Data Analytics Financial Analysis Report & Spreadsheet

Reference the Excel file containing financial information from footnote disclosures and substantive analytical procedures using data analytics from your instructor.

PharmaCorp will be used as the main analytical procedure tasks you will want to focus on for this assignment. The other companies, Novartell and AstraZoro, will be used as industry comparisons.

The opportunity exists in this case to perform planning and substantive analytical procedures for accounts in the revenue cycle. You may assume that the 2015 financial information is unaudited, but the information from 2014 has been audited. Consider the following trends and characteristics of the pharmaceutical industry and for PharmaCorp in particular as you work on this case:

Policy makers in the industry and governments increasingly:Mandate necessary prescripts for patientsFocus on prevention instead of treatment regimes, thereby leading to changes in demand for some products

Required:

Part I: Planning Analytical Procedures

Step 1: Identify Proper Analytical Procedures. The senior auditor suggests you should use these ratios (on the financial statement level) for planning the analytical procedures as part of the revenue cycle at the company:Gross margin: (revenues-cost of sales)/revenuesTurnover of receivables: (revenues/average accounts receivable); use the ending accounts receivableReceivables as a percentage of current assets: (accounts receivable/total current assets)Receivables as a percentage of total assets: (accounts receivable/total assets)Allowance for uncollectible accounts as a percentage of accounts receivable: (allowance/accounts receivable)Identify other relationships or trends that are relevant as part of the planning analytics. Discuss your reasons for your choices.Step 2: Evaluate the Data Reliability When Developing Expectations. The data you will use to develop expectations in the revenue cycle has been deemed reliable by the audit staff.Discuss the likely factors the audit team will consider when making this determination.Step 3: Develop expectations for accounts in the revenue cycle and for the ratios from Step # 1 that you deem as relevant. Since this is a planning analytical procedure, the expectations are not set at a high a high level of precision. Indicate if you expect a ratio to rise, fall, or remain the same, and explain the level of any anticipated rises or falls, or the range of the ratio. Pharma Corp’s financial information is in the first tab of the Excel worksheet, while the information for Novartell and AstraZoro is available in the last two tabs of the file.Consider both historical trends of Pharmcorp and the industry on the whole.Step 4 and Step 5: Define and Identify Substantial Unanticipated Variances. Refer to the text for guidance on materiality.Apply those guidelines to Step 4 of planning the analytical procedures as part of the revenue cycle for Pharmacorp. Define the meaning of a significant difference. Discuss your reasons for these choices. Discuss the qualitative materiality considerations in relation to this case.Once you have determined the levels of difference you would consider noteworthy, calculate the Step 1 ratios (and any additional trend or ration analysis you deemed necessary), based on Pharmacorp’s financial statement figures. Identify the ratios where you expect a significant difference.Step 6 and Step 7: Investigate Substantial Unanticipated Variances and Ensure Appropriate Documentation.Discuss the accounts or relationships you feel should be investigated further using substantive audit procedures. Discuss your reasons for these choices.Describe the information that should be a part of the auditor’s report or files.

