Bangladesh University of Professionals

Mirpur Cantonment, Dhaka

Term Paper on
“Analysis of Audit Report of the DSE Listed Companies”

Course Name: Auditing Practices & Procedure

Course Code: ACT 3203

Submitted To
Md. Mahedi Hasan FCA, CPFA
Assistant Professor
Department of Accounting & Information Systems
Bangladesh University of Professionals (BUP)

Submitted By
Name: Faiza Fairooz Chowdhury
ID: 2121141014
Section: B
Batch: 2020-2021

Submitted on 26th May 2024

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Letter of Transmittal

May 26, 2024

Md. Mahedi Hasan FCA, CPFA
Assistant Professor

Subject: Submission of Term Paper

Dear Sir,

I hereby submit my term paper on "Analysis of Audit Report of the DSE Listed Companies"
in compliance with the guidelines provided for the course "Auditing Practices & Procedures
(ACT 3203)". The study's results should shed light on audit structures, areas of concern that
may arise, materiality, and ways to make financial records clear. I would be greatly thankful
for your acceptance of this term paper and for your valuable feedback.

Yours Sincerely,
Faiza Fairooz Chowdhury
ID-2121141014
Section-B
Department of Business Administration
Accounting and Information Systems
Faculty of Business Studies
Bangladesh University of Professionals

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Acknowledgement

Regarding this term paper, I would like to express my appreciation to my course instructor,
Asst. Prof. Md. Mahedi Hasan FCA, CPFA. Additionally, I would want to express my
appreciation to my classmates, who were a great assistance to me throughout the whole
challenging process of writing the term paper.

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Abstract

This study finds similarities and differences between different sectors by looking at the basic
format of the audit report, risk areas, and impact decisions. Liquidity management and
revenue analysis are two important areas that need to be carefully looked over during the
audit. The findings make it clear that all areas of the economy need thorough auditing to
make sure that their finances are open and transparent.

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Table of Contents
Introduction................................................................................................................................6

Analyze the audit report and distinguish the differences in the basic structure.....................7

Relevance of Key Audit Matters............................................................................................8

Anwar Galvanizing Ltd......................................................................................................8

Apex Spinning & Knitting Mills Limited..........................................................................9

IPDC Finance Limited.....................................................................................................10

Olympic Industries Limited.............................................................................................10

Variations in Audit Fee........................................................................................................12

Anwar Galvanizing Limited.............................................................................................12

Apex Spinning & Knitting Mills Limited........................................................................12

IPDC Finance Limited.....................................................................................................13

Olympic Industries Limited.............................................................................................14

Comparison with the ICAB fees schedule...........................................................................14

Anwar Galvanizing Limited.............................................................................................14

Apex Spinning & Knitting Mills Limited........................................................................14

IPDC Finance Limited.....................................................................................................15

Olympic Industries Limited.............................................................................................15

Report Issuance....................................................................................................................15

Audit risk areas of the companies........................................................................................16

Anwar Galvanizing Limited.............................................................................................16

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Apex Spinning & Knitting Mills Limited........................................................................18

IPDC Finance Limited.....................................................................................................20

Olympic Industries Limited.............................................................................................22

Calculation of materiality with judgment for each of the companies in relation to the audit
..............................................................................................................................................23

Anwar Galvanizing Limited.............................................................................................24

Apex Spinning & Knitting Mills Limited........................................................................25

IPDC Finance Limited.....................................................................................................26

Olympic Industries Limited.............................................................................................27

Suggestions regarding disclosure and presentation in their financial statements................28

Anwar Galvanizing Limited.............................................................................................28

Apex Spinning & Knitting Mills Limited........................................................................29

IPDC Finance Limited.....................................................................................................29

Olympic Industries Limited.............................................................................................30

Conclusion................................................................................................................................30

Appendix..................................................................................................................................31

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Introduction

The auditing process is important for making sure that the financial records of businesses are
correct and reliable. In this study, the audit information of four different groups are looked at
in great depth. We look at their organization, key audit issues, risk areas, estimates of how
important things are, and ideas for how financial statements should be shown and disclosed.
This in-depth study sheds light on the accounting methods and problems that different
industries face, highlighting how important it is for financial reports to be truthful and
correct. The four DSE listed companies selected for the report are-

IPDC Finance Limited Olympic Industries

Symbol: IPDC
Symbol: OLYMPIC
Sector: Financial Institutions
Sector: Food & Allied

Apex Spinning & Knitting Mills Limited Anwar Galvanizing Limited

Symbol: ANWARGALV
Symbol: APEXSPINN
Sector: Engineering
Sector: Textile

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Analyze the audit report and distinguish the differences in the basic
structure

Apex Spinning & Anwar

Audit Report IPDC Finance Olympic Knitting Mills Galvanizing
Basic Structure Limited Industries Limited Limited

