an audit on non current assets of pakistan cables
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Table of Contents Introduction of Pakistan Cables ...................................................................................................... 4
Founder of Pakistan Cables ............................................................................................................ 5
Background of Pakistan Cables ...................................................................................................... 6
Vision Statement of Pakistan Cables .............................................................................................. 7
Mission Statement of Pakistan Cables ............................................................................................ 7
Factors Considered Before Accepting the New Audit Client ......................................................... 8
Type Of Business ........................................................................................................................ 8
Industry ....................................................................................................................................... 8
Expertise ..................................................................................................................................... 8
Scope of Audit ............................................................................................................................ 8
Fees ............................................................................................................................................. 9
Contact with KPMG ................................................................................................................... 9
Information Source ..................................................................................................................... 9
Appointment Procedure .............................................................................................................. 9
Audit Engagement Letter .............................................................................................................. 10
Internal Control System ................................................................................................................ 13
Approval Process for Capital Expenditure ............................................................................... 13
Estimation ................................................................................................................................. 13
If Capitalize Expense On Which Basis ..................................................................................... 13
Valuation of an asset ................................................................................................................. 13
Insurance Coverage ................................................................................................................... 14
Audit Methodology to Gather Audit Evidence and Assertions .................................................... 14
Property Plant and Equipment .................................................................................................. 14
Leasehold land ...................................................................................................................... 14
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Leasehold Building ............................................................................................................... 15
Leasehold improvement ........................................................................................................ 16
Machinery ............................................................................................................................. 16
Office Equipment and Appliances ........................................................................................ 17
Vehicle .................................................................................................................................. 18
Furniture and Fittings ............................................................................................................ 19
Loose Tools ........................................................................................................................... 20
Long Term Loans .................................................................................................................. 20
Investment in Associates....................................................................................................... 21
Audit Report.................................................................................................................................. 23
Balance Sheet and Notes to the Accounts..................................................................................... 24
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Introduction of Pakistan Cables
Pakistan Cables, the country's oldest and most reputable cable manufacturer, was established
over 5 decades ago in 1953 under the sponsorship of BICC, UK and the Chinoy family. In the
subsequent five decades, Pakistan Cables has earned a reputation as a market leader in the
industry and a company that does not compromise on quality. Consequently, the company has
gained a position as being the premier cable manufacturer in the country. Pakistan Cables has
been listed on the Karachi Stock Exchange since 1955. In 2010 General Cable Corporation, a
Fortune 500 company and global leader in cable manufacturing invested in Pakistan Cables by
taking up a 25% equity stake in the company. Pakistan Cables' manufacturing facilities and head
office are located in Karachi on an 11.5 acre site. This site also houses a 2MW co-generation
power plant, which allows the company to be self-reliant for its electricity needs. Pakistan Cables
presently employs over 400 people. It has regional office in Lahore and branch offices in
Rawalpindi, Multan, Abbottabad, Peshawar and Quetta. The company's distribution network
covers more than 55 cities and towns all over Pakistan. Pakistan Cables is engaged in the
manufacture of wires, cables and conductors in both copper and aluminum. In addition, Pakistan
Cables also produces aluminum sections for architectural applications under the brand name of
Alum-Ex. The company has two other product lines, namely PVC Compound and Copper Rod.
Given its focus on quality, Pakistan Cables continuously reviews and improves the effectiveness
of its Quality Management System in line with objectives of achieving higher productivity,
uncompromising quality and maximum customer satisfaction. Pakistan Cables was the first cable
manufacturer and amongst the first 5 companies in Pakistan to be ISO 9001 certified. It has
recently updated its certification to the ISO 9001:2008 version.
Pakistan Cables Limited is the country’s oldest cables manufacturer engaged in manufacturing of
wires and cables and other engineering products.
The Company was established in 1953 in collaboration with BICC, United Kingdom.
The Company manufactures General Wiring Cables in the range of 250/750 volts. These cables
manufactured in conformity with national and international standards that provides safety and
saving in electricity consumption because of the use of pure copper and cable grade PVC (Plastic
Compound Vanile).
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The Company provides overhead conductors to the utility companies WAPDA and KESC which
are manufactured from EC grade Aluminum Rod and Copper Rod.
PCL also manufactures telephone, intercom, coaxial cables and various types of special cables
which include air field lighting, control cables, etc.
Alum-Ex is the brand name under which Pakistan Cables manufactures aluminum sections for
the construction and architectural industry.
PCL has also set up a plant to manufacture High Conductivity Oxygen Free 8mm Copper Rod.
