Case facts

On September 2023, you were engaged by PNA Manufacturing Corporation (PNA), a company incorporated in the Philippines, as their auditor. PNA is a wholly owned subsidiary of Granthor Holdings Philippines, Inc. and its registered address is at 123 Cygnus Street, Aquila Village, Makati City. PNA is also listed in the Philippine Stock Exchange.

During the audit, you have identified revenue recognition as a matter that, in your professional judgment, is of most significance in your audit of the financial statements. This is because revenue is a key measure used to evaluate the performance of the Company and is being generated from various sources. Further, while revenue recognition and measurement are not complex for the Company, revenues may also be inappropriately recognized to improve business results and achieve revenue growth in line with the objectives of the Company, thus increasing the risk of material misstatement.

The procedures you have performed in the audit of revenue included the following:

• evaluated and assessed the revenue recognition policies in accordance with PFRS 15, Revenue from Contracts with Customers
• evaluated and assessed the design and operating effectiveness of the key controls over the revenue process.
• vouched, on a sampling basis, sales transactions to supporting documentation such as sales invoices and delivery documents to ascertain that the revenue recognition criteria are met.
• tested, on a sampling basis, sales transactions for the last month of the financial year and also the first month of the following financial year to supporting documentation such as sales invoices and delivery documents to assess whether these transactions are recorded in the appropriate financial year.

On March 20, 2024, you concluded that you have obtained sufficient appropriate audit evidence on which to base the auditor's opinion on the financial statements, and on March 21, 2024, the financial statements are to be printed out and released to the Company's management.

Other information provided to you includes the Annual Report of the Company to be filed with the SEC and PSE. You have not yet received the Company's SEC Form 17-A, but it is expected to be made available to you after March 21, 2024.

Requirement

Draft the independent auditor's report to be attached to the Company's financial statements.