Financial
Sector Food & Allied Textile Engineering
Institutions

Title Provided Provided Provided Provided

Addressee Mentioned Mentioned Mentioned Mentioned

Key Audit Mentioned Mentioned Mentioned Mentioned

Matters

Management’s Mentioned Mentioned Mentioned Mentioned

Responsibility
for Financial
Statements

Auditor’s Mentioned Mentioned Mentioned Mentioned

Responsibility

Opinion Mentioned Mentioned Mentioned Mentioned

Basis of the Mentioned Mentioned Mentioned Mentioned

Opinion

Other Mentioned Mentioned Mentioned Mentioned

Information

Report on other Mentioned Mentioned Mentioned Mentioned

Legal and
Regulatory
Requirements

Signature of the Mentioned Mentioned Mentioned Mentioned

Auditor

Place of Mentioned Mentioned Mentioned Mentioned

Signature

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Date of Audit Mentioned Mentioned Mentioned Mentioned

Report

Despite being from different sectors there are no mentionable differences in the basic
structure of the audit report of the chosen four companies.

Relevance of Key Audit Matters

Anwar Galvanizing Ltd.

Key Audit
Matter Relevance to the Industry Relevance to Investors

In the engineering and industrial

industries, revenue reporting is very Revenue is one of the most important
important because it has a direct effect things for investors to keep an eye on
on both financial success and because it shows how fast and well a
operating results. There are a lot of business is doing. Accurate income
Revenue different goods, refunds, discounts, reporting is necessary so that buyers
Recognition and other rewards used in this field, so can make smart choices about their
sales deals can get complicated. A investments. Any change or misuse of
company must make sure that income revenue reporting could lead to false
is recognised correctly if it wants its information about a company's
financial records to accurately show finances and operations.
how it runs.

This is important for buyers to know

because it has a direct effect on the
Inventory management and pricing are
company's cost of goods sold (COGS)
very important in the engineering
and its ability to make money.
business because inventory things like
Accurate inventory assessment is one
raw materials, work-in-progress, and
way to figure out how well a business
Inventory finished goods are very varied and
is running and how much money it will
Valuation worth a lot of money. If a company
make in the future. It also gives buyers
gets its assets priced correctly, its
faith in the company's ability to use its
financial records will show how much
resources well and avoid losses caused
they are worth on the market.
by material that is out of date or
moving slowly.

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Apex Spinning & Knitting Mills Limited

Key Audit
Matter Relevance to the Industry Relevance to Investors

Because of the complicated nature of

When investors look at a
sales deals in the textile industry,
company's success and growth
which includes VAT, trade
possibilities, they need accurate
discounts, and large purchases,
income statistics. If revenue
income tracking is very important.
reporting is messed up or twisted,
Correct revenue reporting makes
Revenue investors could get the wrong idea
sure that financial success is shown
Recognition about how healthy the company's
correctly by taking into account the
finances are. To make smart
terms and conditions of sales deals.
investment decisions, you need to
This is very important in a field
have correct income tracking,
where the time of recognising
which shows how profitable and
income can have a big effect on cash
efficient the business really is.
flow and profit margins.

The textile industry counts on correct

Investors look at inventory value
inventory values a lot because they
to see how well a company
keep a lot of different kinds of stock,
manages its resources and to
like raw materials, work-in-progress,
figure out what risks come with
and finished goods. It is very
having old or slow merchandise.
Valuation of important to use accurate assessment
Investors' opinions on how well a
Inventory methods because over- or under-
business runs and how profitable it
reporting of inventory has a direct
will be in the future depend on
effect on cost of goods sold and total
how accurately its product is
revenue. Keeping track of stuff that
valued. This, in turn, affects the
isn't being used or moves slowly is a
balance sheet and profit ratios.
big problem in this business.

Deferred tax measurement is very

important for the textile industry Investors are very worried about
because there are many short-term how the company's delayed tax
differences between how accounting payments will affect the value of
Measurement
rules and tax laws treat assets and its assets and its future cash flows.
and Recognition
liabilities. Proper measurement is the To figure out if an investment will
of Deferred Tax
only way to make sure that IAS 12 is be worth it in the long term, it's
followed and that the company's necessary to accurately measure
future tax obligations are correctly and recognise delayed tax.
shown.

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IPDC Finance Limited

Key Audit
Matter Relevance to the Industry Relevance to Investors

Since there is a lot of credit risk in

Investors pay close attention to
banks, it is very important to make
how much money is set aside for
accurate estimates of the provisions
loans and advances because it has
for loans, advances, and leases.
a direct effect on the company's
Because it's hard to understand and
Measurement of profits and financial health. If the
depends on personal opinion, this
Provision for business has enough reserves, it
process should only be done by
Loans, means it is doing a good job of
people who are skilled at predicting
Advances, and controlling credit risk and
business performance and figuring
Leases possible failures. Provisioning
out secondary value. Proper funding
that isn't enough can cause losses
is important for keeping trust in the
that aren't expected, which can
financial system because it makes
hurt the company's finances and
sure that the institution is stable and
make business choices harder.
follows the rules set by regulators.

