Jahez_Internal Audit Report_Financial Control_Jan'23_01032023.pptx

Internal Audit, Risk, Business & Technology Consulting
JAHEZ INTERNATIONAL
COMPANY
January 29, 2023
INTERNAL AUDIT REPORT |
FINANCIAL CONTROL AUDIT
AUDIT PERIOD: 01-JAN-22 TO 30-Jun-22

© 2022 Protiviti Saudi Member Firm For Management Consultancy
CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
TABLE OF CONTENTS
2
Report usage limitations:
This report is solely for the information of client management and should not be used, circulated, quoted or otherwise referred to for any other purpose, nor included or referred
to in whole or in part in any document without our prior written consent. Protiviti assumes no responsibility to any user of the report other than those included in the distribution
list. Any other persons who choose to rely on our report do so entirely at their own risk.
1 SCOPE OF WORK AND INTRODUCTION 3
2 RISK RATING POLICY 6
4 DETAILED OBSERVATIONS 10
5 DISCLAIMER 42
3 EXECUTIVE SUMMARY 8

SCOPE OF WORK AND
INTRODUCTION

4
SCOPE OF WORK
The scope of Internal Audit of Financial Control included review of below mentioned sub-processes/ areas for the period from 01
January 2022 to 30 June 2022:
 Standard Policies & Procedures
 Delegation of Authority (DoA)
 Roles & Responsibilities and Segregation of Duties (SoD)
 Key Performance Indicators (KPIs)
 Department Structure and Manpower
 Budgeting
 Monthly Closing & Financial Reporting - Period Closing Checklist
 Monthly Closing & Financial Reporting - Periodic Review of GL
 Monthly Closing & Financial Reporting - Prepaid Expenses and Accrued Liabilities
 Taxation (VAT & Withholding Tax)
 Insurance
 Fixed Assets

Internal Audit Scope
Our procedures were performed in accordance with
the Internal Audit scope and approach set forth in our
Engagement Letter dated 25th July 2021 and were
limited to the following area:
 Financial Control
Review Period
 01st January 2022 to 30th June 2022
Scope Exclusions
► None
Draft Report for Management Comments
 The draft report was issued to the Management for
their comments on 23-Jan-2023.
5
Internal Audit Objectives
Briefly the objectives of our Internal Audit were to:
 Gain an understanding of key activities and processes being performed at various plants;
 Perform an assessment of risks within the processes and test related controls for the processes; and
 Provide observations and recommendations wherever appropriate.
Internal Audit Approach
Briefly the approach of our Internal Audit were to:
 Conduct interviews to understand process objectives and flows;
 Obtain data relevant to the scope for the period under review;
 Analysis of the data obtained and identification of preliminary observations;
 Identify gaps in the design and/or operating effectiveness of controls;
 Discussion of the observations with process owners; and
 Co-develop action plan and implementation matrix.
Internal Audit Team
 Mr. Ajit Vaidya
 Mr. Vijay Singh
 Mr. Sudhanshu Tripathi
 Ms. Noura Alghamdi
Distribution List
 Chief Financial Officer (CFO)
 Internal Audit Manager
 Jahez Management Team
INTRODUCTION

RISK RATING POLICY

7
RISK RATING POLICY
High
Risk Significance
Medium Low
Internal Audit’s rating based on criteria defined below*
Impact:
High : Missing Process (Design gap)
Medium : Process Exist, but needs improvement (Design gap)
Medium/Low : Process Exist, but not followed (Depends on criticality of observation)
* All above is for reference purpose and may change depending upon the criticality of the observation by Internal Audit
Impact
Regulatory
(All High)
Reputation
(All High)
Operational
Financial
(All High)

