BAHRIA UNIVERSITYInstitute of Professional PsychologyMANAGEMENT LETTER

FOR THE YEAR ENDED JUNE 30, 2013ILYAS SAEED & CO

CHARTERED ACCOUNTANTS

A Member firm of Midsnell Group International

Ref: Audit/IPP/12March 09, 2014The Chief Financial Officer,Bahria University Karachi Campus,13, National Stadium Road,

KarachiDear Sir,

Subject: AUDIT FOR THE FINANCIAL YEAR ENDED ON JUNE 30, 2013.

We are pleased to inform you that we have since completed the audit of Bahria University Institute of Professional Psychology (IPP) Karachi Campus, for the year ended June 30, 2013.

We may inform you that our audit work involves evaluating only those systems and internal controls in your organization upon which we rely for the purpose of determining our audit procedures. Accordingly our audit may not have identified and the comments in this letter may not be a comprehensive record of all the weaknesses that may exist.

The responsibility for maintenance of an adequate system of internal control as well as for the prevention and detection of irregularities and fraud rests with the management, we are not required to search specifically for frauds and irregularities and, therefore, our audit cannot be relied upon disclose such matters. However, our audit was planned so that we would have a reasonable expectation of detecting material misstatements resulting from fraud or error.

During the course of our audit certain weaknesses/ observations came to our notices which we discussed in our draft Management Letter. These are stated below:

GENERAL OBSERVATIONS1. Internal Audit Department

It was observed the Bahria University, IPP has not yet established any internal audit department. It is not only a volition of Statutes, Academic Regulations and Financial Rules of Bahria University but also treated as the possible reason behind all internal control lapses. According to above referred rules of Bahria University, an internal auditor should assign to fulfill some prime responsibilities of examining its organization internal control structure and evaluate its adequacy and effectiveness of such controls for smooth functionality of the organization. (Ref to19.2 19.7 rules of Statutes, Academic Regulations and Financial Rules)2. Accounting Software

It was observed that accounting software (Peach Tree), used by the Bahria University, IPP has some critical flaws. It has a record editable option which provides an opportunity to make changes in accounting record at back date without acknowledgement of relevant authority and may cause a major financial misappropriation. It has also been observed that in the absence of logical access control of this accounting software, management created more than one head of accounts to treat same natured transactions that ultimately leads to number of accounts with no movements. We can understand the importance of accounting software for a well growing organization that not only fulfill its current accounting needs but also has the capacity to tackle it future growth. Bahria University, as a whole, have multiple accounting locations that forward their results to the headquarter staff for consolidation. Thus closing process will be less efficient. The main problem is that some locations will be less efficient than others, due to different policies, procedures, training, staff availability, management skills, and so on. The result is that a few locations will always be late in forwarding their results to the headquarters staff, which delays the close.

3. FIXED ASSETS

a. During the course of audit, it was observed that there is no fixed asset register was maintained by the management of Karachi Campus. The management provided us a reason that fixed asset register is maintained at headquarter only.(Refer to TR-6 issued by the Institute of Chartered Accountants of Pakistan)b. No assessment regarding impairment of assets was made at reporting date.

(Refer : IAS 36 Impairment of Assets).c. Residual values and useful lives of assets were not reviewed at financial year end.

(Refer : IAS 16Property, Plant and Equipment).d. There is no capitalization policy of Fixed Assets; hence this result in small amounts of fixed assets purchased was being capitalized. After inquiry from the management capitalization policy of the campus mainly depends on judgment.4. LOANS AND ADVANCES

There is no any procedure / requirements / policy relating to loans to be given to employees. It is merely dependable on the discretion of the relevant director of the constituent unit.As per rule number 9.14 of finance rules, All advances paid by the Bahria University shall be recorded in the advance register and the Director Finance and Finance Manager and Audit Manager and shall watch their adjustment. However, at Karachi Campus no such register is being maintained.5. OTHER PAYABLE:

During the audit procedure it was observed that the different account payable opening balances with no movement during the year are appearing in the balance sheet. Upon our despite reminders the management fail to provided us the detail of these opening balances. The details of unidentified liabilities are as follow:

GL Head NameBalance as at June 30th, 2013.

Other Receipts181,607/-

Salaries and Wages Payable239,739/-

Other Payables324,282/-

Total Liability Payable745,628/-

It is recommended to the management to identify the above balances and make necessary adjustment whatever is applicable.

6. OTHER PAYABLE:

During the audit procedure it was observed that the different account receivables opening balances with no movement during the year are appearing in the balance sheet. Upon our despite reminders the management fail to provided us the detail of these opening balances. The details of unidentified assets are as follow:

GL Head Balance as at June 30th, 2013.

Advances to Employees49,425/-

Advance for Expenses321,066/-

Total Liability Payable370,491/-

It is recommended to the management to identify the above balances and make necessary adjustment whatever is applicable.

During the audit procedure it was observed that the management is maintaining separate account head for income tax deduction with respect to Payroll and Vender. However the management is recording the transactions into book of accounts haphazardly. This make impossible to reconcile the payable balance. An attempt was made to reconcile the balance however the Income tax deduction in respect of Payroll tax remains un-reconciled. As per our understanding the difference pertains to opening balance. In number of instances it was observed that the over or under payment of tax has been deposited by the management, which show negligence at the part of the management. It is recommended to the management to reconcile the balance and to record the transactions into relevant accounts so that the payable balance is reconcilable.7. BANK BALANCE:

During the audit procedure it was identified that the management is maintaining two bank accounts with the Allied Bank Limited. The same were confirmed from the direct confirmation send to the banks. However the management is maintaining a single bank account in it books of accounts to record the transactions and journal entries. The bank balance as per ledger was in accordance with the external confirmation balance when both of the banks accounts were added. This shows that the management is recording all the transactions in the single bank account. It is recommended to the management to open up separate ledger accounts for the both banks and record the relevant transaction in the relevant bank account ledger. Should you desire any further explanation on any of the matters stated here above, please do not hesitate to contact us again.

In the end, we shall like to express our appreciation and thanks to all the officers and staff members of the company who were all very cooperative and helpful to us in the smooth conduct of our audit.

Thanking you and with profound regards.

Very truly yours,

___________________

ILYAS SAEED & CO.

(Chartered Accountants)