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Strengthening the Lines of Defense: Comparative Analysis of Post-Audit with PreAudit Scheme and Purely Post-Audit Scheme in Audit of Government Agencies
Willen Blanca S. Hui
Prince Joy T. Mappala
Royce Jane C. Mayo
Fatima Mae D. Tumbali
Mareshah Joyce L. Rivera
Adviser: Giged T. Battung,CPA,DBM
mareshahrivera@gmail.com
09368260606
St. Paul University Philippines
TuguegaraoCity,Cagayan 3500
ABSTRACT
Corruption in the government is preventable in audit. The 1987 Constitution made the
Commission on Audit (COA) the guardian of public funds with exclusive authority to
define the scope of its audit. COA had been interchangeably shifting from the use of
post with pre-audit scheme and purely post-audit scheme. COA Circular No. 2009-002
had reinstituted Selective Pre-Audit but later on repealed by COA Circular no. 2011-002.
The research compared the implementation of Post-Audit with Pre-Audit scheme and
purely Post-Audit scheme in audit of national government agencies in Tuguegarao City.
Questionnaires, interview guides and documentary analysis were employed in this
study. The results of the study revealed that there was high implementation of both
schemes. One hundred percent (100%) of the respondents agreed that the Post-audit
with Pre-Audit eliminated irregular, unnecessary, excessive expenditures but 86%
commented that this had caused delay in services of government agencies. Fifty seven
percent (57%) of the respondents commented that Post-Audit had greater control over
tomorrow's costs but 43% argued that it could not detect and prevent corruption
because the audit is only done after payment of transactions. The analyses of the
Annual Audit Reports of the national agencies from 2010 to 2013 had shown that there
was 140% increase of irregular, unnecessary and excessive expenditure when pre-audit
scheme was no longer used. Though there was a decrease in number of government
agencies having weak internal control but there was 17% increase in the number of
agencies having a weak internal control over their cash. It is recommended that PreAudit scheme should not be lifted and must be utilized to the fullest as an effective
system to reduce excessive, irregular and unnecessary expenditures.
Keywords: Corruption, Pre-Audit Scheme, Post-Audit Scheme, Internal Control,
Expenditures

BACKGROUND OF THE STUDY

Audit is the greatest nemesis of corruption. Audit can prevent scandalous
spending of peoples money. The course of the Philippine history had been hunted by
lavish and unjustified scandal of corruption, illegal government transactions and political
cover-up. Presidential candidates would usually include in their enticing speech a
program to battle corruption for the growing population of marginalized and
underprivileged sector of the society but eventually some public servants would turn out
to be of the same family, only colored with a different species. The peoples money is
very appetizing to resist for those who are greedy. Indeed, the pork barrel became a
reason for some to work their way towards getting a position in the government.
In the Philippines, the pork barrel system was first introduced in 1922 with the
passing of the Public Works Act separately from the General Appropriations Act (GAA).
The first pork barrel was legitimized under Public Works Act 3044 which divided public
works into two types: (1) national and other buildings, roads and bridges in provinces,
buoys and beacons, necessary mechanical equipment of lighthouses and (2) police
barracks, normal school and other public buildings, certain types of roads and bridges,
artesian wells, wharves, piers, and other shore protection works, cable telegraph and
telephone lines. The latter was the forerunner of the infamous pork barrel.
The Commission on Audit (COA) is the Supreme Audit Institution in the
Philippines. Regarded as the defender of peoples money, have exclusive authority to
define the scope of its audit an examination, establish the techniques and methods
required, and promulgate accounting and auditing rules and regulations for the
prevention and disallowances of irregular, unnecessary, excessive, extravagant or
unconscionable expenditures, or uses of government funds and properties. Quality
audits can potentially aid public managers in fulfilling obligations through enhanced
accountability and the safeguard of public assets (Aikins, 2012).

