Internal Audit Checklist of Real Estate & Property Industry 1. Checklist 1. Checklist of Fixed Asset Register (IA Checklists / Audit Programme)
(1)
Check that a Fixed Assets Register is maintained and updated at all times
( Manual Manual / Computerized Computerized ).
(2)
Check that the Fixed Assets Register gives details of the fixed assets -
Quantity / No / Location / Identification Number / Depreciation / Rate / accumulated depreciation depreciation / original original cost / additions /deletions/ written written down value.
(3)
Check that the identification identification number given on the fixed asset tallies with
the number given in the FA Register.
(4)
Check that for purchases as well as sale of fixed assets proper
authorization authorization has been taken from the appropriate authorities
(5)
Check that the discrepancies observed on physical verification of fixed
assets have been correctly adjusted in the books of account after taking approval from the appropriate appropriate authority.
(6)
Check the method and the procedure adopted for carrying out the physical
verification verificat ion of fixed assets and ensure that verification verifica tion was carried out as per the generally accepted accounting practices and procedures.
(7)
Check that the physical verification sheets in respect of fixed assets are
properly prepared and duly signed by the persons responsible for carrying out the physical verification. The name, designation of employees and the date of
carrying out the physical verification should also be clearly mentioned in the physical verification sheets.
(8)
Check that the physical verification of Fixed Assets is carried out by the
Management Management at least once in 3 years.
2. Internal 2. Internal Audit Checklist of Accounts Deptt. (IA Checklists / Audit Programme)
Cash Vouchers \ Bank Vouchers
Check authorization of Cash Vouchers \ Bank Vouchers by a responsible person.
Check supporting Bills / Invoices
Check the correctness of the accounting head – head – expense expense / income
Check for cash cash receipts signature signature /acknowledgement of cash recd.
Check that all the relevant columns of the Cash/ bank vouchers have been properly filled in.
Check that all the supportings supportings to the Vouchers are crossed as cancelled after the payment.
Check that payments payments are made only against original supportings. supportings. Purchase Vouchers
Check authorization of Purchase Vouchers by a responsible person. Check the Purchase Purchase Voucher with the supporting documents like Bill / Invoice Invoice and the Goods Received Note(GRN). Check whether the rates given in the purchase invoices are as per the purchase Orders raised/amendments to the Purchase Orders/ approved by an appropriate authority.
Check whether payment has been made/Bill passed for rejected quantity of material as per the GRR.
Check whether a proper accounting head - expense has been debited.
Check that all the relevant columns of the Purchase Vouchers have been properly filled in.
Check that the PV is passed as per the terms given in the Purchase Orders.
Check that the purchase voucher is prepared only in respect of original Bills / Invoices.
Photocopies of invoices \ duplicate invoices should not be passed.
Check that the Bills / invoices are passed strictly as per the PO terms. Journal Vouchers
Check authorization of Journal Vouchers by a responsible person.
Check the Journal vouchers with supporting Bills / Invoices /documents.
Check that supporting documents are duly approved by an appropriate authority.
carrying out the physical verification should also be clearly mentioned in the physical verification sheets.
(8)
Check that the physical verification of Fixed Assets is carried out by the
Management Management at least once in 3 years.
2. Internal 2. Internal Audit Checklist of Accounts Deptt. (IA Checklists / Audit Programme)
Cash Vouchers \ Bank Vouchers
Check authorization of Cash Vouchers \ Bank Vouchers by a responsible person.
Check supporting Bills / Invoices
Check the correctness of the accounting head – head – expense expense / income
Check for cash cash receipts signature signature /acknowledgement of cash recd.
Check that all the relevant columns of the Cash/ bank vouchers have been properly filled in.
Check that all the supportings supportings to the Vouchers are crossed as cancelled after the payment.
Check that payments payments are made only against original supportings. supportings. Purchase Vouchers
Check authorization of Purchase Vouchers by a responsible person. Check the Purchase Purchase Voucher with the supporting documents like Bill / Invoice Invoice and the Goods Received Note(GRN). Check whether the rates given in the purchase invoices are as per the purchase Orders raised/amendments to the Purchase Orders/ approved by an appropriate authority.
Check whether payment has been made/Bill passed for rejected quantity of material as per the GRR.
Check whether a proper accounting head - expense has been debited.
Check that all the relevant columns of the Purchase Vouchers have been properly filled in.
Check that the PV is passed as per the terms given in the Purchase Orders.
Check that the purchase voucher is prepared only in respect of original Bills / Invoices.
Photocopies of invoices \ duplicate invoices should not be passed.
Check that the Bills / invoices are passed strictly as per the PO terms. Journal Vouchers
Check authorization of Journal Vouchers by a responsible person.
Check the Journal vouchers with supporting Bills / Invoices /documents.
Check that supporting documents are duly approved by an appropriate authority.
Check the correctness correctness of the accounting head - debit / credit.
Check that all the relevant columns of the journal vouchers have been properly filled in.
In case of contractors bills check that bills submitted by the contractors are supported by the Work Orders issued in advance to the contractors. No bill should be passed unless supported supported by a/ WO and the value of the Bill should be in agreement with the WO prepared. Check that the Work Orders are prepared in advance before the start of the work. Check that the bills of the contractors are duly approved and certified for payment by the person responsible for getting getting the work done i.e the user. All the bills must have “Approval” for payment in writing by the user on the face of the bill. Check that all the supporting bills / invoices to a journal voucher are approved / certified for payment by the User Department. The user Department should specifically specifically put a remark on the bill for approval\ payment. In case of contract jobs relating to labour supply the bills are to be supported by attendance sheets duly certified by the Time Office. In case of transporters bills - check the bills with the agreed rates and receipted copies of consignment notes. Check the measurement books in case of bills for civil work and ensure that the Measurement books are signed and checked by the Engineer in charge of the Work. In case of running and final bills for civil work check that the civil engineer has checked and verified the measurements and entries of all running and final bills are made in the Measurement Books. Advance to Employees Employees
Check the Trial balance in respect of Advance to employees to ascertain the amount outstanding in the name of each employee. Find out the date date since when the advance is outstanding to be settled and make a list if employees advances that have not been settled for a long period. Ensure that no further advance advance is given to an employee unless the previous previous outstanding advance is cleared by him. Advance to an employee may be towards - Travel / Official work\ loan or a salary advance. Ensure that the recovery is made from the salary of the employee when the advance taken taken by the employee is not settled by him within a reasonable period. Further check that the recovery recovery of installments installments in respect of loan loan / salary advance is is made correctly on monthly basis from the salary of the employees. Check and make a list of employees who have left the company and their full and final settlements have not been made but debit balances are still appearing in their names in the Advance to employees account. Confirmation of Balances
Confirmation of balances with the banks \ Lending institutions should be obtained on a monthly basis for the purpose of preparation of bank reconciliation statements. Confirmation of balances balances with the Creditors Creditors / Debitors Debitors should be obtained obtained on a six monthly basis. The balances in the Creditors\ Debtors Ledger account should also be reconciled with the balances as per the party’s books on a six monthly basis. basis. Debtors Ledger Trial Balance \ Debtors Ledger account
Check that the balance shown by the Debtors Ledger Trial balance agrees with the balance shown by the Debtors control account in the General Ledger Trial balance.
Check the Agewise analysis of Sundry Debtors and comment upon it.
Check the Debtors Accounts that are stuck up for long and are doubtful of recovery.
Check the debtors accounts where legal cases have been filed / are to be filed and ascertain the progress in the legal cases.
Carry out a scrutiny of various Debtors Account in the debtors ledger and check for the following :o
Match the Debit and Credit entries individually.
o
Give the break up of the closing balance - Invoice wise.
o
o
o
o
Ensure that there are no such cases where the payments have been received for later bills and the earlier invoiced are unpaid. Give a break up of the closing balance as above in (b) including the details of any debits on account of debit notes raised on the parties. Prepare a list of Debtors account showing closing credit balances. Tally each debit with a corresponding credit to locate any under payment / over payment for any invoices.
