1. Incomplete or Unsupported Expenses
This is one of the most common findings among SMEs. Even legitimate business expenses can be disallowed if supporting documents are missing or incorrect.
Typical Issues
- Missing ORs or VAT invoices
- Receipts issued under a personal name, not the company
- Lack of documentation for reimbursements
- Digital receipts not stored or validated properly
How to Avoid This
- Require official receipts or VAT invoices for every expense
- Keep both digital and physical copies
- Standardize your approval and documentation workflow
- Use an accounting system or work with accounting services in Pasig / Metro Manila to organize expenses
Unsupported expenses are one of the main reasons auditors propose adjustments during audits.
2. Incorrect or Delayed Revenue Recognition
Many SMEs record income only when cash is collected, which leads to misstated financials especially for retainer-based or project-based businesses.
Typical Issues
- Revenue booked in the wrong period
- No signed contracts or service agreements
- Delayed invoicing
- Unrecorded sales discovered during audit
How to Avoid This
- Apply proper PFRS for SMEs revenue recognition
- Secure signed contracts and billing schedules
- Issue invoices promptly (automate if possible)
- Reconcile sales with BIR filings (2550M/Q, 2551Q, 1701/1702)
Audit firms in Manila and Pasig review revenue recognition early because it affects tax compliance and financial statement accuracy.
3. Unreconciled Balances (Bank, Books, and BIR)
When balances don’t match, auditors immediately question the reliability of your books.
Typical Issues
- Bank reconciliation not done monthly
- Old reconciling items never resolved
- Differences between books and BIR returns
- Large year-end adjusting entries
How to Avoid This
- Reconcile all bank accounts monthly
- Investigate discrepancies immediately
- Ensure books match BIR filings
- Work with providers offering tax and accounting services in the Philippines to maintain accurate records
Reconciliation issues are among the biggest red flags for external auditors and the BIR.
4. Poor Inventory or Fixed Asset Tracking
Product-based businesses and asset-heavy companies are prone to audit findings due to weak tracking systems.
Typical Issues
- No regular physical count
- Missing or untagged assets
- Inventory mismatches
- Unrecorded disposals or write-offs
How to Avoid This
- Conduct regular physical counts (monthly or quarterly)
- Tag and document all assets
- Reconcile stock records with accounting books
- Use an inventory system or consult providers of internal audit services in Manila
Weak inventory and asset controls often lead to significant audit adjustments.
5. Weak Internal Controls & Lack of Segregation of Duties
Even if records are complete, weak controls create risks of error — or worse, fraud. Auditors review controls carefully because they affect every part of your financial statements.
Typical Issues
- One person handles cash, recording, and approval
- Processes are undocumented
- Heavy reliance on manual bookkeeping
- No regular review by management
How to Avoid This
- Separate critical duties: custody, recording, approval
- Document processes and approval limits
- Train employees on compliance and internal controls
- Move from manual spreadsheets to accounting systems
Strong controls reduce audit findings and protect your business from costly mistakes.
Why Fixing These Issues Early Matters
Businesses that prepare early experience:
- Fewer audit adjustments
- Faster audit completion
- Less stress during audit season
- Lower risk of BIR penalties
- More accurate financial reporting
- Better financial decisions year-round
Proactive audit preparation is especially important if your business engages audit firms in Metro Manila, relies on lender credit, or plans to scale.
FAQs: Common Audit Findings in the Philippines
1. What causes most audit findings?
Incomplete documentation, misaligned books vs. BIR filings, and weak internal controls.
2. Can early preparation reduce audit findings?
Absolutely. Monthly or quarterly cleanup significantly lowers the risk.
3. Does UNA offer pre-audit reviews?
Yes, UNA provides audit, tax, and accounting services in Pasig and Metro Manila, including full pre-audit cleanup and risk assessments.
4. What if we discover errors before the audit?
Correct them immediately and document all adjustments. Early corrections reduce findings and speed up the audit.
Need Help Avoiding Audit Findings or Preparing for Audit Season?
UNA Tax & Accounting Services helps Philippine SMEs avoid common audit issues through:
- Monthly or quarterly bookkeeping reviews
- Pre-audit cleanup and reconciliation
- Internal control strengthening
- Documentation checks and BIR alignment
- Audit-ready schedules
- Full coordination with your external auditor
Don’t wait for findings, prevent them.
Book your FREE 15-minute Audit Preparation Consultation with UNA today.
Email us at: sales@una-acctg.com
Stay compliant. Stay audit-ready. Stay confident with UNA.
