AL-ABBAS CEMENT INDUSTRIES LIMITED

ADVANCE AUDIT
FINAL PROJECT
MAM SHEEREN

Presented By:

Najam Ali L1F11MCOM0001

FahadRasool L1F11MCOM2043

2013

UNIVERSITY OF CENTRAL PUNJAB

AL-ABBAS CEMENT INDUSTRIES LIMITED

Contents
Appointment letter ....................................................................................................................................... 2 AUDIT ENGAGEMENT LETTER ................................................................................................................ 3 Audit Procedures .......................................................................................................................................... 4 Adequacy of audit procedures ...................................................................................................................... 5 Copies Of Financial Statements to be Audited ............................................................................................. 6 Balance sheet ................................................................................................................................... 6 Profit &loss Statement ..................................................................................................................... 6 Cash Flows statement ...................................................................................................................... 6 Statement of Change in Equity ........................................................................................................ 6 Statement of Comprehensive income ............................................................................................. 6

Audit Committee of AL-ABBAS CEMENT INDUSTRIES LIMITED Pakistan ................................................... 12 Purpose ............................................................................................................................................. 12 Committee Membership .................................................................................................................... 12 Management Letter .................................................................................................................................... 14 Audit Evidences .......................................................................................................................................... 16 Bank Confirmation Letter ....................................................................................................................... 16 Yours faithfully, ........................................................................................................................................... 16 Tax Confirmation Letter .................................................................................................................... 17 Management Representation Letter ............................................................................................................ 19 Auditor Report to Members ....................................................................................................................... 22

ADVANCE AUDIT FINAL PROJECT 2013

AL-ABBAS CEMENT INDUSTRIES LIMITED

Appointment letter

To

KPMG taseer hadi &co Chartered Accountant Sheikh sultan trust building no.2 Karachi,75530 Pakistan Subject: Youre Appointment as First Statutory Auditors of the Company Sir With reference to your consent letter and certificate under 224 (IB), we are pleased to appoint you as the Statutory Auditors of the Company for the Financial Year (year of incorporation). The following records are available to you for the audit of al-Abbas cement limited industry. Invoices Minute books Balance sheet Profit and loss statement Statement of change in equity Cash flows statement Statement of comprehensive income

Kindly acknowledge the receipt of the same. Thanking you

ADVANCE AUDIT FINAL PROJECT 2013

AL-ABBAS CEMENT INDUSTRIES LIMITED

AUDIT ENGAGEMENT LETTER
Board of directors AL-ABBAS CEMENT INDUSTRIES LIMITED Pakistan Subject matter: Audit engagement letter for the financial year 2013.
You have requested that we will audit the balance sheet of AL-ABBAS CEMENT INDUSTRIES LIMITED Pakistan as on December 12, 2012. That includes financial statements such as cash flow statements, statement of changes in equity. We will audit the accounts of your company according to the international standards on Auditing. You are requested to have your financial statements be prepared under IFRS (International Financial Reporting Standards). All the documents supporting the transactions must be ready in order to save the time. Supporting evidences could be checked. We will charge remuneration or audit fee 30 Lac rupees. We will please to see a friendly and coordinated behavior from your staff and employees. You are requested to attach the copy of this letter in return for acknowledging the conditions. Very truly, KPMG taseer hadi &co (Chartered Accountant)

ADVANCE AUDIT FINAL PROJECT 2013

AL-ABBAS CEMENT INDUSTRIES LIMITED Audit Procedures

1. We have gained an understanding of internal control system of AL-ABBAS CEMENT INDUSTRIES LIMITED Pakistan. According to our observation the internal control system in AL-ABBAS CEMENT INDUSTRIES LIMITED Pakistan is very strong. Therefore we have decided to go for sampling instead of detailed checking. Because the auditing standards state that the fundamental objective of the audit is to obtain reasonable assurance that the financial report as a whole is free of material misstatement. Audit firms should consider ways to further improve audit quality and significantly reduce the number of instances where this assurance is not obtained. Following are major audit procedures which we will apply for audit of AL-ABBAS CEMENT INDUSTRIES LIMITED Pakistan. Physical Observation of inventory and other assets Checklist Price Testing Control Testing Confirmation of available cash from banks Foreign Currency Translation Reconciliation Testing Classification of expenses and income

