Internal audit arcotech ltd
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Internal audit arcotech ltd

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Internal audit arcotech ltd Document Transcript

  • 1. The Managing DirectorARCOTECH LTDPLOT NO. 181, SECTOR -3HSIDC GROWTH CENTRE, BAWALDISTT. REWARI (HARYANA)Date: Dear Sir,We wish to inform you that we have completed the Concurrent Audit for thethree months ended 30th June 2010 and are submitting the Audit Report foryour kind perusal and attention. We hope that our report provides valuableinputs for decision making process and also on the working of AccountsDepartment & Stores.We have checked the books of account maintained in Tally.We would also like to take this opportunity to thank the members of theAccounts Department for their co-operation and assistance. In case anyfurther clarification or information is required on any of the points in ourreport kindly call us. Thanking you, Yours faithfully, For DHAR TIKU& CO. Chartered Accountant (M.S. MEHER) PARTNER
  • 2. Internal Audit Report for the Period 01.04.2010 - 30.06.20101 VOUCHING1.1 Observation: Payments in excess of Rs. 20,000/- in cash It was observed that no expenditures were incurred in respectof which payment in excess of Rs. 20,000 was made otherwisethan an account payee cheque or account payee draft.1.2 Observation: Unaccounted Entries in the Bank: We have checked the reconciliation of the Bank accounts forthe quarter ended on 30th June 2010. It was observed that therewere no unrecorded entries.2 SALES AND OTHER INCOME2.1 Scope: We have checked the sales order, sales invoice, supporting with transport bills & cross checked the entries in sales ledger on a cent percent basis.2.2 Observations: a) Sales reported to different authorities: We reconciled the sales as reported in the Sales Tax Return, books of account and quarterly profit & loss account published. We noticed difference in the sales reported to different authorities, which are detailed below: 2
  • 3. (Rs. In lacks)Month Sales as per Sales as per Sales as per books of vat return quarterly account financial statementUp to 30thJune 2010 3134.76 3133.78 3135.08 Risk: The Sales reported to the various Government account. In the present case, the sales reported to Sales Tax and published profit & loss account are different than the sales as per books. Hence the Correct Sales figure cannot be ascertained. Also if the Company has reported incorrect sales to government authorities, it is liable to penalties and prosecution. Suggestion: The sales reported at the different places should be reconciled immediately and revised returns should be submitted wherever necessary.b) In checking of sales invoice we observe that in most of the cases transporter’s bills ware not attached with the invoice. Some invoices with which transport bill was not attached are as: 3
  • 4. Date Invoice no. 12/05/2010 371 to 379 17/05/2010 402 to 407 18/05/2010 401 to 412 20/05/2010 423 to 424 20/06/2010 516 to 519 23/06/2010 523 to 536 24/06/2010 539 to 544 Suggestion: Transportation bills should be attached with the invoice.c) We observe that in some of the cases sale value (amount) under invoice is different as in transport bill. Following are the cases in which sales value is different. Date Invoice no. Sales value Sales value as per sales as per invoice transport bills 4
  • 5. 30/06/2010 597 & 598 101610/- 665867/-d) During our audit we observe that company’s policy in respect of consignment sale is goods are invoices to the consignee at invoice price and booked sale as per account sale prepared by consignee. But up to finalization of our report concern department has not received any account sale from the consignees and booked consignment sale as normal sales (i.e. stock with consignee were not taken in account). Risk: Profit given by profit and loss account is overstated. Suggestion: The necessary account sale should receive on timely basis and necessary correction made in books of account at earliest. Observation: Sales Return accounted for but supporting vouchers are not available: In course of checking of sales return voucher it is observe that sales return has been accounted for without supporting vouchers (i.e. debit note issued by customer) relating to that sales return. Date Voucher no. Amount 10-06-2010 CR/001/2010-11 329675.92 10-06-2010 CR/002/2010-11 320077.47 23-06-2010 CR/003/2010-11 130655.18 23-06-2010 CR/004/2010-11 174546.35 5
