audit strategy assigment

7/28/2019 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

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