STANDARD INTERNAL AUDIT PROGRAMME
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I. SALES:

1 To study the system for approval and acceptance of orders and to give suggestions for improvement. 2 To check the order acceptance with price list, if any, and to report the financial impact of sales below the price list. 3 To compute the percentage mix of sales made to new parties developed during the period under review and also compute the opportunity loss due to non-development of prospective parties as customers. To identify the reasons for non – development of these parties into customers. This may, further, be correlated with the expenses incurred during foreign tours conducted by the marketing personnel. 4 To study the system of order acceptance and invoicing and to report deficiencies in internal control, if any, along with suggestions for improvement. 5 To check the complaints and rejections during the period under review. Following aspects are to be checked in details: a) Nature of various complaints and percentage thereof. Reasons for frequent complaints of similar nature to be looked into. b) To study the role and follow up done by the Quality Assurance Department in respect of various complaints received during the period. c) To check whether there has been any major rejection, both, in domestic and overseas market, identify the reasons for the same and follow up action taken in this respect. d) To study the various reports prepared for monitoring and reporting the complaints and rejections during the period under review. If not reported in the MIS, to suggest a proper reporting format. 6. Checking of samples sent to various customers and parties: a) To check whether samples are sent to all the parties with special reference to the parties whose demand is substantial and payment term are also good. To identify the reasons for not sending the samples and compute any opportunity loss. b) To see whether any report/MIS prepared for samples sent to various parties and suggest any improvement, if required. c) Check the follow up actions taken on samples sent to various parties. 7. To verify and report the delay in despatch of materials as per schedule mentioned in the Order Confirmation and to identify the reasons for delay in despatch. Also to check that there is no time gap between production and dispatch. 8. To test check sales invoice with price list, orders and contracts. 9. To test check calculation of sales invoices. 10. To test check delivery challans, dispatch register/challans and stock register. 11. Check Debit Note/Credit Note raised during the period and to verify the justification for raising such Debit Note/Credit Note. 12. Study the MIS reports prepared and note that all the relevant information is available in the same. 13. To study the system of Sales Accounting and to give suggestions for improvement. 14. To check reconciliation of total sales as per the financial records and stock records to ensure that corresponding entries have been recorded and passed. 15. To check the reconciliation of total sales with the Sales Tax Returns. 16. To check that Sales Tax Forms are received along with payment and if not, payment for additional tax is received.

II. DEBTORS:

1. To compute the holding period of Debtors and to report old outstandings and the follow up made for the same.

2. To analyse the trend in Debtors Turnover over the years.

3. To study the system of accounting of collections made from Debtors and to give suggestions for further improvement.

4. To scrutinise the Ageing Report of Debtors and see that all the credit entries have been adjusted against the corresponding debits. To report the deficiencies observed in the Ageing Report.

5. To report the lack in follow up action by the marketing personnel for overdue Debtors. Also to report cases where further sales are made to the customers who have huge outstanding overdue balance as on the date of further sales. 6. To study the system of giving discount and check the following: a) To check whether the same is being given as per the rules. b) To see whether cash discount is given on the basis of date of realization of cheque or on the basis of date of receipt of cheque. If the same is on the basis of date of receipt of cheques, to check that the cheque has been realized within a reasonable time. 7. To study the MIS reports prepared for Debtors and suggest improvement therein, if required. 8. To see whether the status of overdue debts is reviewed and the follow up actions taken is respect of the same.

