AS PER Version No 01
INTRNAL AUDIT Dated 16 April 2019
BDL MANUAL
Page No
ANNEXURES
INVITATION FOR EXPRESSION OF INTEREST (EOI)
EOI No: BDL/IA/EOI/Internal Auditors/2019-20 dated: 16/04/2019
Due date & time for submission of EOI : 06/05/2019 @ 14:30 hrs(IST)
TO BE SUBMITTED IN SEALED COVER IN POST / REGISTRED POST / COURIER
IMPORTANT NOTE
Applicants are requested to submit their proposals in a sealed cover with EOI
reference and should reach DGM(CC), Bharat Dynamics Limited, Corporate Office,
TSFC Building, Gachibowli, Financial District, Hyderabad-500032 on or before the due
date & time.
Total pages: 27 Pages
Invitation for EOI: Covering Letter
Format for submission of EOI - Annexure - 1A
Evaluation table for EOI - Annexure - 1B - To stipulate broad requirement (PQ)
Scope of Internal Audit - Annexure - 1C
Terms & Conditions - Annexure - 1D
Dear Sir/Madam,
Sub : Request for submission of EOI
--:o0o:--
1. Bharat Dynamics Limited (BDL) is a Public Sector Undertaking under the
Administrative control of the Ministry of Defence with presence in three
geographical presence Kanchanbagh (Telangana), Bhanur (Telangana) and
Vizag (Andhra Pradesh). Further, two more locations viz Ibrahimpatnam
(Telangana) and Amravathi (Maharashtra) are upcoming. Units located in these
are engaged in the manufacture and supply of defence equipment required for
Armed Forces. BDL is inviting EOI in the enclosed format from Chartered
Accountant (CA) Firms for appointment of Internal Auditors for its Divisions for
carrying out the Internal Audit function for each Division separately for a period
of Two years (from 1st April 2019 to 31st March 2021). Keeping with the
requirements of transparency and equality of opportunity, we are seeking to
make these appointments on the basis of tenders.
2. Appointment of External Internal Auditors for Internal Audit work will be
distributed to 4 segments. One audit firm will be given appointment for one
segment only. However, an audit firm can quote for all the 4 segments at the
time of tender process.
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Details of the 4(Four) segments:
Segment 1 - KB Unit
Segment 2 - Bhanur Unit
Segment 3 - Vizag Unit
Segment 4 - Corporate, System/IT Audit, Ibrahimpatnam and SFD.
3. We have ERP SAP Package in place and is fully operational.
4. Interested Chartered Accountant (CA) Firms may please fill in the enclosed
formats (please note that only the enclosed formats must only be used) and
send us the same to the following address: Deputy General Manager (CC)
Bharat Dynamics Limited, Corporate Office, TSFC Building, Gachibowli,
Financial District, Hyderabad-500032. So as to reach, latest on or before
06/05/2019 @ 14:30 hrs(IST).
5. Expression of Interest (EOI) proposal as per the format enclosed duly filled in
and signed should reach us on or before due date and time in a sealed cover
duly super scribed with our EOI No, EOI due date and "Appointment of
Internal Auditors". The offers received in any other mode E Mail/Fax will not
be considered as valid offers for evaluation and summarily rejected. Responses
received after due date and time shall not be considered and no further
correspondence on such responses shall be entertained. BDL will not be
responsible for any loss or delay in receipt of EOI response. LATE
RESPONSES SHALL NOT BE CONSIDERED AND OPENED.
6. EOI response should be free from correction, over writing, erasures etc. Each
page should be numbered. This should be ink signed by authorized signatory
indicating name and designation with Office seal.
7. The offers received in time are considered as valid and shall be opened on
07-05-2019 at 10:30 AM in Corporate Office, TSFC Building, Gachibowli,
Financial District, Hyderabad - 500032. The interested Applicants who desire to
witness the opening of responses may attend the session along with their
identity and signed authorization letter.
8. Canvassing by respondents in any form, including unsolicited letters on EOI
submitted or post corrections shall render their EOI response liable for
summarily rejection.
