Objectives of Auditing the company's Financial Statements:
To form an independent audit opinion on whether the company's financial statements provide a true and fair view of the company's financial position and results of its operations.
To ensure the proper presentation of the financial information in the company's books and records.
Responsibilities of the Company's Management:
Maintaining adequate financial and administrative system to be relied upon when we perform both the interim as well as the final audit procedures. The organization structure of a company consists of a number of functions which interact together to achieve the company's objectives. These functions or components include:
Documentary flowcharts which help to identify the documents and records, sequence of procedures, and departments participating in the execution of a particular function or activity. Also, they help to determine the relationship and movement and transfer of documents between the various departments performing a particular transaction or task.
Documents help to determine the nature and sequence of activities performed for a particular procedure or function described in its documentary flowchart. They provide written evidence about the actual existence of the company's transactions. They are also used as a basis for recording the company's transactions and the preparation of the various financial and non financial reports.
Books and records:help the preparation of the various reports for various decision making purposes and to monitor the various activities of the company through the assessment of the actual results recorded and their comparison with budgeted data and other significant information.
Chart of accounts:help to identify the type of accounts which represent the financial transactions made by the company. It identifies those accounts which should be included in the accounting books and records through a proper clarification of the company's various accounts with the aim to help in the preparation of the trial balance and the financial statements with its attached notes and detailed schedules.
Financial & administrative manuals: help to determine, in a written form the main procedures and regulations associated with the various activities of the company (purchasing, sales, warehousing, financial and administrative… etc). They also determine the authorities of the managers employed by the company.
System of reporting help managers, supervisors and executives make their various operating, financial, monitoring and investment decisions. In addition they help management evaluate the performance of the company and its employees and show the deviations between the actual results and budgets.
Internal control system: Maintaining a proper internal control system aimed at discovering all misstatement within the company's accounts and financial statements. We will plan our audit tests in order to be able to have a reasonable expectation of those misstatements which are considered material. However, the company's management should not rely on our audit tests for the discovery of those misstatements.
The company's management is required to provide management representation for all oral evidence provided during our performance of both our interim as well as final audit.
The company's management is responsible for providing all documents and schedules and financial as well as non financial statements related with the company's activities in order to help us perform all substantive tests of transactions as well as tests of balances. We also have the rights to attend the company's general meetings and be notified in appropriate and legal time about those meetings.
The company's management is responsible to notify us (the auditors) whether any irregularities have occurred during the financial period for which the company's financial statements were prepared and which might have a material effect on the company's activities and financial position. Also, the company's management is responsible to notify us whether the above irregularities are still existing at the time of the preparation of the company's financial statements.
Responsibilities of the Auditor and Scope of Audit Work:
We have a statutory responsibility to report to the management of the company whether in our opinion, the financial statements give a fair view of the state of the company's affairs, the results of its operations and its cash flow position at the end of the year, and whether they are properly prepared in accordance with the Egyptian (or International) Accounting Standards and prevailing Egyptian laws. In determining our opinion, we are required to consider the following matters, and to report on any in respect of which we are not satisfied.
Our responsibility as auditor of the company depends on the information and documents we were able to receive from the company's management for the purpose of our audit and the requirements of the laws and regulations governing the company's operations in addition to the requirements of both the International Auditing Standards as well as the Egyptian (or International) Accounting Standards.
We will perform the audit using sampling techniques in order to accumulate all required evidence needed to help us form our opinion on the company's financial statements. The nature and extent of our tests will vary according to our assessment of what is material in the context of the company's financial statements, our assessment of the company's accounting system and, where we wish to place reliance on it, the system of internal control which may cover any aspect of the company's business operations. We will also present reports outlining the various deficiencies discovered during our audit.
Prepare an audit plan and follow up its proper implementation according to Egyptian Auditing Standards taking into consideration changes in the accounting methods used by the company.
We will study and assess the company's internal control system and perform various types of compliance tests with the aim to ensure that proper segregation of duties and responsibilities are applied in relation to the safeguarding of the company's assets, approval of the company's transactions …. etc. In addition, proper recording of the company's transactions, proper documentation and procedures are followed by the company's management. All the above tests will help the auditor to determine his ability rely on the company's internal control system in identifying the size of the evidence required for his audit.
We will perform all audit procedures associate with both the interim and final audit. We will make four visits through the financial year, three to perform the interim audit and the review services and the fourth to perform audit tests related with the confirmation of the financial statements' balances. In cases where deficiencies in the company's internal control are discovered we will extend our visits based on our assessment of both the audit and business risk related with the company in order to perform tests of transactions and balances and we will communicate all results of the audit to the appropriate management level.
We have a professional responsibility to report if the financial statements do not comply in any material respect with Egyptian (or International) Accounting Standards unless in our opinion, the non – compliance is justified in the circumstances. In case there is a disagreement with the company's management about accounting standards application, we will ensure proper communication is made with the appropriate management level to resolve such disagreement and we will include the appropriate qualifications (if any) in our audit report.
The responsibility for the prevention and detection of irregularities and fraud, rests with the company's management. However, we shall endeavor to plan our audit so that we have a reasonable expectation of detecting material misstatements in the financial statements of accounting records resulting from such irregularities, but our examination should not be relied upon to disclose those which may exist.
We shall report to you, normally in writing, any significant weaknesses in or our observations on the company's systems and other areas which come to our attention during our audit, and which we consider should be brought to your consideration. In fulfilling such responsibility we will report to you the following:
Whether all evidence reasonably expected to be available been obtained and evaluated.
Whether appropriate disclosures were made for accounts included in the company's financial statements.
