Cognizant Technology Solutions

Japan Centre Review 2014

Planning materiality, tolerable error and nominal amount
Preliminary Materiality is based on annual financial statements as at December, 2013:
Earnings before tax 450,045.97 $
Particulars Basis of computation Amount in $ (Dec 2013)
Planning materiality ('PM') 5% of pre-tax income (EBT) 22,502
Tolerable error ('TE') 50% of PM 11,251
Nominal amount ('SAD') 1% of PM 225
2,369,492.03
Taking into account the facts and circumstances in each case
The ranges we consider for setting PM are as follows:
Measurement Basis Range
Basis Range
Revenue -1%
Gross Margin 1-2%
EBITDA 2-5%
Equity 1-5%
Assets -%
MT
** PRA - Materiality threshold is arrived based 5% of pre-tax income. Tolerable error range is not determined.
1% on MT
2,000,000.00
** PRA - Materiality threshold is arrived based 5% of pre-tax income. Tolerable error range is not determined.
Cognizant Technology Solutions
Japan Centre Review 2014
GL Code GL Description Account Balance
1100140 Mizuho Bank YEN 561111494.9
1120101 Trades Accounts Receivable 528924011.7
1120102 Trade Accounts Receivable-IC 21837389.5
1120201 Reserve for billed receivables -124283491.7
1120401 Allowance for Doubtful debts -7729531.23
1120301 Unbilled Receivables 138482312.4
1120302 Res. for Unbilled Receivables -18055563.05
1120303 Unbilled Trade Receivable-IC 10487428.26
1120501 Assoc Travel and Reloc Advance -2851145.32
1120502 Asso. Initial Settlement Loan 2192618.23
1120601 Associate Loans -174423.55
1120901 VAT Tax Receivable 186545
1120902 Sales Tax Receivable 26768
1120903 Consumption and oth tax recv 101422931.7
1140103 Deposits - Rental 373800
1150101 Prepaid - Rent 3325958.52
1150102 Prepaid - Insurance 27452
1150112 Prepaid - Others 74999.63
1150110 Prepaid Federal Taxes 85093200
1160101 Deferred Income Taxes-Current -23971
1160102 Deferred IncomeTax-FAS123R Cur 12990984.2
1220601 Deposits - Rental 23128500
1230401 Air-conditioner 404892
1230403 Communication & Network Equip. 3873082
1230501 Computer Equipment 6798908.35
1230601 Furniture & Fixtures 2352100
1230901 Interiors 4101700
1230902 Electrical Installation 341220
1231001 Computer Software 48381
1231401 Accum. Dep-Air-conditioner -404892
1231403 Accum. Dep-Commn.& NW Equip. -3150002.6
1231501 Accum. Dep-Computer Equipment -5898252.58
1231601 Accum. Dep-Furniture & Fixture -1087987.97
1231901 Accum. Dep-Interior -4101700
1231902 Accum. Dep-Elec Install. -341220
1232001 Accum. Amort Computer Software -48381
1270102 Deferred Income TaxFAS123R LT 3700633.72
2110101 Trade Accounts Payable -2392628
2110403 Consumption & oth tax payable -133778463.7
Methodology:
