Page | 1

A Report OnBeximco Pharmaceuticals

An overall Audit plan andstrategy.

2/20/2014

F-310: Auditing

Department of Finance

University of Dhaka

Submitted To:

Md. Salahuddin ChowdhuryAssistant ProfessorDepartment of FinanceUniversity of Dhaka

Submitted By:

SL No. Name ID No. Remarks01. Md. Sabbir Rahman 17-036

02. Muntasir Rahman Khan 17-042

03. Md. Muhimin Muid 17-072

04. Nipul Hosen 17-05805. Kamran Reja 17-10206. Md. Rajib Hossen 17-140

Page | 2

Table of contents

Sl. No Topics Page No.

1. Executive summary 4

2. Letter of transmittal 5

3. Objectives 6

4. Limitations of the study 7

5. Sources and methodology 8

6. Chapter one: Details of the company Company Description Mission Vision Core Values Key Company Information

9 – 12

7. Chapter two: Our audit Procedure 13 – 25

8. Conclusion 26

Page | 3

Executive summary

Auditing is an essential field in the modern business sector.It encompasses the overall financial aspects of a company. Itprovides extra confidence to the stakeholders of theorganization concerned. In todays world a public organizationcan not be imagined without audit.

When assigned by our honorable course teacher to conductanalysis based on auditing standards, first of all we didcomprehensive analysis about company selection.then we movedfurther to complete this report as instructed.

In this report we have tried to show some basic information ofthe concerned company which is Beximco Pharmaceuticals in thiscase. We have shown a little company description with thecompany’s mission, vision, key information since it’sinception.

We have tried to show key information of the company such asits internal processes of the operations. Some basicinformation is also given regarding our analytical procedurewhich we followed in this report.

We tried our best to establish the report as assigned. But wemust admit that we are not professionals. So there may arisesome situations which will not pertain to others.

The report encompasses our audit plan, strategy, and internalcontrol system of the intended company, test of thosecontrols, substantive procedure and analytical procedures done

Page | 4

by us. The report also showed our future prospects from thisaudit planning and strategy.

We have shown our audit planning, collected sufficient andappropriate audit evidence at our level best, we did test ofcontrols and substantive procedures to make this report asprecise and reliable as possible.

This report is the reflection of our belief and workprocedures that we have done and hold preparing this. Wecannot guarantee the aspects shown within this report but thisreport depicts our methods and processes we have on thistopic.

Page | 5

Transmittal Letter

17th February, 2014Md. Salahuddin ChowdhuryAssistant ProfessorDepartment of Finance,University of Dhaka.

Subject: “A report on ‘Beximco Pharmaceuticals’ on an auditplan”.

Dear Sir,With due respect, we want to state that, we are the studentsof BBA Program, Department of Finance 17th batch, University ofDhaka. As a requirement of the course “Auditing” we have donea report on ‘‘Beximco Pharmaceuticals’ on an audit plan”. Weare feeling immense pleasure to prepare this report. In theanalysis we mainly focused on auditing strategy which complieswith the report’s requirement.

Thanking you and looking forward to receiving your cordialapproval of the submission.

Sincerely yours,

Md. Sabbir Rahman,

Muntasir Rahman Khan,

Nipul Hosen,

Md. Muhimin Muid,

Kamran Reja,

Md. Rajib Hossen,

Page | 6

Section-B

B.B.A 17th batch

Department of Finance

University of Dhaka

Objectives of the report:

To gain the knowledge of overall audit techniques. To learn about auditing standards both national and

international level. To gather knowledge about comprehensive audit analysis. Learn how to conduct an audit of an organization. To know about the internal audit structure of a company. To know about financial statements analysis of an

organization. To know about the audit review system of a company.

Page | 7

Limitations of this study:

Since we are not professionals in the auditing arena it wasvery common for us to be mislead by the huge data of thetopic. Some of the data reported herein are assumptions ofours and we don’t guarantee that. Due to some timeconstraints we could not get to some sight to physicallyobserve the situation. The source of information we used inpreparing this report may contain some vague data. Againstthese constraints we have tried our level best to make thisreport comprehensible and reliable to the users.

