V&S Auditors

Internal Control Report

For the Management of the company Inversiones Warner
Mic S.R.L.
Prepared by the Audit
Period 2014

Scope.

We have made the considerations based on the work done between January 1 and the
December 31, 2014

Justification

The reports from our firm at the end of the examination period serve Management not only
to evaluate the work done but to determine if what was executed corresponds to the
company requirements.

The framework of our Audit in the company seeks a future vision, focusing on...
evaluation of the requirements of this, in all areas of the company.

For this reason, in addition to the reports required by law regarding the presentation of the
Financial Statements such as the Opinion of the same and the Internal Control Report; they
It is suggested that management reports be prepared by areas, such as Resources.
Humans, sales, warehouse, and accounting.

Conceptual Framework

Internal Control is a process executed by the Management of the company to

management of your business, specifically designed to provide you with security
reasonable to achieve effectiveness and efficiency in operations; sufficiency of the
financial information and compliance with the laws.

Legal framework

The report on Internal Control constitutes a basic element that allows

determine if the legal and regulatory frameworks are being complied with; if the regulations
Corporates are taken into account; if the applied procedures correspond to the
proposed by the General Management and if the established internal control guidelines
correspond to the dynamics and development of the company.

Internal Control Approach

The Internal Control evaluated by our firm is based on Audit Standards.

general acceptance, which although they do not have the quality of mandatory, do
correspond to a process that has as a basic premise for its development
Control approach in the evaluation of our Financial Audit.

Theoretical framework of the components of Internal Control in the company

The components of Internal Control are interconnected; they derive from the vision of the
company, and they integrate into the administrative processes.
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These components are:

Control environment.

Which is associated with elements such as integrity, ethical values, and competence or
knowledge as well as the skills that people possess for an adequate
fulfillment of its functions.

Risk Assessment.

It is the identification and analysis of relevant risks for the achievement of the objectives of
Warner Mic S.R.L. investments, which represent the basic orientation of resources and
efforts, and they constitute the path to identify critical success factors. In
These risks include external and internal factors.

Control Activities

These are the activities carried out by management and other people in the company, to
to directly fulfill the assigned activities, which are represented in
policies, systems, and procedures, and among these are included controls related to
with information systems.

Information and Communication

In order to achieve the objectives of Inversiones Warner Mic S.R.L., it is necessary to have
appropriate and timely information.

It can be concluded that information serves different purposes and is used

at different levels.

Monitoring and Supervision

These can be executed by the personnel responsible for the controls themselves.
(evaluation) and is applied through questionnaires or interviews, communicating the weaknesses
opportunities for improvement.

Objectives of the Internal Control Report

To disclose the internal control situation of the company.

2. Comply with the obligation to promptly and in writing report the irregularities or
deviations incurred in the execution of the social objective

3. Inform the General Management that the operations being carried out comply with
the statutes and with its decisions.

4. Inform the General Management about the fulfillment of responsibilities

assigned as they are:

Ensure that the accounting is regularly kept in compliance with regulations.

in force
Regularly inspect the company's assets and ensure that they are taken care of.
timely marketing and safety measures.
Provide instructions, practice inspections, and request reports that are
necessary to establish permanent and necessary controls.
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Authorize with the signature the Financial Statements duly accompanied by the
Opinion and the Notes that form with them an indivisible whole.

Topics to be addressed in this report

The topics that are considered important and require attention have been selected.
taken into account when making decisions

1. Considerations related to general operational aspects in the

purchases or acquisitions

a. The purchasing processes are carried out according to the buying and selling needs
in detailed form of the orders.

b. Management of software for order processing, management and inventory control

in warehouses.

c. The current system of inventory control in the warehouses and sales store still
it is not 100% reliable due to the existence of several conditioning factors.

The purchase orders made by the company should be considered in detail.

orders placed.

It is necessary to better sectorize the cost controls and management indicators.

It should be taken into account that the company must consider the added value that is given to it.
must give to the operations.

The management trend should be to maximize this future value, based on a

excellent management in all areas of the company through added value.

It is necessary to develop an analysis process related to acquisitions of the

products and those that are in warehouses that allow for lowering the tax on
the rent. This implies what was previously stated that it is necessary to establish
some cost centers, to control inventories.

Purchases with some companies are important, so we must achieve

improvements in product prices.

Another vital aspect is particularly based on the Product (Software) with its process
of control of the products in the warehouse, seeking the greatest advantages for the company.

