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Presentation on theme: "INTERNAL AUDIT REPORT OF ABC Limited PRIVATE LIMITED 4 TH QUARTER A.Y. 2014-15 INTERNAL AUDIT REPORT OF ABC Limited PRIVATE LIMITED 4 TH QUARTER A.Y. 2014-15."— Presentation transcript:


2 TABLE OF CONTENTS Slide Page: Executive Summary 3 Chapter- 1 Introduction 4 Chapter -2 Scope of Audit 5 Chapter-3Observations 6 Journal Vouching, 7 Ledger Scrutiny, 10 Statutory compliances : 17 Service Tax Works Contract Tax TDS Inter-group reconciliation, 18 Bank Accounts 20 Bank Term Loan accounts, Current Bank accounts, Statutory Records. 21 General Records 22 Graphical Analysis. 26 Chapter-4Annexure 28 2

3 Executive Summary  While carrying on the audit we find that internal control of entity is not up to the mark as the observations raised in the previous internal audit report are still not resolved i.e. Most of the receivables and payables are still having the same balances; apart from that we found that management of receivables and payables requires more attention.  ABC Ltd., a dynamic commercial venture in collaboration with Citi Property Investors, is a business ecosystem that sets new bench marks in creating world class business environment for corporate around the globe.  A green building certified by the Leadership in energy and environmental design (LEED) Silver rating by the US Green Building Council  Spread over 44,100 sq. mtr of lan having alush green campus, the project has been designed in the form of 4 towers of approximate 3,07,260 sq.ft. LEED certified Silver Rated Green Building the park is equipped with a Club house (squash courts, yoga, gym) 250 seater auditorium, Banks & ATM’s, Multi Cuisine Food Court, Coffee Shops, Concierge, Travel & Medical Desk.  It offers more than just an invigorating climate. The three dimensional geometry of this site is such that as one approaches the site, the campus would gradually open up visually & volumetrically, positioning with a striking appreance. 3

4  The function line for ABC Ltd. Pvt. Ltd. is to operate & develop its project named as ABC Ltd. located in ……... In this project Company is mainly engaged in the business of renting of office space.  Operation of Systems, procedures & Controls are the responsibility of entity’s management & our responsibility is to express an opinion on the weaknesses in internal controls, risk management and governance (entity level controls), framework, highlighting any exceptions and cases of non-compliance and suggest or recommend improvements in the design and operations of controls based on the internal audit. 4

5  The Internal Audit was conducted in accordance with generally accepted audit procedures as applicable;  It was planned and performed to obtain reasonable assurance whether the systems, processes and controls operate efficiently and effectively and financial information is free from material misstatement;  Assessing the strength, design & operating effectiveness of internal controls at process level and identifying areas of control weakness, business risks and vulnerability in the system and procedures adopted by the entity;  Assessing the accounting principles and estimates used in the preparation of the financial statements; and  Evaluating the overall entity-wide risk management and governance framework. 5

6 Observations are divided in two parts i.e. Part A & Part B, former one contains the queries which were not resolved & the later one contains the queries which were resolved after submitting & discussing the Draft Internal audit report. Observations Part- A Part- B Former queries 4 th Quarter queries 6

7 Journal Vouching ParticularsDate of EntryVoucher No. Amount ( ` ) Advertisement expenses31-Mar-148827,83,200/- 1.In the following cases, supporting of vouchers have not been produced for our verification – Recommendations : For every expenses, proper supporting should be there to avoid the disallowability in the income tax assessment. 2. Legal & Professional Charges – Nature of Consultancy not mentioned in the bill. Payment made to xyz Ltd., whereas debit balance outstanding has not been adjusted. ` 25,09,000/- amount of consultancy charges paid to xyz Ltd. 7 Part- A