Page | 8

Sources & Methodology:

We have gathered the required information mainly from theinternet service of the organization concerned and varioussources such as the book “Assurance” for CA professional StageKnowledge level and the company branch.

When we authorized to prepare a report on “An audit plan” bythe honorable course instructor “Md. Salahuddin Chowdhury” wefirstly chose the company on which we will accomplishcomparative audit analysis. Then we designed an overall auditplan which is relevant to the report by which we will getnecessary information about the company to prepare the report.After collecting data we made analysis of the information.Then we prepared the report based on the financial statementsof the organization. We took necessary part & curtailed theirrelevant portion & prepared the report.

Page | 9

Chapter 1

Details of the company

Page | 10

Company Description

Beximco Pharmaceuticals Ltd. is a leading manufacturer ofpharmaceutical formulations and Active PharmaceuticalIngredients (APIs) in Bangladesh. It is the flagship companyof Beximco Group, the largest private sector industrialconglomerate in Bangladesh.

Beximco Pharma's state-of-the-art manufacturing facilities arecertified by global regulatory bodies of Australia, EuropeanUnion, Gulf nations, Brazil, among others. The company isconsistently building upon its portfolio and currentlyproducing more than 500 products in different dosage formscovering broader therapeutic categories which includeantibiotics, gastro-intestinal, respiratory, analgesics,cardiovascular, anti-diabetics, etc, among many others.

With decades of contract manufacturing experience with globalMNCs, skilled manpower and proven formulation capabilities,the company has been building a visible and growing presenceacross the continents offering high quality and affordablegenerics. Ensuring access to quality medicines is the powerfulaspiration that motivates more than 2,700 employees of theorganization, and each of them is guided by the same moral andsocial responsibilities the company values most. BeximcoPharma has the unique distinction as the only Bangladeshicompany to get listed on the AIM of London Stock Exchange.

Mission

Committed to enhancing human health and well being byproviding contemporary and affordable medicines, manufacturedin full compliance with global quality standards. The company

Page | 11

continually strives to improve the core capabilities toaddress the unmet medical needs of the patients and to deliveroutstanding results for the shareholders

Vision

Be one of the most trusted, admired and successfulpharmaceutical companies in the region with a focus onstrengthening research and development capabilities, creatingpartnerships and building presence across the globe.

Core Values

The core values define who the company is; they guide to takedecisions and help realize the individual and corporateaspirations.

Commitment to qualityAdopting industry best practices in all the operations toensure highest quality standards of the products.

Customer satisfaction Committed to satisfying the needs of the customers, bothinternal and external.

People focusGiving high priority on building capabilities of the employeesand empower them to realize their full potential.

AccountabilityEncouraging transparency in everything we do and strictlyadhere to the highest ethical standards. The management team

Page | 12

is accountable for the own actions and responsible forsustaining corporate reputation.

Corporate Social ResponsibilityActively taking part in initiatives that benefit the societyand contribute to the welfare of the people. Taking great carein managing the operations with high concern for safety andenvironment.

Page | 13

Key Company Information:

Year of Establishment 1976Country ofIncorporation

Bangladesh

Commercial Production 1980Status Public Limited CompanyBusiness Lines Manufacturing and marketing of

pharmaceutical Finished Formulation Products, Large Volume Parenterals and Active Pharmaceutical Ingredients(APIs)

Main Country ofoperation

Bangladesh

Corporate Headquarter& Registered Address

17 Dhanmondi R/A, Road No. 2, Dhaka- 1205, Bangladesh Phone : +880-2-8611891 (5 lines) Fax : +880-2-8613470 Email : beximchq@bol-online.combeximchq@bol-online.com

OperationalHeadquarters

19 Dhanmondi R/A, Road No. 7, Dhaka- 1205, Bangladesh Phone : +880-2-8619151 (5 lines), +880-2-8619091 (5 lines) Fax : +880-2-8613888 Email : info@bpl.netinfo@bpl.net Website : www.beximcopharma.com

