Haier Pakistan (Private) Limited Internal Audit Department

M. Waqar Taqi B. Com. (Pun!a" Colle#e o$ Commer%e)

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Haier Pakistan (Private) Limited Internal Audit Department

Table of contents
1. The Exordium 3 2. The internship4 3. About Haier..5 4. Ariel Vie of the !actor"..11 5. The #nternal Audit $epartment..12 %. &or'in( experience..13

M. Waqar Taqi B. Com. (Pun!a" Colle#e o$ Commer%e)

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Haier Pakistan (Private) Limited Internal Audit Department

The Exordium
)In the Name of ALLAH the Compassionate the

Merciful
All the acclamation and admiration is for Almi(ht" Allah the most *erciful+ ,racious and -eneficent+ &ho is entire source of all the 'no led(e and isdom endo ed to man'ind. # offer m" humblest than' from the core of our heart to Hol" .rophet *uhammad /.eace -e 0pon Him1+ ho is fore2er source of (uidance and 'no led(e for the humanit". Praise to Allah, Lord of the creation, the Compassionate, the Merciful, the King of the Judgment da ! Alone"

/Al 3uran1

2 The internship
In this modern age of business, all world class universities require their degree students to obtain practical training in various business entities. This helps the students to obtain practical insights of what they have learned during the studies.

M. Waqar Taqi B. Com. (Pun!a" Colle#e o$ Commer%e)

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Haier Pakistan (Private) Limited Internal Audit Department University of the Punjab, Lahore, also requires their practical training. It was a great pleasure for me to be chosen in "aier Pa#istan $Private% Limited for internship program. This opportunity not only did help me in applying my #nowledge gained from the optional paper of &Principles of 'uditing( in the final year of my ). products. ,urther I am e-tremely than#ful to "aier+s .anagement especially "/ and Internal 'udit 0epartments, who provided me an opportunity to see practical side of a such a large .ultinational ompany. om, but this also helped me to understand organi*ational culture of "aier and moreover strong brand loyalty for the "aier+s ommerce !raduates to obtain three months

1ith regards, *. &a4ar Ta4i ). om. $2334536% Punjab ollege of ommerce $P %

/oll 7umber 8 933: 8 ;ection ' <:

M. Waqar Taqi B. Com. (Pun!a" Colle#e o$ Commer%e)

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Haier Pakistan (Private) Limited Internal Audit Department

3 About Haier
5alient #nformation Haier ,roup

T"pe !ounded Head4uarters 6e" people #ndustr"

!overnment =wned <>9: $adopted current name in <>>2%, ?ingdao, hina ?ingdao, hina @hang /uiminA hairman and B= Cang .ianmianA President 1u DesongA Eice5 hairman Blectronics, 1hite !oods, ,inancial ;ervices .ajor appliances ;mall appliances ommercial heating and cooling systems onsumer electronics F<G.G billion $2334% 43,333 "aier Blectronics !roup o. $;B"DA <<H>% ?ingdao "aier o. $;;BA H33H>3% www.haier.com

.roducts

7e2enue Emplo"ees 5ubsidiaries &ebsite

G.< "istory
"aierIs history begins long before the actual founding of the company, in <>23Is ?ingdao where a refrigerator factory was built to supply the hinese mar#et. 'fter the <>:> establishment of the PeopleIs /epublic of hina, "aier was then ta#en over and turned into a state5owned enterprise. )y the <>93s, the factory was in debt for over 7C J<.: million and suffered from dilapidated infrastructure, poor management, and lac# of quality controlsK resulting from the planned economic system and relevant policies. Production had slowed to a tric#le, rarely surpassing 93 refrigerators a month, and the factory was close to ban#ruptcy. In desperation, the ?ingdao government turned to a young assistant city5manager, @hang /uimin, responsible for a number of city owned appliance companies. @hang was appointed the managing director of the factory in <>9:.

