PCT Ltd (PCTL)

[falon]

The PCTL’s 2019 10K is the most comprehensive one done on the company in addition to the Covid-19 situation there were many sales of equipment, many addition of distributors, many occasions of stock sales and subsequent events.

The appointed auditor was paid $63,693 last year, $31,035 for 2017, $19,500 for $2016 and $5100 for 2012-2015, $3500 for 2011, $2000 for 2010 and $500 for 2009. All reports were by Sadler except prior to 2016 reports were done by different auditors from Utah.

PCTL transitioned from an emerging growth company to a growing company in 2018 and more so in 2019 and to present times. As one can see the cost of 10K audits increased as the company developed its product lines and started selling them. The biggest increase came from the cost of the 2018 audit which doubled from the previous year. I expected this year’s cost of the audit to be closer to $100,000 if not more. The earlier the year the shorter and concise the report.

Even with the additional activities by the company, there is nothing that I see out of the ordinary that should take such an extended period of time to complete the audit. This isn't our first rodeo with Sadler. They have been here as PCTL emerged to the company they are today.

The biggest changes to be reflected on the 10K is the sales of stock, increase in outstanding shares and the boost in revenues from previous years.

The 10K is in the making and will show up one day but not today as it is Sunday.

I'm not angry

I'm not upset

I'm mad as hell

just kidding:)

Some light reading:


What are the top challenges in the field of audit?

1. Engagement letter
It had always been a challenge to draft an almost perfect engagement letter. It is a pre-requisite to comply with various accounting standards. Agreeing the terms of audit engagements is one of the requirements. It ensures a clear understanding and communication of the responsibilities of the auditor and the duties of the management.

2. Revenue recognition
This proves to be one of the most complicated and sensitive areas of audit for the most obvious reasons. Sometimes, the audit evidence turns out to be weak or too vague. Thus, auditors conduct a substantive test for completeness. Documents like sales invoice etc are verified in order to be sure of the authenticity. Analytical procedures help them generate sufficient evidence on the basis of various proofs and detailed testing helps generate the required levels of confidence to support the assertions.

3. Fraud
The auditor as well as the management is responsible if a blatant fraud is ignored unless proven otherwise. It may arise due to management override of internal controls. The auditor has to set aside all assumptions and apply professional skepticism when carrying out their audit. The appropriateness of journal entries will ensure that there are less chances of collusion. Segregation of duties should be in place. Any inappropriate or unusual activity should be flagged. Any provision or accounting estimates should be thoroughly checked for fraudulent intentions and biases. Hence, a retrospective review of management judgments and assumptions related to significant accounting estimates is important.

4. Inventory
Some companies “get done” with stock takes on the grounds that it is inconvenient or too costly to do so. Also, they think it is an hindrance in the regular workflow. Also, audit firms are known to have failed to address the relevant assertions where stock take attendance is concerned. Hence, the auditor should check the existence and condition of the inventory by performing test of controls. Last but not the least, one should obtain necessary and sufficient audit evidence to confirm the reliability of management’s stock taking procedures.

5. Written representations
Written representations can never be sufficient and appropriate audit evidence. They can support an audit evidence. Also, accounting standards specify a few areas where written representations are needed.

6. Documentation

“How much documentation is enough?”

To answer that question, one can safely say that there is no ‘hard and fast’ rule where audit documentation is concerned. Yet, accounting standards on audit documentation specify that the auditor must make a judgement based on the objective contained in that particular standard. It should be sufficient and appropriate record of the basis for the auditor’s report. Hence, it should act as an evidence that the audit planning and performance is in accordance with the necessary financial standards.

7. Audit report
Various dedicated paragraphs in the audit report hold significance for the investors to judge a company. Eg. The emphasis of matter paragraph specifies certain matters of significance which the auditor might want to highlight. Thus, it indicates that there is no modification in auditor’s opinion in respect of the matters therein. But, it is important to know that particular fact.

Conclusion

This article has tried to highlight major areas of an audit process which serve as common pitfalls for both, the company and the auditor. They can avoid it by using tools like VComply which enable them to work on a single platform. VComply has a compliance workroom which enables the company to post the proof of compliance. One can access, monitor and review it from time to time. A good review process by the audit firm may also flag any additional areas as deficiencies in the process. Thus, ensuring robust internal controls and timely compliance shall help the company to emerge victorious in such scenarios.

https://blog.v-comply.com/challenges-in-audit/