INTERNAL AUDIT PROGRAMME
Name & Address of Client
Name of Person in Charge of Accounts
Contact Details
Email ID
CA In Charge of Audit
Name of Audit Assistants
Particulars
1. (a) Obtain Opening Trial Balance to
confirm correct carry forward of previous
years’ closing balances
(b) Scrutinize the ledger/accounts to
find out any abnormal
account/transaction not falling in the
regular course of the business of the
entity
I. SALES
(i) Check availability of following
documents :
a. Discount Policy
b. Credit Policy
c. Copy of Sales Invoice
(ii) Ensure documentary proof for
compliance of following :
a. Payment of GST
b. Timely filing of GST returns
(iii) Check Whether
a. there are any instances of advance
invoicing/ late invoicing as compared to No
dispatch
b. pre-shipment inspection has been
carried and material has been
dispatched as per invoice
c. there is appropriate authorization for
free samples
d. Approval for taking sale return,
receipt and inspection of returned goods
and issue of credit note, etc. Sales
return reason, analysis and comment on
sales return material lying in stock and
the gain/ loss on resale of returned
material
e.Returned bills are cancelled
f.There is segregation of duties between
invoicing and collection of payment.
Ajfan Dates & Nuts, Chennai PAN
Rama Ramkumar TAN
GST
ESI
RAZIQ AHMED, FCA PF
Riya Xavier, Jishma M., Syed Saifuddin Period of Audit
PART A - GENERAL
Audit Comments
Accounts for the Financial Year 2018-19
is not yet finalised.
Hence No Opening Trial Balance
available
Accounts for the concerned period not yet Due to shortage of man power in
finalised. Accounts Department, accounting is
Hence could not scrutinize the books. delayed
PART B - SPECIFIC
Auditor Observations
1)No such Practise, Software allows
discount rate upto 7%,However such
discount is availed only on exceptional
cases.
2)But there is another system called Price
Overriding where the staff can change the
sale amount but the same will reflected in
the Sales summary generated at the end
of the day.
3) Maximum Discounts available for staff
sale is 5%
No
Availbale
Not done for the months of March and
April
GSTR1 for the month of Jan, Feb and Mar
is not filed. GSTR 3B for the month of Mar Shortage of personnel
is not filed.
No
Yes. Normally samples are not provided.
No comments
If provided, the same is billed.
Main item returned is Dates
Reason is it's quality
Invoice for the returned goods are
cancelled and new invoice is raised for
the item purchased in exchange of the
returned goods, but the same practice is
not followed in RK Salai and
Nungambakkam.
No,Both duties are done by Same
personnel
AHDPK2903L
33AHDPK2903L2ZJ
Apr-19
Auditee Reply Suggestions
Due to shortage of man power in
Recruit 2 more staff to accounts for
Accounts Department, accounting is
regularising the accounts
delayed
Recruit 2 more staff to accounts for
regularising the accounts
Auditee Reply Suggestions
No discount policy document available,
Discount norms dictated by oral terms,
Sales are made at discount to particular
Price overriding policies to be covered in
persons (ie, lessor of the shop with the
the proposed discount policy document.
approval of MD) which exceeds this limit
Such policy formed to be applied
which is noted manually.
consistently and the software should be
customized accordingly.
No comments NA
No comments NA
Recruit 2 more staff to accounts for
Shortage of personnel
regularising the accounts
Recruit 2 more staff to accounts for
regularising the accounts
If large number of items is purchased,
we suggest to carry out pre-shipment
No comments
inspection to ensure all items purchased
are billed.
No comments.
Since sales return are insignificant
Returns are accepted on rational basis.
compared to the turnover, developing and
Inspection for the returned goods is
implementing a policy document for same
done.
seems to be ineffective.
Shop in charges of RK Salai and
Nungambakkam don't know how to
cancel the bill. They note it down
manually. And raise new bill for the
Train the staff properly to use the
items purchased instead. In ECR,
software and also bring uniformity in
returned bill is not cancelled in the
dealing with sales return.
software, no new bill is raised. If the
value of items purchased goes above the
returned items, then bill for the
differential amount only is raised.
If such duties are done by same
Collection of payment and invoicing is
personnel,there should an appropriate