III. PURCHASES : 1. Raw Material – Direct Import: 1.1 To check the basis of pricing of materials for direct imports and to see that the terms as stated in the Contract is applied. 1.2 To check whether quotations are invited from various suppliers to obtain best competitive rates. 1.3 To study the system of checking of invoice in the Accounts Department and to see that proper internal control exists. Report any lacuna observed in this respect and also give suggestions for improvement. 1.4 To check the packing list with the Bill of Entry and the Bill of Lading. 1.5 To check the accounting of purchases and to verify the documents attached with the Purchase Journal including purchase order. 1.6 To check the Purchase Bills with Purchase Register, Stock Register, GRR, inspection report, weighment report etc. 1.7 To check demurrage incurred, if any, and reasons for the same. 1.8 To check reconciliation of total purchases as per the financial records and stock records to ensure that corresponding entries have been recorded and passed. 1.9 To verify freight, clearing agents expenses etc. and to see that the same is not excessive. 2. Raw Material – High Sea Purchases: 2.1 To check the Contract/Agreement with the Importer. 2.2 To check the Internal Control System on checking of rates applied for high sea purchases. To report deficiencies, if any and to give suggestions for improvement. 2.3 To study the system of recording of receipt of materials and to check the internal control on the same. 3. Raw Material – Local Purchase: 3.1 To check the Agreement/Contract for raw material purchase done in domestic market and check the basis of pricing. 3.2 To check quotations invited to obtain best competitive rates. 4. Purchases – General Stores: 4.1 To check that registration of parties is reviewed from time to time and to review the possibility of purchasing directly from the manufacturers or their authorised agents and to report on purchase made from general order suppliers and un-registered parties. 4.2 To check and report on the procurement of materials from a single source and whether such purchases could be avoided. 4.3 Random checking of delivery with reference to terms and conditions of purchase orders and whether liquidated damages if applicable have been recovered from the defaulting parties. 4.4 To check pending purchase orders and report on the overdue orders with reasons thereof. 4.5 To check the Indent/Stores Requisition/Purchase Orders to establish that all the materials procured were actually required. 4.6 To check the Purchase Order and the Comparative Statement to see that the Purchase are made at best market price and terms. 4.7 To check entries in the Gate Records and GRR to ascertain that GRR has been made for all the materials received and that no material is received without entry in the gate records. 4.8 To check whether purchases are made from un-registered dealers and to ascertain additional sales tax liability arising there from and whether the same can be avoided. 4.9 To scrutinize pending purchase orders and report on the overdue order with reasons thereof. 4.10 Random checking of delivery with reference to terms and conditions of purchase orders and whether liquidated damages, if applicable, have been recovered from defaulting parties. 4.11 To check local purchases and to verify whether the rates are higher than regular purchases. IV. SUNDRY CREDITORS: 1. To check the bill wise details of Sundry Creditors and to check the correctness of the outstanding balance with reference to the accounting vouchers.

2. To check the accounting for acceptance of materials against L/C.

3. To check that payment to suppliers is made as per the terms of reference.

4. To check the debit balance lying in the name of Suppliers and ascertain the reasons for the same to report any further advances given to the parties with whom advances already exists on the date of fresh advance.

V. STOCK:

1. Raw Materials:

1.1 To check the consumption of raw materials with reference to the norms/target.

1.2 To check the reconciliation of quantity issued as per stores and quantity received as per the Planning/Production Department.

1.3 To scrutinize the consumption trend on monthly basis and compare the overall trend in the earlier years. 1.4 To compute the stock holding period and to report excess stock holding with reference to norms/projections. 1.5 To check the raw materials issues with the requisition slips on a test basis. 1.6 To check physical verification working papers and the shortage/excess noticed on physical verification. 1.7 To check closing stock valuation with purchase bills, stock register, cost sheets, market price/ contract price etc. 1.8 To see the utilisation of Advance license for import of raw materials. Also check and suggest hedging transaction for achieving the contemplated material margin.

2. Finished Goods: 2.1 To compute the stock holding period of closing stock of finished goods vis a vis the projections and to report non – moving stocks. 2.2 To report stock in hand without having confirmed orders for the same.