Creditors Ledger Trial Balance/Creditors Ledger Account
Check that the balance shown by the Creditors Ledger Trial Balance agrees with the balance shown by the Creditors control account in the General ledger trial balance. Check the creditors account that are outstanding to be paid since long (unclaimed Creditors) and that can be considered for a write back in the books of account. Carry out a scrutiny of various Creditors account in the creditors ledger and check for the following. o
Match the Credit and Debit entries correspondingly.
o
Give the break up of the closing balance – balance – Invoice Invoice wise.
o
o
o
o
Ensure that there are no such cases when the payments have been made for later invoices and the earlier bills are unpaid. Give a break up of the closing balance as above in i (b) including the details of any credits on account of credit notes raised on the party. Prepare a list of creditors account showing closing debit balances alongwith the reasons for debit balances. Comments or details should be taken from the auditee in respect of every single debit balance. Tally each credit with a corresponding debit to locate any over payment /under payment for any invoice.
Check all the Creditors Ledger Trial balance as given below for above details. -
Suppliers
-
Contractors
-
Transporters
-
Others
Outstanding Liabilities Check that the outstanding liabilities pertaining to the earlier years have been adjusted in the books of account. Excise V/s Accounts Reconciliation
Ensure that a reconciliation statement is prepared on a monthly basis to reconcile the modvat / Cenvat balance in the excise excise with the accounts balances. Check if any old pending entry is appearing in the reconciliation statement. Check the unreconciled / reconciled difference in the balances shown by the excise records and the accounts records. TDS
Check that all TDS deductions are deposited in time with the government - check the monthly TDS statement and the actual date of deposit with the TDS challans.
Check whether the TDS Returns are submitted in time with the Government.
Check that the TDS deductions are made properly from all the payees wherever applicable. Budget V/s Actual - Expenses
Check the Budget V/s Actual position as on a particular date with the Budget statement for all the expenses Fixed / Variable overheads.
Check the Variances between the Budget / Actual figures.
Obtain comments on reasons for variances between the Budget V/s Actual.
Analyse the variances between Budget / Actual in terms of percentage. Scrutiny of Ledger Account - Expenses / Others
Check that in case of expenses the distination between Capital and Revenue expenditure is properly made.
Check that proper account head has been used to debit the expenses.
Pick up a few entries from the ledger account and trace the entry to the Voucher and the supporting bills / Invoices to ensure that the expense bills are properly approved / authorized and accounted for. General Ledger Trial Balance / Revenue ledger Trial Balance
Carry out a scrutiny of the General Ledger Trial balance/Revenue ledger Trial balance and comment on accounts that need to be reconciled like inter office account / Inter unit account etc. In case of accounts like TDS Receivable / Interest Receivable/ Insurance claim Receivable / Margin money deposit with banks ask for the break up / detailed statements of accounts and comment upon it. In case of Creditors / Debtors account check that the amount as given in the General ledger agree with the balance shown by the Creditors ledger Trial balance/ Debtors ledger Trial balance. Check whether any special accounts like suspense account etc are appearing in the trial balance and carry out a scrutiny.
In case of other accounts carry out a review of the ledger of the account to locate any irregularity / reconciliation matter
3. Internal Audit Checklist of Administration Deptt. (IA Checklists / Audit Programme)
ADMINISTRATION
Enquire into the activities that are covered under the Administration of the organisation. Normally the following activities would come within the Administration Department of an organisation. o
Security Services
o
Canteen Services
o
Houskeeping Services
o
Courier Services
o
Fax / Photo copy machines
o
Telephone lines
o
Renovation and routine repairs
o
Despatch of correspondence
o
Incoming correspondence
o
Visitors Register at the Reception
o
Travel – air / train / taxi
o
Hotel reservations
o
Fixed Assets for maintenance / repair
o
Vehicles
o
Guest Houses
o
Colony upkeep / maintenance.
o
Check the contract with the security contractor.
o
Ensure that the terms and conditions and other general matters are
Security
being complied with by the contractor. o
The bill of the contractor should be accompanied by the attendance sheet of the security personnel deployed during a particular period / month.
o
The bill of the contractor should be accompanied by a certificate from the contractor that the statutory obligations have been complied with by the contractor.
o
The Bill should be approved by the Head of the Administration.
o
Ensure that a specific clause has been put in the contract regarding the PF / ESI liability of the employer of security personnel. It should be clearly mentioned in the contract as to who will bear the employer’s contribution towards PF / ESI. ( The company or the contractor.)
o
In case the contractor is to bear the PF liability then the company should ask for copies of monthly challans in respect of PF deposits from the contractor.
o
Study the various clauses of the contract and ensure their compliance.
o
Ensure that contract has been awarded to the contractor on the best possible terms. Quotations/offers of other contractors should be verified to ensure that financial terms a well as general profile/standing & reputation of the contractors have been considered for appointing the contractor.
o
Check that the security personnel are properly deployed over the area under their jurisdiction and responsibility. Ask for a deployment plan from the Head of security.
o
Check the Registers and records maintained at the security gates/ security points and ensure that the registers and records are kept uptodate / maintained properly / all columns are filled in completely.
o
In case Gun men have been deployed ensure that they hold valid licences and that the licences are renewed in time.
o
Ascertain the responsibility of the Security Department / contractor in the form of a check list. The check list should give point wise duties of the security. The activities/work to be performed by Housekeeping should be documented in the form of a check list.
Canteen Services o
Check the contract with the canteen contractor and ensure that the terms and conditions of the contract are being complied with.
o
Check compliance with point No(s) 3 to 8 as stated in the case of security services. The points are applicable to Canteen Services also.
o
Ensure that a duly approved Rate list of food items has been prepared and is displayed at the canteen.
House keeping Services o
Check the contract with the Housekeeping contractor and ensure that the terms and conditions of the contract are being complied with.
o
Check compliance with point No(s)3 to 8 as stated in the case of security services. The points are applicable to Housekeeping services also.
o
Ascertain the responsibility of the Housekeeping Department / Contractor in the form of a check list. The check list should give point wise duties of the Housekeeping / contractor. The activities / work to be performed by Housekeeping should be documented in the form of a check list.
Courier Services o
Check the contract with the courier companies.
o
Ensure that the terms and conditions of the contract are complied with, by the contractor.
o
Check that the Bill of courier is checked in detail with the copies of consignment Notes and the Proof of delivery. The Administration Department should not pass the bill unless all the consignment notes are matched with the Proof of Delivery (POD).
o
The bill should be approved by the Head of Administration.
o
Ensure that the Contract(s) have been awarded to the contractor / courier company on the best possible terms. Quotations / Offers of other contractors / Courier companies should be verified to ensure that the financial terms as well as the general profile / reputation of the courier agencies have been considered before appointing the contractor / courier company.
Fax Machines / Photocopy Machines o
Check the total number of fax machines installed and their location.
o
Ensure that a budget has been fixed i n respect of every single fax machine.
o
Compare the Budget V/s Actual position in respect of all the fax machines and comment upon the negative variances between the budget and actual.
o
Ensure that a proper control is kept over the paper issued for photocopy purpose. A record should be kept by the photocopy operator of the number of sheets of paper received in a month and the number of photocopies made during that month. A monthly control report should be prepared.
o
Ensure that system of requisition slips for fax / photocopy is in place. Requisition slip system would ensure that there is no misuse of the fax/ photocopy machines.
o
Ensure that the fax / photocopy machines are maintained properly and that the operators of the machines do not allow any unauthorised entry of persons to operate machines.
o
In case the work of photocopy has been given to an outside agency – check the contract entered into with the party and ensure that the terms and conditions of the contract have been complied with.
o
Ensure that the contract with the outside agency is renewed in time i.e. before the expiry of the validity of the contract.
o
A monthly record should be maintained by the company in respect of paper issued to the contractor and the number of photocopies made during the month. The variation / differences should be explained by the Department.
o
In case the photocopy / fax work is carried out after the office hours the requisition slips be kept and the employees instructed and encouraged to enter
the details of number of photocopies made / fax done, after the working hours in the register.
