10 THINGS YOU MUST CONSIDER WHILE DOING BANK AUDIT

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As the FY 2015-16 ends and the countdown starts for the Banks Audit. 1^st April reminds chartered accountants to revise the check list, last year bank audit reports and many things which they left unchecked last year. So out team has decided to prepare to 10 things you must consider while Bank Audits. We have seen that most of the youngster Chartered Accountants searched on google about the check list for Bank Audit, Step by Step bank audit process, Process for bank Audit, Complete details regarding Bank Audit, how to conduct concurrent audits for Bank and many more. So this post is just for you.

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1. Start with Basics

The first basic principle of Bank Audit is to check the basic information about the customers of the Bank. The best way to check the same is to vouch the self-attested customer’s identity proofs. By doing so you will be able to know whether your customers are really genuine or fake accounts.

2. Statutory Compliances

Like any other assesse banks are also bound to other statutory liabilities such as Income Tax, Service Tax etc.  You can check whether Bank has regularly deducted TDS on interest paid to customer and deposited the same before the due dates. Also check whether the bank has also charged Service Tax at appropriate rates.

3. Penal Interest

Check whether bank is appropriately charging Penal Interest for Non submission of Stock Statements, FFR Reports etc. as per the circulars issued for the banks.

4. Check Unusual Transactions

Get the report for unusual transaction from the banks software and do in-depth study of the same.

5. Surprise Cash Verification

It would be necessary in every bank audit to do a surprise cash verification. Also check whether cash counting machines are working properly.

6. Top Customer

Check the list of Top Customers as most of the embezzlement found in the accounts of top customers only.

7. Checking Previous Audit reports

Before starting the Bank Audit, you must recheck the last years bank audit reports. There is catch in reading the previous audit reports as it has been seen that banks mostly repeat the same errors in current year as in last year.

8. Vouching

After adopting the smart work don’t forget the importance of vouching as this may help you to understand the working of the bank in depth.

9. Renewal of Sanctions

Bank sanction needs to be renewed every year on the basis of latest documents received from the customers. Check the same and report for non-renewal of sanctions.

     10. Other Internal Controls

Among other things check internal controls for issuing of check books, demand drafts etc.

HOW TO DO AUDIT OF FOREIGN SUBSIDIARY

INTERNAL AUDIT OF FOREIGN SUBSIDIARY

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The world is a global village. Where it is a boon on one hand, on the other it also means that the competition faced by the business in our country are no longer confined to the domestic boundaries, they too are coming from across the globe. An opportunist will however take it as the market gone global. Whichever way we take it, one thing is something everyone will agree to and that is the need to expand- the need to the go beyond the domestic boundaries and face the completion head front. The scenario is slowly but steadily changing and we have seen more and more Indian MNCs emerge . Videocon is a good example.

Setting up a subsidiary in a foreign land comes with a lot of challenges. The law that is applicable to the holding company may not be the same as applicable its foreign subsidiary. The law that will be applicable to a foreign subsidiary will be that which is prevalent in the foreign country. Apart from that work environment and cultural differences are also there. One must cope up with all of them and then only the organization can flourish. One of the many concerns of the management while setting up a foreign subsidiary is control. They wish to have effective control over the subsidiary while sitting miles away. To ensure the same, internal audit is one of the ways to ensure the existence and effectiveness of control. The management can place reliance of the internal audit report and rest assured with the fact that management of the subsidiary in foreign land is organized and well in order.

Internal auditing is a catalyst for improving an organization’s governance, risk management and management controls by providing insight and recommendations based on analyses and assessments of data and business processes .

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Internal audit is not just a tool for the management to ensure that the controls are in place and running effectively but also mandatory under various laws in different countries. Almost In all the countries there exists a law that makes internal audit for a certain class of companies compulsory. Therefore we can say internal audit is not only a need of the management but a requirement of law.

As companies expand globally, internal audit functions need to determine whether to provide audit coverage from a central location or from a satellite or branch operation aligned geographically with the expanded business operations. This is a matter of choice. While some organizations prefer local auditors which are well versed with the situations and practices of the land in which the subsidiary is incorporated while others prefer auditors from the country of parent company with a view that parent company’s management rely on them. At times the assignment is outsourced. This approach may be adopted either for quality or cost effectiveness.