3. General Stores: 3.1 To check the consumption of major items vis a vis norms/ past trend. 3.2 To compute per ton cost of stores consumed and to report reasons for variation vis a vis target. 3.3 To compute the stock holding period and compare the same with the stock holding period in earlier year. 3.4 To study the system of stores accounting and suggest improvement. 3.5 To check whether store issue is recorded cost center/department wise and the consumption at the respective center/department with reference to norms/past trend. 3.6 To check loan register for materials issued on loan with the challan and verify that materials not returned are included in the closing stock. 3.7 Check materials sent outside for job – work/repairs and see the return of the same in due time. 3.8 To check the indenting procedure and to determine the desirability of fixing Maximum, Minimum and re-ordering level or any other modality for indenting of materials. 3.9 To check over/under stocking of materials with reference to minimum, maximum and re-ordering levels of materials and to report on the overall stock holding period as well as that of major items of stores. 3.10 To report the slow moving, non-moving and obsolete materials. 3.11 To check that used materials have been received back against fresh materials issued from stores and to check recording of used materials/scrap in the scrap register. 3.12 To check control on receipt and issue of major store items. 3.13 To check that issues to contractors and outside parties are duly sanctioned and whether the items are included in the works order issued to them. 3.14 To check the rejection memos with the Inspection report and Goods Outward Register. 3.15 To check Excise Invoice and claim of CENVAT. 3.16 To check that no material has been purchased inspite of having sufficient stock as well as to check that there are no materials having NIL stock for which issue slips have been raised. 3.17 To report materials purchased but not consumed for long. 3.18 To check and report the cases where materials were purchased without inviting quotation from 2 – 3 suppliers. 3.19 To check that cash purchases have been made only in case of emergency and have been routed through stores. 3.20 To check the system of Motor Rewinding and see whether any life analysis is done or not. In case record for the same is not maintained, work out the life of a rewinded motor and that of a new motor and compare the same. Also check whether the old bearings/wires are returned to the stores or not. Also check the mode of inspection and acceptance of the rewinded motors.

VI. PRODUCTION: 1. To check that production is made as per the programme given by the Planning Department and to report cases of delay along with the reasons for the same. 2. To check the product mix with the targets and to report the item wise value addition in the product mix. 3. To compute machine wise efficiency and reasons for low efficiency including downtime and reasons thereof. 4. To check alloy wise yield for each batch and to ascertain and report the reasons for variance vis a vis the standard. 5. To check the percentage/quantity of melting loss vis a vis the standard and reasons thereof. 6. To check the milling loss percentage from batch to batch. 7. To compute the production cycle for each batch. 8. To check machine wise details of scrap generated as per Scrap Report and compute the percentage with the input of that particular machine with reference to the norms. 9. To cross check the quantum of Scrap generated per the Scrap Report and the quantity received in stores. 10. Quality Control: a) To check that the defects noticed during production process/finished goods returned by customers have been analysed and are not repetitive in nature.

11. Work in Progress: a) To compute the stock holding period of WIP stock and to report cases of excess time taken in production as well as material lying in WIP for abnormally long time. b) To check the correctness of WIP stock with records maintained on shop floor.

VII. OPERATING RESULTS: 1. To work out product wise as well as total contribution. Reasons for variance in the contribution are to be analysed and reported.

2. To analyse the reasons for variation in net profit vis a vis projections.

3. To see the concept of Budget and the targets set for the financial year. Check whether there is any revision in the same and the basis of such revision. See the performance level reporting done to the management and report the variance.

VIII. EXPENSES AND OTHER FINANCIAL ASPECTS:

1. To identify the major expense accounts and compare the same with the target as well as the expense during the corresponding period in previous year. To identify the Internal Control weakness and report the same along with suggestions for improvement.

2. To carry out a detailed analysis of all the major expense and to make analytical reporting of the expenses with suggestions for cost control.

3. To do detailed analysis of the expenses like Foreign Travelling Expenses to be done and the opportunity loss incurred due to non- capitalization of the opportunities available to be reported.