Telephones o
Ensure that a budgeted amount has been fixed in respect of every telephone. The budget amount should be approved in writing.
o
A monthly Budget v/s Actual statement – Telephone wise should be prepared and reviewed.
o
In case the actual expenses exceed the budgeted amount on a quarterly /six monthly / annual basis, ensure that the approval for the excess amount is obtained from the appropriate authority.
o
Ensure that the telephone bills are duly approved / certified for payment by the concerned users.
Guest House o
Check that the record of fixed assets installed at the Guest House is kept properly in a bound register / computer. The record of fixed assets (FA Register) should contain all the details of FA like -Quantity / location/ Make & type / Identification Number / value etc.
o
A six monthly verification of the FA should be carried out and the physical balances compared with the book balances. The discrepancies should be reported.
o
Similarly a record of electricity / water / and telephone bills should be kept in a register / computer.
o
A register should be kept for recording all STD / ISD calls. The visitors should be requested to enter the details of call made in the register.
o
A bound register should be maintained to record on a daily basis the Bill number - amount and the type of purchases made - Milk / Vegetables / Food items etc. The register should be kept upto date.
o
Per meal cost should be worked out on a monthly basis ( By dividing the total expenses on food / milk / vegetables etc by the No of meals provided during the month). The per meal cost would indicate the expenses actually incurred on meals provided to the guests and assess whether the m eal cost is high/ normal.
o
A guest / occupancy register should be maintained at the guest house and all the particulars of the guest like - Name / Time in / Time out / date of arrival / date of departure / address / Room No allotted etc should be entered.
o
A Meal register / slip should be made to record the details of meals provided to the guests. The meal slip should be prepared by the caretaker and the signatures of the guest should be taken on the slip.
o
The register / slip should clearly indicate the No of Break fast / lunch / dinner /tea / milk / snacks etc provided to the guest.
o
A register / statement of consumables (other than Fixed Assets) should be maintained and all particulars of items like - buckets / room heaters / mattresses / cutlery / Bed sheets / covers / utensils should be entered. The Register / Statement should be prepared Room wise.
o
In case the guest house is in a rented / leased premises - verify the rental / lease agreement and see whether the terms and conditions are complied with.
Visitors Register at the Reception o
Ensure that the system of issuing Visitors Card to the visitors is in existence. The cards should have a serial control.
o
The visitors Card Number should be entered in the Visitors register.
o
The visitors register should be complete in all aspects i.e. all the entries as prescribed in the format should be filled in properly and completely. No column in the register should be kept as blank.
o
The visitors register should be maintained clearly in a legible hand.
Travel - Air / Taxi / Train o
The bookings in respect of Air / Taxi / Train should be made on the basis of Requisition slips. The Requisition slips should be properly filled in by the employees with necessary details like – Approval of the HOD / authorized by / Date and time / details of travel / Name and Designation / purpose / signature etc.
o
The Administration Department should not accept the Requisition Slips not filled in completely and properly.
Stationery o
Ascertain whether there is any system / procedure to ascertain the book quantity of stock of stationery at any point of time.
o
Check whether there is a procedure wherein the opening balances, Receipts, Issues and the closing balances of each stationery item (costing say Rs.25/- or
more per number) are recorded in the stationery stock Register (manual / computerised). o
Carry out a physical verification of stationery items (costing say Rs.25/- or more) in stock and compare the physical balances with the book balances and locate the discrepancies, if any.
o
Ensure that there is a system of issuing stationery items to various Departments against duly approved Requisition slips.
o
Check whether a monthly statement of stationery issued to various Departments is made. The statement should reflect the details of items of stationery issued Department wise.
Hotel Reservations / Guest House reservations
Ensure that there is a proper procedure for making Hotel / Guest House reservations.
The procedure should ensure that the details in respect of Hotel/Guest house reservations are recorded in a control book / register. The details should include –
Sl
Na
Designa
Locat
Hot
Reservation
Type
of
No
me
tion
ion
el
period
accommod
of
Na
From
ation
the
me
To
(v)
(vi)
pers on
(i)
(ii)
(iii)
(iv)
(vii)
Whether booking
Bill details
Bill paid by
Any
is
Bill
(Name / Date/ Mode of
information
confirmed/pending
No. Date
payment)
cancellation
(viii)
(ix)
(x)
(xi
Amount
like
Check whether all the columns of the Control Register are filled in properly and completely. All the necessary details as given in the format should be entered in the Control Register.
other
Fixed Assets for maintenance - Repair
o
A record of fixed Assets for which the Administration Department is responsible for carrying out the repairs / maintenance or upkeep should be kept by way of a register ( Manual / computerized). The FA would include Air conditioners, Refrigerators, Water coolers, Fax / photocopy machines, Electrical Equipment etc. The record should include details of FA like - Quantity / location / Identification Number / make or type. Check whether such a record of FA is maintained by the Administration Department.
o
A physical verification of such FA should be carried out on a six monthly / annual basis to find out the discrepancies, if any.
Renovation and Routine interior maintenance o
Check whether quotations / comparative statements were invited / prepared before issuing a Purchase / Work Order to a contractor / party.
o
Ensure that the Purchase / Work Order were issued keeping in view the commercial
considerations
-
lowest
quotation
/
offer
/
profile
/
experience/ technical competence / recommendation of architects Engineers etc. o
Check whether the Purchase / Work Order were issued before the start of the work by the parties. Confirmatory orders should not be issued except under special circumstances.
o
Check whether the Comparative statements are duly approved and dated by a competent authority.
o
Ensure that the variation between the actual Quantity / Value and the Quantity / Value as per the PO / WO does not exceed + 5%. The Qty / Value as given in the PO / WO should be as accurate and as possible and all work should be estimated and planned in advance and provided for in the PO / WO. The amendments to the PO / WO should be issued in special cases only. The cases of amendment orders being issued for an increase in the scope of work should be minimum and the full scope of work / activities should be estimated / calculated in advance.
o
Ensure that the amendments to PO / WO are issued before the start of the extended work/scope of activities and not after the completion of work.
Colony upkeep / Maintenance o
Check whether the Administration Department has prepared a list of Fixed Assets provided to the employees at their residential premises.
o
Check whether an acknowledgement has been taken in the list of FA provided to the employees from the employees. The signatures of concerned employees should be taken in the list of FA, as a token of their acceptance towards having received the FA.
o
The Administration Department should carry out a physical verification of FA at the residential premises of the employees and compare it with the list. The discrepancies if any between the physical balances and the book balances should be enquired into.
o
The Administration Department should maintain a Register / book wherein all the complaints received from the colony residing employees should be entered into, serially.
The specific nature of the complaint should also be entered, whether Electrical / Mechanical / Civil / Electronics etc along with the date / time of lodging the complaint by the employee. Similarly, the date and the time of attending / rectifying the problem should also be entered along with the signatures of the complainant. The Register would enable the Administration Department to exercise a proper control over the complaints / maintenance work.
Vehicles o
Ensure that the details of company owned Vehicles are available by way of a register.
o
Check whether insurance cover is renewed in time.
o
Check the Registration books / Insurance papers of all the vehicles to locate any discrepancies, if any.
o
Check whether log books are properly maintained in respect of vehicles. Check the entries in the log books.
o
Ensure that a Vehicles register is maintained and details of running and maintenance expenses in respect of every vehicle are entered vehicle-wise, giving Bill No / Date and the amount.
o
Check whether a monthly exercise is carried out to calculate the running and maintenance cost of every vehicle per km. This can be worked out by dividing the total of running and maintenance expenditure
by No of Kms run by the
vehicle as per the log book. The Administration would know at a glance the per Km cost of running and maintaining a particular vehicle on a monthly basis.