Traditionally, government auditing is on pre-audit system. But there had been

many attempts to lift the pre-audit system. Citing the case of Gualberto J. DelaLlana
vs. COA, the Supreme Court dismissed the petition seeking to annul and set aside COA
Circular No. 89-299, which lifted the system of pre-audit of government transactions.
Petitioners contended that the lack of pre-audit by COA caused serious
irregularities in government transactions, such as the P728-million fertilizer fund scam,
irregularities in the P550-million call center projects of the Commission on Higher
Education, and many others.
However, lifting the pre-audit and using post-audit scheme had been justified by
others stating that the former will result in further delays, establish another level of
unnecessary reviews, and may unduly prejudice the implementation of urgent
government projects and transactions must now yield to the higher interest to protect
and conserve government resources and minimize losses from illegal

expenditure.Value-adding audits that enhance the bottomline, improve program

execution, facilitate achievements and augment goal realization can contribute to
success ( Zacchea,2013). These two systems of audit available to COAs disposition
are the lines of defense of the peoples money. But, one audit procedure, on its own,
cannot provide the quality of audit evidences that a combination of approached can
produce (Dotel, 2015). This research sought to analyze the audit system utilized in the
Philippines. Analyzing the government audit processes and schemes employed could
provide credibility and enhance the audit system.
FRAMEWORK AND METHODOLOGY
To be able to describe methodically the comparative analysis of Pre-Audit
System and Post-Audit System in audit of government agencies, the researchers used
the descriptive method. The data gathering instruments that were applied survey
questionnaires, interview and documentary analysis. Questionnaire were floated to 7
auditors of the Commission on Audit (COA) who were auditor of national government
agencies in Tuguegarao City. They were the only ones who were taken as auditorrespondents because they were the ones who experienced both schemes in auditing
national agencies in Tuguegarao City. Eleven auditee-respondents were also taken to
get the feedback from the point of view of the auditee. Interviews were conducted to
both sets of respondents to generate clearer understanding of the two schemes.
Documentary analysis was also utilized by the researchers in analyzing the COA reports
on the national government units.
Frequency of the study and thus, these tools helped the researchers in obtaining
the profile of respondents as well as their responses.
The weighted mean and documentary analysis helped the researchers in
determining the effectiveness of pre-audit and post-audit system to the following cases
and matters: a.) disallowances, suspensions and charges b.) unliquidated cash
advances and unsettled fund transfers c.)irregular, excessive, unnecessary,
unreasonable, and extravagant expenditure.

Conceptual Framework
INPUT

PROCESS

OUTPUT

-Comparative Analysis of
Pre-Audit Scheme and
Post-Audit Scheme

-Strengths
and
Weaknesses of Pre-Audit
and Post-Audit schemes,
Identified.

-Profile

of
the
respondents in terms of:
a. Age
b. Gender
c. Civil Status
d. Number of years in
profession as auditor
e. Agency/Agencies
audited in the past 6
years (2008-2013)
-State Audit Code of the
Philippines
(P.D.
No.
1445) as amended by
2009 Revised Rules of
Procedure
of
the
Commission on Audit
-COA Circular No.201102 Lifting of Pre-Audit
scheme
-COA Circular No.81-162
Delineating the Duties
and Responsibilities with
respect to Pre-Audit and
Post-Audit accounts
-Gualberto J. DelaLlana
vs. COA G.R. No.180989
-Auditors Report
2008-2013

from

- SWOT Analysis
- Benchmarking
-Documentary Analysis

-Differences
and
Similarities of Pre-Audit
and Post-Audit Scheme
-Effectiveness of PreAudit
and
Post-Audit
schemes, Identified.