Part II: Substantive Analytical Procedures

A
1
2
3
4
5
6
7
8
10-K FILINGS
9
10
11
12
13
14
Accounts receivable, less allowance for doubtful accounts, 2015—$374; 2014—$226
Inventories
Taxes and other current assets
Assets of discontinued operations and other assets held for sale
Total current assets
Long-term investments
PharmaCorp
Consolidated Balance Sheets (USD $)
In Millions, except Share data, unless otherwise specified
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
D
Dec. 31, 2015
ASSETS
Cash and cash equivalents
Short-term investments
Identifiable intangible assets, less accumulated amortization
Taxes and other noncurrent assets
Total assets
LIABILITIES AND EQUITIES
Short-term borrowings, including current portion of long-term debt: 2015—$2,449;
2014—$6
Accounts payable
Dividends payable
Income taxes payable
Accrued compensation and related items
Other current liabilities
Liabilities of discontinued operations
Total current liabilities
Long-term debt
Pension benefit obligations
Postretirement benefit obligations
Noncurrent deferred tax liabilities
Other taxes payable
Other noncurrent liabilities
Total liabilities
Preferred stock, without par value, at stated value; 27 shares authorized; issued:
38 2015—967; 2014—1,112
Common stock, $0.05 par value; 12,000 shares authorized; issued: 2015—8,956;
39 2014—8,902
40 Additional paid-in capital
41 Employee benefit trusts
42 Treasury stock, shares at cost: 2015—1,680; 2014—1,327
43 Retained earnings
44 Accumulated other comprehensive loss
45 Total shareholders’ equity
46 Equity attributable to noncontrolling interests
47 Total equity
48
49 Total liabilities and equity
E
Dec. 31, 2014
(audited)
(unaudited)
15 Property, plant and equipment, less accumulated depreciation
16 Goodwill
17
18
19
20
21
B
$10.489
22.219
12.478
6.963
9.196
70
61.415
14.249
14.361
44.572
46.113
5.088
185.798
$3.282
23.170
13.158
6.510
9.480
5.217
60.917
9.914
15.921
44.669
51.284
5.697
188.002
6.524
4.116
4.164
1.834
910
2.146
13.041
0
28.719
30.936
7.930
3.393
21.593
6.610
4.939
104.120
3.578
1.896
909
2.220
15.066
1.124
28.909
34.826
6.455
3.244
18.861
6.886
6.100
105.381
39
45
448
445
72.608
-1
-40.121
54.240
-5.953
81.260
418
81.678
71.423
-3
-31.801
46.210
-4.129
82.190
431
82.621
185.798
188.002
F
G
50
51
52
53
54
A
B
PharmaCorp
Consolidated Statements of Income (USD $)