Incoming / Outgoing Correspondence o
Ensure that a separate manual register is maintained for the incoming and outgoing correspondence.
o
Check whether all the relevant information is recorded in the incoming / outgoing registers.
o
The registers should be kept updated at all times and entries should be made on a day to day basis.
o
A stamp / seal should be put on the cover of every incoming correspondence indicating the date of receipt of the document / correspondence.
o
A separate record/ register should be kept f or documents / correspondence sent through the Registered post.
( copies of Registry receipts should be
preserved). o
o
A proper record should be kept of Postage stamps. In case of Franking machine - check the use and the balance amount at the end of the day.
4. Internal Audit Checklist of Bank Reconciliation Statement (IA Checklists / Audit Programme)
(1)
Check that Bank reconciliation statements in respect of all the bank
accounts are prepared on a monthly basis.
(2)
Check that the entries appearing in the Bank reconciliation statements
are cleared in the subsequent month.
(3)
Check for any old pending entry and inquire into the nature and details of
such an outstanding entry.
(4)
Check that entries relating to cheques issued but not presented for
payment for more than 6 months are reversed.
(5)
Check that all post dated cheques received are kept in safe custody until
deposited.
(5)
(7)
Cheque that all cancelled cheques are kept properly in the cheque book.
Check the cheque signing authorization levels of management and
ensure that the cheques are signed according to the prescribed and delegated authority.
(8)
Check that cheque books / counter foils are kept in safe custody.
5. Internal Audit Checklist of Dispatch of Goods & Receipt of Material (IA Checklists / Audit Programme)
DESPATCH OF GOODS ( FINISHED PRODUCTS)
Check that the plan for the despatch of finished products is received by the Despatch section clearly indicating the Quantity/ location and the description of the material.
Examine the method and the procedure for the despatch of material to ensure that the despatches are effected smoothly.
Check the despatch report prepared as at the end of the day to ensure that the despatches planned for the day are in fact effected in totality.
Check the pending delivery / despatch status for a particular period (on a day to day basis). This information can be maintained in the form of a report.
Ensure that there is a proper system to weigh the finished goods for despatch. The weighbridges and the related equipment should always be properly maintained (including calibration of weighing machines)
If the sales invoices are prepared at the despatch section check a few invoices spread over a period to ensure that the invoices are prepared correctly as regards Rates / Excise duty / Sales Tax etc. Ensure that a proper control is kept over the stationery of blank invoices. The sales invoices should be authorized by a person duly authorized in writing in this behalf. Check that the Freight consignment Notes are properly prepared.
Check that the consignment of finished goods once weighed and okayed at the despatch section are checked for the necessary papers - Gate pass / Sales Invoice / Road permit / Freight Consignment No, etc. at the exit gate by security or by a responsible person deputed in the sales despatch section.
Verify the status of transporter wise trucks provided against the trucks ordered. Also, ensure that penalty for not providing the trucks is charged without exception.
Check that all the trucks being despatched are not being loaded less than the minimum weight agreed for payment. If so, proper justification & approval should be reviewed.
Status of marine insurance, if any to be checked.
Check that all the transporters are approved transporters and their contract is approved by authorized person from Head Office.
INWARD MATERIAL (GOODS)
Check that entry for the incoming material is made at the entry gate register.
Ensure that the weighment / Counting of the incoming material is made properly and correctly at the receiving section .
Check that stamp / acknowledgement of the receipt of the incoming material is made on the back side of Freight consignment Note . The remark should indicate the quantity (weight / number of pieces etc.) of the material recorded at the receiving section along with condition(ok / damaged / wet etc) in which material has been received.
The receiving section should maintain a record of all the incoming material
received
consignment wise, clearly giving the date / No. of vehicle / Description of the material / Quantity etc. This record can be maintained in the form of MIS report prepared on a daily basis.
QUAL ITY ASSURANCE
Check the procedure for the clearance of RM f or use in the production
Ensure that the procedure for quality testing of raw material / finished goods is well documented in the form of a quality manual.
Ensure and check that the raw material / finished goods once rejected are not subsequently cleared under deviation. In special cases ensure that the approval under the deviation is duly approved.
Check the specification / laid down standards for the testing and clearance of the raw material / finished goods and ensure that the actual test result conform to the laid down specification.
When ever there is a change in the laid down specification ensure that the change is approved and authorized in writing by an appropriate authority and that the change is incorporated in the manual of specification.
Check the time taken at the quality assurance to clear the sample received
for testing . The
test sample of raw material and finished goods should be cleared with in a short time.
Check the management level to which the Head of Quality Assurance reports- As a matter of fact in order to ensure that the quality assurance function as an independent arm the quality assurance should report to the Head of the Organization / Unit.
Ensure that the testing samples accepted / rejected are segregated and kept separately with proper and clear marking . Ensure that the sample do not get mixed up.
6. Internal Audit Checklist of Excise (IA Checklists / Audit Programme)
EXCISE
Ensure that the Modvat / Cenvat is claimed and credit is taken in the excise records immediately after the receipt of the material. There should be no delay in taking the credit of Modvat / Cenvat once the material has been received. Calculate the loss of interest due to delay in Modvat / Cenvat claim.
Challans / invoices in respect of material sent for processing should be received back in the plant within 6 months. Ensure that the material sent outside the factory for processing is received back in the factory within 6 months from the date of despatch. (180 days). (A delay beyond 180 days would result in a loss of Modvat / Cenvat to the sender).
Check whether the statutory records PLA and RG - I are properly maintained.
Check whether the classification, declaration, Price declaration or MRP value, declaration of marketing pattern, and discount structure are filed by 15th April every financial year.
Check whether RT-12 returns have regularly been filed with the excise authority by 10th day of the following month accompanied by copies of PLA and TRG challan and Cenvat monthly return. An acknowledgement should be obtained from the Excise Department.
For export sales ensure that applications in Form AR4 and the original invoices have been submitted to the excise authorities.
Credit on Capital goods is to be taken immediately in the same financial year upto 50% of duty paid and the balance credit in any subsequent financial year provided capital goods are still in possession and use of the manufacturer. Ensure that the above provision is taken care of.
Further the cenvat credit is allowed even if the goods (Input / Capital) are acquired by the manufacturer on lease, hire purchase or loan agreement from a financing company. The credit is not allowed if the manufacturer claims depreciation under Section 32 of the Income Tax Act on the amount of duty paid. Check whether the above provisions have been considered while considering the Modat / Cenvat Credit.
The Excise law / rules should be referred from time to time as the provisions change every year.
Ensure that full Credit for Modvat / Cenvat / PLA has been taken by 20th of every month in respect of duty debited for despatches made during 10/15th day of the month and full credit is taken by the 5th of the next month in respect of duty debited for despatches made between 16th to 30/31st of the month. Ensure that there is no lapse on this account and that the duty credited is equivalent to the duty debited on fortnightly basis.
Ensure that Cenvat account debit should be limited to the Credit balance available on the 15th day and the last day of the month respectively.
7. Internal Audit Checklist of Export Sale of Goods (IA Checklists / Audit Programme)
EXPORTS - Sales
Check whether the export obligation have been fullfilled / short fulfilled before the expiry of the validity of the Advance licence / export obligation period.
Ensure that the documents to be submitted to the bank are processed and submitted in time to avoid any delay in/late credit by the banks in case of sight LC.
Check whether there are cases of short payments received from the banks in respect of Export bills.
Check whether the contracts for commission for export sales are finalized / renewed in time.
Check whether there are cases of unutilised Advance licences.
Check whether any penal interest has been paid due to the non fullfilment of export obligation.
Check whether any undue delay has taken place for the despatch of goods from the date of the shipping bill.
Verify the export invoices with reference to the export sales register and ensure that the invoicing is made as per the terms of the orders received from the export customers.
