Sui Northern Gas Pipelines Limited. Project of Auditing.
Sir Adeel Akhtar.
Syed Ali Kamran Abidi. 50 Mirza Ali Raza. 90
Jafar Tayar. 48
Syed Hussain Zain ul Abideen. 85
Introduction: Sui Northern Gas Pipelines Limited (SNGPL), is the largest integrated gas company serving more than 2.5 million consumers in North Central Pakistan through an extensive network in Punjab and NWFP. The Company has over 42 years of experience in operation and maintenance of high-pressure gas transmission and distribution systems. SNGPL was incorporated as a private limited Company in 1963 and converted into a public limited company in January 1964 under the Companies Act 1913, now Companies Ordinance 1984, and is listed on all the three Stock Exchanges of the Country.
SNGPL transmission system extends from Sui in Balochistan to Peshawar in North West Frontier Province (NWFP) comprising over 6121 KM of Transmission System(Main lines & Loop lines). The distribution activities covering 142 main towns along with adjoining villages in Punjab & NWFP are organized through 8 regional offices.
SNGPL has 2,536,700 consumers comprising Domestic, Commercial, General Industry, Fertilizer, Power Generation, Cement Sectors & CNG.
The company’s objectives:
Quality Consumer Services .
Clean, Efficient and Reliable Gas Delivery.
Healthy and Safe Working Conditions.
Fair Return to Shareholders.
Optimal usage of its resources.
To be the leading integrated natural gas provider in the region seeking to improve the quality of life of our customers and achieve maximum benefit by for our stakeholders by providing an uninterrupted and environment friendly energy resource.
A commitment to deliver natural gas to all doorsteps in our chosen areas through continuous expansion of our network, by optimally employing technological, human and organizational resources, best practices and high ethical standards.
Departments of SNGPL:
Purchase and store
Auditing Rules of SNGPL:
There are two types of audit carried out by the company: 1)Pre audit. 2)Post audit. Pre audit: Pre audit as the name specifies is carried out before an activity or transaction. Post audit: Post audit is carried after the activity or transaction.
Areas of Pre Audit:
Local Purchase requisitions.
Audit Programme For The Year 2004-2005 – Multan Region Sr. # Department/Section Period to be Covered- 2004-05 Audit schedule Report From To Draft Final 1 Accounts Jan. to June 04 01.10.04 10.11.04 25.11.04 26.12.04 2 Admin 3 Purchase & Stores 26.11.04 15.12.04 31.12.04 31.01.05 4 Sales 5 Building July to Dec. 04 01.01.05 05.02.05 20.02.05 20.03.05 6 Metering 7 Distribution Dev. 21.02.05 05.03.05 20.03.05 20.04.05 8 Accounts 21.03.05 20.04.05 05.05.05 05.06.05 9 Admin 10 Purchase & Store 06.05.05 25.05.05 10.06.05 10.07.05 11 Sales 12 Building Jan. to June 05 11.06.05 15.08.05 31.08.05 30.09.05 13 Metering 14 Distribution Dev.
Operations of the Administration are:
Admin dept. is responsible for the security, attendance of employees, leave, maintenance of office building, hiring of building in sub areas, to contact with local management, transport operations, hiring of vehicles, protocol to officers and executives.
Audit checks are:
ATTENDENCE REGISTER/ SHEETS:
a) Checks daily attendance is marked in sheet.
b) Check in case of new appointments, the letter of appointment etc.
c) Check various type of leave, late, from relevant record under audit.
ii) VEHICLE RETURN/ LOG BOOK.
a) Obtain a list of vehicles operating with the area and verify with the vehicle return.
b) Check monthly vehicle return in all respect.
c) Check monthly vehicles return is sent to HO in time. d) Check private usage of vehicle has been informed to accounts for necessary recoveries.
iii) ELECTRICITY REGISTER:
Check electricity consumed in offices, repeator station, company owned/ rented bungalows from the electricity bills. Also compare it with two month previous bills and find out if any variation is there.
Check sequences of meter reading and their particular.
Check that authorized authority has pass the bill for payment.
Check actual expenditure up to date within the budget provisions.
ii) Check proper sanction are obtained for over runs as against the budget provision.
iii) If sanction not obtained, reasons therefore.
Check rent/lease paid for offices/ residential building if taken on rent/lease.
ii) Check medical/conveyance/ expense paid.
iii) Check temporary/casual staff appointed is not on roll for over 3 months.
iv) Check any other statement required to be maintained per law is prescribed.
Evaluative the adequacy of internal check and control as per procedure.
Operations of Sales:
New connections, applications, surveys, draw house line plans, to issue demand notices and security deposits.
Consumer Master Card:
2)Sales: Audit checks are:
i) Gas Sales contracts:
Check with applications of the customers.
Check with survey report.