Overseas Offices &Associates

Australia, Bhutan, Cambodia, Chile, Ghana, Hong Kong, Indonesia, Jordan, Kenya, Kuwait, Malaysia, Myanmar, Nepal, Pakistan, Philippines, Saudi Arabia, Singapore, Sri Lanka, Vietnamand Yemen

Authorized Capital(Taka)

9,100 million

Paid-up Capital (Taka) 3,503.3 millionNumber of Shareholders Around 86,000Stock Exchange Dhaka and Chittagong Stock Exchanges

Page | 14

Listings of Bangladesh and AIM of London StockExchange

Number of Employees 2,748TIDM: (TradableInstrument DisplayMnemonic)

BXP

Date shares wereadmitted to trading Dhaka Stock Exchange :3 July, 1985

Chittagong Stock Exchange :11June, 1995

AIM ( Alternative Investment Market) :

21 October,2005

ISIN [Internationalsecuritiesidentification number]

US0885792061

Page | 15

Chapter 2

Our Audit Procedure

Page | 16

Our Audit Planning:

We planned our audit to:

Ensure appropriate attention is devoted to importantareas of the audit

Identify potential problems and resolve them on a timelybasis

Ensure that the audit is properly organized and managed Assign work to engagement team members properly Facilitate directions and supervision of engagement team

members Facilitate review of work

We will search these information while inspecting thefinancial statements of the company:

Whether financial statements together comply with thenotes thereon have been drawn up in conformity with theCompanies Act, 1994 and Securities and Exchange Rules,1987 and statements present fairly the Company’s state ofaffairs, the result of its operations, cash flow andchanges in equity?

Proper books of accounts of the Company have beenmaintained.

Whether appropriate accounting policies have beenconsistently applied in preparation of the financialstatements except those referred to in the financialstatements and that the accounting estimates are based onreasonable and prudent judgment?

If the International Accounting Standards (IASs)/Bangladesh Accounting Standards (BASs)/InternationalFinancial Reporting Standards (IFRSs)/Bangladesh

Page | 17

Financial Reporting Standards (BFRSs), as applicable inBangladesh, have been followed in preparation of thefinancial statements?

Whether the internal Control System is sound in designand has been effectively implemented and monitored?

Whether there is statement which is materially untrue ormisleading and there is no omission of facts in suchstatements?

Whether there are transaction has been entered into bythe Company which are fraudulent, illegal or in violationof the Company’s code of conduct?

As per general terms by ISA 300 we have planned our audit inan effective manner.

The structured approach of our audit plan includes,

Step 1

We should comply with all the necessary ethical reqiurementsrequired by BSA. We will perform the audit procedure in Trueand Fair view.

Step 2

We should understand the terms of engagement required by BSA.

Step 3

We have established the overall audit strategy focusing onthese following factor:

Page | 18

We have to determine the relevant characteristics of theengagement, such as the reporting framework used as thiswill save the scope for the engagement and understandingthe entity and its environment.

We will discover key dates for reporting othercommunications.

We must determine preliminary risk assessment,materiality, whether internal controls are to be tested.

We should consider of when the work is to be carried outfor example before or after the year end.

We have to consider of team members available, the skillsand when they are to be used.

Key contents of our audit strategy:

Understanding Beximco Pharma’s environment

At first we should focus on the basic characteristics ofBeximco pharma. Which are:

The business Principal business strategies Their financial performance The company’s reporting requirements Level of competency of the management team

Understanding the client and its environment:

Page | 19

Understanding the company’s accounting and internal controlsystem

We have to check whether the accounting policies followedby Beximco pharma are relevant with the standard ofaccounting practiced in Bangladesh.

The effectiveness of new accounting or auditingpronouncements

We will use our cumulative knowledge of the accountingand internal control systems and will place relativeemphasis on different types of test.

Beximco pharma uses the internal control system to:

Minimize the business risks. Ensure the continuing effective functioning. Ensure the company complies with relevant laws and

regulations.

