Global Motor Manufacturers Australia Pty Ltd Financial Statement Audit 2018-19

Variance Analysis

Account Financial
Name No. Statement Classification Sub-Classification

Bank - Main Operating Account 1001 Balance sheet Current assets Cash and cash equiv

Bank - Term Deposit 1002 Balance sheet Current assets Cash and cash equiv
Petty cash account 1003 Balance sheet Current assets Cash and cash equiv
Accounts receivable 1004 Balance sheet Current assets Accounts receivable
Allowance for doubtful debts account 1005 Balance sheet Current assets Accounts receivable
Raw materials 1006 Balance sheet Current assets Inventory
Work in progress 1007 Balance sheet Current assets Inventory
Finished goods 1008 Balance sheet Current assets Inventory
Other receivables 1009 Balance sheet Current assets Other current assets

Prepayments 1010 Balance sheet Current assets Other current assets

Land 1101 Balance sheet Non current assets Property, plant and
Property 1102 Balance sheet Non current assets Property, plant and

Property Depreciation 1103 Balance sheet Non current assets Property, plant and

Plant 1104 Balance sheet Non current assets Property, plant and
Plant depreciation 1105 Balance sheet Non current assets Property, plant and
Equipment 1106 Balance sheet Non current assets Property, plant and
Equipment depreciation 1107 Balance sheet Non current assets Property, plant and
Accounts payable 2001 Balance sheet Current liabilities Accounts payable
Interest payable 2002 Balance sheet Current liabilities Other current liabilit
Accrued expenses 2003 Balance sheet Current liabilities Accrued expenses
Payroll tax payable 2004 Balance sheet Current liabilities Other current liabilit

Income tax payable 2005 Balance sheet Current liabilities Other current liabilit

Provision for recall 2008 Balance sheet Non current liabilitieNon-current trade a

Bank Loans 2101 Balance sheet Non current liabilitieBank Loans

Retained earnings 3001 Balance sheet Equity Retained earnings

Sales 4001 Income Statement Income Revenue

Interest revenue 4002 Income Statement Income Revenue

Discounts allowed 4003 Income Statement Income Revenue

Grant income 4004 Income Statement Income Other revenue

Materials purchased 5001 Income Statement Cost of sales Cost of sales

Packaging 5002 Income Statement Cost of sales Cost of sales
Opening inventory 5003 Income Statement Cost of sales Cost of sales

Closing inventory 5004 Income Statement Cost of sales Cost of sales

Production line labour 5005 Income Statement Cost of sales Cost of sales
Sales commissions 5101 Income Statement Expense Administration expe
Sales promotion 5102 Income Statement Expense Administration expe
Advertising 5103 Income Statement Expense Administration expe
Gifts & samples 5104 Income Statement Expense Administration expe

Marketing expenses 5105 Income Statement Expense Administration expe

Payroll 5201 Income Statement Expense Employee benefits

Superannuation 5202 Income Statement Expense Employee benefits
Payroll benefits 5203 Income Statement Expense Employee benefits
Payroll taxes 5204 Income Statement Expense Employee benefits

Recruitment expenses 5206 Income Statement Expense Employee benefits

Rent 5301 Income Statement Expense Occupancy expenses

Utilities (water, electricity, gas) 5106 Income Statement Expense Administration expe
Travel costs 5107 Income Statement Expense Administration expe
Entertainment 5108 Income Statement Expense Administration expe
Telephone 5109 Income Statement Expense Administration expe
Office stationery 5110 Income Statement Expense Administration expe
Legal fees 5111 Income Statement Expense Administration expe
Audit & accountancy fees 5112 Income Statement Expense Administration expe

Consultancy fees 5113 Income Statement Expense Administration expe

Repairs & maintenance 5114 Income Statement Expense Administration expe

Cleaning 5115 Income Statement Expense Administration expe
Bad debt expense 5116 Income Statement Expense Administration expe

Insurance 5117 Income Statement Expense Administration expe

Provision for recall expenses 5118 Income Statement Expense Administration expe
Property depreciation 5401 Income Statement Expense Depreciation
Plant depreciation 5402 Income Statement Expense Depreciation
Equipment depreciation 5403 Income Statement Expense Depreciation

Interest expense 5501 Income Statement Expense Finance costs

Bank fees 5502 Income Statement Expense Finance costs

Income tax expense 5601 Income Statement Expense Income tax expense
 Greater than
Natural Balance 2019 Balance 2018 Movement % Movement materiality (Y/N)

