ZMESSENGER(PVT) LTD.

INTERNAL AUDIT
REPORT

FOR THE MONTH MAY

2021

1
 Content

1. Introduction
2. Preamble
3. Executive Summary
4. General Observations
5. Invoicing Process
6. Debtors Management
7. Lucky1 – Monthly Review
8. Detailed Findings of Internal Audit
Scope
- Receipt Process
- Bank Reconciliation
- Revenue: VAS

Internal
Review of Payments and Invoicing Processes – February to May 2020 Audit Review for the Month of May 2021 2
1. Introduction
1.1 Scope
The overall objective of this review was to determine whether the internal controls as given in the Flowcharts and Internal Memorandums
regarding the areas; Invoice & Receipts, Debtors Management, Lucky1 – General Review, Bank Reconciliation and Revenue: VAS have
been duly followed. This review was conducted based on the scope of areas as decided by the Management of the Company.

1.2 Our Approach

The approach we adopted involved the following:

• Understanding the processes within the scope and identifying key process risks and controls with reference to the Quality
Procedures, Flowcharts and Internal Memorandums and by conducting interviews with the process owners
• Developing control testing programs
• Evaluating the control design effectiveness and discuss observations with process owners by executing the control programs. This
entailed testing operation of key controls through:
- Performing analytical procedures on data provided.
- Observations from key documentation
- Re-performance of controls
• Discussing the issues and improvement opportunities with process owners
• Assigning priority ratings for the observations in the report based on its significance (Rating definitions are provided in section 1.5
below).
• Summarize issues, improvement opportunities and recommend next steps.

Based on results of our work, detailed findings were identified, and recommendations were developed to address these findings.

A sample of transactions as at 31st May 2021 has been covered during this Review

Internal Audit Review for the Month of May 2021 3

1. Introduction (Contd.)

1.3 Restrictions on the Use of Our Internal Audit Report

This report is intended solely for the information and use of the Management of zMessenger(Pvt) Ltd. and is not intended to be
and should not be used by any other parties. EY therefore assumes no responsibility to any user of the report other than the
Company’s Management. Any other parties who choose to rely on our report do so entirely at their own risk.

The priority rating used in this report does not represent a conclusion on the adequacy or effectiveness of internal controls.

1.4 Dates of each stage of the Internal Audit

Field work commencement date 03.06.2021

Field Work completion date 25.06.2021

Date of Report issued for Management Comments

Date of Closure meeting and receipt of comments

Date of Management Discussion

Date of Final Report Issue

Internal Audit Review for the Month of May 2021 4

1. Introduction (Contd.)
1.5 Risk Rating Criteria

Priority Ratings: the observations of our report have been classified as either being High, Medium, Low

A finding, which has a material impact on internal control, finance or operations

and is time sensitive to the organization. It requires the immediate attention of
High
Department and Senior Management. There should be a priority action plan for
its resolution.

A finding of moderate significance to the organization. It requires the attention of

the responsible Department Management within a reasonable time frame
Moderate
(generally less than 3 months). There should be an agreed program for its near-
term resolution.

A finding of lesser significance. It does not warrant immediate attention; however,

Low there should be an agreed program for ultimate resolution (generally within 6
months).

Not Rated Findings which have not been rated and are reported as a factual finding.

Internal Audit Review for the Month of May 2021 5

2. TO BE COMPLETED UPON ACCOUNTS FINALIZATION
PREAMBLE •Total Payable
•Total Receivable
Rs. 163,029,059.16
Rs. 176,271,573.15
•Receivable over
•Total Payable
90 Days Rs. 155,665,210.82
Rs . 37,960,833.31

•Total Receivable
Rs. •Total Tax Payable
•Total Revenue •Total Revenue
•Receivable over Rs. 35,874,797.12
90 Days . Rs. 44,240,801.27 Rs.
Rs. •Total Tax Payable
Rs. 37,364,611.51