Page | 20

Understanding the entity and it's environmentNature of the entityobjectives and strategies and relating business risksmeasurement and review of the clients financial peformanceinternal controlIndustry, regulatory and other external factors

As per BSAs requirement we will determine overall responses to assessed risks at thefinancial statements level and will design for further audit procedures to respond toassessed risks at the assertion level so that the overall audit risk will reduce to anacceptably low level.

If the internal control system is weak then we will use thisprocess to assess risk level of the entity:

Risk and materiality:

We will assess risks of fraud or error and identify thesignificant audit areas on which we will perform our auditprocedures. For that we will:

Set materiality for audit planning purposes Search for material misstatements Identify complex accounting areas

Page | 21

Identify relevant business risksEstimate the impact of risksAssess the likelihood of occurrenceDecide upon the actions (internal controls, insurance, changes in operations )to manage them

We will use materiality in our assurance engagement processusing this diagram:

Page | 22

PLANNING MATERIALITYBased on draftfinancial statementsand other available

Apply planning materiality to

ACTUAL ERRORS DETECTED

ACTUAL ERRORS DETECTED

Test all items ≥ PLANNING MATERIALITY

Sample from remaining items ≥

Final MATERIALITY based on results obtained and final

ACTUAL ERRORS PROJECTED TO

Compare and consider need for additional testing

Co ordination, direction, supervision and review

We will go to the company’s various departments toperform the audit procedures In different locations.

The audit team will include 6 to 7 members with differentassigned tasks

The team will attend client premises for countingphysical inventory or other year end procedures.

Time:

Accounts will be taken for discussion within 20 days after theclosing day of the financial year.

Staffing:

The audit team will consist of 5 to 7 members.

Senior-2 weeks

Junior-1 week

Step 4

Developing the audit plan including risk assessment proceduresand audit tests necessary to comply with the ISAs.

Sufficient appropriate audit evidence:

If we want to minimize the risk level then we have to collectsufficient appropriate audit evidence.

Sufficiency:

Sufficiency is the measure of quantity of audit evidence

Appropriateness:

Appropriateness is the measure of quality or reliability ofthe audit evidence.

Page | 23

Sufficient appropriate audit evidence [theprocedure]:BSA 500 Audit evidence requires auditors to obtain sufficientappropriate audit evidence to be able to draw resonableconclusions on which to base opinion. so we have taken auditevidence from reliable sources with sufficiency.

We can collect quality evidence from these sources:

External source We will collect evidence from the external sourcesbecause it is more reliable than that obtainedfrom the company’s records

Previousauditor

The evidence collected from previous auditors ismore reliable than that obtained from indirectsources.

The client Evidence obtained from the client is more reliablewhen the internal control system operateseffectively within the organization.

Writtendocuments

Paper or written documents and electronicrepresentations will be given more importance byus when performing the audit procedure.

Originaldocuments

Original documents are more reliable thanphotocopies or facsimiles.

The audit evidences of Beximco Pharmaceuticals Ltd. we will acqiure are mostly fromInternal, Entity and written sources.

Procedures to obtain evidence: we will obtain evidence by oneor more of the following procedures outlined in BSA 500. Theseare:

Inspection of tangible asset Inspection of documentation Observation Inquiry Confirmation Recalculation

Page | 24

Reperformance Analytical procedures

We will collect sufficient appropriate audit evidence by usingvarious sampling methods underlined below to ease the auditprocedure:

Random selection:

It ensures that all items in the population have an equalchance of selection.

Systematic selection:

In this method items are selected using a constant intervalbetween selections but the first interval should have arandom start.

Haphazard selection:

It is an unbiased sampling method in which the assuranceprovider selects items based on their own experience which issimilar to random sampling.

Sequence or block selection:

Data are sampled in a sequential manner.

Monetary unit sampling:

It ensures that every monetary item in a population has anequal chance of being selected

We will follow the systematic approach for our audit procedure since it is astructured approach and poses greater horizon than that of other methods.

Page | 25

Financial Statement Assertions:

BSA 500 Audit evidence requires classes of transaction,account balances and presentation and disclousers insufficient detail to form a basis for the asessment of risksmaterial missatement and the design and performance of auditprocedures. We will use assertions in these areas:

Classes of Transaction

We will assert transactions that should been recorded havebeen recorded in the proper financial year. Amounts, data,transactions and events have been recorded accurately.