1. Based on the materiality amount, map the significant and insignificant accounts
2. Identify all the accounts based on in scope areas
3. For the in-scope areas, identify the accounts pertaining to the relevant areas and tag accordingly.
2110501 Fed Taxes Withheld - Payroll -1306281.14
2120101 Acc. Lia. Sal and Wages-PY -3875545.12
2120102 Acc. Lia. Sal and Wages-CY 88423.67
2120301 Acc. Lia. Food & Beverage -70310
2120307 Acc. Lia. BBEP PY -19647960
2120308 Acc. Lia. BBEP CY -30015977
2120501 Acc. Lia. Vacation -45400921
2120702 Acc. Lia. Bonus-CY -112985310.4
2120901 Training -123440
2121402 Acc. Lia. Audit Fees-CY -969999.96
2121602 Acc. Lia. Professional Fees-CY -1122990
2121603 Acc. Lia. Subcontractors -13451720
2121901 Acc. Lia. Utilities excl phone -345070
2122001 Acc. Lia. Communication -967280
2122101 Acc. Lia. Printing & Stat -151200
2123101 Acc. Lia. Warranty & Rework -6361075.07
2123103 Acc. Lia. Others -3149310.21
2123301 Accrued Federal Income Taxes -55368797
2123303 Fed. Accr Income Tax Payments 20196170
2123701 Customer Rebates -30369347.69
2140101 Deferred Revenues -32561376.37
2150101 Trade Accounts Payable - IC -249984777.5
2150102 Interco Other Rec/Payable -2839758.82
2150104 Interco Recharges - Travel -6255548.69
2150107 Interco Equity Recharges -1954038.53
2150108 Unbilled Trade Payable - IC -97125534.68
3140101 Additional Paid in Capital -300000000
3140103 APIC-Tax bene Rel Stock Plan -11374838.33
3150101 Ret Earnings Opening Balance -173927252.6
4100101 Revenue - Direct -3019787955
4100102 Revenue - Inter Company -197831600.9
4100106 Rev - Acquisition Amortization 2530356.31
4100107 Revenue Rebill T&E Exp -16361707.01
4100108 Revenue Rebill HW & SW Exp -2436219.71
4110101 Contra Revenue - Reserves 123078736.5
4110102 Contra Revenue - T&M Reserves -987029.07
4110103 Contra Rev-Vol Disc & Other Cr 23204828.65
5100101 Salaries & Wages 1194867400
5100201 Employee Commissions 7904107.99
5100302 Empl Bonus-Performance Portion 121014920.8
5100602 Vacation Accrual 12723161.66
5100701 Stock Compensation - ESOP 3486188.44
5101101 Mediclaim Insurance 2548
5101102 Medical Expenses 25576
5101110 Health Checkup 188190
5101801 Assoc Recruiting-Referral Fees 479412
5102201 Reloc-Travel Expenses Taxable 2961710.14
5102301 Beverages 919578
5102302 Meals 871360.73
5102303 Awards 4200
5102306 Team Outings 716570.09
5102310 Other Entertainment 15177877
5102312 Cognizant Celebration Fund Exp 60000
5110101 Hotel Accommodation 5444982.9
5110201 Airfare - ESA Submission 5092845.89
5110202 Airfare - Vendor Inv and Accru 8726213.75
5110301 Local Transp-Car taxi etc. 4173304.91
5110303 Local Transp-Car Rental(T&E) 1360887.19
5110401 Meals& Ent.-Meeting Int & Ext 301756
5110402 Meals & Enter-Int Bus. 407229.1
5110502 Living Expenses 25291.75
5110503 Travel - Kit Expenses 67158.68
5110504 Travel - Medical Insurance 145267.64
5110506 Travel - Others 172304.48
5110603 Vehicle Rental - Car (non T&E) 337290
5110901 Customer Seminars & Meetings 34440
5111001 Customer - Transportation 11925.49
5111003 Customer - Meals & Enter. 4558685.5
5111004 Customer - Other 72554
5120101 Prof Society Membership 148000
5120701 Legal Fees 5775736.23
5120801 Professional Services 55661669.06
5120804 Seminars/External Training 4685568.93
5120805 External recruiting fees 19474736.04
5120903 Immigr Costs - Visa Stamping 5465604.35
5121001 Subcontracting External 202145409
5121101 Subcontracting Intercompany 1023999182
5130101 Office Rent 29053205.76
5130201 Cleaning Charges 1191000
5130502 Hall Hiring Charges 77000
5130603 Other Maintenance & Repair 151640.36
5130604 Building Maintenance Lessor 7032410
5140101 Electricity Charges 3480959
5140301 Telephone - Local 5858910.36
5140302 Telephone - Long Distance 13150
5140304 Telephone / Broadband at home 133255
5140305 Mobile Phone Charges 6457268.04
5140501 Postage Related Expenses 1691290
5150102 Other Equipment Rental/Lease 142561
5150301 Furn & Fixtures Rental/Lease 4208740
5150401 Network Equipment Repairs 242340
5150403 Electrical Repairs 217600
5150406 Hardware Repairs 421184
5150501 EDP Hardware Expense 75265
