Audit Report

Asad Abbas (18110226)

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Table Of Content
1. Grant Thornton Anjum Rahman (GTAR)
1.1 History 2
1.2 Services 2
1.3 International affiliation 4
1.4 Major Clients 4
1.5 Specialization 4
2. Client Chem Coat
2.1 About Client 5
2.2 Services and Client 5
2.3 Industry Analysis 7
2.4 Revenue and expenses 7
3. Audit Methodology of firm
3.1 Application of IT 7
3.2 Audit Plan 8
4. Work Process
4.1 Individual Task 9
4.2 Problems 10
5. Learning Experience and Skills
5.1 Time Management 11
5.2 Interpersonal Skills 11
5.3 Presentation Skills 12
5.4 Organizational Behaviour 12
5.5 Learning Skills 12
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1. Grant Thornton Anjum Rahman (GTAR)

1.1 Audit Firm History and Introduction:

Grant Thornton Anjum Rahman was shaped in 1986. It has quickly ventured into a standout
amongst the most dynamic and expert administration associations. The consolidated industrial
and management learning, background and assets empower them to give an extraordinary level
of administrations to the customers.

Grant Thornton Anjum Rahman (GTAR) is one of driving firms of Chartared Accountatnts in
Pakistan. It has aim to give the most elevated nature of expert administrations in accounting,
auditing and tax assessment. GTAR has 6 accomplices, utilizing more than 300 individuals and
having an office organize spread more than 3 noteworthy urban areas of the nation: Karachi,
Lahore and Islamabad.

Other than accounting and auditing as one of its center administrations, the management
counseling routine of GTAR is a standout amongst the most dynamic practices in Pakistan,
giving an extensive variety of administrations in ranges including financial related services and
accounting, resource allocation, future planning, capital markets, data innovation and human
resource advancement/administration.

1.2 Services Providing:

Globally, GTAR is the part firm of Grant Thornton International, one of the world's driving
associations of autonomously claimed and oversaw accounting and counseling firms giving tax
assurance and expert opinion in auditing to their customers. Being the part firm of Grant
Thornton, GTAR is learning and getting experience, particularly in the fields of evaluation,
accounts, tax, administration consultancy, corporate issues, and so on of our neighborhood
commercial center with the advance procedures and master assets of an expert management
association at the lead of worldwide accounting field.
Grant Thornton is giving services in three primary fields;

1) Business assurances services

2) Tax services
3) Corporate and secretarial services

Grant Thornton is approved to act as external auditors by:

 State Bank of Pakistan (SBP)

 Central Board of Revenue (CBR)
 Securities & Exchange Commission of Pakistan (SECP)
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Following is the detail of the services above mentioned services;

1.2.1 Business assurance services:

Grant Thornton gives business strategic services to numerous multinational, medium ranked
organizations, non-government institutes and donor firms.GT conducts reviews of customers as
required by the different laws in Pakistan and furthermore direct them as special businesses
where auditing is not compulsory.
These business assurance services include:

 Management audits
 Internal audit
 Investigations

1.2.2. Tax services:

Many direct and indirect tax services are provided by Grant Thornton. Tax aligned in such a way
that they meet their business strategies and also follow the ITO of Pakistan. These services are;

 Compliances Services
 Representation and Litigation with Tax Authorities
 Expatriates and Personal Income Tax Services

International Taxation services:

Beside this GT provides international taxation services that include advisory, compliance with
law and litigation. The international network of GT covers 110 countries globally which provides
them with the technology and resources to meet the requirements of international tax of the
business. Business efforts made internationally to achieve better tax treatment and to minimize
the risk of business. These services include:

 Inbound Investment Advisory

 Tax Planning for Corporate / Group Structures
 Planning for Mergers and Acquisitions transactions
 Contract Structuring

Ex-patriate Tax:
GT also offers a variety of expatriate tax services which are:

 Ex-patriate tax compliance

 Tax advisory
 Tax Equalizations
 Executive services
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1.2.3. Corporate and secretarial services:

The corporate and secretarial services offered by the GT are:

 Dealing with a number legal bodies on the behalf client to corporate legislation such as
the Corporate Law Authority, Monopoly Control Authority and Ministry of Finance.
 Advising and assisting in setting up of corporate structures.
 Liquidation, Flotation and winding up of joint stock companies.
 Provide assistance in incorporation of companies.
 Helps in providing corporate technical advice and secretarial services in completing
documents and acting as company secretary.
 Provision of services of obtaining relevant permissions relating to foreign investment and
operation of foreign companies in Pakistan from government agencies including Board of
Investment (BOI).

