicable laws, rules and regulations not only on the sample
transactions but also on the population of transactions subjected to sampling selection,
and therefor provides the auditor with an achievable target and manageable audit
scope in the post-audit of transactions.

However, samplings inherent limitation is that it is merely an audit technique and

may not provide all the answers to the problems that may be encountered in the
conduct of the audit. Thus, to ensure that the standard of "sufficient, relevant and
competent evidence" needed by the auditor to arrive at a conclusion on the regularity,
efficiency, economy or effectiveness of operations or to express an audit opinion on the
financial statements, is adequately met, it will be necessary for the auditor, to employ, in
addition to the procedures applied to the sample transactions, other audit tools and
techniques such as but not limited to the following:

5.1 Inspection / physical count

5.2 Confirmation
5.3 Observation
5.4 Analysis
5.5 Interview / inquiry / questionnaire
5.6 Recomputations
5.7 Review of reconciliation procedures
5.8 Modeling
5.9 Flowcharting / validation

6.0 POST-AUDIT OF BACKLOGS

The up-dating of post-audit backlogs shall be carried out in accordance with the
procedures prescribed. However, in view of the Annual Audit Reports that have been
rendered in the previous years, the audit of the corresponding accounts need not be
disturbed except when the same is relevant to and affects the balances of
accountabilities reflected in the books of accounts. As a general rule therefore, the
audit of backlogs shall be limited to the determination of regularity or validity of
transactions except when balances of accountabilities are affected as a result of the
issuance of CSBs or other pertinent special audit reports.

7.0 TRANSMITTAL OF ACCOUNTS/RECORDS BY THE AUDITEE-AGENCY

 In cases where the agency's reporting/accounting system does not indicate the
details of the transactions nor provide for reports such as Report of Collections or
Report Disbursements / Checks Issued or other similar reports indicating the details of
the transactions, the submission of the accounts/records to the auditor must be
accompanied by a Transmittal Form listing down all the transactions by official receipt
numbers or check.

The Transmittal Form shall contain columns for Item Number, Official
Receipt/Check Number, Voucher Number and Amount. Furthermore, the Item Number
column shall show the total of the transactions in a batch.

8.0 CONTINUATION OF THE SAMPLING SCHEMES PRESENTLY EMPLOYED

The existing sampling schemes, i.e., the COA Sampling Card Methodology
(CSCM) and the Pareto's Principle of Distribution shall still be continued. The auditor
shall have the option to choose which scheme is best suited to their particular auditee-
agency.

The selection of the appropriate sampling scheme(s) best suited to the

transactions/accounts of the auditee-agency shall be reported in writing by the unit
auditor to the COA Director concerned for monitoring purposes. Thereafter, no
changes in sampling methodology shall be effected by the auditor without the prior
approval of the Director concerned.

9.0 LEGAL AUTHORITY VIS-A-VIS LIABILITY

The provisions of the Constitution grant the Commission exclusive authority to

define the scope of its audit and to establish the methods and techniques required
therefor. This Constitutional prerogative is amplified in Section 43(3) of PD No. 1445,
otherwise known as the Government Auditing Code of the Philippines and in Section
28(3), Subtitle B, Book V, of the Administrative Code of 1987 (EO No. 292), which
contain the basic proviso that justifies the promulgation by the Commission of auditing
procedures and techniques to wit:

"In the performance of their respective audit function as herein

specified, the auditors shall employ such auditing procedures and
techniques as are determined by the Commission under regulations that
it may promulgate."

When the auditor employs the sampling techniques authorized by the

Commission and as long as he apply the technique in good faith and with due care, he
does not incur any civil, criminal or administrative liability arising in any way from his
use of such audit technique.

The sampling procedures herein prescribed should be applied only in instances

where the volume of transactions is physically impossible to audit 100%. When the
volume of transactions does not warrant the application of sampling technique, the
auditor may perform a 100% audit.

BE IT FURTHER RESOLVED, to authorize the Chairman of this Commission to make

changes or modifications, on a case to case basis, in the application of certain provisions of
this Resolution as may be warranted to suit the actual conditions obtaining in the audited
agency.