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While conducting an internal audit of a foreign subsidiary, the auditor faces many challenges. The major obstacles in performing internal audits of overseas subsidiaries are language and differences in local business practices. In addition, the operations of many overseas subsidiaries are based on different systems than those of their parent company, making it difficult to perform an efficient risk based internal audit in a short period of time. Furthermore, business and accounting information may not reach the parent company in a timely manner, and it is not uncommon for there to be significant amounts of improper usage of funds and fraudulent accounting when you are able to evaluate the situation. However the same can be overcome by proper research and planning in advance.

What differentiates internal auditing from most other professions, though, is the single, global nature of its standards. Our worldwide profession is shaped and guided by the International Standards for the Professional Practice of Internal Auditing. These standards, from The Institute of Internal Auditors (IIA), engender quality and consistency for internal audit organizations throughout the world. Yet flexibility and adaptability underscore the standards; as the internal audit profession continues to evolve, so does our understanding of its parameters.

The standards on internal auditing issued by the Institute of Chartered Accountants of India are also very much in line with the international standards and thus making the Indian internal auditors competent to perform the said assignment. Today Indian internal auditors are nowhere behind when it comes to the audit of foreign companies; Infosys being a leading example. These audits when performed by Indians are not only high quality and cost effective but also completed with a time boxed approach.

One of the distinct features of the internal auditing standards (whether issued by IIA or ICAI) can be summed up to highlight their flexibility and adaptability. On one hand they are strong enough to ensure uniformity and high quality and on the other they are adaptable so that the practices and methods can be varied as per the environment of the auditee.

We can sum up to state that globalization has changed the competitive scenario and expansion seems to be the need of the hour. With more and more Indian companies going cross borders the issues regarding effective management and controls arise. Internal audit serves the purpose in this situation. They are not only need of the management but mandatory as per various statutes. However due to various barriers such as linguistic, environmental cultural etc, the task becomes more and more cumbersome. Internal audit due to its uniform approach globally tries to overcome those barriers. The standards issued by ICAI which are in line with those issued by IIA ensure quality and standardization in the internal audit assignment. Thanks to their flexibility and adaptability, they help the conduct of internal audit assignments across the globe and make the Indian professionals stand shoulder to shoulder with professionals anywhere in the world and thus reinstating the fact of world being a global village.

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Regards

CA GROUPS

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Disclaimer : If a person copies this article without giving any credit will be liable of punishment under copyright act , as this article is copyrighted content in the name of CA GROUPS

HOW TO DO AUDIT OF PURCHASE DEPARTMENT

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In our list of Internal audit checklist series, today we are going to teach you how to do Audit of Purchase Department. Previously we taught you Audit of HR Department and today i am sharing with you my experience of auditing in purchase Department.

Every auditor should kept in his mind following things before audit of Purchase Department of any organisation.

AUDIT OF PURCHASE DEPARTMENT : CHECKLISTS

1. Check whether organization is having approved Purchase Manual. Purchase Manual should include policies / procedures (SOP) / and all the matters relating to purchase process.
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2. Carry out a scrutiny of Indents / Purchase requisitions to ensure that the purchase orders are placed as per the requirements given in the Indents
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3. Comparative statements should be prepared on cost criteria. All the costs such as the base price / taxes / duties/ freight & cartage/ insurance / interest etc should be indicated in the comparison and the final cost of comparison should be the landed cost of the item.
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4. Check whether there is an approved Vendor list of suppliers / authorized dealers/ AMC has been prepared and being updated on a regular basis by an executive authorized by authority. The Approved Vendor list should carry all the items of purchases – Raw Material / service / Consumables / Packing material etc. The vendor list can be in ERP or an Excel file as per the scale of purchase.
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5. Check on the possibilities of entering into Quarterly / monthly / annual rate contracts with the suppliers where the consumption level is high. (Mostly done for IT services)
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6. Reasons for purchases made at different rates should be asked. Any Rate Variations without a proper justification should be reported in observations.( As per my exp difference in Rates is majorly due to quality of goods. )
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7. Check whether the comparative statements of quotations (CSQ) are duly approved by an appropriate authority (as per DOA) and dated.
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8. A scrutiny of Purchase Orders should be done on sample basis to ensure that comparative statement of quotations are prepared and attached with PO and also properly authorized as per DOA matrix and the order should be placed on the lowest bidder after considering factors like quality / delivery / payment terms / profile & competence of the vendor to deliver material.
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9. Ensure that in case of Repeat orders Quotations are called from the competitive suppliers again and a fresh comparative statement prepared. Further a Repeat order should not be placed beyond 6 months from the date of the original PO.
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10. Find out the Variations in rates of items purchased over a period of time . The purchase register whether prepared Manually / in ERP/in SAP must having an item Code / Name of the item and purchases made of that item over a period of time at varying / same rates with reference to the Purchase Order Number.
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11. In case of single offer / quotation cases obtain reasons for placing the order on specific parties.
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12. Ensure that a sufficient number (at least 3) of quotations / offers are called from the suppliers at the time of making a comparative statement. If it is not possible proper justification should be recorded
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13. Ensure that a justification note is put in writing and got approved from appropriate authority on every comparative statement giving reasons for awarding the PO to a supplier.
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14. Ensure that in case of Repeat orders Quotations are called from the competitive suppliers again and a fresh comparative statement prepared. Further a Repeat order should not be placed beyond 6 months from the date of the original PO.
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15. Examine whether there is any system of standard costing or Budgetary Control in the Purchase Department.
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16. Obtain a list of pending Purchase Requisitions for conversion into PO and comment upon the old pending PR’s.
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17. Ensure that the quantity discounts / rebates offered by the suppliers as the PO terms have been availed by the company.
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18. Ensure that the Purchase Orders have been signed / authorized by authorities as per the financial limits given in the Purchase Manual / Policy. Any Deviations should be reported.
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19. Obtain a list of all pending POs for delivery of material and comment upon the old pending PO where the due date of delivery of material has expired. (Make PO Tracking sheet for the same)
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20. Check on the possibilities of entering into Quarterly / monthly / annual rate contracts with the suppliers where the consumption level is high. (Mostly done for IT services)
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21. In case of amendments in the PO ensure that the amendments are duly approved by an appropriate authority as per DOA MATRIX and reasons for the amendment (Rate or Quantity) should be documented.