ADVANCE AUDIT FINAL PROJECT 2013

AL-ABBAS CEMENT INDUSTRIES LIMITED

Adequacy of audit procedures

1. Auditors are important gatekeepers in our financial system. The quality of an audit supports high quality financial reports, informed investors and market confidence 2. The objective of our inspections is to work co-operatively with firms to improve and maintain audit quality. 3. Australias audit regime is similar to the regimes in other major developed countries. We understand that audit oversight regulators in a number of other countries have experienced similar trends in audit quality. 4. There are some important areas where the firms need to focus their attention and make improvements to ensure audit quality. While firms have indicated a commitment to improving audit quality, they should increase their efforts to improve audit quality and the consistency of audit execution. 5. Matters relevant to understanding our findings and the percentages reported above are outlined in Table 1. The percentages reflect findings in the areas discussed later in this section. 6. The auditing standards state that the fundamental objective of the audit is to obtain reasonable assurance that the financial report as a whole is free of material misstatement. Audit firms should consider ways to further improve audit quality and significantly reduce the number of instances where this assurance is not obtained. 7. There will be instances where auditors detect material misstatements during the audit process and these misstatements are corrected before a financial report is completed and released. These instances are not measured in this report.

ADVANCE AUDIT FINAL PROJECT 2013

AL-ABBAS CEMENT INDUSTRIES LIMITED

Copies Of Financial Statements to be Audited

Following are the copies of financial statement that are audited during in our work of audit in AL-Abbas Cement Industry Limited.

Balance sheet Profit &loss Statement Cash Flows statement Statement of Change in Equity Statement of Comprehensive income

ADVANCE AUDIT FINAL PROJECT 2013

AL-ABBAS CEMENT INDUSTRIES LIMITED

ADVANCE AUDIT FINAL PROJECT 2013

AL-ABBAS CEMENT INDUSTRIES LIMITED

ADVANCE AUDIT FINAL PROJECT 2013

AL-ABBAS CEMENT INDUSTRIES LIMITED

ADVANCE AUDIT FINAL PROJECT 2013

AL-ABBAS CEMENT INDUSTRIES LIMITED

ADVANCE AUDIT FINAL PROJECT 2013

AL-ABBAS CEMENT INDUSTRIES LIMITED

ADVANCE AUDIT FINAL PROJECT 2013

AL-ABBAS CEMENT INDUSTRIES LIMITED

Audit Committee of AL-ABBAS CEMENT INDUSTRIES LIMITED Pakistan
Aves Cochinwala Member/chairman Nasim Beg Member Syed Salman Rasheed Member Muhammad Ejaz Member Purpose
The Audit Committee is appointed by the Board to: (1) assist the Board in monitoring (a) the integrity of the financial reporting process, systems of internal controls and financial statements and reports of the Company, (b) the performance of the Companys gl obal internal audit function, (c) the compliance by the Company with legal and regulatory requirements, and (d) the qualifications, independence and performance of the Companys independent auditor employed by the Company for the purpose of preparing or issuing an audit report or related work (the Outside Auditor); and (2) be directly responsible for the appointment, compensation and oversight of the Outside Auditor. Committee Membership

ADVANCE AUDIT FINAL PROJECT 2013

AL-ABBAS CEMENT INDUSTRIES LIMITED

The Audit Committee should consist of no fewer than three members, as determined annually by the Board on the recommendation of the Compensation, Nominating and Governance Committee; provided, however, that the Committee may operate with fewer than three members as long as such composition complies with applicable laws, rules, regulations, and securities exchange listing standards. The members of the Audit Committee shall meet the independence and expertise requirements of the New York Stock Exchange, any other exchange on which the Company's securities are traded, Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules and regulations of the Securities and Exchange Commission (the "Commission"). Audit Committee members shall not serve simultaneously on the audit committees of more than two other public companies without the approval of the full Board. The members of the Audit Committee shall be appointed annually by the Board on the recommendation of the Compensation, Nominating and Governance Committee. Audit Committee members may be replaced by the Board at any time. The Board shall designate the Chairman or Chairwoman (the "Chairperson") of the Audit Committee. Committee members may resign by giving written notice to the Board. A Committee member may resign Committee membership without resigning from the Board, but a member shall cease automatically to be a member of the Committee upon either ceasing to be a member of the Board or ceasing to be "independent" as required above.

