Brexit Capital Limited Audit Report: Financial Statement Analysis 2019

This report provides an audit analysis of Brexit Capital Limited's financial statements for the period from March 24, 2019, to December 31, 2019. It includes a review of the Director's Report, highlighting the company's principle activity, directors, and business review, which indicates financial losses. The report examines the Independent Auditor's Report, assessing the auditor's opinion, basis for the opinion, and responsibilities of both the directors and the auditor (UWL C.P.A). The analysis covers the income statement and financial position, scrutinizing revenue, corporation tax expense, amounts due to shareholders, and changes in equity. The report identifies several financial weaknesses, including inconsistencies in the income statement, balance sheet, and lack of revenue activities and tax reporting. The report concludes with recommendations for improving the company's financial position and addresses potential risks, such as fraudulence and insolvency, emphasizing the need for improved financial management and accurate reporting within six months. The report includes references and supporting documents like the letter of appointment and minutes for appointing the auditor.

1Running head: AUDITING
Auditing
Brexit Capital Limited
Directors Report and Financial Statements
Period from 24 March 2019
(Date of Incorporation)
To 31st December 2019

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Table of Contents
1.0 Directors Report...................................................................................................................3
1.1 Brief Introduction.............................................................................................................3
1.2 Principle Activity.............................................................................................................3
1.3 Directors...........................................................................................................................3
1.4 Business Review..............................................................................................................3
1.5 Permitted Indemnity Provision........................................................................................4
1.6 Auditor.............................................................................................................................4
2.0 Independent Auditor’s Report..............................................................................................4
2.1 Title of the Auditor...........................................................................................................4
2.2 Opinion on Financial Statements.....................................................................................4
2.3 Basis for Opinion.............................................................................................................5
2.4 Additional Information Other Than Financial Statements...............................................5
2.5 Directors Responsibility...................................................................................................5
2.6 Auditor’s Responsibility..................................................................................................5
3.0 Income Statement.................................................................................................................6
4.0 Financial Position.................................................................................................................6
4.1 Revenue............................................................................................................................8
4.2 Corporation Tax Expense.................................................................................................8
4.3 Amounts Due to Shareholders.........................................................................................8
4.4 Changes in Equity............................................................................................................8
5.0 References..........................................................................................................................10
Appendix..................................................................................................................................12
1. Letter of Appointment......................................................................................................12
2. Minutes for Appointing Auditor......................................................................................12
3. Proposed Audit Adjustment.............................................................................................13

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1.0 Directors Report
1.1 Brief Introduction
Brexit Capital Limited has incurred losses in the year 2019. The company conducts various
business transactions within the market. The company has four key shareholders, who have
contributed well in the organisation but the asset of these shareholders can lose on demand. In
the current condition, it has been found that the growth of the company is poor.
1.2 Principle Activity
Principle activity can be defined as the process, which promotes value-added business or
financial activity, which can help in growing and making strong economic conditions for the
company (Tilastokeskus n.d.). In relation to Brexit Capital Limited, the company follows
party confirmation process for establishing a legal business. In this process, Brexit Capital
Limited provided disclose account form to know the loan amount and security type, which
can be considered to be the principal activity of the company.
1.3 Directors
The director plays a major role in any organisation because people of the entire organisation
have good faith in that person. In addition, the director must have the proper interest, skill,
and diligence towards the organisation (Delotte 2013). Dwi Jaya is the director of Brexit
Capital Limited, wherein three people are helping her to develop the business i.e. Dwi Mulia,
Dikari, and Tan Khin Pin.
1.4 Business Review
Based on the current report, Brexit Capital Limited is facing loss. It can be considered to be
bad for the organisation, as it can lead the company towards insolvency.

