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2 INTELLIGENT COMMUNICATION SYSTEMS INDIA LIMITED

INTERNAL AUDIT REPORT FOR THE PERIOD (1ST APRIL 2011 TO 30TH SEPTEMBER 2011)

Index

RAMESH CHANDRA ROY & ASSOCIATES

Serial

Intelligent Communication Systems India Limited Content Page No.


Introduction Area of Operations Franchisee Debtors Observations on Non-operative Bank Accounts Purchases(including miscellaneous) Main Fixed Assets Creditors Statutory Compliances & Recommendations Board Meeting Income Tax Service Tax Provident Fund & ESI 3 4 5-7 7-10 10-12

A. B. C. D. E. F.
(i) (ii) (iii)

13-15 15 16-17

G. H.
(i) (ii) (iii) (iv)

17 17 18 19-20

You can think of some better looking borders for it and for borders given above as well.

A. Introduction
a (i) Purpose:-

4 The purpose of this report is to provide a handy reference material to the management of INTELLIGENT COMMUNICATION SYSTEMS INDIA LIMITED for taking early corrective measures to the observations, on its diverse areas of operations and to provide recommendations on the areas in need of tighter internal controls. Our objective had been to make a professional assessment as to extent of efficacy of the existing controls framed by the management and the need to suggest and provide for alternate or complimentary controls for the best suited Corporate Governance Objective for the Company. The purpose is inclusive to review the operation of the overall internal control system. The objectives of this report are as follows:1) Ascertain that applicable accounting policies are being followed consistently as per the spirit of statutory requirements and to the operative directions put in place by the management. 2) Assess and Analyze internal check system and to suggest measures to plug existing loopholes in the internal control system noticed during the course of evaluation. 3) Make a professional assessment to the efficiency of the operative controls to present timely and error-free reporting requirements of the management. 4) Existence of measures for early detection of the errors/inconsistencies in the reporting environment. 5) Facilitate preparation of correct financial statements and supporting schedules meant for Statutory Audit in time and to provide for satisfactory explanatory notes for the audit queries.

a (ii) Scope of Work:This report detail the findings based on our process review of Compliances through various control assessment measures. During the course of our exercise, we applied a fair mix of substantive as well as procedural compliance review of transactions selected for scrutiny. Our main observations with the recommendations are summarized in this report.

a (iii) Sources of Informations :Audit observations in this report are based on our evaluation of the internal control system of the organization and discussions with key personnel and information, documents and personnel records provided by the management. We have applied suitable audit techniques for identifying areas of weaknesses in Internal Control, their overall impact as to the materiality of the financial position

5 of the Concern, its possible recurrence in future, appropriate solutions and designs to provide for its effective counter-measures so as to detect and curb such weaknesses and its adverse impact to the organization at earliest We have discussed our observations in this report with the relevant staff personnel who have confirmed their factual accuracy in all material respects.

a (iv) Confidentiality:This report is confidential and has been prepared exclusively for the management of ICSIL. It should not be used, reproduced or circulated for any other purpose, in whole or in part, without our prior written consent. Our firm does not hold any liability towards any third party for any damages for its unauthorized use. Such consent could only be given after full consideration of circumstances.

B. Areas of Operations
b (i) Accounts and Finance
Cash, Bank and Journal Vouching had been carried out to verify the correctness and rationality of the expenditure claims in the interest of the organization. Bank Reconciliation and other matters related therewith or incidental thereto have been scrutinized to ensure the overall efficacy of checks in the system. Deviations noted in this regard have been attached as Annexure-A with this report.

b (ii) Purchases
Assessment and verification of purchase system and transactions effected during the period have been carried out to gauge the procedural compliances and correctness of the expenditure incurred in this regard. Purchase orders and price quotations from various parties for computer hardware items and miscellaneous purchases have been sampled for scrutiny during the period to ascertain the efficiency and economy observed in making purchases for the Company. Deviations noted in this regard have been attached as Annexure-B with this report.

b (iii) Statutory Compliances


1) Under Companies Act. 2) Under Income Tax Act. 3) Under Service Tax Act I think above paragraphs should give you 4) Under Employees Provident Fund & Miscellaneous Provisions Act. fair idea as to the expected language to be used in a professional report. Please b (iv) System draftReview the rest of it accordingly. System of recording and raising should sales bill for computer IT training and supply P.s-Your report speak andyour of computer hardware. language, it should not be based overly on cut/paste technique. b (v) Contracts Review of contracts between Intelligent Communication Systems India Limited and various parties.

b (vi) Tax Deduction at Source


Tax Deduction at Source, deposit and rate categories of payment under various sections and the tax deducted thereon.

b (vii)Minutes of Board Meetings


The Minutes of the Board Meetings held during the Internal Audit period.

b (viii)

Service Tax:

Service tax liability, service tax credit, deposit of service tax and submission of returns of service tax under Finance Act 1994, as amended by Finance Act 2005.

