INTERNAL AUDIT DIVISION

E-mail CIA@abansgroup.com

Abans Group
To : Mr. Kolitha Perera - Asst. Accountant

Thr : Mr. W.G.G.A.S.Gurusinghe - Chief Internal Auditor

From : Ms. T.M.D.Dilrukshi - Ass: Manager- Internal Audit

Cc : Mrs. A. Pestonjee - Chairperson

: Mr. P.N. Pestonjee - Director
: Mrs.S.Dubash - Director
: Mr. Rusi Pestonjee - Director
: Mr. B. Pestonjee - Director
: Mr. Prabath Wijedasa - GM
: Mr. Chandima Bandara - DGM Finance

Subject : Reviewing Financial Statements as at 31.03.2015.

[Abans Graphics (Pvt) Ltd]

Ref No : IA/FA/AGL/15/07/91

Date : 25th July 2015

We performed an audit on the financial statements of Abans Graphic (Pvt) Ltd as at 31 st March
2015. Our focus and attention was mainly on the following areas.
 Fixed Assets
 Sales
 Purchase
 Loan Payable to Abans PLC - Laptop
 Debtors
 Creditors
 Advances
 Salary, EPF, ETF and Sport club
 Abans Printing Department A/C
 Value Added Tax
 Nation Build Tax
 Petty Cash
We wish to receive your comments on our audit observations made in this report within seven (7)
days of receipt of this report.
Thanks & Best regards.

..……………………
Ms. T.M.D.Dilrukshi
Page 1 of 7 [File : Abans Graphics Reviewing Financial Statements as
at 31.03.2015]
[Date : 13/Sep/2019]

#400,4th Floor, Abans Ltd, Galle Rd, Col-03. [Tel: - 0112-301554]

/conversion/tmp/scratch/437302811.doc
(Attended By: Udayangani & Wasana)
Observation 01: Unpaid Loan to Abans PLC

It was noted Employee of the Abans Graphics has obtained a laptop from Abans PLC and the loan
installments have to be remitted to Abans PLC by deducting from the employee’s salary. Even
though the loan deducted from the employee, Abans Graphics has not settled the loan and
outstanding from 2007. Details are as follows:

Loan grant date : 2006 July

Name of Employee : Raveen Kulendra
Loan Amount : Rs.50, 000.00
Loan remittance due date : 28th February 2007

This was shown in the balance sheet as a current liability from the year of 2006/07 to 2014/15.
Details are as follows,

Date Description Amount

31/07/2006 Provision for salary-July 2006 5,000.00
31/08/2006 Provision for salary-August 2006 5,000.00
30/09/2006 Provision for salary-September 2006 5,000.00
31/10/2006 Provision for salary-October 2006 5,000.00
30/11/2006 Provision for salary-November 2006 5,000.00
31/12/2006 Provision for salary-December 2006 5,000.00
31/01/2007 Provision for salary-January 2007 5,000.00
28/02/2007 Provision for salary-February 2007 15,000.00
Total 50,000.00

Note: This observation we have reported in our previous audit report dated 27 th February 2012
(Ref: IA/FA/AGL/12/02/002) and answered by Accountant of Abans Graphic as this will be written
off with the management approval.

Effect

 Unnecessary liability has been shown in the accounts of Abans Graphics Pvt Ltd.
 Current Liabilities shown an inaccurate amount in the Balance Sheet.
 Inter Company Balance will get affected by Rs. 50,000

Recommendation

Necessary entries should be passed to written off this balances immediately without carried
forwarding.

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[Date : 13/Sep/2019]
Observation 02: Fixed Assets
It was noted that following expenses have capitalized as computer equipment in financial year
2014/15. Details are as follows:

GRN / Payment Ledger Description Amount Depreciatio Remarks

Invoice Date recorded (Rs.) n impact
Date Date (Rs.)
19/03/2014 09/05/2014 10/04/2014 Kaspersky 1,650.01 550.00 Note 01
Antivirus
Software 2013
14/07/2014 05/08/2014 14/07/2014 Onsite visiting 2,500.00 833.33 Note 02
charges to
Troubleshoot
Printing issue
Total 4,150.01 1,383.34

Note 01: The purchasing of Kaspersky Antivirus Software is software which does not have an
economic useful life over one year; however it appeared in Computer Equipment Ledger as fixed
assets additions in financial year 2014/15.

Note 02: Onsite visiting charges to Troubleshoot printing issue has identified as computer
equipment which is not used for the purpose increasing capacity of the printer.

Effect:
Net profit overstated by Rs. 2,766.67 and fixed assets overheated by same amount.

Recommendation
Responsible officer should make careful attention when updating Fixed Assets ledger and
necessary correction entries should be passed to correct the above misstatement.

Observation 03: Abans Printing Department

 It was noted that the Printing Department-acquisition account has reflected a payable
balance Rs.2,385,679.56 which is made up of annual machine hiring charges of Rs.240,000
provided from over 11 years. This is a payable to Abans Printing Department and payment
has not made in cash for same.

 Even though the Property, Plant and Equipment reflected value of Rs. 4,350,962 in the
printing department books, those are not deprecated as per the Printing dept. records.