2. Review by areas of operation

a. Revenue and Client Management Area

1. The corresponding reviews of the area were carried out determining that there are
records managed by the sales area and records made by the accounting area that many
Sometimes they are not compatible. Many times invoices are canceled due to lack of planning.
with the companies to avoid tax effects.

2. The value of the balances of services and other contracts paid in advance as of December 31
from the year 2014 is S/. ………………….. and the balance on the same date of the previous year was
S/. 68,000.00
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3. The value of the merchandise balances as of December 31, 2014, is s/.

......... and the balance as of the same date. These values are affecting the results of the
the company from the previous period is S/. 19,563,037.60,

3. The value of the Deferred Asset balances as of December 31, 2014, is s/.
………... and the balance as of that date. These values are affecting the results of the
The company's previous period is S/. 678,342.00.

Evaluation of Internal Control

1. The revenues received as a result of sales are recorded and

controlled through current account deposits through daily settlements of the
documents.

2. The income from customer payments as well as advances is

prepared by the corresponding area and controlled by the financial and accounting area.

3. The operations carried out by the Financial and Sales areas allow for
Follow-up on the compliance of the goals. However, it does not have a budget for
in a way that allows for tracking compliance with goals, so that the
The results are positive; however, they could be greater.

Recommendations to improve internal control:

1. That the portfolio and accounting records be unified, and that once it is established...
better procedure that the record remains solely in the hands of the accounting department.

2. A functions manual and a procedures manual must be prepared.

activities from all areas of the company.

3. there must be an internal control area that monitors the functions and
procedures permanently in all areas, who will be responsible for informing
said compliance with goals to the general management.

4. The control of difficult-to-collect debts must continue until the achievement of the
cancellation.

5. It has been determined that to facilitate bank reconciliations, the differences of

they will register in the following month, but it is required that in no case there is a
delay in the application of this procedure.

b. Area of Expenditures and behavior with Liabilities

Evaluations are carried out permanently during the document review.

advance withholding tax at the source, of Reteiva, of Sales Tax based on
the guidelines established in the tax regulations and when it has been relevant
they have made observations related to possible deviations.

2. We have considered the documentary control to be adequate.

3. Direct purchases from suppliers have been supported without having alternatives for
other quotes. However, when it comes to travel expenses, they have
found cases where documents are not reported in a timely manner.
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4. Leasing contracts are being made for land and motor vehicles for the
The amount of s/. ……………… in the year 2013 and in the year 2014 amounts to s/. 2,331,559.86,
whose installments have been paid on time.

5. An inventory of stocks was established that by the end of the year could not be completed.
check it, because the audit exam was conducted in the month of March of this year.
despite being recurrent, what is meant to be said is that it should have been done earlier, is
to say before the end of the year to witness the physical inventory count and thus verify the
accuracy of the inventory.

6. Regarding payroll payment, it is being managed through the company.

but not everyone is included, since there are staff who are on receipt for
fees and there is no location contract based on what we have evaluated and considered
inadequate, because it could lead to unaccounted accruals.

7. National regulations apply in relation to aspects of liability, deadlines and

payments corresponding to the following taxes.
Income Tax
Withholding of the General Sales Tax
General Sales Tax
Withholding of General Sales Tax
Excise tax on consumption

9. The company complies with the payment to social security entities and the obligations.
parafiscal contributions according to the established percentages and taking into account the deadlines
assigned.

10. The lease agreements are properly signed and valid.

11. The company takes out insurance at a fair value for the assets it possesses.
and for the contracts with third parties that he/she signs, according to the clauses established in
the same.

12. The expenses are subdivided into Cost of sales, Administrative expenses, Expenses of
Sales and Other Expenses.

13. Food vouchers are used in accordance with the flexibility agreements.
facts with the employees and whether to exceed the legal framework.

14. Expenses in general meet the requirements to be deductible, meaning that they are
provided, reasonable, adequately supported and have a causal relationship
with the income except for those previously mentioned paid by Management
General.

15. The difference in Change due to Customer Advances Received was a value
important in the year.

16. Withholdings were assumed at the source due to unjustified accounting errors.

17. The tax on financial transactions that constitutes an expense does not
Partially deductible, it was significantly reduced compared to the previous year.

18. The applied cost of sales corresponds to those values that can be activated as
Inventories and will be applied as sales occur. However, in the
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the cost system works by applying all elements as expenses (cost)

due to the absence of a properly established Inventory system.

As of December 31, the final adjustments were made to the update process.
the records in the Fixed Assets software. A partial physical test was also conducted.
this inventory allowed us to determine a reality of the fixed assets that are still
controlling according to the instructions of General Management and based on policies and
procedures that are being implemented.