The main thing that a bank does is

People who invest money want to
make loans and advances, keep
know that the bank has strong
records of them, and pay them back.
protections in place to stop scams
Due to the high number of deals,
and mistakes and that the records
mistakes, handling issues, or scams
Loans and of loans and advances are
could happen easily. It is very
Advances accurate. The truth of a
important that this area is well
company's loan and advance
handled so that the institution has
records affects its finances, which
correct financial records and follows
in turn affects how risky it is and
all legal rules. This is for operating
how well it is doing.
ethics and image reasons.

Olympic Industries Limited

Key Audit
Matter Relevance to the Industry Relevance to Investors

Valuation of PPE, such as factories and machines, It is important to give investors

Property, Plant, are important assets that affect how trust that PPE is priced correctly
and Equipment well the food and related businesses so that they can understand the
(PPE) work and how much they produce. company's assets and any future
Estimating the assets' value and capital spending needs. It is
useful life is important for managing important to get the worth right
them, planning their upkeep, and because depreciation charges can
making sure that the finances are change the firm's balance sheet

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and ability to make money.

Accurate value is important for
correct. investment decisions because it
lets people trust the reported
financial success and asset use.

Investors use the inventory value

as a key measure because it shows
In the food and related industries, it's
how well the company manages
important to get an accurate
its stock and how likely it is that
inventory value so that assets aren't
products will become obsolete,
overstated. This is because many of
Valuation of both of which affect its ability to
the goods and products in these
Inventory make money. A correct inventory
industries have short shelf lives and
value affects investors' trust and
go bad quickly. Keeping track of
the investments they make
assets affects both the cost of goods
because it shows how well the
sold (COGS) and the bottom line.
company manages its cash flow
and runs its business.

Investors look at tax costs to get a

Taxes are an important part of the
better idea of the effective tax rate
food and related business because
and how it affects net income. To
there are many tax rules and benefits
get a better idea of a business's
that affect how food is made and
health and cash flow, it may help
distributed. Correctly figuring out
to report its tax expenditures more
Income Tax and reporting income tax costs is
accurately. It also gives
Expenses important for making sure that
information on how well the
financial reports are correct and that
company is following tax laws and
tax rules are followed. Misstatements
what its possible future tax
put at risk both the company's net
responsibilities are, which is very
income and its ability to follow the
important for making long-term
rules.
investments.

Investors need to see the

The food and allied business use paperwork to be sure that related
related party deals a lot to get raw party deals are legal and won't
materials, send out goods, and do change the numbers. Investors can
Transactions
other operating tasks. To keep judge the honesty of management
with Related
financial records open and honest, it and the accuracy of financial
Parties
is important that these deals are made records by how well these
without any unfair pressure and are transactions are recorded and
logged properly. made public. This affects their
trust and decision to spend.

The food and allied businesses Financial info that people can trust
depend on IT systems for everything, is important when they make
IT Systems and from keeping track of finances to purchases. Effective IT systems
Controls making sure factories follow the right and rules make sure that the
steps and keeping track of stock. IT company's financial info is
rules that work well help keep data correct, safe, and that no one else

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safe, stop scams, and run processes

can get to it without permission.
smoothly. Two of the most important
With this promise, buyers will
jobs of good IT systems are to keep
trust you and you'll be able to
data safe and make sure operations
make smart business decisions.
run smoothly.

Variations in Audit Fee

Anwar Galvanizing Limited

Year Audit Fee Comparison

The audit fee went up to Tk.

2023 Tk. 255,555 255,555 because the
operations and audit scope
might have grown. The
increase could be because
the audit job became more
2022 Tk. 172,500 complicated or broad,
because government rules
have changed, because the
business has grown, or
because the audit firm's fees
have changed.

Apex Spinning & Knitting Mills Limited

Year Audit Fee Comparison

For the years 2022 and 2023,

2023 Tk. 402,500 Apex Spinning & Knitting
Mills Limited's audit fee was
Tk. 402,500. This
consistency over the last two
years shows that the
organization's financial
reporting standards have
stayed the same, and the
2022 Tk. 402,500 audit work has stayed mostly
the same in terms of its
scope and difficulty. Fees for

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audits tend to stay the same

when things like the
company's finances,
processes, and internal
controls are rock solid.

IPDC Finance Limited

Year Audit Fee Comparison

The audit fee for IPDC

2022 Tk. 1,299,505 Finance Limited went up a
little from Tk. 1,222,455 in
2021 to Tk. 1,299,505 in
2022. This price increase
could be because the
auditor's hourly rate
changed, there are more
audit processes that need to
be done, or the company's
operations are more
2021 Tk. 1,222,455 complicated. The main
things that change audit fees
from one year to the next are
the scope of the audit,
changes in the law, and
changes in how the company
works.