5160104 Internet Charges 1197594
5170105 Stationery - Other 2007870.36
5170201 Office Supplies 149637
5180105 Advertising Sponsorship 2047500
5180109 Advertisement - Others 10512000
5180204 Photocopying Expenses 1402606
5180301 Other Printing Production 5862086
5190101 Bad Debt Expense 3065386.02
5190201 Warranty & Rework Expense 327630.66
5200303 Depr-Commn. & NW Equip. 752563.07
5200401 Depr -Computer Equipment 2029066.55
5200501 Depr-Furniture & Fixtures 248677.78
5210103 Tax Interest 8300
5210201 Real Property Taxes 53400
5211001 Bank Charges 3174602.36
5211502 Book & Journal Subscriptions 1256260.6
5211503 Misc./Other Operating Expenses 180086131.3
5220401 Forx Gain / Loss 63153628.96
5220504 Int Inc-Non US -50279
5230101 Current Federal Income Taxes 21724929
5230102 Deferred Income Tax Expense -6122213.28
Material Significance Remarks
Y Significant BRS
Y Significant Not in Scope
Y Significant Not in Scope
Y Significant Not in Scope
Y Significant Not in Scope
Y Significant Not in Scope
Y Significant Not in Scope
Y Significant Not in Scope
Y Significant T&E
Y Significant T&E
N Insignificant Payroll
N Insignificant Insignificant
N Insignificant Insignificant
Y Significant Regulatory
N Insignificant Procurement
Y Significant Procurement
N Insignificant Procurement
N Insignificant Procurement
Y Significant Regulatory
N Insignificant Insignificant
Y Significant Regulatory
Y Significant Procurement
N Insignificant PP&E
Y Significant PP&E
Y Significant PP&E
Y Significant PP&E
Y Significant PP&E
N Insignificant PP&E
N Insignificant PP&E
N Insignificant PP&E
Y Significant PP&E
Y Significant PP&E
N Significant PP&E
Y Significant PP&E
N Insignificant PP&E
N Insignificant PP&E
Y Significant Regulatory
Y Significant Procurement
Y Significant Regulatory
Methodology:
1. Based on the materiality amount, map the significant and insignificant accounts
2. Identify all the accounts based on in scope areas
3. For the in-scope areas, identify the accounts pertaining to the relevant areas and tag accordingly.
N Insignificant Not in ambit of FS review
Y Significant Payroll
N Insignificant Payroll
N Insignificant Insignificant
Y Significant Payroll
Y Significant Payroll
Y Significant Payroll
Y Significant Payroll
N Insignificant Insignificant
N Insignificant Procurement
N Insignificant Procurement
Y Significant Procurement
N Insignificant Insignificant
N Insignificant Procurement
N Insignificant Insignificant
Y Significant Not in Scope
Y Significant Procurement
Y Significant Regulatory
Y Significant Regulatory
Y Significant Not in Scope
Y Significant Not in Scope
Y Significant Not in Scope
Y Significant Not in Scope
Y Significant Not in Scope
N Significant Not in Scope
Y Significant Not in Scope
Y Significant Not in Scope
Y Significant Not in Scope
Y Significant Not in Scope
Y Significant Not in Scope
Y Significant Not in Scope
Y Significant Not in Scope
Y Significant Not in Scope
Y Significant Not in Scope
Y Significant Not in Scope
N Significant Not in Scope
Y Significant Not in Scope
Y Significant Not in ambit of FS review
Y Significant Not in ambit of FS review
Y Significant Not in ambit of FS review
Y Significant Not in ambit of FS review
Y Significant Not in ambit of FS review
N Insignificant Insignificant
N Insignificant Insignificant
N Insignificant Insignificant
N Insignificant Payroll
Y Significant T&E
N Insignificant T&E
N Insignificant T&E
N Insignificant Insignificant
N Insignificant T&E
Y Significant Not in ambit of FS review
N Insignificant Insignificant
Y Significant T&E
Y Significant T&E
Y Significant Not in ambit of FS review
Y Significant T&E
N Insignificant T&E
N Insignificant Insignificant
N Insignificant Insignificant
N Insignificant Insignificant
N Insignificant Insignificant
N Insignificant Insignificant
N Insignificant Insignificant
N Insignificant Insignificant
N Insignificant Insignificant
N Insignificant Insignificant
Y Significant T&E
N Insignificant Insignificant
N Insignificant Insignificant
Y Significant Not in ambit of FS review
Y Significant Not in ambit of FS review
Y Significant Not in ambit of FS review