B.

Franchisee Income:ICSIL runs TCIL-IT Computer Education & Training Scheme all over the country for which it grants license to the parties who are interested in running the centre. The Franchisee is allowed to runs the course from the list of courses approved by the company. The Franchisee has three options to pay for the license fee: Option 1: Rs. 75,000/- lump sum + service tax as applicable + Bank Guarantee (BG) of Rs.30, 000/Option 2: Rs. 30,000/- for the three years + service tax as applicable + BG of Rs. 30,000/Option 3: Rs. 20,000/- per annum + service tax as applicable + Security Deposit of Rs. 20,000/- in cash/DD. Payment of License fee is mandatory for the second year, thereafter optional. Irrespective of the Option availed, Franchisee has to pay the following sums to ICSIL: Royalty: 20% of fee collected from students on monthly basis. Application Money: Rs. 250/Processing Fee: Rs. 2,000/ICSIL through its franchisee has opened centre all over the country from it imparts Computer education & training scheme from it collects income in the form of Royalty. For running the centres franchisee has to fulfill certain criteria which are as follows:

8 1. Minimum of 50 Registrations in 6 months from the date of starting the centre. 2. 100 registrations in 1 year from the date of starting the centre. 3. All the equipment & infrastructure facilities as per agreement. 4. Licensee is required to send monthly reports as prescribed in the agreement latest by 10th of every following year. During the course of our scrutiny it was observed that control system over franchisee management required close monitoring so as to exclude any possibility which had the potential resulting in to revenue leakage and also remove any impediment in Brand building exercise for the company. Some of the lacunas found in the internal control relating to franchisee income were as follows: (a) The royalty income is not remitted to the company on the monthly basis rather it is remitted on the quarterly, six monthly or even on yearly basis. Periodic reconciliation exercise needed to ascertain the difference between amount receivables as per the Franchisee Terms and amount actually received during the period. Consequent steps should have been undertaken to ensure timely recovery of the royalty income due to the company from its franchisee. Proper structuring and streamlining is required to cross check the number of students enrolled in the particular centre and the course opted by them. If there is shortfall in the royalty income from the franchisee then they are reminded at the year end to clear its dues. The account of franchisee is not reconciled on the monthly basis. Therefore it amounts to Revenue loss in form of opportunity cost. Effective steps were needed to encourage the Licensee to send the monthly report as stipulated in the agreement to the Licensor. This report carries vital importance in terms of controls and reconciliation. A proper system needs to be placed so as to keep a close vigil to ensure whether 50 and 100 students in 6 months and 1 year from the date of opening of centre respectively, has been achieved or not and necessary steps should be undertaken to ensure compliance in this regards. Course completion certificates are issued by ICSIL on the basis of Certificates asked by the franchisee on due verification of Full Fees Collected from the students according to the course opted by them. Whereas there is no proper control on students who has not paid their balance fees after their course duration. During the course of audit it was observed that license fee receivable from the franchisee as 2nd or 3rd installment during the year was not received. Total amount involved on this account amounted to 4.70 Lakhs, the details of which were as follows:

(b) (c)

(d)

(e)

(f)

(g)

9 S. No. Name of the Centre 1. M/s Kaithal Institute of Education & Mgmt. Technology, Haryana 2. M/s Global Institute of Computer Education, Haryana 3. M/s CMT Computer Education, Karnataka 4. M/s Sai Group of Education, Haryana 5. M/s Job Career Acedemy Gujarat 6. M/s Excellent Computer Centre, Chennai 7. M/s Abacus First Institute of Information Technology 8. M/s Vivek Computers, Karnataka 9. M/s Ingenious Technologies, Tamilnadu 10. M/s Sigma College of Information Technology, Tamilnadu 11. M/s SME Soceity, Karnataka 12. M/s Versatile Computer Services, Gujarat 13. M/s ABC Computer Acedemy, Jammu 14. M/s Bicard, Pune 15. M/s Aim Inst. of Mgmt, Gujrat 16. M/s Pearl Training Academy, Karnataka Due Date 08.04.11 09.04.11 23.04.11 26.04.11 11.05.11 25.05.11 11.06.11 12.06.11 17.06.11 22.06.11 01.07.11 20.07.11 27.08.11 08.09.11 21.09.11 23.09.11 Installment Amount 3rd 30,000/3rd 2nd 2nd 2nd 3rd 3rd 3rd 3rd 3rd 3rd 2nd 2nd 2nd 3rd 30,000/40,000/20,000/30,000/30,000/30,000/30,000/30,000/30,000/30,000/30,000/20000/30000/30000/30000/-