ADVANCE AUDIT FINAL PROJECT 2013

AL-ABBAS CEMENT INDUSTRIES LIMITED

Management Letter
June-30-2012 Management of the AL-ABBAS CEMENT INDUSTRIES LIMITED Dear Members of Management: In planning and performing our audit of the financial statements of AL-ABBAS CEMENT INDUSTRIES LIMITED of the Pakistan. as of and for the year ended june 30, 2012 in accordance with auditing standards generally accepted in the Pakistan. Standards, issued by the Comptroller General of the Pakistan., and Office of Management and Audit Requirements for Federal Financial Statements, as amended, we considered the AL-ABBAS CEMENT INDUSTRIES LIMITED control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the AL-ABBAS CEMENT INDUSTRIES LIMITED internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the AL-ABBAS CEMENT INDUSTRIES LIMITED internal control over financial reporting. This report is based on our knowledge as of the date of our report on the financial statements, obtained in performing our audit thereof, and should be read with that understanding. Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over financial reporting. However, in connection with our audit, we identified, and included in Section I, deficiencies related to the AL-ABBAS CEMENT INDUSTRIES LIMITED internal control over financial reporting and other matters as of JUNE-30-2012 , that we wish to bring to your attention. Based on our audit work, we believe management adequately addressed the significant deficiency, Report on Internal Control over Financial Reporting and On Compliance and Other Matters Based upon the Audit Performed in Accordance With Government Auditing Standards. Although we have included managements written response to our comments in Section I , such responses have not been subjected to the auditing procedures

ADVANCE AUDIT FINAL PROJECT 2013

AL-ABBAS CEMENT INDUSTRIES LIMITED

applied in our audit of the financial statements and, accordingly, we do not express an opinion or provide any form of assurance on the appropriateness of the responses or the effectiveness of any corrective actions described therein. This report is intended solely for the information and use of management, the Audit Committee, the Inspector General, and others within the organization and is not intended to be, and should not be, used by anyone other than these specified parties.
Yours truly, KPMG taseer hadi &co Chartered Accountant Karachi,75530 Pakistan

ADVANCE AUDIT FINAL PROJECT 2013

AL-ABBAS CEMENT INDUSTRIES LIMITED

Audit Evidences Bank Confirmation Letter
The Chief Manager, Our Ref: KPMG Standard Chartered Bank Lahore Dated: 30-06-2012 Dear Sir, Subject: REQUEST FOR BANK REPORT I/R OF ANNUAL AUDIT OF AL_ABBAS CEMENT INDUSTRIES LIMETED FOR THE YEAR ENDED 30-06-2012. In accordance with your above named customers instructions given here below, pleased send Direct to us at the above address, as auditors of your customer, the following information, relating to their affairs as at the close of business as on 30-06-2012. Please state against each item in the space provided any factors which may limit the completion of your reply. If there is nothing to report please state NONE Where the space provided is not sufficient please use additional sheets and reference the form appropriately. If for some reason the format of this form is not suitable please return the white copy with your reply anyway. It is understood that the reply you give is in strict confidence for the purpose of audit only Yours faithfully, KPMG taseer hadi &co (Chartered Accountant)

ADVANCE AUDIT FINAL PROJECT 2013

AL-ABBAS CEMENT INDUSTRIES LIMITED

Tax Confirmation Letter
Date:30-06-2012

The Chief Manager, Our Ref: KPMG Standard Chartered Bank Lahore Dated: 30-06-2012

Subject:

REQUEST FOR BANK REPORT I/R OF ANNUAL AUDIT OF AL_ABBAS

CEMENT INDUSTRIES LIMETED FOR THE YEAR ENDED 30-06-2012.

Sir, In connection with examination of above clients financial statements as at the above date, we shall be grateful if you, in the capacity of their tax advisor furnish us the following information to enable us to express an opinion on their financial statements: 1. 2. 3. Current status of tax assessments completed. Estimated tax liability for assessment not yet finalized. Details of appeals filed either by the company or by the department indicating details of significant issued and quantum of amounts involved. 4. An evaluation of the likelihood of an unfavorable outcome and an estimate, if one can be made, of the amount or range of potential liability. 5. Any other matter, which you feel that we should be aware of. An early response in this regard would be highly appreciated.

ADVANCE AUDIT FINAL PROJECT 2013

AL-ABBAS CEMENT INDUSTRIES LIMITED

Yours truly, KPMG taseer hadi &co (Chartered Accountant)

ADVANCE AUDIT FINAL PROJECT 2013

AL-ABBAS CEMENT INDUSTRIES LIMITED

Management Representation Letter
To Yours truly, KPMG taseer hadi &co Chartered Accountant Karachi,75530 Pakistan This representation letter is provided in connection with your audit of the financial statements of AL-ABBAS CEMENT INDUSTRIES LIMITED Pakistan for the year ended December 31, 2011 for the purpose of expressing an opinion as to whether the financial statements give a true and fair view of (present fairly, in all material respects) the financial position of AL-ABBAS CEMENT INDUSTRIES LIMITED Pakistan as of December 31, 2011 and of the results of its operations and its cash flows for the year then ended in accordance with (indicate applicable financial reporting framework). We acknowledge our responsibility for the fair presentation of the financial statements in accordance with (indicate applicable financial reporting framework). We confirm, to the best of our knowledge and belief, the following representations: Include here representations relevant to the entity. Such representations may include the following: There have been no irregularities involving management or employees who have a significant role in internal control or that could have a material effect on the financial statements.