EXECUTIVE SUMMARY

9
SUMMARY OF OBSERVATIONS
1 Absence of Policies and Procedures for Finance & Accounts Process  
2 Need to Improve Controls Over Review and Monitoring of Budget   
3 Three-Way Match Needs to be Established in Accounts Payable Process  
4 Need to Strengthen Controls Over Insurance Coverage for Fixed Assets   
5 Physical Verification of Fixed Assets Process Needs to be Established   
6 Need to Improve Controls Over Recording of Expenses  
7 Books Not Reconciled With VAT Returns  
8 Strengthen Review Process for Open Advances/ Vendors Debit Balances   
9 Strengthen Review Process for Vendors Outstanding Balances   
10 Bad-Debts Provisioning Needs to be Reviewed by Management   
11 Vendor Master Creation Process Needs to be Strengthened  
12 Non-Adherence of Procurement Policy  
13 Procurement Policy Needs to be Reviewed and Updated  
14 Purchase Requisition & Purchase Order Creation Process Needs to be Improved  
15 Improve Controls Over Review and Monitoring of Procurement Process  
Business Impact Root Cause
L D S O
M
H
H High Impact
M Medium Impact
L Low Impact
D Design Deficiency
S System Deficiency
O Operational Ineffectiveness
Observations
S. No.

DETAILED OBSERVATIONS

1. ABSENCE OF POLICIES AND PROCEDURES FOR FINANCE & ACCOUNTS PROCESS
Observation
During process understanding and discussion with Process Owners, it was noted that some of the key policies were not available in the Finance
& Accounts process. Below are these key policies:
 Absence of policies and procedures for the Finance & Accounts operations.
 Absence of KPIs for individuals of Finance & Accounts department to define their job profile and enable them to have better clarity of their
roles and responsibilities.
HIGH
Root Cause
 Absence of initiative to develop and implement adequate policies in the Finance & Accounts process.
11
Annexure
NA
Design System Operational


1. ABSENCE OF POLICIES AND PROCEDURES FOR FINANCE & ACCOUNTS PROCESS
12
Management Response / Action Plan
 Policies and procedures project is planned to be performed for all departments during the H1 2023. We will ensure adequate policies and
procedures are developed and implemented for Finance & Accounts process.
Responsibility
 CFO and Group Financial Controller
Recommendation
 Management shall establish adequate policies and procedures for Finance & Accounts department.
Target Implementation Date
30th June 2023
Risk / Potential Impact
 Lack of comprehensive and up to date policies may lead to lack of clarity, inconsistencies in tasks carried out, conflicts, operational
inefficiency, etc.
 In the absence of comprehensive policies, induction of the new members to the Finance & Accounts Team may be carried out ineffectively.
12

2. NEED TO IMPROVE CONTROLS OVER REVIEW AND MONITORING OF BUDGET
Observation
The Finance Team develops the annual budget with the use of Software Tool. Based on past performance, operational trends, market
segmentation, current market conditions, anticipated capital expenditures, cash inflow-outflow, and the prior year's budget, Finance Team
prepares an estimate. The necessary information, such as the quantity of orders, the number of free meals/ customer wallets, the previous
month's earnings (revenue) from delivery services, etc., are filled in the Software Tool, and a budget is created.
Based on the process understanding with Process Owners, following discrepancy was noted:
Budget was not integrated with ERP: Budget was not linked with ERP system (Microsoft Dynamics).
HIGH
Root Cause
 Absence of initiative to integrate the budgeting process with ERP by Finance Team.
13
Annexure
NA



2. NEED TO IMPROVE CONTROLS OVER REVIEW AND MONITORING OF BUDGET
14
 ERP Budget Implementation is planned to activate the budget module and test. This will be effectively operating from 2024.
Responsibility
Recommendation
 Budget shall be linked with ERP to avoid any kind of inadequate/ unplanned purchases and correct monitoring over budget versus actual
costs.
31st December 2023
 In absence of Budget in ERP, comparison between budget versus actual cost cannot be done efficiently.
14