1.3 International Affiliation:

Grant Thornton International is one of the main associations of the world. It is considered as one
of the biggest firms around the world. Grant Thornton International firms are available in more
than 100 nations, utilizing 2,539 partners and representatives in more than 519 workplaces
around the world, turning over joined business of more than US $ 4 billion for every annum.
Services that are given by it are in strict agreement with the universal quality level set out by
Grant Thornton International.

These organizations work in 113 nations in 521 workplaces globally. Entire firm fills in as
independently claimed and are overseen by auditing and bookkeeping firms. Each of its part firm
is an independent lawful, financial and managerial substance. Firms are ordinarily sorted out as
indicated by the laws of the nation where it works locally.

IBCs are being set in major urban centers around the world for an easy access of the international
service of all Grant Thornton firms.

1.4 Major Clients:

Major clients of Grant Thornton Anjum Rahman are Listed and unlisted companies. Among the
listed companies following are the clients of GTAR;

 Pioneer Cements limited

 Master textile
 ICC Textiles Limited
 Nespak Pvt. limited
 SGM sugar mills limited Lahore

1.5. Specialization:
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Grant Thornton has specialization both in business assurance services and tax services. They are
providing audit and Tax services to a wide range of business segments and organizations.

2. Client-Chem Coats:
2.1. About Client:
The Chem Coats is Pvt. Ltd Company. It makes specialized construction chemicals through
mixing the according to recipe, R&D continues to introduce new chemicals and building
materials due to the consistent development of chemical industry and the presence of
competitors. My client acquire chemicals from world resource manufacturer, blend according to
the recipe as provided by the R&D by keeping in mind the climatic conditions of the location
and region. To maintain its quality level, they put their product through a series of trials to
remove any discrepancy. Chem Coats has a policy that its products and services should meet the
requirements of clients, price and delivery should be ahead of its competitors. They strieving to
achieve this policy by taking regular measurements, and checking and maintaining an effective
quality system. They working on the principle of continuous improvement to maintain their share
in the market. They are doing it by ensuring the well settled standards, measurement of
performance and the level of quality at Chem Coats. They have achieved organizational
excellence and quality awareness through continuous process of improvement, measuring and
developing customer and employee satisfaction programs. Chem Coats give a team of trained
and highly skilled workers for the application of its products and services country wide through
its centers in Lahore, Islamabad, Faisalabad and Karachi for clients. They are trying to providing
best construction materials and services to their clients with a competitive price and quality
service. Products and services offered by Chem coats are under;

2.2. Services and products of Client:

1. Admixtures
Water reducing, plasticizing, retarding, accelerating and superplastic sing mixtures for concrete
and mortar. Air entraining & surface retarding admixtures.

2. Flooring
Cement adhere, metallic & natural aggregate massive duty industrial flooring systems. Polymer
modified self-leveling floor overlays, epoxy & polyurethane systems for wall & floor coatings,
toppings & screeds.

3. Adhesives
Polymer & epoxy adhesives, suitable for joining old to new concrete structures keeping in view
tensile, flexural and shear strength.

. Coatings
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A coating is a covering that is applied to the surface of an object, usually referred to as the
substrate. In many cases coatings are not only decorative but protect against atmosphere and
chemical attack

5. Concrete repair and protection

Polymer modified & fiber filled cementitious structural repair mortars suitable for use in varying
climatic conditions for repairing concrete & masonry. Formulated for patching in vertical and
overhead conditions. Products include epoxy fearing compound and mortars

6. Grouts
Grout is a construction material used to embed rebar, grout machine footings, fill voids, and seal
joints. The products include precision, non-shrink structure cementitious, epoxy and polyester
resin grouts

7. Sealants
Bitumen & acrylic mastic, Poly Sulphide & polyurethane, modified epoxy urethane & coal tar,
structural glazing silicone sealants. PVC & rubber water stops. Closed cell polyethylene joint
formers.

8. Waterproofing
Modified bitumen & acrylic emulsion coatings. Silane Siloxane water repellant, polymer
modified cement coatings. APP modified bitumen heat bonded membranes & bitumen roofing
felt.

9. Services:
Chem Coat are the producers and providers of building and development chemicals. They give
answer for the building and common developments ventures. Its national quality and expansive
base of item offerings, serve huge customers like Nestle, as well as little clients like homes and
little workplaces.