In 2010 / 11, Pakistan Cables had a total turnover of USD 46 million. The Company has been a
regular winner of the Karachi Stock Exchange’s Top 25 Companies Award, most recently
winning the award in 2004, 2006 & 2007. Pakistan Cables has also been recognized as a winner
of the Brands of the Year Award in 2007 & 2008. Protecting the health and safety of our people
and ensuring a healthy working environment is also of great importance to Pakistan Cables. The
Company is committed to working towards designing a workplace that minimizes work related
risks and occupational health and safety. Pakistan Cables also lays great stress on environment
protection. Plant operations are strictly controlled to maintain safe environment for workers, as
well as the surrounding community. Several measures have been taken to control pollution and
to maintain a clean, green and healthy environment. Pakistan Cables has also achieved in January
2011 certification for its HSE Management Systems conforming to ISO 14001:2004 EMS and
OHSAS 18001:2007.
Founder of Pakistan Cables
Mr. Amir. S. Chinoy is the founder of Pakistan cables limited. He was born in Bombay on 21st
September 1921. He migrated to Pakistan in 1948. He played a pioneering role in the
industrialization of Pakistan by introducing and establishing concerns in heavy chemicals (Pak
Chemical Limited), electrical cables (Pakistan Cables Limited) and galvanized steel pipes
(International Industries Limited). His commercial interests also extended to trading
(representing major European and American companies), contracting and distribution.
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Mr. Amir S. Chinoy was president of Sind Club (1973 ~ 75), Rotary Club (1968 ~ 69) and
Steward of the Karachi and Lahore Race Clubs. In his lifetime, he also wrote a book “The
Chinoys”. He passed away peacefully on 23rd Ramazan 1418.
Background of Pakistan Cables
Pakistan Cables history can be traced back to the early 20th Century with the formation of F.M.
Chinoy & Co. In 1904 F.M. Chinoy & Co. were appointed the sole agency for Shell Petrol in
India and by 1916 F.M. Chinoy & Co. had obtained the agency for Chevrolet. F.M. Chinoy &
Co. eventually expanded to include agencies for Armstrong Siddeley, Oakland, Pontiac,
Lanchester and Vauxhall. During this period F.M. Chinoy & Co. began operating The Bombay
Garage in Bombay and in a short span of time The Bombay Garage’s footprint expanded to
cover most of India.
After the Independence of Pakistan in August 1947, the founder of Pakistan Cables, Mr. Amir S.
Chinoy migrated across to Karachi. He established a number of businesses following his
migration, including Pak Chemicals, International Industries and Pakistan Cables.
Pakistan Cables, the country’s oldest and most reputable cable manufacturer, was established
over 5 decades ago in 1953 as a joint venture with BICC. In the subsequent six decades,
Pakistan Cables has earned a reputation as a market leader and premier cable manufacturer in the
country and a company that does not compromise on quality. Pakistan Cables has been listed on
the Karachi Stock Exchange since 1955. In 2010 General Cable Corporation, a Fortune 500
company and global leader in cable manufacturing invested in Pakistan Cables by taking up a
25% equity stake in the company.
Pakistan Cables is an affiliate of General Cable, which is amongst the world’s largest cable
companies with revenue in 2011 of USD 5.8 billion. General Cable has a global presence with
57 plants in 26 countries including the US, Canada, France, Germany, Spain, Brazil, China,
Thailand, South Africa, and the Philippines.
The affiliation with General Cable gives Pakistan Cables several advantages over its competitors,
including the ability to source almost any type of cable for customers, access to cutting edge
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technology, technical support & management best practices, procurement advantages and export
opportunities. Hence Pakistan Cables is the only cable company in Pakistan with multinational
affiliation and product quality to match the best in the world.
Vision Statement of Pakistan Cables
The vision of Pakistan cable is to be the company of first choice for the customers and partners
for wire, cables and other engineering products. Pakistan cables vision is to be the best cables
and wires manufacturer and also remain best in the aluminum section/profiles. Pakistan cables
set up a plant to manufacture high conductivity oxygen free 8mm copper rod.
Mission Statement of Pakistan Cables
Pakistan cables mission statement is to strengthen company leadership in manufacturing and
marketing of wire and cables. To have a strong presence in engineering products market while,
retaining the options to participate in other profitable business.
Pakistan cables achieving consistent, long term financial growth and profitability for its
shareholders. The growth of the company and shares its success.
Pakistan cables is to operate ethically while maximizing profits and satisfying customers “need
and stakeholders” interest.
