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ACCOUNTING FOR DECISION MAKING

TOPICS
RATIOS & ANALYSIS RELATED PARTY TRANSACTION DIRECTORS TRAINING REQUIREMENTS FOR CFO & COMPANY SECRETARY INTERNAL AUDIT Group Members Fahad Salahuddin Fahad Ahmed Hammad Malik Sharoon Rasheed Sheraz Waqas Mahmood

Comparative Horizontal & Vertical Analysis Comparative Ratios Comparative Significant Risks OF Pak Suzuki Indus Motors Atlas Honda Cars

Comparative Horizontal Analysis (Year 2011)

All values in 000

Comparative Horizontal Analysis

Comparative Horizontal Analysis


300.00 275.00 250.00 225.00 200.00 175.00 150.00 125.00 100.00 75.00 50.00 25.00 0.00 -25.00 -50.00 -75.00 -100.00 -125.00 -150.00 276.25 183.20 86.24 2.68 22.124.30 38.9323.63 35.62 47.31 33.59 218.48

91.86

11.42 -15.80

11.78 15.65 7.88 26.15


10.77 -16.05 -14.49 -46.40 -16.41 -66.55

104.38

24.95 -23.48 -29.52 -75.22 -20.33 -64.98 Toyota Pak suzuki Honda

-139.49

Sales Honda Pak suzuki Toyota 38.93 23.63 2.68

Cost of sales 35.62 22.12 4.30

Distributio Administrat Other Gross profit n and ive operating marketing / (loss) expenses income costs 183.20 11.42 26.15 218.48 86.24 33.59 15.65 7.88 -15.80 47.31 11.78 -16.05

Other operating expenses 10.77 91.86 -14.49

Finance cost -66.55 -16.41 -46.40

(Loss) / Profit before taxation -75.22 104.38 -23.48

Taxation -139.49 24.95 -29.52

(Loss)/Profi t after taxation -64.98 276.25 -20.33

Comparative Vertical Analysis

All values in 000

Comparative Vertical Analysis


Thousands 4,500 4,000 3,500 3,000 2,743 2,500 Rs 000 2,000 1,500 1,000 500 0 -500 -1,000 Gross profit / (loss) Honda 199,310 Pak suzuki 1,869,410 Toyota 4,089,135 Distributio n and marketing costs 139,185 -263,651 690,130 (Loss) / Profit before taxation -244,827 1,365,297 4,011,455 199 690 139 -264 736 427 172 620 84 356 107 65 -93 152 77 18 -245 571 54 -298 1,869 4,089 4,011

1,508

1,365

1,268 794

Administr ative expenses 171,729 735,935 426,517

Other operating income 83,977 620,390 1,507,878

Other operating expenses 64,945 107,072 355,796

(Loss) / Profit from operations -92,572

Finance cost 152,255 17,845 77,115

Taxation 53,625 570,876 1,268,071

(Loss)/Pro fit after taxation -298,452 794,421 2,743,384

Comparative Vertical Analysis


100.00 90.00 80.00 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00 -10.00 100 100.00 93.37 100.00 99.10 96.45

6.63 3.55 0.90 Sales Cost of sales Gross profit / (loss) 0.63 Distribution and marketing costs 1.12 -0.50 0.78 Administrative expenses 0.69 1.40 0.38 Other operating income 2.44 1.18 0.58 0.20 0.12 0.03 0.69 Finance cost 6.50 2.59 -1.11 (Loss) / Profit before taxation 2.06 1.08 0.24 Taxation 4.45 1.51 -1.35 (Loss)/Profit after taxation Toyota Pak suzuki Honda

0.29

Other operating expenses

Ratios

Ratios
12
6.63

10 8 6 4 2 0 -2
0.9 0.7 0 0.7 0.2 3.5 1.84 2.32 2.1 6.3 0 2.3

-4
Gross profit/(loss)mar gin Toyota 6.63 Pak suzuki 3.5 Honda 0.9

0 -4.8

-6

Current ratio 1.84 2.32 0.7

Quick ratio 0 0.7 0.2

Total assets turnover 0 2.3 2.1

Price earning ratio(AT) 6.3 0 -4.8

RISK MANAGEMENT

Related Party Transaction

What Are Related Party Transactions?


