1.

ACCOUNTING SYSTEM

Observation
We noted that the Company is still using the manual procedure in
processing financial information though transactions had significantly
increased during the year as a result of improved performance of
satellite branches. Since this procedure requires more time in
processing all accounting transactions, certain financial information
are not made available as the need arises.

Recommendation
The Company should adopt a computerized accounting system, an
application of accounting software that will support the Companys
operation. The adoption will aid and enhance the performance of the
staffs in processing accounting transactions, minimize possible errors
and provide quick, easy access to the preparation of the financial
information for management use and consolidation purposes.

Managements Response

2. ACCOUNTING SYSTEM

Observation
The Companys accounting software, International Garment System
(IGS) was not properly registered with the BIR prior to its use.

Recommendation
The Company should file an application for permit to adopt
computerized accounting system and/or components thereof as per
RMO No. 21-00, in accordance with Companys operation, legal and
other technical requirements and to avoid the possible penalties that
the BIR may impose.

Managements Response
This will be discussed with the top-level management.

3. IMPROVING COST ACCOUNTING SYSTEM

Observations
a. The Company uses standard costing in computing for monthly raw
materials inventory usage. However, monitoring is not being done
on a regular basis to ensure that the standard costing used is
reasonable and approximates the actual cost.
b. The cost of the Companys non-good items is based on 70% of the
unit selling price and cost of direct labor and manufacturing
overhead is 100% included in the costing of items actually sold to
customers.
 Recommendations
a. To improve accuracy of costing, we suggest that the
Company regularly monitor its standard costing for raw materials
inventory. The standard cost should be revised accordingly
depending on the fluctuations of purchase price. Please also note
that the difference between standard cost and actual cost should
be adjusted regularly (e.g. monthly, yearly, etc.).

b. Proper treatment for costing non-goods items follows:

b.1Cost of raw materials included in non-good items should be
based on standard cost.
b.2Costing of direct labor and manufacturing overhead should
be proportionately allocated to goods actually sold to customers
and non-goods items.

Managements Response
a. This fiscal year, May 2002, we have revised our procedure in
costing the actual material usage. We already have the actual
monitoring on the usage and actual inventory count on a monthly
basis.
b. We have also revised the costing for the NG products
starting this fiscal year. It will we based on the percentage of NG
against the production output.

4. ACCOUNTING SYSTEM

Observation
We noted that the Company is still using the manual procedure in
processing financial information though transactions had
significantly increased during the year as a result of improved
performance of satellite branches. Since this procedure requires
more time in processing all accounting transactions, certain
financial information are not made available as the need arises.

Recommendation
The Company should adopt a computerized accounting system, an
application of accounting software that will support the Companys
operation. The adoption will aid and enhance the performance of
the staffs in processing accounting transactions, minimize possible
errors and provide quick, easy access to the preparation of the
financial information for management use and consolidation
purposes.

5. ACCOUNTING SYSTEM
Observation
The Companys accounting software, FACT system, is not properly
utilized and not updated. This resulted to difficulty in verifying
entries posted to the system and in significant differences between
the subsidiary and general ledgers.

Recommendation

The Company should ensure regular update of computerized and

manual accounting records. This will assists in and enhance the
processing of accounting transactions, minimize errors, generate
accurate financial reports and analyses for management use as
well as it will facilitate early identification and resolution of errors
and issues.