done by the same person.
mechanism for Post sale Inspection .
g. Daily Sales reports are submitted to
the Regional Office on Day to Day basis . WhatsApp media is used to send reports. Yes,But through whatsapp mode
h.Sales collections are Deposited into
Bank on Day to Day basis .
Not followed in majority of the shops
II. PURCHASE & PROCUREMENT
(i) Check availability of following
documents :
a. Purchase Order
b. Goods received Note
c. Original Invoice
d. Lorry documents for freight payment
and for TDS, if applicable
(ii) Check Whether
a. Material is supplied as per purchase
order and material receipt note (MRN) is
prepared after quantity and quality
checks and authorization
b. Bill is passed by accounts department
for the quantity as accepted by stores
after making deduction for any quality
discrepancy
c. The value of purchase is recorded net
of GST ITC, if claimed
d. There is any long outstanding
advance made to suppliers
e. There is any material purchase
without Purchase Order and/ or
emergency purchases (Local purchase)
System generated Purchase order raised
at the time of invoice reciept(and not
when the purchase is ordered),Which
overrides the very purpose of such
document.
System generated Goods received Note
raised at the time of invoice reciept(and
not when the goods are received ),Which
overrides the very purpose of such
document.
Available. Invoices of Expenses as well
For facilitating the calculation of GST
as Fixed Assets are filed along with these
ITC
Purchase Invoices.
Lorry documents are available with
purchase invoices. TDS is deducted and
paid correctly.
No such system of raising Purchase order.
Its been informed that,in many
Fully controlled by the Purchase
instances,goods received is not as per
Manager
purchase ordered via existing system of
whatsapp mode of communication.
Bill is received by the accounts
department on a later period and
accounted accordingly.
Yes
No
Yes.All the Purchases are done through
adhoc mode of Purchase order
Staff shortage
Less sales realisation
Purchase manager raises the order
manually (based on his knowledge and
experience in inventory management)
and send it to the vendor through
whatsapp. So no records available
Goods received are checked against the
purchase invoice, which is the only
available document to verify purchase.
No comments.
No Comments
No Comments
No Comments
There is no systematic procedure for
placing purchase order.Purchase
manager himself is placing the order
thorugh phone upon his best judgement
Must Avoid such practice , sales report
must be reported via Email.
We suggest door step banking so that
cash realised is deposited on time
without any failure.
Purchase order should be raised in the
appropriate format and should be
communicated to the vendors via formal
mode of communication by purchase
head.
And it should be verified against
Purchase Invoice when goods are
received.
There should be a system to notify the re-
order lever (preferably through software)
To be properly documented.
To be raised at the time of receipt of the
goods
To be verified with corresponding
purchase order and invoice to ensure the
actual reciept.
To be properly documented.
Separate Files should be maintained for
Purchases,Expenses and Fixed asset
additions
NA
A system of raising purchase order and
GRN is required.
1)Proper mechanism to be established for
ascertaining Reorder level and
2)approriate vendor should be selected
based on various criterias such as
cost,time etc and
3)Therby purchase order(to be serially
numbered) to be raised and
communicated via formal mode of
communication.
4)Follow up of the purchase order raised
and communicated is neccessary to
ensure timely availability of stock.
5)Once the goods are recieved,GRN to be
raised(to be serially numbered) after
quanity and quality checks. It has to be
verified with corresponding Purchase
order and Invoice and should also ensure
that corresponding PO number is
specified in every GRN
Each process has to be carried out by
different personnel as against the existing
practise of being carried out by one or two
personnel.
Necessary arrangement should be made
to ensure that invoices are received at the
time of goods reciept.And the same
should be accounted accordingly
No Suggestions
No Suggestions
As Mentioned above, Purchase order must
be made systematic.Likewise emergency
purchase can be minimised by
maintaining re order level
III. INVENTORY & STORES
MANAGEMENT
(i) Check availability of following
