Audit Firm Practicum Report By Wadood Mazari

PRACTICUM REPORT | WADOOD ALAM MAZARI 1
PRACTICUM REPORT
Firm for practicum: Riaz Ahmad & Company (RACO)-Nexia International
Date of commencement: January 23, 2018
Date of end: July 23, 2018
Submitted by: Wadood Alam Mazari (BSAF VIII)
Submitted to: Coordinator BSAF

Contents
Acknowledgment....................................................................................................................................4
Introduction to Practicum and Report....................................................................................................5
Profile of RACO........................................................................................................................................6
Services offered by RACO ...................................................................................................................6
Industry Expertise of RACO.................................................................................................................8
Organogram of RACO..........................................................................................................................9
EXPERIENCE AT CLIENTS........................................................................................................................10
SHAHEEN INSURANCE COMPANY LIMITED...........................................................................................11
ANNUAL AUDIT OF SHAHEEN INSURANCE COMPANY LIMITED .......................................................12
Conduct of Audit:..............................................................................................................................12
Test of Controls (TOC) and Test of Details (TOD)..............................................................................19
Conclusion:........................................................................................................................................20
Learning outcomes: ..........................................................................................................................21
STATE LIFE INSURANCE CORPORATION OF PAKISTAN..........................................................................22
Products of State Life Insurance Corporation of Pakistan................................................................23
Main Departments of an ideal SLIC zone office................................................................................24
ANNUAL AUDIT OF STATE LIFE INSURANCE CORPORATION OF PAKISTAN ......................................26
Test of details and Test of Controls ..................................................................................................30
Conclusion:........................................................................................................................................31
Learning outcomes: ..........................................................................................................................32
PAKISTAN CIVIL AVIATION AUTHORITY.................................................................................................33
Airports managed by CAA.................................................................................................................34
CAA Headquarters Karachi................................................................................................................35
Civil Aviation Training Institute (CATI) Hyderabad............................................................................35
Airports .............................................................................................................................................35
Verification of Fixed Assets of PCAA as year ended on June 30, 2018.............................................37
Work Plan..........................................................................................................................................38
General Procedures to Verify Fixed Assets.......................................................................................39
Learning outcomes............................................................................................................................40
SECTIONS AND SEPARATERS.................................................................................................................41
Suggestions:..........................................................................................................................................43

Acknowledgment
I would like to extend my hand of gratitude to everyone who directly or
indirectly helped me reach where I am today. With the blessing of Allah
Almighty, devoted prayers of parents, continuous support of teachers, and
unconditional guidance of seniors at audit firm I have successfully completed my
six months practicum and BS Accounting and Finance degree as well.
I am also thankful to Sukkur IBA University for providing me a chance to push
my limits high and complete my undergraduate studies in my desired program
on scholarship throughout four years.

Introduction to Practicum and Report
The course schema of BS Accounting and Finance at Sukkur IBA University
requires a six month mandatory internship (hereinafter called practicum) at any
audit firm registered with Institute of Charted Accountants of Pakistan (ICAP).
Eighteen credit hours of eighth and last semester of BS Accounting and Finance
are completely attributed to practicum, practicum report and practicum
presentation.
The practicum aims to bridge the gap between academic knowledge and
practical work experience. This practicum is expected to help graduating
students to equip themselves with necessary skills and knowledge according to
industry requirements. This experience will enable students to transform their
theoretical knowledge into practice and it will help fresh graduates to take a lead
and cast an impressing impact to outperform others in this competitive job
market.
For the purpose of this practicum I joined Lahore based Riaz Ahmad and
Company (RACO) Charted Accountants-a member firm of Nexia International
Karachi office.
The report covers almost all events of my practicum without disturbing the
principle of confidentiality of RACO and its clients. The report not only addresses
the organizational structure and operational mechanism of RACO but also briefly
carries information about clients (only those clients where I have been working
at) business. The mechanism and conduct of audit has been explained in detail.
In the end of client audit details some learning outcomes have been furnished.
The contents of report have been collected from knowledge, data and
information that I gained from seniors, audit manuals, permanent files, websites
of RACO/ clients and internet at large. Although I was sent to listed audit clients
but my responsibilities were limited because I was most junior in audit team and
there was no room for mistakes especially in annual audit of listed clients.
Therefore this report is not guaranteed to cover whole audit procedures and
audit cycle.
At the end of report few recommendations have been presented in personal
capacity

Profile of RACO
Riaz Ahmad & Company (RACO) was established in 1955. Since its inception, it
has been rendering services in the field of audit, review, advisory and related
matters. With constant growth and excellence in delivery of services RACO has
marked its name in leading audit firms in Pakistan. RACO has four offices in
Pakistan, namely Lahore Office (Head Office), Karachi Office, Faisalabad Office,
Islamabad Office. RACO is an ‘A Category’ firm. Out of more than 600 audit firms
in Pakistan only 115 are Quality Control Review (QCR ) rated by ICAP and RACO
is one of those QCR rated firms.
RACO is a member firm of Nexia International that is operating in 97 countries
with its 620 offices worldwide. According to statistics of 2017, Nexia
International is 9th
most revenue earning firm in the world.
Services offered by RACO
 Audit
Audit manual of RACO is prepared in compliance with both International
Standards on Auditing and ethical principles laid down by International
Federation of Accountants.
Audit approach of RACO emphasizes on various areas as given below
 Developing a complete understanding of business of client.
 Tracing risk related to material misstatement in financial
statements and checking control of client on those risky areas.
 Setting out different tests and audit procedures to obtain
important supporting documents of main financial statement
assertions.
 Assessing performed work and re-working (if required)
 Concluding an opinion and communicating that opinion in the form
of audit report.
 Tax
Tax consultancy can be classified in following categories.
 Tax Planning: It mainly concerns with new or revised tax laws and
their impact on business. Assisting in tax planning for upcoming
projects and ventures. Anticipating possible problems and
proposing possible solutions.

