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Audit and Assurance Final Term Assignment's
Audit and Assurance Final Term Assignment's
JUNE 1, 2015
SUBBMITED BY AHHMAD-NUMAN ROLL NO 132-71
SUBBMITTED TO SIR MUHAMMAD YASIR
Assignment no 1 Final Term.
Audit panning and analytical procedures
The Internet has dramatically increased global e-commerce activities. Both traditional
"brick and mortar" businesses and new dot-com businesses use the Internet to meet
business objectives. For example, eBay successfully offers online auctions as well as
goods for sale in a fixed price format.
Required.
1. Identify business strategies that explain eBay's decision to offer goods for sale at
fixed prices.
EBay’s decision to offer goods for sale at fixed prices based on these strategies.
To match the opposition. Because other retailer’s offer products at fixed prices through the
Internet, eBay’s facility to offer products at fixed prices allows eBay to invite customers who are
interested in purchasing products offered by other retailer’s. Customers less interested in
participating in online public sale may come to eBay to purchase products at fixed prices instead
of visiting other retailer’s Web sites. Thus, eBay may have decided that it is necessary to offer
products at fixed prices to match their opposition and meet consumer expectations in the
marketplace.
Enable to grow new target Markets by offering products at fixed price to its customer.
Many customers may not be passionate to contribute in online public sale due to the problem of
uplifting their bids online for the time in which auction is actuality done. By offering products at
fixed prices to customers through its Web site, eBay may be able to grow its market to customers
who do not select to contribute in the online auction.
2. Describe three business risks related to eBay's operations.
Customer’s Gratification with Product. Because eBay offered products by autonomous third
parties, eBay faces risks associated to product quality and features. If a customer purchased
products through eBay fail to meet customer expectation for quality, use of eBay auctions by
customer may devaluate over time.
Customer Secrecy. Due to buying products online customers will be providing secret personal
information, including credit card data, eBay’s system must be designed to protect customer
privacy during transmission and processing of orders. Breaches in customer privacy may affect
future demand for online sales and may increase legal exposure to the company.
Internet Accessibility. EBay’s business model is helpless without access to the Internet. During
the periods when Internet is not available, eBay is unable to conduct business. If Internet outages
are lengthy or frequent, consumers may be less interested in shopping on eBay.
3. Acquisitions by eBay in recent years include PayPal, an online payment service, and
Skype, an internet communications company. Discuss possible reasons why eBay
made these strategic acquisitions.
The basic purpose or aim of purchasing of PayPal an online payment service by eBay is to
modernize the payment process between buyers and sellers on the eBay auctions. PayPal allows
customers, both the individual and business to send and receive payments online with an email
address securely, easily and quickly. PayPal's service builds on the existing financial
infrastructure of bank accounts. Attaining PayPal allows eBay to decrease business risk by
ensuring they control this important aspect of the payment process in online business. The basic
decision to purchase the Skype an Internet communications company, is to make stronger eBay’s
access to the wildest growing Internet communications company. That helps eBay to ensure the
controls on this important aspect of its business model.
4. Four years after acquiring Skype, eBay sold most of its interest in the company.
Discuss how that impacts eBay's business risks.
EBay Inc. acquired Skype in 2005 for $2.6 billion but in 2007, eBay Inc. took a $1.4 billion
reduce in the book value of Skype, admitting that the procurement had not performed as
projected. Between 2005 and 2007, its stock price was cut in half and its market cap shrank by
$30 billion. In 2009 The Company’s board decided to divest Skype due to a lack of
collaborations with the company’s core businesses and its focus on commerce. EBay retained a
30% stake in Skype, safeguarding possible advantage to any future value formation. EBay
wanted to unload Skype after failing to integrate the company into its core operations, and was
now soliciting bids to cut its losses.
5. Identify possible risks that can lead to material misstatements in the eBay financial
statements if business risks related to its operations, including recent acquisitions
and divestitures, are not effectively managed.
Each of the possible business risks that can lead to material misstatements are:
1. Inadequate Ability to Grip Demand.
2. Customer Gratification with Product
3. Consumer Secrecy
4. Internet Accessibility
May lead to an increased risk of material misstatements in the financial statements, if not
effectively managed.
Inadequate Ability to Grip Demand. If demand for products through the eBay Web site
exceeds the company’s ability to process orders in a timely fashion, customers may cancel earlier
recorded orders or request returns when delivery take place well away from the expected
delivery date. The accounting systems must be planned to exactly reflect cancellations and
returns in a timely fashion in accordance with GAAP. Additionally, if the processing of orders is
significantly delayed, the accounting systems must be effectively planned to ensure sales are not
recorded in advance (e.g., not until delivery).
Customer’s Gratification with Product. While the autonomous sellers who offer products on
eBay auctions bear principal duty for product quality and feature, some customers may seek
financial reimbursement from eBay when products are not delivered or are in poor quality.
Thus, eBay’s financial statements may need to include reserves for product returns.
Consumer Secrecy. If consumer privacy is breached, existing sales may be lost or returns
beyond the normal period may be requested. Such activity would need to be properly reflected in
the financial statements. Additionally, legal exposures may increase, which may require
additional financial statement disclosures.