  • 6. Suggestion: The necessary debit notes need to be attached with respective invoices at the earliest.3 PURCHASE VOUCHING a) Raw materials: Scope: We have checked the Purchase bills on a cent percent basis and found that all the entries for purchases were supported by bills of the parties from whom the material were purchased. We have also checked the bills with the purchase orders for purchases above Rs. 50000. Our observations are given below. Observations:a) Difference in quantity ordered and quantity received: 6
  • 7. In a few of cases it was observed that there were differences in quantity ordered and quantity received. No written instruction is produced to us to this effect. Risk: The Company prepares the Purchase Order based on its production requirements as identified by the Design and Development Dept. and the Stores Department. When the Company accepts higher quantity of material than specified in P.O. it is unnecessarily blocking funds and storage space .It also becomes difficult to check the bill with the purchase order. Suggestion: A revised purchase order should be issued in such cases.b) Difference in quantity as per purchase bill and quantity transported to company as per transport bills: In the course of checking of purchase of raw material it was observe that in the few of the cases quantity of raw material purchase as per purchase invoice is different than the quantity of material transported to the company under same invoice. And also material receipt note issued as quantity received was for quantity as in purchase invoice these both are contradictory. Following are the cases in which quantity difference are reported: 7
  • 8. S. Invoice Date Suppliers Quantity Quantity No. No. as per as per Invoice Transport bill 49 45 27/04/2010 Neel 1318.53 1358.3 Kamal Enterprises 64 02 04/05/2010 Metal 593 543 traders Suggestion: Quantity of material should be checked and cross verifies the same with the transportation bill while receiving the material.c) Purchase order not issued: In the course of checking of purchase of raw material it was observe that in the following cases purchase order had not been issued for ordering supplies. Date Invoice No. Suppliers Amount 18/04/2010 380 Srinisons 1660499/- wiring system Pvt. Ltd.Suggestion: Purchase order should be issued in all order of supplies.d) Transportation bills were not attached with invoice: In the course of checking of purchase of raw material it was observe that in the few of the cases transportation bills were not attached with the purchase invoice. 8
  • 9. S. No. Invoice Date Suppliers Amount No. 01 01 01/04/2010 S.R. 2777404.45 International 02 02 01/04/2010 S.R. 2975173.95 International 10 01 4/04/2010 Shiva meta 4367613.00 12 03 6/04/2010 Nihon sales 2203585.00 13 04 7/04/2010 Nihon sales 2163458.00 26 972 9/04/2010 Neel kamal 621628.00 Enterprises 32 08 10/04/2010 Goodwill 204104.00 Metal & alloys 39 15 20/04/2010 M S Metal 245220.00 40 21 21/04/2010 Neel kamal 999238.00 Enterprises 43 203 23/04/2010 Modvak 1056924.00 Engineering 44-47 63-66 24/4/2010 S.K. ----------- Enterprises 55 552 24/04/2010 S.R. 1758222.90 InternationalSuggestion:Transport bills should be attached with the purchase invoice toensure that the right quantity & value of material received. 9
  • 10. e) Supplementary bills issued by suppliers not recorded in books of accounts:In the course of checking of purchase of raw material it wasobserve that in the few of the cases supplementary bills issued bysuppliers not recorded in books of accounts. Following are thecases in which entries are not made:Date Bill No. Amount (Rs.)04/05/2010 11 7939404/05/2010 12 6240004/05/2010 13 8475612/05/2010 22 20803Risk:Supplementary bills were issued in case of mistake or somethingwas omitting in original bills. So it should be recorded in books ofaccount on timely basis. Suggestion: It is advised to record unrecorded entries at the earliest. b) Consumable: Scope: We have checked the consumables bills on a cent percent basis and found that all the entries for purchases were 10