3. THREE-WAY MATCH NEEDS TO BE ESTABLISHED IN ACCOUNTS PAYABLE PROCESS
Observation
As per best practice, a three-way match is an accounting control that ensures that the purchase order, inventory receipt and invoice, all match in
terms of product, quality, quantity and price.
On review, it was noted that there was no mechanism in place to perform three-way match. Inventory based purchased orders (POs) are only
created in the system. For other than inventory, POs were manually prepared and approved (in excel).
The system also has the ability to create Goods Receipt Note (GRN) but it is not yet operational, thus the system control for a three-way match
about the transaction's accuracy in terms of price comparison, quantity, and invoice value could not be carried out.
HIGH
Root Cause
 Absence of policies and procedures to perform three-way match prior to recording the transactions in accounts.
15
Annexure
NA


3. THREE-WAY MATCH NEEDS TO BE ESTABLISHED IN ACCOUNTS PAYABLE PROCESS
16
 Procurement department is being implemented with Procurement Manager being hired to be accountable for the overall process.
 Adequate policies and procedures will be developed on three-way match process.
 Three-way match process will be implemented to ensure proper control over procurement and accounts payable process. (28th February
2023)
Responsibility
Recommendation
 To prevent any form of anomalies for material receiving, price comparison, and invoice booking, a system-based 3-way match function shall
be created and implemented.
30th June 2023
 In absence of three-way match control, correctness and accuracy of the transactions in terms of quantity, price and quality cannot be
established.
16

4. NEED TO STRENGTHEN CONTROLS OVER INSURANCE COVERAGE FOR FIXED ASSETS
Observation
As per best practice, insurance policies for fixed assets are purchased based on the assets position in the FAR. Prior to choosing the policy, a
location-by-location summary sheet (for assets & inventory) is created, on which the specifics of the assets and their categorization (Building,
Plant & Machinery, and Furniture Fixtures) are included. Additionally, insurance providers provide quotes, and the basis for the finest quotation
policy is finalized.
During the discussion and understanding of the process, it was noted that there was no process was defined for insurance of the fixed assets
such as written guidelines or policies that can define the process of data extraction for preparing backup files, accountability of the people who
will be involved in process, approval matrix before obtaining the insurance policy, and periodic review for monitoring insurance coverage.
Furthermore, no insurance policy for fixed assets for the fiscal years 2021 and 2022 was obtained.
MEDIUM
Root Cause
 Absence of policies and procedures to define the process of data extraction for preparing backup files, accountability of
the people who will be involved in process, approval matrix before opting the policy, and periodic review for monitoring
insurance coverage.
 Absence of monitoring of insurance coverage by Finance Team for fixed assets.
17
Annexure
NA
 
Particulars Opening Balance (In SAR Mn) Addition (In SAR Mn) Depreciation (In SAR Mn) Total (In SAR Mn)
CAR 0.14 - -0.02 0.12
COM 1.62 0.71 -0.35 1.98
ELE 0.73 0.04 -0.15 0.63
EQT 0.05 - -0.01 0.04
FUR 0.91 0.06 -0.21 0.76
LHI 1.23 1.13 -0.36 2.00
Grand Total 4.69 1.95 -1.10 5.53

4. NEED TO STRENGTHEN CONTROLS OVER INSURANCE COVERAGE FOR FIXED ASSETS
18
Responsibility
Recommendation
 Adequate policies and procedures shall be developed for data extraction, data validation (maker-checker) and responsibility of employees for
calculation of sum insured.
 Assets shall be completely insured and periodic review shall be done to validate whether assets are properly covered under insurance or not.
30th June 2023
 In case of absence of policies and procedures may lead to conflict in data extraction process/ validation, accountability and responsibility of
employees for calculation of sum insured.
 Assets which are not covered in sum insured cannot be claimed in case of any damage/ accident/ loss.
 Policies and procedures project is planned to be performed for all departments during the H1 2023. Adequate policies and procedures will be
developed on insurance of fixed assets.
 All assets are covered with the Property All Risk Insurance for FY 2023. The same will be shared with auditors for their review.
18

