BKAA2013 AUDIT AND

ASSURANCE I (GROUP D)
1. FAQIHATUN NAZIFAH BT MASRUDDIN (246700)
2. FAYE WONG CHIA CHI (253041)
3. LIYANA BT KAMRUL ARIFIN (255417)
4. SYED LUQMAN B SAYED MUHAMED (256152)
1.0 COMPANY BACKGROUND

• Incorporated as a private company on 5th May 1964.

• Listed in Bursa Malaysia under sector of consumer products and services

on 13th March 1970.

• Financial year-end is on 30th of June every year.

• The size of the company base on their asset is RM 2,013,504 thousand.

 Name of top 5 Shareholder No. of Shares %

1. Assets Nominees (Tempatan) Sdn Bhd

238,217,035 74.57
- Hong Leong Manufacturing Group Sdn Bhd

2. AmanahRaya Trustees Berhad

5,349,533 1.67
- Public Smallcap Fund
3. Assets Nominees (Tempatan) Sdn Bhd
- Exempt AN for Hong Leong Industries Berhad 4,000,000 1.25
(HLYM-ESOS)

4. Citigroup Nominees (Asing) Sdn Bhd

3,886,800 1.22
- Exempt AN for Citibank New York (Norges Bank 14)

5. AmanahRaya Trustees Berhad

3,027,500 0.95
- Public Strategic Smallcap Fund
2.1 REGULATORY FRAMEWORK INCLUDING
FINANCIAL REPORTING
• Accordance with MFRS, IFRS, and the Companies Act 2016 in Malaysia.

• Ended on 30th of June every year.

• Establish the context of risk and identify risks in relation to the Group’s
risk appetite.
2.2 ARE THERE ANY SPECIAL ACCOUNTING STANDARDS
SPECIFIC TO THIS INDUSTRY?

• Yes, they adopted MFRS 9, Financial Instruments to replaces MFRS 139,

Financial Instruments: Recognition and Measurement.

• Disclose in Note 34 to the financial statements for the financial year

ended 30 June 2018.
3.1 DESCRIBE THE CHARACTERISTICS OF THE INDUSTRY
RELATING TO YOUR CLIENT

• Manufacturing industry,
• Engage in the transformation of goods, materials or substances into new
products through a transformational process,
• Produces physical goods and products.
3.2 WHAT ECONOMIC FACTORS AFFECT THE INDUSTRY?

• Foreign currency fluctuations

• Market demand
Economic • Increasing energy cost
Factors • Intense competition from
their competitors
3.3 ARE THERE ANY DEVELOPMENT REPORTED IN THE
MEDIA ABOUT YOUR COMPANY, WHICH COULD HAVE
AN IMPACT ON YOUR AUDIT PLANNING
• Changed their accounting policy in the classification of the entity’s financial
assets and financial liabilities,

• Changes being made in the Board of Directors over the past financial
years,

• New liquidator for the company.

3.4 PERFORM ANALYTICAL PROCEDURES AND IDENTIFY
WHAT ACCOUNTS REQUIRE MORE ATTENTION FROM
YOU AS AUDITRORS
• Ratio analysis,
• Trend analysis.
• Reasonableness test.
RATIO ANALYSIS

Liquidity Ratio
2017 2.81%
Current Ratio
2018 3.68%
2017 1.22%
Assets Turnover Ratio
2018 1.29%
2017 8.58%
Inventory Turnover Ratio
2018 9.17%
RATIO ANALYSIS

Profitability Ratio
2017 6.64%
Net profit margin
2018 16.17%
2017 19.15%
Return on asset
2018 16.00%
2017 25.44%
Return on equity
2018 20.33%
RATIO ANALYSIS

Solvency Ratio
2017 24.71%
Debt to asset ratio
2018 21.29%
2017 32.81%
Debt to equity ratio
2018 27.05%
2017 2.91%
Long term debt to equity ratio
2018 2.48%
RATIO ANALYSIS

Efficiency Ratio
2017 0.92 times
Account receivable turnover
2018 0.40 times
2017 1.26 times
Account payable turnover
2018 0.52 times
2017 8.58 times
Inventory turnover
2018 9.17 times
TREND ANALYSIS

Total staff salaries and other expenses for the Group is

RM189,535,000 in 2017 and RM186,806,000 in 2018

Auditor needs to excess the management directly to

obtain information

The ending balance of total compensation is then

compared
TREND ANALYSIS
Total revenue generated from sales of goods and
services for the financial year 2017 and 2018 are
RM2,272,208,000 and RM2,488,246,000 respectively
Auditor needs to excess the management directly to
obtain information about the bad debt expense for
both years

Auditor is then required to examine the trend line

of bad debt expenses
REASONABLENESS TEST

• Procedures that are used to examines the validity of accounting

information.