(h)

List of Centres from the where the License fee is receivable but not received and which is adjusted against Bank Guarantee or Security Deposit. Total amount involved were amounting to Rs. 0.60 Lakhs. Details of which were as follows:

10

S. No. Name of the Centre 1. M/s Shape Institute and Development. , Udumalpet 2. M/s Balaji Graphics, Coimbatore

Due Date 19.01.201 0 27.03.201 0

Installment Amount 2nd 30,000/2nd 30,000/-

(i)

List of Centres which have not submitted Bank Guarantee as on 30.09.11: 1. M/s Sai Tech Solution, Haridwar 2. M/s Kaithal Institue of Information & Management Technology, Haryana 3. M/s Unique Computers, Jagdalpur 4. M/s CMT Computer Education, Karnataka 5. M/s Prarthan Computech Byrappa, Bangalore MANAGEMENT COMMENTS:1. Royalty is mostly on monthly basis only and the details are always checked with the correctness and accuracy and there has been no case where calculations have been found wrong. 2. Certificates are issued only after verifying the fee/royalty paid by the students. 3. Although royalty comes from time to time still various reminders by email or telephonic are sent to the franchisee on regular basis. 4. We receive regular royalty reports month wise. 5. This is pressurizing techniques in order to increase revenue for franchisee. We keep on reminding the franchisee of the target. Non achievement of targets and consequent termination of franchisees license would cause loss of revenue to the company. 6. Received all License Fees, as BG were encashed.

11

4).

DEBTORS:Outstanding Debtors:During the course of audit we verified outstanding balances of debtors and found that there was large number of debtors which were overdue for a period of more than six months. Number and volume of outstanding is indicative of weak recovery system of the company. As per explanation provided to us no debtors confirmation has been obtained. From the legal point of view money suits are susceptible from time-barring clause and needs extra precautions so as to ensure that its recoverability is not impaired. The lists of following debtors are as follows:Debtors- AMC, Service, Trading Total amount outstanding under this head was Rs. 2,44,38,293.43 out of which Rs. 6,52,325.43 were outstanding for more than 3 years. Serial No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. Name of the Debtors (AST)-Hoshiarpur
Centre for Professional Dev. In Higher

Deptt. Of Social Welfare Dr. N C Joshi memorial Hospital Indian Air Force, New Delhi Maulana Azad Medical College MTNL (Laxmi Nagar) North Eastern Police Academy (RS) HKM State Library (UE) Ludhiana TCIL (BTS) DSCF Telecom Const. TCIL Kuwait

Amount as Date from on 31.03.2011 Balance Outstanding 76,038/31.03.2006 39,130/29.03.2005 2,42,774/31.03.2010 88,160/31.03.2010 1,75,810/12.01.2010 35,539/02.07.2010 3,780/08.10.1998 76,110/05.05.2009 94,351/26.02.2008 26,999/07.11.2005 87,519/02.05.2006 14,313/01.01.2004 3,10,195.43 03.08.1999 2,31,67,575/- 31.03.2010

where is

12

Debtors- Cabling Total amount outstanding under this head was Rs. 29,27,179.42 out of which Rs. 7,33,359.42 were outstanding for more than 3 years Serial No. 1. 2. 3. Name of the Debtors Air Force Station TCIL (MTNL Cable) TCIL (PGCIL) Amount 21,93,820/33,643.42 6,99,716/Date from Balance Outstanding 20.02.2009 22.03.2005 08.06.2006 where is

Debtors- CDOT/MARR(New Tel) Total amount outstanding under this head was Rs. 7,52,820/- out of which Rs. 7,52,820/- were outstanding for more than 3 years Serial No. 1. 2. 3. 4. 5. 6. Name of the Debtors Aligarh Banda Banswara Bareilly Bhilwara Bijnor Amount 3,51,632/17,500/2,75,000/20,000/2,55,000/2,67,460/Date from where Balance is Outstanding 31.03.2008 31.03.2008 31.03.2008 31.03.2008 31.03.2008 31.03.2008