The mission of Pakistan cables is also to assist in the socio-economic development of Pakistan
by being good corporate citizens. Pakistan cables is taking a long-term view of business
relationships. It is practicing the highest standards of integrity and professionalism.
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Factors Considered Before Accepting the New Audit Client
In this we will discuss the factors which we have to consider before going to a new client for
audit. The factors which we are considering before going to the Pakistan cables company for the
audit of Non-Current Assets of the company
Type Of Business
Pakistan Cables Company is a public limited company. So our team will know how to
design the financial statement of the business and how to disclose the information in the
balance sheet of the company. We know about the financial requirement which are
compulsion by the SECP (Security and Exchange Commission of Pakistan)
Industry
Pakistan Cables Company is the electric conductor goods. We have identify the industry
of the Pakistan cables company so it will be easy to identify the assets of the company
according to the definition given by the International Accounting Standards and GAAP
(General Accepted Accounting Principle)
Expertise
We have expertise in the field of the Non-Current Assets valuation and their estimation.
If we will audit the Non-Current Assets we will do it ease and confident about our
working.
Scope of Audit
The scope of our audit is defined which is on non-current assets of Pakistan cables
company limited. So we will do audit on the non-current assets of the Pakistan cables
limited
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Fees
Our fees has been fixed and confirmed by the management of the Pakistan cables
company limited and if other review will be conducted they have to decide the firstly
before getting into the contract for other services
Contact with KPMG
We have to contact with the KPMG audit firm because they are the previous auditor of
the Pakistan Cables Company limited. Which have conducted the audit on non-current
assets of Pakistan cables limited company. Which tell us about the calculations and
estimation of the non-current assets and also provide information about the past records
and data of the non-current assets.
Information Source
Our information sources is the management of Pakistan cables limited will provide also
the information which is necessary to perform the audit on non-current assets of the
company and the estimation which are taken by the management of the Pakistan cables
company limited.
Appointment Procedure
We have to see that we are appointed by the proper rules and procedures. Proper rules
and procedures means that we are appointed on the vacant post of auditor which are
approved by the shareholder in the annual general meeting.
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Audit Engagement Letter
To,
1 July 2013
The Chairman of Pakistan Cables Limited
Mr. Amir Chinoy
1. We are pleased to act as the auditor of the Pakistan Cables limited and we are writing this
letter to confirm our appointment agreement with terms and condition
2. The purpose of our letter is to confirm our audit procedure with accompanied term and
condition for carrying out the work.
3. We are bound to act according with ethical code and conduct of Chartered Accountants
(Pakistan) and ISA (International Auditing Standards)
Period of Engagement
1. This letter will be effected from 1 July 2015
2. We will deal with matter arising in this period
3. We will not be responsible for the past event/matters arising from the previous period.
Any matters which are arising from the past KPMG audit firm will be responsible.
Scope of Our Audit
We will give our opinion on the Non-Current Asset whether they are giving true and fair
view.
Our Responsibility
We have set out our scope of audit with your requirement. If any changes will be occurred
we will draft the new audit engagement letter. We will rely on you start our audit procedure.
If we want any information from past and if it is incorrect or inaccurate we will not be
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responsible. We will give our opinion on the basis of IAS,IFRS and GAAP whether the Non-
Current Assets are giving true and fair view or not
Your Responsibility
As we relying on you any information given by you or by third party with your permission. If
any changes happens which you feel is important and alteration is needed tell us or advise us.
Otherwise we are not responsible for any cause.
Statutory Responsibility
As chairman this your responsibility to maintain the books of accounts and apply the rules
and standards of International Financial Reporting Standards.
1. This is your responsibility to make the estimation
2. It is your responsibility to maintain the asset ledgers
3. This is your responsibility to detect the error and fraud
4. This is your responsibility to show the proper disclosure and break-up of the assets
5. This is your responsibility to implement the IAS-16
6. You have to address the shareholder with the audited report
7. We will give the opinion on the non-current assets of the company
8. We will deliver you a report before time
9. This our professional and statutory responsibility that we have to check whether the
Standard is properly implemented or not
10. This your responsibility to record the subsequent expenditure which are directed by
the Standards.
