Caliber Food & Beverage Company Limited

Preliminary Audit Report FY 2076-77

PRELIMINARY AUDIT REPORT

For the Period of Shrawan 1st 2076 to Ashadh 31st 2077

SUBMITTED TO

Caliber Food & Beverage Company Limited

Lalitpur, Nepal

SUBMITTED BY:

AKG Associates

Chartered Accountants

Lalitpur, Nepal
 Caliber Food and Beverage Company Limited
Preliminary Audit Report FY 2076-77

1 Table of Contents
SECTION D...................................................................................................................................................3
AUDIT FINDINGS AND OBSERVATIONS........................................................................................................3
1. Accounts Department......................................................................................................................3
2. Finance and Admin Department....................................................................................................3
3. Human Resource Department........................................................................................................4
4. Store Department..............................................................................................................................4
5. VAT Reconciliation...........................................................................................................................4
6. Infringement of VAT Act, 2052.......................................................................................................6
7. Bank Reconciliation Statement........................................................................................................7
8. Adjustment Entries not Passed.......................................................................................................7

CA. Raja Ram Kadel

AKG Associates
Chartered Accountants Page 2
 Caliber Food and Beverage Company Limited
Preliminary Audit Report FY 2076-77

AUDIT FINDINGS AND OBSERVATIONS

1. Accounts Department
Accounting department is responsible for recording of financial transactions. We have reviewed the work
conducted by the accounts department. During this we found many discrepancies regarding the internal
control system and accounting principles. Such instances are:
 There are many instances where accounting vouchers were not approved.
 The management has practice of passing entries on back date and hence the voucher number does
not match with that of the system.
 In many instance expenses are booked without sufficient appropriate supporting.

2. Finance and Admin Department

The company has practice of purchasing fixed assets and raw materials without authorization and a formal
procedure. Any kind of purchase is recommended to gone through following procedure:

Invoice
Good Verification and
Purchase Receipt/Invoice Vendor
Determination of Requisition Order Received
Requirement Payment
What The form or When the When the Recommend
material or electronic requisition is material is accounts
transmission received. department to
service is approved it record
required? use to inform become Check
the purchasing purchase Condition and transaction as
per received
department quality.
order. invoice.
that item or
service are
needed for
business
purpose.

CA. Raja Ram Kadel

AKG Associates
Chartered Accountants Page 3
 Caliber Food and Beverage Company Limited
Preliminary Audit Report FY 2076-77

3. Human Resource Department

A human resources department is a critical component of employee well-being in any business.HR
responsibilities include payroll, benefits, hiring, firing, and keeping up to date with state and federal tax
laws. However, such functions are being carried forward without any policies and processes. Some of the
weaknesses are mentioned below:

 Human Resource Management Policy has not been formulated.

 Employees are not provided with appointment letter which also violates Labor Act 2074.
 Non-maintenance of personal files of each employee.
 Staying on leave without formal approval. No application and approval from authorized person.

4. Store Department
Store keeper is a responsible person to maintain proper record of stores. Further he/she has a
responsibility to compare physical stocks with book figures periodically and reconcile the discrepancies, if
any and to report on waste, scrap and obsolete stocks.

Observation

Store keeper has not maintained records of materials received/issued, finished goods received/issued. Due
to such practice, the company could not certify the actual quantity of stocks in the hand on any point of
time and it may lead to misutilization of materials and finished goods. Further, the company has not
practice of reconciling the physical stocks with book figures and reporting on waste, scrap and obsolete
stocks.

5. VAT Reconciliation
We have compared the Input VAT and Output VAT with books of accounts and return filed as per VAT act.
Outcomes of such comparison are summarized below:
5.1. Opening VAT balance

As per
 Particulars Return As per Tally Difference Remarks
VAT receivable 316,559.00 0 316,559.00

5.2. Bhadra 2076

As per
 Particulars Return As per Tally Difference Remarks
Taxable Sales 0 0 0
Sales VAT 0 0 0

CA. Raja Ram Kadel

AKG Associates
Chartered Accountants Page 4
 Caliber Food and Beverage Company Limited
Preliminary Audit Report FY 2076-77

Taxable purchase 36,873.15 0 36,873.15

VAT on purchase 4,793.51 0 4,793.51 Note 1

Note 1: Reconciliation

Date Particulars Amount (Rs.) Vat (Rs.)

2076/05/05 Consulting service fee from AKG Associates was 4,793.51
recorded in tally on Ashoj. 36,873.15

5.3. Ashoj 2076

As per
 Particulars Return As per Tally Difference Remarks
Taxable Sales 0 0 0
Sales VAT 0 0 0
Taxable purchase 140,687.27 76,746.15 63,941.12 Note 1
VAT on purchase 18,289.35 9,977.00 8,312.35 Note 1

Note 1: Reconciliation

Date Bill Particulars Amount (Rs.) VAT (Rs.)