13 7. 8. 9. 10. 11. 12. 13. Bikaner Churu Etah Etawah Haldwani Junjhunu Rampur 27,875/3,56,113/40,000 48,800/1,21,500/2,33,543/3,97,777/31.03.2008 31.03.2008 31.03.2008 31.03.2008 31.03.2008 31.03.2008 31.03.2008

Debtors- Franchise Total amount outstanding under this head was Rs. 48,821/- out of which Rs. 1,040/were outstanding for more than 3 years Serial No. 1. 2. 3. 4. 5. 6. 7. 8. Name of the Debtors FIIT Govt. of TN (Backward Classes) Higher Education Society IRIS Software Khanams Charitable Trust Max Computers (Kashipur) Meenakshi Computer Orissa Amount 378/35,880/8,913/828/773/773/236/1,040/Date from where Balance is Outstanding 01.01.2009 30.01.2009 31.03.2010 27.07.2009 30.06.2009 23.06.2009 18.02.2009 22.08.2007

Rs.

Debtor- E-10-B Total amount outstanding under this head was Rs. 25,01,576/- out of which 21,25,078/- were outstanding for more than 3 years Serial No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Name of the Debtors Agra (E-10-B) Aligarh (E-10-B) Allepy Bhimavaram Bhuvaneshwar Calcutta Calicut Chitoor Coimbatore Dharmapuri Dhule Amount 35,251/52,345/40,000/6,843/60,300/39,200/39,355/1,080/33,300/18,000/48,000/Date from where Balance is Outstanding 24.03.2005 31.03.2006 27.11.2003 12.01.2005 30.01.2002 30.03.2000 29.05.2009 04.03.2004 04.03.2004 28.03.2002 03.05.2002

14 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. Ernakulam Erode Faridabad Ghaziabad GMT Pune` Goa Gujrat Gulbarga Gurgaon Himat Nagar Hubli Hyderabad Kannur Karim Nagar Kerala Kottayam Madurai Mangalore Manipal Maraimalainagar Nadapuram Nagercoil New Delhi Nizamabad Pathanamthitta Pondicherry Rajapalayam Ranchi Rourkela Salem 2,236/12,000/7,349/9,125/7,984/17,748/1,29,600/16,200/2,70,253/1,24,314/47,708/49,635/6,080/15,800/26,228/77,400/34,870/46,014/140/3,712/45,050/17,500/22,605/23,291/92,464/27,000/6,052/1,73,790/94,700/27,000/31.03.2005 31.03.2003 05.11.2004 22.02.2006 06.10.2005 06.10.2005 31.03.2006 27.09.2001 31.03.2005 30.12.2003 29.12.2005 31.03.2010 31.03.2006 24.10.2003 21.06.2006 19.01.2005 29.12.2006 21.06.2006 07.02.2005 19.08.2009 12.01.2005 31.03.2006 20.09.2006 21.06.2006 03.03.2009 31.03.2006 31.03.2006 12.05.2005 05.10.2001 18.02.2003

42. 43. 44. 45. 46. 47. 48. 49. 50. 51.

Secundrabad Thanjavur Thodupuzha Tiruvalla Virudhunagar Warrangal Tirupur Anantapur Vishakapatnam Guntur

2,700/45,000/18,734/1,57,600/19,900/98,376/70,377/1,56,700/49,635/75,032/-

28.03.2002 21.06.2006 31.032006 24.07.2007 20.04.2004 28.09.2004 31.03.2010 08.07.2003 31.03.2010 31.03.2010

MANAGEMENT COMMENTS:-

15

The payments terms are on back to back basis and their payment is released only after realization from the client. 5. OBSERVATION OF NON-OPERATIVE BANK ACCOUNTS:OBSERVATION:There were several accounts noticed whereby no transactions have taken place for a period ranging between 2-4 years. An ambiguous financial policy is needed to ascertain the number of accounts to be maintained and mechanism to place surplus fund to the short term/long term deposits so as to avoid idle funds as well as a well lubricated financial liquidity. For the purpose short term and long term budgeting system needs to be incorporated and to be observed along with due introspection of variances. As per the normal practice in banking sector, banks usually deduct at least something as service charges annually/ semi-annually. This is so even in case of non-operative bank accounts. Keeping this fact in view, Position of non operative account on the date of audit is as under: Serial No. 1). 2). 3). 4). 5). Name of Bank Balance as on Date of Non 31.03.2011 Operation Bank of Baroda A/c No. 01.04.2009 192980 Punjab & Sind Bank01.04.2007 Chandigarh A/c No. 2577 Punjab & Sind Bank 21.10.2009 Chennai A/c No. 1870 United Bank of India A/c No. 01.04.2008 844 Punjab & Sind BankTrivandrum A/c No. 2038

MANAGEMENT COMMENTS:Observation discussed and noted for future compliance.