M. Waqar Taqi B. Com. (Pun!a" Colle#e o$ Commer%e)

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Haier Pakistan (Private) Limited Internal Audit Department

G.2 @hang /uimin and the corporate legend

@hang was an avid reader who had studied 1estern and Lapanese business practices and management techniques. 1hen he arrived in <>9:, @hang reali*ed that the poor condition of the factoryIs quality controls was endangering its continued survival. In <>94, a customer brought a faulty refrigerator bac# to the factory and showed it to @hang. @hang and the customer then went through his entire inventory of :33 refrigerators loo#ing for a replacement. In the process he discovered that there was a 23 percent failure rate in his merchandise. To drive home the importance of product quality, @hang had the 6H dud refrigerators lined up on the factory floor. "e then distributed sledgehammers to the employees and ordered them to destroy the refrigerators. The wor#ers were hesitantK the cost of a refrigerator at the time was about 2 years worth of wages. ;eeing their distress, @hang saidA M0estroy themN If we pass these 6H refrigerators for sale, weIll be continuing a mista#e that has all but ban#rupted our company.M The refrigerators were smashed to pieces. =ne of the hammers is on display at company headquarters as a reminder to posterity.

G.G ,ounding a new company

"aier was founded as 3in(dao 7efri(erator 8o. in <>9:. 1ith hina opening up to world mar#ets, foreign corporations began searching for partnerships in hina. =ne of these, !ermanyIs Liebherr !roup, entered into an agreement with ?ingdao /efrigerator o., offering technology and equipment to its hinese counterpart. /efrigerators were to be manufactured under the name of 3in(dao9:iebherr pinyinA ?ingdao5Libohaier%. ombined with @hangIs disciplined management techniques, which bro#e from the tradition of the Iron rice bowl in hinese state5owned enterprises, the company began to turn around. )y <>9H, ?ingdao /efrigerator had returned to profitability and sales growth averaged 9G percent per year. 1ith sales of just 7C JG.4 million in <>9:, sales roc#eted to 7C J:3.4 billion by 2333K a growth of more than <<,433 percent. 1ith the success of ?ingdaoIs refrigerator company, the municipal government as#ed it to ta#e over some of the cityIs other ailing appliance ma#ers. In <>99, the company assumed control of 3in(dao Electroplatin( 8ompan" $ma#ing microwaves% and in <>><, also too# over 3in(dao Air 8onditioner .lant and 3in(dao !ree;er.

G.: The "aier )rand

"aving diversified its product line beyond refrigerators, the company adopted a new name in <>><. )orrowing from the !erman name of its partner, MHaierM came from the last two syllables

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Haier Pakistan (Private) Limited Internal Audit Department

of the hinese transliteration of Liebherr $pronounced MLi5bo5hai5erM%. 3in(dao Haier ,roup was further simplified in <>>2 to Haier ,roup, the companyIs current name. The company set out to establish itself as the countryIs leading brand, focusing upon reliability and product quality. 0iversification would also allow "aier to spread out its ris# among various product lines. ;o, in <>>4 "aier bought out its chief rival in ?ingdao, 7ed 5tar Electric Appliance !actor". In <>>6, the company moved into television manufacturing with the acquisition of Huan(shan Electronics ,roup. )y the end of the <>>3s, "aier was the most recogni*ed brand in the country with products ranging from mobile phones to computersK it had also captured a dominant mar#et share in its core white goods division.