Consulting service fee from AKG
2076/06/0 Associates was claimed on Bhadra but (4,793.5
3 9 recorded in Tally on Ashoj (36,873.15) 1)
2076/06/30 Vat on food and entertainment from
Anupam Foodland recorded in tally but (390.0
415 no credit item in vat return (3,000.00) 0)
2076/05/3 Purchase from Shree Thapa hardware 13,495.
1 58 has not been recorded in tally 103,814.12 84
Total 63941.12 8,312.33

5.4. Kartik 2076

As per
 Particulars Return As per Tally Difference Remarks
Taxable Sales 0 0 0
Sales VAT 0 0 0
Taxable purchase 0 4,349.54 4,349.54 Note 1
VAT on purchase 0 565.44 565.44 Note 1

CA. Raja Ram Kadel

AKG Associates
Chartered Accountants Page 5
 Caliber Food and Beverage Company Limited
Preliminary Audit Report FY 2076-77

Note 1: Reconciliation

Date Bill Particulars Amount (Rs.) VAT (Rs.)

Internet bill from worldlink
communication limited has been
2076/07/2 recorded in tally but not claimed in
6 595633 return 4,349.54 565.44

5.5. Ashadh 2077

As per
 Particulars Return As per Tally Difference Remarks
Taxable Sales 0 0 0
Sales VAT 0 0 0
Taxable purchase 0 36,873.15 36,873.15 Note 1
VAT on purchase 0 4,793.51 4,793.51 Note 1

Note 1: Reconciliation

Date Bill Particulars Amount (Rs.) VAT (Rs.)

2077/03/2 Bill from AKG Associates recorded in
1 7910 tally but not claimed in return 36,873.15 4,793.51

6. Infringement of VAT Act, 2052

Reverse charge mechanism as per Section 8
The construction of a building or apartment or shopping complex and similar other structure as specified by
the Department, of which value is more than Five Million Rupees, and which is built for business purpose is
procured from a person who is not registered, tax shall be assessed and collected from a person who has
ownership in that structure as if such construction were procured from a registered person.”
The company has constructed the building of value greater than 5 million however the building has been
built from non-registered person. So, it’s the liability of the company to deposit the amount of tax.
Summary of that is given below:
Reverse VAT to
Particulars Purchase with VAT Purchase without vat Total be paid
5,140,242.0
Opening Balance     7  
834,477.8 2,947,402. 3,781,880. 383,162.3
Purchase during 2076-77 4 79 63 6

Recommendation

CA. Raja Ram Kadel

AKG Associates
Chartered Accountants Page 6
 Caliber Food and Beverage Company Limited
Preliminary Audit Report FY 2076-77

It is recommended to the management to book the tax liability for the expenses incurred for the
construction of the building and pay the same amount within the reasonable time to avoid the fines and
penalties.

7. Bank Reconciliation Statement

During our audit period, we found that bank balance as per books of accounts and as per bank statement
has not been matched. The bank reconciliation statement or adjustment entries have not been made till the
conclusion of audit. Summary of such discrepancies are as follows;

Balance as on 2077/03/31
Particulars
As per Tally As per Bank Statement
NCC Bank Limited 5,000.00 5,000.00
Sanima Bank Limited  337,584.00 (Cr) 246,566.61

Recommendation
It is recommended to prepare the Bank Reconciliation Statement on periodical basis (monthly) to reconcile
the balance as per Bank Statement and balance as per Books of Account.

8. Adjustment Entries not Passed

Since adjustment entries has not been passed as per the Audited Financial Statement for the Fiscal Year
2075-76, Opening balance as per Tally and closing balance as per Audited Financial Statement of Fiscal Year
2075-76 has not been tallied. Such instances are as follows:

Particulars As per tally As per audited FS Difference

Reserves & Surplus 3,136,441.67 8,460,245.00 (5,323,803.33)
Calls in Advance 4,100,100.00 13,830,100.00 (9,730,000.00)
Paid Up Capital 44,400,000.00 34,570,000.00 9,830,000.00
TDS Factory Rent 24,444.44 23,333.00 1,111.44
TDS on Audit Fee   750.00 (750.00)
Sundry Creditors 666,219.87 709,686.00 (43,466.13)
Trisuma Hardware Pvt. Ltd 460,053.23 474,819.00 (14,765.77)
Salary Payable 90,000.00 156,298.00 (66,298.00)
Capital Work In Progress 5,140,242.07 4,955,294.00 184,948.07
Cash-in-Hand 34,019.25 29,249.00 4,770.25

CA. Raja Ram Kadel

AKG Associates
Chartered Accountants Page 7