 In depth Consulting: Detailed tax advisory, tax avoidance, tips and
tricks for tax benefits etc. come under this umbrella.
 Compliance and Reporting: It deals with consulting of ongoing tax
related matters like return filing, preparing wealth statements,
appealing tax assessments, presenting tax working before
relevant authorities etc.
 Advisory
 Risk advisory services
 Internal Audit Services
 Information Risk Management
 Regulatory and compliance services
 Business Performance Evaluation services
 Accounting Advisory services
 Program Management and Quality Assurance
 Financial Risk Management
 Financial Advisory services
 Corporate Finance
 Transaction services
 Restructuring
 Forensic services

Industry Expertise of RACO
RACO provides services to almost all kinds of businesses. Followings are some
main areas where RACO has strong expertise.
 Banking
 Investment
 Securities
 Modarba
 Pharmaceuticals
 Textile
 Insurance
 Energy
 Non Profit Organizations
 Airlines
 Cement
 Ceramics
 Transportation
 Trading
 Water and Power
 Fertilizers
 Oil and Gas
 Automobiles
 Petroliam
 Construction Companies
 Paper and board etc.
 Computers
 Electronics
 Schools, Colleges and Universities.
 Health care.
 Hotel and Restaurants
 Housing Finance
 Govt., local bodies and authorities
 Chemicals etc.

Organogram of RACO
Role of personals
Partner: A partner must be a qualified charted accountant. Partner
seeks attention of potential clients for audit, interim review and
other non-assurance assignment and communicates with external
authorities and offices for various corporate matters.
Audit Managers: An audit manager should at least be a CA inter
with articles completed. They assist partner in various tasks and also
supervise performance of audit teams that are working at clients.
Audit Associates: They are senior audit trainees mostly work as job
in charge at clients. They are responsible for smooth conduct of audit
and assignments. They coordinate with client personel for audit
related matters. Audit associates guide fellow team members and
also supervise their performance.
Partner
Audit
Manager
Audit
Trainees
Audit
Manager
Audit
Trainees
General
Department
Receptionist Mail Clerk
Peon
/Genetor/ PA
IT Clerk

EXPERIENCE AT CLIENTS
SHAHEEN INSURANCE
COMPANY LIMITED
STATE LIFE
INSURANCE
CORPORATION OF
PAKISTAN
PAKISTAN CIVIL
AVIATION
AUTHORITY

SHAHEEN INSURANCE
COMPANY LIMITED
Shaheen Insurance Company Limited (SICL) commenced its operations in 1996.
Since then it has earned a reputable name in non-life insurance sector. The
main shareholder of Shaheen Insurance Company is Shaheen Foundation
(PAF). SICL has extended its network to three provinces of Pakistan and having
offices in following cities/areas
 Karachi (Head Office)
 Faisalabad
 Lahore (Zonal Office)
 Lahore Corporate
 Gujranwala
 Islamabad
 Peshawar
 Abbotabad
 Sialkot
 Multan
 Hyderabad
SICL offers insurance products (listed below) for both personal and business
mishaps;
 Personal Products
 Travel Insurance:
 Shop Insurance:
 Motor Insurance:
 Personal Accident:
 Business Products
 Fire Insurance
 Marine Insurance
 Engineering Insurance
 Motor Insurance
 Health Insurance
 Bond Insurance and Miscellaneous

ANNUAL AUDIT OF SHAHEEN INSURANCE COMPANY LIMITED
AS YEAR ENDED ON DECEMBER 31, 2017
Audit Objectives:
Our audit objectives were as follow;
 To ensure that the Shaheen Insurance Company Limited (SICL) was in
compliance with established policies and regulations governing insurance
underwriting.
 Recorded revenues were earned by the company
 Gross premium, Admin Surcharge, Federal Insurance Fee, Federal Excise Duty
and Service charges were recorded correctly as to the amount and period.
 To ensure that adequate procedures were developed by the Underwriting
department.
 To ensure that procedures from proposal received till policy issued and
recorded in premium register were proper and accurate.
Conduct of Audit:
One of my seniors and I were tasked with working of premiums of SICL. We
followed audit program step by step so that audit can be conducted in its true
means and we tried our best to show professional attitude with ethical
principles laid down by ICAP and International Federation of Accountants. Our
task began with reading of detailed audit program compiled by RACO
professionals. Our sample was comprised of 75% of polices with large sum
insured amounts and 25% of policies with small sum insured amounts. Policies
with small sum insured amounts were selected randomly.
After taking sample a list of selected policies was made and shared with audit
coordinator of SICL. The coordinator and other staff of SICL was highly
cooperative and supportive in terms of provision of required data. Once we
received copies of policies and other required documents, we started
performing out audit procedures (Observation, Re-calculation, Inquiry etc.) as
per our audit program.
See next page for audit program

