Logistics

and
Transportation

Group 6 BSA 4204|Bustamante|Enriquez, k.|Provido|TerRible

Overview
Transportation is defined as the movement of people, animals,
and goods from one location to another. These modes of transport
may include:
air cable
rail pipeline
road space
sea

The logistics industry can be Logistics includes the process of

defined as the science of obtaining, planning, implementing, and
producing, and distributing controlling procedures for the
material and products to the efficient and effective
correct place and in the correct transportation and storage of
quantities. goods.
Overview
The advancements of new technologies and improved business
processes have had an enormous impact on transforming both
the logistics industry and transport industry.

In this highly competitive market both information and physical

products must move with efficient speed and at lower cost, paired
with improved service. Successful supply chain management and
logistics are often the difference between surviving and flourishing in
the current marketplace. Upon improving the supply chain will see
immediate benefits in terms of lower costs and optimized delivery.
 Nature and background
logistic industry and transportation industry

The logistics industry is much broader than the transportation

industry. While transportation focuses on the movement of
goods from one place to the other, the logistics industry
implies a broader spectrum and refers to the whole ‘flow’
management.

logistic industry
difference
transportation
industry
 transportation
industry
It is a function within the logistics industry
operations. It is focused purely on the definition
and deployment of transportation modes, such as
sea, road and air.

The supply chain refers to the entire value chain

from the suppliers to the end customer, including
after sales services and reverse logistics (recycling).

Types of transportation are as follows:

Truck Freight - Road Transportation

Ship - Marine Transportation
Train - Rail Transportation
Plane - Air Transportation
Intermodal Transportation
 Logistic
industry
It requires planning, whilst transportation is the
mode to execute the planning when freighting
goods from point A to B.

When it comes to the logistics industry,

logistics executives must make further
decisions beyond the mode of
transportation to include:
Packaging
Containerization
Documentation
Insurance
Storage
Importing and Exporting Regulations
Freight Damage Claims
Working and collaborating with other
executives within the supply chain
Managing vendors and partners
Responsible for risk mitigation
Three main directions correspond with
the three logistical processes

inbound outbound reverse

logistics logistics logistics

It refers to the It pertains to the It means that

movement of flow of goods products’
goods between between movement from
businesses and companies and the end-
their suppliers to the end- user/consumer
cut the definition user/consumer. back to the
short. manufacturer or
reverse supply
chain.
logistics structure
 Today's global logistics manager would be familiar with the
role of each of the following:

Foreign freight forwarders - handlers of a myriad of

foreign freight services.

Export management companies - suppliers of expertise

those wishing to sell products overseas but lacking the
necessary resources.

Export trading companies - locators of overseas buyers.

Customs house brokers - overseers of the movement of

goods through customs.

Ship brokers - sales representatives for ship owners and

purchasing representatives for the shipper.

Ship agents - local representative of the ship operator that

handles the ship's arrival, berthing, clearance, loading and
unloading.

Export packers - suppliers of export packaging services.

Port authorities - owner and operator of the port.

Review concept: True or false
Transportation implies a broader
spectrum and focuses on the movement
of goods from one place to the other,
the logistics industry refers to the whole
‘flow’ management.
answer: False
Transportation implies a broader
spectrum and focuses on the
movement of goods from one
place to the other, the logistics
industry refers to the whole ‘flow’
management.

note: The logistics industry is much broader than

the transportation industry.
Review concept:
It involves the process of moving products from
their final destination, typically consumers, back
to the manufacturer or original distribution point.
This movement is necessary for reasons such as
returns, repairs, recycling, or disposal, and aims to
manage this flow of goods efficiently and
sustainably.
answer:

