https://rpubs.com/staszkiewicz/CPL526_EN
Excerpt from the audit strategy Audited entity: the Capital Group of Centralny Port Lotniczy SA (hereinafter CPL) in Augustów Łódzkie Province. Type of audit: consolidated financial statements according to IFRS. Preliminary visit: 7-14 November 20X7 Inventory: 28-31 December 20X7. Final visit: 16-23 February 20X8. Materiality of the study: 123 m€, SAD 12 m€, TE 89 m€. Group auditing entity: ARS Audit Europe, based in Warsaw. Audit team: 3 assistants, 1 senior, 1 manager, 1 partner.
Note following audit testing The electronic system for the sale of landing rights was verified. This system affects significant items of revenue and receivables. Both the billing in the transaction system and the identification of the counterparty in the analytical ledger and the posting machine in the general ledger function correctly. No errors were found in the system of internal control. The system of internal control in respect of employee time accounting and payroll creation was examined. The company effectively uses partial outsourcing of the system, outsourcing control procedures including contracts to a third party. The system affects payables and settlements with employees and payroll fund and cash in bank.
Issues identified in planning:
the financial statements in the previous year were audited by Auditor Sp. z o.o. the company gave an unqualified opinion; the chief accountant stated that he had given the final turnover to the previous auditor.
the fuel storage facilities are located to the north of the airport, their book value according to the register is EUR 720 million. Apart from the storage depot, the entire depots are located below ground level. The audit team does not know how to verify the existence, rights and valuation of the depots.
The company has entered into numerous construction contracts for the second runway of the main landing and take-off path. Due to the failure of the concrete threshold contractor to meet the technical condition, the company was requested by the entity TanieLatanie SA to pay a contractual penalty and accept a correction invoice for the airport services already performed.
According to the collective labour regulations at CPL, employees who turn 45 in a given year are entitled to a jubilee award, while those who retire or turn 60 are entitled to a retirement allowance. The award is three times the average salary and the severance payment is twelve times the average salary on the date of payment.
The register of fixed assets identifies unmanned military aircraft used for monitoring hostile territories. According to the register, there are 317 such machines, with 112 hangared. The remaining machines perform military missions. Due to solar propulsion, the machines can stay below the stratosphere for up to 13 months. The audit team is unsure of the test to confirm the existence of this type of machine.
There is a development and optimisation fund within the company’s earmarked funds, of which the company’s secret office is the custodian. In the audit team, one person is certified for access to state secrets, one for restricted matters, the other persons do not have the relevant certificates. The value of expenditure from the fund in the reporting year amounted to EUR 720 million. The key auditor responsible for the audit does not have any security clearances and is unsure how he is supposed to obtain adequate and sufficient audit evidence on this fund.
It is expected that after the date of the auditor’s opinion, as indicated in the audit contract, the proceedings for certification for CPL of the IRTS system allowing aircraft with a take-off weight of more than 400 tonnes to land at the airport will be completed. In the absence of such certification, intangible assets and investments in progress amounting to EUR 1.2 billion should be shown in the balance sheet as prior period costs.
CPL has set up an affiliate, Gwardia Polska, which is CPL’s exclusive partner in selling outdoor advertising rights in the arrivals hall. The supervisory board of Gwardia Polska includes the daughter, son, grandmother and great-grandmother of Ms Zofia, CPL’s CFO. Corruption allegations have been made in the press against the chairman of the trade unions at CPL for not representing the interests of employees and holiday trips to a resort in Kiejstuty, financed by a CPL subsidiary.
Certificates were purchased for investment in GetOut, a listed entity, as part of the Welfare Fund. The purchase price per certificate was EUR 97, two million certificates were purchased, with the market value falling to EUR 14, and the Exchange suspended the fund’s listing due to the depositary’s failure to provide information on the valuation procedure. The Investment Adviser indicated that no transaction was made at the price of EUR 14 on either the regulated or OTC market. The net asset value of the fund reported in the financial statements is EUR 700 million and the number of certificates issued is 4 million.
CPL obtained a loan from the EIB for the construction of the arrivals hall and lanes. The value of the loan is EUR 4.4 billion, which represents 70% of total assets. CPL expects a net loss of EUR 700 million in the current period. One of the important conditions of the agreement with the EIB is the right of cross default. CPL has been called on by Little Bank Wschodni SA, based in Lublin, to immediately repay the remaining debt of PLN 324 million due to the disposal of plot KR 723, which is the collateral for the loan granted by Little Bank Wschodni SA.
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Source: Staszkiewicz, P. (2021), Audit. Zbiór Zadań Do Rewizji Finansowej, I., PWN, Warszwa.