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Olympic Industries Limited

Year Audit Fee Comparison

The audit fee for Olympic

2023 Tk. 1,200,000 Industries remained
consistent at Tk. 1,200,000
for both 2022 and 2023. This
stability suggests that the
scope and complexity of the
audit engagement, as well as
the company's financial
reporting requirements,
remained relatively
2022 Tk. 1,200,000 unchanged over the two
years. Factors such as
consistent financial
performance, stable business
operations, and effective
internal controls may
contribute to the consistent
audit fee.

Comparison with the ICAB fees schedule

Anwar Galvanizing Limited

Audit Fee ICAB fees schedule

Tk. 255,555 Tk. 420,000

According to the ICAB fees schedule, the audit fee is Tk. 420,000 and the actual audit fee
for the year 2023 is Tk. 255,555.

Apex Spinning & Knitting Mills Limited

Audit Fee ICAB fees schedule

Tk. 402,500 Tk. 665,000

According to the ICAB fees schedule, the audit fee is Tk. 665,000 and the actual audit fee
for the year 2023 is Tk. 402,500.

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IPDC Finance Limited

Audit Fee ICAB fees schedule

Tk. 1,299,505 Tk. 3,500,000

According to the ICAB fees schedule, the audit fee is Tk. 3,500,000 and the actual audit fee
for the year 2022 is Tk. 1,299,505.

Olympic Industries Limited

Audit Fee ICAB fees schedule

Tk. 1,200,000 Tk. 1,595,000

According to the ICAB fees schedule, the audit fee is Tk. 1,595,000 and the actual audit fee
for the year 2023 is Tk. 1,200,000.

Report Issuance

Anwar Galvanizing Limited Unqualified Opinion

Apex Spinning & Knitting Mills Limited Unqualified Opinion

IPDC Finance Limited Unqualified Opinion

Olympic Industries Limited Unqualified Opinion

The audit was done in accordance with International Standards on Auditing (ISAs) for all the
four companies. The responsibilities under those standards are further described in the
Auditors’ Responsibilities for the Audit of the Financial Statements section of the report. All
the companies believe that the audit evidence obtained is sufficient and appropriate to
provide a basis for their opinion.

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Audit risk areas of the companies

Anwar Galvanizing Limited

Financial
Ratio 2023 2022 Explanation

The decrease in the current ratio suggests that the

company's ability to cover its short-term liabilities with its
Current
1.432 1.654 short-term assets has weakened. This could indicate
Ratio
higher current liabilities or reduced current assets
compared to the previous year.

The slight decline in the quick ratio indicates a marginal

reduction in the company's ability to meet its short-term
Quick Ratio 0.896 0.947 obligations without relying on the sale of inventory. This
points to potential liquidity issues or increased reliance on
inventory for covering short-term liabilities.

The substantial increase in the debt-to-equity ratio

Debt to highlights a significant rise in debt relative to equity. This
Equity 2.04 0.042 drastic change suggests that the company has taken on a
Ratio considerable amount of new debt, which increases
financial risk and potential interest obligations.

The debt-to-equity ratio and this rise both show that debt
Debt to
is becoming a bigger part of the company's capital
Total
0.671 0.041 structure. Because the company has borrowed a lot of
Capital
money, more and more people are worried about its ability
Ratio
to stay healthy and financially safe in the future.

As a result of less profit from core tasks, the working

Operating profit ratio has gone down. This could be because the
Profit 0.059 0.121 prices are lower, there are fewer sales, or the general costs
Margin are higher. It means that the business may be having
trouble running efficiently.

It seems that the company has slightly raised its debt-to-

equity ratio because its financial leverage has gone up a
Financial
2.04 1.994 little. This slow change and the sudden rise in other debt-
Leverage
related measures point to a strategy shift towards more
borrowing.

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Audit Risk Areas Identified

Audit Risk Issue

Area Identified Audit Risks Suggested Audit Procedures

Scrutinize cash flow forecasts

Potential difficulties
Liquidity and current liabilities.
Declining in meeting short-term
and Evaluate management's plans to
Current and obligations,
Solvency address liquidity issues.
Quick Ratios questioning the going
Concerns Review post-balance sheet
concern assumption.
events impacting liquidity.

Perform detailed procedures on

Sharp increase Risk of covenant debt covenants and agreements.
in Debt to breaches, interest Review related party
High
Equity and payment defaults, transactions.
Leverage
Debt to Total and increased Assess the accuracy of interest
Capital Ratios financial risk. expense calculations and future
payment obligations.

Focus on revenue recognition

Declining
policies.
profitability could
Significant drop Assess cost allocations and
Profitability indicate higher costs,
in Operating expense classifications.
Issues inefficiencies, or
Profit Margin Perform analytical procedures on
competitive
profitability trends and cost
pressures.
management.

