CADACIO, ABEGAIL P.
BSA 3-A
MODULE 5 (Auditing Logistics and Transportation Industry )
Assessments/ Answers:
1. State the nature and background of the specialized industry.
The nature and background of this specialized industry is so much broader than the prior other industry that we have discussed.
This module focuses on the two broad topics such as logistics and transportation. This two interconnected topics are very
relevant in these days whereas in new normal.
The logistics industry encompasses much more than transportation. While getting around
The logistics sector encompasses the entire 'flow' management and is focused on the movement of commodities from one
location to another. This does not only apply to the
Goods transportation and delivery, as well as storage, handling, inventory, packing, and distribution
several other factors.The logistics industry's transportation activities are a function. It is solely concerned with defining and
deploying transportation modes such as sea, road, and air. It's also crucial to distinguish between logistics and supply chain
management. The supply chain encompasses the whole value chain, from suppliers to end customers, as well as after-sales
services and reverse logistics (recycling).Types of transportation are as follows:
1. Truck Freight — Road Transportation
2. Ship — Marine Transportation
3. Train — Rail Transportation
4. Plane — Air Transportation
5. Inter-modal Transportation
When it comes to logistics, preparation is required, and transportation is the medium of execution.
transporting products from point A to point B Although they are not synonymous, transportation is merely a means of getting
around.A component of logistics When it comes to the logistics industry, leaders must continue to innovate.
Other considerations outside mode of transportation from packaging till risk mitigation.
2. What are the relevant statistics, and updates of the specialized industry in the Philippine setting?
The freight and logistics market in the Philippines is predicted to develop at an annual rate of 8.2%.
during the predicted time frame Currently, new web technologies and services are being introduced.
In the Philippines, where E-commerce is booming, last-mile logistics is becoming increasingly popular.
Especially among the country's domestic shipping companies.
There are numerous distributions as well as in the Philippines, storage hubs are turning to technology and robotics to
help them grow. In the foreseeable future, efficiency, accuracy, and total productivity will all improve. In addition, the
Department of Trade and Industry Philippines has unveiled a National Logistics Master Plan that intends to boost the country's
logistics capabilities.Increasing Philippine competitiveness by establishing an effective transportation and logistics sector
that will help the Philippines' economy to be more stable and resilient.
“Build, Build, Build Program” – Government Initiative- Under the "Build, Build, Build" program, the government is
advancing a number of infrastructure projects, including three bus rapid transit systems, four seaports, six airports, nine
railways, and 32 bridges and highways Furthermore, as a government attempt to improve the
Transportation. The "Public Utility Vehicle Modernization" scheme will be implemented across the country.
(PUVMP) program."
Booming Express Delivery Market in Philippines- Express Delivery market is also booming
along with e-commerce in the region. Express delivery which comprises of services for documents,mails, parcels and couriers at
a premium price for faster delivery times has gained significant
popularity amongst the Filipino population. Over the last few years, the country's infrastructure has grown and developed.
augmented the country's rapid delivery sector with an increased affinity for
Businesses and consumers will be able to transport items in less time. The Philippines expresses themselves
The sector primarily relies on two means of transportation: air and road networks. The year was
Road express systems accounted for the majority of the express delivery market in 2015.
express.
Freight Forwarding- Freight forwarding companies account for 21.1 percent of carrying storage and premises.
This sector, which accounts for the majority of the country's transportation services, is mostly dominated by
Freight forwarding via car. It is expected to continue to dominate the global logistics market.
With the government's "Build Build Build" initiative, freight forwarding in the Philippines is expected to develop even more (BBB)
Program.
3. Identify the different audit and accounting considerations and trends for the industry.
Audit Considerations- when it comes to the audit of this kind of specialized industry there are lot of audit considerations and
challenges that should be manage properly and addressed in a procedural manner. First in the list of challenges faced by the
industry was the COVID 19 pandemic such as flight declines and cancellations, travel bans, maritime fallout.
Most of the business now a days suffers short term and long term of the effect of pandemic. Maximizing revenues , meeting
international financial reporting standards requirements, managing tax risks , managing fraud , mergers and acquisitions as
facilitator of industry restructuring , opportunities in the emerging markets such as automation and block chain , financing
transport infrastructure and public private partnerships build-operate-transfer or leasing agreements. , regulatory compliance
and framework such as inefficient Custom Clearance Processes and manual processes. , traffic congestions particularly in Metro
Manila. These are the given challenges that should be consider during the audit of the industry.
Key Audit Procedures:
Transportation companies provide clients with specialized distribution services, such as inbound and outbound logistics.
Certain elements are carefully examined during audit procedures.
or a company's records to ensure that quality, safety, and legal requirements are followed consistently.