Reverse Logistics

“Build, Build, Build
Program” – Government
Initiative
The government is
accelerating multiple
infrastructure projects such as
three bus rapid transits, four
seaports, six airports, nine
railways and 32 roads and
bridges.
Key market trends
Booming Express Warehouse Opportunities for
Delivery Market Market Logistics and
Warehousing Industry
The express delivery The country is one of The country is seeing an
systems have the most convenient increase particularly in
created a door to docking locations for sales of food and
door linkage across supply routes as it beverage, clothing
domestic and essentially connects apparel, and electronics,
international many export and which is fueling the
markets. import markets of demand for warehouses
different countries and storage facilities
across the globe expansion.
Key Audit Considerations

Safety Policy Audit

It can be beneficial to audit a transportation company's
safety policies and procedures, including vehicle inspection
procedures, disaster response plans and incident report
policies, to ensure that safety plans and procedures remain
relevant and effective over time.

Safety audits analyze all documentation related to policies

and procedures, as well as combing through previously
filed incident reports to ensure that policies and
procedures are actually being carried out.
Key Audit Considerations
Physical Equipment Audit
It can be beneficial to conduct physical audits of productive
equipment such as trucks, trailers, refrigerated storage
facilities and loading machinery.

Physical equipment audits not only ensure that all

equipment on the books is present and accounted for, but
they can also audit the safety, repair and usage records of
each piece of equipment to prevent damage to over-used
equipment. Audits can identify vehicles and equipment that
may need to be replaced or taken out of use for repair. Also,
consider PPE impairment.
Key Audit Considerations
Legal compliance Audit

Legal compliance audits can ensure that

safety policies, equipment standards,
accounting records and financial
reporting remain in line with state and
federal mandates.

Compliance audits can ensure that all

vehicles maintain current emissions tests,
for example, and that accounting records
comply with generally accepted
accounting principles.
Review concept:
________________ ensures that all equipment
on the books is present and accounted for
and it audits the safety, repair and usage
records of each piece of equipment to
prevent damage to over-used equipment.
answer:

Physical Equipment Audit

 OTHER Audit Considerations
REVENUE RECOGNITION PRINCIPLE
Revenue Recognition Principle
dictates when revenue should be recognized in financial statements.

Importance in Transportation and Logistics

In transportation and logistics, revenue recognition can be complex due
to the nature of services provided. Companies in this sector often engage
in long-term contracts, providing services over extended periods.
Additionally, they may offer a range of services, from shipping goods to
warehousing and distribution.
 OTHER Audit Considerations
REVENUE RECOGNITION PRINCIPLE
Basic core principles

Under the new revenue recognition accounting model, companies will

recognize revenue using a single standard that faithfully depicts the transfer
of promised goods or services to customers in an amount the entity expects
to receive in exchange for those goods or services.
 OTHER Audit Considerations
REVENUE RECOGNITION PRINCIPLE
Financial Accounting Standards Board(FASB) provided five steps to achieve this core
principle in recording the timing of revenue recognition.
 OTHER Audit Considerations
REVENUE RECOGNITION PRINCIPLE
For a calendar year nonpublic company, with the effective date required to adopt the
guidance, an adjustment will be required to be made on January 1, 2019 to record the
effect of adopting the new standard. After considering the impact of the new standard,
the general form of the adjustment for a carrier is as follows.
 OTHER Audit Considerations
how to audit payroll expense?
Auditing payroll is the process that
auditors use to test the true and fair view
of the payroll balance on the income
statement.
Payroll expense presented on the income
statement, it represents the cost that the
company spends on the employee.
 OTHER Audit Considerations
how to audit payroll expense?
Payroll is one of the significant expenses that
company spends to support its operation.
It is a compulsory expense that company
cannot avoid unless they outsource
everything.
Most of the time, the auditor will scope the
payroll expense as it is a large portion of the
operating expenses. However, it is most likely
considered a low risk due to its
straightforward nature.
 OTHER Audit Considerations
steps in auditing payroll expense

Understanding Reviewing Testing Analyzing Reviewing

Payroll Internal Payroll Payroll Compliance
Processes Controls Transactions Expenses
 OTHER Audit Considerations
steps in auditing payroll expense
Case Study: Auditing Payroll Expenses for ABC
Corporation

ABC Corporation is a medium-sized manufacturing

company with approximately 500 employees. The
company operates in a highly regulated industry
and places a strong emphasis on financial integrity
and compliance. As part of its annual audit process,
the external auditors are tasked with auditing the
payroll expenses to ensure accuracy and
compliance with regulatory requirements
 OTHER Audit Considerations
Risk Associated with Payroll Expense

The risk associated with auditing

payroll expenses happens when
the auditor cannot detect or
prevent risk.

