602987064.

docx
PT Ban Indonesia
Period : 31 December 2005

Prepared by: BS, 6 Nov 05

Reviewed by: AS, 6 Nov 05

GENERAL INSTRUCTIONS

This Questionnaire regarding conditions that relate to engagement risk and the control environment.
Following most general questions is a series of consider points that aid in responding to the general
question.

Answers to the general questions and consider points should be based upon inquiry (which may be
supported by observation and inspection), analytical procedures and observations and inspections.

PRIOR AUDIT INFORMATION

When using prior audit information we should determine whether changes have occurred that may
affect its relevance in the current audit.

A. RISK FACTORS RELATING TO THE CONTROL ENVIRONMENT

Management Characteristics and Integrity

Characteristics and Integrity

1. Associations or involvement with activities, of which we are aware, that while

not alleged to be illegal, are questionable or could lead to embarrassment to
the Firm No
2. Management has frequently changed banks, attorneys, or auditors No
3. Management has failed to engage reputable professional third parties as
appropriate (e.g., investment bankers, attorneys, actuaries, appraisers) No
4. Management appears willing to accept unusually high levels of risk No
5. Individuals with no apparent ownership interest in, or executive position with,
the entity appear to exercise substantial influence over its affairs No
6. Management is inexperienced No

Overall Commitment to Accurate Financial Reporting

1. The company adopts or fails to adequately disclose controversial accounting

policies No
2. Management tends to interpret accounting standards aggressively No
3. Management fails to adequately challenge internal estimates and valuations No
4. Management is reluctant to record adjustments proposed by the auditors No
5. We are aware of the existence of transactions without substantial economic
justification No
6. We are aware of allegations (written or oral) by employees of inappropriate or
inadequate accounting practices No

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602987064.docx
PT Ban Indonesia
Period : 31 December 2005

Prepared by: BS, 6 Nov 05

Reviewed by: AS, 6 Nov 05

Commitment to Designing and Maintaining Reliable Application and Information

Systems
No
1. Management appears unconcerned about significant deficiencies in the
application systems and control activities
No
2. The entity has failed to establish procedures relative to the prevention of illegal
acts
No
3. Management displays a significant disregard for regulatory authorities
No
4. Employee job descriptions, including specific duties, reporting responsibilities
and constraints, have not been clearly established or effectively
communicated to employees
No
5. Past audits have indicated a significant number of misstatements or correcting
entries made by the client, particularly at or near year end
No
6. Past audits have indicated a lack of supporting information for payments
No
7. The general state of the client’s records has been poor
No
8. It appears that management fails to follow up effectively on questions about
financial results or variances from budget
No
9. The accounting or information technology departments appear to be
inadequately staffed
No
10. Resources (e.g., personal computers, access to information technology,
temporary personnel) to assist personnel to perform their duties often
appear to be unavailable or inadequate
No
11. It appears that management, accounting, or information technology
personnel are not sufficiently competent to perform their assigned
responsibilities, consider
 Adequacy of compensation
 Clarity and adequacy of hiring and promotion criteria
 Adequacy and effectiveness of employee performance evaluation
techniques
 Effectiveness of training programs
No
12. The client often fails to meet closing schedules, report deadlines, etc. (both
internal and external)

Describe any additional risk factors identified in this category:

None noted.

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602987064.docx
PT Ban Indonesia
Period : 31 December 2005

Prepared by: BS, 6 Nov 05

Reviewed by: AS, 6 Nov 05

Organization and Management Structure

Organizational Structure

1. The client has a large number of decentralized operating entities No

2. The reporting structure is unduly complex No
3. The client has undergone rapid expansion No
4. The client has recently acquired other entities No

Management Structure and Control Processes, Supervision and Monitoring

1. A defined management structure is lacking or there is poorly defined allocation

of responsibility and accountability No
No
2. Management’s capability or style is inconsistent with the size and growth of the
business
No
3. There is insufficient supervision and monitoring of the accounting function
No
4. When there are unusually close relationships between employees and
suppliers, there is a lack of independent review of transactions between
such parties

Methods of Assigning Authority and Responsibility

No
1. Management employs ineffective methods to direct or monitor (a) effective
planning, development, and maintenance of systems or (b) control activities
No
2. Management has not clearly communicated the scope of authority and
responsibility to information technology and accounting personnel
No
3. The level of communication between the managers of the accounting and
information technology departments appears to be insufficient
No
4. The documentation of information technology policies and procedures is
inadequate