Their streamlined production network framework and market based structure empowers them to
convey complete arrangements that have a mix and careful comprehension of their business with
an incredible profundity and broadness of innovation and mastery. Chem Coats conveys and
offers development experts everything that will enhance their execution as well as the quality,
look and experience of the building. Their administrations are included waterproofing, solid
repair and grouts, sealants, industrials floor coatings, admixtures and cements. Chem Coats
begins its administration before a deal is made as its specialists start informing clients at the
arranging stage with respect to development or new plan of building. Along these lines they can
look for an issue before beginning the venture, thusly they are spare time as well as the cash of
its clients. Along these lines, they likewise give application preparing, specialized documentation
and additionally master guidance for the whole span of development.
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Chem Coat gives a decent after deal benefit which does make repairs as well as ensures their
clients nonstop high profitability to build the client devotion with it. Since at Chem Coats
everything begins with clients, then the item they require. It screens its exercises to address the
issue of their profitable clients and a viable client relationship administration.

2.3. Industry Analysis:

Chem Coat is among top building chemicals makers in Pakistan. Its real rivals incorporate
Ittehad Chemicals, Asian Chemicals, Descon, and so forth. It is not the market pioneers in this
class. Since it bargains in particular chemicals and don't has a substantial assembling
arrangement when contrasted with the huge names like Descon, and so forth. A couple worries
toward the start of Chem Coat was the risk of having misfortune on stock. Since there were at
that point enormous names in this class and they have set faithful client base, so it was the
supreme risk. In any case, it settle this issue by decreasing the hazard which happened when they
got a couple of customers and it began to deliver chemicals just upon particular requests from
their customers. Presently they work together by purchasing the crude material, mixing them as
indicated by the request of customer. With time, Chem Coat extending its client run as well as
the scope of its items.

2.4. Revenues & Expenses:

The significant wellspring of the income originates from offering chemicals and giving
administrations. It don't have stock holding as it makes as indicated by request and furthermore
don't have a major handling unit. Its assembling unit comprises of a solitary plant which
basically mixes the crude materials, blended by the formula of item. Along these lines of
business decreases their expenses to an awesome degree. In any case, they do bring about repair
and support costs. Quantities of works is additionally low, as they contract works on day by day
bases, consequently diminishing settled cost of work. In light of this thin scope of costs the vast
majority of its income goes to benefit. It has a turnover of around 165 million every year.

2.5. Market Position and Future Plans:

Chem Coat is not among extremely best makers due to the next enormous fishes in the market. It
doesn't spending much on development and extension and simply taking after the pioneers and
patterns. This impedes it from picking up the top position in the market. It is wanting to present
3D covering, which as of now been presented in other nation and huge makers in the nation. It is
likewise attempting enhance the quality level of its administration having more number of lasting
specialists.

3.0 Audit methodology of firm:

3.1. Application of IT:
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As it is clear the vast majority of the work is done on portable workstations and soft copy. A few
review devices and programming are utilized by the firm, a few points of interest are given
underneath;

3.1.1. Voyager
Our audit group utilized this product to check financial explanations, misrepresentation in
statements and after that interface it to the techniques and internal controls that are set up to
address those dangers. This gives a beginning stage to get to the degree to which the fraud or risk
may exist in the financial statements. It is used in following processes;

 Planning stage
 Assessment of risk
 Execution plan
 Evaluation and testing of internal controls
 Concluding statements

3.1.2. IDEA

It is used to extract, scrap and analyze the important stats and figures. It plays an important role
in sampling of data. It fastens the process of sampling and make it efficient. Main use of it is in
following tasks;

 Analyzing big amount of financial data

 Verifying the calculation
 Data sampling on the basis of risk

IDEA highlights the following errors;

 Tolerable error
 Confidence error
 Expected error

3.1.3 T-Beam
T-Beam is used in following phases of audit for trail maintenance;

 Audit planning
 Analytical procedures
 Producing work papers and financial statements.
 3.1.4 Pentana
 This software is used to verify whether the disclosure of financial statements are in
accordance to International Financial Reporting Standards or not.