8 3. During F.Y. 2011-12, a contractor for civil work, PQR Pvt. Ltd. has filed a petition claiming ` 46,39,441/- as final amount of retention money, as against a liability of ` 28,43,083/- booked by Company. On account of that the company had deposited ` 46,39,441 with High Court which was released during the previous year, Finally the case has been shifted from Court to Arbitration. Based on discussion, the Management believes that there is a fair chance of decision in its favour and hence no further provision is considered in the books. Legal & professional charges were booked on 01-Sep-13 for ` 1,10,000/- & ` 50,000/- respectively for ……………for the above matter and on 22- Jan-14 for ` 1,33,370/- for Mr. SRGR Law Offices and also on 28-Mar-14 for ` 50000/- for ……….. for the above matter. The same should be considered for Contingent Liability. 4. An order has been issued from Customs, Central Excise & Service Tax, Noida for show cause notice dated 03-Oct-12 on account of service tax default: ParticularsAmount ( ` ) Demand (with interest)1,75,02,594/- Penalty1,76,64,976/- Interest1,24,984/- Based on discussion, the management believes that the show cause notice was not maintainable and they will appeal to higher authority and hence no further provision is considered in the books. Legal & professional charges were booked for ` 1,50,000/- in the credit of Ram & Co. for preparation of reply of show cause notice. The same should also be consider for Contingent Liability 8

9 5. Fixed Assets – Building Phase II ` 52,90,558 – The above addition relates to previous years. Hence depreciation should be charged from the date of completion of Building instead of payment of bills. DG Set II The DG Set was purchased in F.Y. 2012-13 and depreciation was provided in 2012-13 on DG Set. Additional installation amount ` 439719 paid on 15-6-2013. Therefore depreciation of previous year should be charged. DG Set I ` 51,05,154 – 9

10 Ledger Scrutiny- 1. Interest on FDR – ` 44,49,482.00/- for FDR (Margin Money – BG) ` 7,84,81,321.70/- for FDRs ` 15,000.00/- for FDR (Sales Tax) a.Provision of interest receivable as on 31 st March14 has not been made. b.Interest received on FDR matured of ` 64,10,000Vijaya Bank has not been adjusted from accrued interest. 2. Diesel Exp. – SS tock of Diesel as on 31 st Mar 14 has not been credited in diesel expenses. 3.Provision for Income tax for F.Y. 2010-11 ` 81,18,825 and for F.Y. 2011-12 ` 66,46,339 to be reversed. 4.Insurances documents were not provided for verification - Insurance Building ` 1,193.00 5.Interest Accrued on statutory Dues ` 1,36,142/- has not been paid till now. 6.IFRSD-Indian Pollution Control Association, ` 5,000/- is received 04-Sep-08. Why amount is outstanding so long? 10

11 7. The following expenses have not been booked in the accounts from the date mentioned against each – ParticularDate Flower Exp.After Sep.2013 Yoga Exp.Oct.13 to Nov.13 Internet Access ChargesJan.14 to Mar.14 Facility Management ChargesOct.13 to Nov.13 8. Audit Fee payable – Audit fee payable to E & Y for 2011-12 ` 70,966/- has not been paid. Hence excess provision should be reversed. 11

12 10. The following are the parties outstanding due to retention money or some other reasons held at the time of execution of contract. The same are outstanding since the date mentioned against each, you are kindly requested to look into. Retention money outstanding more than three years should be written off, if not claimed :- Particulars Closing Balance as on 31-March-14 Outstanding Since Creditors against Retention Money : Ram 2,60,919.00 Cr 20-07-12 Shyam 14,36,980.00 Cr 09-12-09 Hari Mohan 3,500.00 Cr 01-10-13 Raju 14,250.00 Cr 01-01-14 12

