Audit ProposalKPMG PBS

8/8/2019 Audit ProposalKPMG PBS

http://slidepdf.com/reader/full/audit-proposalkpmg-pbs 1/20

KPMG ČESKÁ REPUBLIKA

Proposal for audit services for the

accounting period ending

31 August 2008

Czech British School, s.r.o.



2This proposal is made by KPMG Česká republika, s.r.o.and is in all respects subject to the negotiation, agreement and signing of specific contracts.

Introduction

• The management of Czech British School, s.r.o. (further Czech British School) has requested aproposal for the provision of audit services for the accounting period ending 31 August 2008 asfollows :

• an audit of your statutory financial statements for the 19 month period ending 31 August 2008 inaccordance with the Act on Auditors and International Standards on Auditing and the relevant guidanceof the Chamber of Auditors of the Czech Republic

• a limited review of your financial statements for the 7 month period ending 31 August 2007 inaccordance with the Act on Auditors and International Standards for Review Engagement and the

relevant guidance of the Chamber of Auditors of the Czech Republic




Why KPMG Czech Republic?

• Knowledge of the Czech British School, s.r.o. line of business• KPMG provides audit and advisory services to companies in the same or similar line of business as International

School of Prague or OPEN GATE - Boarding school, osmileté gymnázium v Babicích, s.r.o. – see an overview of KPMG clients.

• The knowledge and deep understanding of our client‘s business is fundamental to the KPMG audit approach.

• Experienced and stable multi-disciplinary team• KPMG has a team of top professionals who have extensive experience in auditing major companies in various

industrial and commercial sectors. Our team includes professionals from various areas – auditors, tax advisors,financial risk management and information risk management professionals, etc.

• The results of our audit work bring a consistent approach to dealing with issues in individual companies.

• Comprehensive services• KPMG has extensive experience in reviewing financial statements, prepared under Czech and other accounting

standards (IFRS, US GAAP, EU Directives, national legislation of parent companies, etc.).

• If you choose KPMG, the information obtained during our audit of the financial statements can be used for other related services, e.g. tax advisory services, due diligence, review of the internal management system,

implementation of new information technologies, assessing information system risks, preparing marketing andcomparative studies etc.


http://slidepdf.com/reader/full/audit-proposalkpmg-pbs 4/204This proposal is made by KPMG Česká republika, s.r.o.and is in all respects subject to the negotiation, agreement and signing of specific contracts.

KPMG worldwide

• KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. Weoperate in 144 countries and have more than 104,000 professionals working in member firms aroundthe world. The independent member firms of the KPMG network are affiliated with KPMGInternational, a Swiss cooperative. KPMG International provides no client services.

• KPMG member firms are committed to being the business adviser of choice to the world’s mostadmired global organizations. We recognize that major global companies with operations in diversecountries have complex needs – whether they are addressing strategic and risk management issues,organizational and infrastructure change, cross-border mergers or acquisitions, foreign investmentsand other issues. Thanks to a thorough knowledge of the risks and limits of individual lines of

business, KPMG assists its clients in focusing on the identification of opportunities to improveperformance and shareholders‘ or member’s value.

• Fundamental to KPMG’s approach is the thorough knowledge and deep understanding of our clients’industries. We believe that this knowledge enables us to help our clients to achieve the best results intheir respective industries. This is why we invest in continuously improving our knowledge of theindustries we serve.

• KPMG member firms serve many of these global companies, using our global network, professionalskills and the very latest in knowledge-sharing tools and communications. Through our globalnetwork of linked practices, we keep up-to-date with the developments in International AccountingStandards, accounting and tax legislation of EU member states and have access to information thatcan be used for effective economic management.


http://slidepdf.com/reader/full/audit-proposalkpmg-pbs 5/205This proposal is made by KPMG Česká republika, s.r.o.and is in all respects subject to the negotiation, agreement and signing of specific contracts.

KPMG in the Czech Republic

• KPMG has been active in the Czech Republic since 1990, when the first office in Prague wasopened. Currently, KPMG Czech Republic employs 650 people, with offices in Prague, Brno, ČeskéBudě jovice, Jablonec nad Nisou and Ostrava.

• Of our 528 professionals, 23 are partners, 24 certified auditors, 68 certified accountants and 42 taxadvisors. At KPMG Czech Republic, a total of 28 qualified foreign practitioners are employed.