Whether the company maintains proper books of accounts and records and appropriate schedules were received from the branches not visited during our audit.
Whether the financial statements comply with the schedules and other supporting documents including accounting reports and with the requirements of the laws and the company's regulations.
Whether proper physical count of the company's inventory was made according to the acceptable practices.
Whether the financial statements were prepared in accordance with the Egyptian Accounting Standards.
Whether financial statements were affected by fundamental uncertainties including the company's going concern assumption.
Whether all management decisions comply with information contained in the company's financial statements.
When performing our audit, we will coordinate with both the internal audit department in relation to the nature, timing, and extent of our audit tests to be performed including the assessment of the deficiencies contained in the department's reports to the company's management.
Reports and Other Communications Related with Scope of Audit Work:
Engagement Letter:
This letter after being studied and approved by the company's management represents the agreement made between our office and the company's management which any party can refer to in case of legal dispute. The engagement letter is considered valid from one audit to another until the parties agree to its replacement or modifications.
Representation Letter:
Represents management representation to the auditor confirming that the company's accounts and financial statements do not contain material misstatements and that the company's management provided the auditor with all required information and explanation required for the performance of the audit. Such letter should be submitted to our office before the certification of the company's annual financial statements.
Permanent File Updating Letter:
Represents the main method by which the auditor can update the content of its permanent file containing the company's organization chart, job description, accounts and books used by the company to record its transactions, documentary flowcharts …. etc. Such letter should be sent to the company before the start of the audit work.
Scope of the Audit Requirement Letter:
Represents all requirements of documents, information and explanation needed by the auditor for the proper performance of both the interim and final audit procedures.
Management Letter:
Represents report to management, normally in writing, of any significant weaknesses in, or our observations on the company's systems and other areas which come to our attention, and which we consider should be brought to the company's management consideration.
Misstatements Associated with the Company's Internal Control System:
First: the company's organization structure:
Segregation of duties and responsibilities.
Completeness of the company's documents and records.
Completeness of the company's operational and recording procedures.
Supervision and reporting system.
Second: safeguarding the company's assets and documents.
Misstatements Associated with Interim Audit:
Audit of the company's authorization procedures.
Documentary audit.
Arithmetical audit.
Audit of the accounting entries and posting procedures.
Misstatements Associated with the Confirmation of the Company's Financial Statements Balances:
Whether all evidence reasonably expected to be available been obtained and evaluated.
Whether the financial statements were prepared in accordance with the Egyptian (or International) Accounting Standards.
Whether financial statements were affected by fundamental uncertainties including the company's going concern assumption.
Whether the company's financial statements give a true and fair view about the company's financial position, results of its operations.
The Auditor Report on the Company's Financial Statements:
Represents the final product of the audit work and contain any qualification required by the auditor based on the results of the audit of the company's financial statements in addition to the determination of the management as well as the auditor's responsibilities.
Relationship with Government Bodies and Tax Authorities:
Attend the tax inspection of the company's documents and records upon management request.
Audit and certify the company's annual tax returns.
Certify all certificates requested by government bodies after its audit with the company's book and records.
Attend and represents the company's management at the various internal committees and arbitration committees and courts of law for all tax disputes.
Management Advisory Services:
The office will be delighted to provide his expertise in management advisory services in relation to the following:
Design of the financial, electronic and administrative systems with the assistance of the professional IT institutions performing such services.
Design of the costing systems.
Design of the reporting and human resources performance evaluation in addition to employees compensation schemes.
Advising management about the preparation of budgets, financial and economic studies, due diligence and valuation studies.
Providing human resource recruitment services.
Advising management about the preparation of financial studies reports and the calculation of financial indicators for management decisions.
Provide assistance and advice in relation to the preparation of business agreement, contracts and financial legal arbitration.
Prepare feasibility studies for the company's expected projects.
Advise management about tax dispute with the tax authority and social insurance disputes and represent the company's management up to the arbitration committee of the tax authorities. Also our legal consultants can represent the company at the various legal courts.
Situation Diagnosing Steps:
Determining the performance of every company in the group in presenting tax returns on legal entities income in light of law no.91 of 2005 or law no. 157 of 1981 and its amendments.
Determining company's tax position and applying law no. 91 of 2005 which includes determining the expected value of tax obligations and delay fines (if it happened)
Determining the way of calculating monthly payroll taxes according to tax law, tax inspection position, submitted tax annual assessments , the expected value of tax obligations and delay fines (if it happened)
Analyzing how every company in the group committed to stamp tax law and law no. 111 of 1980 and its amendments in law no. 143 of 2006 and determining the inspection position , the expected value of tax obligations and delay fines (if it happened)
Determining disagreement points between the company and the tax authority in every type of taxes such as taxes on company's income, payroll, and specific stamp tax... etc.
Tax planning step:
Determining weakness points appeared in the applied taxation system in every company in the group and suggesting the best solutions to avoid the future influences and resulted obligations.
Determining package of tax services suit every company in the group according to the previous determined tax assessment and inspection to every type of taxes mentioned previously.
Examining the integrated relations between the group either in ownership structure or the regular business dealings to put an over all view on how the group will achieve the optimum tax payment in the light of the related laws.
Analyzing the activities of the subsidiaries outside Egypt or in the free zones and determining the ability to make benefit of these companies to achieve the optimum tax payment in the light of the related laws.
Analyzing the availability of mutual assets can benefit the companies and determining the best ways to use these assets in away showing company's expenses and duties from tax point of view.
Determining the position of managers salaries in the top management levels in each company in the group (the directors) and determining the best ways to make tax adjustment in away of achieving the optimum tax payment and reducing there duties if its possible.