Group 6- FARM FRESH

                                      

COMMERCE DEPARTMENT

DPA50153 – AUDIT 2

MINI PROJECT (CLO 2)

PROGRAMME: DAT5A & DAT5B | SESSION: 2 2023/2024

                 

GROUP 6: FARM FRESH SDN BHD

GROUP MEMBERS:

PART A

ANNUAL REPORT 2022

·                          

                           

      

A   ANNUAL REPORT 2023

                          

jd.                       

PART B

  

Financial ratio	2022	2023	Variance
	RM	RM	RM	%
A1 Turnover (credit) ( Credit Sales / Average Trade Receivables )	3.80 x	5.03 x	1.23 x	1.32%
A2 Turnover (cash) ( Cash Sales / Cash and Cash Equivalents )	22.59 x	41.75 x	19.16 x	1.84%
A Total turnover (A1+A2)	26.39 x	46.78 x	20.39 x	1.77%
B Trade purchases	20,545,379	20,182,967	362,412	0.98%
C Gross profit	52,872,593	58,555,345	5,682,752	1.10%
D Net profit	29,448,909	24,960,331	4,488,578	0.84%
E Property, plant & equipment	106,282,619	118,834,386	12,551,767	1.11%
F Inventories	36,473,751	90,746,508	54,272,757	2.48%
G Trade Receivables	24,846,729	31,954,670	7,107,941	1.28%
H Cash at bank/ in hand	9,565,273	6,850,502	2,714,771	0.71%
I Total current assets	389,303,008	418,152,953	28,849,945	1.07%
J Total assets	724,805,467	788,824,309	64,018,842	1.08%
K Trade payables	6,072,696	3,603,212	2,469,484	0.59%
L Bank overdrafts and short–term borrowings	1,319,373	1,890,447	571,074	1.43%
M Total current liabilities	36,602,250	90,666,140	54,063,890	2.47%
N Total borrowing ( including overdrafts )	2,486,795	2,486,795	-	1%
O Net assets/shareholders` funds	24,983,000	28,752,000	3,769,000	1.15%
Gross profit (%) (C/A X 100)	4.99 %	7.99 %	3 %	1.60%
Net Profit (%) (D/A X 100)	8.96 %	1.87 %	7.09 %	0.20%
Receivables` credit (G/A1 X 12)	78,463,354.74	76,233,805.17	2,229,549.57	0.97%
Creditors` settlement (K/B X 12)	0.77	2.14	1.37	2.77
Inventories turnover (B/F)	0.56	0.22	0.34	0.39%
Liquidity current ratio (I/M)	10.64	4.61	6.03	43%
Liquidity quick ratio (I – F/M)	389,308,007	418,152,952	28,844,945	1%
Gearing 1 (N/J)	3.43	3.15	0.28	0.91%
Gearing 2 (N/O)	0.10	0.09	0.01	0.9%

 

 

 

PART C

 

Q1. Verify the potential impact of these variations on the company's business risk, going concern status and any relevant issue.

Potential impact of variations of Farm Fresh Sdn Bhd are:

I)                    Financial challenges

 

·         Revenue of Farm Fresh has decreased due to advertising, production of products and marketing.  This has caused a variation between FY2022 & FY2023.

·         Company still continues the production and markets more of fresh dairy products to consumer which eventually will higher the sales.

 

II)                  ESG and sustainability 

 

·         Consumers and employees have increasingly different expectations, both of the businesses they buy from, and work for. Leaders are under pressure from regulators and the market to prove that their organizations are acting responsibly and acting sustainably.

·         it’s important to embed ESG in their business strategy to build a resilient business set to thrive in the new reality and to play their part in making the world a more sustainable and better place for everyone

 

III)                 Disclosures

While assessing the appropriateness of the going concern assumption, if management is aware of material uncertainties related to events or conditions that may cast significant doubt on the company’s ability to continue as a going concern, then the company should disclose those uncertainties. In our view, if there are such material uncertainties then a company should, at a minimum, disclose the following information:

·         details of events or conditions that may cast significant doubt on the company’s ability to continue as a going concern and management’s evaluation of their significance in relation to the going concern assessment

 

 

Q2. Prepare the steps would you take to corroborate the information obtained from this analytical procedure with other audit evidence, such as documentation supporting management's assertions and external sources of information.

 

i)                    Relevance and Reliability

 

Relevance deals with the logical connection with, or bearing upon, the purpose of the audit procedure and, where appropriate, the assertion under consideration

The reliability of information to be used as audit evidence, and therefore of the audit evidence itself, is influenced by its source and its nature, and the circumstances under which it is obtained.

 

ii)                   Documentation Review

Analysing the audit reports written by auditors which includes the calculations and other documentation.

The auditor's responsibility in the audit of financial statements with respect to management's use of the going concern assumption in the preparation and presentation of the financial statements.

 

iii)                 External sources and confirmation

 

·         Transaction confirmations – management verify the balancing amounts for suppliers and verify and set marketing standards

·         Analysts examine the company product’s quality and gives verification for auditing evidence.

 

Q3. Explain additional audit procedures would you recommend to understand the underlying reasons behind these variations.

i)                    Inspection of physical or tangible assets

 

·         Inspection of tangible assets is the procedure where auditors physically examine the company’s assets including properties such as land, building, vehicles, equipment, or inventory. This process doesn’t only confirm the existence of the asset, but also helps in determining whether it suffered defects or impairment, which affect its value.

 

·         Auditors can make a list of all the fixed assets of a company or use this asset register checklist for the inspection.

 

ii)                   Inquiry

 

·         One of the simplest types of audit procedures is inquiry. This procedure involves auditors collecting verbal evidence through formal or informal inquiry from the people in the organization. Although relevant, this type of evidence isn’t strong enough to stand alone and would need other supporting documents or proofs to be considered valid.

 

 

iii)                 Recalculation

 

·         This audit process is fairly straightforward. In recalculation, auditors recompute the transactions themselves and compare them to the initial financial statement or calculation of the company. Auditors can then identify if they are balanced, or further investigate if there are any differences or discrepancies found.

 

iv)                 Observation

 

·         With this type of audit process, auditors usually try to confirm that existing business procedures or measures are being implemented by the organization. This type of procedure gives auditors an idea on how internal processes work, and if they can affect the operations of the organization as a whole.

 

These audit procedures also enable auditors to independently examine on their own and not just rely on the information that a company has given. This helps ensure that audit results are unbiased and as accurate as possible.

 

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