Test assumptions used in

Higher financial risk financial models.
Increase in and sensitivity to Assess the impact of leverage on
Financial
Financial changes in interest financial statements.
Leverage
Leverage Ratio rates and economic Review interest rate sensitivity
conditions. analysis and risk management
strategies.

Apex Spinning & Knitting Mills Limited

Financial
Ratio 2023 2022 Explanation

The decrease in the current ratio indicates a reduction in

liquidity, meaning the company has fewer current assets
Current
1.11 1.41 available to cover its short-term liabilities. This could be
Ratio
due to an increase in current liabilities or a decrease in
current assets.

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The increase in the quick ratio suggests improved

liquidity when excluding inventory, implying that the
Quick Ratio 0.981 0.808 company has a better capacity to meet its short-term
obligations with its most liquid assets. This might result
from higher cash balances or receivables.

The significant increase in the debt-to-equity ratio

Debt to
indicates that the company has increased its reliance on
Equity 3.12 2.15
debt financing relative to its equity. This suggests higher
Ratio
financial risk as the company is more leveraged.

Debt to The increase in the debt to total capital ratio further

Total indicates that a larger portion of the company's capital
0.757 0.683
Capital structure is financed through debt. This points to higher
Ratio financial leverage and potential risk.

The substantial increase in the operating profit margin

Operating
suggests significant improvement in operational
Profit 0.312 0.0146
efficiency or profitability. This could be due to higher
Margin
revenues, better cost management, or both.

The increase in financial leverage reflects the company's

Financial higher reliance on debt relative to equity in financing its
4.118 3.153
Leverage assets. This indicates an increase in financial risk and
potential strain on the company's financial stability.

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Audit Risk Areas Identified

Audit Risk Suggested Audit

Area Issue Identified Audit Risks Procedures

Review the valuation

Verification of the methods used for current
valuation of current assets and confirm their
Liquidity Current and assets and completeness accuracy.
Management Quick Ratios of current liabilities. Verify the completeness of
Accuracy of receivables current liabilities.
and payables. Test the accuracy of
receivables and payables.

Examine the terms and

Review of the company's
conditions of debt
debt agreements,
Debt to Equity agreements and verify their
repayment schedules, and
Debt and and Debt to compliance.
covenant compliance.
Leverage Total Capital Assess the impact of
Assessment of the impact
Ratios increased leverage on
of increased leverage on
financial statements and
financial health.
forecast potential risks.

Review revenue
Validity and recognition policies and
completeness of revenue assess compliance with
recognition and cost accounting standards.
Profitability Operating
allocation. Verify the accuracy of
and Margins Profit Margin
Accuracy of sales records sales records and expense
and expense categorization against prior
categorization. periods and industry
standards.

Analyze the composition of

Examination of the
the company’s capital
company’s capital
structure and assess the
structure.
proportion of debt to
The rise in Evaluation of
Financial equity.
financial sustainability of current
Stability Evaluate the long-term
leverage financing strategies.
viability of current
Assessment of the risk of
financing strategies and
default and overall
forecast potential solvency
impact on solvency.
issues.

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IPDC Finance Limited

Financial Ratio 2022 2021 Explanation

The increase indicates rising expenses relative to

Expense Ratio 0.537 0.446 revenue, suggesting higher operational costs or lower
expense management efficiency.

The increase suggests heightened lending activities

Loans/Total relative to deposits, potentially increasing income
1.152 1.081
Deposits Ratio from interest but also raising risk if loan quality
declines.

The decrease indicates a smaller portion of deposits

Liquid Assets to
held in easily liquidatable assets, which may impact
Total Deposits 0.214 0.235
liquidity and the ability to meet short-term
Ratio
obligations.

The increase reflects better efficiency in generating

Return on
returns from investments, indicating improved
Investment 0.360 0.322
investment strategies or higher returns from existing
(ROI)
investments.

The decline suggests reduced profitability from core

Operating Profit
0.542 0.640 operations, possibly due to increased operating
Margin
expenses or lower revenues.

The increase indicates improved overall profitability,

Net Profit suggesting better cost management, higher revenue,
0.277 0.256
Margin or lower tax/interest expenses relative to total
income.

Return on Assets Stable ROA suggests consistent efficiency in using

0.010 0.010
(ROA) assets to generate profit over the two years.

The slight decrease suggests a marginal decline in

Return on profitability relative to shareholders' equity,
0.132 0.139
Equity (ROE) potentially due to increased equity or lower net
income.

Audit Risk Areas Identified

Audit Risk Suggested Audit

Area Issue Identified Audit Risks Procedures

Portfolio and N/A Lack of adherence to Review lending policies and

Loan lending policies and procedures to ensure
Provisioning, inadequate loan compliance with regulatory
Adherence to provisioning may requirements. Assess the
Lending lead to increased adequacy of loan

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provisioning by evaluating
credit risk and the quality of the loan
Policies
potential losses. portfolio and testing the
accuracy of provisions.

