Scope of Internal Audit

Sample Scope of internal Audit plan for auditors Department in India with guidelines for Audit Works, Activities & Report in word/ .doc Format

FINANCIAL YEAR: 2013 – 14

1.0 Follow up Audit (I st Quarter)

1.1 Compliance of points raised regarding scrutiny of Trial Balance in the previous Internal Audit Report.

1.2 Statutory compliances to be checked i.e., deposit of taxes and filing of returns within due dates as per the statutory Acts (Excise, Service Tax, Sales Tax, TDS etc).

2.0 Internal Audit at Factory (II Quarter)

2.1 Purchase :

i) All purchases done at local level should be properly checked. There should be proper quotations and written purchase orders. Any irregularity should be remarked.

ii) Any goods purchased which are already in stock in enough quantity or any goods purchased which has not been used since long time should be remarked separately.

iii) Big variation in rates between two purchases should be properly examined.

iv) Stock of items purchased locally should be checked out and a list of such items be sent with the report – showing date of purchase.

v) Compliance of purchase policy at factory.

2.2 Stores :

i) A separate list should be given for non/slow moving items along-with date of purchase, condition of material, etc.

ii) Stores consumption should be thoroughly checked and any doubtful purchase should be remarked.

iii) All directly booked items should be thoroughly checked and any doubtful purchase should be remarked.

iv) Old stores & spare part items were written off subject to the following:

a) Complete separate record to be maintained;
b) If any item is consumed, the same will be duly informed to the Corporate Office for information simultaneously.

2.3 Wages :

i) At least 8 weeks (or 2 months) wages should be checked for all workers thoroughly.

ii) Wages payment should be checked personally for at least one day and if you feel any suspicion, you should extend your checking accordingly.

iii) After allotment of work for a particular day, you shall physically verify in the field whether all allotted workers are there or not.

2.4 Excise & Modvat / Cenvat :

Thorough checking of excise accounting need to be made. Whether proper method of accounting has been adopted or not and also that Modvat/Cenvat has been availed in respect of all the admissible inputs. If not, details of such items, showing the excise duty impact should be furnished.

2.5 Statutory Compliances

Statutory compliances to be checked i.e., deposit of taxes and filing of returns within due dates as per the statutory acts (Service Tax, Sales Tax, TDS, P.F., E.S.I. etc).

2.6 Sales & Dispatch:

i) Scrutinizing the existing procedure of Invoicing and dispatch of material as per invoice. Checking will be extended if any major deviation found.

ii) Reconciliation of dispatched and billing quantity.

3.0 Follow Up Audit (III Quarter)

3.1 Status of two major deviations reported in the previous internal audit report.

3.2 Statutory compliances to be checked i.e., deposit of taxes and filling of returns within due dates as per the statutory acts (Excise, Service Tax, Sales Tax, TDS etc).

4.0 Internal Audit at HO (IV Quarter)

4.1 Scrutiny of Trial balance

i) A complete scrutiny of Trial Balance is to be made and comment on the procedure adopted (except the statutory points which are to be considered by the statutory auditor)

ii) Comments on the head / amounts which need to be set off from other heads.

iii) Comments on the heads / amounts which need to be written off, with the approval of management.

iv) Suggestion for the improvement in SAP.

4.2 Comment on Outstanding debtors more than 90 days

i) Analysis of debtors as on date with the list and comments on debtor’s outstanding more than 90 days to be provided by the respective depots / HO.

ii) To check whether the small / un-productive accounts are written off with the approval of the management.

4.3 Statutory Compliances

i) Statutory compliances to be checked i.e. deposit of taxes and filing of returns within due dates as per the statutory acts (Service Tax, Sales Tax, TDS, P.F., E.S.I. etc).

4.4 Secretarial Matter:

i) Comments on secretarial work i.e. minutes of Board of Directors, Shareholders and their various Committees (their upto-date position and procedure as well as comments on various returns filed).

ii) Whether compliance of Code of Conduct for Directors and Senior Executives and the Insider Trading Code of the Company complied with, any violation if any be cited.

5.0 Internal Audit of Depots

5.1 Physical Verification of Stocks:

i) To take physical verification of stocks, lying in depot and report short / excess and undelivered goods if any with reasons thereof.

ii) To comment on the pattern of taking physical verification of stocks by the Authorised Person and suggest improvement if any.

iii) To check and take comments on whether any scrap or waste materials are lying in go-down, the reasons behind the same and comment on their consumption / transfer to other depots.

iv) To prepare a report on the sale / transfer of slow moving items in consultation with the BM / RM and C&FA and give necessary suggestion for the same.

5.2 Inward Movement of Stocks

I) The inward movement of the goods from factory to depot is to be checked thoroughly. A comment should be given as to the stocks were entered in the books color-wise strictly as per the challan accompanied with the respective vehicle with which the goods were received.

5.3 Billing & Delivery

i) To test check whether the invoices are signed by the authorized personnel. Also, the invoices are made on the company’s printed invoices.

ii) To check that the goods are delivered to the dealers and no goods are pending for delivery.

5.4 Comment on Outstanding more than 90 days

i) Items more than allowable period with ageing analysis as on the date of the audit.

ii) To check whether there is any case, where suit has been filed for recovery, status thereof, i.e. continuing since when and the circumstances involved and comment on the possibility of recovery in his opinion with the consultation of the depot in-charge.

iii) To comment on the un-operative amounts lying in credit at the account of the dealer.

iv) To check that accounts are being reconciled periodically and the confirmation of account Statements are obtained in writing from all the dealers on quarterly basis.

5.5 Safety measures of stocks

i) To comment whether there is a sufficient and suitable environment for preservation of the stock.

Ii) To find out whether the stocks are safeguarded against theft or misuse by any person at any time.

iii) To find out whether the stocks are safeguarded against fire, flood, natural calamities, termite attacks, etc.

iv) Stock must be kept in the premises, which should be free from water leakages.

v) Fire fighting equipments must be installed in stock premises and these should be regularly checked.

5.6 Insurance of stocks

i) Check whether the insurance policies cover the below mentioned risks:

a) Fire
b) Natural Calamities

ii) It should be ensured that the sum insured is sufficient to cover the amount of the stocks at any point of time.

5.7 Checking of Credit / debit notes issued from depots

i) To check the credit / debit notes prepared by the depot in favour of the dealer and to comment whether the same are fully supported and issued correctly.

5.8 Statutory compliances Related to depots

5.9 Suggestion if any

6.0 Stock Audit at Factory

i) To take physical verification of stocks, lying in factory and report short / excess and undelivered goods if any within reasons thereof.

ii) To check whether the Stock Verification have been done on regular intervals.

iii) Tests check of the stocks on the basis of the last stock verification sheet, or if needed, the checking may be extended.