The establishment of pre-audit and post-audit scheme was designed to assist

FEEDBACK
auditors in inspection and examination of public funds. In this study, the researches
were guided with the above paradigm on Figure 1. The inputs were the profile of the
respondents in terms of their age, gender, and number of years in profession as an
auditor and chief accountant experiencing pre-audit and post-audit schemes. The
researchers utilized the State Audit Code of the Philippines (P.D. No. 1445) as amended
by 2009 Revised Rules of Procedure of the Commission on Audit, COA Circular
No.2011-02 lifting of pre-audit scheme, COA Circular No.81-162 delineating the duties
and responsibilities with respect to pre-audit and post-audit accounts, Gualberto J.
DelaLlana vs. COA G.R. No.180989, and auditors report from 2008-2013 as input in
conducting the study. The processes selected by the researchers were comparative
analysis, benchmarking, SWOT analysis, and documentary analysis. With these
processes, the researchers identified the strengths and weaknesses of pre-audit and
post-audit schemes, including their similarities and differences and the effectiveness of
pre-audit and, post-audit schemes.
RESEARCH FINDINGS AND DISCUSSION
Fifty seven and fourteen percent 57.14% of the respondent-auditors were 55
years old and above. 81.82% of the respondent auditees were over 42 years old. This
reflects that auditors and auditee who experience both pre-audit and post-audit belong
to the older age. This implies obtaining knowledge of both pre-audit and post-audit
require a long span of time. There were more female auditor-respondents and auditeerespondents or 85.71% and 63.64% respectively. Moreover, The study revealed that
respondent auditors and auditee were mostly married with a percentage distribution of
100% and 91 %.Findings revealed that 71.42% were team leader, thus, an experienced
of both pre-audit and post-audit is a competitive edge to have a higher position as an
auditor.Majority of the respondents had over 20 to 30 years of experienced on their
respective fields with 42.46% and 45.46% respectively.
Table 1.Frequency and Percentage of Distribution of Respondent-Auditors
According to Number of Working Hours or Training Related to Implementations of
Pre-Audit.
8hours
16-24 hours
None
Total

Frequency
3
2
2
7

Percentage
43%
28.5%
28.5%
100%

Table 1 shows the extent of implementation of the working hours or training in

relation to audit. It further shows that the majority of the respondents spend 8 hours of
audit accomplishments during the Pre-Audit era.
Table 2.Frequency and Percentage of Distribution of Respondent-Auditors
According to Number of Working Hours or Training Related to Implementations of
Post-Audit.
No. of Working Hours
8hours
32-40 hours
More than 40 hours
Total

Frequency
1
1
5
7

Percentage
14%
14%
72%
100%

Table 2 shows the extent of implementation as to working hours or training in

relation to audit. It further shows that five (5) or 72% of the respondents spend more
than 40 hours of audit implementation when Post-Audit started. Having been the
primary nature of audit conducted by Commission on Audit, the respondents auditors
have essential working hours with regards to Post-Audit.
Table 3.Frequency and Percentage of Distribution of the Strengths of Pre-Audit
According to Respondent Auditors
Frequency
Eliminate
irregular,
unnecessary, excessive
extravagant expenditures
Ensure that projects and
expenditures have proper
funding
Ensure that funds are
properly
authorized
before release

Percentage
100%

86%

71%

Eliminate
funds

29%

wasting

of

Table 3 shows the strengths of pre-audit according to respondent-auditors. The

table signifies that elimination of irregular, unnecessary, excessive, extravagant
expenditures is the foremost strength of pre-audit having a percentage of 100%. It
furthers shows that Pre-Audit is an essential element on combating corruption in the
government.
Table 4.Frequency and Percentage of Distribution of the Weaknesses of PreAudit According to Respondent-Auditors

Frequency
Causes delay in services of
6
government agencies
Higher possibility of red
tapes and collusions

Percentage
86%

43%

Incur more expenses in the

conduct of audit

14%

Funds for projects will be

reduced because of too
much scrutiny of PreAudit

29%

Table 4 shows the weakness of pre-audit according to respondentauditors. The table presents that pre-audit causes delay in the service of
government agencies having a percentage of 86%. Being in the beginning of
every transaction, Pre-Audit checks and account for any irregularities that
could be time consuming for the agency.
Table 5.Frequency and Percentage of Distribution of the Strengths of Post-Audit
According to Respondent-Auditor
Frequency
Greater
control
over
4
tomorrow's costs through
implementation of savings
initiatives

Percentage
57%

Better organized and up-todate audit information

43%

Identification of potential
undercharge exposure and
problem areas

57%

Improved bottom line

43%

Table 5 shows the frequency and percentage of distribution of strengths of postaudit according to respondent auditor. The table implies that post-audit contributes to
greater control over tomorrows cost through implementation of saving initiatives and

identification of potential undercharge exposure and problem areas having a percentage

of 57%.
Table 6.Frequency and Percentage of Distribution of the Weaknesses of PostAudit According to Respondent-Auditor

