Advanced Auditing and Assurance: Mayne Pharma Group Ltd Case Study

This case study analyzes Mayne Pharma Group Limited, an Australian-based pharmaceutical manufacturer. It examines Mayne's internal and external environments, operations, and business risks, utilizing the 2018 annual report. The report identifies three key business risks: in-house product i...Read More

Running head: CASE STUDY-MAYNE PHARMA GROUP LTD.
CASE STUDY-MAYNE PHARMA GROUP LTD.
Name of the Student
Name of the University
Author Note

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CASE STUDY-MAYNE PHARMA GROUP LTD.
Executive Summary
This report has been discussed about the Mayne Pharma Group Limited (ASX code-MYX). It
comprises of the research on Mayne’s internal and external environments, operations with the
help of 2018 annual report. The activities of Mayne Pharma Group Limited and business
risks which is involved in the organization are discussed here.

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CASE STUDY-MAYNE PHARMA GROUP LTD.
Table of Contents
Introduction................................................................................................................................3
Answer to question 1:.................................................................................................................3
Answer to question 2:.................................................................................................................4
In-house products improvement.............................................................................................4
Market pricing strategy and competitive power.....................................................................5
Company’s relationship with the Customer...........................................................................5
Answer to question 3:.................................................................................................................6
Cash and Cash Equivalents:.......................................................................................................6
Completeness:........................................................................................................................6
Trade receivables and payables..................................................................................................7
Cut-off:...................................................................................................................................7
Creditors.....................................................................................................................................7
Accuracy and Valuation:........................................................................................................7
Conclusion..................................................................................................................................8
References..................................................................................................................................9

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CASE STUDY-MAYNE PHARMA GROUP LTD.
Introduction
Mayne Pharma Group Limited is a manufacturer of Pharmaceutical products which is
based in Australia. In this report, three business risk are evaluated relating to this
organization. The operations through which the organization manufacture the products and all
the activities where they are involved are discussed here. In the later part, with reference to
the three accounts, their risks are being evaluated and what are the key assertions of each risk
are presented in this report.
Answer to question 1:
Mayne Pharma Group Limited is normally specialized in manufacturing
pharmaceutical products. It is an ASX-listed which expertise in the delivery of the drug, it
focuses on commercializing and branding the pharmaceutical products. Mayne Pharma has a
clear vision to provide patients with better medical facilities. So, that the patients do not have
to suffer from the high cost of medicines, the company manufactures more affordable
products. It is important to know that how Mayne Pharma become Mayne Pharma limited
until 2001 FH Faulding & Co was the name of Mayne Pharma (Maynepharma.com, 2019). It
deals with all the wholesaling of health and pharmaceutical products. The organization does
focus mainly on pharmaceutical products, and it does research, develop the products,
manufacture and also does the marketing of the products which are in the stage of the selling.
The main operations for the manufacturing of the products are based on Puerto and Australia,
and from there, the products are distributed all over the world.
The motive of the organization is to improve the structure of the manufacturing of the
pharmaceutical products, through the implementation of the efficient management group and
the advancement of the technology. After the acquisition was finalized with the Faulding &

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CASE STUDY-MAYNE PHARMA GROUP LTD.
Co., the organization does have variations in its production, and it started producing health-
related products. From the annual report of the Mayne Pharma Group Limited, it is found that
the organization has two divisions in the Pharmaceuticals industry, one is Generic
Pharmaceutical Market, and the other is Consumer Health Products. The business structure
which they follow is divided into two parts, first is wholesale distribution services and the
other is retail services which are related to the branding and the services of the management
in relation to the pharmacies.
Answer to question 2:
In Mayne Pharma Group Limited, three business risks have been identified. They are:
 In-house products improvement.
 Market pricing strategy and competitive power.
 Maintaining a relationship with the customers.
The three business-related risks are explained below to provide a clear idea of why they are
identified as risks.
In-house products improvement
The Mayne Pharma Group Limited have been unsuccessful to come across the
requirements needed in clinical trials as well as failed to initiate bioequivalence. The
innovation of rational property, along with products, was found to be costly and time-
consuming (Pitelis, Desyllas and Panagopoulos 2018). Therefore, the company’s prediction
went wrong. The projects related to the improvement of the in-house products might fail to be
profit-oriented or experience low market demand.