BANK RECONCILIATION STATEMENT

16 During the course of Audit it was observed that there is need for Reconciliation of Bank A/c on monthly basis, depending on the volume of transaction in the particular bank, by the concerned department and also there were few banks which were put into dormant status as there was no transactions for over a period one year as suggested by us in the previous Internal Audit Report also and hence these banks were not reconciled. The lists of such banks are as follows: a. b. c. d. e. Bank of Baroda A/c No. 192980 10590200000575 Punjab & Sind Bank Chandigarh A/c No. 2577 Punjab & Sind Bank Chennai A/c No. 1870 Punjab & Sind Bank Trivandrum A/c No. 2038 United Bank of India A/c No. 844

MANAGEMENT COMMENTS: -

VERIFICATION OF CASH BOOK: 1. It is observed that all vouchers are serially numbered. 2. It is observed that Cash withdrawals from Bank are accounted in the cash book on the same day. 3. Cash balance has been physically verified and tallied with the books of account maintained. (Need to be done).

17

PHYSICAL VERIFICATION OF CASH AS ON -----------Conducted cash verification at ------ P M on ---------S. No 1 2 3 4 5 6 7 Denomination No. of Notes Total Remarks

CHANGE

18

FIXED DEPOSIT RECEIPTS During the course of our audit, it was noticed that Fund management as to fixed deposit had much scope for improvement and decisions for encashment as well as premature withdrawals should be based on information generated out of well structured management information system. It again points to the need of a prudent system of budgeting. The Company has two types of FDRs namely Short Term & Long Term Receipts. Short Term Receipts is generally for period which may vary from 7 days to 1 month depending upon the requirement of fund. Long Term Receipts is for a period of 1 year which can be renewed as per requirement of company. It is suggested here that in this competitive era there is a need for market research among different banks before placing the funds in short term/long term deposits so as to ensure maximum yield to the company on account of interest income. We have reviewed the documents related to FDRs and observed that there is delay in encashment of matured FDRs with the bank which results in loss of opportunity interest on the maturity amount to the company. The details of such delay are as follows: FDRs with State Bank of India FDR No. 602945110001497 602945110001498 602945110001499 602945110001360 602945110002427 Maturity Amount 287656.70/289742.27/289730.56/702969.24/5,00,000/Maturity Date 10.09.2011 10.09.2011 10.09.2011 04.07.2011 14.05.2012 14.05.2012 14.05.2012 14.05.2012 14.05.2012 Date of Encashment 30.09.2011 30.09.2011 30.09.2011 12.07.2011 04.07.2011 04.07.2011 04.07.2011 04.07.2011 04.07.2011 Delay in Encashment 4 days 4 days 4 days 8 days Prematurely Encashed Prematurely Encashed Prematurely Encashed Prematurely Encashed Prematurely Encashed

602945110002424 5,00,000/602945110002425 5,00,000/602945110002426 5,00,000/602945110002428 5,00,000/-

19 602945110002422 5,00,000/14.05.2012 12.07.2011 Prematurely Encashed

MANAGEMENT COMMENTS:-

6.

PURCHASES:The names of the respective personnel, who provided us information, documents and records, are:1) Mr. Anil Khanna- Executive - Hardware During the course of our audit we have verified the records related with purchases made by the company, purchase orders, bills raised by the parties, quotations, payments etc., for both types of purchases i.e. main purchases and Fixed Asset purchases. Our observations in this regard are as follows:A) Main Purchases:As per order of Govt. of Delhi all organizations or departments controlled by Govt. of Delhi will purchase all computer related requirement from the list of companies mentioned in the order, ICSIL being one of the company mentioned in the order. As per order ICSIL will charge 5% Service charge on the order value plus service tax on service charges as applicable. So ICSIL procure the computer hardware requirement on behalf of department or companies. PURCHASE POLICY:In absence of any formal purchase policy manual / guidelines, we were not able to comment on standard procedures adopted by the management for the purchases and that whether standard criteria or methods adopted are in

20 lines and in accordance with the parameters laid down in same line of industry or companies engaged in turnkey projects in India. However, we have relied upon the written/ oral comments given by the Management /person in charge/ authorized persons who are engaged in the purchases. Absence of purchase policy indicates that decisions were taken on adhoc basis for material procurement and it is not a healthy practice for the long term viability of a company. In order to infuse total transparency in the system a clear cut credit management policy should be in vogue and same should be adhered to for infusing greater confidence among the creditors and long term business relationship.

i).