Check security deposit receipt and the signatures of both the parties.
ii) Securities Obtained:
Check that securities obtained are according to the company policy.
Check with actual billing of three months and note down if exceeding the security.
Check what actions have been taken by area sales in case where securities are lower than billing.
iii) Meter Rentals:
a) Check the meter rentals are according to the type of meters installed, report if variations found.
Gas sales contracts.
Consumer master cards.
Gas sales bills.
iv) Consumer’s Disconnected:
Obtain a list of all disconnected consumers.
Check the action taken by area sales.
v) Serving the Consumer Premises:
Check that consumer premises have been surveyed.
Check the record of drawings is kept.
Check from test reports house line is in accordance with the drawings.
vi) Budgetary Control:
Check that the expenditures are within the budget provisions.
Check proper sanctions are obtained for budget provisions.
vii) Internal Check & Control:
Give brief report on internal check and control.
Operations of Distribution:
To provide physical connection, Lay down service lines, pipe fitting, coat and wrap materials and provide consumer meter station.
Audit checks are:
i) Estimation Of Materials: a) Check the variations between actual and estimates of pipe, fitting, coat & wrap material. ii) Construction of Main Service Lines: a) Check that the quantities not vary more than 10% with FPC. b) Check the daily report of pipe coating and wrapping. c) Check the excavation has been done as per company standards. d) Check the CMC received from sales and entered into the register as per procedure.
iii) Main Services Lines:
* There connection, disconnection and reconnection must be under the procedures.
Check 10% inventory items physically.
Check record of stationary items.
v) Budgetary Control:
Check actual expenditures with budget provisions.
Check the sanctions for over-runs in budget.
vi) Internal Control:
Check adequacy of internal control enforced by management.
Operations of Accounts:
To prepare accounts, to maintain cash book and to reconcile it daily, payment of bills, prepare advance register, to check payments and receipts
Audit checks are:
Cash & Revenue Stamps:
a) Check cash physically.
b) Check Revenue stamps.
c) Check and agree the physical balance with Imprest
d) Check cash book is completed and reconciled daily.
e) Check that the keys of safe are kept separately by cashier and executive.
2)Imprest Cash Book: i) Check lodgments from pay –in-slips and bank advices. ii) Check payment vouchers , duly approved , with relevant supports and expenses head charged and period to which the expenditure is related as per procedure. iii) Check that previous cash book has been sent to HO for reconciliation. iv) Check that cash/cheques received are deposited for reimbursement. v) Check bank reconciliation statements for the period.
2) Unclaimed Wages Register:
i) Check entries in the register with Imprest cash book ‘Receipt side’
ii) Check payment entries in the register with Imprest cash book
iii) Analyze old unclaimed wages outstanding.
iv) Check proper return is sent to HO on prescribed date.
ii) Advance Register:
a) Check entries with the advances forms and verify with the vouchers.
b) Check that the advances are approved by the competent authority.
c) Check the monthly list is extracted and reminders are to the persons who did not render accounts.
TA / HA Exp. Control Register: i) Check entries in TA /HA from the TA/HA bills are properly made. ii) Check journey tickets arranged by company are fully shown reference of payment etc. i) Checks the bills paid to the suppliers are routed through register. ii) Check reference of payment i.e. purchase order and receiving statement. Bills Payment Control Register:
iv) Cheque Book Register:
a) Check relevant entries of Cheque books i.e. date of receipt, Sr. No. etc are made in the register.
b) Check that any checks canceled are indicated in the register.
c) Check Cheque books received, utilized and in hand physically.
v) Receipt Book Register:
Check relevant entries of receipt book.
Check receipt books are received, utilized and in hand physically
Check Dishonored Register:
i) Check this register has been maintained.
ii) Check relevant entries in respect of cheques dishonored have been made and re-lodged per banker’s instructions.
iii) Check such cash have been controlled verify entries into this register ,collection cash book etc.
iv) Check and verify , if not collected into bank reconciliation statement of account till it is collected.
Over Times Claims:
i) Check over times claims in respect of columns are properly filled in calculations, verification of section/ department Incharge etc. Also verify the over time permission slips are attached with the claims as per instruction issued from HO time to time.
ii) Check over time claims in comparison to daily progress report.
iii) Check over time claims with attendance record.
iv) Check over time drivers/ field staff with the Log sheets of Vehicle construction equipment & gate register.
v) Check summaries of over time forms and see these been sent to HO in time.
vi) Collection Section Area:
Check bank statement of each collection account.
Check revenue summary report and ensure credit against collected fund.
Check monthly collection reconciliation and compare it with bank statements.
Check and verify record pertaining to less/excess punching with collection register.
Checks the amounts of connection securities, cost sharing charges etc.