• When the results and findings of these analytical procedures are materially
different from auditor’s expectations, the auditor should proceed with
discussion with management.
4.1 WAS THIS COMPANY SUBJECT TO ANY
REGULATORY SANCTIONS?
• Accordance with the By-Laws (on Professional Ethics, Conduct and
Practice) of the Malaysian Institute of Accountants (“By-Laws”) and the
International Ethics Standards Board for Accountants’ Code of Ethics
for Professional Accountants (“IESBA Code”),and we have fulfilled our
other ethical responsibilities in accordance with the By-Laws and the
IESBA Code.
4.2 WHO WAS THE AUDITOR LAST YEAR? THIS YEAR
AND NEXT YEAR?
• The auditor for Hong Leong Industries for the three years in a row is
KPMG PLT.
4.3 HOW MUCH WERE THE AUDIT FEES AT GROUP
LEVEL? AS A % OF NET PROFIT?
• Amounted to RM1,625,538.

• 0.404% of net profit.

4.4 DID THE SAME AUDITOR AUDIT ALL COMPANIES
IN THE GROUP ?
• No, Hong Leong Industries Berhad use a difference auditor but other
companies of this group use the same auditor.
4.5 WHAT TYPE OF AUDIT REPORT WAS ISSUED?
WHY?
• Operational Audit
4.6 HOW MANY REPORT ARE THERE IN ANNUAL REPORT
AND ARE ALL THESE REPORTED AUDITED? WHY? WHO
REQUIRE ALL THESE REPORTS?
1. Independent Auditors’ Report, Directors’ Report,

2. Board Audit Report

3. Risk Management Committee Report

4.7 WAS THE ANNUAL REPORT TIMELY ?

• Being issued timely to the due of financial year which ended on 30 June
2018.

• It’s updated in Bursa Malaysia yearly based on the requirement provided.

4.8 IS THERE AN INTERNAL AUDIT DEPARTMENT?
• Yes, the Internal Audit function is carried out in-house by the Internal
Audit Department of HLMG Management Co Sdn Bhd, a wholly owned
subsidiary of Hong Leong Manufacturing Group Sdn Bhd.
4.9 WHO MANAGES THE COMPANY AND WHO OWNS
THE COMPANY? ARE THEY THE SAME PEOPLE?

• The owner of Hong Leong Berhad is YBHG Datuk Kwek Leng San, 63
years old, Singaporean.

• The manager of Hong Leong is YBhg Dato’ Dr Zaha Rina Binti Zahari, Mr
Peter Ho Kok Wai, Ms Quek Sue Yian and YBhg Datuk Noharuddin bin
Nordin @ Harun.
4.10 HOW MANY INDEPENDENT DIRECTORS ARE
THERE ON THE BOARD OF DIRECTORS?
1. Dato’ Dr Zaha Rina binti Zahar,

2. Mr Peter Ho Kok Wai,

3. YBHG Datuk Noharuddin bin Nordin @ Harun.

4.11 HOW MANY TIMES DID THE AUDIT
COMMITTEE MEET WITH AUDITORS?
• In accordance with the MIA, Messrs KPMG PLT rotates its Engagement
Partner and Concurring Partner once every five (5) years to ensure
objectivity, independence and integrity of the audit opinions.
4.12 ARE THERE ANY NON-AUDIT FEES? AS A % OF
NET PROFIT?
• Amount of non-audit fees is RM68,000.

• Therefore, 0.0169% of the net profit of year 2018.

4.13 DID THIS COMPANY WIN ANY AWARD FOR GOOD
REPORTING OR BEING A GOOD CORPORATE CITIZEN?

• Based on the annual report of this company, it doesn’t stated any award
for good reporting or being a good corporate citizen.
4.14 WHAT ADDITIONAL INFORMATION WOULD YOU
LIKE THEM TO PROVIDE IN THE ANNUAL REPORT?
SUPPORT YOUR ANSWER.
1. State clearly the organization’s mission and relate the activities back to
the mission throughout the report,

2. Set targets for the following year,

3. Include current stock prices and lookup information, historical financial

information.
4.15 PROVIDE TWO (2) SUGGESTIONS ON HOW THE
CHOSEN ENTITY MAY IMPROVE THE QUALITY OF ITS
ANNUAL REPORT?
1. Explain the bad as well as the good,

2. Create a narrative.
4.16 WHAT WOULD YOUR EXPECTATIONS BE FOR THIS
COMPANY IN TERMS OF PERFORMANCE AND RISKS.
JUSTIFY YOUR ANSWER.
1. Bussiness risk
2. Engagement risk
3. Audit risk
4. Fiinancial reporting risk
THANK YOU