It is the result of inherent risk,

control risk, and detection risk.
 OTHER Audit Considerations
Risk Associated with Payroll Expense
Inherent Risk:
It is the risk that attaches to the
account balance based on the
nature of the account, and
business complexity.
It is the auditor’s judgment over
the account base on various
factors.
Auditor has nothing to do with the
inherent Risk.
 OTHER Audit Considerations
Risk Associated with Payroll Expense
Control Risk:
The risk that company internal
control fails to detect and prevent
material misstatement from
happening.
It depends on the control design
by client management and
implementation.
An auditor can only validate the
effectiveness of internal control.
Review concept:
What are the five steps provided by
Financial Accounting Standards Board
(FASB) to achieve the core principle in
recording the timing of revenue
recognition?
answer: five steps provided by Financial
Accounting Standards Board (FASB)

1. Identify the contract with a customer

2. Identify the separate performance obligations
in the contract
3. Determine the transaction price
4. Allocate the transaction price to the separate
performance obligations in a contract.
5. Recognize revenue when (or as) performance
obligation are satisfied.
 OTHER Audit Considerations
AUDIT ASSERTION FOR PAYROLL EXPENSE
Cut-off
The company must record the expense which really
happens during the accounting period.

Occurence
The payroll expense shows the records of transactions
that really happens during the year.

Accuracy
The payroll expense must be the same as the amount
spent on the employees.
 OTHER Audit Considerations
AUDIT ASSERTION FOR PAYROLL EXPENSE
Completeness
All the expenses happened in the period must be fully
recorded.

Classification
Present in the correct classification. The payroll is the
main operating expense that has to be present on its own
line.
 OTHER Audit Considerations
SUBSTANTIVE ANALYTICAL PROCEDURE
FOR PAYROLL EXPENSE

Analytical Procedure:
Compare the balance from one month
to another

Auditor can measure the payroll cost by

comparing it with operational size.
 OTHER Audit Considerations
SUBSTANTIVE ANALYTICAL PROCEDURE
FOR PAYROLL EXPENSE
Analytical Procedure:
Auditor can access payroll cost for a
month and multiple within 12 mos. The
amount should be comparable on the
income statement

Investigate the payroll cost that has

significant variance compared to their
independent expectations.
 OTHER Audit Considerations
TEST OF DETAIL FOR PAYROLL EXPENSE
Assertions TEST OF DETAIL

Auditor has to compare the transaction to the original

Accuracy document.
Compare the payroll listing to the amount on the trial balance.
The auditor must go deep by checking each component.

Test if the recorded balance is completed or not.

Completeness Request payroll listing and reconcile it with the balance on
income statement.

Classification Payroll expense reported in the correct account

Review concept:

What audit assertions when all the

expenses happened in the period must
be fully recorded?
answer:

Completeness
Review concept:
Statement 1: Auditor can access payroll cost
for a month and multiple within 12 mos. The
amount should be comparable on the
balance sheet.
Statement 2: Analytical procedure is the
process the auditor use high-level analysis
to perform an overall assessment to ensure
the balance of payroll expense.
answer:

S1: FALSE (INCOME STATEMENT)

S2: TRUE
 AUDIT PROCEDURES FOR FIXED ASSETS
Risk Associated with Payroll Expense
Fixed Assets

long-term assets that are recorded in the balance sheet and show
balance at the end of the reporting date.

not recognized as expenses in the income statement at the time of

purchasing but it is recognized as expenses when the entity uses
them.

normally large if we compare them to other assets like current

assets. And they are generally considered as sensitive areas from the
audit perspective.
AUDIT PROCEDURES FOR FIXED ASSETS
Understanding Control
Auditors should obtain the key control on how the entity manages
and control its fixed assets.