11. If we want any information from your management this your responsibility to provide
us
12. It’s your responsibility to maintain the revaluation surplus account
Our Services to You
1. We are providing services to you according to the ISA and SECP rules and
regulations
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2. We will gather the evidence with the help of internal control and other techniques
which are used to proceed the audit work due to lack of time if any misstatement will
be undiscovered we will not be responsible
3. We will tell you about any weakness in the internal control system on the non-
current assets
4. We will found out any irregularities in recording the noncurrent assets
5. Our report will be issued with the accompanied of account balances
6. Once we have issued the report we are not responsible for it
7. We will not leak any information related with you
Fees
We will charged the fees of an audit according with the market rate means the fees which
are charged by the other firms in the market. We will charged the 1million rupees by
providing our services. If any other services you want from us we will alter the fee.
Agreement of Terms
1. Once the agreement is accepted it will be affected till it is replaced
2. If the new service will also provide you this letter will be terminated
3. This letter we are sending you with the scope if any changes want to make let us
know
4. This letter should be read in accordance with the firm standards
Your sincerely,
Signature
Friends Charted Firm
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Internal Control System
Internal control system of the Pakistan cables limited is as discussed under
Approval Process for Capital Expenditure
In Pakistan cables limited whenever the company want to incur they have to take the
approval for purchase or expansion of an asset. They have to take the approval from Board
of Director if the (BOD) has approved they will convey it to the Chief Financial Officer.
Estimation
They management of Pakistan Cable Limited make estimations for the assets which are as
Useful life
Salvage value
Cost of an asset
If Capitalize Expense On Which Basis
The management of Pakistan cable capital the expenditure on its nature. They will see
whether this expenditure is on regular basis or this expense will enhance the capacity or
useful life of any asset
Valuation of an asset
The management team of Pakistan cables limited making the revaluation of an asset on the
regular basis. The company has policy about the revaluation which is
Building will be revalued after every two year
Leasehold land will be revalued every year
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Insurance Coverage
Any insurance which is taken against any asset should be capitalized to the asset because
the insurance is specific taken foe the asset. It should be capitalized to the amount of an
asset
Audit Methodology to Gather Audit Evidence and Assertions
Property Plant and Equipment
Leasehold land
Assertions for the Leasehold Land are;
1. Valuation
The land valuation technique used by the management is the revaluation of the
asset so we will see the value of the asset in the market at the time of audit.
2. Completeness
The revalued land should be complete in every regard of the asset in aspects of
the revaluation account and the revaluation is to be mentioned in retained earning
of the company equity
The following described below is the type of test which we are going to use;
1. Comparative Analysis
We will compare the value of land last year and value of current year any
difference between the values will be charged to revaluation surplus account
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Leasehold Building
Assertions for the Leasehold Building are;
1. Estimation
For leasehold building we have to estimate about the depreciation of the building
and to calculation basis for depreciation
2. Segregation
We have to segregate the depreciation into two different parts which are;
Asset Control Account
Revaluation Surplus Account
The following described below is the type of test which we are going to use;
Test of Control
We will rely on the internal policy of the Pakistan cables limited because we have
taken;
Book Value
Revaluation
Depreciation
Reporting date book value
As we have gone through it we have found that all the things are reported fairly
enough and all the treatment according to it
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Leasehold improvement
Assertions for the Leasehold Improvement are;
1. Estimation
First of all we will estimate the cost of leasehold improvement on which price it
was included in the balance sheet to charge the depreciation on it
2. Recognition
On which price the leasehold improvement was included/recorded in the ledger
are they have include the attributable cost in it
The following described below is the type of test which we are going to use;
Test of Details
We will test the leasehold improvement with the procedures which are as under;
At which time it`s purchase we will see the date
We get the evidence from cash flow statement in investing
activities
The useful life of an asset estimated by the management
How it has been depreciated
The depreciation rate on leasehold improvement
Depreciation method is straight line
Machinery
Assertions for the Machinery are;
1. Break-up
We will see the break-up of machinery, how many machinery are old and any
new machinery is purchased so we will take into the account for audit because
there will be ease to identify the machinery
2. Segregation
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There will be segregation of the machinery in which areas the machinery are used
by the organization in which areas and to allocate the expense accordingly
3. Estimation
In estimation we will how much useful life is estimated by the organization for
the machinery because useful life of machinery is depend on the nature and
technology of a machinery
The following described below is the type of test which we are going to use;
Test of Controls
We will discuss the test which we are going to apply on the machinery. First of all
we have to see the things as under;
The depreciation rate
Calculate depreciation
Charge the depreciation
Different depreciation rates for different machinery
Balance of machinery at the reporting date
Any addition in the machinery
Office Equipment and Appliances
Assertions for the Machinery are;
1. Completeness
We have to go for the completeness in each aspects of the asset because in office
equipment’s because there is more use of technology in it which is the major
thing/point for it
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2. Estimation
We will estimate the useful life of an asset because there is more technological
innovations in it and the depreciation is more than any asset
The following described below is the type of test which we are going to use;
Test of Controls
We will rely on the internal controls which are adopted by the Pakistan Cables
Limited. In this we will see the following points;
Useful life of asset
Depreciation rate
Depreciation calculation
Any addition in the asset
Total depreciation expense
Book value at the end of year
Vehicle
Assertions for the Vehicle are;
1. Valuation
First of all in the vehicles value of the vehicle reported in the balance sheet
because this asset has a risk of damage as compare to other asset and any
insurance which is taken by the Pakistan Cable Limited is included in it or not.