•Total Cost of Goods •Total Cost of Goods

•Intercompany Loan to DigitalX (Pvt)
Sold Sold
Ltd. As at 30th April 2021
Rs. 16,047,755.89 Rs.
Rs. 220,351,516,97
•Other Expenses •Other Expenses •Intercompany Loan to DigitalX (Pvt) Ltd. As
Rs. 16,403,143.20 Rs. at 31st May 2021
•Total Expenses •Total Expenses Rs. 222,756,761.63
Rs. 32,450,899.09 Rs.
Figures as at 30th April 2021 Figures as at 31st May 2021
* Please note that the figures for zMessenger(Pvt) Ltd. have been extracted from the Profit & Loss Statement and
Balance Sheet as at 31st May 2021
Internal Audit Review for the Month of May 2021 6
3. Executive Summary
Reference in
Observation Issue Rating
Detail report
GENERAL OBSERVATIONS 4.0
 Availability of long outstanding payable balance to the Inland Revenue Department 4.1 High
 Lack of planning in the cashflow forecast 4.2 Moderate
INVOICING PROCESS 5.0
Invoicing Process – Summary – zMessenger (Pvt) Ltd. 5.1
Invoicing Process – Summary – DigitalX (Pvt) Ltd. 5.2
Detailed Findings 5.3
 Lack of pipeline review/ Reconciliation for strategy team’s activities 5.3.1 High
 Campaigns stalled without notice/ approval 5.3.2 High
DEBTORS MANAGEMENT 6.0
Debtors Aging Analysis 6.1
Debtors Management 6.2
 We did not observe any weaknesses during the review of this area 6.3
Lucky1 – General Review 7.0
• Refer Lucky1 Special review for observations in this area. - -

Internal Audit Review for the Month of May 2021 7

3. Executive Summary (Contd.)
Reference in
Observation Issue Rating
Detail report
DETAILED FINDINGS OF THE INTERNAL AUDIT SCOPE 8.0
Receipt Process 8.1
 We did not observe any weaknesses during the review of this area - -
Bank Reconciliation Process 8.2
 We did not observe any weaknesses during the review of this area - -
Revenue: VAS 8.3
 We did not observe any weaknesses during the review of this area - -

Internal Audit Review for the Month of May 2021 8

4. General Observations
4.1 Availability of Long outstanding payable balance to the Inland Revenue Department High

The long outstanding balance to the Inland Revenue Department was Rs. 37,364,611.51 as at 31st May 2021. This consists of VAT Rs.
33,996,164.81 and NBT Rs. 3,368,446.70
Issue/
Observation No payments were made during May refer Table 4.1.1 for Details.

Refer Table 4.1.1

Risk Factor Design Gap Operational inefficiency  System Based Compliance 

Root Cause Lack of adequate Cash-flow planning

Failure to make timely payments to the Tax Authorities could lead to operations being sealed, legal action against the Company and loss
Risks/Impact
of reputation.

Action Required It is recommended that the Senior Manager – Finance and Manager – Finance Operations construct a payment plan in which to pay the
/Recommendation long outstanding balance within a reasonable period (Ex - Within 6 months)

Management Action Plan

Responsibility of Issue

Expected Date of
Implementing the Action
Plan

Internal Audit Review for the Month of May 2021 9

4. General Observations (Contd.)
Table 4.1.1 Details of Balances Payable to the Department of Inland Revenue and Payments made

30th April 2021 31st May 2021

Details
Amount (Rs.)

VAT 32,506,350.42 33,996,164.81

NBT 3,368,446.70 3,368,446.70

Total Balance 35,874,797.12 37,364,611.51

Note – Figures have been extracted from the Balance Sheet as at 31 st May 2021

Refer Balance sheet as at 31st May 2021

Adobe Acrobat
Document

Internal Audit Review for the Month of May 2021 10

4. General Observations (Contd.)
4.2 Lack of planning in the Cashflow Forecast Moderate

During the audit review, it was observed that there was a lack of coordination in forecasting the collections for a period, therefore it is not
utilized in an efficient manner.

Issue/ During the month of April, the total cash inflow (Sum of collections from Customers and treasury activities of the Company) was Rs.
Observation 52,939,597.36 (The Total collection was Rs. 45.2 million approx. total setoffs for the period were Rs. 7.7 million approx.). The outflow for
this month was Rs. 52,767,549.75

Refer Graph 4.2.1

Risk Factor Design Gap Operational inefficiency  System Based Compliance


Root Cause Lack of planning for the Cashflow process.