Hope now you can do Audit Of Purchase Department very easily if you are having any queries related to Audit must ask below in Comments we will try to solve it.

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Regards

CA GROUPS

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Disclaimer : If a person copies this article without giving any credit will be liable of punishment under copyright act , as this article is copyrighted content in the name of CA GROUPS

HOW TO DO HR AUDIT OF ORGANISATION : COMPLETE CHECKLIST

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Many of the articles asked me about how to do HR Audit of a Organisation. So I am providing the HR audit checklist for you all. This HR Audit checklist can be used in Internal Audit Department of the organisation. Or you can also use it while making HR SOP. If you think i have missed any area then you can comment below or you can also put your queries regarding HR Audit. Because i have done 2-3 HR Audits till now and I can share my experience with you.

HR AUDIT CHECKLIST :-

A. MANPOWER REQUIREMENT

Check that details relating to manpower requirement is informed to the management at least well in advance.-

• No. of Employees required
• Kind of Manpower required ( Skilled / Unskilled
• Qualification required ( Graduate/ PG / Professional )
• Experienced, Fresher or Trainee
• Budget

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B. Interview

1. Check that interview is taken by the committee appointed for the purpose, comprised of of at least three members or may be through proper channel like first HR Round then Technical.

• One Functional Head or Respective departmental head.
• Higher official – Unit Head
• One HR Manager or Executive

2. A proper form should be provided by the HR Executive, Which is duly filled by the candidates.

3. The interview is conducted at Unit level or HR Level for the first phase and then short listed candidates are interviewed by the higher management for final phase.

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C. Offer Letter

Offer letter should be given to the selected candidates within 2 -3 days for their acceptance

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D. After Appointment or Onboarding

Please Check that :-

•  Appointment letter is given on the date or within 3 days of joining.
• Employee Information form should be filled and documented within 3 days of joining.
• Terms and conditions associated with appointment should presents a clear picture.
• Complete code of conduct should be provided to the candidate who thoroughly reads it
• Code of Conduct sheet shall be updated on timely basis.

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E. Training & Development

• There must be proper training calendar for all employees.
• Lock-in-period of at least one year on completion of probation/ Training period.
• Performance Management Document should be present

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F. Statutory Compliances Relating To HR :

1. Check for Applicability of various acts and Their due compliance by HR Executive-

• The Apprentices Act,1961
• The Employee’s Provident Fund and Miscellaneous Provisions Act,1952
• The Employee State Insurance Act,1948
• The Factories Act,1948
• The Minimum Wages Act,1948
• The Payment of Bonus Act,1965
• The Payment of Gratuity Act,1972
• The Payment of Wages Act, 1936
• The Trade Union Act,1926
• The Workmen’s Compensation Act
• Factory and Boilers Act
• The Industrial Disputes Act, 1947
• Contract Labour (Regulation and Abolition) Act
• The Industrial Employment (Standing Orders) Act
• Air (Prevention and Control of Pollution) Act, 1981
• Water ( Prevention and Control of Pollution) Act
• The Environment (Protection) Act
• Noise Pollution (Regulation and Control) Rules,2000
• The Personal Injuries (Compensation Insurance ) Act, 1963

2. All the required registers and documents as per above applicable acts should be maintained.

3. Various challans are paid on time. For eg. Challan for PF has to be paid by 15th of next month and Challan for ESI has to be paid by 20th of next month)

4. Consolidated HR records are sent to the HR head for the group including details about all the compliances made by the Company by 20th of next month in a prescribed format.

