MID TEST AUDIT MANAJEMEN

19 Maret 2019
Nama : Michaela Hartanto 117210757

1. What is a Management Audit ? A management audit is an analysis and assessment of

competencies and capabilities of a company's management to carry out corporate
objectives. The purpose of a management audit is not to appraise individual executive
performance, but to evaluate the management team in its effectiveness to work in the
interests of shareholders, maintain good relations with employees and uphold reputational
standards.

The differences between management audit and financial audit

management audit
carried out by internal auditors, at the end of the report the auditor provides a report to
management about audit findings regarding the effectiveness of management control
whether or not the company's operating activities have been effective or not
Financial audit
led by a registered accountant from the public accounting firm, at the end of the audit the
auditor must provide an opinion regarding the fairness of the financial statements that have
been compiled by management
2. to identify programs, activities, and activities that still need improvement, so that the
recommendations given can later be achieved improvements to the management of various
programs and activities in the company. What’s more, Providing assistance to management
As an auditor to help management, must first understand the management principles
applied and management functions, namely planning, organizing, staffing, leading, and
controlling.
3. An audit of financial statements is a need to improve the quality of financial statements.
The improvement in the quality of these financial statements is an issue in which criticism
is one form of business communication that is prepared and presented to its users as a
means of making business decisions prepared based on statements of financial accounting
standards (PSAK) stipulated by the Indonesian Institute of Accountants (IAI). In the audit
process, there is often miscommunication between independent auditors and management
with regard to the responsibility for preparing and presenting financial statements and the
responsibility for providing fair opinion. The audit process that is sometimes less smooth
is often caused by management's lack of understanding of the audit process and the process
of collecting audit data adequacy collected and analyzed by an independent auditor who
will later be the basis for granting fairness opinion. Therefore, it is important to establish
partnership with them regarding the management process audit. Establish partnership
means that an effort to bridge communication and understanding the responsibilities of
each party related to management data and the types of assignments carried out by
 independent auditors along with the output produced by both parties. The gap between
expectations and the results contributed by each party is expected to be smaller, so that
each party concerned can obtain optimal results.
4. Procurement audit can improve efficiency in company because Encourage the development
and maintenance of reliable procurement information management and disclosure of
information in periodic reports, including fulfillment of accountability obligations, Ensure
that procurement activities have been completed with applicable rules and regulations, To
achieve goals, in accordance with the vision and mission of the organization, and to Assess
economization, efficiency and effectiveness of procurement

How to prevent fraud ?

 Justice, Honesty, Economics and Efficiency
The tender winner's decision must be fair and impartial. the procurement committee must
be fair to all suppliers who meet the requirements for competency in the procurement.
Public funds may not be used to benefit certain people or companies; standardization and
specifications must not be discriminatory; providing and contractors must be selected based
on their qualifications and abilities; there must be equal treatment regarding time limits,
confidentiality, and so on. Procurement of goods and services must be economical and
produce quality goods and services in accordance with the prices paid or low prices to be
acceptable to the community.
 Money value
procurement must obtain goods or services according to specifications at the lowest price
(maximizing the value of money)
 Accountability
Accountability means that the government, institutions or public companies and public
officials on the one hand and the private sector, companies and parties that play a role in
the company on the other hand, must be able to account for work and tasks, as well as all
decisions that are their responsibility. full must be systematic and applicable.
 Integrity
Integrity means that the process of procurement of goods and services runs honestly and
complies with applicable laws, the basis for selecting tender committees is the best staff,
has technical capabilities and is not discriminatory, tendering is conducted honestly and
openly, encouraging fair business competition so that the quality of work and prices the
right, and the results are useful and can be used for the benefit of all parties.
 Transparency
Transparency means that laws, regulations, institutions involved, processes, plans and
decisions made can be accessed by the public or at least representatives of the community.
So that all processes and decisions can be monitored, discussed, and received input from
the parties (multi stakeholders), and policy makers can also be held accountable.
Corruption will develop rapidly in "dark places" and manipulation for personal gain
 facilitated by officials. Transparency must be carried out from the start so that a long
decision-making process can be monitored.

