It is time for the Commission on Audit (CoA) to prepare for the big job ahead. The people continue to ask: “Where is the P60-billion PhilHealth money?”

It is time for state auditors to review audit techniques and sharpen their skills to follow the money trail.

The 1987 Philippine Constitution vests on the CoA the power to conduct financial, performance and compliance audits.

In a financial audit, the objective is to determine whether the financial statements were prepared, in all material respects, in accordance with an applicable financial reporting framework. The audit criteria in a financial audit are the Philippine Reporting Standards (PRS) and International Public Sector Accounting Standards (IPSAS). The audit result is the Independent Auditor’s Report containing the audit opinion (published as part of the Annual Audit Report).

A performance audit is conducted to determine whether government undertakings, systems, operations, programs, activities and organizations are operating in accordance with the principles of economy, efficiency and/or effectiveness, and whether there is room for improvement. The result of a performance audit is the Performance Audit Report containing audit conclusions.

A compliance audit determines whether the activities, financial transactions and the information comply, in all material respects, with the authorities that govern the audited entity. The audit criteria include laws, rules and regulations. The result is a management letter containing the audit conclusions (for direct reporting engagement).

As the basis for the auditor’s opinion in the financial audit, ISSAIs/ISAs require the auditor to obtain a reasonable assurance that the financial statements as a whole are free from material misstatement, whether due to fraud or error.

Reasonable assurance is a high level of assurance. It is obtained when the auditor has acquired sufficient appropriate audit evidence to reduce audit risk (that is, the risk that the auditor expresses an inappropriate opinion when the financial statements are materially misstated to an acceptably low level). However, reasonable assurance is not an absolute level of assurance, because there are interest limitations of an audit which result in most of audit evidence on which the auditor draws conclusions and leaves the auditor’s opinion being persuasive rather than conclusive.

As such, an audit opinion only covers the financial audit and, thus, does not reflect the agency’s level of compliance with laws, rules and regulations reported under a compliance audit (unless these have a financial impact), nor the application of the principles of economy, efficiency, and effectiveness in the agency’s operations reported under a performance audit

The Commission on Audit must now move towards digital transformation and audit approaches and processes pursuant to the strategic thrust of President Ferdinand Marcos Jr. to embrace digitalization and adopt technical innovations to make the country competitive.

CoA Chairman Gamaliel Cordoba extolled the state auditors and their institution: “CoA has long held the respect of the public and government agencies as an institution that zealously safeguards the nation’s coffers — here and abroad. We will now move into modernizing audit through leveraging technology. I hope that we will be able to take a step further, enabling technology-driven government accounting systems and digitizing government transactions in partnership with government agencies.

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