Nature of Operations and Business Process

Pinoy-Magas sells leche flan, maja blanca, cookies, sago’t gulaman (desserts) to customers. The company’s primary competitive strategy is to improve the quality and services in every aspect of their operation. The company offers foods that has nutrients at an affordable price. The market for desserts is extremely competitive.

The Pinoy- Magas Company is established as a manufacturing enterprise selling various products namely:

Products Prices

Leche FlanMediumRegular

Php 50.00Php 15.00

Maja BlancaMediumRegular

Php 45.00Php 15.00

Cookies (per piece)BananaChocolate

Php 5.00Php 5.00

Sago’t Gulaman Php 10.00

Type of Organization

The enterprise is set-up as a partnership comprising ten members per articles of partnership. Each person is prescribed to contribute cash as a capital of the partnership. Every partner is mandated to contribute cash as capital of the partnership of Php 300.00 equally.

The organization is composed of the following:

Dizon Balbiran

Millette Claveria

Krizzel Sajonas

Phoebe Louis Eco

Ma. Fatima Soriano

Ma. Danica Lynda Tenorio

Nerissa Joy Fernandez

Joshrich Yvette Veronia

Jan Henry Mangapot

Emmanuel Ison

Planning Materiality

We believe that operating results are the most appropriate basis for estimating planning materiality as described below:

Comparison of Basis

Financial Statement Base March 5, 2013

Sales Php 2315.00

Total Assets 4207.79

Pre-tax Net Income 1271.36

Computation of Planning Materiality

Base Amount Percentage Materiality Estimates

Sales Php 2315.00 1% 231.50

Total Assets 4207.79 1% 420.78

Pre-tax Net Income 1271.36 10% 127.14

The range for planning materiality is from Php 420.78 to Php 231.50 based on the company’s steady growth in sales and earnings. We have selected Php 350.00 as a reasonable materiality amount for planning purposes.

Planning Meetings

Based on discussions with Mr. Balbiran the following are tentative dates of importance for the audit:

Day 1 A. Agreeing the terms of Engagement

B. Pre-Engagement Conference

C. Obtain an Understanding of the Entity

D. Develop Overall Audit Startegy

E. Develop Detailed Audit Plan

Day 2-5 Substantive Testing

Day 6-7 Completing the Audit

Day 8-9 Reporting

Day 10 Exit Conference with the Client

Measurement and Review of Financial Performance

Inventory Net income Sales by type of product

Procedures to Obtain an Understanding of the Client and Its Environment

The following procedures were performed by the audit team to obtain understanding of the client and its environment:

Review of Business Plan Inquiries of Management Review of Articles of Partnership