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Assignment no 1 Final Term.

Audit panning and analytical procedures
Understanding the client business and assessing the business risk.
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.
1. Identify business strategies that explain eBay's decision to offer goods for sale at
fixed prices.
EBays decision to offer goods for sale at fixed prices based on these strategies.
To match the opposition. Because other retailers offer products at fixed prices through the
Internet, eBays facility to offer products at fixed prices allows eBay to invite customers who are
interested in purchasing products offered by other retailers. Customers less interested in
participating in online public sale may come to eBay to purchase products at fixed prices instead
of visiting other retailers 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
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.

Customers 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, eBays 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. EBays 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 eBays
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 Companys board decided to divest Skype due to a lack of
collaborations with the companys 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:

Inadequate Ability to Grip Demand.

Customer Gratification with Product
Consumer Secrecy
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 companys 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).
Customers 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,
eBays 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.


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.

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 companys 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 clients

Various appropriate internal control procedures and tests of control to determine the
strength of internal measures over the clients regarding sales and debtors and payroll
departments in accordance with my view point.

Control Objectives for the sales and debtors.

For many businesses, sales are made on credit and so objectives for the sales cycle includes
control debtors as well.
These control objectives include:
Customers' orders should be authorized, controlled and recorded in order to execute them
Goods shipped and work completed should be controlled to ensure that invoices are issued and
revenue recorded for all sales.
Goods returned and claims by customers (for example, in respect of damaged goods) should be
controlled in order to determine the liability for goods returned and claims received.
Invoices and credits should be appropriately checked for accuracy and should be authorized
before being entered in the receivables' records.
Authorized customer transactions, should be accurately entered in the accounting records.
There should be procedures to ensure that sales invoices are subsequently paid by customers and
that doubtful amounts are identified in order to determine any provisions or write offs required.

Control Procedures over Sales and Debtors.

There are a large number of controls that may be required in the sales cycle due to the
importance of this area in any business and the possible opportunities that exist for diverting
sales and cash receipts away from the business.

Control procedures at key stages of the sales cycle are:

Invoicing and credit notes

Returns inwards
Bad Debts

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

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 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.

Invoicing and credit notes:

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

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

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.
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

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.
Check the existence of evidence for authorization in respect of:
1. Acceptance of the order.
2. Dispatch of goods raising of the invoice or credit note
3. Pricing and discounts
4. Write off debtors as bad debts.

Check both that the relevant signature exists and that the control has been applied.

Seek evidence of checking of the arithmetical accuracy of:

1. Invoices, including pricing, and VAT and sales tax calculations
2. Credit notes, this is often done by means of a 'grid stamp' containing several signatures
on the face of the document. Ensure that the control has been applied by checking the

accuracy of such invoices and credit notes.

Check dispatch notes and goods returned notes to ensure that they are matched with invoices

and credit notes.

Check that control account reconciliations have been performed and reviewed.
In all cases, tests should be performed on a sample basis.

Control Objectives for the payroll department

Payment is made only to bona fide employees of the entity.

All payroll costs are recorded for work done by employees.
All benefits and deductions are calculated correctly.
Payroll transactions correctly recorded in the accounting system.
Payroll transactions are recorded in the correct accounting period.
Payroll transactions are properly classified in the financial statements.

Control Procedures over payroll system

Segregation of duties between HR and payroll function.

Personnel files held for all employees.
Authorization procedures for hiring, terminating, time worked, wage rates, overtime, benefits.
Any changes in employment status of employees informed to HR department (maternity or

special leave)
Use of time clocks to record time worked.
Clock cards approved by supervisor.
Only employees with valid employee numbers are paid.
Payroll budgets in place and reviewed by management.
Pre-number clock cards in use.

Authorization of wage cheques cashed.

Security and quick banking of unclaimed wages.
Security of pay packets.
Security of cash transit.
Verification of identity.
Recording of distributions.
Preparation and authorization of cheques and bank transfer list.
Comparison of cheques and bank transfer list with payroll.
Maintenance and reconciliation of wages and salaries bank account.
Verification of payroll amounts and benefits calculations.
Payroll budgets in place and reviewed by management.
Agreement of gross earnings and total tax deducted with taxation returns.
Changes to master payroll file verified through before and after reports.
Payroll master file reconciled to general ledger.
All starters, leavers, changes to salaries and deductions are reported punctually to payroll

department and changes are updated to the payroll master file quickly.
Independent approval and review of accounts charged to payroll.

Tests of controls for the payroll system

Observe and evaluate proper segregation of duties.
Review a sample of starters and leavers in the year to ensure correct documentation is in place.
Review and test authorization procedures in place.
Review policies and procedures in place for changing status and consider whether adequate or
Review personnel files for a sample of employees whose status changed in the year.
Observe employees use of time clocks.
Inspect a sample of clock cards for evidence of approval by appropriate level of management.
Review and test procedures for entering and removing employee numbers from the payroll
master file.
Review budgeting procedures.
Review numerical sequence of clock cards.
Attend the cash pay-out of wages to confirm that the official procedures are being followed.
Before the cash wages are paid compare payroll with wage packets to ensure all employees have
a wage packet.
Examine receipts given by employees.
Check unclaimed wages are recorded in unclaimed wages book.
Observe whether any employee receives more than one wage packet.