ADVANCE AUDIT FINAL PROJECT 2013

AL-ABBAS CEMENT INDUSTRIES LIMITED

We have made available to you all books of account and supporting documentation and all minutes of meetings of shareholders and the board of directors (namely those held on March 15, 2011 and September 30, 2011, respectively). We confirm the completeness of the information provided regarding the identification of related parties. The financial statements are free of material misstatements, including omissions. The Company has complied with all aspects of contractual agreements that could have a material effect on the financial statements in the event of noncompliance. There has been no noncompliance with requirements of regulatory authorities that could have a material effect on the financial statements in the event of noncompliance. The following have been properly recorded and, when appropriate, adequately disclosed in the financial statements: o The identity of, and balances and transactions with, related parties. o Losses arising from sale and purchase commitments. o Agreements and options to buy back assets previously sold. o Assets pledged as collateral. We have no plans or intentions that may materially alter the carrying value or classification of assets and liabilities reflected in the financial statements. We have no plans to abandon lines of product or other plans or intentions that will result in any excess or obsolete inventory, and no inventory is stated at an amount in excess of net realizable value.

ADVANCE AUDIT FINAL PROJECT 2013

AL-ABBAS CEMENT INDUSTRIES LIMITED

The Company has satisfactory title to all assets and there are no liens or encumbrances on the companys assets, except for those that are disclosed in to the financial statements. We have recorded or disclosed, as appropriate, all liabilities, both actual and contingent, and have disclosed in to the financial statements all guarantees that we have given to third parties. There have been no events subsequent to period end which require adjustment of or disclosure in the financial statements. No other claims in connection with litigation have been or are expected to be received. There are no formal or informal compensating balance arrangements with any of our cash and investment accounts. We have properly recorded or disclosed in the financial statements the capital stock repurchase options and agreements, and capital stock reserved for options, warrants, conversions and other requirements. Thanks in Advance Yours Truly (Senior Executive Officer) AL-ABBAS CEMENT INDUSTRIES LIMITED Pakistan

ADVANCE AUDIT FINAL PROJECT 2013

AL-ABBAS CEMENT INDUSTRIES LIMITED

Auditor Report to Members
We have audited the annexed balance sheet of Al-Abbas Cement Industries Limited (the Company) as at 30 June 2012 and the related profit and loss account, statement of comprehensive income, cash flow statement and statement of changes in equity together with the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit. It is the responsibility of the Companys management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these statements based on our audit. We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the above said statements. An audit also includes assessing the accounting policies and significant estimates made by management, as well as, evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable basis for our opinion and, after due verification, we report that: a) in our opinion, proper books of account have been kept by the Company as required by the Companies Ordinance,1984; b) in our opinion: i) the balance sheet and profit and loss account together with the notes thereon have been drawn up in conformity with the Companies Ordinance, 1984, and are in agreement with the books of account and are further in accordance with accounting policies consistently applied; ii) the expenditure incurred during the year was for the purpose of the Companys business; and iii) the business conducted, investments made and the expenditure incurred during the year were in accordance with the objects of the Company; c) in our opinion and to the best of our information and according to the explanations given to us, the balance sheet, profit and loss account, statement of comprehensive income, cash flow statement and statement of changes in equity together with the notes forming part thereof

ADVANCE AUDIT FINAL PROJECT 2013

AL-ABBAS CEMENT INDUSTRIES LIMITED

conform with approved accounting standards as applicable in Pakistan and give the information required by the Companies Ordinance, 1984, in the manner so required and respectively give a true and fair view of the state of the Companys affairs as at 30 June 2012 and of the profit, its cash flows and changes in equity for the year then ended; and d) in our opinion, no Zakat was deductible at source under the Zakat and Usher Ordinance, 1980. We draw attention to note 1.2 to the financial statements which describes that the accumulated losses of the Company as at 30 June 2012 stand at Rs. 1,697.265 million and as that date, its current liabilities exceed its current assets by Rs. 1,304.210 million. These factors indicate the existence of a material uncertainty which may cast significant doubt on the Companys ability to continue as a going concern and therefore it may not be able to realize its assets and discharge its liabilities in the normal course of business. However, the financial statements have been prepared on going concern basis, based on the financial and operational measures taken by the management as more fully explained in note 1.2 of the financial statements. Our opinion is not qualified in respect of this matter Yours truly, KPMG taseer hadi &co (Chartered Accountant.

ADVANCE AUDIT FINAL PROJECT 2013