5. PHYSICAL VERIFICATION OF FIXED ASSETS PROCESS NEEDS TO BE ESTABLISHED
Observation
As per process discussion and understanding, it was noted that fixed assets have never undergone physical verification activity. The assets
have not been physically tagged and reconciled with the fixed assets register.
Further, on discussion it was noted that there was no such SOP/ policy defined for the addition and deletion of fixed assets, capitalization
process, physical verification process, and tagging of assets.
MEDIUM
Root Cause
 Absence of adequate policies and procedures over fixed assets management.
 Lack of initiative from Management to perform the physical verification activity on periodical basis.
19
Annexure
NA
 

5. PHYSICAL VERIFICATION OF FIXED ASSETS PROCESS NEEDS TO BE ESTABLISHED
20
Responsibility
Recommendation
 Periodic physical verification process shall be performed to avoid any kind of discrepancies in assets as per books of accounts and physical.
 Management shall establish adequate policies and procedures for fixed assets including procurement process, material receiving,
capitalization, physical verification and disposal process.
31st December 2023
 The difference in the assets as per books of accounts and physical may not be identified due to absence of physical verification of fixed
assets.
 Absence of adequate policies and procedures may lead to ambiguity in tasks performed, discrepancies, disagreements, operational
inefficiencies, etc. among the employees.
 Policies and procedures project is planned to be performed for all departments during H1 2023. We will ensure adequate policies and
procedures are developed and implemented for fixed assets management.
 Agreed, we will conduct the physical verification for fixed assets.
20

6. NEED TO IMPROVE CONTROLS OVER RECORDING OF EXPENSES
Observation
As per present practice, the accountant parks all invoices and accounting entries in MS Dynamics (ERP) on daily basis. The Chief Accountant or
Account Manager posts the entries in ERP after parking them. When entries are posted, the system will fully implement them.
On sample review of 20 GLs, it was noted that in 8 GLs accounting entries were reversed upto 66% of total expenses booking under respective
GL after the posting.
MEDIUM
Root Cause
 Lack of initiative to ensure that the Finance Team receives the required training during the development and deployment
of the new ERP (MS Dynamics).
 The individual assigned to check or review the document and accounting entries is doing it incorrectly.
21
Annexure

Annexure

6. NEED TO IMPROVE CONTROLS OVER RECORDING OF EXPENSES
22
Responsibility
Recommendation
 If a new ERP is introduced or the employee/ workforce is newly hired, proper training shall be provided to them.
 The person who is hired as a checker shall be capable and accountable for their job responsibilities.
From Immediate Effect
 Inadequate training of the Finance Team may cause human error to occur more frequently during the booking of accounting entries.
 The maker-checker control over the accounting entries may not be reliable if an incompetent/ irresponsible person is employed.
 The reversal entries are related to corrections of allocation or posting dates that are done after detailed monthly closing review.
 Accounting entries will be rigorously reviewed after parking. Nothing will be reversed once entries have been posted without the group
Financial Controller's or CFO’s approvals, and all justifications will be adequately documented in reversals cases.
22

7. BOOKS OF ACCOUNTS NOT RECONCILED WITH VAT RETURNS
Observation
As per current practice, VAT computation is shared to third party consultant along with details such as input tax ledger and output tax ledger,
purchase, sales etc. for their review. Third party consultants computes the VAT liabilities and provides the information in a pre-defined manner to
the Jahez Finance Team for the purpose of paying the VAT due and filing the returns.
On review of VAT returns and Books of Accounts (MS Dynamic), variation noted in the months of April, May & June 2022.
MEDIUM
Root Cause
 Absence of monthly closing activity in ERP due to which backdated entries impacted the books of accounts.
23
Annexure

Annexure

7. BOOKS OF ACCOUNTS NOT RECONCILED WITH VAT RETURNS
24
Responsibility
Recommendation
 Monthly closing activity shall be followed, and once monthly closing activity is completed, ERP shall be locked for backdated entries.
From Immediate Effect
 Backdated entries may impact book of accounts in the absence of monthly closing procedure.
 For the first half, we used to get VAT reports from old ERP (Holool) till end of Q2-2022, that’s why there is a difference with the VAT reports.
 Due to the first months of application of the ERP, we were not proceeding with the monthly period close and this resulted with adjustment
entries posted in certain periods after the VAT return submission.
 The differences are taken in consideration in the next returns.
 The monthly closure process will be strictly followed, and once it is completed, ERP will be blocked for backdated entries. Once the ERP has
been blocked, it can only be unblocked with the group Financial Controller's or CFO’s approvals, and all justifications will be adequately
documented.
24