5. Function of HR Audit
 to evaluate the effectiveness of various HR functions, which are updated:
recruitment and selection, training, and performance updates.
 to Analyze the contribution of the HR function to the company's business
operations
 to benchmark HR activities to encourage continuous improvement
 to identify various strategic problems and administration of the application of the
HR function
 to Analyze the satisfaction of HR department service users
 to evaluate compliance with various laws and regulations, government policies and
regulations
 to Improve line functions in the implementation of the HR function
 to Measure and analyze the costs and benefits of each HR program and activity
 to improve the quality of HR staff
 to focus HR staff on a variety of important issues and promote change and creativity
6. by helping companies periodically analyze marketing efforts, create and revise marketing
approaches to get better results, giving a company fresh new ideas, techniques and new
direction in the future, improving marketing response, identifying the areas needed to
improve and produce specific suggestions and ideas and how to improve them, and
providing an independent and unbiased evaluation of marketing programs, including a
company's strategy, supply and creativity
CASE
To find the size of the market, we can use the following equation:

 (Average Boots Price) * (% of male population that bought work boots in past year)
 (total population for the segment) * (number of pairs bought in a year)
Exhibit One gives us the populations for each segment and the percentages that bought
boots. We therefore need to find the number of boots sold and the average price of each pair.
the candidate will need to make some assumptions.

Average number of boots purchased per user

 For work boots, we know that blue collar workers purchase an average of 2 pairs per year
(from Introduction, Footnote 1)
 White collar workers and students who buy work boots probably use them less rigorously
and less frequently, therefore probably only purchase 1 pair per year
  For casual boots, we can make a reasonable assumption, knowing that casual boots are
purchased primarily for weekends and light wear (from text), so the average number of
pairs should be no more than work boots from Exhibit 1 (i.e. 1 pair per year)

Average price per pair of boots

 Work boots cost more (compare Blue Collar vs. Student) so the average price should be
higher than 140 EUR for all (150 EUR is reasonable); casual should be lower than student
(100-110 EUR is reasonable)

The total market value will then be the sum, for each segment, of the following equation:
(Average Boots Price) * (% of male population that bought work boots in past year)
* (total population for the segment) * (number of pairs bought in a year)
(€150 * 60%* 11 MM * 2) + (€150 * 25% * 12 MM * 1) + (€150 * 15% * 7 MM * 1)
= EUR 2,588 MM
Following the same procedure the casual boot market is then:
(Average Boots Price) * (% of male population that bought work boots in past year)
* (total population for the segment) * (number of pairs bought in a year)
(€100 * 20%* 11 MM * 1) + (€100 * 35% * 12 MM * 1) + (€100 * 55% * 7 MM * 1)
= EUR 1,025 MM
Duraflex has a 16% share of the work boot market and 40% ofthe casual boot market, therefore:

 Duraflex’s revenue from the work boot market = 16% * 2,588 MM = 414 MM
 Duraflex’s revenue from the casual boot market = 40% * 1,025 MM = 410 MM

So Duraflex gets most of its revenue from work boots, even though the revenues are almost evenly
split
Question 2

Distribution
Duraflex is not sold where work boots are being purchased. Exhibit 2 shows that Badger’s and
Steeler’s boots are often purchased in safety / work channels, whereas Duraflex does not have a
significant presence in them. Therefore, Duraflex will need to broaden distribution if it is to
increase its share; it needs to get shelf space in the relevant channels
Buyer Purchase Criteria by Brand (BPCs)
Exhibit 3 shows us that Badger’s top two associated criteria are: “Quality / Durability” (45%) and
“Comfort” (39%). The same holds true for Steeler. Thus, these seem to be critical criteria for work
boot market. However, Duraflex’s top criteria are “Styling” (45%) and “Quality / Durability”
(37%), with “Comfort” being a distant 3rd at 19%, far from its competitor’s figures . Duraflex is
not meeting the key needs of blue collar workers and will need to strengthen its “Comfort”
perception