BE IT FINALLY RESOLVED, that the Directors/Officers-In-Charge of COA Central

Operating Offices and Regional Offices shall be responsible for the proper implementation of
this Resolution.

This Commission shall take effect immediately and shall supersede COA Memorandum
No. 93-316D dated November 11, 1993.

Quezon City, July 4, 1995.

(SGD.) CELSO D. GAÑGAN, Chairman

(SGD.) ROGELIO B. ESPIRITU, Commissioner
(SGD.) SOFRONIO B. URSAL, Commissioner
ANNEX A

REPUBLIC OF THE PHILIPPINES

Commission on Audit
Quezon City

March 8, 1993

MEMORANDUM To :

ALL AUDITING UNIT HEADS CONCERNED

Subject: Random Number Start for the Second Quarter, 1993

Pursuant to COA Memorandum No. 85-316-C dated September 19, 1985 which
prescribes the adoption of the COA-Sampling-Card Methodology (CSCM) in addition to the
existing Pareto Sampling Scheme for the post-audit of government transactions, we are
furnishing you the following information regarding the starting numbers for the second quarter
of 1993.

A. Pareto Sampling Scheme

Reporting Table Location Starting Route

Month Number Column Row Number

April '93 6-8 3 431 97311 -down-

May '93 6-7 5 341 82320 -down-
June '93 6-2 3 63 20738 -down-

B. COA-Sampling-Card Methodology

April '93 Table I, 4 digits 5 21 8930 -down-

Table II, 3 digits 5 36 023 -down-
Table III, 2 digits 6 10 06 -down-
Table IV, 4 digits 1 48 0008 -down-
Table V, 2 digits 2 9 18 -down-

May '93 Table I, 4 digits 6 57 8231 -down-

Table II, 3 digits 2 104 554 -down-
Table III, 2 digits 4 25 19 -down-
Table IV, 4 digits 5 64 0415 -down-
Table V, 2 digits 1 11 11 -down-

June '93 Table I, 4 digits 6 73 7276 -down-

Table II,3 digits 1 24 926 -down-
Table III, 2 digits 3 15 16 -down-
Table IV, 4 digits 3 100 1570 -down-
Table V, 2 digits 5 15 19 -down-
 Additional guidelines on the use of the random number table are:

1. When one-digit number is required - drop the left-hand digit of the two-digit
random number selected.

2. When more than four-digit numbers are required - add to the selected 4 - digit
number the required additional number of the digits from the next adjacent
column to the right. In case the selected number falls under the last column,
use the first column of the same row.

C. Simplified Sampling Scheme

Column Row Starting Route

Number

April '93 Table I 1 5 16 -down-

Table II 4 20 32 -down-
Table III 3 35 805 -down-

May '93 Table I 4 20 04 -down-

Table II 2 19 36 -down-
Table III 4 1 108 -down-

June '93 Table I 1 1 45 -down-

Table II 6 30 37 -down-
Table III 4 77 193 -down-

Please give this information to the auditors under your jurisdiction who may wish to
apply either scheme.

COA Director Concerned

ANNEX B

COA RANDOM NUMBER TABLE I

TWO DIGITS FOR NUMBERS 01 TO 50

01 02 03 04 05 06

(01) 45 41 29 12 15 03
(02) 15 03 47 24 20 10
(03) 14 25 37 50 31 38
(04) 24 03 28 13 10 17
(05) 16 19 20 35 13 27

(06) 06 46 46 39 17 14
(07) 14 37 47 46 20 04
(08) 46 18 15 07 44 19
(09) 01 18 22 14 40 40
(10) 05 21 49 16 20 08

(11) 11 48 18 27 21 36
(12) 17 06 19 43 04 33
(13) 19 12 09 20 17 32
(14) 19 29 33 03 26 01
(15) 01 19 12 15 19 01

(16) 26 02 28 19 44 24
(17) 13 22 21 23 28 28
(18) 43 41 35 32 02 21
(19) 35 26 33 34 26 44
(20) 09 37 35 04 42 43

(21) 48 14 06 37 21 13
(22) 19 05 26 15 28 31
(23) 50 41 17 17 26 32
(24) 26 41 04 21 06 17
(25) 26 11 13 48 24 38

(26) 12 35 42 43 11 17
(27) 27 01 24 09 14 20
(28) 42 23 23 17 14 05
(29) 25 13 48 26 16 25
(30) 11 43 19 12 36 41

Table I will be used if the sample interval is from 01 to 50.

