Audit of Educational Institution

A collection of flashcards designed to aid in the understanding and recall of key concepts and terms related to the audit of educational institutions.

Academe

The world of education, particularly higher education institutions such as colleges and universities.

Academic Institution

An organization dedicated to education, providing instruction in various disciplines at different levels.

Public Institutions

Educational institutions funded by the government, offering subsidized tuition and mandated quality education.

Private Institutions

Independently funded and operated institutions offering tailored educational programs.

Technical-Vocational Institutions

Institutions focused on providing practical skills training for specific trades and careers.

RA 9155: Basic Education Act

A law focusing on governance of basic education, enhancing quality in public schools.

RA 10931: Tertiary Education Act

A law providing for free tuition and other school fees for students in state universities and colleges.

CHED Memorandum Orders

Guidelines and policies issued by the Commission on Higher Education for the operation of higher education institutions.

Data Privacy Act of 2012 (RA 10173)

Regulates the processing of personal information within educational institutions.

IFRS 1

First-time Adoption of International Financial Reporting Standards.

IFRS 15

Revenue recognition standard for contracts with customers.

Misstatement of Tuition Revenues

Risk related to inaccuracies in recording tuition and fee revenues due to billing or processing errors.

Educational and General Revenues

Includes sources like student tuition fees and government grants.

Auxiliary Enterprises Revenues

Earnings from facilities and services provided to faculty, staff, and students.

Expired Term Endowments

Funds reclassified from temporarily restricted to unrestricted.

Unrestricted Funds

Current funds used for day-to-day operations.

FASB 116

Accounting for Contributions Received and Made.

Segregation of Duties

Control procedure ensuring no single employee can authorize, collect, and record transactions alone.

Revenue Recognition (IFRS 15)

Assesses the policies for recognizing tuition, grants, and donations.

Internal Control Systems

Controls over cash receipts and financial reporting to prevent misappropriation.

Compliance with Regulatory Frameworks

Verifying adherence to laws and regulations influencing educational institutions

Key Audit Considerations

Specific factors unique to auditing academic institutions to ensure accurate financial representation.

Scenario: An academic institution receives a large government research grant that is contingent upon reaching specific project milestones.

Audit Requirement: The auditor must evaluate if the institution recognizes revenue only when performance obligations are met under IFRS\ 15, rather than when the cash is initially received.

Scenario: You observe that the university registrar also performs the function of cash collection for late enrollment fees.

Audit Assessment: This represents a high-risk internal control weakness. The auditor should recommend a Segregation of Duties where the personnel assessing fees (Registrar) is separate from the personnel handling cash (Bursar/Treasurer).

Scenario: A State University and College (SUC) is audited to determine if students are being charged tuition fees that should be covered by the government.

Audit Action: The auditor verifies compliance with RA\ 10931 (Universal Access to Quality Tertiary Education Act) by cross-referencing student billing records with the government’s reimbursement claims for free tuition.

Scenario: A college operates a commercial bookstore and several dormitory buildings on campus.

Audit Focus: The auditor should test if revenues from these Auxiliary Enterprises are separately tracked from general tuition revenue and determine if appropriate internal controls are in place for inventory and cash receipts.

Scenario: During a systems audit, it is discovered that student financial aid data is accessible by the marketing department without encryption.

Audit Action: The auditor must report a compliance failure regarding the Data\ Privacy\ Act\ of\ 2012\ (RA\ 10173) and recommend immediate implementation of access controls to protect sensitive personal and financial data.

Scenario: There is a significant discrepancy between the total number of enrolled students and the total tuition revenue recorded in the general ledger.

Audit Action: The auditor should perform a substantive test of details, recalculating tuition based on enrollment lists and fee schedules to identify potential Misstatement of Tuition Revenues due to billing errors or fraud.

Which Philippine legislation provides for free tuition and other school fees in State Universities and Colleges (SUCs)?

RA\ 10931 (Universal Access to Quality Tertiary Education Act).

What is the primary difference between Public and Private academic institutions in terms of funding and governance?

Public Institutions are government-funded with mandated quality standards and subsidized tuition, whereas Private Institutions are independently funded and offer tailored educational programs.

Under IFRS\ 15, at what point should an academic institution recognize revenue from a student's tuition fee contract?

Revenue should be recognized over time as the performance obligation (providing educational services) is satisfied, rather than when the full amount is billed at the start of the semester.

Problem Solving: A university has 5,000 enrolled students for the semester. The tuition fee is set at P20,000 per student. The general ledger shows a total tuition revenue of P95,000,000. What is the potential audit concern?

There is a potential Misstatement of Tuition Revenues of P5,000,000 (5,000 \times 20,000 = 100,000,000). The auditor must perform substantive tests to identify if the discrepancy is due to unrecorded scholarships, billing errors, or fraud.

Scenario: During an audit, you find that the Registrar has the authority to assess student fees and also record the payment in the system. Which control principle is violated?

Segregation of Duties. To prevent fraud, the personnel assessing fees (Registrar) should be separate from those handling cash and recording financial transactions (Bursar/Treasurer).

How should an auditor verify compliance with the Data Privacy Act of 2012 (RA 10173) within a university setting?

The auditor should check for the implementation of data encryption, access controls for sensitive student financial aid data, and verify that departments (like marketing) cannot access personal info without authorization.

What are Auxiliary Enterprises in an academic setting, and what is the auditor's focus when reviewing them?

They are self-supporting operations like dormitories, canteens, and bookstores. The auditor focuses on internal controls over cash receipts and inventory management to prevent misappropriation.

Define the accounting treatment for Expired Term Endowments.

These are funds that were previously restricted by a donor for a specific time period. Once the period ends, the funds are reclassified from temporarily restricted to Unrestricted Funds for day-to-day operations.

What is the significance of RA 9155 in the Philippine educational system?

It is the Governance of Basic Education Act, which provides the framework for the management of basic education and emphasizes the empowerment of schools and learning centers.

Problem Solving: A college receives a government grant of P1,000,000 restricted strictly for research equipment. At year-end, the college has spent P600,000. According to FASB\ 116, how much should remain as restricted?

The remaining P400,000 should be reported as restricted revenue until the rest of the expenditure is made according to the donor's requirements.

What role do CHED Memorandum Orders play in the audit of higher education institutions?

They provide the specific guidelines and policies that the auditor uses as a benchmark to ensure the institution is operating within the legal and quality frameworks established by the Commission on Higher Education.

Why is the audit of Unrestricted Funds critical for an institution's day-to-day operations?

Because these funds cover the general operating expenses; ensuring their accuracy prevents liquidity issues and confirms that operational costs are being met by appropriate revenue streams.