Pricing
We know that Badger is launching an “aggressively priced” work boot line. Duraflex can alter its
pricing strategy, e.g. lower its own boot price. However, looking at Exhibit 3, among the stronger
work boot market competitors, we see that only Steeler shows price as a top BPC (and then it is
the lowest one) – potentially because they are the lower cost option in this market. Given that price
does not appear to be an important criteria for work boot consumers, Duraflex will likely not realise
great benefits from this strategy, and will also lower its profits in doing so, We know from the case
that Duraflex has a premium price positioning, hence, lowering its price may lead to the perception
of lowering quality

Cost Analysis

Comparing Badger to Duraflex work boots, from Exhibit 4, there is one key area where
Badger proportionately and absolutely spends more than Duraflex: “Materials”. This
supports their perception of “Quality / Durability” and “Comfort” among their consumers.
Also, they spend more on “labour”. Retailer margin is lower for Badger – due to
significant presence in safety / work channel. Sales & Marketing spend is lower for
Badger – potentially driven by lower marketing requirements in safety / work channel as
well as established brand name among blue collar workers. Also, Badger has built a loyal
customer base, and it is less costly to maintain existing customers than attract new ones

Summary:

 Duraflex is not sold where work boots are being purchased

 Duraflex is not meeting the key needs of blue collar workers, as it is weaker than
competitors on the critical “Comfort” dimension
 Badger prices its boots more competitively, which is likely to be particularly
appealing to the large work boot market; this has helped develop a large and loyal
consumer base
 Badger has lower retailer margins (both absolute and relative) and spends less on
Sales & Marketing . Badger has lower margins (both absolute and relative); given
already higher market price, Duraflex has limited flexibility to raise its boot
prices; Duraflex may lower its margin somewhat and shift emphasis to labour and
materialsv

Question 3
The company can either:
  Focus on increasing its work boots activities, or

 Emphasize casual boots

Increased Work Boot Market Focus
Justification:
Represents approximately 40% of Duraflex’s business (from question 1), making it very difficult
to profitably ignore this market. While Duraflex does have greater market share in the casual boot
market, we know from information given in the case that the casual boot market is smaller in size
than the work boot market, which may indicate less opportunity for share growth; also, we derive
lower margins (15% vs. 21%) from casual boots (from Exhibit 4). Given that Badger is introducing
a new work line, they may see new growth potential in the market which Duraflex may also want
to capitalise on, building a stronger image among blue collar workers may entice them to try other
Duraflex footwear products.
Implications:
Enter safety / work channel – we may be faced with pressure from Badger exerting influence on
retailers in this channel, Build “Comfort” and “Quality / Durability” perception among blue collar
workers, Increase proportion of costs allocated to materials and labour – potentially reducing
company margin, There may be unique / niche positionings for Duraflex (suggestions should be
well thought through), and Introduce sub-brand or increase promotion of brand with a focus on
blue collar workers: may include on-site promotions, advertising in industry publications, or
advertising in magazines / on television during programmes with a higher blue collar readership /
viewership
Emphasise Casual Boots
Justification:
Stronghold for Duraflex right now (40% market share), Fastest growing market, Represents
approximately 40% of Duraflex’s business (from question 1), making it very difficult to profitably
ignore this market, Focusing additional resources on the work boot market would risk alienating
casual boot buyers (white collar workers and students), and “Style” is the top BPC for Duraflex
(from Exhibit 3). From the statistics on Badger and Steeler, we know this is likely not an important
criteria for the work boot market. By focusing on the casual boot market Duraflex can devote
additional resources to keeping up with styles to better appeal to this target
Implications:
Unlikely to be a strong competitor reaction, since Duraflex is already dominant player, Duraflex
will not need to enter new distribution channels, and Candidate should discuss a strategy for work
boot market – either winding down, maintenance etc. and implications of this