Executive Summary

Chapter 1
Introduction

This course shows the different topics of assurance. We discussed in this report about the audit
plan for the audit of Renata Limited. We also discussed audit program for the audit of Renata
Limited. We discussed various topics on the basis of annual reports of Renata Limited.

1.1 Origin of the Report

This report is prepared This report is prepared during the 3 rd Year, 2nd semester and would be
submitted in the same semester. The standard procedure for the long, formal report is followed
here as part of the instruction of the course instructor.

1.2 Objectives of the Report

The primary objective of the report is to fulfill the partial requirement of the course.
The secondary objectives of this report are:

To gather knowledge about environment of Renata Ltd.

To know the risk assessment of the company

To know about the materiality of the company

To gain an in-depth knowledge about analytical procedures of the company
To gain knowledge about the audit plan of Renata Ltd.
To know the audit program of the company

1.3 Methodology
At first, we tried to understand the theoretical aspect of audit plan and audit program. We
completed our report by taking information from the annual reports of 2013 and 2014 of Renata
Ltd. We also took information from different books. We prepared this report using Microsoft
Word.

1.4 Limitations
There are some limitations of this report. We prepared this report within a limited time. Lack of
previous experience regarding the topic is also one of the limitations of preparing the report.
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Although we had these limitations, however we tried our level best to fulfill the objectives of this
report properly.

Chapter 2
Literature Review

2.1 Audit strategy

The formulation of the general strategy for the audit, which sets the scope, timing and direction
of the audit and guides the development of the audit plan is called audit strategy. The key
contents of audit strategy are - understanding the entitys environment, understanding the
accounting and internal control systems, risk and materiality, consequent nature, timing and
extent of procedures, co-ordination, direction, supervision and review and other matters such as
terms of the engagement.

2.2 Audit plan

An audit plan is the specific guideline to be followed when conducting an audit. It sets out the
nature, timing and extent of audit procedures to be performed to obtain audit evidence. It
includes the tolerable error, expected error, sampling method, test of control, test of detail and
accounting estimates.

2.3 Audit program

Audit program is the list of audit procedures which are to be performed by audit staff in order to
obtain sufficient appropriate evidence. The individual procedures are determined after obtaining
an understanding of the accounting system and determining the audit strategy to be followed. It
is the step by step procedure which is laid down by the auditing firm that must be followed by its
accountants in conducting an audit. It is an action plan that documents what procedures an
auditor will follow to validate that an organization is in conformance with compliance
regulations. An auditor prepares a plan after the selection of senior and junior staffs allocating
the jobs to them, mentioning when to start, how to do the work etc. This plan is known as audit
program.
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An auditor should include all the procedures in written form, objectives of each sector and all the
directions which are to be given to the staffs which helps to control their works and helps to
implement such programs into action. The audit procedures, when combined, form the audit
program. Audit program includes revenue, purchase system and substantive tests of transactions.
Substantive tests of transactions include property, plant and equipment, cash, intangible noncurrent assets like licenses, development costs and purchased brands, inventory, trade payable,
receivable and bank.
Audit programs are important because they standardize the data collection and evaluation
process. By setting out a specific list of steps to be followed and data to be collected, the
program ensures that auditors collect all the information they need in an efficient manner while
under appropriate supervision. Keeping the process standardized also means that all the data
collected can be used to make useful comparisons between businesses, departments, and
previous years' inspections, since the same set of data is collected each time. Additionally, having
a program like this in place makes sure that any problems are discovered promptly and reported
to the correct person.

Chapter 3
Overview of Renata Ltd.

Overview of Renata Ltd.

Type of Company: Listed Public Limited (Dhaka Stock Exchange)
Main Business: Renata Limited is one of the leading and fastest growing pharmaceutical and
animal health product companies in Bangladesh. It has three production sites- Mirpur site,
Rajendrapur site and Bhaluka site.
History: The Company started its operations as Pfizer (Bangladesh) Limited in 1972. For the
next two decades it continued as a highly successful subsidiary of Pfizer Corporation. However,
by the late 1990s the focus of Pfizer had shifted from formulations to research. In accordance
with this transformation, Pfizer divested its interests in many countries, including Bangladesh.
Specifically, in 1993 Pfizer transferred the ownership of its Bangladesh operations to local
shareholders, and the name of the company was changed to Renata Limited.
Distributors and Affiliations: Its alliance-partners are as follows:

Novartis Vaccines (Rabipur, Vaxem HiB, and Agrippal)

BASF, Germany (Animal Nutrition Products)
InterVax, Canada (Meningococcal Vaccine)
Evans Vanodine, UK (Disinfectant)
Zinpro, USA (Metal Amino Acid Complexes)
Biomin Laboratories, Singapore (Mycotoxin Binders and Nutraceuticals)

International Presence: Guyana, Jordan, Kenya, Myanmar, Philippines, Sri Lanka,

Vietnam, and United Kingdom

Investment: 100% Shareholding in Renata Agro Industries Limited

Bankers: Agrani Bank, Standard Chartered Bank, Eastern Bank, HSBC, Sonali Bank,

Citi Bank, and Mutual Trust Bank

General Facility (Mirpur, Dhaka)

Area: 196,730 SFT or 18,277 m2

Manufacturing Capabilities: Tablet, Capsule, Soft Gel, Effervescent Tablet, Dry Syrup,

Sterile Dry Fill, Sterile Liquid Fill, Large Volume Parenteral (Pilot), Lyophilisation

(Pilot), and Premix

Packaging Capabilities: Blister pack, bottle dry-fill, pot-fill, and strip packaging

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Chapter 4
Impact of FDI on BOP of
Bangladesh
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Impact of FDI on BOP of Bangladesh

Foreign direct investment; net (BOP; US dollar) in Bangladesh was measured
at -1497759298 in 2013, according to the World Bank. Foreign direct
investment;

net

(BOP;

US

dollar)

in

Bangladesh

was

reported

at

967400932.54 in 2010, according to a World Bank report released in 2011.

Foreign direct investment; net (BOP; US dollar) in Bangladesh was reported
at 713383102.55 in 2009, according to a World Bank report released in 2010.
Foreign direct investment; net (BOP; US dollar) in Bangladesh was reported
at 1009623163.99 in 2008, according to the World Bank. Foreign direct
investment is net inflows of investment to acquire a lasting management
interest (10 percent or more of voting stock) in an enterprise operating in an
economy other than that of the investor. It is the sum of equity capital,
reinvestment of earnings, other long-term capital, and short-term capital as
shown in the balance of payments. This series shows total net, that is, net
FDI in the reporting economy from foreign sources less net FDI by the
reporting economy to the rest of the world. Data are in current U.S. dollars.

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Figure no. 5: Impact of FDI on Bangladeshs BOP

The economic impact of FDI on the level of economic activity has been widely investigated in
recent years across different countries. Some results suggest that the inflow of FDI can crowd
in or crowd out domestic investment depending on specific circumstances. Overall, FDI has a
positive impact on economic growth but the magnitude of the effect depends on the availability
of complementary resources, especially on the domestic stock of human capital.
In Bangladesh, FDI inflows are reported under the capital and financial account of the countries
BOP statement which provides the direct effect on the BOP. Thus the inflow of FDI plays an
important role in determining the surplus\deficit in the capital and financial account of the BOP
statement. From the above, it can be said that the initial impact of an inflow of FDI on
Bangladeshs BOP is positive but the medium term effect could become either positive or
negative as the investors increase their imports of intermediate goods and services, and begin to
repatriate profit. After setting up capital machineries, the FDI-financed companies begin to
export their products as most of these companies are export-oriented. Usually, FDI inflow tends
to have a greater positive impact through augmenting exports than creating a negative impact
through increasing imports. It is found that FDI-financed firms tend to export a greater
proportion of their output than their local counterparts as these firms usually tend to have a
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comparative advantage in their knowledge of international markets, efficiency of distribution

