Explore Many Areas Of Risks And Audit Of BMW Company (Research Paper Sample)

FINANCE AND ACCOUNTING
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Introduction
The BMW group has two major segments of operations. The financial statements have been consolidated. The products of the company include, BMW 2Series Gran Tourer, the new BMWX1and the new MINI Clubma which are the latest vehicles, others vehicles are also made. The company makes motorcycle which has a capacity of 400cc and above. The company falls in the automotive industry and as auditors we had to observe this. The BMW Group being subdivided into the Automotive and Motorcycles, Financial Services and Other Entities segments (the latter primarily comprising holding companies and Group financing companies).The audits will confirm all the aspects of noncurrent tangible assets such as property plant and equipment. The audit will verify the accuracy, completeness, rights and obligation, valuations and allocations, presentations and disclosure and classification. The audit will specifically audit the land and building.
The audit was “conducted our audit of the consolidated financial statements in accordance with German generally accepted standards for the audit of financial statements promulgated by the Institute of Public Auditors in Germany (IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework and in the group management report are detected with reasonable assurance” CITATION Pol157 \l 1033 (Polyne, 2015)
There are many areas of risks that are present in the company. The disclosure that regards to contingencies may not sufficiently reveal the effects of the pending proceedings in this case. In addition, the financial results of the company and the subsidiary company might be manipulated to influence the market value of its shares before the sale transaction. Finally; the related party transactions with the subsidiary company may be misrepresented to improve the market. The auditor must scrutinize these risks to ascertain the probability of fraud.
According to our audit, it is evidenced that BMW company assets such a land and building are fully owned, in use, physically owned by the company, depreciated as per the given policy.
* Physical existence
The company land has been estimated to be 10Ha.The physical confirmation of the land could be seen. The hectare in the title deed can be confirmed viz as viz its physical presence. The land has been fenced by the company implying that it the company property. The fact that the company has been subdivided fully into subsections of the manufacturing may clearly indicate the physical presence of the land. Basically the land can be verified to be present. On the other hand, the buildings are structured in a way that they are visible. There are no underground buildings sand all the buildings are visible. The company has no other major plants or divisions but all its manufacturing processes are done in a single piece of land and buildings in it. Others are distribution points that are owned by distributors. The acquisition of the piece of the land can clearly be validated and was authorized by surveyors.
* Owned by the company
The noncurrent assets that are the building and the land are properly owned by the BMW. The audit was done by investigating the files those entries the title deed of the piece of land. The title deed was original and was confirmed from the ministry of land to be the original copy. The physical presence of the buildings on the land revealed that the land actually belonged to the company. The files of the buildings revealed the contractors that were tasked to build the buildings. The ownership of the design plans, expenditure receipts on the building under the name of BMW further more indicated that the buildings are owned by the company. The buildings have been tagged BMW and the logo of the company is manifested in each building of the company and this could further explain that the company fully owners the building. The fixed assets that have been recorded in the financial statements are fully owned by the company. There are no evidence of transfers of the company building and land in any document. The disclosure by the management revealed that there are plans of acquisition of these assets by any other company. In addition, there is no plan for partnership by the company with any other company. The date of the acquisition has been shown in the note 120 in the 2015 financial statements. In addition the sale agreements which led to the acquisition of the land prove beyond reasonable doubt that the company has no partnership and that the land and the building are assets of the company.
The statement by the board of directors which claim that “land and building of the company are fully owned by the company, there are no leases from other company. Furthermore the company is not in any partnership with another company whatsoever” shows that the company fully owns the assets. Based on the audit which has considered the materiality and proper documentation it is evidenced that the completeness of the documentation proves beyond the reasonable doubt that the company owns the land and the building.
* In use
There is a clear cut difference of the usage of the assets. The land has buildings in it and both the land and the buildings are owned by the company. They are actually in use. The land has the subsections of the manufacturing building in it. Packing; warehouse and testing tracks have been instituted within the piece of land. The company show room is within the buildings on the piece of land. The physical presence of the operations and buyers in the show room revealed that the company is on operation and that the assets are in use.
* Correctly valued (cost, net realizable value or revaluation)
Based on the financial statement, the buildings were valued at €900M.The building depreciates at the rate of 6% annually. Basically, the audit revealed that the building was correctly valued according to the accounting and state policies. The calculation from the year of incorporation reveals that the cost that is represented in the financial statement is the actual cost of the building. The depreciation rate in accordance with IAS 23 which reveals that the rate should be applied on an annual basis. Therefore, the building was correctly valued. On the other hand the land appreciated by 16%.The cost of the land is verifiable in the previous statements and the appreciation of the land has been consistent. The representation of the cost on the balance sheet has been done with accuracy. The summary of the depreciation and appreciation calculation which is attached in the note 57 in the financial statements shows correct and accurate calculation. Basically, the summaries of the land and building depreciation schedule found in the statements were confirmed to be true. The opening balances of the land and building in these schedules were correct. There was no exaggeration and errors in the calculation. The original costs were verified and the depreciation cost was correctly eliminated from the building cost. The cost of the land has been valued at €200M.The land has appreciated by 16% to €232M.The appreciation value is significant and reliable in accordance to the state policy.
Basically, we used an expert from property consultation to verify the strength of the building and of the depreciation was done correctly. Most of the time the depreciation rates are usually high especially in the manufacturing factories. This is because of the heaviness and the machinery that are used during the construction process. Therefore there was need for the expert to ascertain the real depreciation rate of the company.
Basically, the urgency to check the list that has investment plans of the company was emphasized. The investment plans of the company unto the land and on the building were scrutinized. The work on investment was proceeding as scheduled; the vehicles and motorcycles were made as planned. Over 2million units of vehicles were made in 2015 and 2.5 million units of motorcycles were sold. The physical examination of the motorcycles that remained in addition to the sampled number of invoices revealed that the company actually is using the resources and that it is functional. The invoices counting were done through sampling. This was not very accurate approximation but it shows the close picture of the numbers. However, the computerized data was able to be recorded significantly.
The auditing working papers were compared with the previous year’s recordings. The working papers validated the revenues rise from €2.5B to €2.6B.The revenue that the company gets has been properly been documented and the notes and provisions have been given.
* Properly recorded and presented in the financial statements
For the financial data to make sense, then they should be properly being presented in accordance to the GAAPs and the IASs. The recording of the land and the building was done correctly, the figures were done correctly and thus this showed fair presentation of the financial statements. The assets were correctly classified as noncurrent assets and thus were recorded as in the group. Basically the presentation of the financial statements has observed the fully the outstanding policy of International Accounting Standards. The management has ensured that all the purchased land is classified to avoid misrepresentation of the assets. We were able to use qualified valuers who correctly valued the land and the buil...