Senior Management Control Methods

1. There is a lack of an effective budgeting or planning process, consider whether

 The budget is used as a tool to motivate lower levels of management to
reach certain earnings targets, thereby increasing the risk of error
 The budget is accurate enough to be a meaningful monitoring method
that will detect significant misstatements in the financial statements
 The budget is prepared by an appropriate level of management
 Variations from the budget are closely monitored by the appropriate
level of management
 Plausible explanations are obtained for significant fluctuations No

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602987064.docx
PT Ban Indonesia
Period : 31 December 2005

Prepared by: BS, 6 Nov 05

Reviewed by: AS, 6 Nov 05

2. The internal audit department is ineffective or nonexistent, consider whether

 The internal audit department fails to undertake activities that may
mitigate conditions in the control environment which may increase risk
 The internal audit department does not appear to have an objective
attitude when performing its duties
 The internal audit department does not report, or have unrestricted
access, to the audit committee or board of directors
 Internal audit personnel do not appear to be competent or adequately
trained
 Internal audit staffing levels do not appear adequate
 The internal audit department does not use audit programs and working
papers to document the planning and execution of their work
 Management does not take adequate and timely action to correct
conditions reported by the internal audit function
 The internal audit department does not appear to be substantially in
compliance with appropriate professional standards

Perusahaan tidak memiliki internal audit department karena manajemen

berpendapat hal itu belum diperlukan karena saat ini manajemen masih
dapat mengawasi kegiatan perusahaan.

No

Impact of Computers

1. Management appears to underestimate the importance of the computer

processing environment, consider
 The level of management to which the computer processing
environment reports
 The level of senior management’s involvement in the computer
processing environment
 The level of investment in the use of information technology No
2. There is an absence of appropriate corrective action by management to
address recurring problems relating to information systems No
3. There is a lack of accountability for the computer processing environment No
4. There is a lack of management awareness of computer-related factors
affecting the business No
5. There is an absence of standards in hiring practices for the computer
processing environment No
6. There is an absence of appropriate resource commitment No
7. There is reliance on systems that do not appear to be well controlled No
8. There is an absence of timely and/or meaningful information No
9. There is an absence of clear reporting relationships for the computer
processing environment, both within and outside the computer processing
environment No

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602987064.docx
PT Ban Indonesia
Period : 31 December 2005

Prepared by: BS, 6 Nov 05

Reviewed by: AS, 6 Nov 05

10. There is no management involvement in monitoring the computer

processing environment No
11. There is an apparent absence of monitoring of critical control activities No
12. There is an absence of strategic plans for the computer processing
environment or plans that are inconsistent with strategic plans for other
areas of the client’s business No
13. There is a lack of communication between the computer processing
environment and information systems users No
14. There is a lack of internal information systems audit capability No

Activities of the Audit Committee or Board of Directors

1. The members are of inappropriate experience and standing in the community

to serve effectively No
2. The audit committee (board) has an insufficient number of independent
members No
3. The meetings to set policies and objectives, review the entity’s performance,
and take appropriate action are irregular, and/or minutes of such meetings
are not prepared and/or signed on a timely basis No
4. The audit committee (board) has not set forth its duties and responsibilities,
particularly with regard to the review of the financial statements (e.g.,
established a written charter or other similar document) No
5. The audit committee has an inappropriate level of knowledge of the entity’s
operations to carry out its oversight responsibilities No
6. The audit committee (board) takes inappropriate actions with regard to
deficiencies in internal control that are brought to its attention No
7. The audit committee (board) meets at inappropriate intervals with the external
auditor No
8. The audit committee (board) meets irregularly with the entity’s in-house
counsel and outside counsel No

Describe any additional risk factors identified in this category:

None noted.

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602987064.docx
PT Ban Indonesia
Period : 31 December 2005

Prepared by: BS, 6 Nov 05

Reviewed by: AS, 6 Nov 05

II. OTHER ENGAGEMENT RISK FACTORS

Nature of the Business and Business Environment

Nature of the Business

1. The entity operates in an industry frequently associated with questionable or

illegal activities No
2. The entity uses complex or innovative financing techniques No
3. The entity has a long-term operating cycle No
4. The entity operates in a volatile industry or market No
5. The entity has made a significant acquisition in the past year of an entity that
operates in an industry in which management has little or no prior
experience No

Business Environment

1. There are pressures from regulatory authorities that may influence

management to distort financial results No
2. The most recent regulatory examination report or equivalent contain severe
criticisms that management has not addressed owing to disagreements or
other factors that evidence a deteriorating relationship with the regulator No
3. The entity is vulnerable to economic events (e.g., sharp fluctuation in
interest rates, commodity prices, or foreign currency exchange rates) No
4. The entity is vulnerable to changes in government (e.g., if business is a
government contractor) No
5. The entity issues securities to the public or has broad public accountability No
6. Unusual significance will be attached to the financial statements No
7. The entity is involved in a transfer of interest or a contest for control No
8. The entity is vulnerable to consumer or social issues (e.g., compliance with
environmental control standards, product liability issues) No

Describe any additional risk factors identified in this category:

None noted.

