Audit Strategy Assigment
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Transcript of Audit Strategy Assigment
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CONTENTS OF THE AUDIT STRATEGY
1 The assignment objectives and reports to be issued
2 The audit timetable, to meet the required reporting deadlines forthe audit report
3 Changes in clients organization or business or externalenvironmental changes affecting the clients business, sinceprevious audit
4
A summary of key financial ratios and other ratios from previousyears
5 Planning decisions for the audit
6 The use that will be made of the clients staff in the audit and theuse that will be made of the external experts
7 Possible problem areas in the audit and the approach to beadopted to deal with them
8 Staffing requirements for the audit, the planned allocation of the
work between members of the audit team, time budgets andrecord from the previous audit
9 Attendance locations
10 Proposed methods of communication with the client
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1- THE AUDITT OBJECTIVES AND THE REPORTS TO BE ISSUED:
1.1 AUDITT OBJECTIVES
The audit scope addresses the three objectives:
1. To express an opinion on the financial statements of the Abbott laboratories Pakistan Ltd that whether
the financial statements, prepared by the management and those charged with governance in all
material respects, present true and fair view of the state of entitys affairs within applicable IASs/IFRSs
and Companies Ordinance 1984 as at/for the Quarterly or Annually financial statements.
2. Give a Review on the Statement of Compliance with the best practices of the Code of Corporate
Governance contained in the code applicable to the Abbott laboratories Pakistan Ltd for the year ended
and prepared by the board of directors of the Abbott laboratories Pakistan Ltd to comply with the listing
regulations of the KSE where the company is listed.
3. As the Abbott laboratories Pakistan Ltd is a multinational company so to contribute the group audit of
the consolidated financial statements of Abbott laboratories.
1.2 REPORTS TO BE ISSUED AND OTHER MATTERS TO BE COMMUNICATED:REPORTS
TO BE ISSUED:
During the audit and at conclusion following reports are to be issued:
1. Review reports on Quarterly/Semi-Annual Financial Statements.
2. Review reports to the members on Statements of Compliance with the best practices of the Code of
Corporate Governance.
3. Auditors Report to the Members.
4.
Communicate certain papers to the audit committee during the audit.
OTHER MATTERS TO BE COMMUNICATED:
Matters Communicated
Relationships that may bear on the firms
Independence, integrity and objectivity of the audit
engagement partner and audit staff
To be formally reported at year end to a
separate Audit Committee
The general approach and overall scope of the audit,
including levels of materiality, fraud risks and audit
responses and engagement letter
All these papers and engagement letter for the
audit is communicated to the audit
committee.
Disagreement with management on certain matters
that, individually originate, could be significant to the
entitys financial statements or the auditors report
Communicated in the Audit Committee paper
and Final audit report
Audit adjustments, whether or not recorded by the
entity that have, or could have, a material effect on
Communicate in Audit Committee paper and
Final audit report
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the entitys financial statements
Material uncertainties related to events and
conditions that may cast significant doubt on the
entitys ability to continue as a going concern
Audit Committee paper and Final audit report
Expected modifications to the auditors report Audit Committee paper and Final audit report
2 THE AUDIT TIMETABLE TO MEET THE REQUIRED REPORTING DEADLINESFOR THE AUDIT REPORT:
2.1 AUDIT TIMETABLE:
Here the audit process and their key stages are mentioned.
Audit
processKEY STAGES June July Aug Sep Oct Nov Dec Jan
Fe
b
1 Planning
Perform risk assessment procedures and
identify risks
Determine audit strategy & present to
Audit Committee
Determine planned audit approach
2Control
Evaluation
Understand accounting and reporting
activities
Evaluate design and implementation ofselected controls
Test operating effectiveness of selected
controls
Assess control risk and risk of significant
misstatement
3
Test of
control andSubstantive
procedures
Consider test of control procedures
Plan substantive procedures
Perform substantive procedures
Consider if audit evidence is sufficient and
appropriate
4Finalization
audit
Perform completion procedures
Perform overall evaluation
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Form an audit opinion
Audit Committee reporting
2.2 REPORTING DEADLINES:
Following are the reporting deadlines.
Report Reporting Date
Review Report on Quarterly/Semi-Annual
Accounts
31st
May
30th
August
30th
November
Review reports Statements of Compliance
with the Code.22
ndFebruary
Auditors Report to the members 22nd
February
3 CHANGES IN CLIENTS ORGANIZATION OR BUSINESS OR EXTERNAL
ENVIRONMENTAL CHANGES AFFECTING THE CLIENTS BUSINESS, SINCE
PREVIOUS AUDIT:
Since previous audit following organizational, business and environmental changes have taken place in
clients organization:
3.1Organizational Changes:
No change in the board occurred during the period.