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CASE STUDY-MAYNE PHARMA GROUP LTD.
Thus, to mitigate the risk, the company should recruit those individuals who have
proficient knowledge in developing products in order to balance the risk (Paradise 2016). The
innovation or the improvement related to the products should be under regular observation.
The regulatory authorities’ suggestions should be taken into consideration.
Market pricing strategy and competitive power
The second business risk, which has been detected is with competitive power and
market pricing strategy. The product demand decreases because of changes occurring in
competitive aspects (Danzon, Mulcahy and Towse 2015). Market share is increasing because
new organizations are entering the market. The way of strategizing their market price
provides an unsatisfactory result. Hence, the Government have to compensate that by
providing them with reimbursement.
Therefore, to mitigate the risk which the organization is facing, there is a need for the
employees who are specialized in the development of the product. Mayne limited should
implement a process related to the selection of the products which have less risk and have a
balance while selecting (Danzon 2018). There is a requirement of the advanced computerized
system through which all the processes can be monitored properly. Through this technology,
the organization should manage the review of the products which the consumer is giving after
using. By following this process, the relationship with the consumer can become more strong.
The organization should follow the market trend so that they can be ahead of the competitors
and can have more market share.
Company’s relationship with the Customer
The last business risk, which is to be discussed here is the organization's relationship
with the consumers. It can happen in the market that because of the increasing competition,
consumers can use the products of the other company (Pilon and Hadjielias 2017).

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Sometimes, it is not possible for the organization to keep the price as per the market
competitor; thus this inability disappoints the consumers and through this way the consumers
do not keep the faith and change the brands. As the price of products is higher, the
organizations fail to attract new consumers.
Moreover, the organization needs to mitigate the risks which are happening with the
relationships of the consumers. The organization has to execute a marketing strategy plan in
which there should be an involvement of a marketing team for more selling of the products
(Bahri-Ammari and Soliman 2016). In the marketing team, there should be a salesperson
involved who should be experienced enough to get through all the understanding and
requirements of the market structure. The management should understand the requirements
which the consumers are demanding. Through this way, an organization can regain its own
customers.
Answer to question 3:
The three accounts that can be at risk is explained below to provide a clear idea of
why they are identified as risks.
Cash and Cash Equivalents:
Completeness: As per the company’s data, the company has borrowed long term
funds for their operation of the business. The fluctuation in the interest rates in the market is
highly affecting the value of cash and cash equivalents of the company as shown in the
company’s balance sheet. The risk raised when the organization’s borrowing is issued at a
variables rate; thus, it faces the cash flow interest rate risk (DeJong et al. 2016). From the
report, it was found that 59% of the borrowings of the organization is being swapped from
the variable interest to the fixed interest. As per the end of the report, in the year of 2018 Net

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variable interest rate exposure is accounted to $175,509,000 compared to $176,358,000 of the
year 2019. The high differences in the amounts raised must also considers the real dates and
data. As there is chances of misrepresenting the figures. The data whether showing the same
result as happened in actual have to check (DiMasi, Grabowski and Hansen 2016). Though
all the interest rates which are being set are based on the current market observation. All the
transaction should be recorded in the server of the organization so that the company have an
appropriate evidence to overcome from the risk of completeness. The auditor has to check the
presented documents with the real scenario to compare them with the real from the stated
reports.
Trade receivables and payables
Cut-off: This risk is related to the transaction of the currency exposures, which is
mainly related to the operations of sales and purchase of the organization. It happens when a
payment is given or received with the other countries, as there is a change of the currency the
chances of the risk exposures increases (Harris and Rajgopal 2018). From the report, it is
seen that 93 % of the revenue of the organization and 84% of the cost which is involved in
the production process are denominated in the currencies other than the currency which is
used in the organization The auditor has to check whether the company has recorded all these
data of transactions and events in the correct accounting period. The fluctuations of foreign
currency revenue or loss, the effect is the cash and cash equivalents, borrowings and trade
receivables & payables.
Creditors
Accuracy and Valuation: The organization has an exposure to the risk when there
is uncertainty for the payment of the party to the organization. This risk can be arising from