Y Significant Not in ambit of FS review
Y Significant T&E - Partial
Y Significant Not in ambit of FS review
Y Significant Not in ambit of FS review
Y Significant Not in ambit of FS review
N Insignificant Not in ambit of FS review
N Insignificant Insignificant
N Insignificant Insignificant
Y Significant Not in ambit of FS review
Y Significant Not in ambit of FS review
Y Significant Not in ambit of FS review
N Insignificant Insignificant
N Insignificant Insignificant
Y Significant T&E - Partial
N Insignificant Not in ambit of FS review
N Insignificant Insignificant
Y Significant Not in ambit of FS review
N Insignificant Insignificant
N Insignificant Insignificant
N Insignificant Insignificant
N Insignificant Insignificant
N Insignificant T&E - Partial
Y Significant Not in ambit of FS review
N Insignificant Insignificant
Y Significant Not in ambit of FS review
Y Significant Not in ambit of FS review
N Insignificant Not in ambit of FS review
Y Significant Not in ambit of FS review
Y Significant Not in ambit of FS review
N Insignificant Insignificant
N Significant PP&E
Y Significant PP&E
N Insignificant Insignificant
N Insignificant Insignificant
N Insignificant Insignificant
Y Significant Not in ambit of FS review
N Insignificant Not in ambit of FS review
Y Significant Not in ambit of FS review
Y Significant Not in ambit of FS review
N Insignificant Insignificant
Y Significant Regulatory
Y Significant Regulatory
Cognizant Technology Solutions
Japan Centre Review 2014
GL Code GL Description Account Balance
1100140 Mizuho Bank YEN 561111494.9
1120501 Assoc Travel and Reloc Advance -2851145.32
1120502 Asso. Initial Settlement Loan 2192618.23
1120601 Associate Loans -174423.55
1120901 VAT Tax Receivable 186545
1120902 Sales Tax Receivable 26768
1120903 Consumption and oth tax recv 101422931.7
1140103 Deposits - Rental 373800
1150101 Prepaid - Rent 3325958.52
1150102 Prepaid - Insurance 27452
1150112 Prepaid - Others 74999.63
1150110 Prepaid Federal Taxes 85093200
1160101 Deferred Income Taxes-Current -23971
1160102 Deferred IncomeTax-FAS123R Cur 12990984.2
1220601 Deposits - Rental 23128500
1230401 Air-conditioner 404892
1230403 Communication & Network Equip. 3873082
1230501 Computer Equipment 6798908.35
1230601 Furniture & Fixtures 2352100
1230901 Interiors 4101700
1230902 Electrical Installation 341220
1231001 Computer Software 48381
1231401 Accum. Dep-Air-conditioner -404892
1231403 Accum. Dep-Commn.& NW Equip. -3150002.6
1231501 Accum. Dep-Computer Equipment -5898252.58
1231601 Accum. Dep-Furniture & Fixture -1087987.97
1231901 Accum. Dep-Interior -4101700
1231902 Accum. Dep-Elec Install. -341220
1232001 Accum. Amort Computer Software -48381
1270102 Deferred Income TaxFAS123R LT 3700633.72
2110101 Trade Accounts Payable -2392628
2110403 Consumption & oth tax payable -133778463.7
2120101 Acc. Lia. Sal and Wages-PY -3875545.12
2120102 Acc. Lia. Sal and Wages-CY 88423.67
2120301 Acc. Lia. Food & Beverage -70310
2120307 Acc. Lia. BBEP PY -19647960
2120308 Acc. Lia. BBEP CY -30015977
2120501 Acc. Lia. Vacation -45400921
2120702 Acc. Lia. Bonus-CY -112985310.4
2120901 Training -123440
2121402 Acc. Lia. Audit Fees-CY -969999.96
2121602 Acc. Lia. Professional Fees-CY -1122990
2121603 Acc. Lia. Subcontractors -13451720
2121901 Acc. Lia. Utilities excl phone -345070
2122001 Acc. Lia. Communication -967280
2122101 Acc. Lia. Printing & Stat -151200
2123103 Acc. Lia. Others -3149310.21
2123301 Accrued Federal Income Taxes -55368797
2123303 Fed. Accr Income Tax Payments 20196170
5101101 Mediclaim Insurance 2548
5101102 Medical Expenses 25576
5101110 Health Checkup 188190
5101801 Assoc Recruiting-Referral Fees 479412
5102201 Reloc-Travel Expenses Taxable 2961710.14
5102301 Beverages 919578
5102302 Meals 871360.73
5102303 Awards 4200
5102306 Team Outings 716570.09
5102312 Cognizant Celebration Fund Exp 60000
5110101 Hotel Accommodation 5444982.9
5110201 Airfare - ESA Submission 5092845.89
5110301 Local Transp-Car taxi etc. 4173304.91
5110303 Local Transp-Car Rental(T&E) 1360887.19
5110401 Meals& Ent.-Meeting Int & Ext 301756