Debit $ 114,000,000 $ 120,000,000

-$ 6,000,000 -5% Y
Debit $ 65,000,000 $ 5,000,000 $ 60,000,000 92% Y
Debit $ 100 $ 100 $ - 0%
Debit $ 26,491,150 $ 25,000,000 $ 1,491,150 6%
Credit -$ 600,000 -$ 550,000 -$ 50,000 8%
Debit $ 15,000,000 $ 14,000,000 $ 1,000,000 7%
Debit $ 25,000,000 $ 26,000,000
-$ 1,000,000 -4%
Debit $ 22,000,000 $ 17,000,000 $ 5,000,000 23% Y
Debit $ 800,000 $ 750,000 $ 50,000 6%

Debit $ 250,000 $ 180,000

$ 70,000 28%
Debit $ 16,000,000 $ - $ 16,000,000 100% Y
Debit $ 24,000,000 $ 24,000,000 $ - 0%

Credit -$ 9,500,000 -$ 8,500,000

-$ 1,000,000 11%
Debit $ 75,000,000 $ 25,000,000 $ 50,000,000 67% Y
Credit -$ 4,000,000 -$ 3,000,000 -$ 1,000,000 25%
Debit $ 7,000,000 $ 6,000,000 $ 1,000,000 14%
Credit -$ 2,500,000 -$ 1,000,000
-$ 1,500,000 60%
Credit -$ 18,000,000 -$ 25,000,000 $ 7,000,000 -39% Y
Credit -$ 120,000 -$ 50,000 -$ 70,000 58%
Credit -$ 175,000 -$ 120,000 -$ 55,000 31%
Credit -$ 190,000 -$ 160,000 -$ 30,000 16%

Credit -$ 1,600,000 -$ 1,800,000

$ 200,000 -13%

Credit -$ 22,000,000 $ -
-$ 22,000,000 100% Y
Credit -$ 18,000,000 -$ 8,000,000 -$ 10,000,000 56% Y
Credit -$ 214,750,100 -$ 46,702,838

-$ 168,047,262 78% Y

Credit -$ 220,700,000 -$ 226,700,000

$ 6,000,000 -3% Y
Credit -$ 1,300,000 -$ 100,000 -$ 1,200,000 92%
Debit $ 10,000,000 $ 5,000,000
$ 5,000,000 50% Y

Credit -$ 5,000,000 $ -

-$ 5,000,000 100% Y
Debit $ 70,000,000 $ 50,000,000 $ 20,000,000 29% Y
Debit $ 4,000,000 $ 3,000,000 $ 1,000,000 25%
Debit $ 75,000,000 $ 80,000,000 -$ 5,000,000 -7% Y

Credit -$ 85,000,000 -$ 90,000,000

$ 5,000,000 -6% Y
Debit $ 8,000,000 $ 9,000,000
-$ 1,000,000 -13%
Debit $ 1,000,000 $ 2,000,000 -$ 1,000,000 -100%
Debit $ 80,000 $ 65,000 $ 15,000 19%
Debit $ 1,000,000 $ 1,000,000 $ - 0%
Debit $ 2,000,000 $ 190,000 $ 1,810,000 91%

Debit $ 450,000 $ 600,000

-$ 150,000 -33%
Debit $ 9,000,000 $ 8,500,000
$ 500,000 6%
Debit $ 900,000 $ 807,500 $ 92,500 10%
Debit $ 100,000 $ 90,000 $ 10,000 10%
Debit $ 495,000 $ 465,375 $ 29,625 6%

Debit $ 150,000 $ 180,000

-$ 30,000 -20%
Debit $ 15,262,500 $ 15,000,000
$ 262,500 1.7%
Debit $ 1,500,000 $ 1,700,000 -$ 200,000 -13%
Debit $ 80,000 $ 85,000 -$ 5,000 -6%
Debit $ 1,000,000 $ 400,000 $ 600,000 60%
Debit $ 50,000 $ 40,000 $ 10,000 20%
Debit $ 8,000 $ 6,000 $ 2,000 25%
Debit $ 850,000 $ 60,000 $ 790,000 93%
Debit $ 150,000 $ 150,000 $ - 0%

Debit $ 1,000,000 $ 1,200,000

-$ 200,000 -20%
Debit $ 7,000,000 $ 5,000,000
$ 2,000,000 29%
Debit $ 80,000 $ 75,000 $ 5,000 6%
Debit $ 120,000 $ 140,000 -$ 20,000 -17%

