Audit Program of Puregold co. by BSBA-FMA - TIP QC

1. COMPANY PROFILE
COMPANY NAME: PUREGOLD PRICE CLUB, INC.
SECTOR: SERVICES
SUBSECTOR: RETAIL
COMPANY VISION
“Sa PUREGOLD, Always Panalo!”
To be the Most Customer-Oriented Hypermart offering a One-Stop Shopping convenience and Best
Value to our Customers.
COMPANY MISSION
“Sa bawat araw, PUREGOLD kasama mo!”
Our Mission is to Provide Products, Services and Business Opportunities to Every Filipino Family.
 We Establish Lasting Relationship with Our Suppliers and Business Partners.
 We Strive to Promote the Personal and Professional Development of our Employees.
 We Commit Profitable Results to the Stockholders.
COMPANY VALUES
 Sense of Belonging
- Feeling that one has an essential role to play as part of the PUREGOLD family
 Customer Service
- Providing products and services that meet the demands and expectations of customers
 Dynamism
- Open, adaptive and responsive to the changing environment
 Commitment
- Dedicated and conscientious focus on work
 Integrity and Loyalty
- Honor, credibility, honesty, dignity, "palabra de honor", "walking the talk"

3. BOARD OF DIRECTORS/ MANAGEMENT TEAM/ EXECUTIVE OFFICERS
Leonardo B. Dayao
President
 Mr. Dayao has been a Director and the President of the Company since 1998.
 Mr. Dayao received a Bachelor of Science degree in Commerce from the Far
Eastern University. He is a CPA. He has also completed Basic Management
Program at Asian Institute of Management and earned units in MBA from
UP-Cebu.
Lucio L. Co
 Mr. Co has been a Director and the Chairman of the Company since it was
incorporated in September 1998.
 Mr. Co has been an entrepreneur for the past 40 years.
Susan P. Co
Vice-Chairman
 Mrs. Co has been a Director, Vice-Chairman and Treasurer of the Company since it
was incorporated in September 1998.
 Mrs. Co received a Bachelor of Science in Commerce from the University of Santo
Tomas.
Ferdinand Vincent P. Co
Director
 Mr. Co has been a Director of the Company since 2003. He has been duly elected to
hold office as Director for one year and until his successor is elected and qualified.
 Mr. Co received a Bachelor of Science degree in Entrepreneurial Management from
the University of Asia and the Pacific.
Pamela Justine P. Co
Director
 Ms. Co has been a Director of the Company since 2003. She has been duly elected
to hold office as Director for one year and until her successor is elected and
qualified.
 Ms. Co received a Bachelor of Science degree in Entrepreneurship from Thames
International Business School.
Edgardo G. Lacson
Independent Director
 Mr. Lacson was elected as an Independent Director of the Company on October 5,
2010 and will hold office until his successor is elected and qualified.
 Serves as Independent Director in the Philippine Stock Exchange.
 Mr. Lacson received a Bachelor of Science in Commerce from De La Salle
University.
Marilyn V. Pardo
Independent Director
 Mrs. Pardo was elected as an Independent Director of the Company on October 5,
2010 and will hold office until her successor is elected and qualified.
 She is currently the Chief Executive Officer of Asian Holdings Company,
Downtown Properties, Inc., Casa Catalina Company, and Catalina Commercial
Properties, Inc. Mrs. Pardo received a Bachelor of Liberal Arts and an Associates
Degree in Business from Assumption College.

4. AUDIT OBJECTIVES
Provide reasonable assurance and verify whether:
 Expenses are valid, complete, and recorded correctly as to account, amount, and period, and have
occurred and pertain to the operations and normal operating cycle of the entity.
 Expenses have been classified in the proper accounts, appropriately presented in the books in
accordance with applicable framework, standards and company policies, and disclosures are clearly
expressed in the financial statements.
 Expenses are supported by appropriate business documents and legitimately authorized by a
designated personnel.
 Payments of expenses were confirmed by the payee and backed up by confirmation forms such as
the official receipt, properly signed by the recipient’s cashier by the accounting department.
ANALYTICAL PROCEDURES
 Check the numerical sequence and details of the accounting data per the source document for the
completeness and correctness of:
 Amount
 Payee
 Particulars
 Medium of Payment (Cash/Bank)
 General ledger entries
 Check
 Original receipts
 Perform variance analyses (if data is available) and compare the balances to prior periods seeking
explanations for unusual items and significant variances.
 Expenses of significant amounts and extraordinary case have undergone proper proceedings and
approved, authorized and signed by the top management.
GENERAL AUDIT PROCEDURES (SUBSTANTIVE TEST)
For the selected samples of each class of expense:
 Find any canceled transactions through canceled payment vouchers and canceled checks.
 Check large amounts and the clear description of large amount transactions.
 Determine any deviation from financial reporting standards and company’s payment policies.
 Determine if transaction exist by vouching from the general ledger to voucher and check register.