In Millions, except Per Share data, unless otherwise specified
Dec. 31, 2015
D
E
Dec. 31, 2014
F
G
Dec. 31, 2013
$58.886
$65.159
$65.065
57 Cost of sales
11.234
14.176
14.888
58 Selling, informational and administrative expenses
16.516
18.632
18.873
59 Research and development expenses
60 Amortization of intangible assets
7.770
5.275
1.880
4.031
12.080
9.074
5.644
2.830
2.499
12.304
9.583
5.264
3.245
3.841
9.571
2.462
9.618
3.809
8.495
1.153
8.318
55 Revenues
56 Costs and expenses:
61 Restructuring charges and certain acquisition-related costs
62 Other deductions––net
63 Income from continuing operations before provision for taxes on income
64 Provision for taxes on income
65 Income from continuing operations
66 Discontinued operations:
67 Income/(loss) from discontinued operations––net of tax
68 Gain/(loss) on sale of discontinued operations––net of tax
197
250
-19
4.873
1.404
-11
69 Discontinued operations––net of tax
5.080
1.654
-30
70 Net income before allocation to noncontrolling interests
14.598
10.049
8.288
71 Less: Net income attributable to noncontrolling interests
72 Net income attributable to PharmaCorp Inc.
28
40
31
$14.570
$10.009
$8.257
74 Income from continuing operations attributable to PharmaCorp Inc. common shareholders
$1,27
$1,07
$1,03
75 Discontinued operations––net of tax
$0,68
$0,21
$0,00
76 Net income attributable to PharmaCorp Inc. common shareholders
77 Earnings per common share––diluted:
$1,96
$1,28
$1,03
78 Income from continuing operations attributable to PharmaCorp Inc. common shareholders
$1,26
$1,06
$1,03
79 Discontinued operations––net of tax
$0,68
$0,21
$0,00
80
81
82
83
84
$1,94
7.442
7.508
$0,88
$1,27
7.817
7.870
$0,80
$1,02
8.036
8.074
$0,72
73 Earnings per common share––basic:
Net income attributable to PharmaCorp Inc. common shareholders
Weighted-average shares––basic
Weighted-average shares––diluted
Cash dividends paid per common share
85
86
87
88
A
B
PharmaCorp
Consolidated Statements of Cash Flows (USD $)
In Millions, unless otherwise specified
Dec. 31, 2015
D
(unaudited)
89 Operating Activities
90 Net income before allocation to noncontrolling interests
91 Adjustments to reconcile net income before allocation to noncontrolling interests to net cash provided by operating activities:
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
Depreciation and amortization
Share-based compensation expense
Asset write-offs and impairment charges
(Gain)/loss on sale of discontinued operations
Deferred taxes from continuing operations
Deferred taxes from discontinued operations
Benefit plan contributions (in excess of)/less than expense
Other non-cash adjustments, net
Other changes in assets and liabilities, net of acquisitions and divestitures:
Accounts receivable
Inventories
Other assets
Accounts payable
Other liabilities
Other tax accounts, net
Net cash provided by operating activities
Investing Activities
Purchases of property, plant and equipment
Purchases of short-term investments
Proceeds from redemptions and sales of short-term investments
Net proceeds from redemptions and sales of short-term investments with original maturities of 90 days or less
Purchases of long-term investments
Proceeds from redemptions and sales of long-term investments
Acquisitions, net of cash acquired
Proceeds from sale of businesses
Other investing activities
Net cash provided by/(used in) investing activities
Financing Activities
Proceeds from short-term borrowings
Principal payments on short-term borrowings
Net payments on short-term borrowings with original maturities of 90 days or less
Principal payments on long-term debt
Purchases of common stock
Cash dividends paid
Other financing activities
Net cash used in financing activities
Effect of exchange-rate changes on cash and cash equivalents
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents, beginning
Cash and cash equivalents, ending
Cash paid during the period for:
Income taxes
Interest
E
F
G
Dec. 31, 2014
Dec. 31, 2013
(audited)
(audited)
$14.598
$10.049
$8.288
7.711
381
1.199
-7.123
839
1.459
135
-203
8.809
519
1.298
-1.688
207
147
-1.769
-172
8.299
505
3.386
111
2.109
-156
-677
-49
375
-731
93
569
-3.438
1.190
17.054
-66
1.184
801
-367
1.498
-8
20.240
-708
2.917
-718
-401
1.214
-12.666
11.454
-1.327
-24.018
25.302
1.459
-11.145
4.990
-1.050
11.850
93
6.154
-1.660
-18.447
14.176
10.874
-4.620
2.147
-3.282
2.376
279
1.843
-1.513
-11.082
5.699
5.950
-4.128
4.737
-273
0
118
-492
7.985
7
-8.304
-1.413
-8.228
-6.534
488
-15.999
-2
7.207
3.182
10.389
12.910
-3.926
-7.540
-6.896
-9.100
-6.134
169
-20.607
-29
1.447
1.735
3.182
6.500
-9.349
-1.197
-106
-1.000
-6.088
66
-11.174
-31
-243
1.978
1.735
2.430
$1.873
2.938
$2.085
11.775
$2.155
H
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
I
J
K
H
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
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74
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84
I
J
K
PharmaCorp Operating Segments
We manage our operations through five operating segments —Primary Care; Specialty Care and Oncology; Established Products and
Emerging Markets; Animal Health; and Consumer Healthcare. As of the third quarter of 2012, the Animal Health and Consumer Healthcare
business units are no longer managed as a single operating segment. Each operating segment has responsibility for its commercial
activities and for certain research and development activities related to in-line products and in-process research and development
(IPR&D) projects that generally have achieved proof-of-concept.
On November 30, 2015, we completed the sale of our Nutrition business to Choco and recognized a gain on the sale of this business in
Gain/(loss) on sale of discontinued operations––net of tax in the consolidated statement of income for the year ended December 31, 2015.
The operating results of this business are reported as Income/(loss) from discontinued operations––net of tax in the consolidated
statements of income for all periods presented.
We regularly review our segments and the approach used by management to evaluate performance and allocate resources. Generally,
products are transferred to the Established Products business unit in the beginning of the fiscal year following loss of patent protection or
marketing exclusivity.