A related party transaction is a transfer of resources, services, or obligations between related parties, regardless of whether a price is charged. [IAS 24.9] Examples of the Kinds of Transactions that Are Disclosed If They Are with a Related Party Purchases or sales of goods Purchases or sales of property and other assets Rendering or receiving of services Leases Transfers of research and development Transfers under license agreements Transfers under finance arrangements (including loans and equity contributions in cash or in kind) Settlement of liabilities on behalf of the entity or by the entity on behalf of another party

Code of Corporate Governance 2012


a) The details of all related party transactions shall be placed before the Audit Committee of the company and upon recommendations of the Audit Committee the same shall be placed before the board for review and approval.
b) The related party transactions which are not executed at arm's length price shall also be placed separately at each board meeting along with necessary justification for consideration and approval of the board on recommendation of the Audit Committee of the listed company. c) The board of directors of a company shall approve the pricing methods for related party transactions that were made on the terms equivalent to those that prevail in arms length transaction, only if such terms can be substantiated. d) Every company shall maintain a party wise record of transactions, in each financial year, entered into with related parties in that year along with all relevant documents and explanations.

Particulars to be Recorded for Related Party Transactions

Name of related party

Nature of relationship with related party

Nature of transaction

Amount of transaction

Terms and conditions of transaction, including the amount of consideration received or given

Directors Training Program

What Are Directors Training Programs?

In order to enhance the skill set of the directors special training program are designed to impart knowledge regarding :

Strategic Direction and Risks Monitoring Financial Strategy, Risks and Disclosure Guiding Human Performance

Assessing Enterprise Risk and Directing Extreme and Unique Events

Code of Corporate Governance 2012

a) All listed companies shall make appropriate arrangements to carry out orientation

courses for their directors to acquaint them with this code, applicable laws, their duties and responsibilities to enable them to effectively manage the affairs of the listed companies for and on behalf of shareholders

b) It shall be mandatory for all the directors of the listed companies to have certification
under any directors training program offered by institutionslocal or foreignthat meet the criteria specified by the SECP

c) Provided that from June 30, 2012 to June 30, 2016 every year, a minimum of one

director on the board shall acquire the said certification under this program each year and thereafter all directors shall obtain it

Exemption

Provided further that individuals with a minimum of 14 years of education and 15 years of experience on the board of a listed companylocal and/or foreignshall be exempted from the directors training program

REQUIREMENTS FOR COMPANY SECRETARY & CHIEF FINANCIAL OFFICER

COMPANY SECRETARY
Responsibilities :

Efficient administration of a company Ensuring compliance with statutory and regulatory requirements Implementation of BOD decisions.

Requirements :

A member of a recognized body of corporate/ chartered secretaries. OR Is a member of recognized body of Professional Accountants. OR A person holding masters degree in Business Administration or Commerce or being a Law Graduate from a University recognized by Higher Education Commission and having at least five years of relevant experience.

CHIEF FINANCIAL OFFICER


Responsibilities :

Managing the financial risks of the corporation.


Financial planning and record-keeping Financial reporting to higher management.

Requirements :
At least has five years of relevant experience.

Is a member of recognized body of Chartered Accountant


Has a postgraduate degree in finance from a recognized university or equivalent.

APPOINTMENT & REMOVAL

The appointment, remuneration and terms and conditions of employment of the CFO
and the Company Secretary of listed companies shall be determined by the board of directors.

The removal of the CFO and Company Secretary of listed companies shall be made with the approval of the board of directors.

Internal Audit

Internal Audit

Internal audit is an appraisal activity or monitoring activity established within an entity as a service to an entity.

Functions of Internal Audit

Special Investigations Monitoring internal controls Review compliance with laws and regulations Examination of financial information Examination of operating information

Review of the economy, efficiency and effectiveness of a companys operations

Appointment & Removal of Head of Internal Audit

The appointment, remuneration and terms and conditions of employment of

the Head of Internal Audit of listed companies shall be determined by the board of directors.

The removal of Head of Internal Audit shall be made with the approval of the

board only upon recommendation of the Chairman of the Audit Committee:

Qualification of Head of Internal Audit


No person shall be appointed as the Head of Internal Audit of a listed company

unless he/she has 5 years of relevant audit experience and is:


(a) a member of a recognized body of professional accountants; or (b) a Certified Internal Auditor; or

(c) a Certified Fraud Examiner; or


(d) a Certified Internal Control Auditor Provided that individuals serving as Head of Internal Audit of a listed company

for the last five years at the time of coming into effect of this Code shall be exempted from the above qualification requirement.

Code 2002 VS Code 2012


Head of Internal Audit Qualification introduced for Head of IA. The removal of Head of IA is with the approval of the Board only upon Board Committee The secretary of Audit Committee shall either be the Company Secretary or Head of Internal Audit. However, the CFO shall not be appointed as the secretary to the Audit Committee. Reporting Procedure: The Audit Committee of a listed company shall appoint a secretary of the Committee. Internal Audit Outsourcing of Internal Audit. Appoint or designate a fulltime employee other than the CFO, as Head of Internal Audit, to act as coordinator between the firm providing internal audit services and the board.

THANK YOU

Q&A

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