channels, and their ability to adjust and respond to the changing pattern and dynamics of
international markets. Similarly, policies of creating Export Processing Zones contribute to
strengthening the positive correlation between FDI inflows and exports. So, the inflow of FDI
may play an important role in Bangladesh in the long run in reducing the deficit in the countrys
trade balance.
Empirical research in several countries suggests that the initial inflow of FDI tends to increase
the host countrys import. One reason for this is that primarily FDI companies have high
propensities to import capital and intermediate goods and services that are not readily available
in the host country. However, if FDI is concentrated in import substituting industries, then it is
expected to affect imports negatively because the goods that were imported earlier would now be
produced in the host country by foreign investors.
In order to see the impact of FDI on Bangladeshs BOP, we estimated separate import and export
functions for Bangladesh. The results of the estimated import demand function suggest that FDI
increases imports faster by current inflow than with a lag of one year. The co-efficient is
statistically significant with a positive sign and suggests that a 10 percent increase in the inflow
of FDI increases imports by 1.3 percent. The income elasticity of import demand is high
indicating that a 10 percent increase in real GDP increases imports by nearly 27 percent.
Similarly, we estimated a simplified export function in order to see the impact of FDI on
Bangladeshs exports. This shows that FDI with a lag of one year increases exports faster than
contemporaneous period. The co-efficient is significant with a positive sign.
i. The estimated equation is:
In(IMP)= -17.887-0.658(IPR)+2.676 In(GDP)+0.131 In(FDI)+0.051 In(FDI-1)(-3.55)
(-1.91)(3.70)(1.97)(1.16)
R2=0.921 DW =1.53 SER =0.061
Where IMP is real demand for imports, IPR is relative price of imports price of imports deflated
by GDP deflator), and GDP is real GDP. Figures in parentheses are t values.

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ii. The estimated equation is:

In(EXP)= 0.874-2.353 In (XPR)+2.184 In(GDP)+0.060 In (FDI)+0.162 In(FDI-1)(0.05)
(-1.36)(1.69)(0.75)(3.25)
R2=0.895 DW =1.70 SER =0.078 where EXP is real exports XPR is relative price of exports.
It suggests that a 10 percent increase in the inflow of FDI increases export by 1.6%.
The above results show that FDI contributes positively to increasing imports and exports and can
either improve or deteriorate the countrys trade balance depending on the relative magnitude of
the two forces. However, with a positive effect of FDI inflows on the financial account, it is more
likely that the first round effect of FDI is positive on the BOP of Bangladesh.

Chapter 5
Conclusionary aspects

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5.1 Suggestions
The suggestions regarding BOP of Bangladesh are as follows:

Bangladesh must increase its production so that surplus can be exported.

Bangladesh does not need to enter the IMF and World Bank programs.

New water reservoirs need to be made.

Pro Active Export policy and better marketing of surplus

Electricity and Gas crisis needs to be solved urgently so that open mills and factories
give more production and closed units open again.

Bangladesh needs a leadership with competence, clear understanding of the issues,

ability to negotiate with the super powers so that it could come out with a most suitable
package.

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5.2 Conclusion
The most successful countries are those where import restrictions have been relaxed more slowly
than barriers to exporting. The International Monetary Fund, World Bank and the world trade
organization should pay much more attention than they do at present to the balance of payments
consequences in the case of trade liberalization when they design their liberalization programs.
Bangladesh should relax restrictions on imports more slowly than barriers to export. This is
because it takes longer for exporters to respond to trade liberalization than it does for imports to
flood in, potentially causing seriously disruptive balance of payments difficulties. In Bangladesh
researches find that, on average, export growth has increased less than import growth, leading to
an increase in the trade deficit enough to trigger financial crisis. The adjustment necessary to
rectify the trade deficit has decreased GDP growth below what it otherwise would have been if a
balance between export and import had been maintained. These results have important policy
implications for the sequencing of trade liberalization to keep a balance between export and
import so as to avoid balance of payment crisis. This sequencing is as important as the
sequencing of internal and external financial liberalization.

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The future expectation regarding BOP of Bangladesh is that, foreign direct investment (FDI)
may increase if there is political stability and continuation of policies. If the IMF, World Bank
and Asian Development Bank release their loans for Bangladesh as promised, then our balance
of payment may show some improvement. Friends of Bangladesh have promised significant
monetary support, which will certainly have a positive effect. Imports are expected to decrease.
If this happens, it will have a positive effect on balance of payment, since this is relying on
foreign elements and support. If this is accomplished, then the balance of payment deficit will
decrease.

Chapter 6
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Bibliography

Bibliography
Books:
1. Mannur, H.G., International Economics-2nd Revised Edition
2 Madura, Jeff, International Financial Management-8th Edition

Websites:
1. https://www.bangladeshbank.org.bd/
2. https://www.tradeeconomics.com/
3. https://macroeconomicslab.wordpress.com/.../current-balance-of-payments/

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