• KPMG Czech Republic offers a wide range of advisory services aimed at improving your business. Inaddition to audit we provide tax services, risk advisory services and financial advisory services.

• Our services are tailored to the needs of both local and foreign clients.

• KPMG Czech Republic was awarded 1st place in the category named “Services For Companies” inthe announcement of the 100 most admired companies in the Czech Republic in 2006 and 2007 (theCZECH TOP 100).


http://slidepdf.com/reader/full/audit-proposalkpmg-pbs 6/206This proposal is made by KPMG Česká republika, s.r.o.

and is in all respects subject to the negotiation, agreement and signing of specific contracts.

Our clients I

• Our teams’ knowledge in various lines of business enables us to provide the best services to a largenumber of clients. Our experience includes cooperation with the following clients whose businessactivities are similar to those of Czech British School, s.r.o. (in alphabetical order):

• EuroManagers

• Institut environmentálních služeb

• International School of Prague

• New York University

• OPEN GATE – boarding school, osmileté gymnázium v Babicích




Our clients II

• Allianz pojišťovna

• Barum Continental

• BAWAG Bank CZ• Celestica Ráječko

• Citibank

• Česká pojišťovna (group)

• ČEZ

• ČSOB Pojišťovna

• DHL Information Services (Europe)• ECM Real Estate Investments

• EUROPHARM

• GE Money Bank

• HVB Bank Czech Republic

• IMMOEAST Corporate Finance Consulting

• J & T BANKA

• K & K Capital Group• Kooperativa, pojišťovna

• Nationale-Nederlanden životní pojišťovna

• OKD (group)

• Plus Discount

• PPF (group)

• První novinová společnost• Siemens (group)

• Skanska (group)

• Telenor Česká republika

• Toyota Peugeot Citroën Automobile Czech

• Živnostenská banka

Our major clients in other lines of business (in alphabetical order):




Independence, Conflict Checks and Confidentiality

• Independence – KPMG has a web-based tracking application (KPMG’s Independence ComplianceSystem (KICS)) which monitors KPMG’s investments and other financial interests, as well aspartners’ and managers’ personal investments that could compromise independence.

• Conflicts. Our Conflicts Check System is based on a database that contains up-to-date informationon current and prohibited relationships. At the request of the engagement team, our Ethics andCompliance Group generates a conflict report from this database, and the engagement partner reviews the report and acts on its findings.

• Permitted Services. A KPMG internal application (called Sentinel) enables an engagement team andthe lead audit engagement partner to review and approve KPMG’s service relationships withbusiness entities worldwide, helping to ensure that no KPMG engagement team anywhere in theworld unknowingly performs a prohibited service for an audit client or its affiliates in another country.

• Confidentiality. KPMG has clear internal directives with respect to the confidentiality of client-relatedissues. All information received during engagements is treated as confidential. All KPMG personnel,

including administrative, support, and technical staff involved in the engagement, sign an agreementnot to discuss matters relating to the engagement with anyone, including other KPMG personnel,(except for members of their relevant client service team and authorized personnel of the applicableclient or that client's representatives).




KPMG Audit Methodology (KAM) I

• KPMG is always looking to strengthen audit quality in line with the changing expectations of our clients, their investors and the regulatory authorities. We have long pursued this objective through

the continuous assessment of our audit procedures, making sure that they remain as robust aspossible and that they keep pace with the latest requirements.

• The most recent evolution of our audit process is KAM – the KPMG Audit Methodology. Reflectingour traditional commitment to leadership in audit quality, our new approach goes beyond the rulesdeveloped to rebuild confidence in financial reporting. KAM is an acknowledgement of andresponse to the need for listed companies in particular to demonstrate maximum credibility and

transparency in their reporting. At the same time, it meets KPMG’s goal of continuing to provideindependent, rigorous and high quality audits.




KPMG Audit Methodology (KAM) II

There are four key principles that underpin KAM:

• Full adherence to national and international accounting standards• Our audits are planned and designed to be performed in accordance with International Standards on Auditing,

International Financial Reporting Standards and relevant national standards. These include, for example, those

adopted by the Institute of Chartered Accountants in England & Wales, the American Institute of Certified PublicAccountants and the Public Company Accounting Oversight Board.