8. NEED TO STRENGTHEN REVIEW PROCESS FOR OPEN ADVANCES/ VENDORS DEBIT BALANCES
Observation
On review of vendor outstanding balance report as on 4th Dec’22, following discrepancies were noted::
 Advances Not Tagged with the Purchase Orders: Due to absence of system-based PO, POs were not mapped with advances as given to
vendors for routine business procurement therefore advances cannot be traced and reviewed on periodic intervals. Total advance given till 4th
Dec’22 was SAR 1.29 million.
 Absence of Monitoring and Adjustment of Vendor Debit Balances: Vendor debit balances were SAR 2.6 million between Apr-22 to Oct-
22, but there were no such invoices received and no amount was recovered from vendors. Further, on discussion it was noted that there was
no such follow up mail shared to respective department for follow-up and reasoning for long outstanding debit Balances.
HIGH
Root Cause
 Absence of adequate policies and procedures over advances and linking of advances with purchase orders.
 Lack of initiative by Finance Team to follow up with the appropriate department to settle debit balances or explain a
reasoning for remaining unsettled balances.
25
Annexure
 
Month & Year Closing balance as on 04th-Dec-2022 (in Million) Closing balance as on 31st-Dec-2022 (in Million)
April-2022 0.00 0.00
Aug-2022 1.14 1.48
July-2022 1.08 0.30
Nov-2022 0.67 0.30
Oct-2022 0.22 0.05
Sept-2022 0.82 -0.07
Grand Total 3.93 2.07
Annexure

8. NEED TO STRENGTHEN REVIEW PROCESS FOR OPEN ADVANCES/ VENDORS DEBIT BALANCES
26
Responsibility
Recommendation
 Advance payment shall be sent using purchase orders so that it can be monitored periodically, and the required action may be made as
needed.
 Appropriate follow-up shall be done for long-aged advanced/ debit balances.
30th June 2023
 In the absence of a PO-based advance transaction, monitoring, tracking, and settlement of balances may be challenging and difficult.
 Follow up on payment based on quotations will be shared.
 All the main debit balances are related to agreements and are subject to review with every monthly closing.
 All advance payments will be made using purchase orders, as recommended.
 Based on open purchase order report, monthly follow-up will be done with respective department/ vendors for settlement/ recovery against
advance payment.
26

9. NEED TO STRENGTHEN REVIEW PROCESS FOR VENDORS OUTSTANDING BALANCES
Observation
On review of open vendor balances as on 4th Dec’22, noted following discrepancies:
 Vendor Ageing Report was not Maintained: On discussion and process understanding, it was noted that vendor ageing report function was
available in system, but it was not yet activated. Therefore, system-based vendor ageing report cannot be extracted through system and
department was not preparing any king of manual report (in excel) for tracking of vendor outstanding balances. Total outstanding balances
were SAR 14.5 million.
 Absence of Defined Payment Terms: On review of the vendor's overdue balance report it was noted that in 25 cases amounting to SAR
12.8 million payment was still pending and due for payment upto 368 days.
MEDIUM
Root Cause
 Non-activation of vendor ageing function in ERP.
 Lack of awareness among Finance Team to fill the payment terms in vendor master during creation of vendor master.
27
Annexure
 
Particulars Amount (In SAR Million)
International Suppliers -1.42
Local Suppliers -13.13
Grand Total -14.55
Annexure