Failure to plan the cashflow can result in inefficient management of cash, which can lead to operational payments being prioritized over
Risks/Impact
statutory payments.

Action Required During the months in which the collections are confirmed to be higher than the expected cash outflow, the Company could redirect some
/Recommendation of those funds towards repaying statutory payments as failure to pay these could lead to legal action.

Management Action Plan

Responsibility of Issue

Expected Date of
Implementing the Action
Plan

Internal Audit Review for the Month of May 2021 11

4. General Observations (Contd.)

Graph 4.2.1 Cashflow Summary

Cashflow Summary
120,000,000.00

100,000,000.00

80,000,000.00
Value (Rs.)

60,000,000.00

40,000,000.00

20,000,000.00

-
Dec Jan Feb March April May

Month

Receipts (Rs.) Payments (Rs.)

Note: The Total Collection from Customers was Rs. 45.2 million approx. of which Rs. 7.8 million approx. were setoffs during April 2021. Net
Collection Rs. 37.8 million approx. There was a NLB recovery from DX which amounted to Rs. 4.8 million approx

Internal Audit Review for the Month of May 2021 12

5. Invoicing
Process
5.1 Invoicing Process – Summary – zMessenger
(Pvt) Ltd.
Digital Marketing - Monthly Invoice Value Digital Services (VAS) - Monthly Invoice Value
49
30,000,000.00 30,000,000.00
28,247,892.78 46
26,285,877.23
25,000,000.00 25,000,000.00 32
50 58 38
43 32
20,989,558.60
20,836,697.96
19,877,735.31
41 20,775,908.70
20,000,000.00
18,868,410.45 20,000,000.00
51 18,177,360.79
Invoice Value (Rs.)

Invoice Value (Rs.)

18,071,036.32
56
15,993,098.67
22 14,690,782.02
15,000,000.00 15,000,000.00

10,000,000.00 10,000,000.00

5,000,000.00 5,000,000.00

- -
Dec Jan Feb March April May 12,997,860.41
Dec Jan Feb March April May

Month Month

• Please note that Digital Marketing includes the Shortcode, Viber and Social Listening revenue lines
• Please note that these values depict the total value of invoices raised within the calendar month and not the revenue attributed to each month as per the monthly BU Sales report
• The VAS revenue has recorded the Mobitel services for February, Approx value of 8mn was invoiced during the month of April.

Internal Audit Review for the Month of May 2021 13

5. Invoicing Process (Contd.)
5.2 Invoicing Process – Summary – DigitalX (Pvt)
Ltd. Value of Invoices Raised by EY
No. of Invoices
raised by EY
Percentage of Representative
Month Invoice Amount Revenue
Adstudio 9,324,054.50 70.50% 39
Dec 13,225,602.50
Lucky1 3,901,548.00 29.50%
Adstudio 3,590,000.00 18.76%
Jan 19,132,199.21 25
Lucky1 15,542,199.21 81.24%
Adstudio 3,244,972.00 20.11%
Feb 16,139,264.00 Lucky1 4,790,992.00 29.69% 27
T&O 8,103,300.00 50.21%
Adstudio 6,414,060.00 38.40%
Mar 16,701,555.00 Lucky1 - 0.00% 42
T&O 10,287,495.00 61.60%
Adstudio 9,245,857.35 100.00%
April 9,245,857.35 Lucky1 - 0.00% 32
T&O - 0.00%
Adstudio 8,953,874.61 21.78%
May 41,104,402.60 Lucky1 32,150,527.99 78.22% 50
T&O - 0.00%

• Note – During the month of May, There was a large backlog of Lucky1 logs which were received: Breakdown of Revenue is as follows:
Mobitel – Jan – Mar 2021 – 19,934,987,34
Hutch – Sept – Mar 2021 – 7,311,604.65
Dialog – March 2021 – 4,238,92.00

• April’s Lucky1 invoice Value (Applicable as revenue for the month of May) – 4,474,900.00
Mobitel – 19,934,987,34
Hutch – 7,311,604.65
Dialog – 4,238,92.00

Internal Audit Review for the Month of May 2021 14

5.3 Detailed Findings (Contd.)
5.3.1 Lack of pipeline review/ Reconciliation for strategy team’s activities High
During the audit review, it was observed that there was no pipeline review for upcoming and in-progress campaigns. This was
recognized as an observation in the November 2020 internal audit report as well, at the time it was recommended by the audit
team that a database should be maintained. Further it was also emphasized that the same could be used to review the
number of successful bids, which pitches were unsuccessful.