Companies in the transportation industry frequently conduct audits for revenue recognition, payroll records, safety regulations,
equipment maintenance, and regulatory compliance. Knowing the many audit techniques used in this industry will help you
keep your own transportation business running smoothly. Keeping everything moving smoothly while adhering to legal
requirements.
A. Revenue Recognition Principles
B. Payroll Audits- Payroll audits can be especially beneficial for companies that pay hourly or on a piece-rate scale, to ensure
that all employees have been paid fairly and accurately for the work they performed. Payroll audits in the transportation
industry involve systematically analyzing mileage records and hourly time sheets against payment records, looking for
discrepancies between earnings and actual payments.
C. Safety policy audit- Safety is of paramount importance in the transportation industry, for legal as well as practical reasons. It
can be beneficial to audit a transportation company's safety policies and procedures, including vehicle inspection procedures,
disaster response plans and incident report policies, to ensure that safety plans and procedures remain relevant and effective
over time.
D. Physical equipment audit-Physical audits not only ensure that all equipment on the books is present and accounted for, but
they can also audit the safety, repair and usage records of each piece of equipment to prevent damage to over-used equipment.
Audits can identify vehicles and equipment that may need to be replaced or taken out of use for repair. Also consider PPE
impairment
E. Legal compliance audit- Legal compliance audits can ensure that safety policies, equipment standards, accounting records and
financial reporting remain in line with state and federal mandates. Compliance audits can ensure that all vehicles maintain
current emissions tests, for example, and that accounting records comply with generally accepted accounting principles.
4. Look for at least 2-3 audited financial statements of companies under the specialized industry in
the Philippines and list down your observations from audit report to the financial statements.
Audited Financial Statement of
Company A- MetroPac Movers, Inc. (A Subsidiary of MetroPac Logistics Company, Inc.)
https://www.mpic.com.ph/wp-content/uploads/2020/08/MMI_FS1218-Metropac-Movers-SIGNED.pdf
Company B- Chelsea Logistics and Infrastructure Holdings Corp.
Given the audited financial statement, we now that it has that special/unique kind of audit among other businesses that is why it
is call specialized industry. This industry shows an external and impartial analysis of a company's operational efficiency, goods
transportation flows, completeness of inventory control, and the capacity utilization of its warehouses, among other points as
well as the reliability and legality of financial information in accordance in law, standard and structure are clearly presented.
With this data in hand, investors are properly guided in making decisions in continuing investment. Also, for the industry’s
monitoring purposes in assessing development and improvement to gain more of the industry.
CADACIO, ABEGAIL P.
BSA 3-A
MODULE 6 (Auditing Power, Water, and Telecommunications Industry)
Assessments/Answers:
This module focuses on three major utilities services. The Power, Water, and telecommunication. These businesses are
highly interdependent and regulated, and any risk to their sustainability will pose a threat not only to their own and associated
industries, but to the entire economy.
1. State the nature and background of the specialized industry.
Giving the sustainable information for the power Industry, The electric power industry started in the Philippines as a
private sector-led industry in 1890
and remained so until the late 1960s; the government pursued rural electrification through the
cooperative business model starting in 1969; the monopoly of generation by the National Power
Corporation (NPC) started in 1973; and then the re-entry of private sector in the generation sector
through independent owner producers (IPPs) started in 1987. Prior to the 2001 restructuring under
the Electric Power Industry Reform Act (“EPIRA”), the electric power industry had a vertically
integrated generation and transmission sector through the NPC and wholesale power purchases
from the IPPs were predominantly through the NPC (see diagram below). On August 14, 1969, Republic Act 6038 created the
National Electrification Administration
(NEA) and laid the groundwork for accelerated electrification in the countryside. The law provided a
framework for rural electrification through not-for-profit cooperatives as a business model and loans
and technical assistance from the NEA. In 1972, then President Ferdinand Marcos imposed Martial
Law and shortly thereafter, the Marcos administration seized the assets of Meralco.
To briefly discuss the phases the power industry’s supply chain:
1. Power Generation -Types of source of energy are enumerated below:
a. Conventional sources – coal, gas, oil, hydropower, and nuclear power; and
b. Non-conventional sources – solar, wind, biogas (from organic wastes), and bagasse
(byproduct of sugarcane).
2. Power Transmission The National Grid Corporation of the Philippines (NGCP) was the highest bidder. It
assumed control of the national transmission system from the National Transmission
Corporation (TransCo), whom assumed the same function from the now defunct National
Power Corporation (by way of RA 9511 enacting congressional franchise for a total of 50
years).