20. Depreciation is applied in a straight line but using properly formatted software.
validated.

21. Errors were corrected that were causing discrepancies in the information.
fixed assets.

22. Errors that were causing discrepancies in the information were corrected.
stocks.

Recommendations

1. Regarding expenses, we consider rationalization necessary, since the

the monthly accounting average of the year was higher than that of the previous year, which represents
an increase of ………..%. The most significant increase is observed in the field of
The current operational risks must be taken into account.

2. A proper balance must continue to be maintained between the resources allocated to

dollars that generate income from exchange rate differences and those external resources that
They generate expenses for the same concept.

3. It is necessary to find the best solution to ensure that the officials who travel on per diem
report in a timely manner the use of the money that has been given to them.

4. Regarding the use of licensed Software in the company, it is necessary to establish the
greater control over the use that employees make of pirated software to prevent it from happening
What responsibilities the General Management assumes that are sanctionable in light of the Law.

5. Payroll control must ensure to the company that flexibility decisions

are framed within the guidelines of the current labor laws.

The accounting software must have proper maintenance at all times.

It is necessary to consider the need to establish a process in warehouse control.

and sales that allow for managing the accuracy of what is sold within the sector of
Inventories.

8. It is necessary to establish control over the services provided in all areas.

third parties, to avoid late billing, as well as charges that are not fully
justified

9. Define what will be done with the assets located in places different from the
company.

10. The fixed asset control program must be properly used by assigning it if it is
necessary a person who is responsible for the various information generated
especially of fixed assets.
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c. Human Resources Area

1. this function is being developed by another area that does not correspond to it, and due to the magnitude
From the company's sales, it should have its own human resources area that
It fulfilled its function, it corresponds to the management of quality assurance; being the
This area is also responsible and receptive to the results of the Quality Audits.

2. It is observed through the rotation of staff that the selection, training, and process of
induction is not carried out by the corresponding area.

3. training activities are carried out and those who are responsible are exactly
this area.

d. Sales area

1. While there are certain distributions of monthly expenses, and a segmentation of them,
We find it necessary to establish a system that introduces fundamental changes in its management.

A sales system is a basic element for assigning the selling price; without
The current basis for the embargo is to use it for budget analysis for which
they can be support. However, we consider that it does not contribute to obtaining in a way
requires a profit margin, or the establishment of break-even points; prior to the
subdivision of sales and expenses into variable and fixed to know the margin of
operation.

3. There are currently other modern techniques for assigning sales in an environment
of cutting-edge technology, when intellectual capital should begin to be evaluated, part
from which it must also be assigned to determine prices.

The properly implemented sales system will be a basic element for

determine a segregation of the necessary inventories according to the law for
assign them to Sales.

e. Tax Area.

2. Nevertheless, despite the previous situation and with the limitations already mentioned, progress has been achieved.
to seek the closest approximation to a fair Income tax payment, but whose
result requires the review of experts who find greater possibilities
for this year as well as for the following ones.

3. The topic is even more complex if we take into account that taxes are not
only the Rent one if they are not also the Sales Tax, Withholding of
General Sales Tax, Withholding of General Sales Tax, Tax
selective to consumption and others.

3. It is essential to establish that with the Management of Pension Funds, as well as in the
Investment management in technology can achieve reductions in taxes.

4. A previous report highlighted the actions taken by the Administration of

to achieve the payment of a fair tax; we recommend its reading and analysis.
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g. Accounting Information Area

1. In the area of accounting information, the following situations are presented:

New software has been acquired, with whose configuration it will turn into a
tool that will give greater solidity to the information.
b. The Accountant controls the key that prevents modifications to the
closed information both monthly and at the end of the period

2. One of the responsibilities assigned to this area is the review of the payroll, which in the
year had some difficulties.

3. The handling of the principle of causation and realization allows us to prepare a

Special schedule for the timely reception of documentation.

4. Throughout the year, several meetings were held between Accounting, Auditing and
Finance, to define procedural aspects and the final figures of the end of
period.

5. With the support of the Audit and the Financial area, the cash flow statement and the
statement of changes in equity and for the Financial Statements.

The accounting closing was done on the last day of the first month of the following year.

7. The current regulations regarding the application of the Principles are taken into account.
of Generally Accepted Accounting Principles and the applicable chart of accounts and has been left
certificate that the implementation of IFRS must be carried out since the company is in the
obligation to use international accounting and reporting standards
Financial.