• A critical emphasis on the key procedures, risks and controls• Every aspect of KAM involves the clearest possible focus on the client’s financial statements. By emphasizing

the critical nature of substantive procedures, effective risk assessment and control testing activities, KAM isdesigned to identify the risks that affect key captions, the audit procedures to address those risks, where the

risks of potential misstatement are greatest and the effectiveness of internal controls in mitigating these risks.

• Understanding the business by using industry-experienced professionals• The quality of our audit work depends on deploying professionals with precisely the right combination of

technical skills and relevant industry experience. Using multi-disciplinary teams, we develop a strongunderstanding of our clients’ business processes, accounting policies and controls, together with the financialreporting issues specific to each organization’s industry and operations.

• Global consistency, reinforced through rigorous co-ordination and continuity• KAM is used by KPMG’s auditors across all the countries in which KPMG firms operate worldwide. This means

that, in any location where audit work needs to be carried out, our firms’ clients can be sure it will be performedby professionals working to the same methodology, processes and documentation. Global audit consistency isfurther reinforced through sophisticated technology and rigorous oversight.




KPMG Audit Methodology (KAM) III

A clear focus on your financial statements• These are the key phases that KAM defines for delivering the sharpest focus on the integrity and accuracy of our firms’

clients’ financial statements:

KPMG Audit Methodology

SubstantiveTesting

3

Plan substantive procedures Perform substantive procedures Consider if audit evidence is sufficient and appropriate Conclude on critical accounting matters

Completion4

Perform completion procedures perform overall evaluation of the financial statement and

disclosures Form an audit option

1 Planning

Perform risk assessment procedures and identify risks Determine audit strategy and identify critical accounting matter s Determine planned audit approach1

ControlEvaluation

2

Understand accounting and reporting activities Evaluated design and implementation of selected controls Test operating effectiveness of selected controls Assess control risk and risk of significant misstatement

2

1 2Preliminary decision on controlsor substantive approach for eachaudit objective

Confirm decision on controls orsubstantive approach for eachaudit objective

KPMG Audit Methodology

SubstantiveTesting

3

Plan substantive procedures Perform substantive procedures Consider if audit evidence is sufficient and appropriate Conclude on critical accounting matters

Completion4

Perform completion procedures perform overall evaluation of the financial statement and

disclosures Form an audit opinion

1 Planning

Perform risk assessment procedures and identify risks Determine audit strategy and identify critical accounting matter Determine planned audit approach1

ControlEvaluation

2

Understand accounting and reporting activities Evaluated design and implementation of selected controls Test operating effectiveness of selected controls Assess control risk and risk of significant misstatement

2

1 2Preliminary decision on controlsor substantive approach for eachaudit objective

Confirm decision on controls orsubstantive approach for eachaudit objective




Planning

• We will use a risk-based approach to understand Czech British School’s business, industry andenvironment. Our starting point will be to identify the areas where the risk of material misstatementin your financial statements is greatest through structured interviews with your management,analytical procedures, observation and inspection. This will involve considering Czech British

School’s:

• Financial reporting framework

• Business and industry

• Accounting policies and practices

• Financial performance

• Internal controls.

Timelines: Interim audit




Control evaluation

• Using a structured approach, we can evaluate Czech British School’s controls to assess the risk of significant misstatement for each audit objective. For audit objectives where we plan to rely oncontrols to modify the nature, timing and extent of our substantive procedures, our control evaluationmay include:

• The design and implementation of company-wide controls

• Understanding the relevant accounting and reporting activities

• ‘Walk-through’ tests of selected transactions to confirm our understanding of how your accounting and controls work

• Testing the operating effectiveness of selected controls.

Timelines: Interim audit




Substantive testing

• We will test selected audit objectives using substantive analytical procedures, tests of details or acombination of the two, as well as substantive procedures directed towards any fraud risk we haveidentified. In designing our substantive procedures, we will consider:

• The characteristics of the class of transaction, account balance or disclosure

• Our assessment of the risks of material misstatement identified during planning

• The effectiveness of controls over these risks.

Timelines: Interim and final audit




Completion

• We will review Czech British School’s financial statements and determine whether the audit evidenceobtained for each audit objective reduces the risk of material misstatements to an acceptably lowlevel. We will form conclusions on specific topics, such as litigation and claims, and prepare a finalevaluation of any fraud-related matters.

• Our audit opinion will be based on a review of the final financial statements and an evaluation of allaudit evidence in accordance with applicable auditing standards.