Evaluate the company’s

Insufficient liquid liquidity management
assets may pose practices and policies. Test
Decrease in liquid
liquidity risks and the adequacy of liquid asset
assets suggests
Liquidity Risk hinder the holdings by comparing
potential liquidity
company's ability to them to short-term liabilities
issues.
meet short-term and assessing the ability to
obligations. convert assets into cash in a
timely manner.

Scrutinize revenue
Decreased profit
recognition methods and
margins may
Decline in expense management
indicate
operating profit practices. Analyze revenue
Profitability inefficiencies in
margin and mixed streams and cost controls to
Analysis revenue generation
trend in net profit identify areas for
or cost management,
margin. improvement. Assess the
impacting overall
impact of tax implications
profitability.
on profitability.

Review investment
Effective investment
strategies and assess the
strategies and
Improved ROI accuracy of investment
Investment and accurate valuation of
suggests better valuations. Evaluate the
Asset investments
investment realization of returns on
Management contribute to
performance. investments and compare
improved returns on
them to industry
investment.
benchmarks.

Assess the impact of new

equity issuance or profit
Changes in equity distributions on
Slight decline in
Equity and structure and profit shareholders’ returns.
ROE necessitates
Capital distributions may Review equity changes and
assessment of
Management impact shareholders’ evaluate their effects on the
equity changes.
returns. company’s financial
position and shareholders’
equity.

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Olympic Industries Limited

Financial
Ratio 2023 2022 Explanation

The increase indicates improved liquidity, suggesting

Current
2.29 1.974 that Olympic Industries is better able to cover short-term
Ratio
liabilities with its short-term assets.

The rise suggests enhanced liquidity excluding

Quick Ratio 1.53 1.430 inventory, implying a better ability to meet short-term
obligations using the most liquid assets.

The decrease indicates reduced leverage, showing that

Debt to
0.405 0.541 Olympic Industries has either decreased its debt or
Equity Ratio
increased its equity, resulting in lower financial risk.

The decrease indicates reduced leverage, implying that

Debt to Total
0.288 0.351 the company is financing a smaller portion of its capital
Capital Ratio
structure with debt, which enhances financial stability.

The increase suggests better operational efficiency or

Operating
higher profitability from core business operations,
Profit 0.085 0.067
potentially due to improvements in cost management or
Margin
increased sales revenue.

The significant decrease reflects the company's reduced

Financial reliance on debt for financing its assets, indicating a shift
1.14 1.54
Leverage towards more equity financing or successful repayment
of existing debt.

Audit Risk Areas Identified

Audit Risk Suggested Audit

Area Issue Identified Audit Risks Procedures

Overstatement of current Verify the accuracy of

Improved liquidity assets or understatement receivables, inventory
ratios need of current liabilities may valuation, and
verification to ensure lead to misleading payables. Ensure that
Liquidity
accurate liquidity ratios. current assets and
Management
representation of Verification of liabilities are
current assets and receivables, inventory appropriately stated in
liabilities. valuation, and payables accordance with
is crucial. accounting standards.

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Incomplete recording of Assess the

Reduction in leverage debt and lack of clarity completeness of
ratios indicates on debt covenants may recorded debt. Review
Debt and
potential focus on pose risks. Review equity debt covenants and
Leverage
debt repayments and financing activities and evaluate the source and
equity financing. assess compliance with terms of equity
debt terms. financing.

Examine revenue
recognition policies to
Increased margin Inappropriate revenue ensure compliance with
requires scrutiny of recognition policies and accounting standards.
Profitability
revenue recognition inaccurate expense Review expense
and Margins
policies and expense classifications may classifications and
classifications. impact reported margins. allocations for
accuracy and
consistency.

Review debt
Capital structure changes agreements and equity
Decrease in financial
and financing strategies transactions. Assess the
leverage necessitates
Financial should be evaluated for impact of capital
review of capital
Stability their impact on the structure changes on
structure and
company's financial the company's financial
financing strategies.
health. stability and
sustainability.

Here's a table summarizing the audit risk areas for the four companies indicating whether the
risk of audit is high or low for each identified area:

Risk
Company Audit Risk Area Level

Liquidity and Solvency Concerns High

High Leverage High

Anwar Galvanizing Limited
Profitability Issues High

Financial Leverage High

Liquidity Management High

Apex Spinning & Knitting Mills Debt and Leverage High

Limited Profitability and Margins Low

Financial Stability High

IPDC Finance Limited Portfolio and Loan Provisioning High

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Liquidity Risk High

Profitability Analysis Medium

Investment and Asset

Low
Management

Equity and Capital Management Medium

Liquidity Management Low

Debt and Leverage Low

Olympic Industries Limited
Profitability and Margins Medium

Financial Stability Low

Calculation of materiality with judgment for each of the companies in

relation to the audit

Anwar Galvanizing Limited

Overall Planning Materiality

Overall Planning Materiality Taka

1 Un-audited total assets 799,721,330

2 Un-audited total revenues 737,973,899

3 Select the larger of line 1 or line 2 799,721,330

4 Select a multiplier 1%

5 Multiply line 3 by line 4 7,997,213

6 Un-audited pretax income 68,818,529

7 Select a multiplier 6%

8 Multiply line 6 by line 7 4,129,111

According to the OM, the financial statements as a whole are fairly stated.