At the time, when this was suggested to the Sales Team with the COO, it was informed that the weekly strategy review
covered this aspect and the digital spend was pre-approved by the Manager – Finance Operations therefore Finance was also
Issue/
aware of the upcoming costs etc.
Observation
However, with recent issues pertaining to Samsung invoicing, there is no evidence that the pipeline review is conducted
through the strategy review or whether strategy’s activities are reviewed as there have been multiple instances when certain
components of campaigns were not completed (Student Ambassador campaign – YouTube pre-roll), PO’s have been under-
utilized (Influencer Campaign), long delays in invoicing campaigns (S21 Digital Spend, Influencer campaign, Samsung
refrigerator video production) and incorrect campaign reports being submitted (student ambassador & avurudu carnival).

Risk Factor Design Gap Operational inefficiency System Based Compliance

Lack of pipeline review
Root Cause
Lack of due procedure
 for Strategy Team 
• Due to lack of pipeline review, there are instances when campaigns are missed from billing, and when there are long
delays between when the campaigns end and when it is billed
Risks/Impact • Due to lack of procedure in the strategy team’s activities, there is no evidence of an approval process for the campaign
reports submitted to clients. Due to incorrect reports, there are delays in invoicing, duplication of work and delays in
receiving payments.
• We recommend that the Head of Strategy should review and approve campaign reports before they are submitted to clients
Action Required
• A review should be conducted for upcoming and in progress campaigns to ensure they are fully utilized and invoiced
/Recommendation
appropriately

Internal Audit Review for the Month of May 2021 15

5.2 Detailed Findings (Contd.)

5.3.1 Lack of pipeline review/ Reconciliation for strategy team’s activities High

Management Action Plan

Responsibility of Issue

Expected Date of
Implementing the Action
Plan

Internal Audit Review for the Month of May 2021 16

5.3 Detailed Findings (Contd.)
5.3.2 Campaigns stalled without notice/ approval High
During the weekly Samsung review, which was implemented recently, it was brought to our attention that the PO for S21
Digital Amplification (Valued at 10 million approx.) was issued on 30 th Jan 2021 and digital spending had commenced in
January 2021 had not been invoiced yet. This was found when a vendor (Newswire) had claimed a payment for a direct
placement made for this particular campaign.
Issue/
During the meeting it was informed that there is a component of the campaign which has not been completed on the request
Observation
of the client. This was directly informed to the Strategy team and had not gone through the Account Lead. The Finance
Division was unaware of this campaign or that it was stalled.

Refer Table 5.3.2.1 for details

Risk Factor Design Gap Operational inefficiency System Based Compliance

• Lack of pipeline management
Root Cause
 procedure
• Lack of clear 
• Due to lack of pipeline planning the Finance Division is unaware of the campaigns which are upcoming, and the direct costs
Risks/Impact involved, this leads to cashflow issues to the Company
• Due to lack of a clear procedure, there is no approval process for such delays or cancellations
We recommend that a clear procedure should be laid down with regard to the Samsung campaigns and spending. Further,
Action Required
SM-F has implemented a Samsung master sheet on google sheets for the Sales team and the Finance to update on the
/Recommendation
upcoming and in-progress campaigns.

