Discussion on User Acceptance Testing of Data Masters

Please read the message below from the Project Manager (KPMG) and let us know about the tentative completion date for your assigned data masters. Can you please check with the respective departments and let me know when can they submit the Data Masters required from their departments ? This is critical.I regret to say that I did not get any update from any department as of now. 

Any update on the submission of Data Master files by different departments ? Please let me know as this information will be helpful to me when I will review the project plan tomorrow.

Based on our numerous discussions and the project plan, today (05-Dec-2012) is the due date for the submission of the Data Master files for the User Acceptance Testing-UAT phase. This data master files will be uploaded into the UAT instance for the purposes of the 
TESTING phase. Please submit all the Data Master files to Data Manager who is our point of contact for all the documents in the project.

If there are any issues, please get back to your respective KPMG module leaders.

Just as a reminder, we need to complete all the Data Masters files for upload into the Production instance by end of Dec-2012.

What about vacancy of directors?

A vacancy created by the removal of a director if he had been appointed by the company in general meeting or by the board in on a casual vacancy, be filled by the appointment of another director in his stead by the meeting at which he is removed, provided special notice of the intended appointment has been given.

A director so appointed shall hold office until the date up to which his predecessor would have held office if he had not been removed as aforesaid.

If the vacancy is not filled, it may be filled as a causal vacancy in accordance with the provisions.

The above provisions of removal of a director shall not affect :-




a. Any compensation or damages payable to him in respect of the termination of his appointment as
director or of any appointment terminating with that as director

b. Any other power to remove a director which may exist apart from this provision.

Appointment by Proportional Representation

Appointment of directors by third parties.

The Articles under certain circumstances give power to the debenture holders or other creditors, e.g., a banking company or financial corporation, who have advanced loans to the company to appoint their nominees to the board. The number of directors so appointed shall not exceed 1/3 of the total number of directors, and they are not liable to retire by rotation.

Appointment by Proportional Representation
[Sec. 265]

 

 

The Articles of a company may provide for the appointment of not less than 2/3rds of the total number of directors of a public company or of a private company which is a subsidiary of a public company according to the principle of proportional representation. The proportional representation may be by a single transferable vote or by a system of cumulative voting or otherwise. The appointment shall be made once in 3 years and interim casual vacancies shall be filled in the manner as provided in the articles.

Appointment of Directors by the Company

2. Appointment of Directors by the Company

(Secs 255 to 257, 263 and 264). Shareholders in general meeting must appoint directors. In the case of a public company or a private company, which is a subsidiary of a public company, at least 2/3rds of the total number of directors shall be liable to retire by rotation. Such directors are called rotational directors and shall be appointed by the shareholders in general meeting.

Ascertainment of Directors retiring by Rotation and Filling of Vacancies (Sec. 256)

· At the annual general meeting of a public company or a private company which is a subsidiary of a public company, 1 /3rd (or the number nearest to 1/3rd ) of the rotational directors shall retire form office.

· The directors to retire by rotation at every annual general meeting shall be those who have been longest in the office since their last appointment.

· At the annual general meeting at which a director retires by rotation, the company may fill up the vacancy (thus created) by appointing the retiring director or some other person.

· If the place of the retiring director is not filled up, the meeting may resolve not to fill the vacancy. If there is no such resolution, the meeting shall stand adjourned till the same day in the next week. If at the adjourned meeting also, the place of retiring director is not filled up, nor is there a resolution not to fill the vacancy, the retiring director shall be deemed to have been reappointed at the adjourned meeting.

Impact of CMS in life-cycle performance of a product or service

Although product/service profitability may be calculated periodically as a requirement for external reporting, the financial accounting system does not reflect life-cycle information. The cost management system should provide information about the life-cycle performance of a product or service. Without life-cycle information, managers will not have a basis to relate costs incurred in one stage of the life cycle to costs and profitability of other stages. 

 

For example, managers may not recognize that strong investment in the development and design stage could provide significant rewards in later stages by minimizing costs of engineering changes and potential quality-related costs. Further, if development/design cost is not traced to the related product or service, managers may not be able to recognize organizational investment “disasters.”

A cost management system should help managers comprehend business processes and organizational activities. Only by understanding how an activity is accomplished and the reasons for cost incurrence can managers make cost-beneficial improvements in the production and processing systems. Managers of a company desiring to implement new technology or production systems must recognize what costs and benefits will flow from such actions; these assessments can be made only if the managers understand how the processes and activities will differ after the change.