Cost Sharing Register:
i) Check cost sharing register and report cases of defaulters.
vii) Budgetary Control:
Check actual expenditures are within the budget provisions.
Check paper sanctions are obtained for over runs of budget provisions
viii) Internal check & Control:
a) Evaluate the adequacy and effectiveness of internal control.
Operations of Metering:
Maintenance, meters, valves, filters, Defective meters, Tools/equipment and inventory items.
5 ) Metering: Audit checks are:
a) Obtain copy of program of checking, inspecting, flow proving of meters installed at meter stations, and check a record maintained for detailed below:
i) Check all the flow , pressure, and temperature recorders calibrated over per procedure.
i) Check that industrial, commercial and domestic meters are flow proved and reconditioned as per company procedure.
i) Check that valves of all types are inspected and lubricant as per company’s procedure.
5) River crossing Valves:
i) Check the automatic valves installed at different river crossing are operated and lubricated as per company’s procedure to ensure satisfactory working.
i) Check all the filters are installed and major meter stations are opened for inspection and removal of dirt/dusty as per company procedure.
i) Check the record of all defective and broken meters.
ii) Check that defects notified are removed within reasonable time.
Meter Regulation and Valve record:
i) Whether new or repaired check proper record of defective meters, regulators and valves is kept. Also check stock in hand of new, repairable and repaired meters regulators and valves.
a) Check record of tools use in this section.
b) Check physically these tools and equipment on random basis and report variations.
iii) Inventory items:
a) Check the record of inventory items relating to this section.
b) Check all items are painted with Asset code numbers.
iv) Stationary Items:
a) Check receipts and balance of stationary items.
b) Check record is kept as per company’s procedure.
c) Assess usage of stationary items in comparison to the volume of works.
Operations of Purchase and store:
Purchase orders, import orders, quantity of materials and the storing of the received material.
6) Purchase and store: Audit checks are:
1) Physical checking :
i) Physically items of the stores at random.
ii) Record the detail of such checking on stores checking sheets.
iii) Work out shortages/excesses, if any, and obtain the signature of concerned ASO.
Purchase orders (local):
Check compliance of purchase & store procedure:
i) Check with indent/LPR and verify the enquiry letters sent to suppliers.
ii) Check with quotation received from suppliers and verify them with comparative statement.
iii) Check order signed by ASO is within his financial powers.
iv) Check that purchase order is properly prepared giving therein the necessary terms and conditions.
v) Check that purchase order has been executed fully and within the time allowed.
4) Receiving statements for local stores:
i) check description of stores, quantity required to replenish stock from indent/LPR. Also verify these particulars from order, supplier invoice.
ii) check correct index number, unit code number is given.
iii) check it is signed by the concerned ASO.
iv) check posting into index..
v) check it is prepared within 24Hrs from the time of receipt of material in stores (verify from challans).
vi) check that copies of R/S has been distributed according to procedure.
5) Import orders :
i) check with indents and verify the enquiry letters sent to foreign suppliers.
ii) check with quotations received and verify them with comparative statements.
iii) check order signed by the concerned authority is within his financial powers.
iv) check the job for which order is placed is provided for in budget.
External audit repot of Sui Northern Gas Pipeline Limited We have audited the annexed balance sheet of Sui Northern Gas Pipelines Limited as at Jun 30,2004 and the related profit and loss account, cash flow statement and statement of changes in equity together with the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit. It is responsibility of the company’s management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the companies’ ordinance; 1984.Our responsibility is to express an opinion on these statements based on our audit.
We conducted our audit in accordance with the auditing standards as applicable in Pakistan .These standards require that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement . An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the above said statements. An audit also includes assessing the accounting policies and significant estimates made by management, as well as, evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable basis for our opinion and after due verification, we report that :
a) In our opinion , proper books of accounts have been kept by the company as required by the companies ordinance, 1984 ; b) In our opinion: i) the balance sheet and profit and loss account together with the notes thereon have been drawn up in conformity with the companies ordinance,1984, and are in agreement with books of accounts and are further in accordance with accounting policies consistently applied during the year ; ii) the expenditure incurred during the year was for the purpose of the company’s business ;and iii) the business conducted, investments made and the expenditure incurred during the year were in accordance with the objects of the company ; c) In our opinion and to the best of our information and according to the explanations give to us, the balance sheet, profit and loss account, cash flow
Without qualifying our opinion, we draw attention to Note 2 . 18 to the financial statements which explains the provisions of an agreement with World bank for a loan, under which the company is required to earn minimum annual return before taxation, interest and other changes on debit of 17 . 5% per annum of the net average operating fixed assets for the year, excluding interest, dividends and other non-operating income . During the year ended Jun30, 2004, the company’s return before taxation, interest and other changes on debts was less than minimum required return . November 25, 2004 RIAZ AHMED&CO. Lahore Chartered Accountants