Management Letter

The Board of Directors

Manufacturing (M) Bhd.
Address:

Date

Members of the board,

Financial statements for the year ended 31 December 2008

In accordance with our normal practice we set out in this letter

certain matters which arouse as a result of our review of the
accounting system and procedures operated by your company
during our recent interim audit.

We would point out that the matters with in this letter came to our
notice during the conduct of our normal audit procedures which
are designed primarily for the purpose of expressing our opinion
on the financial statements of your company. In consequence our
work did not encompass a detailed review of all aspects of the
system and cannot be relied on necessarily to disclose
defalcations or other irregularities or to include all possible
improvements in internal control.

1. Purchases: ordering procedures

Present system
During the course of our work we discovered that it was the
practice of the stores to order certain goods from A (M) Sdn.
Bhd. Orally without preparing either a purchase requisition or
purchase order.
 Implications
There is therefore the possibility of liabilities being set up for
the unauthorized items and at a non-competitive price.

Recommendations
We recommend that buying department should be responsible
for such orders and if they are placed orally, an official order
should be raised as confirmation.

2. Purchase Ledger Reconciliation

Present system
Although your procedures require that the purchase ledger is
reconciled against the control account on the general ledger at the
end of every month, this was not done from June to September.

Implications
The balance on the purchase ledger was short by some RM30,100
of the general ledger control account for which no explanation
could be offered. This implies a serious breakdown in the
purchase invoice and or payment batching and posting procedures.

Recommendations
It is important that this reconciliation is performed regularly by
a responsible official independent of the day to day purchase
ledger, cashbook and general ledger functions.

Our comments have been discussed with your finance director and
the accountant and these matters will be considered by us again
during future audits. We look forward to receiving your
comments and actions on the points made. Should you require
any further information or explanations do not hesitate to contact
us.
This letter has been produced for the sole use of your company. It
must not be disclosed to a third party without our written
consent. No responsibility is assumed by us to any other person.

We should like to take this opportunity of thanking your staff for

their co-operation and assistance during the course of our audit.

Yours faithfully

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