9. STRENGTHEN REVIEW PROCESS FOR VENDORS OUTSTANDING BALANCES
28
Responsibility
Recommendation
 ERP feature shall be activated to create and monitoring of vendor ageing reports.
 Periodic assessment of the vendor ageing report shall be done to prevent delays in vendor payment, and if any balance needs to be hold,
sufficient justification shall be noted for future use.
31st March 2023
 Absence of vendor ageing report may lead to early payment, which could affect fund management and result in interest loss.
 There may be a possibility that the payment may be delayed, which could lead to a vendor dispute.
 Delays are lined to approval of payment based on agreed conditions or special conditions with suppliers.
 ERP feature for vendor ageing report will be activated for monitoring of vendor balances.
 Payment terms will be specified in the vendor master, and based on that, a monthly review of the vendor's outstanding balances will be
performed. Reasoning for any delayed payment will be documented.
28

10. BAD-DEBTS PROVISIONING NEEDS TO BE REVIEWED BY MANAGEMENT
Observation
As per current practice, bad-debt provisioning is done using the ECL model and takes into account elements like Measurement to Expected
Credit Loss, Default Definition, Forward Looking Macroeconomic Adjustment, Probability Weighted Outcome, and Flow Rate Approach under
IFRS-9. The accounts manager then calculates the provision using that approach.
On review of bad-debts provisioning GL, noted following abnormalities:
 Prior Management Approval is not obtained before provisioning of Bad Debts in Books: No prior approval was taken from respective
authority to follow the maker-checker process before creation of provision of bad debts of SAR 0.2 million for FY 2022.
 Bad-debts provisioning reversed without any approval from Management: A bad-debt provisioning was made against a customer name
Watania Distribution in FY 2021. Further, the customer had consented to draft a new contract during the account recovery negotiations in
which he agreed to lease a property in exchange for the account recovery. Due to this Bad-Debts Provision, SAR 3.92 million was reversed in
FY 2022 (06th Apr 2022). However, no such formal approval was taken from the appropriate authorities.
MEDIUM
Root Cause
 Absence of initiative by Finance Team to obtain prior consent form respective authority before provisioning or reversing
the provisioning entries.
29
Annexure
 
Annexure

10. BAD-DEBTS PROVISIONING NEEDS TO BE REVIEWED BY MANAGEMENT
30
Responsibility
Recommendation
 Approval shall be taken from respective authorities before provisioning of accounts receivable.
 In case of any reversal in provisioning, reason with approval shall be documented for future references.
31st March 2023
 In absence of review (by Management), Finance Team may make mistake during provisioning of bad-debts which may impact the financials.
 Any reversal in bad debts without formal justification and consent of management could have a major negative financial impact.
 Provision and reversals are based on ECL module calculations and not on account-by-account base, no preauthorization is needed as per
the DOA
 Provision for bad-debts and reversal of provision will be reviewed and approved by Group Finance controller/ CFO before posting the entries
in ERP. The same will be updated in DoA.
30

11. VENDOR MASTER CREATION PROCESS NEEDS TO BE STRENGTHENED
Observation
As per the standard practice, following documents are required before creation of vendors accounts in ERP. Once the documents are received,
vendor account is created in system including the mandatory field such as Name, Address, Phone Number, VAT Registration Number, Bank
Details and Payment Terms etc.
On review of vendor master data, it was noted that bank details and payments terms were not available.
MEDIUM
Root Cause
 Absence of adequate policies and procedures over vendor master to ensure all mandatory fields are updated.
 Absence of system control to compulsorily fill the mandatory fields.
31
Annexure
NA


11. VENDOR MASTER CREATION PROCESS NEEDS TO BE STRENGTHENED
32
Responsibility
Recommendation
 To save manual effort for validating bank details through invoices during each payment, bank details shall be filled out in the vendor master
when creating the vendor.
 To prevent any form of payment delay or dispute with vendors, payment terms shall be specified in the vendor master.
 System control shall be implemented to compulsorily fill the mandatory fields.
31st March 2023
 There may be possibility that payment may be made to the incorrect bank account due to human error if the bank information is not updated
during vendor creation on ERP.
 Agreed, we will implement the control as suggested by auditors.
32