documents :
a. Location wise inventory records
b. List of ABC & FSN category items
c. Standard for minimum, maximum,
reorder level of store stock.
(ii) Ensure that the following
documents are authorized properly
a. All material receipt notes (MRNs) and authorisation.
rejection/ return of material
b. Write-off/ discarding of an item due to
difference in physical verification,
technology up gradation, expiry due to
life cycle or for any other reason
(iii) Check Whether
a. Material requisition is properly
vetted/ validated and authorized. And it
should clearly mentions the specification
and quantity of material to be procured
b. All materials received in stores are
kept separately till the inspection
c. All rejected materials are kept
separately from accepted stock
d. Material is stored only after updating
the stock records
e. Compliance with laws and
completeness of statutory records
f. Stock as per inventory software is
matching with physical stock
Available. But valuation in MRP
No such documents available.
No such documents available.
Store staff keep on checking manually the They ensure stock is not being kept
position of stock and determine what all excess or short.
to be ordered.
Purchase Order is raised after receiving
Purchase Invoice. This order is then
converted into MRN by the stores
personnel himself without any proper
Material rejection/return cases are very
less or such a custom is not there. Either
they keep that excess stock or deficient
stock(when compared with PO) is made
good in next purchase. No control exists.
Warehouse/Store staffs manually looks
in for near expiry products and once they
are selected,such products are
transffered from normal stock to
damaged stock section in the inventory
software.And such products are disposed
off seperately or safely.
No such system, When order is placed via
whatsapp, some other items which were
not listed in the order is supplied along
with the ordered items . As mentioned
earlier,there is no mechanism available
for returning such materials and these
items either get obsoleted or is forced to
sell at half the price which will obviously
result in hefty loss.
Yes
Nothing is rejected
Yes
Yes
Discrepancies:
1) Warehouse stock:No opening quantity
available due to software updation,Hence
negative stock
2) Shop stock:Stock transfer in not
properly accepted in the inventory
software by the shop managers
Software to be upgraded to provide
No comments
valuation on cost basis.
They have an idea about these things. Currently there is a purchase manager,
Nothing recordical exists. The items one assisstant and an IT staff is there to
extra delivered, if returned, cost has to take care of the stores. We suggest
be borne by themselves. And in some appointing one more personnel to manage
exceptional cases, these items may move the store effectively by analysing the
fastly. So they are hesitant to requirement of stock, its movement and
discontinue this practice. its demand and supply.
Being a trading concern,that too operating
in FMCG Market, it is an absolute
necessity to ascertain such standard level
for minimum,maximum and reorder level
of stock, If such a report can be generated
from exisitng inventory software,it will be
highly benficial for determinimg requisite
level of store stock.
Each MRN should be serially numbered
and should refer corresponding
PO number,Consequently,Goods received
No comments
without corresponding Purchase orders
should not be accepted and should be
returned back with proper documentation.
Inventory software should have option to
enter Date of expiry so that Expiry report
can generated on need to need
No comments
basis,Hence mistakes crepted due to
manual checking can be reduced to an
extend.
System of raising formal purchase order
Purchase order is for name sake and keeping the same in chronological
order should be in place.
No comments NA
Should consult with vendors to avoid
sending materials that are not mentioned
in purchase order,and in case of any
No comments exception,make a clause that such cost of
returning freight shall not be borne by
us,since such exception is not due to our
fault
No comments NA
No comments NA
1) Integrate the opening stock with the
current period data
No comments
2) Provide appropriate training to shop
managers to run the software properly.
g. Non–moving stock and damaged stock
is kept separately and is reported to Yes No comments NA
management from time to time.