1. Audit Program for Premium:
Audit tests and procedures have been furnished below along with their
corresponding assertion.
1.1 Obtain the premium register of all risks policies
Underwritten during the period.
Completeness
1.2 Obtain the month wise and branch wise summary of
premium underwritten during the year and compare with
the general ledger.
Completeness
1.3 Obtain and enter comparative figures for the previous
two years and compare current year’s accounts with prior
periods and note trends and variations.
Reasonableness
1.4 Obtains explanations of the results and of differences
from previous year budgets and forecasts.
Reasonableness
1.5 Understand the procedures of underwriting the
policies and identify the stage when the premium is
recognised in the books of accounts.
1.6 Select some Policies underwritten during the year
from premium register and apply the following audit
procedures
• Check that the policies are issued against the
insurable interest and uninsurable interests are not insured.
Occurrence
• Check that no back dated policies is issued and
if issued risk coverage is from the date of issuance.
Occurrence
• Check that policies are approved as per
instructions for underwriting limits.
Occurrence
• Check that the premium rate are charged as
per clauses mentioned on policy and as per instruction of
Tariff rate mentioned in Insurance Association of Pakistan
and checked by the competent authority in the
underwriting department.
Measurement/Valuation
• Check that acceptance or renewals of policies
for a period of less than 12 months unless otherwise
provided must be issued in accordance with the Scale of
Short Period Rates Specified Section 13 of the General Rules
& Regulations of the Insurance Association of Pakistan and

in case of short period rates the minimum rate is 0.50 per
mille or the full annual rate whichever is less.
• Check that where additional rates for the
Artificial lighting and night work are charged they must be
charged on pro – rata on the basis of term of policy and up
to expiry date of the policy.
• Check that survey reports are carried out to
make the estimation of value of items to be insured.
Measurement
Valuation
Occurrence
• Check that surveyor is appointed from the
approved list of surveyor and closest to the proximity of the
subject matter insured.
Occurrence
Reasonableness
• Check that quotation is prepared and sent to
customer.
Occurrence
1.6 Check that receipt voucher is prepared and approved
against receipt of premium.
Completeness/Occurrence
1.7 Check that the cover notes are converted into policies
and the cover note cancelled are returned and found in the
files.
Completeness/Occurrence
1.8 Obtain the list of outstanding cover notes and check
that cover notes returned are cancelled.
Occurrence/Completeness
1.9 Check that policy holder’s discounts are as per
guidelines of Insurance Association of Pakistan.
Occurrence/Completeness
/Reasonableness
1.10 Following cut off data has been obtained from the
client.
• Last policy issued in respect of all risks
• Last receipts voucher in respect of all risk.
• Last premium bill issued
• Last quotation issued.
• Last endorsement in respect of all risks.
• Last renewal notice issued in respect of all risks.
• Last surveyor report in respects of all risks.
Cut off/ Completeness

1.11 Check that the refund in case of endorsement is as
per limits approved in underwriting manual Paramount
Guidelines.
Occurrence
1.13 Check that monthly statement for the endorsements. Completeness
1.14 Check that in case of co – insurance arrangements are
made only to the approved co – insurers.
1.16 Ensure that service charges are booked as income in
case of our lead and as expense in case of other lead in case
of co – insurance business.
1.17 Ensure that the service charges are deducted as per
following rates.
• In case of marine business 5 % of gross premium.
• In case of other than marine business 2.5 % of gross
premium.
1.18 Check that in case of co – insurance only our portion
of gross premium, admin surcharge, Federal Insurance Fee
and Federal Excise Duty is booked.
1.19 Ensure that at the end of each reporting period data
from premium written (Segment Wise) is received from the
underwriting department. This data was reconciled with the
GL and CFO has reviewed and approved it for inclusion in
the financial statements
.
1.20 Check that the underwriting sends the data to head
office after reconciling it with the policies issued and
checking that the sequence of the policies underwritten in
the premium register. Also ensure that at Head office the
accounts department also checks the sequence of the
number of policies.
2. ADMIN SURCHARGE
2.1 Obtain the bordereaux, branch form and ledgers
of all risks policies underwritten during the period.,
Completeness

2.3 Obtain the month wise and branch wise summary
of admin surcharge during the year and compare with
the general ledger.,
Completeness
2.4 Obtain and enter comparative figures for the
previous two years and compare current year accounts
with prior periods and note trends and variations. ,
Reasonableness
2.5 Obtains explanations of the results and of
differences from previous years, budgets and forecasts.
,
Reasonableness
2.6 Select some policies underwritten during the year
from bordereaux and apply the following audit
procedures.
• Check that admin surcharge is charged to
the client as per following rates.
1. In case of motor 5 % of gross premium or Rs.
2,000 whichever is lower.
2. In case of Marine 5 % of gross premium or Rs.
2,000 whichever is lower
3. In case of Miscellaneous 5 % of gross premium or
Rs. 5,000 whichever is lower.
4. In case of Fire 5 % of gross premium or Rs. 2,000
whichever is lower.
5. In case of Health Macro insurance 5 % of gross
premium or Rs. 5,000 whichever is lower and in other
cases the 5 % of gross premium or Rs. 2,000 whichever
is lower.
6. In case of Engineering bond business the admin
surcharge is 5 % of gross premium or Rs. 2,000
whichever is lower.
7. In case of Engineering other than bond business
the admin surcharge is 5 % of gross premium or Rs.
5,000 whichever is lower. ,
Valuation/Completeness/
Measurement
2.7 Compare the premium register with the branch
form and branch form with the ledger with the trial
balance to verify the correct posting of transactions.
Completeness

3. Federal Insurance Fee
3.1 Trace opening balances from last year audited
accounts / trial balance.
Existence
3.2 Obtain bordereaux, branch form and general
ledger of federal insurance fee.
Completeness
3.3 Compare opening balances with the general
ledger of the federal insurance fee.
Completeness
3.4 Check the posting from bordereaux to branch
form, from branch form to ledger and from ledger to
trial balance is of correct amount
Completeness/Valuation
/Measurement
3.5 Select a sample of policies and perform the
following procedures
(Vouching)
• Check that Federal Insurance fee is posted
to bordereaux.
Completeness
• Verify that federal insurance fee is
calculated at the rate of 1% of sum of gross premium
and admin surcharge.
3.6 Check that Federal Insurance Fee is deposited into
government treasury within 15 days of the next month
3.7 Ensure that the following cut off data has been
obtained from the client.
• Last surveyor report in respects of all risks. Cut off/.Completeness
3.8 Check closing balance with the closing trial
balance.
Existence

