Aud 4 lesson 4

• Auditing academic institutions presents unique challenges due to the nature of their operations, funding sources, and regulatory requirements.
• Educational services Comprises establishments that

  provide instruction and training in a wide variety of subjects.
• Education Industry

  ▪Collection of organization and businesses that provide products and services aimed at enhancing the quality of education in society
• K to 12 Education Market – the largest contributor to the overall revenues of the Philippines education industr
• High Education Market – the second largest contributor to the revenues of the Philippines education industry
• Test Preparation Market - The fifth largest market in the Philippines education industry
• Relevant Laws and Regulations

  The Higher Education Act of 1994

  Commission on Audit (COA)

  Circular No. 2012-001

  CHED Memorandum Order No. 46, series of 2012

  1994

  (Republic Act No. 7722)

  COA Memorandum Circular No. 2012-002
• Complex

  Funding

  Sources:

  in academic institutions refer to the diverse range of financial support received from various entities such as government grants, research funding, tuition fees, donations, and endowment
• Grant Compliance

  involves ensuring that funds allocated for research projects are used in accordance with specified terms and regulatory guidelines.
• Tuition Revenue Recognition:

  Tuition fees represent a significant portion of an institution's revenue.
• Endowment Management

  Endowment funds require careful management to ensure compliance with donor restrictions and prudent investment practic
• Student Financial Aid

  Auditors review the processes governing student financial aid to ensure compliance with regulations and internal controls.
• Regulatory Compliance

  Academic institutions are subject to various regulations governing financial reporting, tax obligations, and accreditation standar
• Cybersecurity Risks

  With the increasing use of technology, academic institutions face cybersecurity threats such as data breaches and ransomware attacks.

  Internal Controls

  Weaknesses in internal controls increase the risk of fraud, errors, and financial misstatements

  Governance Structure

  The effectiveness of an institution's governance structure impacts risk management and internal control effectiveness.

  Revenue Diversification

  Overreliance on a single source of revenue exposes the institution to financial risks
• Registration and Recognition: Educational institutions in the Philippines are required to register with the Department of Education (DepEd) or the Commission on Higher Education (CHED) depending on the level of education they provide. This process involves submitting necessary documents, meeting specific standards, and complying with applicable regulations.
• Accreditation: Accreditation is a voluntary process that verifies the quality of education provided by an institution. It is typically done by accrediting bodies recognized by DepEd or CHED, such as the Philippine Accrediting Association of Schools, Colleges, and Universities (PAASCU) and the Association of Christian Schools, Colleges, and Universities Accrediting Agency, Inc. (ACSCU-AAI).
• Compliance requirements for educational institutions

  • Compliance with Curriculum and Standards
  • Licensing and Permits
  • Teacher Qualifications
  • Compliance with Labor Laws
  • Health and Safety
  • Financial and Administrative Regulations
• Compliance with Curriculum and Standards

  Educational institutions must follow the prescribed curriculum and standards set by DepEd or CHED, including guidelines for subjects, learning outcomes, instructional hours, and academic requirements
• Licensing and Permits


  Educational institutions are required to obtain appropriate licenses and permits from the local government unit (LGU) where they operate, such as business permits, zoning clearances, sanitary permits, and fire safety clearances
• Teacher Qualifications


  The qualifications for teachers and instructors in educational institutions are regulated by DepEd or CHED, generally requiring appropriate degrees, certifications, or licenses depending on the level of education
• Compliance with Labor Laws


  Educational institutions must comply with Philippine labor laws, including proper employment contracts, payment of wages, benefits, and working conditions for their staff and employees
• Health and Safety


  Educational institutions are expected to provide a safe and healthy environment for students and staff, including complying with safety standards, fire safety regulations, and implementing health protocols
• Financial and Administrative Regulations


  Educational institutions are subject to financial and administrative regulations, including proper bookkeeping, transparency in financial transactions, and compliance with tax obligations
• Compliance requirements for educational institutions