Account Balances

Assertions about that the entity holds or controls the rightto asset and liabilities. All assest, liabilities and equityinterest that should been recorded have been recorded in theproper financial year.

Presentation And Disclosure

Discloused event, transactions and other matters have occuredand pertain to the entity. All disclouser that should havebeen included in the financial statements have been included.Financial Information is appropriately peresented anddescribed and disclusers are clearly expressed.

Test of control

Inspection: we will inspect all classes of transactions,events, entities to make sure that all disclouser that shouldhave been included in the financial statements have beenincluded to reduce the posting risk.

Page | 26

Observation: We will clearly observe that the financialstatements include transaction, entities and events thatoccured in the proper finacial year.

Recalculation: We will recalculate some typical transactionthat is linked up with the major part of the posting risk toensure that the financial statements are free from those kindsof risks.

Extra confirmation: The test of control will make over revenueand receivables and we can confirm that we obtained sufficientappropriate audit evidence at relevant times during the periodunder audit.

Reperformance: The overall procedures will be reperformed byour audit team that is helpful to ensure that there is no someother risks that can cause material misstatements in thefinancial statements.

Test of Control that will be done by us:BSAs require that auditors determine overall responses toassessed risks at the financial statement level and shoulddesign and perform further audit procedure to responed toassessed risk at the assertion level, so that overall auditrisk is reduced to an acceptibly to lower level.

Test of revenue system:

We will test the revenue system (if credit based) of Beximcobasing on this diagram:

Page | 27

Send statementSend

Chase payment

Take Receive payment

Test of purchase system:We will test the purchase system of the company by thisfollowing process:

Page | 28

Send

Document

Make orders

Raise despatch

despatch order

Page | 29

raise requsitionpurchasing department raise orderreceive goodsraise goods received note (GRM)receive invoiceaccounts department match GRM to invoicerecord an account for invoicesent paymentsupplier will extend credit in the futureCarry on production

Our audit plan and related risks:

The risk that the auditors give an inappropriate opinion iscalled audit risk. This risk is crucial to audit procedures.So we must consider this risk. On the other hand the risk thata material misstatement would not be prevented, detected orcorrected by the accounting and internal control systems iscalled control risk.

Moreover the risk that the auditors’ procedures will notdetect a misstatement that exists in an account balance orclass of transactions that could be material eitherindividually or when aggregated with misstatements in otherbalances or classes is called detection risk.

Audit risk = Risk of material misstatements +Detection risk

Audit risk will be acceptable by us under thesesituations:

Inherent risk × control risk× Detection risk =Audit risk

Page | 30

Beximco pharma

Financial statements

AuditorsDetectioncontrol

HighHigh Low=Acceptable

Inherent risk × control risk× Detection risk =Audit riskMedium LowMedium =Acceptable

Page | 31

Substantive procedures that will be done by our audit team onthese issues:

Noncurrent asset

Key issues:Existence, rights,obligations, completeness,valuation

Sources of informationThird party valuationInvoicesPast auditors

Inventory

Key issuesExistence, valuation

Sources of informationAuditor attendance at count,invoices, third partyconfirmations

Receivables

Key issuesRights and obligations,valuations

Sources of informationThird party confirmationCash payments after date

Payables

Key issuesCompleteness

Sources of informationSupplier statements

Bank

Key issuesExistence, rights,obligations, completeness,

Sources of informationConfirmation from bank, bankstatements, client schedules,reconciliations

Long term liabilities

Key issuesCompleteness, accuracy,disclosure

Sources of informationLoan documentationStatutory books, confirmationsfrom ledger, clientcalculations

Page | 32

Page | 33

Conclusion:

This report is the representation of our knowledge and beliefsof the course. We prepared this report by using our knowledgeof the subject. This will greatly help us understand thecrucial implications of auditing arena. Our knowledge base hasalso increased by preparing this report. Recently there havebeen reports of auditing ethics which have drawn our attentionto it and we believe that this report will help us understandthose situations better.

Page | 34