Check whether any amount has been paid towards the extension of the validity of the Advance licence / revalidation charges towards Advance licences.
Check whether interest paid on Discounted LCs after the credit period are recovered from the importers.
8. Internal Audit Checklist of Import Purchases (IA Checklists / Audit Programme)
Check whether any Detention charges / Demurrage charges have been paid to the clearing and forwarding agents - ascertain the reasons for the payments of demurrage / detention charges.
Ascertain whether demurrage / detention/terminal handling charges/free time allowed for the containers by the suppliers as per the terms of the purchase order to be borne by the suppliers have been recovered from the suppliers.
Check whether TDS has been made from the bills of the clearing agents.
Ensure that the Advance licences are fully utilized.
Ensure that the imports purchases have been made within the LC Validity period.
Check whether any LC extension / revalidation charges have been paid.
Check whether customs duty has been paid for imports of material inspite of Advance licences being available.
Check whether excess time is taken for the clearance of material from the customs over and above the grace period / free time allowed.
Check the agreement / contract with the clearing agent and ensure that the terms and conditions of the contract are complied with. o
Obtain the status of Advance licence utilisation.
Ensure that proper offers were made by the suppliers and quotations called from a sufficient number of foreign sources / comparative statements prepared before releasing the PO for imports from a foreign source. Check the Purchase Orders on the basis of Purchase register Item wise.
Observe the rate variation over a period of time in the rates paid to the foreign suppliers for the same product and enquire into the reasons thereof. Scrutinise the offers / quotations of foreign suppliers.
Carry out a comparison of rates paid to the foreign suppliers with the rates prevailing in the domestic market and comment upon the cases where the domestic rates are lower as compared to the imports.
Inquire whether efforts have been made to develop cheaper domestic sources and comment upon the same.
Check whether any amount has been paid towards Advance licence validity extension / revalidation charges. Such expenses are of an avoidable nature.
Check whether any customs duty / penal interest / penalty has been paid towards imports made but export obligation not fullfilled under an Advance licence.
9. Internal Audit Checklist of Insurance Exp. (IA Checklists / Audit Programme)
INSURANCE
Check whether the Insurance policies taken by the company cover the following assets at all the locations (factories, offices, branches etc). o
Plant & Machinery, Furniture / Fixtures, Electrical installation, Office equipments etc
o
Buildings / Warehouses etc.
o
Inventories / Stocks in transit
o
Cash
o
Vehicles
o
Any other.
Ensure that the value of Assets insured is adequate.
Ensure that all the risks are covered in the policy.
Check whether the loss of profits policy has been taken by the company.
Ensure that the additions / deletions to the fixed assets during a particular accounting year are fully taken care of in the policy.
Check whether the insurance premium amount has been properly negotiated. Ensure that competitive rates of 2-3 insurance companies were taken into consideration while finalizing the premium payable. For this purpose all necessary precautions should be taken to reduce the level of premium.
Obtain a list of all the insurance claims pending for settlement as on a particular date and comment upon the old pending cases.
Obtain a list / statement of all the Insurance policies and ensure that all the assets of the company are fully insured.
Ensure that the value of assets / fixed assets declared by the company is proper and that the assets are not under covered.
Ensure that maximum discounts / rebates were availed by the company at the time of finalizing the insurance policies / premium.
Check whether insurance policies in respect of group Gratuity / Medical / Superannuation / accident etc. are obtained at the best rates. Comparative statements / comparative data should be checked.
Ensure that the Insurance policies are renewed in time i.e. before the expiry of the period of validity.
Check the list of fixed assets / assets filed with the insurance company to ensure that all the Fixed assets / assets are covered by the insurance policies.
Ensure that all the policies are obtained for the uniform period matching with the accounting year of the company.
Check whether the terms and conditions given in the insurance policy are complied with by the company.
10. Internal Audit Checklist of Investments (IA Checklists / Audit Programme)
(1).
Check whether a Register of Investment is maintained. (Manual / On computer)
(2).
Check that the Register of Investment gives the necessary details like (a)
Description of the Investments.
(b)
Name of the corporate bodies / other entities where the Investments have
been made. (c)
Distinctive number of certificates
(d)
No. of certificates -shares/ debentures / other securities.
(e)
Face value / paid up values of Investment made
(3).
Check that the certificates of investment are kept securely and in safe
custody. (4).
Ensure that a physical verification of investment scripts is carried out say
at least once in a year and physically found scripts are tallied with the details given in the Register of Investment. Discrepancies if any should be reported. (5).
Ensure that the proper record is made in the Register of Investment
in respect of Bonus Issue of shares and debentures, Rights Issue of shares/ debentures etc . (6).
The entries in the Register of Investment should be tallied and reconciled
with the entries in the printed Annual Accounts. Balance sheet - to locate any differences. (7)
Ensure that all the investments made are in the name of the company and all the transfers have been made and recorded and effected in the name of company .
(8)
Ensure that all the income accounted / due in respect of all the investment made is received and accounted for in the name of company.
(9).
Ensure that all the transactions in investment are authorized by a resolution of the Board of Directors or by the person to whom the powers have been delegated .
(10).
Check that where any shares or securities in which investment have been made by the company are not held by it in its own name the company has entered the details in a register in terms of section (7) of the Companies Act .The register shall disclose (a)
the nature, value and such other particulars as may be necessary fully to identify the shares or securities and
(b)
the bank and person in whose name or custody the shares or securities are held.
(11).
Carry out a scrutiny of the investment account in the ledger to ensure that proper accounting entries have been passed in the ledger account .Vouchers may also be verified to ensure proper authorization etc.
11. Internal Audit Checklist of Outsourcing / Job work (IA Checklists / Audit Programme)
OUTSOURCING
Ensure that Norms are set in respect of Input - Output of outsourcing jobs.
Ensure that control is kept over the outsourcing jobs on a consignment to consignment basis. The consignment wise control should be exercised for Input - Output. Any shortages / deviation from the set input-output Norms on the basis of every consignment should be inquired into and suitable recovery made from the processor. Norms should also be set for process loss / Wastage/ Scrap etc.
Quantity / Value reconciliation with the processor should also be made on a consignment to Consignment basis and a monthly stock certificate be obtained from the processor. Any shortage / Excess in input-output should be adjusted / accounted for in the books also on a consignment to consignment basis. This would ensure a proper control over the quantity of raw material sent to the job processor and the quantity of finished product received from the processor.
The contract with the job processors should be entered for a fixed period subject to renewal. The contract should clearly lay down the terms and conditions (including the Input - Output Norms).
The rates for carrying out the jobs work should be finalized after a proper comparison of the rates and further negotiation.
The terms and conditions of the contract should include the period within which the processor has to carry out the job after the receipt of the material. A penal clause should be included in the contract to this effect.
Ensure that there is a proper control on moulds sent to outsourcing parties and the same are reconciled with periodic statements received from the parties with the total quantity /no despatched by plants.
As far as possible there should be a central Agency (such as Outsourcing Department, H.O.) who deals with all the moulders and distribute the work accordingly from the plants. Also ensure that mould directly received by party from vendors / suppliers are reported to / accounted for by the respective plants.
Ensure that all moulds are returned by parties concerned to the respective locations / plants, once the jobs are completed.
Check if the moulds sent to the contractors are not returned to the Company within a period of six months, whether a debit note or invoice on the excise duty paid by the company is raised on the contractor.
12. Internal Audit Checklist of Personnel & Time Office (IA Checklists / Audit Programme)
PERSONNEL & TIME OFFICE
Obtain a list of sanctioned strength - Department wise and compare with the actual strength of the employees. Note the variation and comment upon the cases where the actual strength of the employees is more than the sanctioned strength. Check approval for the extra man power deployed.