G.4 International e-pansion

Its place in the domestic mar#et secure, "aier moved onto the international stage with the goal of building a global brand name. The company opened a production facility in Indonesia in <>>H, and the Philippines and .alaysia in <>>6. "aierIs move into the U.;. mar#et was cautious at firstK it focused upon two niche mar#ets in compact refrigerators and electric wine cellars. )oth mar#ets were underdeveloped, but "aier believed that they both had growth potential and were being largely neglected. The companyIs sales figures soon proved this belief correct, allowing "aier to firmly establish itself in its U; niche. 1ith this success, "aier loo#ed to ma#e further inroads in the 7orth 'merican mar#et by moving into the full5si*ed refrigerator category. This would bring it into direct competition with established 'merican giantsA !B, 1hirlpool, ,rigidaire, and .aytagK not to mention foreign competitors li#e L! and ;amsung. 's part of its strategy, "aier decided to build a production facilty in the United ;tates at amden, ;outh arolina, opened in 2333. )y 2332, U; revenues reached U;0 F233 million, small when compared to its overall revenue of F6 billion, but "aier set an ambitious sales goal F< billion and <3 percent of the U; refrigerator mar#et. 'lso in 2332, "aier moved into the :andmar' -uildin( in downtown .anhattan. ,ormerly the headquarters for the ,reen ich -an', the 42,333 square foot building was built in <>2: in the neo5classical style. "aier continued its e-pansion into other international mar#ets as well. Production facilities were constructed in Pa#istan in 2332 and Lordan in 233G, greatly strengthening its position in the .iddle Bast mar#et. In 'frica, "aier has plants in five countriesA Tunisia, 7igeria, Bgypt, 'lgeria and ;outh 'frica. The company also purchased a factory in Italy, as part of its continued drive into the Buropean mar#et. "aier has been successful in placing its products in most major Buropean retail chains, either under its own brand or under =B. agreements with foreign partners.

G.H =wnership structure

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Haier Pakistan (Private) Limited Internal Audit Department

'lthough under partial public ownership, "aier is still technically a McollectiveM company, meaning that it is supposed to be owned by its employees. "owever, its actual ownership situation is opaqueK the employees receive no dividends and do not #now how much they own in reality. Interference from officials is also a ris# for ;=BIs li#e "aier. Earious levels of government often try to push their ailing companies upon successful ones, often resulting in failureK "aier was once tal#ed into acquiring a pharmaceutical company, even though it had no prior e-perience or infrastructure in biotechnology. $;ourceA www.wi#ipedia.org the Internet+s largest encyclopedia%

G.6 ;alient ,eatures

It is about :33 Dm north5east of )eijing, with originally the domestic refrigeration production facility. Dey features that resulted in competitive advantage include technical innovation, scientific management, mergers and acquisitions, and multinational e-pansion. Long march from a small enterprise burdened with <.:6 million Cuan in debts to reach its present position as the 7o < domestic electrical appliance producer in hina. 4th producer of electric appliances in the world by volumes. ,rom start 933 staff but not has more than 23,333 employees. >,333 products in :2 categories. "aier achieved several international ertifications such as I;=>33< $in <>>2% and

I;=<:33< $in <>>H%.

G.9 "'IB/ I7 P'DI;T'7

The ompany was incorporated in Pa#istan under the ompanies =rdinance, <>9: as a private limited company under the name of "./. .anufacturing ompany $Pvt.% Limited on 22nd .ay, 233< and ompany $Pvt.% subsequently its name has been changed to "7/

Limited. It is principally engaged in the manufacturing, assembling and sale of Blectrical "ome 'ppliances. "aier Pa#istan $Pvt.% Ltd. is the ;ales O .ar#eting division of the international "aier !roup. The joint venture between /uba !eneral Trading ompany and "aier

M. Waqar Taqi B. Com. (Pun!a" Colle#e o$ Commer%e)

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Haier Pakistan (Private) Limited Internal Audit Department

!roup of consumer. The plant spreads over a vast area of HG acres with a covered area of 3.H million square feet including a wor#ers colony on /aiwind /oad, Lahore. The project is e-pected to produce 3.> million pieces of household appliances per year with plans to e-port to the .iddle Bast and all over 'sia. In the first year of its operations, "aier will generate employment opportunities to H33 individuals with potential to grow up to <233 within the ne-t five years. ,urthermore, "aier will supplement income of <333 to <433 families providing indirect earning and employment possibilities. hina has brought "aier to Pa#istan with an initial investment of about U;FG4 million and a

commitment to provide world5class innovative products based on uncompromising quality to the Pa#istani

G.>

)ranch networ#
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M. Waqar Taqi B. Com. (Pun!a" Colle#e o$ Commer%e)

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Haier Pakistan (Private) Limited Internal Audit Department

"C0B/')'0

;UDDU/ /'I1I70

?UBTT'