9. The cost or charges incurred in preparation and submission of EOI response
shall not be entitled by any respondent.
10. Conditional offers will be summarily rejected.
11. BDL is not bound to accept any response or part of the response and the
decision of BDL is final in this regard.
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12. Disregard of any instruction may result in offer being ignored.
13. Pre-bid meeting will be held at Corporate Office on 29 Apr 2019 @ 11.00 a.m.
This EOI is governed by TERMS AND CONDITIONS as attached.
No Agent/Agents or third party / parties are engaged by BDL in this process.
BDL is also not responsible for any person/firm expression or representing to express
himself / herself/ themselves to be the agent or third party representing BDL in this
process.
It is advised to deal directly with BDL representative who is the signatory to this
document.
For general correspondence, kindly make use of email ID : bdlcorpcomm@bdl-india.in
and Phone no. 040-23456140/23456136 and fax no: 040-23456163.
Yours faithfully
For Bharat Dynamics Limited
Sd/-
Dy. General Manager (CC)
Corporate Office
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Annexure -1A
Format for submission of Expression of Interest
1 Name of the Firm
2 Number of Partners (Pl indicate
whether the firm has more than 2
partners or not)
3 Whether the Firm has experience
in Auditing (Statutory/Internal
Audit) of CPSUs during
immediately preceding seven
financial years
4 Full Postal Address of
Offices/Branch Offices. (This may
be given on a separate sheet of
paper attached)
5 Name of contact person along with
landline and mobile numbers
6 Permanent Accountant Number :
(PAN) of the firm
7 GST Registration No.
I ....................................................................., authorized partner of the firm
certify that the above information is true & genuine. If appointed as internal auditor, my firm
will abide by the rules of the company in respect of maintaining secrecy of data/information.
Signature of Authorised Signatory of the Firm/Seal of the Firm
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Annexure -1B
Pre-qualification criterion for submission of EoI
1. Only Firms/LLP of Chartered Accountants are eligible.
2. The firm should have minimum of two partners.
3. The firm should have experience in Auditing (Internal Audit/Statutory Audit) of
Central Public Sector Undertakings (CPSU) in the immediately preceding seven
financial years.
4. Firms should have branch at Hyderabad/Vizag.
Firms located at Hyderabad are eligible to audit
Segments - KB Unit
Bhanur Unit
Corporate, System/IT Audit, Ibrahimpatnam and SFD
Vizag Unit
Firms loacated at Vizag are eligible to audit Vizag unit only.
Firms meeting above criterion may forward the profile of the firm covering above
points. Enquiry will be floated in TWO BID system (Technical Bid and Commercial Bid) on
all firms meeting the above criterion. There will be 70% weightage for Non-commercial
aspects and 30% weightage for Commercial (Price) and combined score would be drawn.
Detailed methodology for awarding the assignment will be provided in the tender
documents.
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Annexure -1C
Scope of internal Audit
As per Appendix A to Appendix D
6
Annexure -1D
TERMS AND CONDITIONS
In the interest of equity of treatment, Expression of Interest will be processed strictly
as per standard prescribed formats. Nonadherence to the formats shall lead to rejection of
such bids. Further correspondence in respect of non-standard bids will not be entertained.
Sl.
Particulars
No.
1 CA firms, appointed, will have to do the Audit themselves and not resort
to any kind of outsourcing whatsoever. In case, it is subsequently
revealed at any stage of the appointment process / post appointment that
outsourcing has been resorted to, the appointment is liable to be
summarily cancelled with immediate effect.
2 The appointment, for Internal Audit, is for a period of two years, on the
quoted audit fees subject to satisfactory performance in the first year
3 The scope of the Internal Audit is as indicated at Annexure-IC.
4 The Internal Audit is expected to be based on sufficient verification of the
aspects covered in the scope of audit and not be on mere confirmations
obtained from the Finance and other related departments.
