Westgate Company Limited (WCL) is a Canadian manufacturer of public transportation equipment. Sales for the year ended March 31, 2016, amounted to $930 million, on which the company realized a net profit after taxes of $150 million. The company has experienced considerable growth in the last three years, mainly through acquisitions and the development of new product lines.

The transportation equipment industry is highly competitive and is characterized by a small number of large companies located mainly in Canada, the United States, Germany, England, and Japan. Growth is critical to the survival of WCL.

The finance function at WCL is responsible for the coordination of strategic planning. Each vice president is responsible for developing objectives and strategies for the activities under his or her responsibility. A corporate planning committee has been established to decide the key corporate objectives and strategies based on the vice-presidents’ plans.

WCL has decided on the following corporate objectives for 2017:

• to increase sales by $100 million
• to generate a 15% return on shareholders’ equity
• to increase research and development expenditures to 5% of sales
• to increase the company’s share of the new subway car market by 5% in North America

The president of WCL, Mitch Wright, believes that strategic planning is the key to survival. He believes that without proper strategic planning, the company will be rapidly outpaced by its competitors. Consequently, he requested that the internal audit department review WCL’s strategic planning systems and practices, focusing on the process for the preparation of the five-year corporate plan, which was completed in October 2015.

As a senior auditor in WCL’s internal audit department, you have been asked by the chief audit executive to prepare a memo in which you will identify the key areas to review in the strategic planning activity, develop high-level (general) criteria to be used in this audit, and outline the audit procedures in performing this work.

Required

Prepare the memo requested by the chief audit executive.