Performance Materiality

The purpose of performance materiality is to keep the likelihood that the total of uncorrected

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and undetected misstatements will surpass planning materiality in the financial statements to
a reasonable level, while still ensuring that the financial statements are adequately prepared.
Performance materiality/tolerable misstatement is often determined as a fraction of planning
materiality using this technique. The proportion is raised from 50% when the risk of
uncorrected recognised misstatements lowers, although it typically ranges from 50% to 75%.

Performance Materiality for Anwar Galvanizing Limited:

Tk. 7,997,213 x 75% =Tk. 5,997,909

Clearly Trivial Threshold

“Clearly trivial” threshold is intended to help the auditor to identify and accumulate
misstatements identified during the audit, other than those that are clearly trivial. Normal
percentage of trivial amounts calculated based on OM is 5%.

Clearly Trivial Threshold of Anwar Galvanizing Limited:

Tk. 7,997,213 x 5% =Tk. 399,861

Apex Spinning & Knitting Mills Limited

Overall Planning Materiality

Overall Planning Materiality Taka

1 Un-audited total assets 2,227,190,720

2 Un-audited total revenues 4,439,408,694

3 Select the larger of line 1 or line 2 4,439,408,694

4 Select a multiplier 0.75%

5 Multiply line 3 by line 4 33,295,565

6 Un-audited pretax income 101,858,881

7 Select a multiplier 8%

8 Multiply line 6 by line 7 8,148,710

According to the OM, the financial statements as a whole are fairly stated.

Performance Materiality

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The purpose of performance materiality is to keep the likelihood that the total of uncorrected
and undetected misstatements will surpass planning materiality in the financial statements to
a reasonable level, while still ensuring that the financial statements are adequately prepared.
Performance materiality/tolerable misstatement is often determined as a fraction of planning
materiality using this technique. The proportion is raised from 50% when the risk of
uncorrected recognised misstatements lowers, although it typically ranges from 50% to 75%.

Performance Materiality for Apex Spinning & Knitting Mills Limited:

Tk. 33,295,565 x 60% = Tk. 19,977,339

Clearly Trivial Threshold

“Clearly trivial” threshold is intended to help the auditor to identify and accumulate
misstatements identified during the audit, other than those that are clearly trivial. Normal
percentage of trivial amounts calculated based on OM is 5%.

Clearly Trivial Threshold of Apex Spinning & Knitting Mills Limited:

Tk. 33,295,565 x 5% = Tk. 16,64,778

IPDC Finance Limited

Overall Planning Materiality

Overall Planning Materiality Taka

1 Un-audited total assets 86,732,379,052

2 Un-audited total revenues 7,080,316,655

3 Select the larger of line 1 or line 2 86,732,379,052

4 Select a multiplier 1%

5 Multiply line 3 by line 4 867,323,791

6 Un-audited pretax income 1,760,284,157

7 Select a multiplier 7%

8 Multiply line 6 by line 7 123,219,891

According to the OM, the financial statements as a whole are fairly stated.

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Performance Materiality

The purpose of performance materiality is to keep the likelihood that the total of uncorrected
and undetected misstatements will surpass planning materiality in the financial statements to
a reasonable level, while still ensuring that the financial statements are adequately prepared.
Performance materiality/tolerable misstatement is often determined as a fraction of planning
materiality using this technique. The proportion is raised from 50% when the risk of
uncorrected recognised misstatements lowers, although it typically ranges from 50% to 75%.

Performance Materiality for IPDC Finance Limited:

Tk. 867,323,791 x 65% = Tk. 563,760,464

Clearly Trivial Threshold

“Clearly trivial” threshold is intended to help the auditor to identify and accumulate
misstatements identified during the audit, other than those that are clearly trivial. Normal
percentage of trivial amounts calculated based on OM is 5%.

Clearly Trivial Threshold of IPDC Finance Limited:

Tk. 867,323,791 x 5% =Tk. 43,366,190

Olympic Industries Limited

Overall Planning Materiality

Overall Planning Materiality Taka

1 Un-audited total assets 14,080,113,225

2 Un-audited total revenues 25,785,247,628

3 Select the larger of line 1 or line 2 25,785,247,628

4 Select a multiplier 0.75%

5 Multiply line 3 by line 4 193,389,357

6 Un-audited pretax income 2,185,323,690

7 Select a multiplier 7.5%

8 Multiply line 6 by line 7 163,899,277

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According to the OM, the financial statements as a whole are fairly stated.