Benefits of internal audit

Internal audit work costs money and should therefore provide benefits to justify the costs. The justification for internal audit may come from:

• Improvements in financial controls or operational controls within the entity

• Improvements in compliance with key laws and regulations, thereby reducing the risk of legal action or action by the regulators against the entity

• Improvements in the economy, efficiency or effectiveness of operations There may be other benefits of internal audit.

• If the internal auditors carry out checks into the effectiveness of financial controls within the entity, the external auditors may decide that they can rely to some extent on the work done by internal audit. This would save time and effort when carrying out their own audit work. If the external auditors do rely to some extent on the work of internal audit, there may be a reduction in the external audit fee.

• The existence of an internal audit department may enhance the reputation of the entity for sound corporate governance in the opinion of customers and investors.

What are the contents of the audit engagement letter?

The engagement letter should include reference to the following:

• The objective and scope of the audit.

• The responsibilities of the auditor.

• The responsibilities of management.

• Identification of the underlying financial reporting framework.

• Reference to the expected form and content of any reports to be issued.

In addition to the above, the auditor may feel that it is appropriate to include additional points in the engagement letter, such as:

• More details on the scope of the audit, such as reference to applicable legislation, regulations, ISAs, and ethical pronouncements.

• The fact that because of the inherent limitations of an audit, and the inherent limitations of internal control, there is an unavoidable risk that some material misstatements may not be detected even though the audit was properly planned and performed in accordance with ISAs.

• Arrangements regarding the planning and performance of the audit, including the composition of the audit team.

• The expectation that management will provide written representations.

• The basis on which fees are computed and any billing arrangements.

• A request for management to acknowledge receipt of the engagement letter and to agree to its terms.

• Arrangements concerning the involvement of other auditors, experts or internal auditors (or other staff of the entity).

• Any restriction of the auditor’s liability when such possibility exists.

What are the objective of the audit engagement letter?

The objective of the auditor, per ISA 210 Agreeing the terms of audit engagements is accept or continue an audit engagement only when the basis upon which it is to be performed has been agreed. This is done by:

1. establishing whether the preconditions for an audit are present; and

2. confirming that there is a common understanding between the auditor and management.

To establish if the preconditions for an audit are present ISA 210 requires the auditor to:
a. establish if the financial reporting framework to be used in the preparation of the financial statements is acceptable b. obtain the agreement of management that it acknowledges and understands its responsibility:

- for the preparation of the financial statements

- for internal controls to ensure that the financial statements are not materially misstated

- to provide the auditor with all relevant and requested information and unrestricted access to all personnel.

What are the points must remembered while communicating with the current auditors?

The following points must be noted in connection with communicating with the current auditors:

• Client permission is required for any such communication. If the client refuses to give its permission, the appointment as auditor must not be accepted.

• If the client does not give the current auditor permission to reply to any relevant questions, the appointment as auditor must not be accepted.

• If the current auditor does not give any information relevant to the appointment, the new auditor must accept or reject the engagement based on other available knowledge.

• If the current auditor does give such information, the new auditor must assess all the available information and take a decision about whether or not to accept the audit work.

Where the current auditor gives information that is judged to be relevant to the acceptance of the engagement, the proposed new auditor may still accept the assignment. However, he must exercise appropriate professional and commercial judgement in doing so.

Procedures before accepting an audit appointment

Prior to accepting an appointment, the audit firm must take the following steps:

•   It must assess whether acceptance would create any threats to compliance with the fundamental principles. For example, a personal relationship between a partner at the firm and a senior member of the client’s staff could create a threat to objectivity. Lack of technical expertise could create a threat to professional competence and due care.

• It must ensure that resources are available to complete the audit assignment; in particular, it must ensure that there will be sufficient staff available at the right time. Again, not to have sufficient resources available would create a threat to professional competence and due care.

• It must take up references on the proposed client corporation and its directors, if they are not already known to the auditors. This is usually referred to as client screening.

• It must communicate with the current auditors, if there are any, to establish if there are any matters that it must be aware of when deciding whether or not to accept the appointment. Although this is partly a matter of courtesy between professionals, this will involve discussion of the appointment, the client and the audit work. Such discussion will allow the firm to decide if the client is someone for whom it would wish to act.