h. Stock taking and supervision of the

material received should be done on Yes No comments NA
periodic basis

i. There is proper control over scrap/

Yes No comments NA
wastage/ damages/defectives.

IV. HUMAN RESOURCE & PAYROLL

PROCESSING
(i) Check availability of following
documents :
a. Employee attendance register Yes No Comments No comments

We suggest Bio Metric system, which is

b. Employee time register No No such register is maintained.
more reliable than manual register

(ii) Ensure documentary proof for

compliance of following :

a. all documents for compliance with

Income-tax like, house rent receipts,
medical bills, proof of Chapter VIA
deductions, like, LIC, NSC, PPF, tax
NA NA NA
saver FDs, etc., proof of medical
reimbursement, etc. and other
documents/ declarations have been
submitted by employees

b. payment of salary for more than a

specified amount has been made only
through account payee cheques/ drafts
Yes No Comments No comments
and other banking channels including
direct transfer to the account of the
payee

c. computation of income tax liability of

each employee done correctly and
NA No Comments No comments
deduction of tax has been made
accordingly

d. filing of PF and ESIC returns is within

stipulated time and data in returns is
accurate as per books of accounts and
provisions of relevant Act, and correct
information in relation to employees is
reported to authorities as and when
required.
Currently there are 85 staff working in 12
PF and ESI are mandatory schemes. All
shops and office. But PF and ESI is paid High employee turnover
staff to which these provisions are
by employer/deducted from employee Resistance from employee part to join
applicable should be participated in this
salary only for 9 staff. the scheme.
scheme.
Returns are filed at Bangalore Office.

(iii) Ensure that the following

documents are authorized properly

a. verification and authorization of

salary and proper review of payment is Yes No Comments No comments
there.
b. advance payments to employees are
Yes No Comments No comments
properly authorized

e. re-imbursement to employees for the

expenses paid by them are authorized by
Yes No Comments No comments
the relevant authority with the
supporting documents.

(iv) Check whether :

Manual attendance register is
Due to clarity of the images' issue, every
a. the process of conversion of time data maintained. Attendance sheet for the
month there will be complaints from Bio-metric system should be
into payroll data has been scrutinized to month is captured in phone and sent via
stores sales staff egarding salary short implemented.
find any discrepancies. whatsapp from each shop to the
payment
administrator.

d. all the deductions have been made

Yes No Comments No comments
from the salary before the payment

e. cheque has been taken by the correct

person in case of payment of salary by NA No Comments No comments
cheque

f. proper register has been maintained

and signed by the employees after
receiving their cheque or cash

g. advances and loans have been

properly authorized while Whether
advances and loans have been properly
authorized while
h. unauthorized leaves have been
marked as absent
i. Bonus has been accurately calculated,
reported and paid.

j. payment of salary, incentives, bonus

and all other payments processed have
been recorded in the books of accounts

k. proper recording of in-time and out-

time punching in machine software or in
case of manual recording, register is
maintained

l. controls to protect unauthorized

changes in the in-time and out-time of
the employees have been maintained

m. check for guest employees and

deputed employees has been
maintained. Whether movement of
temporary employees from one
department to another has been
recorded.

V. OPERATIONAL & ADMINISTRATIVE

(NOT VERIFIED YET)
EXPENSES
(i) Check availability of following
documents :
a. Original invoice of expense (based on
materiality)
b. Payment vouchers
(ii) Ensure documentary proof for
compliance of following :
a. Payment of GST/PF/ESI/TDS
(iii) Check whether
a. TDS is properly deducted and paid on
expenses
b. The service charges/ expenses is
reasonable according to Section 40A(2)
of Income Tax Act, 1961
c. The payment in cash is more than
10,000 according to Section 40A(3) of
Income Tax Act, 1961
d. Specified expenses u/s 43B is paid
accordingly

e. expenses are authorized properly

f. Imprest account of employees is

settled on time

g. Expenses has been booked properly

mentioning the nature of expense either
operational or administrative

h. Procurement for service for capital

expenditure has not been booked as
revenue expenditure, such as, repair
and maintenance, technical inspection,
erection, commissioning and installation
and so on

i. Value of service has been recorded net

of GST input credit, if claimed

j. TDS, if applicable, should not be

charged to expenses and shall be booked
as liability

k. Imprest given to employee shall not be

booked as salary. There shall be a pre-
drafted format for filing of details of
expenses incurred out of Imprest and it
shall be booked as expenses in proper
head

l. there is expense budget and its

comparison with the actual and
authorization of variations, if any
m. Long outstanding advance to
vendors/ employees

