2. A MNC AUTO NBFC – Risk Based Internal Audit
Client Details • The company is an automobile NBFC in the business of capital financing for vehicle
loans (NBFC-ND-SI)
• The assignment was a co-sourced internal audit executed under the supervision of
Internal Audit Head.
Scope Details
• The scope of the audit covered areas viz. finance, operations including credit and risk
operations and compliances.
• The company also had income from insurance business which consists of commission
income earned from the sale of insurance for vehicles financed.
Value Delivered See Next Slide
Client Testimonial “I would just like to pen a quick note to thank VERITA for successfully completing the
assigned task. VERITA had a clear understanding of the requirements and the team
deployed to complete the assigned task met the deadlines in an efficient manner. Many
thanks to the entire team”
3. Key Observation Value Delivered
• The company had waived off Rs xx Lacs as waivers and
discounts on account of different fees and charges
(processing fees, foreclosure charges, etc.). Such charges
were accounted on receipt basis and hence such waivers
and discounts were not recorded in financials.
• Waiver and discount policy has been designed and
documented. The company has started maintaining MIS which
gives consolidated amount on total waiver and discounts for a
particular period
• The company followed the practice of using pre-franked
stamp papers. However, the company had incurred a loss
of 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 Stamp
Duty Loss by making appropriate changes in the application
system. Because of such changes in the system, automatic MIS
has been generated for stamp duty loss cases.
• 3 product schemes out of sample of 10 schemes where
loans were disbursed even after expiry date of the scheme.
• Automated controls were developed and proper authorization
procedure implemented in the system
• The assets of the company viz. furniture, electronic
equipment etc were not insured adequately.
• The admin department made changes in the process followed
for insurance of the fixed assets owned by the company. The
company covered all assets under appropriate risk coverage
insurance policy.
• Non compliance with Employee State Insurance Act, 1948
• The company has registered under ESI Act and paid the liability
for the year.
• Absence of certain clauses in loan agreement as per RBI
circulars
• Loan agreement was modified and clauses were added as per
RBI circulars
A MNC AUTO NBFC – Risk Based Internal Audit
Back to Index
4. Client Details
Scope Details
Value Delivered
Client Testimonial
• Client is a new generation Insurance Company, with commitment to building a long
term sustainable business focused on a consumer centric approach.
• To validate the health of compliances against requirements of IRDA in terms of
circulars, notifications, Law, etc. in order to minimize the reputation risk
• To make the employees aware and responsible for complying with the regulatory
requirements 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 compliances
See Next Slide
“Many thanks for helping us in this initiative. The efforts put by you are extremely
commendable.” - Compliance Office of the Company
“My compliments to all” – CFO of the Company
A LEADING LIFE INSURANCE CO. – Compliance Self Certification
5. Phase I: Preparation of Master Checklist
• Understood Insurance Act, 1938 and identify key 165 check-
points
• Understood IRDA Rules and Regulations and Identify 521
check-points from all the applicable provisions.
• Understood all the IRDA circulars issued in the past and
Identify key 706 check-points from all the applicable
provisions.
• Analyzed warnings and penalties issued by IRDA for violation
or non-compliance to various life insurers and mapped the
points with the above check-points
Phase II: Compartmentalization of Check-points
All the check-points were bifurcated into following departments
• Investment Function & Actuary Function
• Marketing Function
• Operation Function (It includes Claims, New Business, Policy
Servicing, D-Ops, etc.)
• Legal & Compliance Function
• Branch Operations & Sales Function
• IT Function
• Audit Function
• Training Function
Phase 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 and
activities
• Validated existing controls against regulatory requirements
• Identified gaps in the existing controls
• Provided rectification and recommendations
Phase IV: Development of Self-Assessment Certification
• Developed Regulatory Compliance Self-Assessment
Certification which covers all the applicable points
• Used COSO Methodology to define Compliance Self-
Assessment Certification
Phase 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 Certification
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6. Client Details
Scope Details
Value 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 Review
See Next Slide
A CAR DISTRIBUTION CO. – Risk Based Internal Audit
7. • FIFO method for dispatch of vehicles is not followed diligently. The early dispatches have been observed
for the vehicles which were inwarded later. On sample data analysis of inward and outward date of
vehicles, it has been observed that total XXX vehicles amounting to Rs. XXX crores have been not sold
on 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 been
delivered after XX days.
• Delay in transit from plant to RSO. It has been observed that out of XXXX vehicles, there has been delay
in 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% of
vehicles 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 transit
for more than 30 days as per SAP record.
• The vehicle storage and conditions are not followed as per the defined guideline. Absence of proper
monitoring mechanism on regular interval for storage of vehicles.
A CAR DISTRIBUTION CO. – Risk Based Internal Audit
Back to Index
8. Client Details
Scope Details
Value Delivered
• Client is a dealer of a leading Japanese Car Manufacturing company which made a
remarkable entry in the Indian market with its product. Client also runs an authorized
service 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 Review
See Next Slide
A CAR DEALER CO. – Risk Based Internal Audit
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 revealed
that 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 drive
provided, 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 higher
cost, 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 INR
1.5 lacs is receivable and unclaimed from other dealers for more than 90 days.
Back to Index
10. India Offices
India Corporate Office (Mumbai)
441, Kiran Kunj, S.V. Road, Malad (W), Mumbai 400 064
T: +91 22 2864 5500 | F: +91 22 2864 5400
India Branch Office (Bangalore)
1179, 3rd stage, 4th main BEML Layout, Rajarajeswari Nagar,
Bangalore 560098
India Branch Office (Ahmedabad)
16 Siddhi Banglows, Near 200 FT SP Ringroad Jxn, Bopal, Ahmedabad 58.
T: +919619961986
India Branch Office (Vadodara)
B-84, Bhagyodaya, Refinery Road, Gorwa, Vadodara 16
T: +91 99202 88031
UAE Liaison Office
P.O. Box 128235, M-04, Bil Badi Building, Madinet Zayed, Abu Dhabi,
United Arab Emirates
Oman Liaison Office
P.O. Box 385, Jibroo, P.C. 114, Sultanate of Oman