13 S.No.Particulars Closing Balance as on 31.03.2014 Receiviable from 1.Barclays Shared Services Pvt. Ltd. (BC)68,783.00 Dr 01-05-11 2.Citizen Media (P) Ltd.7,000.00 Dr 21-04-12 3.HCL Security Ltd.51,086.79 Dr 16-02-13 4.Perfect Maintenance Service7,732.00 Dr 14-05-12 5.Mohd.Ahsan Khan10,000.00 Dr 17-09-10 6.Alamdar Fabricator Pvt Ltd20,00,370.00 Dr 20-11-09 7.Ion Exchange Services Ltd4,15,490.00 Dr 23-07-09 8.Shiv Refrigeration Works9,596.00 Dr 08-05-09 9.Aadhunic Technology Pvt. Ltd.2,71,306.00 Dr 01-06-09 10.Rapid Cool3,66,562.00 Dr 09-12-08 11.Yash Industrial Solutions7,610.00 Dr 09-10-10 12.Sterling & Wilson Electrical Mob. Advance5,71,312.00 Dr 08-09-07 Accounts Receivable management should be improved. 11.Debit Balances stated below are receivable since long period which should be written off, out of which balances stated in serial no. 5 to 12 should be adjusted against the provision for doubtful debts which is standing in books from 31-March-2011 for ` 38,22,240/- and provision of 7,805/- created against the debit balance of Sevcon (India) Pvt. Ltd. should be reversed as this amount is adjusted during the period :- 13

14 13. Sundry Debtors (having Dr. Balances) as on 31-Mar-14. In the following cases, Rent is due for more than one month realization of rent be made by 10th of the every month as per the Agreement. Particulars Amount ` Receivable from (in months)* Affiliated Computer Services of India Pvt. Ltd.2,64,876.00 0.25 Amalgamated Bean Coffee Trading Co. Ltd.1,71,487.74 2.50 A M Tader& Services(Subway)76,532.00 1.00 Barclays Shared Services Pvt. Ltd.90,99,344.00 1.00 BhartiAirtel Ltd.3,94,687.78 6.25 BhartiAirtel Ltd.(Mobality)89,803.00 1.75 EPCOS India Pvt. Ltd.1,54,451.00 0.50 F & S Hotels Pvt. Ltd.8,81,851.00 5.75 Idea Cellular Ltd.13,080.00 1.00 IFS Solutions India Pvt.Ltd.4,03,590.00 0.50 Intel Mobile Communications India Pvt. Ltd.1,45,327.14 0.25 ION Trading India Pvt. Ltd.81,40,515.00 3.50 Locon Solutions Pvt. Ltd.2,78,298.00 0.50 Pitney Bowes Software India Pvt. Ltd.23,50,201.00 0.50 Quark India Pvt. Ltd.15,452.00 0.25 Samsung Heavy Industries India Pvt.Ltd.1,00,43,595.00 4.25 Samsung India Electronics Pvt. Ltd.97,71,671.00 0.25 Shiv Shanker& Co.1,85,736.00 4.50 Spectranet ISP Network Pvt. Ltd.14,640.00 5.25 Ubico Networks Pvt. Ltd.66,663.00 1.5 Vodafone27,713.003.75 Every time when bill are raised to the debtors, a reference is given but when any amount received against the same bill, sometimes it is given as against reference & sometimes it is recorded as On account receipt, when recorded as On account, the bill which was raised as giving a reference no. shows it as still receivable. So, it is recommended that every time receipts should be recorded as against to the reference for which bill was raised. * Receivable months are calculated on approximate basis 14

15 Statutory Compliances Service Tax  Service tax payable on realization basis stands in the books as ` 37,886.83/- from 31-Jan-13, Let us know entries against which it is still outstanding, the payment for the bills against it was booked is received or not & if not the action taken to receive the same.  Service tax return should be revised & the same should be given for verification.  Cenvat credit on reverse charge of ` 22,109 booked without payment of service tax but as per Rule 4(7) of CCR 2004 input shall be allowed after payment of service tax.  Service tax payable A/c Under reverse charge is ` 1,17,918/- as on 31 st March 14. But amount were paid ` 95,809/- till date. Balance amount still not paid 15/07/14. Interest due ` 1,156/- upto 15 th July 2014. Works Contract Tax  WCT Under Protest for A.Y. 2007-08 paid on 28-Sep-12 for ` 1,24,992/- was shown in advance recoverable in cash or kind, no appeals & letters were provided kindly let us know the status.  WCT payable amount is ` 2,21,778/- as on 31 st Mar.14 but amount were paid ` 1,61,460/- till date. Balance amount still not paid 23/06/14. Interest due ` 2,627.29 /- upto 15 th July 2014 15