DETAILED OBSERVATIONS OF
PROCUREMENT PROCESS

12. NON-ADHERENCE OF PROCUREMENT POLICY
Observation
On review of the procurement policy, it was noted that the below areas are non-compliance of the policy:
 Procurement Team not yet established: During process discussion and understanding, it was noted that Procurement Team was not yet
established to perform the entire procurement process like: vendor negotiation for price and payment terms, quotation comparison, PO
creation, review & tracking of open PO, vendor evaluation based on their previous performance etc.
 Supplier performance not reviewed: There was no evaluation of supplier performance.
 Purchase order report not available: Purchase order list was available only for inventory items, other than inventory items there was no
such purchase order list(report) available on basis pending orders can be reviewed on monthly / period basis.
 Purchase requisition function not yet activated: The system's purchase requisition feature was still inactive, thus manual procedures were
used. Mail was used to request any materials and services.
HIGH
Root Cause
 Lack of awareness among the employees to check if processes are being followed in accordance with policy.
34
Annexure
NA


12. NON-ADHERENCE OF PROCUREMENT POLICY
35
Responsibility
Recommendation
 Management shall make sure that all processes and procedures are properly carried out to avoid any kind of SOP non-compliance.
31st March 2023
 Non-compliance with SOPs may result in procurement process anomalies, which may result in financial loss or affect regular business
operations.
 Non-compliance of procurement policy/ SOP will be reviewed and implemented in procurement process as recommended.
35

13. PROCUREMENT POLICY NEEDS TO BE REVIEWED AND UPDATED
Observation
On review of procurement policy, noted following points were found to be unaddressed:
 Policy not approved by Management: It was noted that draft policy was not reviewed and approved by the management.
 Procurement committee not defined: It was noted that procurement committee was not defined in policy.
 PO approval matrix not defined: No slab-wise matrix was defined in the policy for the PO approval process.
 No categorization of transaction in between with PO and without PO: No categorization was done in policy for purchases of goods and
services made with or without PO’s.
 Review of open PO & PR: Absence of evaluation process for open PO and PR in the policy.
 Payment process not addressed: It was noted that the policy did not specify the payment processing procedures such as Payment Cycle,
Advance Payment Terms & Conditions, and Review of Vendor Outstanding Balances etc..
 Vendor evaluation process not addressed : It was noted that the policy did not specify vendor performance standards or methods of
evaluation.
HIGH
Root Cause
 Absence of initiative to develop and implement adequate policies and procedures over procurement process.
36
Annexure
NA


13. PROCUREMENT POLICY NEEDS TO BE REVIEWED AND UPDATED
37
 The procurement policy will be reviewed and amended considering recommendations provided by auditor.
Responsibility
Recommendation
 Management shall carry out a detailed review of the existing policies and make required update(s) to ensure that the policies are adequately
covering all the required sub-processes.
30th June 2023
 If SOP is not followed, there is a possibility that the procurement process may be delayed, the price of the goods or services may increase,
there may be disputes among employees about roles and responsibilities that may have an impact on daily operations.
37

14. PURCHASE REQUISITION & PURCHASE ORDER CREATION PROCESS NEEDS TO BE IMPROVED
Observation
On review of Purchase requisitions (PR) & Purchase Order (PO) Creation process, noted following abnormalities:
 Manual process followed for PR Creation: During process discussion and understanding, it was noted that PR creation function was
available in ERP but not yet activated. Therefore, Manual PR was used instead of system generated PR.
 PO and PR report not available: PO and PR were manually prepared so there was no such reports available for monthly/ periodic review.
 PO terms & condition not available: Payment terms, delivery periods, PO validity, and other terms and conditions were not included in
manual POs.
 No Mapping between PO & PR: Due to the manual preparation of PO and PR, there was no such mapping between them.
MEDIUM
Root Cause
 Absence of initiative to enable the system for PR creation.
 Lack of awareness among the employees to create all kind of POs in the system.
38
Annexure

