CEBO International BV

Management Letter 2010
CEBO International B.V.
14 January 2011
AUDIT

Contents
The contacts at KPMG
in connection with this
report are:
Daniël Kleijn
Partner, Alkmaar,
KPMG Accountants N.V.
Tel: +31 [0]72 514 3852
Fax: +31 [0]72 514 3801
kleijn.daniel@kpmg.nl
Page
Introduction 2
General 3
Findings 2010 4
Solved findings 2009 5
John Kloos
Manager, Alkmaar,
KPMG Accountants N.V.
Tel: +31 [0]72 514 3800
Fax: +31 [0]72 514 3801
kloos.john@kpmg.nl
© 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.
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KPMG Audit
P.O. Box 9148
1800 GC Alkmaar
The Netherlands
Ampèrestraat 19
1817 DE Alkmaar
Tel +31 (0) 72 514 3800
Fax +31 (0) 72 514 3801
The Netherlands Fax +31 (0) 72 514 3801
Confidential
CEBO International B.V.
The Management and Supervisory Board
Attn: Mr. E. Bernard
PO P.O. Box70
1970 AB IJMUIDEN
Alkmaar, 14 January 2011
Dear Sirs,
As part of our audit of the financial statements of your company for the year ended
31 December 2010, we have made a study and evaluation of the company's
accounting procedures and system of internal control to the extent we considered
necessary within the scope of the audit.
An audit involves performing procedures to obtain audit evidence about the amounts
and disclosures in the financial statements. The procedures selected depend on the
auditor's judgment, including the assessment of the risks of material misstatement of
the financial i statements, whether h due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity's preparation
and fair presentation of the financial statements in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity's internal control.
One of the objectives of internal control is to guarantee that the financial accounting,
which forms the basis for the financial reporting and decision-making, is sufficiently
reliable and up-to-date for taking reliable management decisions.
This letter is based on our normal work in the context of the audit of the financial
statements. Accordingly, we should point out that this letter does not necessarily
reflect all the deficiencies in your organization that may have been highlighted by a
more specifically focused study and evaluation.
Within the scope of our audit of the financial statements, we also have made a study
and evaluation of the system of internal control with respect to the electronic data
processing. This included the electronic data processing only where relevant to this
audit of the financial statements.
The audit of the financial statements is not specifically focused on the reliability
and continuity of the electronic data processing and therefore does not necessarily
lead to findings that may be highlighted by a study and evaluation that is
specifically focused on this.
Our audit is not geared specifically to detecting fraud. The primary responsibility
for preventing and detecting fraud lies with the company's management.
The auditor is neither responsible nor liable for the prevention of fraud.
As you may appreciate, the management letter is critically by nature. We are, after
all, specifically reporting possible shortcomings or opportunities for improving
the financial and administrative processes and internal control. At your request,
this letter outlines how the financial and administrative processes and internal
control can be improved.
This letter was agreed with Steve Gray (managing director) and Edwin Bernard
(financial controller) on 21 December 2010. Feedback and comments have been
incorporated in this letter where appropriate.
p
We would be happy to assist you in elaborating control measures.
The recommendations and solutions offered in this letter provide you with
reference points for this elaboration.
This report is intended solely for your information and may not be distributed, in
whole or in part, to any other party without our prior written consent.
We would like to thank the Management and staff of Cebo International B.V. for
their cooperation during our audit and the compilation of this report.
We would be happy to provide you with any additional information you may
require.
Yours sincerely,
KPMG ACCOUNTANTS N.V.
KPMG Accountants N.V., registered with the trade register in the
Netherlands under number 33263683 and a member firm of the
KPMG network of independent member firms affiliated with KPMG
International, a Swiss cooperative.
All our services are subject to our general conditions, which are filed
at the Amsterdam District Court under number 32/2004, and which
we will send to you on request.
D.J.H. Kleijn RA

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

Solved findings 2009
Issue Observation Follow-up
1. ID card new employees During our audit we observed that one of the new employees had no
valid ID card.
2. Partially stocktaking No stock-taking has been carried out during 2009 on the raw
materials and the finished goods.
The controller has received the ID card of the new employee. During
our audit we have checked this.
At year-end we have executed a total stock count, both for raw
materials as for finished products. For 2010 we have already
executed a total stock count for the location IJmuiden and OBA in
Amsterdam. The procedure is that we will have a full stock count
twice a year.
© 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.
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