Inspect the unclaimed wages book entries on the pay roll to ensure they agree check that
unclaimed wages are banked regularly by inspection of bank statements and supporting
Inspect that unclaimed wages books to check it shows reasons why wages are unclaimed.
Review pattern of unclaimed wages in unclaimed wages book for variations.
Check the calculation of the holiday payments by recalculation.
Make comparisons on holiday pay between payment records.
Recalculate benefits and deduction for a sample of employees.
Inspect documentation for evidence of managements review.


Assignment no 3 Final Term.

Comparison between the contents of annual reports of Gillette Pakistan limited and Gillette
India limited.
Introduction Paragraph

Gillette Pakistan limited.

Auditors report.
First of all in introductory paragraph auditors tells the name of
company whose financial statements are being audited by him is
Gillette Pakistan limited.
After that State that the financial statements have been audited is
balance sheet and Identify the title of each statement that comprises
the financial statements that are profit and loss account, statement
of comprehensive income, cash flow statement, and statement of
changes in equity together with notes forming part thereof. And
then give explanatory information. we obtained all the information
and explanations which, to the best of our knowledge and belief were
necessary for the purpose of our audit.
After that state that the responsibility of management is to
established and maintain a system of internal control and prepare all
the statements in accordance with approved accounting standards and
the requirement of companys ordinance 1984.and then tells Our
responsibility is to express an opinion on these statements based on
our audit.

Scope paragraph

Basically scope paragraph is summarized form of audit engagement

letter. In which auditors tells we conduct our audit according to
the standards applicable in Pakistan and these standards require
that we plan and perform the audit to obtain reasonable assurance
about whether the statements are free of material misstatement. An
audit includes examining on a test basis, evidence supporting the
amounts and disclosures in the statements. An audit also includes
assessing the accounting policies used and significant estimates made
by management, as well as evaluating the overall presentation of the
statements. We believe that our audit provides a reasonable basis for
our opinion.
Unqualified opinion.
Because auditors stated that financial statements and statement that
comprises the financial statements are free of material misstatement
and prepared in accordance with accounting standard which are
applicable in Pakistan and given the information required by the
companies ordinance 1984.
The business conduct ,investment and expenditure incurred during


the year were in accordance with objective of company

No zakat was deductible at source under the zakat and ushr ordinance
(XVIII of 1980).
Auditor name and Signature

Yes name and signature is given in the audit report.

place and date
Yes place and date is given in audit report.

Gillette India limited.

Independent audit report
Members of Gillette India limited.
financial In report on financial statements auditors stated that we have
audited Associated financial statements of Gillette India limited
which include the balance sheet, statement of profit and loss and
the cash flow statement for the year ended. And a summary of
the significant accounting policies and other explanatory
Managements responsibility
The Companys Management is responsible for the preparation of
these financial statements that give a true and fair view of the
financial position, financial performance and cash flows of the
Company in accordance with the Accounting Standards referred
to in Section 211(3C) of the Companies Act, 1956 (the Act)
and in accordance with the accounting principles generally
accepted in India. This responsibility includes the design,
implementation and maintenance of internal control relevant to the
preparation and presentation of the financial statements that give a
true and fair view and are free from material misstatement, whether
due to fraud or error
Auditors responsibility
Our responsibility is to express an opinion on these financial
Statements based on our audit. We conducted our audit in
accordance with the Standards on Auditing issued by the Institute
of Chartered Accountants of India. Those Standards require that we
comply with the ethical requirements and plan and perform the


Emphasis of matter

audit to obtain reasonable assurance about whether the financial

statements are free from material misstatement.
Unqualified opinion.
Because the auditors stated that financial statements give the
information required by the Act in the manner so required and give
a true and fair view in conformity with the accounting principles
Generally accepted in India and we believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for
our audit opinion as unqualified.
We draw attention to Note 36 (b) to the financial statements
regarding the excess commission provided but not paid to the NonExecutive Directors amounting to 24 lakhs (including service tax of
3 lakhs), which is subject to the approval of the Members at the
ensuing Annual General Meeting of the Company and the Central
Government. Further, as reported for the previous year ended the
Company had provided excess commission amounting to 48 lakhs
(including service tax of 10 lakhs) which was since ratified by the
Members of the Company at the 28th Annual General Meeting of
the Company and paid during the current year, the application for
which is as yet pending for approval with the Central Government.
They also stated that our opinion is not qualified in respect of
this matter.

Report on Other legal and As required by the Companies (Auditors 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.

Auditor name and membership no is given but no signature is given

in this audit report.
Place and date.

Yes place and date is given in this audit