A description of each of our five operating segments follows:
• Primary Care operating segment —includes revenues from human prescription pharmaceutical products primarily prescribed by
primary-care physicians, and may include products in the following therapeutic and disease areas: Alzheimer’s disease,
cardiovascular (excluding pulmonary arterial hypertension), erectile dysfunction, genitourinary, major depressive disorder, pain,
respiratory and smoking cessation. All revenues for these products are allocated to the Primary Care business unit, except
those generated in emerging markets and those that are managed by the Established Products business unit.
• Specialty Care and Oncology operating segment —comprises the Specialty Care business unit and the Oncology business unit.
·
Specialty Care—includes revenues from human prescription pharmaceutical products primarily prescribed by physicians
who are specialists, and may include products in the following therapeutic and disease areas: anti-infectives, endocrine
disorders, hemophilia, inflammation, ophthalmology, pulmonary arterial hypertension, specialty neuroscience and
vaccines. All revenues for these products are allocated to the Specialty Care business unit, except those generated in
emerging markets and those that are managed by the Established Products business unit.
·
Oncology—includes revenues from human prescription pharmaceutical products addressing oncology and oncology-related
illnesses. All revenues for these products are allocated to the Oncology business unit, except those generated in
emerging markets and those that are managed by the Established Products business unit.
• Established Products and Emerging Markets operating segment —comprises the Established Products business unit and the
Emerging Markets business unit.
·
Established Products—includes revenues from human prescription pharmaceutical products that have lost patent
protection or marketing exclusivity in certain countries and/or regions. Typically, products are transferred to this business
unit in the beginning of the fiscal year following loss of patent protection or marketing exclusivity. However, in certain
situations, products may be transferred to this business unit at a different point than the beginning of the fiscal year
following loss of patent protection or marketing exclusivity in order to maximize their value. This business unit also
excludes revenues generated in emerging markets.
·
Emerging Markets—includes revenues from all human prescription pharmaceutical products sold in emerging markets,
including Asia (excluding Japan and South Korea), Latin America, the Middle East, Eastern Europe, Africa, Turkey and
Central Europe.
PharmaCorp Geographic Information
Revenues exceeded $500 million in each of 16 countries outside the U.S. in 2015 and 2014, and in each of 17 countries outside the U.S. in 2013. The U.S.
and Japan were the only countries to contribute more than 10% of total revenue in 2015. The U.S. was the only country to contribute more than 10% of
total revenue in 2014 and 2013.
The following table provides revenues by geographic area:
Year Ended December 31,
(MILLIONS OF DOLLARS)
Revenues
2015
2014
2013
$ 23,086
$ 26,933
$ 28,855
Developed Europe
13,375
16,099
16,156
Developed Rest of World
10,554
10,975
9,891
Emerging Markets
11,971
11,252
10,263
$ 58,986
$ 65,259
$ 65,165
United States
Revenues
013. The U.S.
than 10% of
PharmaCorp Other Revenue Information
Significant Customers: We sell our products primarily to customers in the wholesale sector. In 2015, sales to our three largest U.S. wholesaler
customers represented approximately 12%, 9% and 7% of total revenues and, collectively, represented approximately 16% of total accounts
receivable as of December 31, 2015. In 2014, sales to our three largest U.S. wholesaler customers represented approximately 13%, 11% and 9% of
total revenues and, collectively, represented approximately 14% of total accounts receivable as of December 31, 2014. For both years, these sales
and related accounts receivable were concentrated in our three biopharmaceutical operating segments.
Significant Product Revenues The following table provides revenues by product:
Year Ended December 31,
2015
2014
)
2013
51,214
57,747
58,523
Animal Health
4,299
4,184
3,575
Consumer Healthcare
3,212
3,028
2,748
261
300
319
(MILLIONS OF DOLLARS)
Total revenues from biopharmaceutical products
Revenues from other products:
Other
)
Revenues
$
58,986
$
65,259
$
65,165
Top Five Products in Terms of Revenue (all biopharmaceutical products)
Year Ended December 31,
(MILLIONS OF DOLLARS)
Lyran
2015
$
4,158
2014
$
3,693
2013
$
3,063
Lipco
3,948
9,577
10,733
Enbing (Outside the U.S. and Canada)
3,737
3,666
3,274
Prevnent
3,718
3,657
2,416
Selebrax
2,719
2,523
2,374
PharmaCorp.