Does not contribute to

reduction in volume of
COA audit work, just
postponement of it to
later
dates
after
government
transactions
or
disbursements
are
already consummated

Frequency
1

Percentage
14%

43%

Cannot detect and

prevent
corruption
because it is done
AFTER payment of
transactions, or when
acts of corruption are
already consummated
and it is too late to stop
them, hence it is
USELESS
in
the
PREVENTION
of
corruption and cannot
do away with the need
for selective COA preaudit as potent fraudprevention measure
There is a great
DISADVANTAGE
or
cost penalty to the
governmentLOSSES
of BILLIONS upon
BILLIONS of PESOS
in public funds from

14%

unhampered
and
hence
unabated
CORRUPTION

Table 6 shows the frequency and percentage of distribution of weaknesses of

post-audit according to respondent auditors. The table states that post-audit having a
percentage of 43% cannot detect and prevent corruption because it is done after
payment of transactions, or when acts of corruption are already consummated and it is
too late to stop the perpetrators. Hence, it is useless in the prevention of corruption and
cannot do away with the need for selective COA pre-audit as potent fraud-prevention
measure.
Table 7.Documentary Analysis as to the Increase (Decrease) of Activity and
Transactions Found to be irregular, unnecessary, excessive, unconscionable, and
extravagant
IUEUE

2010
27.6B

2011
13B

2012
29.9B

2013
66.2B

(53%)

130%

122%

Table 7 shows the increase (decrease) of activity and transaction found to be

irregular, unnecessary, excessive, unconscionable, and extravagant. The table also
presents an increasing percentage on irregular, unnecessary, excessive,
unconscionable, and extravagant. Despite the 53% decrease on the first year of
implementation of post-audit, there is a 140% from 2010 to 2013.
Table 8. Documentary Analysis as to the Increase (Decrease) of Total
Disallowances, Suspensions, and Charges of National Government Agencies
from 2010 to 2013
Disallowances,
Suspension,
and Charges

2010
320B

2011
355B

2012
461.7B

2013
474B

11%

30%

3%

Table 8 shows the increase (decrease) of total disallowances, suspensions and

charges of national government agencies from 2010 to 2013. Despite the change from
pre-audit on 2010 to post-audit on 2011, the table indicates that disallowances,

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suspensions, and charges increase 11%, 30% and 3% towards the subsequent years
from the year of implementation of Post-Audit.
Table 9. Documentary Analysis as to the Increase (Decrease) of Unliquidated
Cash Advances/Unsettled Funds

Unliquidated
Cash Advances/

2010
14.6B

2011
14.4B

2012
28B

2013
32.7B

-1%

94%

17%

Table 9 shows the increase (decrease) of unliquidated cash advances of national

government agencies from 2010 to 2013. COA Circular 2009-002 reinstituting selective
pre-audit covers transaction on cash advances. As the government shifted to post-audit
on 2011, 1% decrease was obtain but was overshadowed by the 94% and 17%
increase on 2012 and 2013.
Table 10.Documentary Analysis as to the Audit Opinion Rendered from 2010 to
2013 on National Government Agencies
2010
74%

2011
68%

2012
68%

2013
69%

Unqualified
Opinion

11%

16%

8%

13%

Adverse
Opinion

13%

15%

24%

18%

1%

1%

Qualified
Opinion

Unable
to 1%
conduct audit
Table 10 shows the percentage of qualified opinion, unqualified opinion, adverse
opinion, disclaimer, and unable to conduct audit as to the total rendered opinion. For the
year 2010 where Selective pre-audit is still in effect, qualified opinion has the greatest
percentage with 74%. The table also manifests a decreasing percentage of qualified
opinion starting 2011 up to 2013. For the adverse opinion, the table shows a reverse
percentage indicating an increasing trend starting 2011 up to 2013. Shifting from Preaudit which could eliminate irregular, unnecessary, excessive, unconscionable and

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extravagant, the government abated to the utilization of Post-Audit thus an increase on

opinions being adverse.

