Audit Plan for Aero Inventory Plc

Background Information


The Aero Inventory Plc is a part of aerospace & defence sector of UK, which is performing well over the last five years as compared to the FTSE All Share Index and FTSE AIM All Share Index. Tremendous growth of nearly 450% is observed in this sector, even in the same period the growth of FTSE All share index was only 75%. The reasons of that massive difference in growth are as under:


  • Population growth is augmenting air travel day by day.
  • Privatisation of air travel industry in many countries is inviting new companies to participate.
  • Increasing trends in Intercontinental trade
  • High demand of products due to Iraq & Afghanistan conflict.
  • Large & strong buyers like UK MOD, US DOD, NATO & NASA of their products and services.
  • US Defence budget increased due to overseas operations.
  • Growth in global defence markets especially in the Asian markets.

The United Kingdom aerospace & defence market generated total revenues of $39.5 billion in 2007, this representing a compound annual growth rate (CAGR) of 2.5% for the period spanning 2003-2007. In comparison, the German and French markets grew with CAGR of 0.7% and 2% over the same period, to reach respective values of $27.4 billion and $39.4 billion in 2007.The defence segment was the leading segment in 2007, generating total revenues of$25.1 billion, equivalent to 63.6% of the market's overall value. The civil aerospace segment contributed the remaining revenues of $14.4 billion in 2007, equating to36.4% of the market's aggregate revenues. The market growth forecast for the next five years is 1.6% (CAGR).  (Source: Datamonitor)


Aero Inventory Plc

Business Description

Aero Inventory plc is engaged in the provision of customized e-based procurement and inventory management solutions to the aerospace industry. The Company has long-term sole supplier contracts in place with aircraft maintenance and repair businesses, in Australia, the United Kingdom, Continental Europe and Asia Pacific. These contracts involve taking responsibility for an agreed list of parts for the Company's customers. It has developed a business system, Parts Central, which links data on its stocks of aircraft parts, customer usage and replenishment profiles. Parts Central also provides the functionality to order parts and to track open orders. Logistics is another key area of Aero Inventory's business. Its subsidiaries include Aero Inventory (UK) Limited, Aero Inventory (Hong Kong) Limited, Aero Inventory (Switzerland) AG and Aero Inventory (Australia) Pty Limited.

Geographical Spread

They are providing their services all over the world. Their major focus of business is Chinese and Australian markets. Aero Inventory is based in the UK with offices in Australia, Hong Kong, Indonesia, Ireland, Switzerland and the USA.

After getting preliminary information about the company, we shall arrange a visit to company head office at 30 Lancaster Road, New Barnet, Hertfordshire, United Kingdom to get detailed information about the company, its business results, financial, operational and management systems. We shall meet key persons in the company as well. This important information is given below:

Major Shareholders

The percentage of Ordinary Shares, which is not in public hands, is 8.17%.

Directors of the Company


The company has completely computerised systems installed in each department.

Financial Highlights

                                                                                                                                                                               Amounts in £(M)                                                  

Sales & Assets Comparison

Previous Auditors:

Deloitte & Touche LLP, Chartered Accountants and Registered Auditors Reading, United Kingdom audited this client last year. We will consult them and we will also check their profile, experience and reputation.

Operating lease commitments

At 30 June 2007 there were annual commitments under non-cancellable operating leases, including property leases

Internal Controls

There is a full-fledged internal control system in practice in the company. The internal auditors report is presented to the audit committee. The audit committee is composed of three non-executive directors. We can hope that the audit committee is sufficiently independent and quality of internal audit will be good. A detailed review of internal audit will help us to decide the extent to which we can rely on it.

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Accounting Policies

They are following International Accounting Standards consistently over the years. They have adopted FRS 20 this year; therefore they have restated their financial results for 2006 in accordance with FRS 20.

Related Party Transactions

We have found two different related parties transactions. One is related to Rupert Lewin Racing Limited in which PR Lewin is a director and shareholder who is also the chief executive of AI. The other one is related to Potenza Enterprises Limited, a service company owned by Mr Turner and his family, who is a non-executive director of AI.

Client’s Legal Obligations ...

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