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Audit Report

Date For

: March 12, 2013 : Mr. Russtum Pelima CEO of Pelima Group of Companies From : Mr. Argie Hilario Accounting Supervisor, Yeye Group of Companies Subject: Audit Report on the Companys Financial Statements BACKGROUND Yeye group of companies currently has three micro-businesses in the locality that are operating every day of the week. Financial analysis and reports on these businesses are made and submitted to the top management on a fiscal year basis starting from January to December of that year while daily updates are submitted to the accounting department. SCOPE The scope of this audit includes: Cash handling processes in the cashiers office Financial Statements from January 2011 to December 2012

OBJECTIVES AND RESULTS The audit evaluated the adequacy of controls and processes to achieve key business objectives as it related to cashiers receiving payments. Following are the business objectives and related control assessment (Satisfactory, Needs Improvement, Unsatisfactory). CASH HANDLING PROCESSES
Business Objective Safeguard cash collections Make timely deposits of daily collections Control Assessment Satisfactory Needs Improvement

Good Controls Daily cash receipts are stored in a locked safe in the main cash office. Keys to the cash office safe are maintained on the cashiers wrist or in a locked drawer. A bonded courier service picks of daily cash receipts everyday for the company bank.

FINANCIAL STATEMENTS The accounting department has audited the accompanying balance sheets of Yeye Group of Company from January 2011 to December 2012, and the related statements of income, retained earnings, and cash flows for the years then ended. These financial statements are the responsibility of Yeye Group of Company's management which is to express an opinion on these financial statements based on the recorded audits. The company conducted its audits in accordance with the auditing standards generally accepted in the Republic of the Philippines. The following are comparative income statement and balance sheet reports certified by the companys accounting department:

Audit Report

Sales Less cost of goods sold* Gross margin Less selling and administrative expenses Net operating income Less interest expense Net income

YEYE GROUP OF COMPANIES Comparative Statement of Comprehensive Income For the year ended December 31, 2012 2012 2011 Amount of Increase/(Decrease) P7,020,000 6,860,000 P 160, 000 4,826,250 5,050,000 223,750 -------------2,193,750 1,271,125 -------------1,810,000 1,000,000 -------------383,750 271,125

% of Increase/(Decrease) 2.3 % 4.4% -------------21.2 % 1.3 %

-------------922,625 12,000 -------------P910,625 ======

-------------810,000 8,000 -------------P802,000 ======

-------------112,625 4, 000 -------------108,625 ======

-------------13.9 % 50 % -------------13.5 % ======

2012

YEYE GROUP OF COMPANIES Comparative Balance Sheet For the year ended December 31, 2012 2011 Amount of Increase/(Decrease) Assets

% of Increase/(Decrease)

Current assets: Cash Accounts receivable Raw materials inventory Finished goods inventory Total current assets Non-Current Assets: Land Building and equipment Accumulated depreciation Total assets

P 47, 000 254, 500 30, 000 50, 000 -------------381, 500

P 42, 500 208, 500 45, 000 80, 000 -------------335, 000

P 4, 500 46, 000 (15, 000) (30 ,000) -------------46, 500

10.5 % 22 % ( 33%) ( 37.5 %) -------------13.8 %

300, 000 500, 000 (12, 500) -------------1, 169, 000

300, 000 500, 000 10, 500 -------------1, 123, 000

2, 500 -------------46, 000

23. 8 % -------------4%

Audit Report

====== Current liabilities: Accounts payable (raw materials) Stockholders' equity: YeYes, Capital Dividends Total stock holders' equity Total liabilities and stockholders equity

====== ====== Liabilities and Stockholders' Equity

======

P 50, 000

P 95, 000

(P 45, 000)

47 %

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======

======

======

P 1, 087, 000 32, 000 1, 119, 000 ====== 1, 169, 000

P 1, 000, 000 28, 000 1, 028, 000 ====== 1, 123, 000

P 87, 000 4, 000 91, 000 ====== 46, 000

8.7 % 12.5 % 8.8 % ====== 4%

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In relation to the data shown above, the initial capital requirement of the company and its shareholders in the three businesses as a whole is P1, 169, 000. Such includes the needed materials and equipments for its currently existing businesses. After two years of consistent service and operation, the company yielded a net income of P910, 625 indicating a 13.5% increase from that of the previous years net income which is P802, 000 only. Sales on the three established businesses of the company increased by 2.3% last December 2012 and are projected to increase as the company pushes its snack house district business venture. The companys financial statements referred to above present fairly, in all material respects, the financial position of Yeye Group of Company as of January 2011 to December 2012 the results of its operations for the years then ended in conformity with accounting principles generally accepted in the Republic of the Philippines.

ARGIE HILARIO Accounting Supervisor

MARY GRACE AMORA CEO, Yeye Group of Companies