Professional Documents
Culture Documents
2. Background Information
Some of the more significant information and current developments
since the last examination are as follows:
The Company is engaged in the assembly/manufacturing of home
entertainment equipment consisting of television, radio and stereo sets
and domestic refrigeration appliances, which include refrigerators and
freezers. The companys main office and plant are located in Bel Air,
Manila. It maintains warehouses in Cebu, Davao, and Cagayan. The
Company is registered with the Board of Investments (BOI) under
Republic Act No. 6135 as a preferred non-pioneer enterprise for the
manufacture and export of electronic products.
The company caters largely to the domestic market through an
organized network of franchised dealers. At the beginning of the third
quarters, the Company made its first concentrated effort to sell products
internationally.
Both domestic and foreign markets are expected to increase
significantly over the next several years. The Company believes that it will
continue to be one of the leaders in industry because of its entrenched
international markets. However, market conditions in the industry are
influenced by aggressive competition.
4. Risk Factors
Based on our understanding of the clients business and industry, our
observations from the preliminary review of the interim financial
statements and our evaluation of the audit identified in last years audit,
we have determined that there are no special audit risks associated with
the general business or management environment. However, we have
identified the following areas that require special accounting and auditing
emphasis:
1.) Historically, inventories have been a critical area in the audit
examination because of its materiality. Raw materials and finished
goods inventories are characteristically susceptible to
obsolescence caused by factors such as rapid technological
advances in the industry and extensive product development
activities resulting in the introduction of new models and new
features for existing product lines. Because of these conditions,
certain of the Companys products have been moving very slowly.
Closely attention will have to be given to the reliability of these
products, including related raw materials and work in process.
2.) The Company procures some of its raw material requirements from
ABC Corporation, an affiliate. To provide for a reliable source of
raw material supply, the Company at the beginning of the year
purchased from a third party an additional equity interest of 20% in
4.) Deliverables
The following are the final output to be submitted to the users:
Inventory Observation
December 31
Confirmation of Receivables as of
October 31
November 15
February 28
March 15
March 31
April 5
April 5
Genesis Aguilar
Staff in Charge
Edward Aquino
Assistants
Edel Castillo
Philip Reyes
Arturo Manansala
Joselito Ang
Prepared by:
G. AGUILAR
Manager
Approved by:
V. Amores
Engagement Partner