4 FEDERAL EXERCISE DUTY
4.1 Obtain general ledger and trace opening balances from
last year audited accounts / trial balance
Existence
4.2 Obtain premium register, branch form and check that
the correct posting is made to the trial balance.
Completeness
Reasonableness
4.3 Select a sample of policies and verify the following.
• Check that the federal excise duty is posted to
bordereaux
• Check that the Federal Excise duty is calculated
at the rate of 16 % of sum of gross premium and admin
surcharge.
Completeness
Accuracy
Valuation
4.4 Ensure that federal excise duty is deposited into
government treasury with in time specified in Federal Excise
Duty Act.
Existence/Accuracy
4.5 Ensure that the following cut off data has been
obtained from the client.
• Last surveyor report in respects of all risks.
Cut off
Completeness
Accuracy
Reasonableness
4.6 Check closing balance with the trial balance. – Existence/Complete
ness

Test of Controls (TOC) and Test of Details (TOD)
TOC and TOD are essential part of audit performance. We worked on TOC and
TOD and used every possible tool until we were satisfied with records.
Test of Details (TODs)
1. Party name
2. Branch name
3. Policy number
4. Policy type
5. Gross contribution
6. Admin charges
7. Stamp duty
8. Federal excise duty
9. Federal Insurance Fund
10.Net Contribution
11.Amount received
12.Amount outstanding
13.Receipt voucher number
14.Receipt voucher date
15.Receipt check number (s)
16.Receipt check date
17.Amount reflected in general ledger
18.Amount reflected in bank statement.
Test of Controls (TOCs)
1. Serially numbered
2. Contribution rates are approved
3. Segregation of duties
4. Details of assets attached
5. Inspection report
6. Policy stamp on policy
7. Approved by underwriting manager
8. Journal voucher prepared
9. Journal voucher approved
10. Entry in general ledger

In following images I tried to reproduce two (one for each) working sheets for
TOC and TOD explanation.
A sample sheet of Test of Controls
A sample sheet of Test of Details
Conclusion:
Based on different audit tests and procedures the conclusion on records was
drawn as satisfactory.

Learning outcomes:
 First time practical experience of audit process and procedures.
 Familiarity with practical implementation of various audit and
accounting standards.
 Gained knowledge about insurance industry and its working structure in
Pakistan.
 Personal capacity development in terms of negotiation with client on
various audit related matters.
 Developed soft skills especially MS Excel
 Networking with audit team members and client staff.

STATE LIFE INSURANCE
CORPORATION OF
PAKISTAN
State Life Insurance Corporation was nationalized in early 70s. State Life
Insurance Corporation was emerged as a result of merger of 32 insurance
companies and three Beema units namely A, B, C. The three leaves in
monogram show that three Beema units. The principle business of SLIC is
insurance, however, it also deals in investment business of policyholders fund
in government securities and other businesses. According to a carefully worked
estimation SLIC holds 70% of market share in life insurance industry. SLIC has a
very vast network of its branches nationwide and also in some other countries
as well. One reason of being first choice of policyholders is its huge rewards in
terms of bonuses. The fashion of operations of SLIC consists of many zonal
offices, sector offices, area offices across the country.
Nationwide offices of State Life Insurance Corporation of Pakistan;
 Karachi Principle Office
 Karachi South Zone
 Karachi East Zone
 Hyderabad
 Mir Pur Khas
 Larkana
 Sukkur
 Rahim Yar Khan
 Bahawal Pur
 Multan
 Faisalabad
 Lahore (Central )
 Lahore (Western)
 Sargodha
 Dera Ghazi Khan
 Sialkot
 Sahiwal
 Peshawar
 Swat
 Abbotabad
 Rawalpindi
 Mir Pur (Azad Kashmir)
 Gujrat
 Islamabad
 Gujranwala

Products of State Life Insurance Corporation of Pakistan
Individual Life Plans:
 Whole Life Assurance
 Endowment Assurance
 Sadabahar Plan
 Anticipated Endowment Assurance
 Shad Abad Assurance
 Jeevan Sathi Assurance
 Child Education and Marriage Assurance
 Child Protection Assurance
 Sunehri Policy
 Shehnai Policy
 Operational Maturity Endowment
 Nigehban
 Muhafaz Plus Assurance
Group Life and Pension Plans:
 Term Insurance Scheme
 Provident Insurance Scheme
 House Building and Prerequisites Insurance Scheme
 Pay continuation Scheme
 Group Endowment Insurance Scheme
 Group Pension Scheme
 Private Education
Supplementary Covers:
The purpose of introducing supplementary covers is to enhance the coverage
of main policy. These supplementary covers can be availed together with main
policy not independently. Supplementary covers offered by SLIC are listed
below.
 Accidental Death & Indemnity Benefit (AIB)
 Accidental Death Benefit (ADB)
 Family Income Benefit (FIB)

 Waiver of Premium (WP)
 Special Waiver of Premium (SWP)
 Term Insurance (TI)
 Guaranteed Insurability (GI)
 Refund of Premium Rider (RPR)
 Hospital And Surgical Benefit (H and S)
(The details of products and supplementary covers are beyond the scope of
this report. The report mainly focuses on audit perspective)
Main Departments of an ideal SLIC zone office
1. Policy Holder Services (PHS)
Policy Holder Services department manages issued policies,
documentation of policies regarding renewal, surrender, amendments
and claims of different types of policies. Functions of PHS include but not
limited to;
 Record change in value of sum insured
 Record change in term insured
 Record alteration of payment method
 Deal with Revival Scheme
 Issue of documents (Duplicate)
 Premium and rate calculation
2. Finance and Accounts (F&A)
Finance and Accounts deals with all accounts and finance related
matters. This department remains in contact with head office, banks, tax
authorities, F&A of others zonal offices for financial transaction and
matters. Few functions of F&A are given below;
 Preparing financial statements
 Keeping ledgers updated
 Preparing Trial Balance
 Payroll
 Budgeting
 Payments and Receipts from banks
 Taxation
 Maintaining cash book etc.

