Verita case-studies-v2


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Verita case-studies-v2

  2. 2. A MNC AUTO NBFC – Risk Based Internal AuditClient Details • The company is an automobile NBFC in the business of capital financing for vehicleloans (NBFC-ND-SI)• The assignment was a co-sourced internal audit executed under the supervision ofInternal Audit Head.Scope Details• The scope of the audit covered areas viz. finance, operations including credit and riskoperations and compliances.• The company also had income from insurance business which consists of commissionincome earned from the sale of insurance for vehicles financed.Value Delivered See Next SlideClient Testimonial “I would just like to pen a quick note to thank VERITA for successfully completing theassigned task. VERITA had a clear understanding of the requirements and the teamdeployed to complete the assigned task met the deadlines in an efficient manner. Manythanks to the entire team”
  3. 3. Key Observation Value Delivered• The company had waived off Rs xx Lacs as waivers anddiscounts on account of different fees and charges(processing fees, foreclosure charges, etc.). Such chargeswere accounted on receipt basis and hence such waiversand discounts were not recorded in financials.• Waiver and discount policy has been designed anddocumented. The company has started maintaining MIS whichgives consolidated amount on total waiver and discounts for aparticular period• The company followed the practice of using pre-frankedstamp papers. However, the company had incurred a lossof Rs xx Lacs on account of using higher amount pre-franked stamp paper than state stamp duty act.• The company has worked towards recording accurate StampDuty Loss by making appropriate changes in the applicationsystem. Because of such changes in the system, automatic MIShas been generated for stamp duty loss cases.• 3 product schemes out of sample of 10 schemes whereloans were disbursed even after expiry date of the scheme.• Automated controls were developed and proper authorizationprocedure implemented in the system• The assets of the company viz. furniture, electronicequipment etc were not insured adequately.• The admin department made changes in the process followedfor insurance of the fixed assets owned by the company. Thecompany covered all assets under appropriate risk coverageinsurance policy.• Non compliance with Employee State Insurance Act, 1948• The company has registered under ESI Act and paid the liabilityfor the year.• Absence of certain clauses in loan agreement as per RBIcirculars• Loan agreement was modified and clauses were added as perRBI circularsA MNC AUTO NBFC – Risk Based Internal AuditBack to Index
  4. 4. Client DetailsScope DetailsValue DeliveredClient Testimonial• Client is a new generation Insurance Company, with commitment to building a longterm sustainable business focused on a consumer centric approach.• To validate the health of compliances against requirements of IRDA in terms ofcirculars, notifications, Law, etc. in order to minimize the reputation risk• To make the employees aware and responsible for complying with the regulatoryrequirements timely issued by the IRDA• To analyse the warning and penalties issued by IRDA on time to time basis and vis-à-vis to validate the health of companies compliancesSee Next Slide“Many thanks for helping us in this initiative. The efforts put by you are extremelycommendable.” - Compliance Office of the Company“My compliments to all” – CFO of the CompanyA LEADING LIFE INSURANCE CO. – Compliance Self Certification
  5. 5. Phase I: Preparation of Master Checklist• Understood Insurance Act, 1938 and identify key 165 check-points• Understood IRDA Rules and Regulations and Identify 521check-points from all the applicable provisions.• Understood all the IRDA circulars issued in the past andIdentify key 706 check-points from all the applicableprovisions.• Analyzed warnings and penalties issued by IRDA for violationor non-compliance to various life insurers and mapped thepoints with the above check-pointsPhase II: Compartmentalization of Check-pointsAll the check-points were bifurcated into following departments• Investment Function & Actuary Function• Marketing Function• Operation Function (It includes Claims, New Business, PolicyServicing, D-Ops, etc.)• Legal & Compliance Function• Branch Operations & Sales Function• IT Function• Audit Function• Training FunctionPhase III: Mapping with Process Flow and Health Check• Developed process flow for each key department i.e.Actuary, Investment, Marketing, Operations, etc.