Group 6 Auditing 2

Possible client: Rumah Sehat & Apotek UGM (Subsidiary of PT Gama Multi Usaha Mandiri)

Proposed steps in doing the audit planning of the sales cycle:

1. Contact the client

2. Arrange a meeting with the client

3. Understanding the clients business and industry

o Documents needed: financial reports, documents explaining the clients internal control, SPT

o Industry and external environment

Risks associated with specific industries (inquiry specific to pharmaceutical
industry)
Specific accounting requirements (inquiry)
Economic conditions of the industry (our group will do a small research)
Extent of competition (inquiry what companies and how fierce)
Regulatory requirements > (inquiry regarding the drugs they sell)

o Business operations and processes (all inquiry)

Tour clients facilities (observation)
Identify major sources of revenue (inquiry)
Identify key customers and suppliers (inquiry)
Identify sources of financing (inquiry)
Identify related parties and their transactions (inquiry)

o Management and governance

Managements philosophy (inquiry)
Operating style (how?)
Ability to identify and respond to risk (how?)
Organizational structure (inquiry and inspection)
Activities of BOD and Audit Committee (inspection)
Corporate minutes (necessary?)

o Client objectives and strategies

Reliability of financial reporting (through TOC?)
Effectiveness and efficiency of operations (looking at the previous audit report and
consider it again after the tour and inspection)
Compliance with laws and regulations (look at the SPT (tax), health regulations)

o Measurement and performance

Performance measurement system (inquiry)
Assess whether there is an unreasonable objective and if performance measurement
system encourages aggressive accounting (how?)
Ratio analysis (analytical procedures)

4. Assess the business risks that are relevant and have significant impacts to the sales cycle
5. Methodology of designing ToC
o Understand the internal control of the client
o Assess planned control risk
o Determine extent of ToC
o Design ToC: make a control matrix (follow the given matrix)

6. Formulate an audit program (follow the given matrix)

7. Create a written report?
8. Create the presentation