Long-Term Debt
The following table provides the components of senior unsecured long-term debt:
As of December 31,
Maturity Date
2015
$
3.427
2014
6,20%
March 2022
$
3.348
5,35%
Mar-18
2.965
2.969
7,20%
Mar-42
2.803
2.848
4,75%
Jun-19
2.738
2.683
5,75%
Jun-24
2.734
2.581
Jun-16
—
2.392
6,50%
Jun-41
2.307
2.206
5,95%
Apr-40
2.086
2.188
5,50%
February 2017
1.832
1.893
Mar-16
—
1.564
4,55%
May-20
1.394
1.425
4,75%
December 2017
1.274
1.166
5,50%
Feb-19
1.048
1.061
6,51%
2028
3.403
3.345
5,28%
2019
2.254
2.402
2,48%
2018
771
865
3.625% (At
December 31,
2015, the note
has been
reclassified to
Current portion
of long-term
debt .)
5.50% (At
December 31,
2015, the note
had been called
and is no longer
outstanding.)
Long-term
debt
$
31.036
$
34.926
20-F FILINGS
NOVARTELL GROUP CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(At December 31, 2015 and 2014)
2015
(unaudited)
$m
2014
(audited)
$m
Assets
Non-current assets
Property, plant & equipment
Goodwill
Intangible assets other than goodwill
Investments in associated companies
Deferred tax assets
Financial assets
Other non-current assets
16.839
31.190
30.431
8.940
7.190
1.117
505
15.727
29.843
31.869
8.722
5.957
938
456
Total non-current assets
96.212
93.412
Current assets
Inventories
Trade receivables
Marketable securities and derivative financial instruments
Cash and cash equivalents
Other current assets
6.844
10.051
2.667
5.652
2.990
5.830
10.432
1.466
3.609
2.756
Total current assets
28.004
24.084
124.216
117.496
1.001
(92)
68.184
1.016
(121)
64.949
69.093
65.844
126
96
Total equity
69.219
65.940
Liabilities
Non-current liabilities
Financial debt
Deferred tax liabilities
Provisions and other non-current liabilities
13.881
7.186
9.879
13.955
6.861
7.792
Total non-current liabilities
30.946
28.408
Current liabilities
Trade payables
Financial debt and derivative financial instruments
Current income tax liabilities
Provisions and other current liabilities
5.693
5.845
2.070
10.443
4.898
6.274
1.706
10.079
Total current liabilities
24.051
23.148
Total liabilities
54.997
51.556
124.216
117.496
Total assets
Equity and liabilities
Equity
Share capital
Treasury shares
Reserves
Issued share capital and reserves attributable to novartell AG
shareholders
Non-controlling interests
Total equity and liabilities
NOVARTELL GROUP CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENTS
(For the years ended December 31, 2015, 2014 and 2013)
2015
(unaudited)
$m
2014
(audited)
$m
2013
(audited)
$m
Net sales
Other revenues
Cost of goods sold
56.773
988
(18.756)
58.666
909
18.983
50.724
837
(14.488)
Gross profit
Marketing & Sales
Research & Development
General & Administration
Other income
Other expense
38.805
(14.353)
(9.432)
(2.837)
1.287
(1.959)
40.392
(15.179)
(9.483)
(2.870)
1.254
(3.116)
37.073
(13.416)
(8.970)
(2.481)
1.234
(1.914)
Operating income
Income from associated companies
Interest expense
Other financial income and expense
11.511
652
-824 )
(96 )
10.998
628
-851
(2
11.526
904
-792
64
Income before taxes
Taxes
11.243
(1,625 )
10.773
(1,528
11.702
(1,733
Net income
9.618
9.245
9.969
Attributable to:
Shareholders of novartell AG
Non-controlling interests