Procedure for Purchases:As per the explanation received from the purchase department the procedure for the purchase of hardware is as follows: Enquiry for the purchase of hardware is received from the department (client) by mail or over the phone. Based on the enquiry ICSIL ask its registered vendor to quote for the hardware with exact specification. ICSIL has, on its empanelment, list of vendor which is registered under different categories. Registered vendor quotes for the hardware either by email or by sealed quotation. Comparative statement is prepared and quotation with least price is selected matching the technical specification. The quotation which is selected is sent to the client for its approval. Client approves the quotation and order is placed along with 80% of the order value as an advance.

1. 2. 3. 4. 5. 6.

21 7. Order is placed on the least bidder which supplies the hardware within the stipulated time. 8. After the supply of hardware vendor issues the installation report confirming the successful installation of hardware. 9. Vendor raises the bill for the payment and reciprocally ICSIL raises the bill for the balance amount. 10. After receiving the balance payment from the concern department ICSIL makes the payment to the vendor.

OBSERVATION:Specific observations noted during the course of purchase vouching were as follows: a. In some cases, it has been observed that registered vendors were refusing to make supplies which obviates the registration process of vendors and the relevance of their registration for purchases.
S.N. Particulars Management replies Our observation

22
1. As per the normal practice followed by the company, after receiving the query from client, company called its registered vendor to quote for the particular item whereas in the Purchase Order for the supply of 4 desktop and printer to G.B. Pant Hospital quotation was sent to the hospital for approval without receiving any quotation from the registered vendor and after client has approved the same then quotation are called from the client. Also vendor quoted the desktop @ Rs. 31,500/- inclusive of VAT but supplied the desktop @ Rs. 38,450/inclusive of VAT (service charges extra @ 5%). As per the note sheet in the Purchase Order for supply of 3 desktop, 1 laptop, 1 printer and 3 UPS amounting to Rs. 2,31,875/company has approached three registered vendors namely Unique Infoways, Mayank IT, Targus for quotation of above items but none of the them agreed to supply the hardware at the agreed rates but during our audit no supporting document was found that the company has communicated with the above parties. Finally the order was placed on M/s Computer Clinic. In the Purchase Order for the supply of 3 desktop 2 laptop and 2 printer to District Disaster Management Authority no supporting document was found for calling the quotation from the vendor, no comparison sheet was prepared and quotation was sent to the client for its approval. In the Purchase Order for the supply of desktop, printer and antivirus to General Administration Department we observed that their was no supporting documents for calling the quotation from the vendor and no supporting for the quotation sent to the department for its approval. The Client has asked to send the PI on urgent basis and due to urgency PI was sent based on the rates available with us. Rates of Desktops and Printers were quoted on DGS&D rates and rates of Laptops were sent on the basis of earlier supply made to Aruna Asaf Ali Hospital. As per earlier practice ICSIL used to raise invoice at the rates given by the client as per PO. Later the practice was changed to raise invoice based on the vendors bill. Inquiries were made telephonically.

2.

Such cases need to be recorded with post-facto effect so as to serve as future reference.

3.

Quotations were called over telephone on urgent basis.

Such cases need to be recorded with post-facto effect so as to serve as future reference.

4.

Based on previous PIs the rates were sent to GAD.

Such cases need to be recorded with post-facto effect so as to serve as future reference.

5).

List of Purchase Order where the rates charged to the client is more than the rates quoted by the registered vendor.

23 Serial No. 1. 2. 3. 4. 5. Name of the Department Delhi Tourism Drugs Control Department Description of Order Supply of Printer Supply of Printer, Antivirus and UPS District Health Society Supply of UPS Department of Excise Supply of Desktop & Printer General Administration Supply of Desktop & Department Printer

6).