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the creditors as well as financial assets of the organization, where there is involvement of
cash & cash equivalent, interest rate swaps. In the process of auditing it has to verify the
stated credits have the real figures or not. Auditor will have to verify the information has
fairly disclosed in the reports or not (Bonsall et al. 2016). The organization tries to minimize
the credit risk through placing the cash with the financial institutions, which will maintain the
independent credit rating for the limitations of credit exposure.
Conclusion
From the above discussion, it can be concluded that Mayne Pharma Group Limited’s
risk can be ascertained through some strategic development and changes in the process of
management. The data which has been taken care of the annual report of the organization.
The three business risks, i.e. In-house products improvement, Market pricing strategy and
competitive power and Company’s relationship with the Customer, are discussed here with
the mitigation of the risks. The three accounts are taken from the annual report, and the risks
in relation to that accounts are explained in reference to the key assertions for each account.

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References
Bahri-Ammari, N. and Soliman, K.S., 2016. The effect of CRM implementation on the
pharmaceutical industry's profitability: The case of Tunisia. Management Research
Review, 39(8), pp.854-878.
Bonsall IV, S.B., Holzman, E.R. and Miller, B.P., 2016. Managerial ability and credit risk
assessment. Management Science, 63(5), pp.1425-1449.
Danzon, P.M., 2018. Differential pricing of pharmaceuticals: theory, evidence and emerging
issues. PharmacoEconomics, 36(12), pp.1395-1405.
Danzon, P.M., Mulcahy, A.W. and Towse, A.K., 2015. Pharmaceutical pricing in emerging
markets: effects of income, competition, and procurement. Health economics, 24(2), pp.238-
252.
DeJong, C., Aguilar, T., Tseng, C.W., Lin, G.A., Boscardin, W.J. and Dudley, R.A., 2016.
Pharmaceutical industry-sponsored meals and physician prescribing patterns for Medicare
beneficiaries. JAMA internal medicine, 176(8), pp.1114-1122.
DiMasi, J.A., Grabowski, H.G. and Hansen, R.W., 2016. Innovation in the pharmaceutical
industry: new estimates of R&D costs. Journal of health economics, 47, pp.20-33.
Hadland, S.E., Hadland, M., Li, Y., Krieger, M.S. and Marshall, B.D., 2018. Association of
pharmaceutical industry marketing of opioid products to physicians with subsequent opioid
prescribing. JAMA internal medicine, 178(6), pp.861-863.
Harris, T.S. and Rajgopal, S., 2018. Foreign currency: Accounting, communication and
management of risks.

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Maynepharma.com (2019). [online] Maynepharma.com. Available at:
https://www.maynepharma.com/media/2194/mayne-pharma-annual-report-2018.pdf
[Accessed 21 Sep. 2019].
Paradise, J., 2016. A Profile of Bio-Pharma Consolidation Activity. Annals Health L., 25,
p.34.
Pilon, F. and Hadjielias, E., 2017. Strategic account management as a value co-creation
selling the model in the pharmaceutical industry. Journal of Business & Industrial
Marketing, 32(2), pp.310-325.
Pitelis, C.N., Desyllas, P. and Panagopoulos, A., 2018. Profiting from Innovation through
Cross‐Border Market co‐Creation and co‐Opetition: The Case of Global
Pharmaceuticals. European Management Review, 15(4), pp.491-504.