• Identified sub-processes and activities• Mapped regulatory check-points with the sub-process andactivities• Validated existing controls against regulatory requirements• Identified gaps in the existing controls• Provided rectification and recommendationsPhase IV: Development of Self-Assessment Certification• Developed Regulatory Compliance Self-AssessmentCertification which covers all the applicable points• Used COSO Methodology to define Compliance Self-Assessment CertificationPhase V: Development of CEO /CFO Dashboard• Designed CEO /CFO dashboard which helps them to drill-down the non-compliances during the quarter.Phase VI: Development of Self-Assessment IT Application• Providing training to IT team for developing the self-certification application on company’s intranet.A LEADING LIFE INSURANCE CO. – Compliance Self CertificationBack to Index
  6. 6. Client DetailsScope DetailsValue Delivered• Client is a Car distribution company of the largest manufacturer of cars in India• Risk Based Internal Audit of following areas;• Common Holding Area (CHA) Audit• Regional Sales Office (RSO) Audit for 4 locations• Credit Operations• Master Review• Transporter’s Review• VAT ReviewSee Next SlideA CAR DISTRIBUTION CO. – Risk Based Internal Audit
  7. 7. • FIFO method for dispatch of vehicles is not followed diligently. The early dispatches have been observedfor the vehicles which were inwarded later. On sample data analysis of inward and outward date ofvehicles, it has been observed that total XXX vehicles amounting to Rs. XXX crores have been not soldon FIFO basis• Analysis on sold vehicles but not delivered to the dealers have been performed. As per company policy,XX days (including grace period) of delay is allowed. Total XXX vehicles (X%) out of XXXX, have beendelivered after XX days.• Delay in transit from plant to RSO. It has been observed that out of XXXX vehicles, there has been delayin XXXX cars (XX%) ranging from X days to XXX days.• XX% of vehicles were lying in the stockyard for more than 30 days amounting to Rs. XX Crores. XX% ofvehicles are lying for more than 90 days amounting to Rs. XX Crores• There is no monitoring mechanism for tracking in transit vehicles in SAP. As on 21st November, 2012,XXX vehicles are in transit. Out of vehicles, XXX vehicles (XX%) amounting Rs. XX Crores are in transitfor more than 30 days as per SAP record.• The vehicle storage and conditions are not followed as per the defined guideline. Absence of propermonitoring mechanism on regular interval for storage of vehicles.A CAR DISTRIBUTION CO. – Risk Based Internal AuditBack to Index
  8. 8. Client DetailsScope DetailsValue Delivered• Client is a dealer of a leading Japanese Car Manufacturing company which made aremarkable entry in the Indian market with its product. Client also runs an authorizedservice centre.• Risk Based Internal Audit of following areas;• Purchase of Vehicles, Parts and Accessories• Cheque and Cash Payments• Sales Invoice – New and Old vehicles• Debtors and creditors review• RTO E- Payments• Workshop Review• Sales Docket Review• Compliance Review• Expense ReviewSee Next SlideA CAR DEALER CO. – Risk Based Internal Audit
  9. 9. A CAR DEALER CO. – Risk Based Internal Audit• The test drives form were converted into soft format, analysis of test drive forms on sample basis revealedthat in 50% instances the necessary fields in the test drive forms were not filled up.• In 14% cases it was observed that the pre-defined test drive route was not followed for the test driveprovided, resulting into excess cost incurred in the fuel expenses for test drives.• The company was purchasing 5% of total stock under special (emergency) purchases and at a highercost, however the spare part purchased were lying unused for as high as 180 days.• On analyzing the sales pattern of the workshop it was observed that the discount given was approx 11%against the average margin of 17%, which results in net margin of only 6%• Analysis of the commission earned by the company from other dealers revealed that the amount of INR1.5 lacs is receivable and unclaimed from other dealers for more than 90 days.Back to Index
  10. 10. India OfficesIndia Corporate Office (Mumbai)441, Kiran Kunj, S.V. Road, Malad (W), Mumbai 400 064T: +91 22 2864 5500 | F: +91 22 2864 5400India Branch Office (Bangalore)1179, 3rd stage, 4th main BEML Layout, Rajarajeswari Nagar,Bangalore 560098India Branch Office (Ahmedabad)16 Siddhi Banglows, Near 200 FT SP Ringroad Jxn, Bopal, Ahmedabad 58.T: +919619961986India Branch Office (Vadodara)B-84, Bhagyodaya, Refinery Road, Gorwa, Vadodara 16T: +91 99202 88031UAE Liaison OfficeP.O. Box 128235, M-04, Bil Badi Building, Madinet Zayed, Abu Dhabi,United Arab EmiratesOman Liaison OfficeP.O. Box 385, Jibroo, P.C. 114, Sultanate of Oman