2. Completeness
The vehicle should be complete in each aspect if any addition make are included
in the ledger cost account of vehicle
The following described below is the type of test which we are going to use;
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Test of Control
For this asset we will rely on the internal control policy in which we will see the
following points;
Break-up of vehicle
Any addition
Depreciation rate
Depreciation amount
Book value at the start
Book value at the end
Calculate the depreciation
Any attributable expenses
Furniture and Fittings
Assertions for the Furniture and Fittings are;
1. Completeness
We have examine the completeness of asset in the term of asset which means we
have to look towards the addition or any sale of the furniture
The following described below is the type of test which we are going to use;
Test of Details
We will collect the evidence in the following way;
When the furniture is purchased
Type of wood used in it
Life of wood
Break up of furniture
Salvage value at the end of life
Depreciation rate
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Depreciation amount
Where these furniture are used
Allocate the depreciation expense
Loose Tools
Assertions for the Loose Tools are;
1. Valuation
The valuation of Loose tools are important because the loose tools can be lost
easily because most of them are in small size which can be misplaced and value
of loose tools can over valued
The following described below is the type of test which we are going to use;
Test of Controls
We will rely on the test of controls and we will see the following elements;
Where the tools are used
Types of tools
Moveable/Immovable tools
Depreciation rate
Depreciation amount
Any addition
Any sale
Long Term Loans
The long term loan in the asset side of balance sheet means the loans are provided by
the Pakistan Cables Limited to their employees. The loan is given according to the
scale of an employee in an organization
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Assertions for the Long Term Loans are;
Segregation
The loan should be segregated into the two parts;
1. Long term loan
2. Short term assets (Receivables)
The long term loan should be categorized into the time period of the loan given to
the employee of company how much time is gone when the loan is advances to the
employee of the company so it will be easy to assess the condition of long term loans
The following described below is the type of test which we are going to use;
Test of Details
We will collect the evidence in following ways;
Segregation of loan
Break ups
Estimations
Received in the year
Receivable in the year
Collection charges
Cash flow statement
Balance at the start of year
Balance at the end of year
Investment in Associates
The investment in associates means the Pakistan Cables Limited has invested or
purchased the share of other company more than 20% and less than 50%.
Assertions for Investment in Associates are;
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1. Valuation
The value of an investment at the time of purchase and at the time of reporting
date. The investment will be taken into account on fair market value basis
The following described below is the type of test which we are going to use;
Test of Control
We will rely on the internal controls of Pakistan Cables Limited. They are;
At the date of acquisition
At the date of reporting
Non-controlling Interest
Fair value Adjustment
Share of profit
Value of goodwill
Value shown in the balance sheet
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Audit Report
To,
The Shareholders of Pakistan Cables Limited,
Karachi
1. Our Responsibility
Our responsibility is to give the opinion on the Non-Current assets of Pakistan cables
limited company whether the Non-Current assets are giving true and fair view or not.
As we have gone through the audit procedure on the Non-Current Assets if misstatement
remains incorrect or inaccurate because we have done our audit on the basis of sample so
we are not responsible for it.
2. Management Responsibility
It is the responsibility of the management to prepare the financial statement of the
company which gives true and fair view according to International Financial Reporting
Standards and which are directed by the Companies Ordinance 1984. It will also include
the designing maintaining and implementing the internal control system for the
preparation of Financial Statement according to the standards and the Ordinance
3. Report On The Non-Current Asset
As we have audited the non-current assets of the Pakistan Cables Limited we are
reporting that the non-current assets of the company are giving true and fair view. As the
samples which are chosen by our team we have not found any misstatement in it. Non-
Current Assets are recorded according to the International Accounting Standards
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Lahore, Pakistan Mian Usman Ahmad
30 June 2014 (Senior Member)
Friends Chartered Firm
Balance Sheet and Notes to the Accounts
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