Internal Audit Review for the Month of May 2021 17

5.3 Detailed Findings (Contd.)
5.3.2 Campaigns stalled without notice/ approval High

Management Action Plan

Responsibility of Issue

Expected Date of
Implementing the Action
Plan

Table 5.3.3.1 Details of Digital Spending as per the Strategy Team’s spending

Exchange Rate used for Actual Cost to ZM

Month Digital Spend ($) Invoicing approx (LKR)

Jan 2,274.36 194.91 443,295.51

Feb 10,192.68 202.63 2,065,342.75

Mar 5,189.12 206.08 1,069,373.85

Apr 3,373.30 209.05 705,188.37

Internal Audit Review for the Month of May 2021 18

6. Debtor Management
6.1 Debtors Aging Analysis

Refer Debtors Aging Analysis as at 30th April 2021 Microsoft Excel

Worksheet

Internal Audit Review for the Month of May 2021 19

 6.1.1 Follow up action for Significant Debtor balances outstanding for more than
360 days 30th April 31st May
Customer Name Follow-up action
> 360 Days > 360 Days Total

Asia Broadcasting Corporation (Pvt)Ltd 1,376,037.79 1,376,037.79 1,376,037.79 No Follow-up action has been taken

Ceylon Cold Stores 706,675.39 706,675.39 3,099,172.52 Recoveries officer is following up; outstanding invoices were re-sent to the Client
Commercial Credit & Finance PLC 1,054,164.44 1,061,714.72 1,583,636.60 Outsourced Collections Agent is following up
Dankotuwa Porcelain 622,142.20 622,142.20 622,142.20 No Follow-up action has been taken
Hutchinson Telecommunications Lanka
(Pvt) Ltd. 2,631,024.78 (129,608.98) 8,478,334.01 VAS Manager and SM-F following up; 7.8 mil payment received during May
John Keells Properties 214,111.70 534,111.70 1,006,611.70 Long outstanding balance has increased; no change overall
Lanka News Web 1,014,997.34 1,284,997.34 1,419,997.34 No Follow-up action has been taken

Lanka Orix Information Technology service 902,438.64 960,795.36 3,020,009.54 Recoveries officer is following up
Dispute to be cleared with the Account Lead; Outsourced Collections Agent is
Lion Brewery (Ceylon) PLC 632,167.06 632,167.06 632,167.06 following up
Mindshare 663,204.38 814,674.38 1,075,374.27
National Lotteries Board 1,053,000.00 1,053,000.00 1,053,000.00 VAS Manager and SM-F following up
Nawaloka Hospitals PLC 680,124.34 157,873.98 157,873.98 Outsourced Collections Agent is following up; Payments received
Pan Asia Banking Corporation PLC 613,663.15 613,663.15 7,579,539.61 Outsourced Collections Agent is following up
Seylan Bank 695,454.09 695,454.09 784,043.01 No Follow-up action has been taken
Suzuki 896,754.23 - 2,388,202.76 Total long outstanding cleared; Overall balance reduced by 2 million
Unilever 228,822.94 228,822.94 228,822.94 Outsourced Collections Agent is following up
YouCab 852,841.71 852,841.71 852,841.71 Outsourced Collections Agent is following up

Please note this is a total of the other lower value balances which were outstanding for
more than 360 days, follow up action for the same was not checked as the balances
Others 2,577,140.02 3,219,863.39 were less than Rs. 200,000/-
TOTAL 18,218,001.73 14,586,012.26

Internal Audit Review for the Month of May 2021 20

6. Debtor Management and Cashflow Summary
(Contd.)
6.2 Debtors Management
Objective

• To determine whether the receivable management process is managed effectively with regular follow ups conducted, in order to recover long
outstanding balances.

Sample Selected

Source Document Population Sample Percentage

Debtors Aging Analysis –
89 30 Debtors 33%
31st May 2021

Work Done

1. Requested for the Debtors aging as at 31 st May 2021, in order to verify the Receivable Balance and the long outstanding Customers.
2. Prepared an account movement for the chosen sample of 30 individual customer (Debtor) balances. [(opening balance + Invoices for the month) -
Payments received]
3. Identified variances between the Debtors aging and the Individual Customer Movement and obtained the reasons for variance from the Accounts
Executive.
4. Checked the client information lists maintained by the Accounts Executive and the Recoveries Officer with the Customer list in the QuickBooks
System to verify the completeness of the same.
5. Obtained the Recovery Action undertaken for long outstanding Debtor balances.
6. Checked the last date of Business with the long outstanding Customers through the QuickBooks Customer Accounts.
7. Checked the Payment Plan the Company has with the Client.