Basic earnings per share ($)
Diluted earnings per share ($)
9.505
113
3,93
3,89
9.113
132
3,83
3,78
9.794
175
4,28
4,26
NOVARTELLGROUP CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED CASH FLOW STATEMENTS
(For the years ended December 31, 2015, 2014 and 2013)
2015
(unaudited)
$m
2014
(audited)
$m
2013
(audited)
$m
Net income
Reversal of non-cash items
Dividends received from associated companies and others
Interest received
Interest paid
Other financial receipts
Other financial payments
Taxes paid
9.618
7.938
326
149
(594 )
114
(22 )
(2,022 )
9.245
9.200
304
66
(640 )
9.969
6.262
471
180
-535 )
(47 )
(2,435 )
(145 )
(2,616 )
Cash flows before working capital and provision changes
Restructuring payments and other cash payments from
provisions
Change in net current assets and other operating cash flow items
15.507
(1,173 )
(140 )
15.893
(1,471 )
(113 )
13.586
(1,281 )
1.762
Cash flows from operating activities
14.194
14.309
14.067
Purchase of property, plant & equipment
Proceeds from sales of property, plant & equipment
Purchase of intangible assets
Proceeds from sales of intangible assets
Purchase of financial assets
Proceeds from sales of financial assets
Purchase of other non-current assets
Proceeds from sales of other non-current assets
Acquisitions of interests in associated companies
Acquisitions and divestments of businesses
Purchase of marketable securities
Proceeds from sales of marketable securities
(2,698
92
(370
263
(180
121
-157
118
Cash flows used in investing activities
(5,675 )
Acquisition of treasury shares
Disposal of treasury shares
Increase in non-current financial debt
Repayment of non-current financial debt
Change in current financial debt
Proceeds from issuance of share capital to third parties
Acquisition of non-controlling interests
Dividends paid to non-controlling interests and other financing
cash flows
Dividends paid to shareholders of novartell AG
(505 )
514
1.879
(704 )
(1,737 )
Cash flows used in financing activities
Net effect of currency translation on cash and cash equivalents
)
)
)
)
(1,741 )
(1,639 )
516
(6 )
(2,167
161
(220
543
(139
49
(48
15
(12
(569
(1,750
3.345
)
)
)
)
)
)
)
(792 )
(3,628
59
381
(28
(3,054
4
(3,187
)
)
)
)
(1,678
46
(554
535
(124
66
-25
13
)
)
)
)
(26,666 )
(40,569 )
53.200
(15,756 )
(311 )
811
5.574
(5 )
2.610
19
(32 )
(86 )
(203 )
(64 )
(6,030 )
(5,368 )
(4,486 )
(6,675 )
(15,024 )
4.116
(1 )
(103 )
(2 )
Net change in cash and cash equivalents
Cash and cash equivalents at January 1
1.843
3.709
(1,610 )
5.319
2.425
2.894
Cash and cash equivalents at December 31
5.552
3.709
5.319
20-F FILINGS
AstraZoro
Consolidated Balance Sheet
at 31 December
2015
(unaudited)
$m
2014
(audited)
$m
2013
(audited)
$m
6.189
9.798
16.348
489
299
452
1.111
34.486
6.525
9.762
10.880
442
201
–
1.514
29.324
6.957
9.871
12.158
324
211
–
1.475
30.996
2.061
7.629
823
31
803
7.701
19.048
53.534
1.852
8.754
4.248
25
1.056
7.571
23.506
52.830
1.682
7.847
1.482
9
3.043
11.068
25.131
56.127
Assets
Non-current assets
Property, plant and
equipment
Goodwill
Intangible assets
Derivative financial
instruments
Other investments
Other receivables