Performance Materiality

The purpose of performance materiality is to keep the likelihood that the total of uncorrected
and undetected misstatements will surpass planning materiality in the financial statements to
a reasonable level, while still ensuring that the financial statements are adequately prepared.
Performance materiality/tolerable misstatement is often determined as a fraction of planning
materiality using this technique. The proportion is raised from 50% when the risk of
uncorrected recognised misstatements lowers, although it typically ranges from 50% to 75%.

Performance Materiality for Olympic Industries Limited:

Tk. 193,389,357 x 75% = Tk. 145,042,018

Clearly Trivial Threshold

“Clearly trivial” threshold is intended to help the auditor to identify and accumulate
misstatements identified during the audit, other than those that are clearly trivial. Normal
percentage of trivial amounts calculated based on OM is 5%.

Clearly Trivial Threshold of Olympic Industries Limited:

Tk. 193,389,357 x 5% = Tk. 9,669,468

Suggestions regarding disclosure and presentation in their financial

statements

Anwar Galvanizing Limited

Detailed Liquidity and Solvency Analysis

Current and Quick Ratios: Include a narrative discussing the implications of the current
and quick ratios. Explain any significant year-on-year changes and outline the company's
strategies to manage liquidity risks.

Debt Structure: Provide a detailed analysis of the debt structure, including the debt-to-
equity ratio and financial leverage. Highlight the risks associated with high leverage and
describe the company’s plans for managing these risks.

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Comprehensive Profitability Metrics Explanation

Operating Profit Margin: Explain how strategies for setting prices, changes in the number
of sales, and efforts to keep costs down affect operating profit margins.

Net Profit Margin and ROE: Give some information about what changes the return on
stock and the net profit ratio. It is important to think about what will happen if the capital
structure changes, taxes go up or down, and other big non-operating things happen.

Corporate Governance and Risk Management Disclosures

Governance Practices: Improve the transparency of corporate governance processes by

disclosing more information on the composition and duties of the board of directors, the work
of the audit committee, and the extent to which the company complies with applicable
regulations.

Risk Management Framework: Outline the company's risk management system in detail,
including the main risks and the solutions put in place to reduce them. This clarifies the
company's approach to handling operational and financial risks for stakeholders.

Apex Spinning & Knitting Mills Limited

Improve Presentation of Equity: Break down the equity display into its parts, such as the
reserve and surplus, the fair value surplus of assets, the share price, and the share capital.
Stakeholders may be able to better understand how the company's capital structure has
changed over time this way.

Enhance Clarity in Operating Expenses: Break down business costs into different types,
such as marketing costs and office waste, to make them easier to understand. So, we may
have a better idea of how the business's costs work and how well it runs.

Expand Disclosure on Cash Flows: Give a more detailed account of cash flows, especially
in the part that talks about daily processes. It might be easier to understand how the company
manages its cash if important parts of its deals and payments, like the money it makes, the
money it spends, and its income tax payments, were made public.

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IPDC Finance Limited

Provide Comparative Analysis: By reviewing the numbers from different years, one can
learn a lot about how the business is doing financially and how it has changed over time. If
important financial measures like sales, costs, and profits for at least the last two to three
years are shown, stakeholders will be able to judge the company's financial path and
performance stability.

Expand Disclosure on Risk Management: In the financial records, the company's risk
management strategy is barely stated. However, stakeholders would benefit from more
thorough information on how the company finds, evaluates, and reduces risks. We can talk
about the company's specific risks, the ways it tries to lower those risks, and how well the
current risk management methods work.

Improve Transparency in Capital Structure: It would be better if companies were more

open about their capital structure, which includes their owners' stock, loans, and possible
responsibilities. Capital adequacy measures, the conditions and terms of existing loan
instruments, and any major changes to the capital structure during the filing period may need
to be made public.

Olympic Industries Limited

Expand Disclosure on Non-current Assets: There needs to be more details and a split of
non-current assets, especially PPE and intangible assets like software ERP. For instance, it
might list the types of assets, how long they are supposed to last, how they are depreciated,
and any losses that were found during the accounting period.

Improve Transparency in Liabilities: To make reports clear, give a more thorough

breakdown of all present and future responsibilities. Part of this process could be figuring out
the terms and conditions of different types of debts, such as short-term loans, lease financing,
trade payables, and provisions.

Include Key Performance Indicators (KPIs): Include key performance indicators (KPIs) or
financial statistics to give stakeholders a quick look at the company's success and finances.
Measures like cash ratios, debt ratios, revenue ratios, and more might be part of the
management discussion and analysis (MD&A) or a separate piece.

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Conclusion

A close study of audit findings from various businesses helped us figure out the similarities
and differences between auditing methods. It is important to have strong auditing methods to
keep the financial world open and honest, because they help with things like making money,
following loan rules, and managing cash flow.

Appendix

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