 COA RANDOM NUMBER TABLE II
TWO DIGITS FOR NUMBERS 01 TO 99

01 02 03 04 05 06

01 94 92 45 62 41 80
02 15 57 03 92 89 89
03 07 14 59 47 24 20
04 05 58 82 66 49 90
05 14 58 87 25 37 50

06 51 69 69 81 43 19
07 03 28 52 13 10 17
08 24 62 20 55 97 82
09 84 08 86 97 39 82
10 18 18 50 41 97 06

11 17 71 86 14 85 93
12 70 50 14 37 68 47
13 58 75 20 94 04 95
14 24 73 20 87 46 18
15 19 76 16 39 49 56

16 40 06 40 29 72 70
17 21 49 81 62 06 67
18 16 69 70 11 65 48
19 74 36 50 41 40 87
20 21 78 36 32 57 45

21 19 64 30 43 31 34
22 58 59 71 20 96 82
23 23 52 19 29 59 85
24 92 67 01 56 91 12
25 47 87 01 19 12 61

26 55 50 06 99 80 80
27 72 81 94 42 49 41
28 13 22 72 12 32 86
29 51 76 22 59 27 74
30 22 92 16 64 12 37

Table II will be used if the sample interval is from 51 to 99.

 COA RANDOM NUMBER TABLE III
THREE DIGITS FOR NUMBERS 001 TO 999

001 002 003 004 005 006

001 949 245 624 180 552 572

002 155 703 928 989 689 810
003 071 459 472 420 621 038
004 055 882 664 990 895 474
005 145 887 253 750 313 824

006 516 969 814 319 336 994

007 032 852 131 017 524 888
008 246 220 559 782 421 334
009 840 886 973 982 822 876
010 481 850 419 706 464 639

011 117 186 148 593 093 020

012 705 014 376 847 467 991
013 587 520 940 495 321 356
014 247 320 874 618 150 744
015 197 616 394 956 901 182

016 400 640 297 270 802 774

017 214 981 620 667 082 573
018 116 970 116 548 586 183
019 743 650 414 087 164 772
020 217 836 325 745 222 817

021 196 430 433 134 893 310

022 585 971 209 682 017 324
023 235 219 295 985 330 395
024 926 701 596 112 278 322
025 478 701 191 261 591 702

026 555 016 998 080 115 262

027 728 194 424 942 104 105
028 132 272 128 286 288 697
029 517 622 592 776 364 136
030 229 216 641 237 251 800

031 693 582 653 393 426 844

032 853 854 938 003 784 004
033 435 106 910 595 228 648
034 633 783 199 135 961 189
035 225 718 805 269 962 589

Table number III will be used if the sample interval is from 100 to 999.
 001 002 003 004 005 006

036 831 995 260 819 023 875

037 171 788 532 652 932 771
038 651 993 482 026 418 042
039 172 826 086 423 671 113
040 578 857 247 388 521 889

041 749 505 470 227 118 813

042 151 916 899 576 720 741
043 049 328 580 820 712 428
044 723 584 387 680 724 130
045 224 083 037 165 911 935

046 453 967 347 315 913 890

047 642 877 248 348 417 797
048 008 721 662 762 331 698
049 063 039 335 571 146 725
050 987 044 997 427 618 863

051 968 583 206 758 266 957

052 386 040 764 318 759 223
053 880 757 803 736 431 203
054 791 259 600 821 219 894
055 629 661 785 009 412 100

056 547 958 631 249 469 781

057 374 059 686 483 730 823
058 855 449 786 959 218 405
059 883 848 838 285 377 471
060 779 657 302 314 466 872

061 092 076 765 903 161 920

062 561 209 681 265 103 365
063 543 659 233 780 528 289
064 590 613 152 685 415 129
065 264 226 339 329 768 126