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Other investments
Derivative financial
instruments
Income tax receivable
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Interest-bearing loans and
borrowings
Trade and other payables
Derivative financial
instruments
Provisions
Income tax payable
Non-current liabilities
Interest-bearing loans and
borrowings
Deferred tax liabilities
Retirement benefit
obligations
Provisions
Other payables
Total liabilities
Net assets
-801
-9321
(3
-816
(2,862
(13,903
)
)
)
)
)
)
-1890
(8,975
-109
(1,388
(3,390
(15,752
)
)
)
)
)
)
(125
(8,661
(8
(1,095
(6,898
(16,787
)
)
)
)
)
)
-9309
-2676
-2165
-538
(1,001
)
)
)
)
)
-7438
-2635
(2,674
(474
(385
)
)
)
)
)
(9,097
(3,145
(2,472
(843
(373
)
)
)
)
)
(15,679 )
(29,582 )
23.952
(13,606 )
(29,358 )
23.472
(15,930 )
(32,717 )
23.410
302
3.604
253
533
1.374
17.961
23.737
215
23.952
423
2.978
239
533
1.379
17.894
23.246
226
23.472
352
2.672
107
433
1.377
18.272
23.213
197
23.410
Equity
Capital and reserves
attributable to equity
holders of the Company
Share capital
Share premium account
Capital redemption reserve
Merger reserve
Other reserves
Retained earnings
Non-controlling interests
Total equity
AstraZoro
Consolidated Statements of Income
for the year ended 31 December
2015
(unaudited)
$m
Revenue
Cost of sales
Gross profit
Distribution costs
Research and development
expense
Selling, general and
administrative costs
Profit on disposal of
subsidiary
Other operating income and
expense
Operating profit
Finance income
Finance expense
Profit before tax
Taxation
Profit for the period
2014
2013
27.963
-5383 )
22.580
(320 )
(audited)
$m
33.581
-6016 )
27.565
(346 )
(audited)
$m
33.269
(6,389 )
26.880
(335 )
-5233 )
-5533 )
(5,318 )
-9849 )
–
-11061 )
1.483
(10,445 )
–
970
8.148
528
(958 )
7.718
(1,391 )
6.327
777
12.795
552
(980 )
12.367
(2,351 )
10.016
712
11.494
516
(1,033 )
10.977
(2,896 )
8.081
Other comprehensive
income:
Foreign exchange arising on
consolidation
Foreign exchange
differences on borrowings
designated in net
investment hedges
Fair value movements on
derivatives designated in
net investment hedges
Amortisation of loss on
cash flow hedge
Net available for sale gains
taken to equity
Actuarial loss for the period
Income tax relating to
components of other
comprehensive income
Other comprehensive
income for the period, net
of tax
Total comprehensive
income for the period
6.405
9.470
8.106
Profit attributable to:
Owners of the Parent
Non-controlling interests
6.297
30
9.983
33
8.053
28
Total comprehensive
income attributable to:
Owners of the Parent
Non-controlling interests
6.395
10
9.428
42
8.058
48
$4,99
$7,33
$5,60
$4,98
$7,30
$5,57
1.261
1.361
1.438
1.264
1.367
1.446
3.752
3.494
Basic earnings per $0.25
Ordinary Share
Diluted earnings per $0.25
Ordinary Share
Weighted average number
of Ordinary Shares in issue
(millions)
Diluted weighted average
number of Ordinary Shares
in issue (millions)
106
(60 )
26
-56 )
24
101
86
–
–
1
2
1
72
(85 )
31
(741 )
4
(46 )
(46 )
198
(61 )
78
(546 )
25
Dividends declared and
3.619
paid in the period
All activities were in respect of continuing operations.
$m means millions of US dollars.