A7#A: V#E& <! THE !A8T<7=

Refrigerator & Deep ree!er Hall .tore# of rele/ant 0ro*1%tion Hall#2

"a#$ing Ma%$ine & &it%$en Applian%e# Hall

"or+er#, Colon-

A/C Hall

'a$ore ( Rai)in* Roa* M. Waqar Taqi B. Com. (Pun!a" Colle#e o$ Commer%e)

Main Gate

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Haier Pakistan (Private) Limited Internal Audit Department

#nternal Audit $epartment

I was appointed by the "uman /esource .anager in consultation with 0eputy .anager 'udit $0.'% .r. 7aeem Dadri in the 'udit 0epartment on 'ugust 39, 2336. I started wor#ing from the < st day of my appointment as an internee. ,irst of all I was attached with "afi* Lahangir Dhan $the 'udit B-ecutive% by 0.' who gave me briefing of tas#s normally performed by the internal audit department and informed me about the areas where I was supposed to assist the department. =n the second day of my internship I was introduced with the colleagues in 'udit 0epartment. I found all of them very helpful and cooperative. 0ay after day I continued to visit different 0epartments and collect information according to the schedule and got it verified from the 0.' "aier Pa#istan. .y olleagues wereA D-2 Manager A1*it 3Mr2 4aee5 &a*ri6 H.: H>7

M. Waqar Taqi B. Com. (Pun!a" Colle#e o$ Commer%e)

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Haier Pakistan (Private) Limited Internal Audit Department

.r2 A1*it 78e%1ti/e 3Mr2 9afar :;<al6 6

A1*it 78e%1ti/e 3Hafi! M1$a55a*

>a$angir6

A1*it 78e%1ti/e 3:#$tia; A$5a*6 6

.r2 A1*it 78e%1ti/e 3Mr2 M2 =a#in6 6

A1*it ?ffi%er 3Mr2 .$a$!a* &$an6 6

&or'in( experience
H.< 0ebtor /econciliation H.2 'ccounts /eceivable 'ging H.G )an# /econciliation H.: )ranch B-penses H.4 Lournal Eouchers H.H !ate 'ctivities H.6 ;toc# Ta#ing $Inventory ounts% H.9 Purchase Eouchers H.> Payroll $"PL O "7/% H.<3 =ver Time hec#ing $Logistics%

I wor#ed on the tas#s as mentioned below and the detail of each tas# is also givenA

M. Waqar Taqi B. Com. (Pun!a" Colle#e o$ Commer%e)

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Haier Pakistan (Private) Limited Internal Audit Department

The above mentioned sections in I wor#ed are e-plained as underA

%.1 $ebtor 7econciliation

0ebtor reconciliation involves the confirmation of balances as per boo#s and as per customer and to investigate reason for the difference, and identification of old outstanding balances.

%.2 Accounts 7ecei2able A(in(

This involves age analysis of old outstanding balances. This helps to identify old balances and to do efforts for their recovery.

%.3 -an' 7econciliation

It includes the finding reasons of difference between the ban# report and the accounts. It is performed on monthly bases. company+s

%.4 -ranch Expenses

This includes the verification and chec#ing that these e-penses are valid or not and properly approved before the payment.

%.5 ?ournal Vouchers

Lournal vouchers are brought to the department after posting in journal ledgers. It helps to see whether accounting has been done in a proper way and only approved LE+s are entered in !L.

%.%

,ate Acti2ities

The first tas# I was given wor#ing on ancel I!P $Inward !at Pass% for the last seven months starting from Lanuary <st to Luly G<st. ancel I!P is a document which is prepared at the gate for the goods which are brought into the factory and the person on the gate ma#e a record of all the items on a paper which is called I!P while ma#ing this document if he ma#es any mista#e he cancels this I!P and send it to the relevant store so it is #nown as a ancel I!P. ,or this purpose I went to the !ate. I collect the data from the gate because I!P is drawn on the gate followed by four copies and then from its four copies they, the gate man, #eep one copy with him and send other three copies to the relevant store after this the store #eeper #eeps two copies in his records and attach them with the relevant documents. Then send the last fourth copy to the 'ccounts department. Then I went to all the stores li#e 'ir conditioner store, /efrigerator store, .icro wave oven store, .ain store, 0eepfree*e store, 1ashing machine store and chec#ed all the I!P+s physically. 'fter all these activities I

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Haier Pakistan (Private) Limited Internal Audit Department

prepare the report and got signed by the managers of all the stores and submitted to .r. 7aeem ?adri. ,or this purpose .r. "afi* Lahangir Dhan guide me to complete this entire tas#. 'fter this used to I #eep on chec#ing the I!P records for the month of 'ugust, ;eptember and =ctober and maintained the report whose format is attached after this page.