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1.5 Permitted Indemnity Provision
Permitted Indemnity Provision can be referred to as a legal process, which provides security
against the liability (Companies Registry 2012). In relation to Brexit Capital Limited, the
company has four major shareholders i.e. Dwi Mulia, Dikari, Tan Khin Pin, and Dwi Jaya
with a liability of 34,779 GBP, 15,979.57 GBP, 51,693 GBP, and 14,984 GBP respectively.
1.6 Auditor
Brexit Capital Limited hired UWL C.P.A as the auditor, which will focus on analysing the
financial background of the organisation. The company does not have any personal auditor.
2.0 Independent Auditor’s Report
2.1 Title of the Auditor
A Chartered accountant of UWL C.P.A is the main auditor in this case. The entire account of
Brexit Capital Limited has been properly checked by the above-mentioned charter
accountant. It will help the company to grow its business effectively.
2.2 Opinion on Financial Statements
The company prepares reports, which include Trial Balance, Balance Sheet, Ledger Account,
and Profit/Loss account. Each of the statements has certain drawbacks, which need to be
improved by the company. In relation to the trial balance, the company does not record all its
business activities in the financial book such as revenue activities. Only interest paid has been
reflected by the company. Other revenue activities are not shown properly. In relation to the
balance sheet, the company does not reflect any kind of assets and its depreciation value. The
working capital is not included in the report.

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2.3 Basis for Opinion
Based on the above-mentioned information related to the financial statements, it can be stated
that the presented report of the company is not adequate for to analysing and understanding
the position of the company. The financial strength of the organisation cannot be understood
without the proper valuation of the company’s assets. In addition, the goodwill and
shareholder’s assurance cannot be determined, if a firm does not reflect the asset activity
(Invest Northern Ireland, n.d.). On the other hand, depreciation is the historical value of any
asset, which helps the shareholders to know the organisational capability relating to return on
asset (Thomason 2019).
2.4 Additional Information Other Than Financial Statements
Stakeholders have a major impact on any organisation (Matuleviciene & Stravinskiene 2015).
With respect to Brexit Capital Limited, the report of the company is not does not include any
relevant information. The shareholders of the company are at risk due to the lack of
information related to assets and other income activities within the market. This can help in
obtaining an inaccurate result, which can lead the company towards a complete disaster.
2.5 Directors Responsibility
The director of Brexit Capital Limited has the responsibility to consult with the management
prior to publishing any action, decision, and report. The performance of a company must be
assessed by the director, which can be considered to be one of the major responsibilities
(Larcker & Tayan 2015).
2.6 Auditor’s Responsibility
An auditor has the responsibility to find fraudulence in the financial books. The auditor must
guide the organisation if any misstatement is conducted in the financial books. An
organisation cannot survive in the market without an assistance of a skilled auditor. It

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significantly helps in ensuring the integrity of the financial books (Zagera, Malis, & Nova
2016).
3.0 Income Statement
Paticulars Note Comparative Figures Difference
Revenue 01-01-2020 to 31/3/2020
Interest Income
Business activities have not included in
the ledger and only shareholder’s
activities are included. 3.61£ 4.61£ 1.00£
Cash at Bank 99,129.18£ 1,12,000.00£ 12,870.82£
Equity 100.00£ 500.00£ 400.00£
Total Income 99,232.79£ 1,12,504.61£ 13,271.82£
Expenses
Bank Fees High cost 615.00£ 600.00£ 15.00-£
Consulting & Accounting High credits within the market 43,500.00£ 20,500.00£ 23,000.00-£
Accounts Payble No specified accruals 8,705.00£ 7,000.00£ 1,705.00-£
Accruals 16,000.00£ 9,105.00£ 6,895.00-£
Amount due to Shareholders 1,18,435.57£ 90,000.00£ 28,435.57-£
Total Expenses
The company projected insufficient Trial
Balance. More transactions must be
included in the journal and trial balance 1,87,255.57£ 1,27,205.00£ 60,050.57-£
Profit 88,022.78-£ 14,700.39-£ 73,322.39£
24/3/2019 to 31/12/2019
Date of Nomination
Income Statement: Brexit Capital Limited
Table 1: Income Statement of Brexit Capital Limited
Table 1 depicts the income statement of Brexit Capital Limited. Based on this table, the
company has faced losses within the respective market. Some of the activities, which have
been considered from the trial balance, are questionable. In the income section of the report,
the equity amount of the company is found to significantly low. The company needs to
calculate the actual money volume of the interest not the percentage value. On the other hand,
the expense amount has been found to be relatively high and illogical. The company does not
provide any evidence related to the activities in the trial balance, ledger, and balance sheet.
Hence, the provided report is confusing along with being irrelevant. The company further
needs to work more on representing and calculating financial statements.
4.0 Financial Position
Based on the above-stated conditions of Brexit Capital Limited, it can be clearly suggested
that the financial position of the company is weak. Some of the entries such as accruals,