3. Personal and General Services (P&Gs)
P&Gs Departments manages human resource of State Life Insurance
Corporation of Pakistan. Along with its core function it also renders
some other ancillary services to support other departments.
Responsibilities of P&Gs include but not limited to managing;
 Attendance of employees
 Record of employees
 Leave encashment
 Purchasing tenders
 Purchasing for SLIC
 Overtime work record
 Promotions
 Dispatching
 Stationery stock keeping
 Maintaining record of land and real estate investments
4. Internal Audit
It makes sure all due payments are being paid in such manner in such
time. IA department inspects all transaction (payments or receipts).
It carries out pre- audit (audit before making any payment) and post-
audit (audit after making any payment).

ANNUAL AUDIT OF STATE LIFE INSURANCE CORPORATION OF
PAKISTAN
AS YEAR ENDED ON DECEMBER 31, 2017
Audit Objectives:
At annual audit of SLIC for year ended on December 31, 2017 our audit
objectives were as follow;
 To ensure that the State Life Insurance Corporation of Pakistan was in
compliance with established policies and regulations governing life insurance
underwriting.
 Recorded revenues were earned by the company
 Gross premium, Admin Surcharge, Federal Insurance Fee, Federal Excise Duty
and Service charges were recorded correctly as to the amount and period.
 To ensure that adequate procedures were developed by the Underwriting
department.
 To ensure that procedures from proposal received till policy issued and
recorded in premium register were proper and accurate.
Conduct of Audit
I was part of audit team for external audit of SLIC Karachi East Zone. The
annual audit for year ended on December 31, 2017 commenced in last
week of February 2018 and continued until mid of April 2018. In first two
weeks we were unable to start audit because we hadn’t been provided
required data. The internal functions of SLIC were too complex and too
slow, therefore we faced difficulty in obtaining required data. The
information system of SLIC is not computerized and records are kept in hard
forms in large purpose based journals/registers. We found it extremely
difficult to work on those files because sorting, filtering and taking sample
from journals demands much labor work and then punching of the same on
MS Excel to transform it an easy-to-understand form.
At State Life Insurance Corporation of Pakistan –East Zone Karachi I worked
on Claims. In a claim, claimant demands sum insured against a certain
policy. Whenever a policyholder dies, a nominee (as nominated by
policyholder while taking policy from SLIC) shall intimate a claim. Claim

department shall inspect all documents like death certificate etc. and send
it to Zonal Claim Committee (ZCC). ZCC shall discuss and decide whether
claim should be paid in such manner in such time period to such persons (in
case of more than one claimant) in such ratio (as per policy conditions). If
the amount of claim is more than RS. 1000,000/- then ZCC shall make an
opinion but before payment it is send to divisional office for a review.
Divisional Claim Committee (DCC) shall review it and may hold ZCC decision
or make any amendments. In some cases DCC shall further send the matter
to Principle Office (PO) Karachi.
Once matter is finalized for payment then it is transferred to Finance &
Accounts (F&A) department for check preparation and payment. After
gaining a thorough understanding of claim settlement process I took a
sample and asked for files of those claims. Once I received files I started
working as per following audit program
(Audit Program has been furnished in following pages)

Audit Program for claims
Audit program has been designed to verify assertions asserted by SLIC. In
following table assertions and tests for assertions are given.
4.1 Understand the procedures for awarding claims from
the point of loss intimated to the point it is settled.
Existence / Rights &
Obligations /
Occurrence
4.2 If the audit trail is selected from claims outstanding to
claims paid during the year, ensure opening balances are
tallied with the last years working paper file.
Completeness
4.3 Ensure all claims that are intimated to the insurance
company is recorded. In most of the cases in general
insurance, claim intimation register is prepared after claim
intimation form is filled and is dealt at the head office. So
check whether serial number in the intimation form and
intimation register (which is forwarded to head office) is
matched. In case if system generates its own serial numbers,
check that it is in a sequential order and details in the form
are matched with the intimation register.
Existence /
Occurrence
4.5 Check that the claim information is complete. As per
Part VII – Accounts and Audits of the Insurance Ordinance,
minimum record that should be maintained are:
Record of claim
Date of claim made
Name & address of the claimant
Date of claim settled
If not settled, date of rejection and grounds for
rejection.
Completeness
4.5 Ensure documentation is complete:
Copy of policy
Intimation letter
Correspondence with claimant
Register Medical Practitioner (RMP) report.
4.6 Check that claim which is in record (settled/intimated),
is in accordance with the terms and conditions of the policy.
Ensure procedures for verifying of policies by the claims
department and check whether it is made under signature of
the respective heads of the departments.