3.2. Audit Plan:

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Grant Thornton uses strict procedure to make audit smooth and efficient. Our audit plan was to
access the extent to which the risk may exist in the financial statements. Events were recognized
that may have uncertainty in them and also defined acceptable limit of risk. Also other operations
and capacity of errors were also discussed. The procedures and planning of testing was also
discussed before actually starting the process. In audit plan each segment was defined as audit
entity and also the risk assessment for each segment and way of testing each entity was also
discussed. The term audit and total risk acceptable was also defined. Authorities and chain of
command within client was also discussed to check the level of internal control. Secondly complete
list of employees and their experience was also revealed to our team. Complete steps and way in
which audit will be done was also discussed.
4.0 Work process:
After the planning completed the actual audit work started accordingly to planned way. I
performed monitoring and recalculation of Payroll System, Periodical Verification of Assets,
Vouching, Cash and Bank, Capital Expenditure and Procurement and their Compliance with
Applicable laws, rules and regulations. I also visited clients departments and plants to verify the
physical existence of assets and to see the way in which the work is being done in the company
and physical condition of the assets. I also talked about the payments and its procedure with the
employees.

4.1. Tasks Performed Individually:

My job was to ensure that the physical resources were according to financial records and whether
the amount was calculated wrong or right. I performed proper inspection and did visits to facility
to ensure the consumption and production, whether they are being used accordingly or being
misused. Management of client provided me the register having records of all the assets, so I
checked one by one each category of asset. I then performed the vouching test to ensure the
control checks and authority over the expenses. I further acquired the CAPEX (Capital
Expenditure Form) to check whether the CAPEX requirements were satisfied. I also looked over
the physical resources whether they are perceived by the rules of IFRS. I checked the finance
procedure of the Chem Coat by validating that the software was creating the right measure of
financial slips and whether the information is correct or there is any misrepresentation in the
finance framework. I also talked with the heads and workers to have their remarks on the
procedures. I also did recalculation of payroll. By recalculating the stipend and expenses, I
validated the quality control over expenses and to have risk check.
For vouching I went through following steps;

 Sampling on the basis of risk measurement defined, unusual and non-routine expenses
 For each document I checked the voucher number and voucher type and ask management
to provide their supporting documents. For supporting documents, I took receipts,
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approval documents, quotations, purchase order, registration documentation, bills and

retainer ship agreements.
 After getting the supporting documents, I checked for the difference between the
recorded and voucher amount.
 I checked whether the documents have proper bank statement, authorization, approval
signature, allocation and supporting.
 I also verified the amount on bank statement for the relevant year.
 After the complete check of the documents of the supporting I gave the description of the
verification. For example, “Being expense of Retainer ship fee for income tax for the
month amount to $xx paid to (name) company”
I also checked the verification of fixed assets as by register records and bank statements
and checked for relevant authority i.e. cross checking each entry or record.

For the vouching of office and other expenses, I checked all the related receipts, bills and
approval documents. The receipts from car repairing shops and petrol pumps covering small
amounts were also examined. For any difference between the recorded amount and amount on
voucher, I reported it to my team and management and asked the reason for this difference.
Mostly the difference was due to income and sale tax.

For many expenses I had to check the whole file and trace back the voucher no. and the
complete detail as below;

 Material receiving report

 Invoice
 Approval
 Allocation
 Withholding tax
 Other relevant supporting
 Depreciation rate
 Depreciation for the year

4.2. Problems:
During reviewing the statements, we observed problems recording expenses and the way
they were entered. In payroll framework, the authority approval and presence of directors were
absent in rewarding the employee, which is a non-compliance of Companies Ordinance 1984. I
also noticed that the individual records file of workers were incomplete and managers marking of
expected set of responsibilities and representative examinations were no in a proper and explicit
manner. I noticed that there was no regular physical counts and checks on the premise. It may
result in inventory lost and other frauds to be passed undetected. The further riskiness is
increased by the absence of director signs on daily papers and excuse made by them is that there
are many papers which would consume much time of director if he started to authorize them.
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Many daily and expenses papers were hand written which induce a very loose control and
increases the risk of misstatement. So I concluded that Chem Coat has a much loosed internal
control which may be the reason of high expenses in recent year than to the previous year.
Directors and finance managers main answer to increased expenses for this year was due to the
bribe given by sale person to major client’s agent so that they buy the company product. This
was the major fault as there was no control on this whether the salesperson has money with him
or not, but as long as he is completing his targets, the Chem Coats directors say that they are
happy with it.