VI. OWNER'S CAPITAL (NOT VERIFIED YET)

a. any loan amount is wrongly debited/
credited in Capital Account

b. drawings carefully, usually they are

made for various personal/ household
expenses and sometimes also for
investments in LIC, NSC, PPF, etc.

c. all the transactions in the capital have

been recorded at correct value.

VII. FIXED ASSETS, DEPRECIATION &

AMORTISATION

(i) Check availability of following

documents :
To be filed seperately.
Available,However filed together with To be accounted as journal vouchers
a.   Original Invoice No comments
purchase invoices. instead of purchase vouchers in tally
software
(ii) Check whether :
a. Depreciation is claimed on the
amount excluding ITC if claimed against Yes NA NA
purchase of any machinery
b. there is any Long outstanding
advance made to suppliers but fixed
No NA NA
assets not supplied with capital
commitments

VIII. ACCOUNTS PAYABLES

(i) Check whether :
a. there are journal entries in the
accounts payable account in general No
ledger for larger amounts.

b. external confirmations available for Obtain external confirmation and

No
larger amounts reconcile atleast on a monthly basis.

Either write off or provide payment

c. there is long pending outstanding Yes
entries.

IX. CASH & BANK BALANCE

(i) Check availability of following
documents :

a. Receipt book and payment vouchers Yes NA NA

Bank Statement-Yes
b. Bank statements/ bank reconciliation To be reconciled on atleast weekly basis.
Bank Reconciliation-No
To be obtained at the end of financial
c. Bank balance confirmation certificate No
year.
(ii) Check whether there is :

a. Segregation of duties relating to

authorization of transactions, handling
of cash/ issuance of cheques and writing Yes
of books of account, and rotation of the
duties periodically

b. Proper authorization of cash and

Yes
banking transactions

c. Daily recording of cash transactions Yes,Manual cash book maintained

d. Periodic reconciliation of bank

No To be reconciled on atleast weekly basis.
balances

e. Reconciliation of cash-on-hand with

book balance on a daily basis or at other No,Accounts not maintained properly on a To be maintained and reconciled on a
appropriate intervals, including surprise daily basis. daily basis
checks by higher authorities

f. Safe custody of cash, cheque books,

receipt books, etc.; and security Yes
documents

(iii) Petty Cash

a.Petty Expenses are properly Proper Authorization is done by
Authorized or Not Yes , Properly authorized. No Comments
incharged person.
b. Petty Expenses are recorded on a Need to avoid such practice , entry
timely basis ie., at the time of At the Day end daily petty cah expenses should be made when the expense is
transacation. No, recored at the day end.
and receipts are recorded. incurred , no need to wait till the day
end
c.Proper Vouchers are available for Petty
Proper vouchers are availed . Proper vouchers are availed . No Comments
Expenses .
d.There any Payments which had
incured and the same is not entered in No, but in Nungambakkam we noticed In case of Nungambakkam , if any
Petty Cash Book . this instance.Payment to staff is made No such instance is incurred except in
payment made from petty cash , the
which is properly authorized, but the Nungambakkam.
same must be recorded in books.
same is not recorded in petty cash book.

(iv) Exchange Balance

The Exchange balance of R.s.3000 is not
The exchange balance is not recorded in
a.Exchange balance is acoounted or not. accounted in anywhere ,except in Must be accounted in books.
anywhere
Pondicherry new shop.

Date of Commencement of Audit ………………………

Date of Completion of Audit ……………………….
Date of Signing of the Audit Report ……………………….