8. Verbal, written, or recommended timely instructions were given.

of web pages when necessary; in order for changes to be made to some
new regulations in accounting and tax aspects.

R
 ecommendations

1. Take advantage of hiring the Financial Auditor consultant to establish a manual.

implementation of IFRS that is known by the officials of this area.

2. Ensure that when making the monthly cuts, the balances are fully reviewed.
in a way that avoids delays in the following months.

3. If an Inventory Control of stocks is to be established, it is necessary that this area

receive all the necessary instruction to achieve the best results

4. Regarding the valuation method, there is distortion in its application, it is authorized the
average method and the FIFO method is applied

5. Prepare at least the Income Statement and the Balance Sheet monthly.

6. Prepare the five Financial Statements as of June 30 of each year as

Interim Financial Statements, with the corresponding Accounting Notes,
Certification and Opinion.

7. Establish keys for the use of accounting software that limit access by levels of
authorization once the monthly records are completed.
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h. Various aspects

1. Operating Lease Contracts

It must be taken into account that new Leasing Contracts based on the
Accounting and tax regulation are being managed fiscally as operational.
allowing the monthly fee value to be deductible. A requirement is needed.
assessment to accurately determine the effects between Operating Leasing and the
Financial

2. Compliance Control.

Compliance testing relates to the monitoring and control that is maintained.

about legal and formal aspects.

The accounting books were verified for their registration and updating.
Follow-up was done on the Minutes Book to determine compliance with the
corresponding obligations
The Book of Minutes is kept in the hands of the accounting assistant.
It is more appropriate to keep them in the hands of the General Management Secretary.
The latest registered deeds were observed.
The Certificate issued by the respective entity was reviewed, noting that all
the aspects mentioned there are arranged according to the law and also that they have
the corresponding changes have been taken into account.
The inscription in the registry that establishes the Law of appointment was observed.
of the new General Manager.
The Income Tax Declaration for the previous 2 years has been determined.
The General Sales Tax Declarations of the year both remain
years since its presentation.
The annual information is being sent to the Superintendency.
corresponding, without finding any arrangement of corrections to the information
sent.
There is also a lack of evidence that the correspondence received and the annotation of it
response in accordance with current regulations.
The issued invoicing complies with legal requirements.
The purchase invoices are reviewed to ensure they meet the requirements.
established by law and make possible the deduction of costs and expenses and the
deductible taxes.
The tax requirements in which they request information for cross-referencing
third parties have been answered in a timely manner and so far they have not
received notices, nor additional requirements.

3. Substantive Tests

They correspond to the application of audit techniques, such as observation, analysis, and
evaluation of your environment that is done with the greatest breadth to different operations in
which is monitored from the perspective of its documentation,
realization, causation and its opportunity.

Substantive tests on investments are conducted monthly, finding no ...

important observations.
Reviews of the portfolio have been conducted by executing a Circularization.
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The differences between portfolio reports from the commercial department and
accounting is analyzed.
Differences in accounts receivable and payable with the balances obtained through
the circularization letters as responses from them
Audit was carried out
Income Tax
Withholding of the General Sales Tax
General Sales Tax
Withholding of General Sales Tax
Excise tax on consumption

4. Budget analysis.

It is the interest of this Audit to know the annual budget and follow up on it.
corresponding, but so far due to the process of knowledge of the
the company has not been able to address such an important concept.

5. Final comments and proposals

I want to conclude by commenting on my experiences.

The working conditions that the company has for its employees are especially
interesting for both new and old people, observing a high
degree of commitment.

Although intercommunication does not necessarily imply an imperative need, it

exists within the individual's needs.

The direction is exercised by allowing broad personal autonomy with control over the
results.

The expectations of national or international negotiations depend on many

opportunities in the environment, which in the country has improved significantly due to
security strategy implemented.

Finally, I consider it a priority to evaluate the hiring characteristics, since a

salary with its benefits and labor and tax burdens, although it is a guarantee for the
employee stability leads to limitations in measuring results
expected. The alternative of a flexibilization around results-based evaluation
it would be a possibility.

It is worth analyzing whether there is a tool that has already been technically applied and tested.
through a daily or permanent report allows to determine whether what was produced or executed
it represents a benefit over the applied cost.

I feel that the company is setting up an infrastructure for development.

international operations, and that the future will depend very particularly on them.

I conclude by thanking for the opportunity I have had to collaborate with the company.

Sincerely
V&s.Auditors

GENERAL MANAGER