Review the personnel service files of employees kept by the Personnel Department to check whether – o
all the copies of certificates / testimonials have been taken from the employees at the time of joining .
o
Nomination in case of Gratuity / Pension / PF / superannuation etc have been collected from the employees
o
all the other documents like increment letters / promotion letters etc are properly filed in the service files .
o
Copies of appointment advice / appointment letters / confirmation letters etc are kept in the service files.
Obtain
a
Department.
list
of
all
the
pending
legal
cases
being
handled
by
the
Personnel
Check the status of all the legal cases including the date of next
hearing. Comment upon the speedy settlement of the legal cases . For keeping an effective control over the legal cases the Personnel Department should prepare a status report of pending legal cases on a monthly basis.
Ensure that the Personnel Department is taking due care in case of contract labour employed by it to ensure that legal and statutory obligation like FPS / PF / ESI are taken care of. The Personnel Department should maintain proper attendance record in respect of the contract labour and should obtain copies of monthly PF / ESI challans from the contractor .
Check that the various licenses like the Factory license / license under the Contract labour (abolition + regulation ) act 1970 / license for storage of inflammable and hazardous chemicals etc. are renewed in time.
Ensure that the various provisions of industrial and labour laws
like The Apprentices Act / Factories Act / Payment of wages Act
/ Minimum wages Act etc. are duly taken care of.
Ensure that proper attendance / leave records are maintained by the Personnel Department is respect of all the workmen / staff / officers/ managers / higher management.
Check the leave / attendance record of employees (register /
punch card/ computerized attendance printouts) to ensure that there are no irregularities. Comment on the irregularities. if any, observed .\
Examine the agreement with the Union and ensure that the terms
and conditions as agreed
to by the parties to the agreement are duty complied with. Examples : Incentive scheme, loan / advance scheme , facilities, attendance procedure, leave procedure , festival advance , canteen / tea, transport ,uniform, production etc. Further check the various schemes linked to production / output to ensure that the payment under various incentive schemes are made strictly as per the laid down productivity linked / incentive scheme .
Ensure that the system installed at various locations to mark the attendance(in/out) are working properly and are giving consistent results.
Check the record relating to attendance / leave including a cross verification of data and ensure that the methods and procedure for recording of attendance / leave are sound and sufficient internal controls exist. Point out the lacunae / weakness in the internal control system.
In case of productivity linked schemes ensure that there is a proper system to record and measure the quantity / quality / output of each employee.
Check whether the consent letters have been obtained from the State Pollution Control Boards in respect of AIR / WATER.
13. Internal Audit Checklist of Physical Verification of Cash (IA Checklists / Audit Programme)
(1)
Carry out a surprise physical verification of cash.
(2)
Check that the physical cash balance tallies with the balance shown by
the cash book.
(3)
Check that the cash book is upto date at all times.
(4)
Check that the cash in safe/cash in transit is within the insurance cover
taken.
(5)
Check that fidelity insurance cover is taken in the names of persons who
have the custody of cash.
(6)
Check that receipts are issued by the cashier at the time of receipt of
cash from the employees / others.
(5)
Check that signatures of the payee are taken by the cashier on the cash
payment Voucher at the time of making cash payment.
14. Internal Audit Checklist of Production & Planning Process (IA Checklists / Audit Programme)
PRODUCTION
Verify the production records such as production slips / memos to ensure that the records are properly maintained . Also verify the log books of machinery to check the details of production . Check the production log books.
Check the budgeted production of all the products with the actual result on a monthly / annual basis. Ascertain the reason for a shortfall in the production if any and comment upon it.
Check the production capacity utilization of all the production plants and enquire in to the reasons for lower capacity utilization and comment upon it.
Check the system / procedure / method of recording the input and output.
Check whether the Input / Output Norms have been determined of each process of manufacture / process loss/ wastage (Accounted) losses and the Unaccounted loss and gain.
Check format of the Input and Output statement
and ensure that all the relevant
data/information related to the following are shown separately. o
Opening stocks of RM / WIP}.
o
Closing stock of RM / WIP . } Total Input
o
RM issued.
}
o
Other material issued.
}
o
Accounted losses – various types (Norm v/s Actual)
o
Finished goods (Norm v/s Actual )
o
Unaccounted losses (Norm v/s Actual)
Check the production slips with the entries in the excise record (RG-1).
Comment upon the deviation in the norms set for Input / Output ie Norm v/s actual position.
Check the production schedules to verify whether the production has been carried out as per the scheduled production.
Check the details in respect of yield - Budgeted yield v/s actual yield in respect of all the products and enquire in to the reason for lower yield and comment upon it.
PRODUCTION PLA NNING A ND CONTROL
Study the system / method and the procedure of production planning and the procedure for the preparation of weekly / monthly / annual production budgets.
Check the status of orders received from the Marketing Department for production of various products.
Check the machine utilization status report and comment upon the idle time - reason thereof and the steps to reduce idle time.
Ensure that the log book in respect of all the plant machinery and equipments are kept properly and up to date. Verify the machine log books and comment on the discrepancies observed .
Check that there is a proper lay out for free flow of materials.
Ensure that the actual production is carried out as per Production Planning and comment upon the deviation from the production planning figures.
Carry out a study of machine efficiency and utilization to ensure that the machine are utilized as per the laid standards of efficiency and utilization.
15. Internal Audit Checklist of Publicity & Advertisement (IA Checklists / Audit Programme)
Advertisement and Publicity
PRESS
Press estimates to be verified with the Rate Cards.
Press estimates to be approved by the Head of Advertisement.
Ensure that the approval estimates are serially numbered / recorded in the job order register.
Ensure that the Rate Cards are separately filed.
The Bills submitted by the agencies / casual parties should be checked with the approved estimates to ensure that the ads have been published correctly, the bill has been raised for correct size at correct rate and that all applicable discounts have been allowed.
Check whether the Bills are recorded in the Bills Control Register duly approved by the Head of Advertisement with his signature and date on the bill.
OUTDOOR ADVERTISEMENT
Hoardings / Neon Signs / Bus Panels and Shelters / Wall painting etc
Ensure that competitive Quotations ( with site plans / size / material to be used and job completion schedule) have been obtained from at least 3 reputed parties.
Check whether a written contract has been entered into with the party finally selected for awarding the work. Entry should be made in the Job Order register. The order should be serially numbered.
A physical verification should be carried out of various sites where the Ads are displayed and Job Inspection Report should be sent to the Advertisement Department / outside locations - area offices / branches / depots etc.
Ensure that the Advertisement Department has taken the following steps on receipt of the Bill along with Job Inspection Report / Physical verification Report from various locations:
Deduction of proportionate rental for the period during which the Defect remains unrectified.
Deduction for the number of days for which rental was paid for the period during which Ad was not displayed.
The Bills are duly approved by the Head of Advertisement under signature and date and recorded in the Bills Control Register.
Fabrication of Neon Sign / Glow Sign / Stalls at Exhibitions / Banners at Company’s cost
Ensure that Competitive Quotations were obtained from at least 3 reputed parties stating - size / design / rate / item wise cost / Qty / payment terms / time required for execution of job etc.
Check whether the order was placed on the party giving lowest quotation. Ensure that the order is signed by the Head of Advertisement with date.
A physical verification is to be carried out and the job inspection report to be sent by the local / outside locations to the Advertisement Department.
The duly approved Bill (approved by the Head of Advertisement) to be entered in the Bill Control Register and necessary deductions to be made from the bill on the basis of physical verification Report / Job inspection report.
Printing + Sales promotional / Gift items / Give aways
Ensure that competitive Quotations from reputed printers were called giving all essential details like Quantity / Quality of paper / size / cost-break up etc.
Ensure that the Order is placed on the printer giving lowest quotation and all details are recorded in the Job Order Register.
Bills to be recorded in the Bills Control Register and passed for payment after verification of Quality / Quantity / Rate etc.
Telecast / Broadcast of spots and sponsorships
Check whether the Estimate has been submitted by the Agency along with the Medias’ Rate Card, if any.
Check whether the approved estimate has been entered in the job control Register.
