CEBO International BV

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General Business risk discussion CEBO made an overview of her business risks. We discussed this overview with you. The challenges for the next years will be: • The increase of sales prices in case of an increase of the purchase price; • The increase of gross margin by stopping low margin sales or enhancing their pricing conditions, and the increase of efficiency in the plants; • Garantuee delivery times of products by increasing the number of raw material suppliers, thus decreasing the current supplier dependency, even if this will lead to increasing purchase / freight costs. For this reason, CEBO bought 10,000 tons of raw material from an Indian supplier at the end of 2010 with an increased cost price, and CEBO entered into a five years delivery contract (without price component); Furthermore, CEBO defined management development and business continuity as a focus point for the future. A plan to decrease key personnel independence is under construction, and several actions have been taken. At this moment, in particular the R&D position should be reassessed. The hedging policy of the company is to hedge foreign currency risks on a transaction basis. The foreign currency risks related to the holding activities are controlled by the dividend policy for CEBO UK. Other remarks CEBO Marine In 2010, management increased involvement in the pricing process of CEBO Marine, resulting in increasing sales prices. Sales prices for certain routes have been increased up to 60% without loss of customers. Also the financial focus for CEBO Marine has been increased. Every different route has been analysed in more detail, and is financially evaluated when realized. The cut off of direct costs like harbour costs has been increased by this evaluation. Sales price controls CEBO performs a check on the sales prices by evaluating the gross margin per order every day. Incorrect prices are found and corrected. When invoicing sales orders, CEBO does not use a masterdata file for sales prices. Therefore, every sales price per order has to be entered into the system manually. We advise you to investigate the possibilities to use a masterdata file to invoice the sales orders, thus decreasing the workload related to the invoicing process. Production CEBO manually enters the production from the plant into the system. We understand that this can be automated, but at this moment will not be done due to the wish to better monitor the input. Salary process Only the financial controller is involved in the salary process, the managing director only signs the monthly payments. CEBO chooses to do this, due to the sensibility of this process. We advise you to investigate the possibilities to enhance the level of segregation of duties related to this process. © 2010 © 2010 KPMG KPMG Accountants Accountants N.V., N.V., a Dutch a Dutch limited limited liability liability company, company, is a subsidiary is a subsidiary of KPMG of KPMG Europe Europe LLP and LLP a and member a member firm firm of the of KPMG the KPMG network network of independent of independent member member firms firms affiliated affiliated with with KPMG KPMG International International Cooperative Cooperative (‘KPMG (‘KPMG International’), International’), a Swiss a Swiss entity. entity. All rights All rights reserved. reserved. 3
Findings 2010 Issue Observation Risk Recommendation Management comment 1. ICT; rights granted Within the ICT system “Navision” the logical access security is enforced by a combination of a unique username and password for all employees. The rights granted to the employees are considered as complete for the performance of the tasks of these departments. However, there is no structural periodic check whether the rights granted within the ICT system are still in line with the rights necessary for the tasks to be performed. This may result in unauthorized access to the system. We recommend a frequent check whether the rights granted are still in line with the necessary rights for performing the tasks. Full check on rights granted will be executed by the controller in December 2010 and will be repeated yearly. 2. ICT; control possibilities Navision offers many control possibilities, of which some possibilities have been implemented in the internal control process of Cebo. However, at the moment some controls are still performed manually. Inefficiency. Investigate which controls could be embedded in the automated processes to a larger extent, for example by using log files for changes in master files (for example bank account numbers of accounts payables). In Navision a document is created which enables us to see the margin per delivery. Based on this document we can better monitor our revenue and we can take actions for new deliveries. Optimization of the use of automated controls will continue to be our focus point. 3. Goods movements No structured goods movement list is An overall goods movement list can be We recommend setting up a system of We already made a goods movement compiled for the different flows of materials for the complete process from “purchase up until sales”. At the moment the controller investigates the possibilities in Navision to generate these reports. used as an overall check on the completeness of the recorded sales. It can also generate information for the assessment of milling losses, et cetera. goods movements in Navision. list on detailed level. Know our focus is to set up a full goods movement list. Related to this full goods movement list we decided to have a full stock count twice a year. 4. Control of the outgoing invoices The procedure is that all outgoing invoices are checked by at least two executives. During our interim we observed that not all outgoing invoices are checked by at least two executives. This may result in incorrect or incomplete invoice. We recommend you to reconsider your procedures which contains explicit details regarding the procedure when an executive is absent. We will follow-up your recommendation. © 2007 2010 KPMG Accountants N.V., a Dutch limited liability company, and is a a subsidiary member firm of KPMG of the Europe KPMG LLP network and a of member independent firm of member the KPMG firms network affiliated of with independent KPMG International, member firms a Swiss affiliated with cooperative. All rights reserved. KPMG International KPMG and the Cooperative KPMG logo (‘KPMG are registered International’), trademarks a Swiss of entity. KPMG International, All rights reserved. a Swiss cooperative. 4
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