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G. Attendance

1 Daily attendance is taken either in morning or evening in Attendance Register ( Now a days this is done through ERP)

2 Separate register is maintained for daily workers & staff on probation period

3 This register is checked and signed by Executives of two different Department (i.e. by HR Executive and Unit head)

4 Gate pass register should be maintained. Entries relating to all visitors is made in the register and at the end of the day it is verified by Admin department.

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H. Salary And Wages Procedure

         Check that :-

1 Pay scale and salary structure of the labour & staff should be uniform

2 Calculations of allowances, deductions etc should be according to the provisions and rules .

3 Person making the salary and processing the payment should be different.

4 Salary payment by the first week of next month.

5 Proper workings of salary sheet should be maintained and its authorisation thereon. If payroll processing is outsourced a proper report should be asked from them.

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I. Leave Procedures

Leaves taken by employees are classified in Paid, Casual, Sick Should be allowed as per the HR Policy

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J. Termination or resignation

Proper notice period should be served by the employee and full and final clearance thereof before resignation/termination as per HR Policy.

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K. Promotion Management System

1 After completion of at least 12 months of service, promotion or hike in salary should be done on the basis of performance appraisal and as per management decision.

2 Bonus amount would be calculated depending upon the employee performance and at the decision of the higher management.

3 Employees should submit Self Appraisal Performance Report on quarterly basis to his manager and manager should review the same and transfer it HR Team

4 Employee birthdays, Marriages and anniversaries should given due consideration and token of gift should is sent on behalf of the Company.

5 A suggestion or a complaint box should be kept and it is the responsibility of the HR Department to check the same and reporting the same to the higher management .

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L. REIMBURSEMENT OF EXPENSES TO EMPLOYEES

Expenses are reimbursed to the employees incurred for official purposes as per the reimbursement policy of the organisation.

INTERNAL AUDIT CHECK LIST FOR FINANCE DEPARTMENT

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Internal Audit Check list for Finance Department

A. Stock

      Check that :-

1 Ageing of FG is done on monthly basis by the stores keeper and authorised by
   Manager stores 

2 Physical verification is done monthly by unit staff 

3 Proper classification of Non Moving Stock is done by unit 

4 Above records are verified by Manager Commercial and reported to Unit Head, which
   further reports it to Finance Officer

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B. Cash

       Check

1 Physical cash in custody of Accounts assistant at least once a month, prefer surprise checks

2 The minimum & maximum cash balance at any point of time is Rs.10,000 and Rs. 1 Lac respectively

3 That physical cash is verified by person other than the person in who’s custody cash is kept, which is further approved by unit Head

4 Payments > 20000 are made through cheque

5 That Assistant finance manager’s surprise physical verification of the cash, done at-least twice a month

6 Cash Withdrawal Note for withdrawal of cash from bank which is authorised by Unit Head

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C. Bank

     Check that:

1 Minimum bank balance at any time is Rs 5000

2 Balance above a specified limit is invested in FD by approval of AFM

3 Monthly BRS is prepared by Mang. Comm and is sent to AFM after Unit Head’s authorisation

4 The Cheque Details Register maintained by Ass. A/cs and vetted by Unit Head

5 The acknowledgement of the cheque received from the third party and the cheque issued to the third party

6 Proper recording of Bank Charges on monthly basis and informing the same to Unit Head and AFM

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D. Debtors

    Check that

1 Age wise analysis on monthly basis is done by MC and the same is reported to Unit Head who forward it to AFM

2 Credit period & interest thereon as per Sales & Finance Policy

3 Quartly balance confirmation & turnover ratio is done by MC & reported to Unit Head

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E. Creditors

       Check that

1 Payment is made through cheque only

2 Maximum credit period of 30 days or discount, as the case may be is availed

3 The Creditors Turnover Ratio is calculated on monthly basis

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F. Real State Property

      Check that

1 Proper listing of documents is done in the prescribed format

2 All original & chain doc are kept in custody of Unit Head

3 Physical verification is done by person appointed by UH & Managerial Personnel and reporting of same to AFM

4 Search Report is obtained at the time of purchase.

5 Insurance of Property- documented with Unit Head, Copy is kept with A/ cs Dept.

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G. Investments

       Check that

1 Proper Investment Register for recording of investments and its verification by UH is done

2 New investments are made only after proper approval by AFM

3 Proper investment note is prepared by the Finance Officer.

4 The original documents of the investments are secured by the Unit Head

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H. Loans & Advances

       Check that

1 Proper requirement assessment is made by UH

2 Comparative Rate Analysis is done by UH, which is approved by the BOD

3 Proper documentation & A/cing is done by FO

4 Loan to Staff is as per Loan Policy

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Regards

CA GROUPS

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Disclaimer : If a person copies this article without giving any credit will be liable of punishment under copyright act , as this article is copyrighted content in the name of CA GROUPS

INTERNAL AUDIT PROGRAM CHECKLIST

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The Internal Audit Program includes following contents are as under:

1. Vouching
2. Statutory Requirements
3. Ledger Scrutiny
4. B.R.S. (Bank Reconciliation Statement)
5. Cash verification
6. Internal Control System
7. Reconciliation (of others items)
8. Checking of MIS Report
9. System Audit

After that the following points were discussed in detail on the each item of content of Internal Audit Program.

VOUCHING

The following are the vouching which carried out by the company in the books of accounts.

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BANK VOUCHING

The following points needs to be reviewed at the time of bank vouching.

• Verification of the Bank Balances, Bank Reconciliation Statement, timely updation of BRS, Identification & Reporting of Stale Cheques.
• Loans secured or unsecured: reviewing and reporting of balances/reconciliation.
• Fixed deposits: Reviewing and Reporting of Balances.
• Interest calculations: Verifying and Reporting interest charged on: Loans from Banks,
• Loans procured from Financial Institutions, Banks, and interest received on Fixed Deposits.
• Verification and reporting of the balance confirmations and reconciliations drawn by the management.
• Detail of LC,B/G
• Reporting of inoperative accounts

CASH VOUCHING

The following points needs to be reviewed at the time of Cash vouching.

• Cash Verification
• Cash Vouching
• Checking inter divisions/ inter branches adjustments and balances.

SALE VOUCHING

The following points needs to be reviewed at the time of Sale vouching.

• Sales Master
• Checking of Sales Invoices
• Rates Approvals
• Parts Price list
• Confirmation of Customer order
• Reviewing of transportation cost as per Purchase order and auto update of transportation cost if already paid.
• Clauses in Sale Agreement Report on Amortization/ apportion tool cost
• Report on schedule of customers
• Rejection of order by (i) Return Material Authorization (RMA) (ii) Party side rejection and also check the reason for rejection with quality department.
• Scrap Sale
• Free of Cost losses with the quantity.
• Truck expenses along with Driver Salaries and calculation of cost for per Truck.
• Accidental Claim Report.
• New Enquiry Process (How much enquiry receive/ solved.)
• Rate Approval (Check pricing authority).
• Depleting Business (part wise report and party wise monthly comparison)
• Customer-vise Sales Comparison
• FOC reason and report on cost associated with FOC against rejection
• Approvals of Discounts
• Sales order/Customer Order
• Rejection Report and there cause

PURCHASE VOUCHING

The following points needs to be reviewed at the time of Purchase vouching.

• Actual Receipt of Material according to Schedules .
• Checking of Same Items But Procured From Different Suppliers
• Purchase Vouching along with their reconciliation with MRN, PO and Stock Register.
• Show separate Report on wrong Coding.
• Show separate Report on voucher approval and signature missing.
• Delegation of Authority.
• Report on later on schedule of Purchase Department.
• Transportation Cost included in PO or not.
• Report on effect of price increase.
• Schedule Of Alternate Sources of purchase And Its Pricing Comparisons
• Uniformity Of Monthly Purchases
• Check proper authentication of purchase order

JOURNAL VOUCHING

The following points needs to be reviewed at the time the Journal vouching

• Checking of Journal Vouching.
• Regularly update the voucher in System.
• Debit/Credit note vouching.
• Separate the voucher if not understandable and go for detailed investigation for them.

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Regards

CA GROUPS

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Disclaimer : If a person copies this article without giving any credit will be liable of punishment under copyright act , as this article is copyrighted content in the name of CA GROUPS