3.2Business Changes:
Scientific discovery and innovation are the hallmarks of Abbott's business. Abbott Pakistan has
launched the RSO (Rationalization, Standardization, Optimization) program through which
Packaging of various products is standardized to achieve operational efficiencies such as cost
Improvement, cycle time reduction, and better inventory management
The TPM (Total Productive Maintenance) program is launched to minimize breakdowns and reduce
machine change over time to increase the productivity.
Other minor and immaterial changes also took place.
33External Environmental Changes:
Abbott Pakistan committed to minimizing global environmental impacts , from the sourcing of raw
materials.
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Improve the efficiency and sustainability of the business activities and products and reducing the
Greenhouse gas emissions, water use and waste
Abbott trying that the contractors working on behalf of Abbott to conform to regulatory requirements
and Health and Safety (EHS) standards.
Integrate sound EHS practices consistent with the company management system into all aspects
Of the business, maintaining legal compliance.
With ever increasing emphasis on environment and workers health & safety and also in achieving the
goal of moving towards Zero EHS&E Impacts.
Abbott Pakistan has reached a milestone of 13 Million hours without any loss time accident.
Inflation affects the product prices of the company.
Competition is also increasing for the company due to the entrance of the new local companies and also
due to the foreign investment of multinational companies in this sector.
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4 A SUMMARY OF KEY FINANCIAL AND OTHER RATIOS FROM PREVIOUS
YEARS:
4.1RATIOS:
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4.2 GRAPHICAL PRESENTATION:
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4.3 DETERMINING THE MATERIALITYA:
Materiality is set at the planning stage to ensure that an appropriate level of audit work is conducted. It is
also considered at the reporting stage in order to assess the impact of an item on the financial statements.
Identified errors greater than 2% of materiality will be recorded.
4.4 THE USEFULNESS OF AN INTERNAL CONTROL IN AN AUDIT AND THE HELP THAT
WILL BE TAKEN BY AN EXTERNAL EXPERT:
1. The internal audit of the Abbott Company is very effective so it can be used as one of the audit
procedure.
2. Auditing evaluate the design of an entity's internal controls over risks which could lead to material
misstatement in the financial statements and determine whether they have been implemented.
Emphasis is placed on identifying and obtaining an understanding of control activities that address the
areas where we consider material misstatements are more likely to occur.
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5-PLANNING DECISIONS FOR THE AUDIT:
Planning decisions that are required to be taken during the audit process are:
Planning and Performance procedures
Set the Final Materiality threshold, which should be based on the forecast results.
Safeguards against ethical threats
Risk Planning and risk management related decisions
Decisions regarding reliance or replacement on internal controls/IAA
Decisions relatingIndependent reviews done by the company from the outsource bodies
6- THE USE THAT WILL BE MADE OF THE CLIENTS STAFF IN THE AUDIT
AND THE USE THAT WILL BE MADE OF THE EXTERNAL EXPERTS:
A CFA would be hired for the audit of derivatives and other international financial instruments.
A technology expert is hire to analysis the new proposed technology.
Acturist would be hired for help required in audit of Employee benefits.
Supporting team of specialists to assist the audit team work
7- POSSIBLE PROBLEM AREAS IN THE AUDIT AND THE APPROACH TO BE
ADAPTED TO DEAL WITH THEM:
Following could be the possible problem areas:
Retrieval of operational data is an issue because fire caused data loss.
8-Staffing requirements for the audit, the planned allocation of the work
between members of the audit team, time budgets and record from the
previous audit:
There are 25 staffing members and having five key members in the staff for the audit.
Capital expenditure evaluation for audit prospect is done by 2 members.
Revenue is evaluated by 1 member.
Accounting for fixed assets is done by 10 members.
Property valuations is done by 6 members
Other members performing the other work allocated to them.
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9- ATTENDANCE LOCATIONS:
Head Office and the Factory both are located in Karachi.
Both will be attended.
10- PROPOSED METHODS OF COMMUNICATION WITH THE CLIENT:
Meeting would take place as required by law and other communication would be by e-Mails.
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ANNEXURE:
BALANCE SHEET
ABBOT Laboratories (Pakistan) Ltd
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INCOME STATMENT
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CASHFLOW STATEMENT