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accounting cost, and equity among others are not feasible. The company further does not
provide any evidence related to these activities. Hence, the chance of fraudulence is high. On
the other hand, the company needs to focus on financial activity; otherwise, the stakeholders
will face major issues in their return. The chance of insolvency can be considered to be high,
which must be controlled before it occurs.
31/12/2019 Comparative Figures Difference
Liabilities Notes Amount Amount 01-01-2020 to 31/3/2020
Current Liabilities
Accounts Payable 8,705.00£ 7,000.00£ 1,705.00-£
Accurals 16,000.00£ 9,105.00£ 6,895.00-£
Amount Due to Shareholders 1,18,435.57£ 90,000.00£ 28,435.57-£
1,43,140.57£
Owner Share Capital 10,000.00£ 50,000.00£ 40,000.00£
Total Liabilities 1,53,140.57£ 1,56,105.00£ 2,964.43£
Asset Notes Amount Amount
Current Asset
Cash at Bank
The business of the company are
in doubt. The saving amount in
the bank is too low
99,129.18£ 1,12,000.00£
12,870.82£
Interest Income 3.61£ 4.61£ 1.00£
Asset need to increased 44,100.39£
Suspense Account
The compnay needs to idnetify
more assests to balance with the
liability they have in the market
54,007.78£
Total Assets 1,53,140.57£ 1,56,105.00£ 2,964.43£
Date of Nomination
Balance Sheet of Brexit Capital Limited
Table 2: Balance Sheet of Brexit Capital Limited
Based on the above table 2, it has been identified that the company has been incurring huge
losses within the operating market. In addition, the amount of loss does not match the actual
loss that has been presented in the income statement. In the assets side, the suspense account
has been identified. Hence, the company either has low numbers of assets or all the assets are
not all included in the report. Hence, Brexit Capital Limited can face risks in the current time
within the market. The company does have an appropriate volume of the asset to cover
liability, as it leads the company towards insolvency. Based on the trial balance, the income
statement along with the balance sheet, various drawbacks have been identified, which has
been elaborating below for developing the financial background. It also provides support to
the company to create good financial position within the existing market.

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4.1 Revenue
Primarily, the calculating revenue can help an organisation to determine the company’s value.
In addition, it assists in understanding the financial strength of an organisation (Chandra &
Ro 2014). In relation to Brexit Capital Limited, the company does not show revenue activities
in the financial books.
4.2 Corporation Tax Expense
The corporation tax expense is one of the major aspects for any organisation, as it reflects
valuable business activities such as income tax, business tax, and personal tax among others
(Tax Justice Network 2020). The accountants of Brexit Capital Limited do not include any
kind of tax activity in the report.
4.3 Amounts Due to Shareholders
Every shareholder has the right to claim his or her money from the organisation after the
earning profit (Office of the Director of Corporate Enforcement, 2009). Brexit Capital
Limited is unable to pay back to major shareholders of the company i.e. Dwi Mulia, Dikari,
Tan Khin Pin, and Dwi Jaya. The company needs to focus on earning business revenue to
develop the situation in an effective manner.
4.4 Changes in Equity
Equity refers to the amount that is paid to the shareholders of the company. Hence, change in
equity or low equity can be viewed to be dangerous for any organisation, as it acts as a good
source of money, which helped in increasing the revenue within the market (EFRAG 2008).
In relation to Brexit Capital Limited, the company has to show equity in the report. Though
the company faced loss in the market, it can resolve whether they focus on revenue
management.