Terms and conditions include:
Name of insurer
Date of death is in between the period of insurance.
Premium has been received.
In case if endorsements have been made to the policy, verify
whether premium adjustable has been adjusted and the
claim awarded does not exceed the sum insured.
Completeness / Rights
& Obligations
4.7 Claims must be signed and stamped by RMP (Register
Medical Practitioner. Ensure every insured limit has been
defined in the system and payment not made in excess of
the limit. Valuation / Completeness
4.8 Ensure that adequate controls are followed in the
preparation of claim paid vouchers and signed by the Heads
of the department to ensure amount in the claim paid.
Occurrence /
Completeness
4.9 Payment made by check bears the name of the
insurer. Ensure declaration for the same is provided by the
other party. Completeness
4.10 Check claimant’s acceptance letter for the amount of
sum insured.
Occurrence
4.11 Obtain aging of closing balance of outstanding claims
to ensure movement in the account head.
Valuation / Existence /
Rights & Obligations
4.12 Test check claims outstanding for more than 3 years. Valuation
4.13 Check that bonuses paid are due to be paid Rights & Obligation
4.14 Check that paid bonus was applicable to policy Occurrence
4.15 Check that amount of bonus calculated correctly Valuation
4.16 Check that factor for surrender calculated correctly Valuation
4.17 Check that claim paid relate to current year Cut off
4.18 Check that claim paid in due time period Occurrence
4.19 Examine that the company records portfolio wise
claims and their premiums.
Presentation &
Disclosure
4.20 Agree that closing balance in trial from general ledger
and claim statements.
Accuracy

Test of details and Test of Controls
Test of Details
We went to every possible extent to verify details against assertions asserted
by SLIC. Our test of details included:
1. Policy Number
2. Type of plan
3. Term (years) of policy
4. Date of commencement
5. Date of Maturity/Death/Surrender
6. Date of intimation
7. Cause of death
8. Date of death
9. Name of assured
10.Sum assured
11.Claimant name
12.Claim number
13.Rate of every bonus
14.Denominator of every bonus
15.Re-calculation of amount of every bonus
16.Rider name
17.Rider amount
18.Total gross amount
19.Loan amount
20.Loan with interest
21.Premium with late fee
22.Zakat Rate
23.Zakat Factor
24.Total Zakat amount
25.Total Deductions
26.Net Amount paid
27.Payment voucher number
28.Payment voucher date
29.Entry in General Ledger
30.Bank Statement

Test of Control:
Following are few Test of Controls that we performed during audit:
1. Intimation letter
2. Medical legal report
3. Form A (Claimant Statement)
4. Form B (Medical Attendant Statement )
5. Form C (Certificate of identity)
6. Death certificate (In case of death claim)
7. Original policy documents
8. Investigation report in case of earlier death
9. Police FIR (If applicable)
10.Postmortem report (If applicable)
11. Nominee
12.Reserve Sheet
13.Approved by ZCC/RCC
14.Discharge of policy
15.Information agreed with death claim file
16.Timely entry
17.Posted in General Ledger
18. Pertain to current year.
Conclusion:
Based on different audit tests and procedures the conclusion on records was
drawn as satisfactory.

Learning outcomes:
 I have learned working structure of Pakistan’s largest life insurance
company.
 I have worked on separate heads independently and applied relevant
audit and accounting standards.
 I gained familiarity with different departments of SLIC and their
respective roles.
 I learned about insurance ordinance 2000.
 I experienced working with people of different age brackets.
 I came to know about positions in SLIC where I can pursue my career in
future.

PAKISTAN CIVIL AVIATION
AUTHORITY
PCAA come to existence on December 7, 1982 in the name and style of
Pakistan Civil Aviation Authority. PCAA is a public sector autonomous body
working under Federal govt. Aviation Division Cabinet Secretariat. Before
establishment of Pakistan Civil Aviation Authority, civil aviation related
activities were managed by a Civil Aviation Department in the Ministry of
Defence. The establishment of PCAA aimed for proper regulation & promotion
of CA related activities and to make headway for secure, cost effective and
well-ordered air transport in the country. PCAA was restructured during 2006-
2010 to meet the standards of International Civil Aviation Authority
Organization (ICAO). In June 2011 ICAO audited PCAA as part of the Universal
Safety Oversight Audit Program. It was found that compliance of PCAA with
ICAO was 88% compared to world average of 65%.
The principle functions of Pakistan Civil Aviation Authority are as under;
 Air navigation services
 Airport services
 Regulatory services
Pakistan Civil Aviation Authority promises to continue with constant
adaptation of change to cope with requirements of ICAO.
Wings and Functions:
Followings are different wings and functions of PCAA.
 Airworthiness
 Air Transport
 Directorate of Airspace and Aerodrome Regulations
 Flight Standards

 Flight Inspection Unit
 Personal Licensing
 Aero Medical
 Air Navigation Services
 Airport Services
 Safety Investigation Board (SIB)
 Security Directorate
 Support Functions
 Civil Aviation Training Institute (CATI)
Airports managed by CAA
CAA has Airports almost in every corner of Pakistan. Majority of these Airports
are used for domestic air transport. Some of them are international Airports
and few Airports are not operational. Non-operational Airports are used for
military purpose and for VIP movements.
Following are Airport locations in Pakistan.
1. Karachi (International)
2. Hyderabad (Non-operational)
3. Nawabshah (Non-operational)
4. Talhar (Non-operational)
5. MirpurKhas(Non-operational)
6. Sehwan (Non-operational)
7. Larkana
8. Sukkur (International
9. Rahim Yar Khan (International)
10.Bahawal Pur
11.Multan (International)
12.Faisalabad
13.Sialkot (International)
14.Lahore (International)
15.Mianwali
16.Islamabad (International)
17.Rawalpindi
18.Peshawar (International)
19.Bannu
20.Gilgit
21.Sakardu
22.Saidu Sharif
23.Rawlakot
24.Muzafrabad
25.Dera Ghazi Khan
26.Dera Ismael Khan
27.Zhob
28.Quetta (International)
29.Sibi
30.Jacobabad (under PAF use)
31.Dalbandin
32.Khuzdar
33.Gwadar (International)
34.Jiwani (Non-operational)
35.Pasni
36.Ormara (under Pak Navy use)
37.Pangur
38.Turbat (International)

