GUIDE QUESTIONNAIRE FOR UNDERSTANDING

THE COOP’S BUSINESS AND INDUSTRY

COOP:______________________ AUDIT DATE ________

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OVERALL QUESTIONS:

1. Why are the Coop’s revenues and net surplus increasing or decreasing?
2. What are the major economic factors peculiar to the Coop that affect its profitability?
3. Is the Coop’s industry booming, at a standstill , or declining? What are the major factors causing
this?
4. Is there a cost squeeze? ( fixed selling price, selling costs)
5. Does the business need cash urgently? Is the Coop under-capitalized?

A. INFORMATION ABOUT THE COOP’S INDUSTRY

1. Background on the Industry

What is the nature of the industry? Its general characteristics? Its position in the economy?Is the
industry affected by cyclical or seasonal demand; competing products? What is its growth
potential and outlook? Any trade association? Any significant current developments?

2. Specific Information on the Industry

What products/ processes or services fall under this industry? Who are its major customers? What
are its material and labor requirements? what are the marketing and distribution strategies? How
does it finance its capital requirements?

3. Accounting/ Tax Considerations

Any unusual accounting practices or special auditing considerations? Any unusual tax features or
special tax privileges or exemptions? What important government rules and reglations affect the
industry? Does it report to a special government agency?
B. INFORMATION ABOUT THE COOP’S BUSINESS

1. REVENUE FUNCTION

A. Products – What are the major products? Sal;es volume of the main products in units and
pesos, individually and as a percentage of the total? Any new products for the current
year?

B. Customers – Wo are the customers? What are the approximate numbers and the
geographic distribution of customers? Are there one or few principal customers? Has
there been any recent gain or loss of important customers?

C. Marketing – How does cooperative sell? Are salaried or commission agents, or both
used? Franchised dealers? Brokers? Distributors? Manufacturers’ representative?
Wholesalers? Retailers? By direct mail? Why are these methods used? Any change in
marketing methods this year or anticipated?

D. Distribution – How does cooperative distribute its products? Where are the warehouses?
How are products shipped? Who pays freight out? Any change in distribution method
anticipated?

E. Sales and Credit Policies – to what extent does cooperative offer promotional or discount
allowances? Are reduced prices offered to large customers?To what extent does
cooperative accept sales returns from customers? What are the credit terms? Any changes
in sales/ credit policies this year or anticipated?

F. Competition – Which are the major competitors? Are there many or few?Are
cooperative’s sales prices and policies competitive? Is cooperative dominated by its
competitors? Any new competitors?

G. Sales Experience – What are the trends as to sales volume , price profitability? Bad debt
experience? Extent of returned sales? Any change in sales experience?
 H. Information System – Is the information system on the sales function adequate? Is
information available as to sales volume and profitability by product or product lines?
Any change in information systems?

2. MANUFACTURING FUNCTION

A. Products – What is the nature of the products? Approximate breakdown of material, labor
and overhead in the total cost of principal products? What are the trends of costs of
materials, labor and overhead? Relative amount of raw materials and purchased
components used in the finished products?Risk of obsolescence from change in style or
technology?

B. Raw Materials – What are the principal raw materials? Who are the usual suppliers and
what is their number, size and location? Alternate sources of raw materials? Annual
volume of purchases and the method of purchase or acquisition? What is the relative
price stability/ instability of raw materials?are their transactions with affiliates? If so,
what is the basis of transfer prices? Any change in the raw materials situation?

C. Labor – What is the nature of labor required? What are the training requirements? Are
there union contracts? What is the extent of competition for labor? What is the labor
turnover experience? Any major current developments?

D. Plant Facilities – What is the relative importance of property, plant and equipment in the
manufacturing process? What is the location of plants in relation to markets and source of
labor and raw materials? Age and condition of the plants and equipment? Extent of
automation and mechanization? Relationship of present production to capacity? Are plant
and equipment maintained in good repair? Are plant facilities owned or leased? Have
there been any appraisals of the facilities? Plans for improvement and expansion?

E. Operating Policies – What are the purchasing policies? Production Policies? Normal
operating schedule? Is their peak or slack periods? Do they have a product research and
development program? Any current developments?

F. Information System - Do the accounting and production records appear to be adequate?

Does the cost system appear to be adequate to the needs of the cooperative? Any changes
during the year?

3. FINANCIAL FUNCTION

A. Cash Masnagement

1. Short-term considerations – are cash balances monitored on a daily or weekly basis? Are
forecasts made of collections? Is there a plan for timing of payments of dividends,
 insurance and debt retirement? Does cooperative have a “credit line”? Is temporary
excess cash converted to short-term investments? If so, what are they? Any current
developments?

2. Long-term considerations – Is the cash flow from operations adequate for internal growth
and debt repayment? What are the cooperative’s sources of long term financing? Does
cooperative have plans for asset replacement and maintenance of invested capital in the
face of changing price levels? Any current developments?

B. Investments – What is the form of investments ( e.g. stock, joint venture)? What is their
purpose ? what is their nature? Size? Significant additions/ disposals during the year?

C. Capital Structure – What is the relationship of members’ equity to total asets and to long-
term debt? To what extent has ownership changed in recent years and under what
circumstances? Any new developments?

4. PERSONNEL FUNCTION

A. Management Personnel – Who are the management personnel and what are their lines of
responsibility? Is there an organization chart as to management personnel? Does it
represent actual lines of responsibility and authority? Are there employment contracts,
bonus plans, etc. for their personnel? Any changes in key personnel?

B. Production, Sales and Administrative Employees – What is the approximate number of

employees ( Plant, warehouse, sales, office and others)? How are they paid? How do their
wages compare with average wate rates in the industry? What are the empoloyee
benefits? Does cooperative have adequate training programs? Are there union
agreements? Are management-employee relations good? Any significant changes?

5. ACCOUNTING FUNCTION

What are the accounting records kept? What type of mechanized or EDP equipment is used? Any
changes in equipment or programs during current year?
 6. GENERAL INFORMATION

Any new major litigation? Anu planned acquisition or discontinued operations? Any increase in
internal audit function?any significant current developments that could affect the audit?

C. ACCOUNTING POLICIES

What is the cooperative’s significant accounting policies relating to the: sales function (e.g.
revenue or profit recognition)? The manufacturing function ( e. g. inventory pricing, depreciation or
amortization method)? The financial function? The personnel function ( e.g., accounting for employee
benefits)? Other functions? Any new policies or changes during the year under audit? ( if space is
insufficient, use separates sheets of paper, properly indexed.)

D.NATURE OF REPORTS TO BE RENDERED AND DEADLINES

Nature of reports : What type of reports are expected to be rendered ( e.g. short-form, long-form)? Purposes
of each report? Are special reports required ( e.g. debt compliance letter)? What financial statements are
supplementary schedules will be covered by the report? Any special data to be disclosed?

Timing: indicate deadline dates for the reports mentioned above. Is there any change in nature of reports
required and their deadline dates?