066 935 173 731 084 047 338

067 028 627 792 943 521 549
068 149 646 706 707 054 462
069 705 326 884 891 025 933
070 065 729 437 147 441 368
071 755 332 515 333 337 311
072 436 125 923 951 159 496
073 769 404 438 604 931 727
074 272 108 873 312 740 902
075 367 239 488 221 004 292

076 921 045 075 167 950 463

077 859 704 127 193 980 168
078 510 925 747 546 615 442
079 398 362 295 737 605 860
080 598 397 439 211 046 029

081 121 271 446 596 732 861

082 047 597 733 862 019 143
083 734 865 024 162 301 491
084 048 181 342 501 643 695
085 361 522 663 804 948 089

086 682 827 963 101 241 401

087 983 122 273 452 601 742
088 303 492 644 796 930 062
089 683 828 964 102 243 402
090 030 172 304 494 649 798

091 382 545 709 845 984 174

092 808 960 109 286 461 632
093 290 473 655 829 986 184
094 870 056 235 383 565 748
095 503 692 846 031 205 384

096 091 274 479 656 830 988

097 753 938 114 296 530 710
098 455 665 878 057 236 403
099 238 406 670 898 095 275
100 188 369 570 700 066 252

101 190 370 574 832 096 279

102 207 389 602 907 176 345
103 253 457 696 976 208 390
104 349 554 760 097 280 508
105 531 739 099 350 557 909

106 979 240 509 699 100 392

107 575 939 351 558 912 352
108 672 120 507 716 254 537
109 375 833 353 673 255 608
110 539 192 550 256 300 609

111 408 510 611 674 834 035

112 072 359 380 416 410 511
113 512 619 676 837 360 514
114 518 077 751 218 377 659
115 420 766 369 996 263 918
ANNEX C

SAMPLING EVALUATION WORKING PAPER

_____________________________________
Agency Name

SUBSTANTIVE EVALUATION COMPLIANCE EVALUATION

A B C D
Refe- Book Audit Absolute I II III Total
rence Value Value Error
1 6th 1,000 900 100
2 27th 2,000 1,900 700
3 29th 5,000 3,300 3,000
4 58th 3,000 0 2,000 X 1
5 68th 25,00 23,000 500
6 79th 0 3,000 x 1
7 4th 3,500 / X x 1
8 12th 6,000 / X 1
9 4,600
Total P 2,000,000.00 P6,400.00 4

% for Subs. Error = 6,400 % for Compliance error = 4

------------- = .0032% ----- = 4%
2,000,000 100
Maximum number of errors that may be detected 8% 20%
per COA Simplified Sampling Scheme. ====== =======

Did samples selected pass sampling test? Yes yes

====== =======
Yes/No Yes/No

* Place a check mark (/) if the same as book value.

** Compliance errors : I - No OR
II - No Inspection Report
III - No canvass papers

The samples above were taken from an adjusted population of 1,980 wherein the
auditor selected 100 samples. After auditing and evaluating the samples, it was found out that
errors were below the tolerable error rate for both substantive and compliance test. All the
transactions in the population passed in audit. Likewise, errors detected will be noted in the
CSB.
ANNEX E

April 7, 1995

MEMORANDUM to:

All Heads of Auditing Units Concerned

SUBJECT: Random Number Start for the Month of March 1995 applicable to
the Test Day Audit Scheme

Pursuant to COA Memorandum No. 95-_____ dated _______ 1995 prescribing the
adoption among others of the Test Day Audit Scheme in addition to the other audit sampling
schemes already prescribed by this Commission, you are furnished herewith the following
information regarding the random number start for the month of March 1995 for use in the
application of the Test Day Audit Scheme:

Auditing Location Starting

Unit/Agency Table I Column Row Number Route

"AA" Auditing Unit 01-50 5 9 40 down

"BB" Auditing Unit 01-50 1 7 14 down

"CC" Auditing Unit 01-50 3 10 49 down

"x x x x x x x x" 01-50 xx xx xx down

"x x x x x x x x" 01-50 xx xx xx down

____________________
Director