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Based on the current condition of Brexit Capital Limited, it can be recommended that the
company has been facing a huge risk in the market. The financial condition must develop
within six months. On the other hand, Brexit Capital Limited may project inaccurate financial
activities. Fraudulence has been detected somewhere in the financial statements such as
assets, undefined accruals, high cost and no data associated with the company revenue.

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5.0 References
Chandra, U. & Ro, B. T. (2014). The role of revenue in firm valuation. American Accounting
Association. 22(2), pp.199–222.
Companies Registry. (2012). Directors and company secretaries. Companies Ordinance.
pp.A4183- A4235.
Delotte. (2013). Duties of directors. A Key Feature of the Companies Act, 2008 (The Act) is
that It Clearly Emphasises the Responsibility and Accountability of Directors. pp.1-81.
EFRAG. (2008). Discussion paper distinguishing between liabilities and equity. Pro-Active
Accounting Activities In Europe (PAAinE). pp.1-95.
Invest Northern Ireland. (no date)) Importance of assets in business [online]. Available from:
https://www.nibusinessinfo.co.uk/content/importance-assets-business [Accessed 11 February
2020].
Larcker, D. F. & Tayan, B. (2015). Board of directors duties and liabilities. Stanford
Graduate School of Business. pp.1-18.
Matuleviciene, M. & Stravinskiene, J. (2015). The importance of stakeholders for corporate
reputation. Inzinerine Ekonomika-Engineering Economics. 26(1), pp.75-83.
Office of the Director of Corporate Enforcement. (2009). Members and shareholders their
duties and rights. A Quick Guide. pp.1-8.
Tax Justice Network. (2020). Taxing corporations [online]. Available from:
https://www.taxjustice.net/topics/corporate-tax/taxing-corporations/ [Accessed 11 February
2020].

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Thomason, K. (2019). Why is depreciation important in accounting? [online]. Available
from: https://bizfluent.com/how-7295406-disposal-leasehold-improvements.html [Accessed
11 February 2020].
Tilastokeskus. (no date). Principal activity [online]. Available from:
https://www.stat.fi/meta/kas/paatoimiala_en.html [Accessed 11 February 2020].
Zagera, L., Malis, S.S. & Nova, A. (2016). The role and responsibility of auditors in
prevention and detection of fraudulent financial reporting. Procedia Economics and Finance.
39, pp.693-700.

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Appendix
1. Letter of Appointment
Date
Dear UWL C.P.A,
On behalf of Brexit Capital Limited, I am happy to inform you that company has been
appointed as the auditor for conducting the audit procedure for financial year 2019-2020 on
the books of you company.
I have further enclosed the agreement. I request for your confirmation to accept the offer at
earliest.
Regards,
Brexit Capital Limited
2. Minutes for Appointing Auditor
MEMBERS PRESENT:
1. Dwi Jaya: Director
2. Dwi Mulia: Shareholder
3. Dikari: Shareholder
4. Tan Khin Pin: Shareholder
IN PRESENCE:
Statutory Auditors of UWL C.P.A
Scrutinizer & Secretarial Auditor to Remote Evoting
Details of the Minute:
 The audit will be conducted at 11 February 2020 at 11 am
 The names of the auditing firm and auditors

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 Board of members were present
 Voting was done fairly
3. Proposed Audit Adjustment
A fixed amount will be charged by UWL C.P.A audit firm for conducting the auditing
procedure. An amount of £15,00 will be charged to Brexit Capital Limited.