In the Purchase Order relating to supply of hardware to the Delhi Transport Corporation the rate charged is more than the rate quoted and paid to the vendor which is against the guideline of the Govt. of Delhi. The details of such excessive charge are as follows: Serial No. 1. 2. 3. Particulars Supply of Amount Charged from the Client 42 nos. Printer 20,763/01 no. Line Printer 7,03,500/UPS 4,148/Amount Difference paid to the Vendor 19,762/6,74,000/2.575/1,001/- per unit 29,500/1,573/- per unit

MANAGEMENT COMMENTS:As per earlier practice ICSIL used to raise invoice at the rates given by the client as per PO. Later the practice was changed to raise invoice based on the vendors bill. B). FIXED ASSETS:-

OBSERVATION:During the course of our audit it was observed that for acquiring the fixed assets quotations have been called for from the various vendors and least quoted price is selected. It was observed that fixed assets purchased during the year. The details are:Date 09.05.11 26.09.11 Name of fixed asset Name of purchased supplier Office Equipment Office Equipment the Purchase price (In Rs.) Leading Edge 21,888/Communication Pvt Ltd. Leading Edge 33,070/Communication Pvt

24 Ltd Clinic India Pvt Ltd Rama Motors

09.06.11 13.06.11

Tally ERP 9 Vehicle

33,500/5,75,000/-

The records for the fixed Assets are not maintained. Therefore it is advised to maintain Fixed Asset Register to track all the records associated with the fixed assets. 7). A) CREDITORS:OUTSTANDING CREDITORS:-

During the course of our audit we checked Creditors Ledger and found that there are outstanding balances in few creditors ledger for more than one year in which no transactions were made. The confirmation from the creditors was not obtained and the reason for the non payment was not explained properly to us. Therefore it is recommended that creditors confirmation along with reconciliation with their account statement should be carried out in the year end and correctness of the figure should be ensured. Further amount not payable should be written off to ensure a correct financial position at the year end. The details of which are as follows:Serial No. 1. 2. 3. 4. 5. 6. 7. 8. 9. Name of Creditors Affiance Services Ass. Computer Aids A S Telematics (P) Ltd. Cosmos Pvt. Ltd. Balance as on Date from 31.03.2011 (In Rs.) where Balance is Outstanding 5,17,134/08.08.2006 45,000/62,206.27/31.03.2005 31.03.2006 03.03.2009 19.01.2004 20.02.2009 31.03.2008 11.09.2007 20.03.2008

Telecommunicationa 56,523/34,340/21,88,433/11,44,918.99 35,404/75,076/-

East R Coast Telecom Pvt. Ltd. Escorts Comm. Ltd. New Delhi Tele Relico India R S Enterprises

25 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. Schleicher India Ltd. Shivam Constructions Strategic Communications Unique Engineers & Consultants Express India Sunnet India Bills Awaited-Affiance Services Bills Awaited-Shivam Constructions Bills Awaited-Unique Engineers Bills Awaited-Strategic Communication Sundry Creditors Old 1,20,511/1,51,066/1,58,708/1,36,005/86 3,881/35,880/4,23,449/1,01,227/5,30,905/1,96,524/11,04,366/51 30.03.2009 31.03.2006 31.03.2006 08.08.2006 12.03.2007 02.02.2009 08.06.2006 09.11.2005 08.06.2006 19.06.2006 18.04.2002

MANAGEMENT COMMENTS:Most of these are corresponding to the debit balances outstanding. B). Expenses not booked:There were few instances found for which expenses were not booked. a) Prepaid Expenses: - Prepaid Expenses amounting to Rs. 27,875/relating to the previous year was not booked as expenses in the current financial year. This account was not adjusted since November 2008. MANAGEMENT COMMENTS:Prepaid Expenses pertaining to previous years amounting to Rs. 27,144/was charged to the respective heads on 31.03.2011. 8. A). OTHER OBSERVATIONS AND RECOMMENDATIONS:BOARD MEETING As a part of statutory compliance with the Companies Act it is recommended that efforts should be taken for its overall compliance including No. of Board Meetings, Minutes and other Secretarial aspects incidental thereto. B). i). INCOME TAX ACT:TDS:Less Deduction of TDS;-

26 As per the provisions of Income tax , Tax deducted at source should be deducted at normal rate of tax on the payment of salary to its employees. While conducting our audit we find that the tax deducted from the salary of employees is less than what ought to be deducted. The detail of such shortfall is as follows:S. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Name of the Employee Mr. Sukhpal Singh Mr. Sanjeev Kr. Paliwal Mr. Pradeep Bhardwaj Ms. Pravita Negi Mr. Sanjay Prakash Manish Arora Mr. A. K. Duggal Mr. Anil Khanna Mr. Harvir Singh Mr. Radhey Shyam TOTAL Shortfall 246/155/46/357/71/23/6,950/46/200/76/8,170/-