Annexure

14. PURCHASE REQUISITION & PURCHASE ORDER CREATION PROCESS NEEDS TO BE IMPROVED
39
 Every PO and PR will be created through system, and each PO will be linked to its corresponding PR.
Responsibility
Recommendation
 Purchase Requisition shall be prepared through system for its proper monitoring and review.
 The system shall be used to create all types of PO, and each PO shall be linked to the appropriate PR.
30th June 2023
 Lack of system-based PO and PR may result in irregularities in the procurement process, which may result in financial loss or delay in
procurement process.
 If there are no terms and conditions in the PO, there may be a dispute with the vendor during business transactions.
39

15. IMPROVE CONTROLS OVER REVIEW AND MONITORING OF PROCUREMENT PROCESS
Observation
As per Purchase policy, if purchase for goods/ service is more than SAR 10,000 then 3 independent and qualified offers must be received
before the purchase. In special cases Approval is required from CEO, CFO/ Finance controller before purchase.
On sample review of 20 transactions of fixed assets, noted following abnormalities:
 In 19 out of 20 cases, purchase requisition was not found
 In 7 out of 20 cases, purchase order was not found
 In 19 out of 20 cases, Purchase quotations, Quotations comparison were not found. 1 Instances have a single quotation but for same no such special
approval was found as per purchase policy.
On sample review of following GL’s, noted following abnormalities:
 5 transaction were done in Training course GL of more than SAR 10,000 in each transactions, but there were no such purchase requisitions,
quotations and Purchase order shared to us nor any kind of special approval from CEO, CFO and Finance Controller was available. Refer Annexure
 3 transaction were done in Decorations and improvements on rented premises GL of more than SAR 10,000 in each transactions , but there were no
such purchase requisitions, quotations and Purchase order shared to us nor any kind of special approval from CEO, CFO and Finance Controller was
available. Refer Annexure
 In all 15 instances, there were no such Purchase requisition, Quotations, Quotations comparison and Special Approval were shared to us.
 In 4 out of 15 cases, there were no such purchase order/ contract were raised / made with parties. Refer Annexure
HIGH
Root Cause
 Lack of awareness among the employees to follow the procurement policy.
40
Annexure

Annexure

15. IMPROVE CONTROLS OVER REVIEW AND MONITORING OF PROCUREMENT PROCESS
41
 Issues should be discussed with requesting departments not complying with the procurement policy. All exceptions are based on C-
Level/CEO approvals
 The procurement policy will be carefully adhered to, and if there are any single quotes or less than three quotes, special approvals will be
obtained, based on that invoice will be booked and payment will be released.
Responsibility
CFO and Group Financial Controller
Recommendation
 Regular training shall be provided to the employees to aware them to comply with the procurement policy.
30th June 2023
 Non-compliance with SOPs may result in procurement process anomalies, which could result in financial loss or affect regular business
operations.
41

DISCLAIMER

43
DISCLAIMER
 As it is practically not possible to study all aspects of a process in its entirety thoroughly during the limited time period of review, based
on our methodology for conducting such reviews, we conducted a review of the process & held discussions with the process owners &
other key people in the process during the planning stage of the review which helped us in identifying specific areas where control
weaknesses & process gaps may exist, opportunities for process improvement & / or cost reduction / revenue enhancement.
 Our subsequent test work, study of issues in detail & developing action plans are directed towards the issues identified. Consequently,
this report may not necessarily comment on all the function / process related matters perceived as important by the management.
 The issues identified & proposed action plans in this report are based on our discussions with the people engaged in the process,
review of relevant documents/records & our physical observation of the activities in the process. We made specific efforts to verify the
accuracy & authenticity of the information gathered only in those cases where it was felt necessary. The work carried out & the analysis
thereof is based on the interviews with the personnel & the records provided by them. The identification of the issues in the report is
mainly based on the review of records, sample verification of documents / transactions & physical observation of the events.
 As the basis of sample selection is purely judgmental in view of the time available, the outcome of the analysis may not be exhaustive &
representing all possibilities, though we have taken reasonable care to cover the major eventualities.
 This report is intended solely for the use of management of JAHEZ and is not to be used or relied upon by others for any purpose
whatsoever.

THANK YOU!

Jahez_Internal Audit Report_Financial Control_Jan'23_01032023.pptx

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