3. Power distribution - A distribution utility has the task to provide distribution services and connections to its
system for any end-user within its franchise area, as there are different distribution utilities
available for different areas, consistent with the distribution code. They are required to
provide open and non-discriminatory access to its distribution system to all users.
Water Utility Industry
The National Water Resources Board (NWRB) was established in 1974 in this context.
authoritative national organization in charge of coordinating and integrating all water-related activities
management and development Its principal goal is to promote scientific and orderly development and management of all of the
Philippines' water resources in accordance with the principles of optimum use, conservation, and protection in order to fulfill
current and future demands.
Common water sources and water treatment plants for this industry includes but not limited
to the following:
1. Water Sources
a. Angat Dam
b. Ipo Dam
c. La Mesa Dam
2. Water Treatment Plants
a. Balara treatment plant
b. East La Mesa treatment plant
c. Cardona treatment plant
Telecommunications Industry
When President Fidel Ramos signed the Republic Act in 1995, the business was deregulated.
7925 (The Public Telecommunications Policy Act of the Philippines). This law allowed the sector to flourish.
Better and equitable tariffs are the result of more private companies and enhanced telecom service provision. The
In 1995, the industry was deregulated, resulting in the formation of numerous telecommunication service providers.
Mobile, fixed-line, Internet, and other service providers.
1. Mobile Market with 126 million subscribers as of 2016;
2. Broadband Market
a. Wi-Max
b. Wi-Fi
3. Fixed Line Market
a. Fixed Line Voice
b. Fixed Line Data Market
4. International Long Distance Market
5. Hybrids
2.What are the relevant statistics, and updates of the specialized industry in the Philippine setting?
Updates & Statistics of the Specialized Industry in the Philippines
Power Industry- The cost of coal-fired power will be PHP 4.18 per KWh in 2021. Fuel and capital recovery charges account for the
majority of the cost. Variable and O&M costs have a minor impact. Geothermal energy was discovered based on ERC rate cases
that were discovered.The BACMAN geothermal plant in Pampanga has the lowest cost of power per KWh at PHP4.07/KWh,
according to the rate case application filed in 2018. See the Private Distribution Utilities section for the top-ranking Private
Distribution Utilities per grid.
Telecommunications Industry- the fastest internet providers as of June 2020, according to Statista. Despite this, PLDT and Globe
Telecom remained at the top of the rankings, with a CAPEX for 2020 that is more than twice as high as the industry average. $ 1
billion and above Meanwhile, Dito, a new Internet service provider, expects to invest $5 billion in its network development.
in the next five years Every player is price sensitive and has a buying bias.
Chinese-made equipment
3. Identify the different audit and accounting considerations and trends for the industry.
1. Revenue Recognition Principles and Test of Reasonableness
a. For power industry, distribution retail rate components, as proper billing is the key
aspect in distribution.
b. For water industry, the water billing components: Basic charge, Foreign Currency Different Adjustment (FCDA) -,
Environmental Charge, Sewer Charge, Maintenance Service Charge, Other charges such as VAT, prior billings, etc
c. Tax Incentives;
d. Carbon credit-related income - Carbon credit, also known as emission permit, allows
the holder to emit a specified amount of greenhouse gases.
2.Property, Plant, and Equipment – PPE usually comprise the biggest asset account on the
balance sheet of most plant owners and project developers, since most aspects of the wind
power industry are capital intensive.
3.Cost-recovery - the operation ratio (O) of a certain water service provider reflects its costrecovery situation, where O
is the operation cost, C is the total annual cost, and R is the
annual revenue.
4.Safety Auditing through workplace inspections, employee safety perception surveys, and
work/behavioral observations
5.Operational Audits
6. Regulatory Compliance Audits
7. Other considerations:
a. Fuel accounting;
b. Cost Centers
c. Inventory costing method and wastage
d. Insurance;
e. High debt-to-equity ratio as a risk factor.
4. Look for at least one audited financial statements of companies under each specialized industry
(Power, Water, and Telecommunications) in the Philippines and list down your observations from
audit report to the financial statements.
Audited financial statement of Maynilad Water Services, Inc.
Under observations in the audited financial statement, I can now conlcude that Auditing Power, Water, and Telecommunications
Industry have specific financial reporting standards applicable to them, or to have distinct accounting policies which have been
developed to account for specialized transactions and balances which are based on the normally-applied financial reporting
standards. For instance, IAS® 41, Agriculture is clearly relevant specifically to the agriculture sector and IFRS®, 7 Financial
Instruments: Disclosure will need specific application by companies operating in the banking sector. Some specialized industries
will required specific application of accounting standards, for example, valuation of extracted oil in line with IAS 2 Inventories, or
the valuation of apple trees (an example of bearer plants) under IAS 16 Property, Plant and Equipment.
