Challenges of internal audit | Inquirer Business
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Challenges of internal audit

The report of the Commission on Audit (COA) on the deficiencies of the Department of Health (DOH) on its use of the funds allocated to address the COVID-19 pandemic proved the value of having a government watchdog that is not beholden to the executive department.

By constitutional fiat, the COA is the internal auditor of the government.


It is tasked with the “duty to examine, audit and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property” by all government offices funded by the people’s money.

To accomplish that objective, the Constitution prohibits the enactment of any law that exempts in whatever guise any government office from the COA’s jurisdiction.


In light of that mandate, government offices that are prone to making shortcuts in their operations or treating their coffers as personal piggy banks are uneasy about meeting with COA auditors or replying to their audit reports.

And because of that, COA auditors are not considered viable candidates for Mister or Miss Congeniality in those offices.

Some internal auditors (IA) of private companies can relate to the troubles their counterpart in the COA goes through in the performance of their duties and responsibilities.

In a nutshell, the IA is tasked to “objectively assess the company’s risks and the efficacy of its risk management efforts, ensure its compliance with relevant laws and statutes, and evaluate internal controls and make recommendations on how to improve them.”

Simply stated, it is the IA’s responsibility to see to it that management and the employees do business by the book and, most importantly, the financial statements are accurately and timely prepared.

In the latter case, deliberate slip ups or omissions in financial facts and figures could put the company in trouble with the regulators; if the errors are traceable to the fault or negligence of the executives, the stockholders may demand changes in the boardroom.

It is inevitable that in the course of their work, the IAs may step on the shoes of some top brass who are averse to criticism of their work or recommend changes in business practices that are considered “sacred” because they are the brainchild of some higher-ups.


When any of these incidents happen, hell (in the administrative sense) often breaks loose, especially when punctured egos and lots of money are involved.

This is similar to the situation the COA found itself in when it reviewed the procedures the DOH failed to observe in the disposition of the budgetary allocations to mitigate the adverse effects of COVID-19.

No less than President Duterte took the cudgels for Health Secretary Francisco Duque III and absolved him from any imputations of corruption in connection with those funds.

In the private sector, this situation is usually managed by making the IA report directly or exclusively to the board of directors, or not be placed under the supervision of any executive.

This way, the IA is shielded from the influence or pressure from the top brass whose actions may get in the crosshairs of the IA’s review of business and financial operations.

Thus, when the board of directors takes action on the findings or recommendations of the IA, it is looked at and presented as coming from the boardroom rather than from the “ogre” IA.

It has been bruited about in business circles that an IA who appears to be well-loved or in good terms with the employees should be a matter of serious concern to the company. He or she may be more intent on gaining the esteem of his or her colleagues rather than doing his or her assigned tasks. Joke only!

Going back to the COA auditors, the criticisms they received from President Duterte in connection with their DOH audit are par for the course. After all, they are not engaged in a popularity contest.

The strong statement of support for COA issued by 26 prestigious business groups, academic institutions and civic organizations should give its auditors the confidence and inspiration to continue to diligently perform their tasks. INQ

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