ASSET 2020

PwC Case Study

Introduction Welcome to ASSET 2020! The objective of this training is to provide the
participants real-life events and scenarios showcasing challenges, issues and
common themes from audit engagements and review of financial statements
in Assurance Practice of PwC. The training aims to provide guidance on how
to address these issues, to identify the appropriate behavior and attitude when
facing a difficult situation during audit fieldwork.

Interest One of the primary objectives of financial reporting is to serve the needs of the
financial statement users, such as:

● Internal users, like management, that use financial information to make

decisions related to the entity’s operations, and
● External users, like investors, who use the financial information to
evaluate their financial interest in the entity.

Need Evaluating financial statements requires us to take a step back from the
volume of detailed information and look at the ‘big picture’ of what it really
means to provide insightful analysis and draw meaningful conclusions. In a
moment, you will be provided with several sets of financial statements and
given an opportunity to practice doing this.

Task ● Review and analyze the financial statements and the Company’s profile
to prepare for your meeting with XYZ’s CFO.
● Conduct a meeting with XYZ CFO to understand/clarify your
observations from analyzing the financial statements.
● Discuss with the Engagement Leader the exceptions / issues noted in the
financial statements and suggest audit strategy and plan to address
potential audit risk.
● Prepare a presentation covering the following areas:
- Audit risks arising from the review of financial statements
- Audit strategy and plan as response to the identified audit risk

This document is confidential and should be only used for case study of UP-JPIA ASSET 2020. The
information contained in these documents is confidential, privileged and only for the
information of the intended recipient and may not be used, published or redistributed without
the prior written consent of Isla Lipana & Company.
ASSET 2020
PwC Case Study

Case Study Timetable

Activity / Task Lead Presenter / Duration Projected Time

Participants

Introduction of the Case PwC – Aldous R. 20 mins 10:45 – 11:05

Study (Case Explanation) Sarmiento

Review and Analysis of ASSET Delegates 1 hour 11:05 – 12:05

the Financial Statements
(including preparation for
meeting with
CFO/management)

Meeting with CFO – XYZ ASSET Delegates 20 mins 12:05 – 12:30

Management and PwC
Representative
Audit Strategy and Plan ASSET Delegates 30 mins 12:30 – 1:00
Preparation
Meeting with ASSET Delegates 20 mins 1:00 – 1:20
Engagement Leader and PwC
Representative
Report Preparation ASSET Delegates 40 mins 1:20 to 2:00
Break ASSET Delegates
and PwC 15 mins 2:00 to 2:15
Representative
Oral Defense ASSET Delegates 2 hours 2:15 to 4:15
and PwC
Representative

This document is confidential and should be only used for case study of UP-JPIA ASSET 2020. The
information contained in these documents is confidential, privileged and only for the
information of the intended recipient and may not be used, published or redistributed without
the prior written consent of Isla Lipana & Company.
ASSET 2020
PwC Case Study
XYZ Case Study Background Information

Entity and its Environment

XYZ Retail Company is a chain of hypermarkets in the Philippines. The Company is known for its
affordable quality, everyday freshness, budget friendly variety and fast, friendly and fun service.

The Company has a total of 30 stores and 1 warehouse (Located in Paco, Manila). Historically, the
Company has been profitable considering the large following of consumers who demand quality yet
affordable products. No new stores opened in 2019 and 2018.

XYZ Retail Company prepares its financial statements under PFRS.

Each store of XYZ Retail sells fresh (i.e. fish, meat, vegetables and fruits) which are VAT exempt and non-
fresh items (i.e. general merchandize). Customers may pay via credit card and cash only.

Suppliers generally provide a 90-day credit term to the Company for its purchases. Further, credit card
companies pay retailers within 7 days from date of purchase by the customers.