5110402 Meals & Enter-Int Bus. 407229.1
5110502 Living Expenses 25291.75
5110503 Travel - Kit Expenses 67158.68
5110504 Travel - Medical Insurance 145267.64
5110506 Travel - Others 172304.48
5110603 Vehicle Rental - Car (non T&E) 337290
5110901 Customer Seminars & Meetings 34440
5111001 Customer - Transportation 11925.49
5111003 Customer - Meals & Enter. 4558685.5
5111004 Customer - Other 72554
5120101 Prof Society Membership 148000
5120903 Immigr Costs - Visa Stamping 5465604.35
5130502 Hall Hiring Charges 77000
5130603 Other Maintenance & Repair 151640.36
5140302 Telephone - Long Distance 13150
5140304 Telephone / Broadband at home 133255
5140305 Mobile Phone Charges 6457268.04
5150102 Other Equipment Rental/Lease 142561
5150401 Network Equipment Repairs 242340
5150403 Electrical Repairs 217600
5150406 Hardware Repairs 421184
5150501 EDP Hardware Expense 75265
5160104 Internet Charges 1197594
5170201 Office Supplies 149637
5190201 Warranty & Rework Expense 327630.66
5200303 Depr-Commn. & NW Equip. 752563.07
5200401 Depr -Computer Equipment 2029066.55
5200501 Depr-Furniture & Fixtures 248677.78
5210103 Tax Interest 8300
5210201 Real Property Taxes 53400
5220504 Int Inc-Non US -50279
5230101 Current Federal Income Taxes 21724929
5230102 Deferred Income Tax Expense -6122213.28
Material Significance Category Remarks Work Paper Reference
Y Significant BRS
Reviewed account
as part of BRS
Review
Review BRS /
Arrangement with TRICOR
1) GL Balance does not
match
2) Unidentified receipts
Y Significant T&E
Review as a part
of Finance
Advances issued to
associates accounted
here/ Recovery also
accounted here
Y Significant T&E
Review as a part
of Finance
Advances issued to
associates accounted
here/ Recovery also
accounted here
N Insignificant Payroll
Review as a part
of Finance
why credit balance?
N Insignificant Insignificant
Review ageing of open
line items
N Insignificant Insignificant
Review ageing of open
line items
Y Significant Regulatory
Review ageing of open
line items
N Insignificant Procurement
Review as a part
of Finance
Review Agreement
Y Significant Procurement
Review as a part
of Finance
Review Schedule
N Insignificant Procurement
Review as a part
of Finance
Review - Schedule
N Insignificant Procurement
Review as a part
of Finance
Incorrect schedule
uploaded
Y Significant Regulatory
N Insignificant Insignificant
Y Significant Regulatory
Y Significant Procurement
Review as a part
of Finance
Review Agreement
N Insignificant PP&E
Reviewed account
as part of PP&E
Review
OK
Y Significant PP&E
Reviewed account
as part of PP&E
Review
OK
Y Significant PP&E
Reviewed account
as part of PP&E
Review
OK
Y Significant PP&E
Reviewed account
as part of PP&E
Review
OK
Y Significant PP&E
Reviewed account
as part of PP&E
Review
OK
N Insignificant PP&E
Reviewed account
as part of PP&E
Review
OK
N Insignificant PP&E
Reviewed account
as part of PP&E
Review
OK
N Insignificant PP&E
Reviewed account
as part of PP&E
Review
OK
Y Significant PP&E
Reviewed account
as part of PP&E
Review
OK
Y Significant PP&E
Reviewed account
as part of PP&E
Review
OK
N Significant PP&E
Reviewed account
as part of PP&E
Review
OK
Y Significant PP&E
Reviewed account
as part of PP&E
Review
OK
N Insignificant PP&E
Reviewed account
as part of PP&E
Review
OK
N Insignificant PP&E
Reviewed account
as part of PP&E
Review
OK
Y Significant Regulatory
Y Significant Procurement
Review as a part
of Finance
OK
Y Significant Regulatory
Review ageing of open
line items
Y Significant Payroll
Review as a part
of Finance
This balance pertains to
salaries not paid to
associates in prior years
N Insignificant Payroll
Review as a part
of Finance
Debit balance - Excess
salary processed
N Insignificant Insignificant
Basis for making these
accruals
Y Significant Payroll
Review as a part
of Finance
Statutory deductions in
the nature of Insurance
that should be remitted
to the Japan authorities
Root Cause: Employee
wise Insurance number
is not there
Y Significant Payroll
Review as a part
of Finance
Statutory deductions in
the nature of Insurance
that should be remitted
to the Japan authorities.