 The legal statues of printing dept. is a partnership which does not shows any transactions
other than machinery rent provision made from year 2003. Further the Statement of
Financial position shows that long outstanding intercompany balances without making any
movement as well. Details as follow :
Page 3 of 7 [File : Abans Graphics Reviewing Financial Statements as at 31.03.2015]
[Date : 13/Sep/2019]
 Due from Related parties Due to Related parties
Company Name Amount Company Name Amount
(Rs.) (Rs.)
Abans Tours (Pvt) Ltd 1,896 M/s. Abans Electricals Ltd 26,235
Abans Electrolux Ser (Pvt) Ltd 4,610 M/s. Pastor 48,129
Abans Graphic (Pvt) Ltd 2,064,915 M/s. Abans PLC 1,206,750
Abans Jung Poong 15,750 M/s. Abans Electricals Services (Pvt) Ltd 5,336
Abans Electricals Ltd-Serv. Dept 34,386 M/s. Abans Lanka (Pvt) Ltd - Cellular Div 56,938
Absec (Pvt) Ltd 55,921 M/s. Abans PLC. - Leasing Dept 2,250
Sunsports (Pvt) Ltd 9,219 1,345,638
Abans Restaurants System 229,120
ABS Gardner Dixon Hall 41,092
2,456,909

Effect
There is no such benefit flow to main company by maintaining partnership business and which
generates only an additional cost to the company such as bank charges and Accountancy charges.

Recommendation
 The purpose of maintaining partnership business is not clear. If company wish to obtain tax
benefit throughout the partnership, Annual rent value should be reviewed to take the
maximum tax benefit.
 The responsible officer should review the Accounting policy for deprecate assets of
partnership and if it does not include specific transitional provisions applying to that
change, it shall apply the change retrospectively.
 The most of the related party companies do not exists with the current operations. Therefore
accuracy of having these balances should be checked.

Observation 04: Incomplete Petty Cash Payment Vouchers

It was noted that all most all the petty cash payment vouchers are not properly completed.
Especially in the petty cash voucher the claimed amount has not been written in words &
Description of payment.

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[Date : 13/Sep/2019]
Effect:
Alterations can be done very easily and it could lead to misuse the petty cash float.

Recommendation;
Responsible officials should get completed Petty cash vouchers before making the payment.

Observation 05: Non-moving Trade Debtor balances

It was noted that, transactions recoded in the following debtors’ ledgers containing outstanding
balance from more than one year without showing any movement. Details are as follows.

Coming Amount
Name of Debtor Description
From (Rs)
1 Abstract Lanka (Pvt) Ltd Invoice No. 3348 2013 2,400.00
2 A-Z Electronics (Pvt) Ltd Invoice No. 3095 2012 5,999.99
3 Consultancy Service Invoice No. 0616 2004 1,985.29
4 Sinhagiri (Pvt) Ltd Invoice No. 3587 2013 25,714.28
5 Abans Ltd -Central AC Division Invoice No.3436 2013 4,400.00
Total 40,499.56

Note: Long outstanding debtors have appeared in financial statements which amount to Rs.
405,788.35. Even though the directors’ approval for writing off these balances is provided by the
Accountant, bad debt provision has not made in the Financial Statements for the financial year
2014/15.

Effect
Current Assets has overstated by amount of Rs.40,499.56

Recommendation
 The possibility of recovering or settling them is very remote. Therefore necessary adjustment
should be made to collect or correct (write off/back) the above balances.
 It is recommended to take necessary action to reflect the correct position of above ledger
without further delay.
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[Date : 13/Sep/2019]
 Observation 06: Value Added Tax control
It was noted that accounting treatment for recording of VAT payment has not followed accurately
and the purpose of maintain VAT control account is not achieved. Currently Output VAT only
shows in the Control account and Input Vat and VAT payment for the month has recorded in the
Input VAT account. Therefore we were unable to review the accuracy of Value Added Tax. The
current practice and recommended practice are as follow.

Existing procedure Proposed procedure

Purchase Ledger Account Dr Purchase Ledger Account Dr
VAT A/C Dr Input VAT A/C Dr
NBT Input Dr NBT Input Dr
Creditor A/C Cr Creditor A/C Cr
(Being transfer Input Vat & NBT to accounts) (Being transfer Input Vat & NBT to
accounts)
Debtor A/C Dr Debtor A/C Dr
Sales Account Cr Sales Account Cr
VAT Control A/C Cr Output VAT A/C Cr
(Output VAT+NBT Output) NBT Output Cr
(Being transfer Output Vat & NBT to VAT Cont. (Being transfer Output Vat & NBT to A/C)
Account)
VAT-Input A/C Dr Output VAT A/C Dr
Cash/Bank Cr Input VAT A/C Cr
(Being record VAT payment) VAT Control A/C Cr
(Being transfer Output and Input VAT to
VAT Control Account)
VAT Control A/C Dr VAT Control A/C Dr
NBT Control A/C Cr Cash/Bank A/C Cr
(Being total Output NBT Transfer to NBT Control (Being record VAT payment)
A/C)

Effect
The accuracy of VAT Control ledgers process cannot be monitor closely.

Recommendation:
Responsible officer should take necessary action to follow the proposed procedure as above.

Observation 07: Provision for Rent

It was noted that the provision for rent has not made for year 2014/15. Last year Factory rent
expense has Rs.72,000 in Financial Statements for the year 13/2014.

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Effect:
As a result rent expenses has understated by Rs. 72,000.

Recommendation
Necessary entries should be passed to reflect the correct position of above ledger.

General Observation 01: Adoption of SUN Accounting System

We observed that Abans Graphic (Pvt) Ltd is still using the Sybiz Accounting System. That system
does not have independent review facility. Further we could not able to review group policy
compliances in this system and while all other companies using SUN Accounting System for the
accounting.

Effect:
When considering the group using different accounting system is not a good standard and not essay
to manage information.

Recommendation
SUN Accounting System should adapt to the Abans Graphics (Pvt) Ltd similar to other companies
in immediate effect.

Page 7 of 7 [File : Abans Graphics Reviewing Financial Statements as at 31.03.2015]

[Date : 13/Sep/2019]