Ensure that the Bill submitted to the Advertisement Department is supported by documentary evidence of telecast / broadcast.
Master record of Company property
Ensure that a master record is maintained wherein should be entered full particulars of procurement, Fabrication / Storage / disposal / reuse of the following items paid for by the Company.
-
Hoarding , Exhibition stalls
-
Neon sign structures, Glow signs, Boards.
Kiosks, Solar poles, Bus shelters, Bus Panels etc.
General
Ensure that the orders are placed on the parties after calling competitive quotations from at least 3 parties.
The order / Contracts awarded should be entered in the Job Order Control Register with a serial control.
The Bills duly approved should be entered in the Bill Control Register.
Ensure that Physical Verification Report / Job Inspection Report is prepared in respect of the jobs carried out by the Agencies and check whether deductions have been made from the bills on the basis of physical verification Report / Job Inspection Report.
16. Internal Audit Checklist of Purchase Deptt. (IA Checklists / Audit Programme)
PURCHASES
Check whether an Approved Vendor list of suppliers / authorized dealers has been prepared and is updated on a regular basis. The Approved Vendor list should carry all the items of purchases Raw Material / Engineering / Consumables / Packing material etc. The approved vendor list can be Vendor - item / Item -Vendor wise.
Check whether a Purchase Manual has been prepared and approved. The Purchase Manual should include policies / procedures / and all the matters relating to purchase methodology.
Find out the Rate Variations over a period of time in respect of every item of purchases. The purchase register whether prepared Manually / Computerized would indicate the item Code / Name of the item and purchases made of the item over a period of time at varying / same rates with reference to the Purchase Order Number.
Reasons for purchases made at varying rates should be obtained. Rate Variations without a proper justification should be reported.
A scrutiny of Purchase Orders should be carried out to ensure that comparative statement of quotations are prepared and the order is placed on the lowest bidder after considering factors like quality / delivery / payment terms / profile & competence of the vendor.
Check whether the comparative statements of quotations are duly approved by an appropriate authority and dated.
The comparative statements should be prepared on a landed cost criteria. All the costs such as the basic price / taxes / duties/ insurance / P&F / freight & cartage / interest etc should be
indicated in the comparison and the final cost of comparison should be the landed cost of the item.
Ensure that a proper justification (Technical / Commercial) is given in writing on the comparative statement wherever the purchases are made from a source not being the lowest bidder.
Ensure that a sufficient number (3 or 4) of quotations / offers are called from the suppliers at the time of making a comparative statement.
In case of single offer / quotation cases obtain reason s for placing the order on specific parties.
Ensure that in case of Repeat orders - fresh offers / quotations are called from the competitive suppliers and a fresh comparative statement prepared. Further a Repeat order should not be placed beyond 6 months from the date of the original purchase order. A fresh order should be raised on the suppliers after 6 months have elapsed from the date of the original PO.
Ensure that a justification note is put in writing on every comparative statement giving reasons for awarding the PO to a supplier.
Carry out a scrutiny of Indents / Purchase requisitions to ensure that the purchase orders are placed as per the requirements given in the Indents.
Ensure that the quantity discounts / rebates offered by the suppliers as per
the terms
given in the PO have been availed by the company.
Obtain a list of Indents pending for conversion into PO and comment upon the old pending indents.
Obtain a list of POs pending for delivery of material and comment upon the old pending PO where the due date of delivery of material has expired.
Ensure that the Purchase Orders have been signed / authorized by authorities as per the financial limits given in the Purchase Manual / Policy. Deviations should be reported.
In case of amendments to the PO ensure that the amendments are duly approved by an appropriate authority and reasons for the amendment (Rate / Quantity ) are given by way of a Note.
Comment upon the possibilities of entering into 6 monthly / annual rate contracts with the suppliers where the consumption trend or level is high.
Examine whether there is a system of standard costing or Budgetory Control in vogue in the Purchase Department. Also, check the Monthly Purchase variance Report wherein all items above + 10% in value should be highlighted and reasons thereof.
17. Internal Audit Checklist of Repair & Maintenance (IA Checklists / Audit Programme)
Check that the preventive maintenance schedules of plant & machinery and equipments have been made at regular intervals in respect of all the branches of engineering -> Mechanical /Electrical Instrumental / Electronics etc.
Ensure that the preventive maintenance schedule is approved in writing by the Head of Engineering.
Ensure that preventive maintenance schedule is carried out as per the plan. Comment on the back log, if any.
Ensure that the preventive maintenance schedule includes all the plant machinery and equipments.
The entries is respect of actual preventive maintenance should be made in the schedule drawn along with the date / name and designation of the employee who have actually carried out the preventive maintenance .
Check whether there is any deviation from the planned preventive maintenance schedule . Enquire in to the reason for such a deviation and comment upon it.
Enquire in to the system / method / procedure of carrying out breakdown . maintenance. Check the format of Job Order / Complaint form / Break down form by the Engineering Department to attend the breakdown of machines / equipment.
Ensure that the necessary details are incorporated such as Department, detail of site of breakdown / date and time of breakdown / date and time of breakdown rectification / signature with name and designation of the person who has initiated the job order / signature with name and designation of the person who has actually attended the problem and rectified it.
Carry out a review of the job order forms to locate the time taken to attend to the break down . Ensure that the breakdown is attended to speedily and also make / obtain a list of pending job order / complaints.
Check that the job order form / complaint form format is proper and all the columns are filled in properly and completely. Also ensure that one copy of the job order form is filled and kept by the Engineering Department for record, safely and securely.
Check the log books of machines / equipment to ascertain the time lag between the break down of the machine and the time when machine started working .
Check the budget v/s actual position of the Engineering Department. Comment on the negative variances from the budget.
Work Order for repairs / fabrication work etc.given to the out side parties : Ensure that the work order given to the out side parties for carrying out any kind of repair / fabrication work related to engineering are issued before the start of the work . This aspect has to be strictly adhered to. The bills submitted by the contractor should be compared with the Work order and then the bill may be passed accordingly.
No work should be started by the contractors unless the work order containing estimate of quantity and value has been issued before the start of the work.
5% variation in quantity and value may be allowed only in those cases where it is not possible to estimate in advance with 100% accuracy the quantity and value of work . Rates should be negotiated with the parties before the start of the work .
18. Internal Audit Checklist of Scrap Material (IA Checklists / Audit Programme)
SCRAP MATERIAL
Ensure that a separate space / scrap yard is earmarked for keeping the scrap material. The scrap yard should have an enclosure and a gate with a lock and key.
Ensure that a proper record is kept of receipts, issues, opening and the closing balances quantity of each item of scrap in the scrap yard
Check that proper slips are kept at the point of generation of scrap and at the receiving end ie the scrap yard. At the generation point(s) the output / production / scrap generation slip should be made in 2 copies giving details of the item of scrap and the Qty of scrap.
The weighment / measurement / counting can take place either at the point(s) of generation or at the scrap yard. However, the scrap generation slip should contain the details of the quantity. The slips should have a serial control and should be authorised by a responsible person. The scrap yard should receive the material on the basis of slip and enter the receipt in the scrap register. Weighment should be carried out at the scrap yard if not already made at the production floor. The weighment should be carried out in the presence of a person each from the scrap yard and the production. Thus the scrap yard entries for receipt of scrap should be made on the basis of generation slips only. The issues entries should be made on the basis of sales invoices raised on customers / issue slips for consumption within the plant.
It should be ensured that the entries in respect of receipts and issues in the Scrap Stock Register are made on the basis of generation slips / Sales invoices / issues slips.
The generation slips / Sales invoices / issue slips should be authorised by a responsible person.
Scrap Generation points should be identified and a booklet of generation slips with a serial control given at each generation point. The scrap yard person should sign on one copy of the slip as an acknowledgement of having received the scrap qty as given in the sl ip and return the slip back to the generation point. The second copy of the slip is to be retained at the scrap yard.