Debit $ 180,000 $ 175,000

$ 5,000 3%
Debit $ 22,000,000 $ - $ 22,000,000 100% Y
Debit $ 1,000,000 $ 500,000 $ 500,000 50%
Debit $ 1,000,000 $ 600,000 $ 400,000 40%
Debit $ 1,500,000 $ 1,000,000
$ 500,000 33%
Debit $ 800,000 $ 500,000
$ 300,000 38%

Debit $ 9,000 $ 4,000

$ 5,000 56%
Debit -$ 22,870,650 -$ 38,780,137 $ 15,909,487 -70% Y
Threshold Met
(Y/N/Other) Notes Explained (Y/N)

Meeting 1 - 15 July - CFO reported that the company would invest excess cash
balances into term deposits. The Board approved this as it was in line with risk and
return profile of the company. An increase in interest income would be expected
in line with the increased term deposits. Y
Y

Variance has not been explained. Further investigation is required as part of the
audit strategy. N
Y

Meeting 5 - 15 March - New site purchase (vacant land) was outlined to the Board.
The purchase was partially bank funded and a corresponding increase to the non-
current loan liability account would be expected as a result. The non-bank funded
portion of the balance is expected to result in a decrease to the cash balance at 30
June. Y
Y

Meeting 2 - 15 September - The COO reported on the "production line

optimisation project" and outlined the total expected cost of the project at $40m.
It was noted in Meeting 6 that the project was delivered on time and under
budget. The increase in the balance is $50m which is not in line with the
information provided in the Board reports. N
Y

Variance has not been explained. Further investigation is required as part of the
audit strategy. N
Y

Meeting 1 - 15 July - Legal Counsel provided an update regarding the potential

recall of windscreens produced by the company. The Board was notified that the
potential cost of the recall is approximately $22m and is expected to commence in
the following financial year. Y

Meeting 5 - 15 March - New site purchase (vacant land) was outlined to the Board.
Y The purchase was partially bank funded with a $10m interest only loan. Y
Y Movement is attributed to the profit for the 2018/19 financial period. Y
 Meeting 4 - 15 January - Based on information provided in the Board reports,
revenue from sales was expected to increase during the year. The expected
increase was a result of the closure of the company's largest competitor.

Meeting 1 - 15 July - The decrease may be partially attributed to the recall legal
Y action the company is involved in. N

Meeting 1 - 15 July - CFO reported that the company would invest excess cash
balances into term deposits. The Board approved this as it was in line with risk and
return profile of the company. An increase in interest incomehas been identified
Other movement in line with the increased term deposits. Y
Other movement Variance has not been explained. Further investigation is required as part of the audi
N
Meeting 5 - 15 March - A Government grant was awarded to the company for
Y research into advancements in Australia's manufacturing industry. Y

Meeting 4 - 15 January - Increase in materials purchased is partially explained by

the closure of the company's largest competitor (Alan Key's Spares). It was noted
that there was an increase of 30% in new customers. This does not explain the full
movement for the financial period as it occured in January and a full year effect
Y has not been seen. N
Y

Meeting 2 - 15 September - In line with the Board paper, the decrease in

production line staff was expected to be 15%, with most of these people moving
to other roles within the organisation . Y

Other movement

Meeting 2 - 15 September - In line with the Board paper, the decrease in

production line staff was expected to be 15%, with most of these people moving
to other roles within the organisation. This should result in an increase in a similar
increase to payroll expenses.

Meeting 4 - 15 January - The Board paper summary also noted a 2.5% increase in
staff salaries during January which is not aligned to the movements identified. N

Other movement

Meeting 4 - 15 January - It was noted by the CFO that rental costs had increased
by 3.5%. This movement is in line with the Board paper summary as the increase
has been in place for half the financial period. Y

Other movement
 Meeting 2 - 15 September - The increase in production line operations costs was
expected to be approximarely $18m per year. As the system was implemented in
May, prior to the end of the financial period, the increase in expenditure is aligned
to the Board paper summary. Y

Other movement

Meeting 1 - 15 July - Legal Counsel has provided an update regarding the potential
recall of windscreens. The Board was notified that the potential cost of the recall is
approximately $22m and is expected to commence in the following financial year. Y
Y

Meeting 5 - 15 March - Interest expenses have increased in line with the new
$10m loan provided for the purchase of the vacant land. Y

Other movement
Movement is in line with the profit calculation for the year. Based on the trial
balance, profit in 2018 was $129m and in 2019 was $76m. Based on an average
company tax rate of 30%, the movement is reasonable. Y
Y