Non Deduction of TDS:During the financial year 2010-11 company has paid to M/s Pearl Printer Rs. 66,320/- for the printing of certificates and letter heads but no TDS has been deducted on it amounting to Rs. 1,326/-. During the course of Audit we have informed the concern official about the shortfall of the tax deducted and the same has been deposited with the department on 29.04.2011. ii). ADVANCE TAX:Introduction:Under Sec 208 it is obligatory for every assessee to pay the advance tax in case where tax payable by the assessee is Rs.10, 000/- or more. Due dates for the payment of tax in a case where assessee is a corporate assessee are as follows:On or before June15 of the previous year On or before September15 of the previous year On or before December15 of the previous year Up to 15% of the tax payable Up to 45% of the tax payable Up to 75% of the tax payable

27 On or before March15 of the previous year Up to 100% of the tax payable

OBSERVATION & RECOMMENDATION:But the same has not been followed by the company. Company has not deposited the advance tax for the first quarter, second quarter and third quarter which may lead to levy of interest u/s 234. However, company has deposited advance tax of Rs. 7 Lakhs in the fourth quarter on 14.03.2011. MANAGEMENT COMMENTS;-

C).

SERVICE TAX ACT:As per the provisions of Service Tax Act, service tax should be deposited by the 6th of next month (e-payment) in which service tax has been realized and for the month or quarter ending March the tax has to be deposited on or before 31st March 2011. While conducting the audit we find the following discrepancies. OBSERVATIONS:Month Amount Due date of Actual date deposit of deposit Delay 5 days 31.03.2011 05.04.2011 31.03.2011 05.04.2011 5 days Amount deposited

March 11 37,595/(Franchisee) March 11 47,86,340/(Manpower)

D)

PROVIDENT FUND & EMPLOYEES STATE INSURANCE ACT:OBSERVATION:The Company collects the provident fund, of persons employed in the various departments, schools and company working as computer operators, from the concerned department deposit the same with the authority. During the course of audit we have checked the monthly returns for the financial year and after verifying the same we noted that there was delay in filing monthly return as well as deposit of employers and employees share of provident fund. The details of which are as follows:

28

Provident Fund S. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. Month April 2010 June 2010 August 2010 August 2010 August 2010 August 2010 September 2010 October 2010 October 2010 October 2010 October 2010 October 2010 October 2010 October 2010 November 2010 November 2010 November 2010 November 2010 November 2010 November 2010 November 2010 November 2010 November 2010 November 2010 Amount 8,68,320/9,04,727/19,512/64,726/6,91,859/1,76,642/6,16,631/2,96,110/-` 5,29,858/87,775/5,62,639/21,70,860/18,84,901/78,812/5,039/48,021/44,561/2,61,590/10,01,045/14,463/11,66,684/12,01,318/1,01,964/23,619/Due Date of Actual Date Deposit of Deposit 20.05.2010 21.05.2010 20.07.2010 23.07.2010 20.09.2010 21.09.2010 20.09.2010 21.09.2010 20.09.2010 21.09.2010 20.09.2010 21.09.2010 20.10.2010 22.10.2010 20.11.2010 23.11.2010 20.11.2010 23.11.2010 20.11.2010 29.11.2010 20.11.2010 24.11.2010 20.11.2010 24.11.2010 20.11.2010 24.11.2010 20.11.2010 24.11.2010 20.12.2010 24.12.2010 20.12.2010 24.12.2010 20.12.2010 24.12.2010 20.12.2010 24.12.2010 20.12.2010 24.12.2010 20.12.2010 24.12.2010 20.12.2010 24.12.2010 20.12.2010 24.12.2010 20.12.2010 24.12.2010 20.12.2010 24.12.2010

Delay in days 1 day 3 days 1day 1day 1day 1day 2 days 3 days 3 days 9days 4days 4 days 4 days 4 days 4 days 4 days 4 days 4 days 4 days 4 days 4 days 4 days 4 days 4 days

ESI S. No. 1. 2. 3. 4. Month June 2010 September 2010 October 2010 November 2010 Amount 1,82,370/82,105/14,63,366/10,00,156/Due Date of Actual Date Deposit of Deposit 21.07.2010 23.07.2010 21.10.2010 22.10.2010 21.11.2010 26.11.2010 21.12.2010 27.12.2010 Delay 2 days 1 day 5 days 6 days

29

RECOMMENDATIONS: It was observed that there is delay in depositing the amount of provident fund and ESI to the respective department so it is recommended that deposit of statutory dues with the department should be on or before the due date to avoid levy of any interest or penalty. Also it is recommended that monthly reconciliation of amount of Provident Fund and ESI received from the client and paid to the department should be maintained.

For Ramesh Chandra Roy & Associates Chartered Accountants Gurmeet Singh Sodhi (Partner)

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