AstraZoro
Consolidated Statements of Cash Flows
for the year ended 31 December
2015
(unaudited)
$m
Cash flows from
operating activities
Profit before tax
Finance income and
expense
Depreciation, amortisation
and impairment
Decrease/(increase) in trade
and other receivables
(Increase)/decrease in
inventories
(Decrease)/increase in trade
and other payables and
provisions
Profit on disposal of
subsidiary
Non-cash and other
movements
Cash generated from
operations
Interest paid
Tax paid
Net cash inflow from
operating activities
Cash flows from investing
activities
Acquisitions of business
operations
Movement in short-term
investments and fixed
deposits
Purchase of property, plant
and equipment
Disposal of property, plant
and equipment
Purchase of intangible
assets of intangible
Disposal
assets
Purchase of non-current
asset investments
Disposal of non-current
asset investments
Net cash received on
disposal of subsidiary
Dividends received
Interest received
Payments made by
subsidiaries to noncontrolling interests
Net cash outflow from
investing activities
Net cash inflow before
financing activities
Cash flows from financing
activities
Proceeds from issue of
share capital
Repurchase of shares
Repayment of obligations
under finance leases
Issue of loans
Repayment of loans
Dividends paid
Hedge contracts relating to
dividend payments
Movement in short-term
borrowings
Net cash outflow from
financing activities
Net increase/(decrease) in
cash and cash equivalents
in the period
Cash and cash equivalents
at the beginning of the
period
Exchange rate effects
Cash and cash equivalents
at the end of the period
2014
(audited)
$m
2013
(audited)
$m
7.718
530
12.367
528
10.977
517
2.528
2.650
2.741
765
(1,108 )
10
-160 )
(256 )
88
(1,311 )
–
467
(1,483 )
(16 )
–
(424 )
(597 )
(463 )
9.536
(545 )
(2,043 )
12.368
(548 )
(3,999 )
13.854
(641 )
(2,533 )
6.948
7.821
(1,187 )
3.719
–
10.680
(348 )
-2843 )
(125 )
(672 )
-739 )
(791 )
99
(3,947 )
–
102
(458 )
–
83
(1,390 )
210
(46 )
(11 )
(34 )
43
–
5
–
7
145
1.772
–
171
–
–
174
(20 )
(16 )
(10 )
(1,859 )
(2,022 )
(2,226 )
5.089
5.799
8.454
429
(2,635 )
409
(6,015 )
494
(2,604 )
(17 )
1.980
(1,750 )
(3,665 )
–
–
–
(3,764 )
–
–
(1,741 )
(3,361 )
48
3
687
46
(4,923 )
(114 )
(8 )
(9,321 )
(7,334 )
166
(3,522 )
1.120
7.434
(4 )
10.981
(25 )
9.828
33
7.434
10.981
7.596
Running head: STATEMENT
1
Statement
Name
Course
Date
STATEMENT
2
Statement
Financial auditors evaluate the financial performance of the company and analyze
whether the reported financial results are exact and accurately presented in the different financial
statements presented in the company’s public reports. The role of the financial auditor is thus of
critical importance to ensure that the company complies with the requirements set forth by the
Sarbanes-Oxley Act relative to the obligation to publish accurate financial results. The
misleading publication of such effects may result in high fines and the imprisonment of the
company’s CEO and CFO. As accountants, it is thus our responsibility to learn how to correctly
perform a financial audit to be able of both accurately presenting the financial results of the
company we work for and certify their accuracy to the best of our knowledge once having
accounted for all the necessary data.
The proposed project focuses on the evaluation of the accuracy of the results published
by PharmaCorp, a pharmaceutical company operating in the healthcare industry in the United
States. The analysis of the accuracy of the reported financial results focuses on the following:
1. Definition of the critical internal controls and processes used by PharmaCorp to
analyze the accuracy of the published results.
2. Analysis of the consistency between the reported results by comparing the data within
the different financial statements and carried out both a horizontal and vertical
analysis.
3. Calculation of the key financial ratios that monitor the company’s profitability,
liquidity, and efficiency, among others.
4. Comparison of the calculated financial ratios of the company to those of its main
competitors (e.g., Novartell, AstraZoro, …) to identify those ratios that show either an
STATEMENT
outstandingly poor or good performance as indicators of potential sections in which
data can be flawed.
The timeline to accomplish this project is for twelve days, assuming the following:
Date
Day 1
Days 2-7
Day 8
Day 10
Day 12
Milestone
Start of the project
Definition of the internal controls and procedures used in the project
Collection of all the necessary data from the company and its key competitors
Vertical and horizontal analysis of the financial results of PharmaCorp
Calculation of the key financial ratios
Analysis of the consistency of the financial results published by the company
through the comparison of both the past performance and with the key
competitors
Assessment of whether the company’s decisions reflect the observed trend
Emission of the final report
3