5.0. Learning Experience:

5.1. Time management Skills:
The most important thing I learnt was how manage the time and fulfill the responsibility of the
job. There was much work in final week of the audit and it was 24 to 28 km away from LUMS
and I have to travel such distance by bike and supposed to be present on time as my head of audit
firm was very strict in this matter. There was much work at the end, and our manager has given
the deadline so we have to complete our work before that. Observing which documents are
required, listing them properly, and asking supporting from management, verifying them from
ledgers and bank statements, documenting the reasoning for those amount take a lot of time.
That’s why the time was much important, and I have to meet the deadline accordingly. I used to
complete one section in one day and asked management to ready document for next day to save
time. We also worked during our lunch breaks to meet the deadlines, as we also had pressure
from our head office to finish the work at client place and come to main office to run main
programs and reports of the Audit, combine and consolidate all the information gathered during
our stay and meetings with management and other staff at client.

Our office timings were from 9 to 5, but we have to reach before 8.45 so that after attendance we
can start out work exactly at time. And at the off time, we have to remain in office for work till 6,
7 pm even after the management left. In last days of audit I used to come at 10 and 11 pm for at
least 5 days because we have to meet the deadline given by GT for the audit of the firm. Despite
of all fuss and late nights works and driving through heavy traffic for such a long distance, I
manage my time and met the deadlines. I also remain punctual to my office hours with a very
low number of absentees.

5.2. Interpersonal Skills:

The other thing that I got improved are my interpersonal skills. I used to think that it would be
impossible to work with people with whom I have a big age difference, because all employees
and auditors were professional and have experience while I was just a beginner with no
experience. I learnt how to deal in such condition and how to communicate with seniors. First I
understood my role and position, then I made my way to seek help and do my job accordingly.
People whom I worked made to me to polish my interpersonal skills that are required in
corporate world. So I gained confidence and knowhow of my work. All became easy and felt
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easy to sit with my experienced team and discussed the issues. I learnt how to talk with senior
managers and lower employees. As my position was of an auditor at client, so I acted in auditor
and used my authority given to by my position. I knew how to do work in an environment where
some people have authority on me while at some people I had rights to question at their work.
5.3. Presentation Skills:
When someone is dealing with experienced and professional people, presentation is very much
important and vital. The task I did, I have to present the work according to the presentation rules
set by the GT. Because of these rules of presentation, there remains coherency of data and make
it easy to understand and interpret. All work done by be was on excel and used appropriate
formulas, bodings, colors and tables. I divided the work into two categories, one is the data
collected by us from client and second category consists of the procedures and results we got
from the data. I made a backup file for each file. I also arranged the data according the format
required by GT to run the software on these files. In this way I learnt how presentation is
important in field of audit.

5.4. Organization Behavior:

This internship was practical source for me to learn how an organization is formed and how
authority flow in the organization. The culture of Chem Coat was very strict and there was very
littler flexibility was given to employees. There was no job rotation and all these factors usually
led to greater absenteeism. There were very little incentives given to employees that would have
kept them motivated, lack of entertainment was also the source of demotivation. Company is
located at the bank of Lahore, and most of the employees have to travel a large distance to come
to company, so there must be a source of motivation that would relieve their tiredness of work
and make them to do their job effectively. This may be done by creating a friendly environment
and some source of entertainment at company during breaks. I also observed less communication
between directors and employees, because as I talked with employees they told that directors are
very strict and the way they talked make them uncomfortable. So employees usually run away
from directors. This is very bad as a good communication is very important for an organization
to take right decisions at right time. This may be the reason of Chem Coat lacking behind of
other competitors and not able to lead the industry.

6.5. Learning Excel Skills:

Although I had learnt many excel skills during my courses at LUMS but still I learnt many skills.
I learnt many shortcut keys, tracing back to original data and concept of ‘lead sheet’. So after this
opportunity, I am able to work at excel faster than before. I also learnt about data crashing risk
associated with files containing large amount of data and heavy formulas, so I learnt that backup
is very important in field of accountancy and audit.
I also learn how work goes in an office and what a life an accountant, finance manager, director
and a normal employee is living. This was helpful in which field should I choose, whether I
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should choose an auditor life or an executive life or other sides of professions relating to finance
and accounting field. It really changed my mind how I thought about the professional and job
life. I got that doing a business is far better than doing a job as far I learnt from listening and
observing the people with whom I worked. But I also observed how difficult it is to start a
business and how competitive the is the world of business?
Overall my experience in this internship was excellent. I got many valuable things to learn which I could
not get from my courses. This internship has changed my perception about job, learning and skills
implementation. From specific audit work, to going to the annual stock count and doing the
physical inventory count and from dealing professionally to effectively manage your time and
work, all were the outcomes of this internship. It helped me gaining attention to detail
characteristic. It was the one of useful works I did in my life.