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602987064.docx
PT Ban Indonesia
Period : 31 December 2005

Prepared by: BS, 6 Nov 05

Reviewed by: AS, 6 Nov 05

Financial Results

Financial Results

1. It is likely that the entity, or a major segment of the entity, will be sold No
2. The entity has unrealistically aggressive sales or profitability incentive
programs No
3. The entity is growing and is near the limit of its financial resources No
4. The entity’s performance is declining sharply No
No
5. The entity has a major unprofitable project or venture
No
6. There is doubt whether the entity will have sufficient distributable profit or cash
flow to continue making distributions at the current level
No
7. There is substantial debt from unusual sources (e.g., related parties) or on
unusual terms
No
8. There are material off-balance-sheet financing or contingent liabilities

Describe any additional risk factors identified in this category:

None noted.

Nature of the Audit Engagement

Nature of the Audit Engagement

No
1. Management has failed to give auditors full cooperation in the past
No
2. Management has failed to volunteer information regarding significant or unusual
transactions
No
3. There are significant affiliated entities or other related parties that we will not
audit and with whom significant transactions might have occurred
No
4. This is a first-time audit engagement
No
5. This is a recently acquired client, and there were unusual or controversial
circumstances associated with the client’s decision to change auditors
No
6. The results of our audit will be relied on by other auditors
No
7. We will rely on other auditors for material portions of the work to be performed
on consolidated subsidiaries
No
8. There is reason to believe that we will not be able to render a standard report
because of scope limitations, accounting and disclosure issues, or “going-
concern” problems

Significant Accounting Issues

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602987064.docx
PT Ban Indonesia
Period : 31 December 2005

Prepared by: BS, 6 Nov 05

Reviewed by: AS, 6 Nov 05

No
1. The entity has recently changed, or is considering a change, to a less preferable
accounting method
No
2. There are significant non monetary transactions
No
3. The financial statements include assets that have been written up in value in
connection with a purchase from a related party
No
4. There are unusual problems relating to a possible restatement of financial
statements, including those for interim periods

Business Relationships and Related Parties

There is reason to believe that we do not have a clear understanding of the nature
of the significant transactions and business relationships between the entity and
other entities (particularly if the other entities are presented as third parties when in
fact they are related parties) No

Our Prior Knowledge and Experience

1. There is reason to believe that we have a lack of accumulated experience with

and knowledge of the client No
2. There is reason to believe that a sufficient number of competent personnel will
not be available No

Describe any additional risk factors identified in this category:

None noted.

RISKS IDENTIFIED AND RESPONSES

Pervasive Risk

Management override over the financial statements.

Response on Pervasive Risk

Increased involvement of engagement management at all stages of the audit engagement to ensure
that the appropriate work is planned and its performance is properly supervised.

Inherent Risk

1. Revenue recognitions
2. Valuation of trade accounts receivable.
3. Valuation of its inventory (finished goods)
4. Valuation employee benefits expense

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602987064.docx
PT Ban Indonesia
Period : 31 December 2005

Prepared by: BS, 6 Nov 05

Reviewed by: AS, 6 Nov 05

OVERALL ASSESSMENT OF AND RESPONSE TO ENGAGEMENT RISK

Engagement Risk is assessed as: GREATER than NORMAL

Berdasarkan inquiry dengan manajemen dan temuan-temuan awal mengenai Perusahaan, maka
disimpulkan bahwa engagement risk terhadap audit Perusahaan adalah Greater than Normal. Hal
penting yang menjadi pertimbangan klasifikasi ini adalah kemungkinan adanya management
override terhadap laporan keuangan Perusahaan. Hal ini tidak teridentifikasi/tidak terjadi pada audit
tahun 2004.

CONTROL ENVIRONMENT EVALUATION

The control environment appears conducive to reliable processing of financial information and
effective internal control