This document is confidential and should be only used for case study of UP-JPIA ASSET 2020. The
information contained in these documents is confidential, privileged and only for the
information of the intended recipient and may not be used, published or redistributed without
the prior written consent of Isla Lipana & Company.
ASSET 2020
PwC Case Study
XYZ Retail Company

Statements of Financial Position

December 31, 2019 and 2018
(All amounts in millions of Philippine Peso)

2019 2018

Current Assets

Cash 574 323

Trade and other receivables 335 467

Inventory 1,903 1,309

Prepayments 161 170

Input Taxes 1,265 1,859

Total Current Assets 4,238 4,128

Non-current Assets

Property and Equipment, net 3,024 3,291

Deferred Income Tax Assets, net 120 177

Total Non-Current Assets 3,144 3,468

TOTAL ASSETS 7,382 7,596

Current Liabilities

Trade Payables 3,428 4,097

Accrued expenses 567 406

Payables to government agencies 44 46

Income Tax Payable 2 8

Total current liabilities 4,041 4,557

Non-current liabilities

Retirement benefit Obligation 229 216

TOTAL LIABILITIES 4,270 4,773

This document is confidential and should be only used for case study of UP-JPIA ASSET 2020. The
information contained in these documents is confidential, privileged and only for the
information of the intended recipient and may not be used, published or redistributed without
the prior written consent of Isla Lipana & Company.
ASSET 2020
PwC Case Study
XYZ Retail Company
Statements of Financial Position
December 31, 2019 and 2018
(All amounts in millions of Philippine Peso)

Equity

Share Capital 1,100 1,100

Share Premium 140 140

Reserves for Remeasurement -11 -6

Retained Earnings 1,883 1,589

TOTAL EQUITY 3,112 2,823

TOTAL LIABILITIES AND EQUITY 7,382 7,596

Additional Information:

Trade and other receivables

Receivable from Receivable from TOTAL

Credit Card Employees CREDIT A/R
Companies

Receivables P250 million P85 million P335 million

- Based on our review of employee benefits, a regular employee may be able to purchase goods
with 30 days credit terms via salary deduction.

Inventories

Fresh Non-Fresh Total

Inventories

Inventory P38 million P1,865 million P1,903 milion

Fresh Non-Fresh Total Inventory

Inv. Beg P26 million P1,283 million P1,309 million

Purchases P419 million P13,763 million P14,182 million

Sales P407 million P13,180 million P13,587million

Inv. End P38 million P1,866 million P1,904 million

This document is confidential and should be only used for case study of UP-JPIA ASSET 2020. The
information contained in these documents is confidential, privileged and only for the
information of the intended recipient and may not be used, published or redistributed without
the prior written consent of Isla Lipana & Company.
ASSET 2020
PwC Case Study
XYZ Retail Company

Condensed Statements of Comprehensive Income

For the years ended December 31, 2019 and 2018
(All amounts in millions of Philippine Peso)

2019 2018

Revenue 15,818 13,598

Cost of Sales 13,587 12,238

Gross Profit 2,231 1,360

Operating Expenses -1,738 -816

Interest Income 9 10

Income from operations 502 554

Income Tax Expense

Current -152 -166

Deferred -57 -50

Income for the year 293 338

Other comprehensive (loss) income

Remeasurements loss (gain) on retirement obligation, net of tax -5 -4

TOTAL COMPREHENSIVE INCOME 288 334

Additional Information:

Fresh Non-Fresh Total

Revenue % 3% 97% 100%

COGS P407.61 million P13,179 million P13,587 million

Credit Sales Cash Sales Total Revenue

Revenue % 30% 70% 100%

- Based on our review of key management personnel contracts, management is entitled to a bonus
that is tied up to the gross profit of the Company.

This document is confidential and should be only used for case study of UP-JPIA ASSET 2020. The
information contained in these documents is confidential, privileged and only for the
information of the intended recipient and may not be used, published or redistributed without
the prior written consent of Isla Lipana & Company.
ASSET 2020
PwC Case Study
-

Operating Expenses 2019 2018

Salaries and employee benefits 665 409
Depreciation 151 165
Repairs and maintenance 165 54
Delivery and freight 55 51
Transportation and travel 15 17
Fuel and oil 10 6
Direct write-off - A/R 140 -
Other expenses 537 114
1,738 816

- The trucks usually transport goods from Manila Port Area to the Company’s central warehouse
two (2) to three (3) times a week. The trucks of the Company are used solely for transporting
goods and products from Manila Port Areas to warehouses. These trucks are not use for delivery
to the stores of the Company.

This document is confidential and should be only used for case study of UP-JPIA ASSET 2020. The
information contained in these documents is confidential, privileged and only for the
information of the intended recipient and may not be used, published or redistributed without
the prior written consent of Isla Lipana & Company.