Root Cause: Employee
wise Insurance number
is not there
Y Significant Payroll
Review as a part
of Finance
Y Significant Payroll
Review as a part
of Finance
For senior manager and
above
N Insignificant Insignificant
Basis for making these
accruals
N Insignificant Procurement
Review as a part
of Finance
Basis for making these
accruals
N Insignificant Procurement
Review as a part
of Finance
Basis for making these
accruals
Y Significant Procurement
Review as a part
of Finance
Basis for making these
accruals
N Insignificant Insignificant
Review as a part
of Finance
Basis for making these
accruals
N Insignificant Procurement
Review as a part
of Finance
Basis for making these
accruals
N Insignificant Insignificant
Review as a part
of Finance
Basis for making these
accruals
Y Significant Procurement
Review as a part
of Finance
Basis for making these
accruals
Y Significant Regulatory
Y Significant Regulatory
N Insignificant Insignificant Expenses account
N Insignificant Insignificant Expenses account
N Insignificant Insignificant Expenses account
N Insignificant Payroll Expenses account
Y Significant T&E Expenses account
N Insignificant T&E Expenses account
N Insignificant T&E Expenses account
N Insignificant Insignificant Expenses account
N Insignificant T&E Expenses account
N Insignificant Insignificant Expenses account
Y Significant T&E Expenses account
Y Significant T&E Expenses account
Y Significant T&E Expenses account
N Insignificant T&E Expenses account
N Insignificant Insignificant Expenses account
N Insignificant Insignificant Expenses account
N Insignificant Insignificant Expenses account
N Insignificant Insignificant Expenses account
N Insignificant Insignificant Expenses account
N Insignificant Insignificant Expenses account
N Insignificant Insignificant Expenses account
N Insignificant Insignificant Expenses account
N Insignificant Insignificant Expenses account
Y Significant T&E Expenses account
N Insignificant Insignificant Expenses account
N Insignificant Insignificant Expenses account
Y Significant T&E - Partial Expenses account
N Insignificant Insignificant Expenses account
N Insignificant Insignificant Expenses account
N Insignificant Insignificant Expenses account
N Insignificant Insignificant Expenses account
Y Significant T&E - Partial Expenses account
N Insignificant Insignificant Expenses account
N Insignificant Insignificant Expenses account
N Insignificant Insignificant Expenses account
N Insignificant Insignificant Expenses account
N Insignificant Insignificant Expenses account
N Insignificant T&E - Partial Expenses account
N Insignificant Insignificant Expenses account
N Insignificant Insignificant Expenses account
N Significant PP&E Expenses account
Y Significant PP&E Expenses account
N Insignificant Insignificant Expenses account
N Insignificant Insignificant Expenses account
N Insignificant Insignificant Expenses account
N Insignificant Insignificant Expenses account
Y Significant Regulatory Expenses account
Y Significant Regulatory Expenses account
Remarks - Gaurav
Issue Completed
Issue Completed
Issue Completed
Issue
Issue Resolved
Issue
Issue Completed
Issue Resolved
Issue Completed
Issue Completed
Issue - Incorrect
Computation (Leave
days not as per
policy)
Resolved
Check mail for 5%
and 12%
Performance Pay;
Compute the closing
balance