Analytical procedures Cement Industries in Malaysia

ANALYTICAL PROCEDURES

ANALYTICAL REVIEW

PRESENTING BY:

SYAFIQAH NADHIRAHNUR UMI HANI

NAJEAASIAH KAMILAHNORSHAKIRAH

COMPANY BACKGROUND

STRUCTURE OF CEMENT INDUSTRIES MALAYSIA BERHAD

KHAZANAH NASIONAL BERHAD

UEM GROUP

CIMA

UEM Group wholly subsidiary by

Khazanah Nasional Berhad

CIMA wholly owned by UEM

Group

Nature

Purposes

These may be achieved through the consideration of comparisons of the entity’s financial information with, for example:• Comparable information for prior periods• The entity’s anticipated results• Similar industry information

To examine both financial data and non- financial data, such as the number of employees.

To estimate the expected value (of the ratio/ trend/ account balance/ transaction, etc.)

To identify unusual transactions or event and amount, ratios and trends.

Final analytical review

Sources of information

Financial report Budgets Non-financial information

Involving the process of review the trial balance, financial statements, and footnotes to:

Judge the adequacy of the evidence Determine if any other unusual balances/relationships

have not been investigated

2.0 STEPS TAKEN IN ANALYTICAL

PROCEDURES:

Step 1: Develop an Expectation

Step 2: Identify (actual) material discrepancies

Step 3: Investigate: inquiry AND

corroborating evidence

Step 4: Evaluation: decide if there is

material misstatement or not

IF REASONABLE STOP HERE

Have develop expectation – sales & revenue

will increase, cost of production increase

Where there is significant fluctuations or

info is differ from expected values by

significant amount

Either the expectation and actual

information has tolerable differences or is

significant

The result from inquiry will be evaluated, it

may be material misstatement if the

transaction has significant fluctuations

without any explaination.

3.0 COMPARISON ON FINANCIAL STATEMENT

INFORMATION:

3.1 BUDGETS & FORECAST

Production & Sales budget

Based on demand

annual cement

consumption

Demand drivers; economic growth,

industrial activity, real estate biz & construction

activity

The budgeted production and sales

increase by 6% as expected annual

cement consumption to cross 17.5 million tons by end 2013.

3.2 UNUSUAL FLUCTUATIONS

Required during the planning and completion phases on all audits.

3.0 COMPARISON ON FINANCIAL STATEMENT

INFORMATION:

significant difference are not expected but

DO exist

significant difference are expected but DO

NOT existOR

• SALES• INVENTORIES• DEBTORS• CREDITORS• OTHER

OPERATING EXPENSES

UNUSUAL FLUCTUATIONS

3.0 COMPARISON ON FINANCIAL STATEMENT

INFORMATION:3.3 RATIO & ANALYSIS

3.0 COMPARISON ON FINANCIAL STATEMENT

INFORMATION:3.3 RATIO & ANALYSIS

LIQUIDITY RATIOS & OPERATIONAL EFFICIENCY RATIO

EVALUATIONS:-ANALYSIS Liquidity Ratio

Current RatioRecession over the two-year period from 1.85 (2011) to 1.35 (2012).

• Has fewer current assets to cover its current liabilities

• Working capital of CIMA finally become negative in 2012

Other businesses within the same industry have greater ability to use current assets to pay short-term debt.

Quick Ratio

Recession over the two-year period from 1.27 (2011) to 0.98 (2012)

• Company’s immediate short-term liquidity is at bad position.

Other businesses within the same industry have greater ability to use their current assets (excluding inventory) to pay or meet their short-term debt.

CIMA's quick ratio is below the industry average BUT no indication that the company struggling

EVALUATION ANALYSIS:- Operational Efficiency Ratio

Receivable Turnover

4.145 times over the 2011-2012, (2011 being the highest

• Unable to quickly & efficiently collect its outstanding receivables 4.15 times a year shows bad liquidity positions.

Much lower than the industry average for the two companies,

• Apparent problems with collecting accounts receivable.

Inventory Turnover

Gradually increased 2.80 to 3.53

• the liquidity of the company’s• inventory is at good position.

Consumed its inventory approximately 3.53 times in 2012.• Considerably lower than the industry

average of 6.75 times

As a result, CIMA has more money "tied up" in inventory than other firms within the same industry.

3.0 COMPARISON ON FINANCIAL STATEMENT

INFORMATION:3.3 RATIO & ANALYSIS

PROFITABILITY RATIOS

3.0 COMPARISON ON FINANCIAL STATEMENT

INFORMATION:3.3 RATIO & ANALYSIS

SOLVENCY RATIOS

4.0 COMPARISON ON NON-FINANCIAL DATA:

4.0 COMPARISON ON NON-FINANCIAL DATA:

ANALYTICAL PROCEDURES