16 TDS  26Q Return should be revised & revised return is required for verification.  No TDS has been deducted on Lease rent ` 38,75,781.00 paid to Noida Authority. Inter-group Reconciliation 1. Status of Inter-company balances as on 31 st Mar. 2014 was as follows : Company name Balance as per ABC Ltd. Pvt. Ltd. Balance as per Related Company Differences if anyRemarks 4,05,76,056.00 Dr 5,04,30,124.00 Cr - Tallied A/C should be One 1,48,54,068.00 Dr 50,00,000.00 Cr 2,799,031.00 Dr 2,799,031.00 Cr -Tallied 1,521,203.00 Dr 1,521,202.00 Cr 1.00CrNot Tallied 9,90,150.00 Cr 9,90,150.00Dr - Tallied 16

17 2. The following Inter-company balance outstanding since long, you are requested kindly look into: Company name Balance as per ABC Ltd. Pvt. Ltd. Balance as per Related Company Differences if anyRemarks. 11,550,000.00 Dr11,550,000.00 Cr - Tallied 17

18 2. We have verified the Bank Balances of the following Current Accounts, Status is as under : S.No.Particulars Balance as per Books as on 31 st Mar. 2014 Balance as per Bank Statement as on 31 st Mar. 2014 1 Bank of Baroda A/C No.26290200000744 (18,68,030.00) 2 Syndicate Bank 90951010001776 8,12,206.56 3 Vijaya Bank 712600301000203 13,77,931,.00 4 Kotak Mahindra Bank 01812000001623 (Non Op) 49,889.70 Statement not provided Remarks: Kotak Mahindra Bank balance is outstanding since long period. No account statement has been provided. Bank Accounts 1. We have verified the Bank Statement of Term Loan from Vijaya bank, which was reconciled. Details are as under : S.No.Particulars Balance as per Books as on 31 st Mar. 2014 Balance as per Bank Statements as on 31 st Mar. 2014 Status 1 Vijaya Bank Loan-712608381000027 85,95,99,951.04 Tallied 2 Vijaya Bank Loan-712608391000019 22,25,76,418.00 Tallied 18

19 Statutory Records  Minutes of the Board Meeting for quarter January 2014 to March 2014 were not provided to us for verification.  Register u/s 301 of Companies Act, 1956 were not provided to us for verification.  Board resolution is not provided for the increase in Director’s remuneration of Mr. Ram from ` 10 lac to ` 15 lac during the period 01-Jan-14 to 31-Mar-14.  Appointment of C.S. under section 383A of Companies Act is required. 19

20 General Records  Books of Accounts should be prepared as per Revised Schedule VI of Companies Act, 1956.  We have conducted Internal Audit upto Journal Voucher no. 897. Rectification 1. Rectification of name in bills of JV. Entry DateVoucher No. Amount ` 28-Mar-1478011,12,880/- 28-Mar-1478539,050/- 29-Mar-1479111,24,712/- 01-Jan-1457544,000/- 31-Jan-146575,300/- 25-Jan-1463715,150/- 22-Jan-1463023,850/- 13-Jan-1461613,505/- 10-Jan-1461022,000/- 06-Jan-145989,000/- 31-Mar-148373,381/- Before making Payments, the accountant should check whether those bills are in the name of the Company or not. 20 Part- B

21 2. Rectification in debit note for electricity receipts have been wrongly entered in books while amount of debit note raised differs – DateParty name Debit note raised Actually ` Debit note raised in tally ` 31-Jan-145,02,587/-5,01,718/- 31-Mar-1420,877/-17,176/- Care should be taken while entering the debit notes in the books. 4. Rectification in Date is not mentioned in Cash Voucher - S. No.DateParticular Amount ` 131-Mar-14Repair & Maintenance1,500/- 21

22 22 Graphical analysis of income of each quarter for the year

23 Graphical analysis of expenses of each quarter for the year 23


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