  • 11. supported by bills of the parties from whom the material were purchased. We have also checked the bills with the purchase orders for purchases above Rs. 50000. Our observations are given below. Observation:a) Quotation not invited properly: In the course of checking quotation invited or not for consumable we found that there were only in few of the cases for recurring item contract with suppliers exist. Quotation is not invited for regular item instead purchase order is place on the basis of old contracted price. No contracts were made every year. For non recurring item quotations were received via email. Then comparable statement was prepared as low cost to company. But in most of the cases comparable statements were not approved by authorized authority in such case also order is placed. Suggestion: Company should invite quotation for regular item of consumable at beginning of the each year for purchase to be made during the year. Also for non recurring item it is advised to made comparable statement approved by respective authority for each order to be placed.b) Material receipt note were not attached: 11
  • 12. In the course of checking consumable we found that in some of the cases material receipt note were not attached with the purchase invoice. S. No. Bill No. Date Creditors Amount(Rs.) 41 3088 5/04/2010 Mohit 53200/- Traders 47 872 08/04/2010 Amit 17156/- traders 48 873 08/04/2010 Amit 21693/- traders 49 876 08/04/2010 Amit 21313/- traders 180 588 01/05/2010 Aggrwal 330/- gas 183 756 1/05/2010 MRR 22366/- Enterprises 197 302 3/05/2010 Shakti Sales 11000/- Corporation Suggestion: It is advised to attach copy of material receipt note with the purchase invoice.c) Purchase order were not available: In the course of checking consumable we found that in some of the cases purchase order were not available for checking 12
  • 13. whether order had been place or not. But reference of purchase order was given in invoice. In the following case purchase order was not available. P.O. No. Date Suppliers Amount 25 01/04/2010 Ajanta 24272/- Controls 26 01/04/2010 Amit traders 11040/- 44 05/04/2010 Amit traders 17156/- 99 30/04/2010 Pankaj 68002/- electrical 94 01/05/2010 MRR 22366/- Enterprises Suggestion: It is advised to keep the copy of purchase order in place.4 INCOME TAX4.1 Observation: We have checked the TDS liability on all payments. The Company had made payment towards salary, commission & brokerage, professional charges & to contractor on which TDS has to be deducted. We observe that TDS is deducted but the same was not deposited in the account of government. Our observations are as: 13
  • 14. TDS on Salary: Month Amount Due on Paid on Delay in Rs. number of daysApril-10 65443/- 07-05-2010 Still unpaid N.A. as on 31-07-2010May-10 65443/- 07-06-2010 Still unpaid N.A. as on 31-07-2009June-10 0 0 N.A. N.A. TDS on Contractor: Amount Due on Paid on Delay inMonth Rs. number of daysApril-10 9031/- 07-05-2010 Still N.A. unpaid as on 31-07-20 10May-10 20215/- 07-06-2010 Still N.A. unpaid as on 31-07-20 09June-10 39540/- 07-07-2010 Still N.A. unpaid as on 14
  • 15. 31-07-20 10 TDS on Legal & Professional Fees:Month Amount Due on Paid on Delay in Rs. number of daysApril-10 6412/- 07-05-2010 Rs. 4700/- paid during the m/o N.A. April-10 itself, Remainin g unpaid up to 31/07/10May-10 32942/- 07-06-2010 Rs. 4412/- N.A. paid as on 18/05/10 Remainin g unpaid as on 31-07-10June-10 1614 07-07-2010 Still N.A. unpaid as on 31-07-10 Risk: 15
  • 16. Interest has to be paid for late Payment which is not allowed as deduction under the Income Tax Act, 1961. Suggestion: Company should not default in payment of TDS dues to the authorities.4.2 Observation: Not furnishing the quarterly return of TDS As per provision of Income Tax-1956, after deducting & depositing the same to the credit of central Government quarterly return is also required to be furnished within 15 days from the end of the quarter. It was observed that quarterly return of TDS was not furnished at all relating to TDS of relevant quarter till the date of finalization of our Audit Report. Risk: Interest has to be paid for late filing of Return which is not allowed as a deduction under the Income Tax Act, 1961. Suggestion: The Company should not default in furnishing the return of TDS on due date. 16