• Timelines: final audit




KPMG audit approach

• Our audit of Czech British School will be designed to give you:• Fresh perspectives on opportunities to help secure continuous improvement in your financial processes, controls,

risk management and corporate governance framework

• A clear and consistent focus on key issues across all your worldwide operations

• No-surprises reporting which meets your deadlines• A year-round, hands-on approach that aims to anticipate issues and provides practical support in resolving them• A robust audit opinion.

• Our audit includes in particular:• Identification of the company’s strategic and business risks in order to focus our work on the most significant areas

of the financial statements

• Cooperation with other professional KPMG Czech Republic departments – including tax and information riskmanagement, etc.• Cooperation with employees in the accounting department in order to achieve a joint approach to the audit and

therefore reduce the time between closing the accounting books and issuing the audit report• Effective communication of results to the management of the Czech British School.

• The scope of an audit

• The scope of the audit work performed is designed to ensure that the financial statements of Czech British Schoolpresent, in all material respects, a true and fair record of the Company‘s assets and liabilities, equity, financialposition and results of operations for the given period in accordance with the Act on Accounting and relevantlegislation in the Czech Republic.

• Timelines• According to the audit plan, we expect to map the internal control systems during the autumn and complete the

audit in the spring of next year. Exact dates of deadlines will be discussed with the management of the Czech

British School later on.




Our team I

• A team of professionals possessing the necessary knowledge, skills and experience is assigned toevery KPMG engagement. The team’s ability to carry out a quality audit depends on a thoroughunderstanding of the business processes, accounting procedures, internal controls and financialreporting issues specific to your industry and your company.

• Our team therefore consists of individuals experienced in carrying out audits within the relevantindustry and professionals with detailed knowledge of specific issues who would be pleased toprovide assistance in those areas requiring specific knowledge, skills or tools.

• The audit team may also include:

• Tax professionals, including investment incentive specialists

• Information risk management professionals

• Forensic specialists

• Valuation specialists

• Financial instrument valuation specialists.




Our team II

• Partner in charge of the engagement

Your lead audit engagement partner, Petr Škoda, will serve as the primary contact for your management. He has the overall authority and responsibility for the audit engagement and keyconclusions reached by the engagement team on all accounting and auditing matters.

• Engagement Manager Lenka Sedláčková will serve as the day-to-day audit liaison between Czech British School andKPMG Czech Republic. She will identify, schedule, and supervise the professionals who performthe day-to-day audit work for your organization, reporting directly to the lead partner.

Name Contact information Position

Petr Škoda tel. 222 123 [email protected]

tel. 222 123 635

[email protected]

Partner in charge of the engagement - audit

Lenka Sedláčková Manager - audit

A table summarizing the names of key team leaders is presented below. Short curriculum vitae of the team leaders is also included as part of this proposal.




Client communication

• Once appointed the auditor of your company, we will promptly agree on the dates of regular meetingsor conference calls with the representatives of your company, during which we will review our independence, discuss the progress of our audit work and answer any questions you may haveconcerning your industry, your company’s business activities, operations and accounting, or the

preparation of the financial statements. Irrespective of the subject, you will be granted free access tokey members of our audit team and meetings will be planned in advance.

• We trust that you will be satisfied with the level and method of communication. Our goal is to providesufficient, but not overburdening information. Of course, the audit team will also present you with anyissues discovered during the audit at the earliest opportunity.

• Our team will be in regular contact with your Company throughout the year. We will be continuouslysharing our experience of accounting, internal control systems, tax and information technologyrelated issues with your employees. Knowledge sharing is one of the major additional benefits of our services.




Schedule

Provided service Proposed scheduling Deliverable Deadline

A limited review in accordancewith the Act on Auditors

September 2007 – 1week

Interim audit - review of thefunctionality of the internal controlsystem for audit purposes

August 2008 – 1 week Management letter inEnglish

31 August 2008

Audit of statutory financialstatements in accordance with theAct on Auditors

September 2008 – 1week

An audit report on thestatutory financialstatements in Czech and

English

31 October 2008

n/a

31 October 2007Report on findings

Management letter inEnglish

A management letter setting outour recommendations

31 November 2008

• Three weeks before we start our work, we will provide the companies with a detailed list of the

supporting documentation required for the audit. We expect to discuss any significant audit findingsat the end of the individual audit phases.

Documents

Audit ProposalKPMG PBS