4. To check the expense vouchers and to report.

a) Such cases where the expenses are beyond the rules of the company, and b) Cases of abnormal expenditures, be it by amount or by nature.0

5. To check that there is uniformity in accounting treatment of various expenses.

6. To check the cost of various capital jobs vis a vis job estimates and to check that entries for capitalization are passed immediately.

7. To check the calculation of interest charged by the Banks and other financial institutions.

8. To report the penal interest charged by the banks and other financial institutions.

9. To see the quantum of cash withdrawal and utilization thereof.

10. To see whether the Cash Management System facility offered by various banks is utilized or not and how the time is saved in transferring the realization to the Central Collection center.

11. Costing System:

a) To comment on the existing Costing System. b) To see the use of costing system in each department. c) To do variance Analysis.

12. To check that Tax is Deducted at Source according to the Income Tax Act and the same is timely deposited to the government.

13. To check that Bank Reconciliation Statements are prepared for all the bank accounts and obtain details of entries which are pending for long. Also to see the effect of these pending entries on the position of debtors and creditors.

14. To check that Inter Unit and Branch Reconciliation is prepared on a monthly basis.

15. To check whether all the assets are adequately insured or not.

16. To check whether insurance claims are properly followed or not.

17. To check the telephone wise expenditure and see that proper use of cheap mode of communication like e-mail is preferred over other modes.

18. To check that Power consumption is proper and that the connected load is fully utilized.

19. To check whether expenses of capital nature have been charged to expenses with special reference to Repairs and Maintenance.

20. Vouch the legal and professional expenses and check whether any important suit is pending with implication thereof and current status.

IX. TIME OFFICE:

1. To check the time office records i.e., attendance register, leave register, payment sheet, overtime records etc.

2. To check the labour deployment of casual labour and payment of overtime with work done.

3. To check leave entitlements and recording of the same in the leave register.

4. To check incentive payments with the production of the respective department.

5. To check the compliance of various labour laws including P.F. and ESI for the company own employees as well as the contract labour.

6. To check the system of overtime payment and see the reasonableness for payment of overtime.

7. To see whether the workers are required to work for a minimum number of hours before being entitled to overtime.

8. To study the system of sanction of overtime and report internal control weakness, if any.

9. To check whether T.D.S. and other statutory dues are deducted and paid in time.

10. To check whether statutory compliance of various acts has been made.

X. STATUTORY LIABILITIES:

1. To check other statutory payments like Sales Tax, Excise Duty etc. and report any default in payment of such dues and implication thereof.

2. To report cases to delay, if any, in payment of Statutory Liabilities.

3. To report cases of delay in filing various returns under the Companies Act, Income Tax Act and Sales Tax Act.

4. To check that the balance kept in the Excise PLA is within reasonable limits.

5. To check whether timely credit has been taken in respect of items on which CENVAT credit is available.

6. To check the deduction and payment of Professional Tax.

7. To check that P.F. contributions have been collected correctly and also that these have been deposited promptly.

8. Check of records under P.F. and E.S.I. Act etc.

XI. UTILITIES:

1. To check the records kept for generators and to verify the consumption of diesel and lubricants.

2. To work out the cost per unit of own generated electricity and compare the same with that of cost per unit charged by the Electricity Board.

3. To work out the electricity cost and unit consumed per unit of production.

4. To report wide variance in running cost for generating one unit of electricity.

5. To check the total HSD Oil consumed as per the generator log book and total issued as per the stores ledger.

XII. TRANSPORT:

1. To check the meter reading log book of the vehicles and report the discrepancies.

2. To work out the kilometers run per liter of fuel consumed.

3. To check the difference in oil consumed as per the transport log book and the stores ledger.

4. To work out the total running and maintenance cost per kilometer run for all the vehicles.

5. To check the cost of transportation by own vehicles vis a vis to freight paid to transporters.

6. To check the contracts with all the transporters and also see whether quotations are invited from various transporters to obtain best competitive rates and that comparative statement analysis is done before entering into contract with the transporters.