The better auditors understand internal control over fixed assets, the
better the auditor tailors the procedures and implement the
procedures.

Auditors should assess how management controls the physical

aspects of fixed assets.

Auditors should validate these controls by testing relevant processes

and controls.
AUDIT PROCEDURES FOR FIXED ASSETS
ASSERTIONS

Existence:
There are the risks that fixed assets that report in the balance
sheet might not exist. The auditor should consider performing
the physical observation.

Completeness:
Completely record the fixed assets in the balance sheet. (NOT
COMPLETE - understatement is likely to happen)
AUDIT PROCEDURES FOR FIXED ASSETS
ASSERTIONS
Valuation:
Concern the net present value of the reported fixed assets.
These include the costs that the entity include or exclude
from the costs of capitalization as well as recoverability of fixed
assets compared to its net book value.

Cut-off:
For example, if the fixed assets that purchases before and
after the reporting date are not correctly cut off then the
amount reports in the FS also not correct.
 AUDIT PROCEDURES FOR FIXED ASSETS
ASSERTIONS
Disclosure:
This assertion concern the disclosure of important information that
matters to the users financial statements.
- Accounting policy
- Significant purchase
- Disposal
Common riskS related to Fixed assets
Incorrect Depreciation Rate and Calculation
Depreciation rate is normally decided by management. In some cases,
management might intend to manipulate the depreciation rate to get
the depreciation expenses based on what they want. The auditor needs
to ensure that the assessment of the depreciation rate is performed.
The rate should be based on the expected useful life, as well as the
capacity of assets.

The reported fixed assets are not existing

The assets that report in the financial statements are normally material
compare to other assets and the existence of those assets is normally
the concern of auditors. To address this, the audit might need to check
between book value in the financial statements to fixed assets listing.
And then check the listing to the fixed assets count sheet.

Overstatement of Fixed Assets

It is important to assess the recoverable amount of fixed assets. For
example, the business units of the entity have their revenues down over
that last twelve months. This indicates that book values of fixed assets
that use in these business units are lower than the reported amount.
review concept: TRUE OR FALSE
The assets that report in the financial
statements are normally immaterial
compare to other assets and the
existence of those assets is normally
the concern of auditors.
answer: FALSE- material
The assets that report in the financial
statements are normally immaterial
compare to other assets and the
existence of those assets is normally
the concern of auditors.
 AUDIT PROCEDURES
Reconcile the book value of assets to General Ledger and Trial Balance.

Reconcile book value of assets to fixed assets register or master file to ensure
that the register that is used for the physical count is completed and accurate.

Review the depreciation schedule.

Review the working paper of reconciling fixed assets per listing to actual count
to ensure that the result after count reflects fixed assets in the financial
statements.

Review repair and maintenance costs whether it is currently correctly

classified.
 AUDIT PROCEDURES
Review the acquisition of fixed assets and related capitalization costs whether
all necessary costs that should be capitalized as per IAS 16 had been included
in the capitalization costs.

Disposing of fixed assets during the years is also important for certain cases.

Maintaining a fixed asset register and/or master file is only important for the
accuracy, completeness, and existence of fixed assets.

Review fixed assets impairment assessment. (IAS 36)

Derecognition of fixed assets is agreed to the derecognition procedure and

policy.
review concept:
The better auditors ___________
internal control over fixed assets, the
better the auditor tailors the
procedures and implement the
procedures.
answer:
The better auditors understand
internal control over fixed assets, the
better the auditor tailors the
procedures and implement the
procedures.
thank you for
LISTENING!
Group 6- Logistics and Transportation
BSA 4204