For sale of scrap ensure that a comparative chart of offers / quotations is prepared and the Sales order is made in the name of the best quoted party. All the offers / quotations should be properly evaluated.
Scrap sale should be effected on spot payment terms - cash / DDs at the time of delivery. Ensure that full amount is collected from the customer before the material is allowed to be lifted.
Ensure that Sales Tax / excise duty is properly charged in the Sales Invoice.
Ensure that no debit balances appear in the Sundry Debtors ledger in respect of scrap customers.
Ensure proper counting / weighment / measurement of scrap at the Scrap generation point(s) / Scrap yard.
The Scrap Stock Register should be kept updated at all times. A gate pass should be issued at the time of despatch of material from the Scrap Yard and the gate pass should then be checked at the exit gate by the security.
A periodical physical verification of scrap stock in scrap yard should be made and the physical Qty tallied with the book quantity. The discrepancies, if any should be reported.
The total scrap generation as per the Scrap Stock Register should be tallied with the quantity of scrap generation of various types as shown by the costing data. Comment if any difference / discrepancy is observed.
19. Internal Audit Checklist of Secretarial Deptt. (IA Checklists / Audit Programme)
SECRETARIAL
Carry out a review of the statutory records required to be maintained by the Secretarial Department. The records include the following
o
Register of Members.
o
Register of Debenture holders.
o
Directors Attendance Register.
o
Minute book of the - Board meeting / General Meeting / other Meetings .
o
Register of Contracts
o
Register of Directors share holding .
o
Register of Investment .
o
Register of Fixed Deposits .
o
Register of Share Transfers.
o
Register of Charges.
o
Index of Members.
o
Index of shareholders.
o
Register of Foreign Members.
Ensure that compliance with the S E B I guidelines is made by referring to the S E B I guidelines / circular / notifications etc.
Check that the company is regular in meeting its obligations towards the share holders/ debenture holders / banks / financial institutions / fixed deposit holders etc. Check whether the company has defaulted in making payment to the fixed deposit holders / payment to the financial institution / members / banks / debenture holder etc. and comment upon the nature and the extent of default .
Ensure that the Company has adhered to the various compliance matters falling under Corporate Governance . Refer to the guidelines on Corporate Governance - Terms of Reference of Audit Committees etc.
Ensure that all the share transfers lodged are duly effected in the records.
In case of acceptance of Fixed Deposits from the public, ensure that the provisions of section 58 A /58AA / 58AAA to the Companies act 1956, have been complied with.
Ensure that the provisions of Companies (Acceptance of Deposits) - Rules 1975 are complied with
In case the company has issued debenture / bonds etc. ensure that the terms and condition of the issue, as given in the prospectus to the issue, debenture deed / trust deed have been complied with.
Ensure that the statutory records and registers as required to be maintained under the Companies Act (point 1 above ) are properly maintained and are kept updated at all times.
20. Internal Audit Checklist of Stores & Spares (IA Checklists / Audit Programme)
Store may be categorized into the following categories
1.
Raw Material Store.
2.
Engineering / General Stores.
3.
Finshed Goods Store - Warehouse .
Categorise the Total Store Inventory into the following classification.
Slow moving inventory items that have moved slowly during the period of audit ( A criteria may be set in this regard )
Non moving inventory item that have not moved during the period of audit ( A criteria may be set in this regard )
The classification into Slow Moving / Non Moving inventory should be made for all the stores RM / Engineering / Finished Goods.
The Slow / Non moving inventory should be further classified into the following categories – The value and quantity of -
(a)
Item that will be consumed in the next few months.
(b)
Items that can be sold off being not required.
(c)
Insurance spares - in case of Engineering stores.
(d)
Items that have to be scrapped – useful life being over.
Check the Goods Received Notes (GRN) to ensure that the GRN are properly filled in. Ensure that all the columns of the GRN have been completely filled in.
Ensure that inspection by the proper person has been made and his remark has been entered on GRN. Locate the cases where unreasonable delay has taken place in carrying out the inspection of the material. Check that the date of inspection is put on the GRN by the person who has carried out the inspection.
The GRN should have a serial control and the GRN should be authorised by a responsible official.
Ensure that an action plan has been drawn to dispose off / sell the Non-moving inventory.
Check the Material Requisition Notes / Material Issue Note (MRN / MIN) in respect of the issue of material to production. Ensure that the Material Requisition Notes / Material Issue Notes are properly and completely filled in.
Further check that details of – quantity of stock in hand are filled in all the Material Requisition Notes before the MRN are sent to the Purchase Department for effecting further purchases. All the columns in the NMRN / MIN should be filled in.
Ensure that the MRN / MIN are authorized by a responsible official.
Ensure that the stores stock ledgers are kept uptodate and entries in respect of receipts / i ssues are made on a daily basis.
Carry out a physical verification of say 10% items in the stores inventory (All ‘A’ items should be verified 100%)and check whether the physical balances agree with the book balances appearing in the stores ledger. Comment upon the discrepancies, if any.
Enquire whether there is a system of Perpetual Inventory in force where at any point of time the book balances agree with the physical balances. The system of continuous stock taking -
perpetual inventory should be such that every single item is covered at the physical stock take at least once in a year.
Check that Norms (No of days consumption) have been determined in respect of inventory level of Raw Material. The inventory level should be maintained at that level. Comment if the inventory levels are at a higher level as compared to the Norms.
Ensure that the stores - warehouse inventory is kept properly segregated with clear identification marks. Further, the imported material and the material bought under Advance licence should be stored separately and with prominent identification tags.
Check that entries in the records of the gate have been made for all the inward material. Check the entries in the gate register with the GRR / Invoices of the supplier. The gate entry should be made on the face / back of the suppliers’ invoice.
Ensure that the Rejected Material is kept separately and the material is returned back to the supplier only after adjustment of outstanding balance in Accounts.
Ensure that the Material Requisition Note - INDENT - format has separate columns for showing - stockin hand and - Item consumption pattern for the last 6 months.
Ensure that the shortages in the receipt of material are duly taken care of by recovering the amount from the transporters / supplier/insurance companies. Check that there is a proper control over the claims pertaining to shortage of material.
In case of Engineering Stores ensure that proper identification tags / codes are put on the bins for identification of material.
Check that the return of material from shop floor - production to the stores is effected through Material Return Note (MRN) only. Ensure that the MRN are duly authorized by a responsible person and all the columns of the MRN are properly and completely filled in.
Check whether an ABC analysis of the stores inventory is carried out both by value and consumption. Comment upon the need for an ABC classification of inventory for ensuring a proper control.
Ensure that a proper control is kept by Stores over items sent outside for job work/repair etc (Material sent under a Returnable Gate Pass)Check that the list of pending items (RGP) is prepared on a regular basis and the materials sent are received back within a reasonable period .
Ensure that various items forming part of the Stores inventory are stored properly and safely. For example in case of chemicals, ensure that the containers are kept safely and not exposed to rain / heat /sunlight etc. Carry out a review of all the items Stores-Raw material/General/Engg/Packing material and the finished goods warehouse.
Check the procedure adopted in the Stores for carrying out the inspection of material. Ensure that a place is earmarked for inspection in stores.
Ascertain the status of Pending GRR in the stores - (a) Items where the material has been received but the GRR have not been made and (b) cases where the GRR is made but pending to be sent to the Accounts for further processing on account of want of information. Check that the material received/ GRR preparation and authorisation / sent to accounts cycle is completed within the shortest possible time.
Issues after General Working hours
Enquire into the procedure of making Issues in the night/after general office hours. If the Stores also works in shifts then it may not pose any problem but at such plants where the stores operates only during the normal working hours then enquire whether any Night Issues Register is maintained and entries in the night register duly regularized / authorized next morning by a responsible and authorized person.
Ensure that all key items in the Stores (above or certain value, to be decided by Unit Management) are insured against fire, theft etc.