5. ANALYTICAL PROCEDURE
PAYROLL
A. Ask the Human Resource department to obtain the Personnel and Payroll manual and review the
company’s policies in:
 Time keeping:
 What is the device being used to keep the time of hourly waged employees?
 Who are the in-charged personnel in time keeping? Do they have the minimum qualifications to be
in a position in a time keeping system?
 Computation of basic salaries and the ranges being dependent upon the employees’ position,
employment status, experience, educational attainment, and affiliation.
 Consideration and computation of overtime:
 What cases or instances does an out of regular hours duty is considered an overtime to the
company’s perspective?
 Is there any written confirmation of the employees’ acceptance for the rendering of overtime?
 Terms, conditions, and provisions of the mandatory and non-mandatory benefits that are included
in the computation of employees’ net pay and determine from the check register if these payable/s
and expense are being remitted on time and are backed up by supporting document such as the
official receipt.
 Income tax policies compliance.
 Outsourcing:
 Background of the agency company
 Terms and conditions of the contract in:
a. Periodic payments
b. Timekeeping
c. Sanctions in breach of contract including the monetary liabilities or bonds
 Leave:
 What are the kind of leaves considered by the company as a part of their expense? What are the
limitations?
 Cut-off periods for the releasing of salaries.
 Increase (Is it by promotion, incentive, or bonus?)
B. For sampling test, select twenty percent sample of the total population of each kind of employee with
the highest salaries and trace their:
 Employment contract
 Recent six months computation of gross pay and net pay and determine any unusual amounts and
particulars.
 Rate (hour x basic pay) entered into the payroll processing system for each employee and if it
match the accounting records.
C. Verify the employees receiving paychecks during quarter are employed during the time period for
which the check was issued by inspecting the list of active employees and employees’ employment
contract.
D. Compare the totals such as gross payroll expense, taxes withheld and net check amount to the
general ledger to ensure each payroll is correctly recorded and verify if:
 There’s no duplicate on the entries.
 Balances from the previous period are being carried over.

6. E. Reconcile the generated totals of automated payroll system to the general ledger balances and
determine any difference that may be subject to adjustment by an authorized payroll personnel. In case
of outsourced employees, ask the agency company for their separate computation of payroll and
reconcile it with the company’s payroll computed balances, and determine any adjustment.
F. Have a check of the salary verification form signed by the employees as a proof of salary receipt and
ask for the bank in-charge in the release of periodic salaries the bank statement for the company’s
payroll account.
REPAIR AND MAINTENANCE
A.Interview the repair and maintenance personnel about the following:
 Are the services related to the business operation.
 How often they inspect the tools and equipment on the store?
 What are the procedures the management apply for inspecting the tools and equipment
 Duration of the contract repair and maintenance service provider.
B.Conduct the physical inspection on the tools and equipment of the store with the compliance
engineer:
 Do the store follow the standard quality of the equipment of the store (Freezer, cooler, display cases
or shelves, Point-of-sale (POS), air conditioners, lights, electrical wiring)
 Are all the equipment used by store is necessary in the operation?
C. Determine any of the repair and maintenance expense nature if it’s classified into their proper
accounts whether it is considered as an asset capitalization or repair and maintenance expense.
D. Reconcile the repair and maintenance expense from the voucher register and check register record
per analysis to the general ledger.
UTILITIES
A.Review the general ledger and other accounting records for the utilities expense of the current year
and scan the supporting documents:
 Statement of Account/ Bill of Payment
 Payment Voucher
 Check Register
 Official Receipt
 Bank Statement
B.Identify all meters and make sure that they are functioning and being read properly to check if there is
meter tampering.
 Determine the usage of electricity per kilowatt/hour and water per cubic meter.
 Compare the electricity bills and water bills to its meters.
C. For electricity, Check the quality of the generators used if it is fit to the qualification of the
company’s standards if it is accounted separately from the monthly electricity bill.
D. Compare current month expenses from the last month if it have conformed to the budgeted amounts
for utilities expense.
RENT (LEASE)
A. Obtain a copy of the rent or lease contract and review:
 Location of the property and for what purpose it is being leased

