I used to work as a junior accountant in one of the country's top auditing firms. Most of you probably don't know anything about audit. So here's a quick preview of my profession.
Businesses issue a set of financial statements. It may either be for tax assessments, for loan requirements, for capital purposes, so on. Auditors review these financial statements and issue an opinion as to their fairness, so the public (basically anyone who would like to rely on the assertions of the business) may have a reasonable assurance that the numbers were prepared correctly.
I'm sure you've gotten the hang of it now with my explanation.
I wouldn't say it's a boring job. We've got perks. We get to have lunch with the CEO's. We get firsthand information of a manufacturing firm's margin per bottle of beer. We get to enjoy private resorts and hotels during site visits. Although the bulk of the job description is boring (we spend 3/5 of our fieldwork looking at papers and typing in what they contain on our laptops), at some point stuff gets quite exciting. And weirdly out of place.
Like when I audited the Operating Expenses section of a sugar central two years ago and saw a couple of millions designated as employee subsidies.
Now, auditing that big a company, amounts of that scale are not uncommon. However, that particular expense category stood out because it spikes up every three years (according to my trend review). And since there was a substantial deviation from the prior year's employee subsidies, I had no choice but to investigate.
The amount had increased that year to P14,000,000. Mind you that was a whole number. And if you're in audit you know, as a matter of fact, that whole numbers tend to be dangerous. It usually means that some computations have been encoded by the management manually. What I did first was to understand the nature of the expense—I found out that every year the company sets aside a fund to substantiate factory damages to employees such as when heavy objects fall and hit someone or when a technician gets electrocuted while fixing the power fuse.
During the previous year the amount was only somewhere around 2 million. There had been an accident in the coal section of the factory and ten employees suffered major burns. The previous year's auditors had vouched the recorded expenses to the filed hospital official receipts.
However, for that current year being audited, there had been no such hospital receipts filed along with the check release registers.
Now since the amount was substantial and very awry, I talked to my senior about the specific issue on hand. Seeing the lack of documentation and a probable fault in their internal controls, my senior tasked me to inquire as to the probable cause of the expense first to the factory supervisor. Factory supervisors have complete information on events inside the factory so there's no way a 14 million worth of damages would escape his attention.
Upon inquiry, the factory supervisor stated that there had been no factory accident during that year. There had been a brawl amongst the guards and the delivery men, but there had been no financial impact to the company.
After the factory supervisor, I directed myself to the HR officer. If employee damages have occurred, the HR was also likely aware of it.
Same response: no employee damage requiring substantiations amounting to 14 million occurred during the year.
My last resort had been to inquire with the accounting department. The people in the department were rather accommodating; I had arrived during their afternoon break and they were having coffee and banana cue. From more of camaraderie than courtesy, they offered and I neatly declined. Almost everyone had been smiling that afternoon—it was a December and they were expecting quite a large bonus.
When I dropped the employee subsidies issue, I could swear I saw every coffee mug freeze.
"I thought your manager's already handling that," the division head had asked me in return.
Taken aback with his brusque response, I fired: "We aren't aware of this, sir. I have just started on the expense account this morning."
The division head then told me to bring my senior to his office and I quickly did as I was told. When we were finally inside the division head's office, he sincerely explained what the 14 million was about. He provided us with the brief explanation of the case. I had gathered the details myself amongst the factory workers later on. Only the top management and the audit firm's partners and managers knew about this issue from the financial point of view and we should have been informed by the manager that the employee subsidies section wasn't for audit testing.
Every three years, the sugar central factory closes for an entire week. This period is set aside for "cleansing" of the machineries, particularly the refinery. I grew up in a sugarcane village and I've heard of the infamous urban legend of the child sacrifice. I used to think the story was made up to scare children. However, that time I had 14 million in Philippine currency as proof it was true. The factory owner together with his family would visit seven families who worked in the hacienda and offer a substantial amount of money for one of their children. The seven children purchased are then feasted before the cleansing with the best food that the sugar central had to offer, bathed and clothed with the best dresses, and then bound and fed to the refinery—one child per day. It was said that the child's blood would purify the equipment and bring forth fortune to the industry and to the business.
What's worse? According to the department head, there had never been an instance that the parents had refused the offer. There had even been a time when a worker had volunteered his child as sacrifice. For 2 million pesos.
As I type this, I recall that it has been more than two years ago since that experience. Venture to imagine if you can: this year is another third year. This year is another cleansing. The hacienda is probably celebrating.
Seven families are going to be blest with 2 million pesos each.