We did not observe any weakness during the review of this area.

Internal Audit Review for the Month of May 2021 21

6.2 Debtors Management (Contd.)

Summary of Debtors Aging Analysis as at 31st May 2021

Internal Audit Review for the Month of May 2021 22

7. Lucky1 – General Review
Objective

• Revenue Recognition - To determine whether the processes in place are duly followed and adequate controls are in place to mitigate the risks in a satisfactory
manner.

Sample Selected

Source Document Population Sample Percentage

Invoices – March and April 2021 (Raised during the month of

May) 6 6 100%

Operator Logs – March & April 2021

6 6 100%

Work Done

1. Obtained the invoice listing for March and April (Raised during the month of May, as no logs were provided during the month of April) to verify which operators were
invoiced.
2. Obtained the corresponding Operator Logs to verify the accuracy of the invoices along with the Invoices.
3. Checked the ZM counts for the same period, as provided by the process owner to verify whether there were discrepancies between the two counts.

Refer Lucky1 Special review for observations in this area.

Internal Audit Review for the Month of May 2021 23

8. Detailed Findings of the Internal Audit Scope
8.1 Receipt Process
Objective

• To determine whether the receipts are received and recognized duly in the QuickBooks System.
• To determine whether receipts are recorded as to the correct account, amount and period.
• To determine whether the controls over collections is adequate and follow-up actions are satisfactory.

Sample Selected

Source Document Population Sample Percentage

Bank Statement
NTB – 4989 – May 2021 – Receipts 48 25 50%

Bank Statements *
Other Bank accounts May 2021 – Receipts 16 16 100%

Work Done

1. Checked the accuracy of the amounts, Customer and Cheque numbers updated in the Ledger.
2. Checked the accuracy of the receipts in the Quickbooks System with the Bank Statements.
3. Checked whether the receipt had been duly allocated to an Invoice on the Quickbooks System.
4. Checked the Bank Statements to verify whether the cash had been realized.
5. Verified with the recoveries Officer whether the outstanding Invoice numbers as per the Quickbooks System and the Accounts Receivable were accurate.
6. Checked if any cheques have been returned and if subsequent payments have been made.

We were unable to review the receipts as maintained by the Assistant – Finance due to the current situation.

We did not observe any weakness during the review of this area.

Internal Audit Review for the Month of May 2021 24

8.2 Bank Reconciliation Statements
Objective

• To determine that the procedure in relation to the preparation of Bank Reconciliation Statements and the controls over the same are in line with the
laid down procedures of the Company.
• To determine whether Bank Reconciliation Statements are duly prepared, reviewed and approved.
.
Sample Selected

Company Month No. of Statement Percentage

zMessenger(Pvt)Ltd May -20 13 100%

Work Done

1. Checked whether the Bank statement balances were reconciled with that of the cash books.
2. Checked the arithmetical accuracy of the Bank Reconciliation Statements.
3. Checked whether the stale cheques were identified, authorized and removed appropriately from the Bank Reconciliation Statements.
4. Checked whether the Bank Reconciliation Statements are reviewed and approved by the designated officers.
5. Checked the unrealized and unpresented cheques for the period.

We did not observe any weaknesses during our review of this area.

Internal Audit Review for the Month of May 2021 25

8.3 Revenue: VAS

Objective

• To verify whether the process is in line with the procedures laid down by the Company.
• To check whether the invoices are in line with the Invoice requisition and the operator logs while invoiced appropriately as per the Service Agreements.

Sample

Document Month Population Sample Proportion

Invoice May 2021 22 22 100%

Operator Logs May 2021 8 8 100%

Work Done

1. Spoke to the process owners to verify the service process and the revenue recognition process.
2. Obtained the invoice listing for the Month of May 2021, in order to verify the revenue.
3. Checked for the completeness of the invoice and recalculated the relevant taxes along with the invoice requisitions to verify the accuracy.

Internal Audit Review for the Month of May 2021 26

 Thank You

Internal Audit Review for the Month of May 2021 27