CAA Headquarters Karachi
CAA HQ has following main sections;
 Accounts
 HR
 Utilities
 Budgeting
 Payroll
 Airworthiness
 Medical center
 Pensions
 Finance
 Planning
 Many Directorate offices etc.
For two weeks I worked at HQ then we left for out station.
Civil Aviation Training Institute (CATI) Hyderabad
CATI is only PCAA institute where newly inducted employees of PCCA are given
initial training. CATI provides training in following disciplines.
 Electromechanical engineering
 ATC-Air Traffic Control
 Communication operations
 Electronics Engineering
 Aviation Administration
 Rescue and firefighting services
CATI has different schools in the form of class rooms and labs for training of
newly inducted candidates.
Airports
We visited 14 Airports in Sindh and Balochistan. The nature of work was same
and every Airport has same type of section. The sections at Airports are;
 Supply section: For all kind of inventory and purchases.
 Motor Transport (MT) Section: Management of vehicles and provide
conveyance and other services to other departments.
 Fire stations: Management, maintenance and use of special vehicles.

 Airport operations
I am sharing names of Airports where have been working for this assignment
following by our verification procedures that show how exactly we verified
assets.
Sindh Airports
1. Jinnah International Airport Karachi
2. Hyderabad Airport
3. Nawabshah Airport
4. Sehwan Sharif Airport
5. Moen-jo-Daro Airport
6. Begum Nusrat Bhutto
Airport.
Balochitan Airports
1. Zhob Airport
2. Quetta Airport
3. Sibbi Airport
4. Dalbandin Airport
5. Khuzdar Airport
6. Gwadar Airport
7. Jiwani Airport
8. Pasni Airport
We didn’t visit some airports for reason mentioned below;
Airport name Reason for not visiting
 Mirpukhas No CAA assets exist.
 Talhar No CAA asset exist.
 Jacobabad Under PAF use.
 Turbat Law and order issues.
 Pangur Law and order issues.
 Ormara Under Pak Navy Use

Verification of Fixed Assets of PCAA as year ended on June 30, 2018
Riaz Ahmad and Company (RACO) received an assignment from PCAA for
verification of fixed assets of PCAA placed at various locations across the
country. PCAA already had a Fixed Asset Register (FAR) but that was developed
three years ago and since then a lot of new fixed assets were bought and
disposed and not recorded in FAR due to any reason. As PCAA is a giant body
operating at least 38 different locations in Pakistan, therefore, a large team
was required to perform this assignment. It was decided that airports in Sindh
and Balochistan will be covered by Karachi Office of RACO. Faisalabad office
will send team for airports in Punjab while Islamabad office cover KPK and
Gilgit Balistan region airports.
The assignment had following stages:
 Noting down fixed assets available on floor
 Matching the list with existing FAR
 Preparing Annexes for additions, deletions and irregularities (if any)
 Preparing new FAR
 Tagging of fixed assets
Fixed assets could be classified as following categories;
Category Examples
 Furniture and Fixture Wooden chairs, steel chairs, revolving chairs,
executive chairs, office tables, side tables,
computer tables, almirah, shelves, sofa, bed,
cabinets etc.
 Plant and Equipment Air conditioner units/plants, refrigerators, wall
mounted ACs, medical equipment (at medical
center of PCAA), generators, transformers,
pressure pumps, radar and various specialized
kind of equipment at Airports for navigation
services.
 Computer and Equipment Personal computers, laptops, printers, scanners,
photocopier machines, fax machines, paper
shredders etc.
 Vehicles General vehicles like car, van, tractor, water
bowser etc. and specialized vehicles like fire
fighter, Oshkosh etc.

Karachi office team initiated assignment by starting work at CAA Headquarters
Karachi. In this assignment no work allocation was made. Whole assignment
was of same nature and whole team worked together. However, a couple of
weeks team was divided in two smaller teams. One team was supposed to
continue work at Headquarters and Jinnah International Airport Karachi and
other team was supposed to travel for outstation airports throughout Sindh
and Balochistan province. I was part of team that was supposed to travel to
outstation airports.
Work Plan
Procedures to Conduct the Assignment.
1. Physical verification of the assets placed in PCAA.
 Carry out floor to sheet verification, due to the reason the tracing of the
location from fixed asset register is not possible.
 Each and every asset placed under the ownership of PCAA all over
Pakistan is to be physically verified.
2. Reconcile the physically verified assets with the fixed assets register
provided by the client.
 Assets exist physically but not appearing in the fixed asset register, are
to be shown as the addition.
 Assets appearing in the fixed assets register but does not exist physically
are to be depicted as the assets to be removed from the FAR.
 Prepare annexures in respect of the following aspects.
ANN1- Items reconciled from Fixed Asset Register.
ANN2- Items not identified in fixed asset register but exist on floor. (Additions)
ANN3- Items exist in fixed asset Register but not physically found. (Deletions)
ANN4- Items having Cost less than Rupees 20,000/- (Deletion)
ANN5- Items having any irregularity. (Please specify description)
3. ERP Study ERP and all the manuals necessary to incorporate the
accounting entries in the system of the client.
4. Update Fixed Assets Register by incorporating all the entries in the
fixed asset register.

