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An Audit Procedure is a detailed set of steps that auditors follow to examine an organization's financial records and operations. In the Philippines, these procedures must align with the Philippine Standards on Auditing (PSA) and help auditors gather reliable evidence about a company's financial statements.

These procedures include checking documents, confirming account balances, observing business processes, and analyzing financial data. Filipino auditors use them to detect errors, prevent fraud, and ensure compliance with local regulations like the Philippine Financial Reporting Standards (PFRS) and Securities Regulation Code. The results help stakeholders make informed decisions about the business.

Companies need Audit Procedures during annual financial reviews, major business changes, or when preparing for regulatory inspections. These procedures become essential when filing reports with the Philippine Securities and Exchange Commission (SEC), applying for bank loans, or during ownership transitions.

The procedures also prove valuable when investigating suspected fraud, addressing internal control weaknesses, or responding to stakeholder concerns about financial accuracy. For Philippine businesses, implementing audit procedures before tax season helps ensure compliance with Bureau of Internal Revenue (BIR) requirements and prevents costly penalties or operational disruptions.

• Substantive Procedures: Detailed tests examining financial transactions, balances, and disclosures to detect material misstatements in Philippine financial statements
• Control Testing Procedures: Evaluations of internal control systems to ensure compliance with PSA standards and company policies
• Analytical Procedures: Data analysis comparing financial ratios, trends, and relationships to identify unusual patterns or risks
• Compliance Procedures: Specific checks ensuring adherence to BIR regulations, SEC requirements, and other Philippine regulatory standards

• External Auditors: Independent certified public accountants who design and execute audit procedures following Philippine Standards on Auditing
• Internal Audit Teams: Company employees who implement procedures for ongoing financial monitoring and risk management
• Management: Business leaders who review and approve audit procedures, provide necessary documentation, and implement recommended changes
• Board of Directors: Oversee the audit process and ensure procedures align with corporate governance requirements
• Regulatory Bodies: The SEC, BIR, and BSP who set standards and review audit procedures during examinations

• Company Information: Gather financial statements, organizational charts, and business process documentation
• Risk Assessment: Identify key financial risks, control weaknesses, and areas requiring special attention
• Regulatory Requirements: Review current PSA standards, SEC guidelines, and BIR regulations
• Resource Planning: Determine team assignments, timeline, and necessary tools or software
• Documentation Strategy: Plan how evidence will be collected, stored, and referenced
• Review Process: Establish quality control checkpoints and approval workflows before implementation

• Scope Definition: Clear outline of audit objectives, timeframe, and departments covered
• Methodology Section: Detailed testing procedures aligned with Philippine Standards on Auditing
• Risk Assessment Framework: Identification and evaluation criteria for financial risks
• Documentation Requirements: Specific records, evidence, and worksheets needed
• Compliance References: Citations of relevant PSA, SEC, and BIR regulations
• Quality Control Measures: Review protocols and approval hierarchies
• Reporting Format: Structure for communicating findings and recommendations

An Audit Procedure differs significantly from a Compliance Procedure in several key aspects, though both are essential for Philippine businesses. While audit procedures focus on examining financial records and operations, compliance procedures establish routine protocols for following regulatory requirements.

• Purpose and Scope: Audit procedures specifically target financial accuracy and control testing, while compliance procedures cover broader regulatory obligations across all business operations
• Timing and Frequency: Audit procedures are typically conducted periodically or annually, while compliance procedures run continuously as part of daily operations
• Implementation Team: Audit procedures are executed by certified auditors and specialized audit teams, whereas compliance procedures are managed by department heads and compliance officers
• Outcome Focus: Audit procedures result in specific findings and recommendations, while compliance procedures aim to prevent violations and maintain ongoing regulatory adherence