  • Compliance with Curriculum and Standards
  • Licensing and Permits
  • Teacher Qualifications
  • Compliance with Labor Laws
  • Health and Safety
  • Financial and Administrative Regulations
• Compliance with Curriculum and Standards

  Educational institutions must follow the prescribed curriculum and standards set by DepEd or CHED, including guidelines for subjects, learning outcomes, instructional hours, and academic requirements
• Licensing and Permits


  Educational institutions are required to obtain appropriate licenses and permits from the local government unit (LGU) where they operate, such as business permits, zoning clearances, sanitary permits, and fire safety clearances
• Teacher Qualifications


  The qualifications for teachers and instructors in educational institutions are regulated by DepEd or CHED, generally requiring appropriate degrees, certifications, or licenses depending on the level of education
• Compliance with Labor Laws


  Educational institutions must comply with Philippine labor laws, including proper employment contracts, payment of wages, benefits, and working conditions for their staff and employees
• Health and Safety


  Educational institutions are expected to provide a safe and healthy environment for students and staff, including complying with safety standards, fire safety regulations, and implementing health protocols
• Financial and Administrative Regulations


  Educational institutions are subject to financial and administrative regulations, including proper bookkeeping, transparency in financial transactions, and compliance with tax obligations
• Mining

  • According to United Nations Environmental Program (UNEP) mining is simply the extraction of minerals.
• Philippine Mining Act of 1995 (RA No. 7942)


  Governs all mining operations and related rights in the Philippines, specifically exploration, development, and utilization of natural resources conservation through a partnership of the government and private sector
• Permit system under the Philippine Mining Act of 1995


  1. Exploration permit

  2. Mineral production and sharing agreement

  3. Financial or technical assistance agreement
• People's Small-Scale Mining Act of 1991 (RA No. 7076)


  Defines small-scale mining (SSM) as mining activities which rely heavily on manual labor, using simple implements and methods instead of explosives or heavy equipment
• 2020 Philippine Mineral Reporting Code


  A set of guidelines and standards established in 2020 to govern the reporting of mineral resources and reserves in the Philippines, providing a framework for companies in the mining industry to accurately and transparently disclose information about their mineral assets
• Executive Order No. 79, s. 2012


  Aims to reform the mining sector and promote environmentally-sound mining practices, listing areas closed to mining applications, specifically: areas listed under Sec. 19 of the Philippine Mining Act, protected areas, agricultural lands, tourism development areas, and other critical areas
• Mineral Reserves & Resources

  The economic viability of extracting minerals is crucial. Proven reserves are well-defined deposits with probable extraction, while mineral resources are potential deposits requiring further exploration. Auditors ensure proper classification and valuation based on strict guidelines.

  Depletion Expense

  The cost of a mineral deposit is expensed gradually as it's extracted and sold. Miscalculations of depletion rates can significantly distort profitability. Auditors assess the methods used to ensure accurate expense recognition.
• Impairment

  When the fair value of a mining asset falls below its book value due to factors like commodity prices, the asset may be impaired. Auditors scrutinize the valuation process to identify potential impairment requiring write-downs.

  Reclamation Provision

  The estimated cost of closing a mine and remediating the environment is recorded as a liability. Auditors assess the adequacy of these provisions considering future closure costs.
• Valuation of Mineral Reserves

  The substantial value of mineral reserves makes their accurate valuation critical. Estimation errors can significantly impact financial statements.

  Estimation of Reserves and Resources

  Geologists estimate the quantity and quality of mineral deposits, which inherently involves uncertainties. Auditors assess the estimation methodologies and ensure they are based on sufficient data and sound geological principl
• Commodity Price Fluctuations

  Commodity price volatility can significantly impact the valuation of mineral reserves and the economic viability of mining operations. Auditors consider these fluctuations when assessing the going concern assumption of the company.

  Environmental Liabilities

  Strict environmental regulations and the potential for significant clean-up costs pose a major financial risk. Auditors assess the adequacy of provisions for reclamation and potential environmental fi