analytical procedures cement industries in malaysia
DESCRIPTION
Auditing - Analytical procedures regarding financial and non-financial informationTRANSCRIPT
ANALYTICAL PROCEDURES
ANALYTICAL REVIEW
PRESENTING BY:
SYAFIQAH NADHIRAHNUR UMI HANI
NAJEAASIAH KAMILAHNORSHAKIRAH
COMPANY BACKGROUND
STRUCTURE OF CEMENT INDUSTRIES MALAYSIA BERHAD
KHAZANAH NASIONAL BERHAD
UEM GROUP
CIMA
UEM Group wholly subsidiary by
Khazanah Nasional Berhad
CIMA wholly owned by UEM
Group
Nature
Purposes
These may be achieved through the consideration of comparisons of the entity’s financial information with, for example:• Comparable information for prior periods• The entity’s anticipated results• Similar industry information
To examine both financial data and non- financial data, such as the number of employees.
To estimate the expected value (of the ratio/ trend/ account balance/ transaction, etc.)
To identify unusual transactions or event and amount, ratios and trends.
Final analytical review
Sources of information
Financial report Budgets Non-financial information
Involving the process of review the trial balance, financial statements, and footnotes to:
Judge the adequacy of the evidence Determine if any other unusual balances/relationships
have not been investigated
2.0 STEPS TAKEN IN ANALYTICAL
PROCEDURES:
Step 1: Develop an Expectation
Step 2: Identify (actual) material discrepancies
Step 3: Investigate: inquiry AND
corroborating evidence
Step 4: Evaluation: decide if there is
material misstatement or not
IF REASONABLE STOP HERE
Have develop expectation – sales & revenue
will increase, cost of production increase
Where there is significant fluctuations or
info is differ from expected values by
significant amount
Either the expectation and actual
information has tolerable differences or is
significant
The result from inquiry will be evaluated, it
may be material misstatement if the
transaction has significant fluctuations
without any explaination.
3.0 COMPARISON ON FINANCIAL STATEMENT
INFORMATION:
3.1 BUDGETS & FORECAST
Production & Sales budget
Based on demand
annual cement
consumption
Demand drivers; economic growth,
industrial activity, real estate biz & construction
activity
The budgeted production and sales
increase by 6% as expected annual
cement consumption to cross 17.5 million tons by end 2013.
3.2 UNUSUAL FLUCTUATIONS
Required during the planning and completion phases on all audits.
3.0 COMPARISON ON FINANCIAL STATEMENT
INFORMATION:
significant difference are not expected but
DO exist
significant difference are expected but DO
NOT existOR
• SALES• INVENTORIES• DEBTORS• CREDITORS• OTHER
OPERATING EXPENSES
UNUSUAL FLUCTUATIONS
3.0 COMPARISON ON FINANCIAL STATEMENT
INFORMATION:3.3 RATIO & ANALYSIS
3.0 COMPARISON ON FINANCIAL STATEMENT
INFORMATION:3.3 RATIO & ANALYSIS
LIQUIDITY RATIOS & OPERATIONAL EFFICIENCY RATIO
EVALUATIONS:-ANALYSIS Liquidity Ratio
Current RatioRecession over the two-year period from 1.85 (2011) to 1.35 (2012).
• Has fewer current assets to cover its current liabilities
• Working capital of CIMA finally become negative in 2012
Other businesses within the same industry have greater ability to use current assets to pay short-term debt.
Quick Ratio
Recession over the two-year period from 1.27 (2011) to 0.98 (2012)
• Company’s immediate short-term liquidity is at bad position.
Other businesses within the same industry have greater ability to use their current assets (excluding inventory) to pay or meet their short-term debt.
CIMA's quick ratio is below the industry average BUT no indication that the company struggling
EVALUATION ANALYSIS:- Operational Efficiency Ratio
Receivable Turnover
4.145 times over the 2011-2012, (2011 being the highest
• Unable to quickly & efficiently collect its outstanding receivables 4.15 times a year shows bad liquidity positions.
Much lower than the industry average for the two companies,
• Apparent problems with collecting accounts receivable.
Inventory Turnover
Gradually increased 2.80 to 3.53
• the liquidity of the company’s• inventory is at good position.
Consumed its inventory approximately 3.53 times in 2012.• Considerably lower than the industry
average of 6.75 times
As a result, CIMA has more money "tied up" in inventory than other firms within the same industry.
3.0 COMPARISON ON FINANCIAL STATEMENT
INFORMATION:3.3 RATIO & ANALYSIS
PROFITABILITY RATIOS
3.0 COMPARISON ON FINANCIAL STATEMENT
INFORMATION:3.3 RATIO & ANALYSIS
SOLVENCY RATIOS
4.0 COMPARISON ON NON-FINANCIAL DATA:
4.0 COMPARISON ON NON-FINANCIAL DATA:
ANALYTICAL PROCEDURES