7.  Term
 Rental rate
 Default payment
 Sub-lease
 Public conditions
 Force Majeure
 Lessor’s Right of Entry
 Expiration of Lease
 Judicial relief
B. Obtain an understanding of the accounting policies, relevant to rent (lease) expenses and an analysis
of those account including:
a. Description of accounts.
b. Balances at beginning of period.
c. Additions.
d. Amounts expensed or written off during the period.
e. Balances at the end of period.
C. Determine any of the rent expense nature if it’s classified properly whether it is considered as
leasehold improvement or just rent or lease expense and take into account the amortization of the
leasehold improvement.
D. Obtain or prepare a comparative summary of rent (lease) balances in the financial statements
particularly the income statements supported by the following documents:
 Statement of Account/ Bill of Payment
 Payment vouchers
 Check registers
 Official receipt
E. Review the balances for reasonableness, expected or unexpected fluctuations between periods and
obvious omissions and reconcile as per general ledger.
INSURANCE
A. Prepare or obtain from the client an analysis of prepaid insurance and related expense showing:
 Insurance company name
 Policy number
 Type and amount of insurance coverage to determine the correct amount of prepaid insurance and
prepaid expense.
 insurance coverage period
 Premium amount
 Monthly amortization amount
 Prepaid insurance balance at the beginning of the period
 Current-period insurance expense
 Prepaid insurance balance at the end of the period
B. Have a third party confirmation with the insurance company for the statement of accounts to
determine the any variation and make necessary adjustments.
C. Reconcile insurance expense per the analysis to the client’s general ledger and to the insurance
company’s database system.

8. RELATED EXPENSE AND COMPANY POLICIES
General Policies:
Basis of Preparation
Method of Recognition

9. RELATED EXPENSE AND COMPANY POLICIES
Payroll:
Employee Breakdown
Employee Benefits

10. RELATED EXPENSE AND COMPANY POLICIES
Payroll:
Remeasurement of Defined Benefit Liability
Internal Transactions - Loan Deduction
Retirement Benefit Liability

11. RELATED EXPENSE AND COMPANY POLICIES
Rent (Lease):
Item Properties

12. RELATED EXPENSE AND COMPANY POLICIES
Rent (Lease):

13. RELATED EXPENSE AND COMPANY POLICIES
Rent (Lease):
Lease Agreements

14. Operating Expenses for the year 2013, 2014, and 2015 respectively

15. Accounts Payable and Accrued Expenses
Statement of Comprehensive Income

16. Comparative Analysis - Statement of Comprehensive Income
2015 Audit Report

17. References/ Helpful Links:
PUREGOLD PRICE CLUB, INC. HOME
 http://www.puregold.com.ph/
PSE EDGE
 http://edge.pse.com.ph/companyInformation/form.do?cmpy_id=629
PHILIPPINE RETAILERS ASSOCIATION
 http://www.philretailers.com/tag/puregold/
Prepared by:
Name: Assigned Topic:
Bance, Charlotte Ann Grace M. Company Background; Audit Objectives
Limos, Mary Joyce D. Substantive Tests
Arao, Mary Grace Payroll Expense
Solomon, Rose Ann S. Payroll Expense
Fajutagana, Jana S. Repair and Maintenance Expense
Serrano, Laura Kristel M. Repair and Maintenance Expense
Rances, Monica Aira G. Rent (Lease) Expense
Tan, Nicolle Jan C. Rent (Lease) Expense
Eder, Amelyn M. Utilities Expense
Lanon, Justine Mae L. Utilities Expense
Antipado, Maica D.L. Insurance Expense
Panarigan, Angelica P. Insurance Expense
FMA42FC1
T-TH - (07:30-10:30AM) - 2207
To be Submitted to:
Dr. Nelson Abesamis
ACCTG 010B - Internal Audit
March 09, 2017
To God be the Glory!