CONCLUSIONS
In the light of the aforementioned findings, the conclusions are hereby arrived at.
Pre-audit scheme has greatly helped the government in terms of eliminating
irregular, unnecessary, excessive, unconscionable, extravagant expenditures. It
prevented the occurrence of corruption before it could actually happen. Lifting pre-audit
resulted to increase in the occurrence of irregular, unnecessary, excessive,
unconscionable, extravagant expenditures, unliquidated cash advances, disallowances,
suspensions and charges, thus Pre-Audit could have saved a lot of money for the
improvement and welfare of the marginalized and less privileged. Corruption is
preventable in audit.

Recommendations
Based from the findings and conclusions of the study, the following are
recommended.
First, Pre-audit must be reinstituted on the audit of national government agencies
because it is an effective scheme to eliminated irregular, unnecessary, excessive,
unconscionable and extravagant expenditure. Second, having found out that there is
only a minimum of 8 working hour related to pre-audit, the Commission on Audit must
conduct additional training and seminars to have a better understanding of the pre-audit
scheme. Third, based on the findings of the study, auditors didnt utilize CAAT on the
conduct of pre-audit while auditors didnt utilize CAAT and Risk-Based Audit on the
conduct of post-audit. The Commission on Audit must generate an effective CAAT and
utilize Risk-Based audit to compensate the delay that pre-audit caused on the service of
the government. The used of risk-based audit selection is rapidly gaining wide-spread
acceptance at all levels of government. Federal, state and local government audit
organizations are developing systems for assessing risk and training their auditors to
employ these techniques at both the strategic and engagement planning process (Riskbased audit target selection can increase the probability of conducting valueadded audits, Zacchea 2003). Also, CAATs can improve the effectiveness of audit (The
effect of technology on auditing in government: A discussion of the paperless
audit, Shumate, Brooks 2001)
Fourth, Government agencies must strengthen its internal control on cash
advances. There must be a strict implementation policy on granting cash advance. No
cash advance shall be given unless for a legally specific purpose and no additional cash
advances shall be allowed to any official or employee unless the previous cash advance
given to him/her is first settled or a proper accounting thereof is made. Lastly,

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respondent-auditors must be fully oriented with the right ethics towards audit whether
pre-audit or post-audit is in effect.
REFERENCES
1. Zachea,N. (2003) Risk-based audit target selection can increase the probability
of conducting value-added audits
2. Dotel R. (2015, January) Using audit procedures in revenue audit. International
Journal of Government Auditing p.11-15
3. Shumate, Brooks (2001) The effect of technology on auditing in government: A
discussion of the paperless audit. The Journal of Government Financial
Management
4. Aikins (2012) Determinants of Auditee Adoption of Audit Recommendations:
Local Government Auditors Perspectives
5. Gualberto J. DelaLlana vs. The Chairperson, Commission On Audit, The
Executive Secretary And The National Treasurer, G. R. No. 180989
6. Frequency Counts, http://www.sal.tohoku.ac.jp/ling/corpus3/3freq.htm

BIONOTES
Prince Joy Mappala is currently a 5th Year Student of Accountancy at St. Paul
University Philippines. He had won 3rd place in General Information Quiz bee in the year
2013 in the same institution and 1 st place in a case analysis in RFJPIA in 2105. He also
developed the GABI BASED PANCIT which is a community based product in the town
of General Balao, Solana.
Fatima Mae D. Tumbali is currently a 5thYear Student of Accounting at St. Paul
University Philippines. She had served as an auditor inthe School of Accountancy and
Hospitality Management in the year 2014-2015. Later in 2015 she organized a
community based project with the product VEGGIE LONGGANISA.
Willen Blanca S. Hui and Royce Jane C. Mayoare currently 5th Year Students of
Accounting at St. Paul University Philippines.
Mareshah Joyce L. Rivera is a 4th year student of Accounting at St. Paul University
Philippines. She is currently the auditor of The Paulinian Student Government and the
Vice President for Finance in Junior Philippine Institute of Accountants in the same
institution.