%.@

5toc' Ta'in(

;toc#ing ta#ing which is considered to be an important part of Internal 'udit was done by me during the course of my internship at lest four times. ;toc# ta#e is a process in which the stoc# is counted and reconciled with the report of the relevant department which is prepared through physical counting by them during this process the )in ards are signed and at the end Ledgers are closed. The stoc# ta#e report is also reconciled with the software. This tas# is conducted mostly at the end of the month. .y first stoc# ta#e was conducted with .r. "afi* Lahangir Dhan. 1e went to 'ir onditioner "all for stoc# ta#e. ,irst of all we count the entire stoc# placed in the ware house according to their different models on a particular date while this stoc# ta#e we signed the )in ards as well. 'fter completing the physical counting of stoc# we went to reconcile the stoc# report, prepared by the ware house In5charge, with the software. /ight after this we close the ledgers by reconciling them with the software. This tas# could ta#e a wor#ing day or more.

.tore#

Refrigerator :n%$arge@ .1ltan

Air Conditioner :n%$arge@ &$1r#$ee*

Washing Machine :n%$arge@ M1Eee<

C&D CAB

'o%al Co55er%ial ?/en# &it%$en Applian%e#

'o%al CAB CD Dr-er Di#$)a#$er

%.A &or'in( on .urchase Vouchers

1or#ing on purchase vouchers means to rechec# the vouchers prepared by the accounts department. These vouchers are supported by the following documentsA !oods /eceipt 7ote $!/7%

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Haier Pakistan (Private) Limited Internal Audit Department

Invoice $Inv% Purchase =rder $P=% Inward !at Pass $I!P% Inspection /eport $I/% !oods /eceipt Inspection /eport $!/I/%

If there is any Purchase /eturn then other two documents are prepared which are as followsA 0ebit 7ote $07% =utward !ate Pass $=!P%

'ccounts department receive all the above documents from relevant departments and attach them with the voucher. They also mention the serial numbers of the attached documents in the narration. 1hen the voucher is completed the it is signed by the following personsA Bntered byA Eerified byA hec#ed byA 'pproved byA

%.A.1
$emandB 9

$ocument 8ircle of .urchase

/equirement of 0epartment

.urchase <rderB 9 $eli2er" 8hallanB 9 #n ard ,ate .assB 9 ,ate .assB 9 VerificationB 9

.ade by PP for Local Purchase

;end by Eendor

.ade by .ain !ate in ;upport of 0

.ade by .ain !ate

oncern ;tore confirm the ?uantity

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Haier Pakistan (Private) Limited Internal Audit Department

3ualit" #nspectionB 9

?uality 0epartment hec# the ?uality of !oods

,oods 7ecei2in( >oteB 9 Bach ;tore Prepare its own serial P !/7 #n2entor" $epartmentB 9 0ocuments than send to Inventory for ;oft 1are Bntry ..8B 9 AccountsB 9
ross hec#, /ejection and 'djustment 7ote.

Preparation for PLE and ,und .anagement

%.C

&or'in( on .a"roll

The process in which the accounts department ma#es the salary calculation is chec#ed by audit department. This report contains the following data 'ttendance /ecord 7ew joining /ecord /esignation /ecord 0eductions ,ull and ,inal ;ettlement ;alary ;heet

The ;alary ;heet contains the following main heads

%.1D&or'in( on <2er Time

=ver time is basically given mostly to the Production and Logistics department. The time they spend in the factory for some special tas# more than their duty hours is over time. It is calculated on per hour bases and the amount which is given to the wor#er is <4Q more than their per hour salary to egg on them.

End of report

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