Internet Accessibility. The lack of Internet availability will may lead to penalties or fee
payments to online sellers who use eBay to sale goods and to those who wanting to place
advertisements on the eBay site. When the Internet is down, there may be fees owed to sellers
and advertisers.
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Group no
2
Assignment no 2 Final Term.
Internal control system
Identify different control procedures and relater tests of control used in sales and payroll
department of trading concern.
Assignment
Ali is an auditor having satisfactory quality control review rating issued by institute of chartered
accountant Pakistan (ICAP). He has been appointed as an auditor of Model Manufacturing
limited. He has started work under the company’s internal control environment and obtains
various assertions from the different executives and employees of the company. After going
through a preliminary assessment of the company environment, Ali feels that there is a problem
in the working of internal control system in handling the sales and debtors and payroll
departments. Now, he is planning to check the internal control procedures and tests of control.
Describe various appropriate internal control procedures and tests of control, Ali apply to
determine the strength of internal measures over the client’s
Various appropriate internal control procedures and tests of control to determine the
strength of internal measures over the client’s regarding sales and debtors and payroll
departments in accordance with my view point.
Dispatch Receivables/debtors
Invoicing and credit notes Bad Debts
Orders:
Existing customers should be allocated a credit limit and it should be determined whether this
limit is to be exceeded if the new order is accepted. If so the matter should be referred to
credit control.
Any new customer should be referred to the credit control department before the order is
accepted.
All orders received should be recorded on pre-numbered sales order documents so that a
check can be made that all orders have been allocated with -a completeness check.
All orders should be authorized before any goods are dispatched.
The sales order document should be used to produce a dispatch note for the goods outwards
department. No goods may be dispatched without a dispatch note.
Dispatch:
Dispatch notes should be pre-numbered and a register kept of them to enable them to be
matched with relate to sales invoices and customer orders.
Dispatch notes should be authorized before goods leave the company.
Regular checks should be made to ensure that all dispatches have been invoiced.
Sales invoices should be authorized by a responsible official and matched with the authorized
order and dispatch note.
All invoices and credit notes should be entered in daybook records, the sales ledger, and
sales ledger control account. Batch totals should be maintained for this purpose.
Sales invoices and credit notes should be checked for prices.
All invoices and credit notes should be serially pre-numbered and regular sequence checks
should be carried out.
Credit notes should be authorized by someone independent with dispatch or sales ledger
functions.
Copies of cancelled invoices should be taken.
Any cancellation of an invoice should lead to a cancellation of the related dispatch note.
Cancelled (and free of charge) invoices should be signed by a responsible official.
Each invoice should differentiate between different types of sales and, if relevant, different
rates of VAT or sales tax. Any coding of invoices should be periodically checked
independently.
Returns:
Any goods returned by the customer should be checked for obvious damage and, when
accepted a document should be raised.
All goods returned should be used to prepare appropriate credit notes.
Receivables/Debtors:
A receivables ledger control account should be prepared regularly and checked to individual
sales ledger balances by an Independent official.
Receivables ledger personnel should be independent for dispatch and cash receipt functions.
Statements should be sent regularly to customers.
Formal procedures should exist for following up overdue debts which should be highlighted
either by the preparation of an old list of balances or by the preparation of regular customer
statements.
Letters should be sent to customers for collection of overdue debts. A policy should be in
place for the Institution of legal proceeds where appropriate.
Bad debts
The authority to write off a bad debt should be in writing. Appropriate adjustments should be
made to the sales ledger and the control account
The use of court action or the writing-off of a bad debt should be authorized by an official
independent of the cash receipt function.
Tests of Control
Tests of control should be designed to check that the control procedures are being applied and
that objectives are being achieved
Carry out sequence test checks on invoices, credit notes, dispatch notes and orders. Ensure that
all items are included and that there are no omissions or duplications.
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Assignment no 3 Final Term.
Comparison between the contents of annual reports of Gillette Pakistan limited and Gillette
India limited.
Report on Other legal and As required by the Companies (Auditor’s Report) Order, 2003 (“the
Regulatory Requirements Order”) issued by the Central Government in terms of Section
227(4A) of the Act, we give in the Annexure 1. A statement on the
matters specified in paragraphs 4 and 5 of the Order. 2. As required
by Section 227(3) of the Act, we report that: We have obtained all
the information and explanations Which to the best of our
knowledge and belief were necessary for the purposes of our audit.
In our opinion, proper books of account as required by law have
been kept by the Company so far as it appears from our
examination of those books. The Balance Sheet, the Statement of
Profit and Loss, and the Cash Flow Statement dealt with by this
Report are in agreement with the books of account. In our opinion,
the Balance Sheet, the Statement of Profit and Loss, and the Cash
Flow Statement comply with the Accounting Standards referred to
in Section 211(3C) of the Act. On the basis of the written
representations received from the directors as on June 30, 2013
taken on record by the Board of Directors, none of the directors is
disqualified as on June 30, 2013 from being appointed as a director
In terms of Section 274(1) (g) of the Act.
Auditor name and signature.