General Procedures to Verify Fixed Assets.
(1) Check that to what extent company keeps record of fixed assets.
(2) Check that each fixed asset of company bears a tag carrying information
about asset. This information may include acquisition cost, amount of
accumulated depreciation, rate and method of charging depreciation, new
fixed asset purchases, disposal of fixed assets, quantity, an identification
number etc.
(3) Check that the unique number marked on long term asset matches with
that of mentioned in the FAR.
(4) Confirm that all additions and disposals have taken place in a manner
asserted in policies of the PCAA
(5) Check that the disagreements noticed on between floor and sheet have
been reflected in records.
(6) Check that relevant accounting standards have been adopted while
recording fixed assets.
(7) Inquire that after how many years this verification is carried out.
Status:
Assignment was in stage three i.e. preparing annexures when my practicum
ended. Till that time we observed many mismatched items on register and
floor. We reflected those observed points in annexures.

Learning outcomes
 Learned about asset verification procedures.
 Learned about PCAA and its functions. Prior to this assignment I didn’t
know much about this giant autonomous body.
 Traveling throughout Sindh and Balochistan was itself rich of learning
experience. I came to realize the importance of my multilingual
abilities.
 Learned about different sections and their functions of PCAA at
airports.
 Gained knowledge about routes, landscapes and places of historical
importance in Balochistan.

SECTIONS AND SEPARATERS
During or after audit of any client some files are prepared. These files contain
necessary copies of records, supporting documents and working papers. The
files are dividend parts or sections. These sections are named as Section A, B, C
and so on. Every section has a distinguished type of data in it. The name,
number and composition of these sections vary from firm to firm depending on
audit practices of a firm. Riaz Ahmad and Company uses following sections for
the purpose of preparing files. It should be noted that I added only key points
in description.
Section
Name
Section Description
Section A Confirmation:
Confirmation received from banks, financial institutions, leasing
companies, debtors, and creditors. Control sheets and opinions
received from legal and tax advisors.
Section B Audit Planning and control:
Audit planning memorandum, audit planning check list, analytical
review at planning stage, audit materiality, fraud risk assessment,
audit sampling, time budget and time sheets, work allocation sheets,
periodical progress reports, using work of previous or another
auditor, accounts completion checklist, correspondence with client
and requisitions etc.
Section C Share capital, Reserve, Surplus on revaluations:
Authorized share capital, issued, subscribed and paid ip capital.
Issues of bonus and right shares and deposit of shares.
Minority interest, long term financing, debentures, PTC and TFC, etc.
Section D Current Liabilities:
Creditors, Murabaha, Accrued liabilities, Advance receiving, Unpaid
and unclaimed dividends, contingents liabilities, commitments etc.
Section E Taxation:
Reconciliation of provision of taxation, Deferred taxation provision
and working, computation of taxable income and tax payable, tax
depreciation schedule, tax payments and deductions at source etc.
Section F Fixed assets and investment properties:
For PPE: Land (distinguishing free hold and leasehold), building, plant
and machinery, furniture and fittings, vehicles, office equipment etc.
For intangibles: Goodwill, brand names, computer software, licenses
and franchises, patents, copy right, trade mark, designs etc.

Section G Matter related to associated/holding/subsidiaries:
List of associated, holding and subsidiary undertaking and subsidiary
undertakings and other related parties along with percentage of
holding and list of directors.
Section H Investment and Long Term assets:
Long term investments showing separately investments in related
parties and other investments, with distinction between ‘held to
maturity investments’ and ‘available for sale investments’.
Movements in fair value reserve on long term investments.
Fair valuation working of financial assets etc.
Section J Inventories:
Summary of valued inventory, notes on inventory valuation basis,
cost sheets, NRV working and comparison with cost of inventory,
physical inventory sheets, list of shortages and excesses, purchases
and consumption analysis etc.
Section K Current Assets:
Accounts receivable with working of bad and doubtful accounts,
Current portion of non-current assets, movements in fair value
reserve, quotations on stock exchange etc.
Section L Cash and Bank balances:
Cash in hand and transit, ban balances and reconciliation statement
of 1) current accounts 2) deposit accounts 3) foreign currency
accounts, and cash certificates etc.
Section M Notes to the Interim work:
Important rough working, draft trial balances and financial
statements till finalization and adjustments thereafter.
Section N Internal Control weaknesses:
Internal control weaknesses during audit follow-up and comments.
Section O Profit and Loss account:
Sales/revenue, cost of sales, expenses, finance cost, other operating
income, provision for WPPF , share of profit of associate(s) etc.
Section P Financial Statements and Auditors’ report:
Finalized financial statements, audit report, observations etc.

Suggestions:
1. Need more focus on core subjects i.e. financial reporting, theory and
filing procedure of tax, corporate laws.
2. Invite partners of reputed audit firms at IBA Sukkur and make them
aware about BSAF program and its course schema. Convince them for
induction of last semester students for practicum.
3. Time to time workshops may be arranged for subjects like tax and law
that change very often. Professionals from audit firms, tax consultants
and legal advisory firms may be invited for these workshops.
4. A booklet containing information about main industries and
companies may be prepared and shared with students. This can be
done by officials of IBA and students who go for internships to any
particular company/firm. This booklet may contain comprehensive
information about an industry, it working mechanism and potential
growth. Information about company may include position of company
in industry, organizational structure, market share, principle business,
prospective opportunities for career in advancements in that
particular company, date and criteria for job openings etc.

Sources:
The information of this report have been collected from;
1. Personal experience and discussions with client staff during six
months.
2. Audit manuals, programs provided by firm.
3. Booklets of clients.
4. One to one discussions with seniors.
5. Websites of RACO, SICL, SLICL and PCCA.
6. Internship reports of similar nature on internet.
********** THE END **********
This is not the end, it is even not the beginning of end. It is perhaps end of
beginning.

Audit Firm Practicum Report By Wadood Mazari

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