5 It is expected that the Audit will be undertaken in accordance with the
Internal Audit Standards issued by the ICAI to the extent they are
applicable to the given scope.
6 The Internal Audit report is to be submitted within one month (specific end
dates will be given in the appointment letter) following the close of each
quarter. The Internal Auditor is expected to draw up the Audit Program in
consultation with the Divisional Finance Chiefs for this purpose in order to
stick to the prescribed date for the submission of the report.
7 The report is to be submitted in four hard copies. Additionally, soft copy of
the report would be required. The distribution will be indicated later. Soft
copy may be either in Word or PDF files and may have tables in Excel on
a CD.
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8 The efficacy of the Internal Audit will be judged on the basis of the
following parameters:
a. Number of points raised by the Statutory Unit/Main Auditors of the
Company.
b. The number of points raised by Govt. Audit.
c. Quality of the Accounts during reviews by the Corporate Office.
9 The Audit Reports would be addressed to the General Manager / in-
charge of the Division with one copy each to Head of Finance of
concerned division, Centre Head of Internal Audit Department and
Director (Finance).Further Director (Finance) would have an executive
summary highlighting the important points requiring the action / attention
of the Divisional Management. The Executive Summary should be cross
referenced to the paragraphs in the Internal Audit report containing the
elaborate details.
10 EOI should be submitted in Annexure-1A format only. No other format will
be accepted.
11 Every page of the EOI / Bids will be authenticated by the signature of the
authorized signatory of the firm and the Firm's seal. Unauthenticated
pages will be rejected.
12 Short listed firms based on Expression of Interest shall be issued with
tender documents in TWO BID System, ie. Technical Bid and
Commercial (Price) Bid to be submitted in separate sealed envelope.
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APPENDIX - A
SCOPE OF WORK - PRODUCTION DIVISIONS
An illustrative list of areas to be covered by the external Internal Audit Firm is as
below:
I. Core Areas
II. Bills Receivable
III. Bills Payable
IV. Material Accounts
V. Costing Section
VI. Fixed Assets
VII. Payroll and Cash Section*
VIII. Taxation and GST*
IX. General*
* Non-production areas.
The transactions to be covered in the above areas are explained for a broad view of the
scope of the internal audit. However, the checklist/procedures along with transaction codes
of SAP as in Part III of Internal Audit Manual of BDL will be made use by the External
Internal Audit Firm.
I. Core Areas: Broad areas to be covered under Core Areas
a. Order Status, Delivery Schedules, Slippages and Delivery Date Extensions.
b. Deliveries made, LDs suffered, efforts for refund of LDs etc.
c. Procurement policies, Inventory levels, Redundant Materials, Disposal action,
etc.
d. Trade Receivables, Age wise analysis of Trade Receivables, Efforts made for
timely realization etc.
e. Manpower Availability, Utilization, Action Plan for improvement, Reasons for
underutilization.
f. Machine utilization.
g. Profitability/Performance.
h. High Value Purchases.
i. Rejections in production.
j. Jobs not billed.
II. Bills Receivable
Check
a. Timely claiming of initial and progressive advances and raising of bills as per
terms of Indents
b. Whether sales are set-up for all the items delivered. List of dispatch advices with
dates pending over a month may be enclosed.
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c. Accounting of sales is as per terms of indent, Accounting policy and Ind AS 115
Revenue from contracts with customers.
d. Invoices are correctly prepared and Commercial Bills are raised & sent to
customers on time
e. Invoices are raised for all OBDs. Amendments are obtained for extension of
delivery dates
f. Escalations Claims & FE Variable claims are being made
g. Report on long outstanding claims which require to be provided for as doubtful
claim. In this connection it may be kept in view of the Company's accounting
policy on Sundry Debtors whereby disputed/time barred debts from the
Government Departments are not treated as doubtful.
h. Comment on the stages of reconciliation of Advances from Government of India
as per the books of AO (DAD) and that of the Division. Whether the year wise
and project wise analysis is done and if so whether it is correct.
i. Examine every case of reversal of sales, find-out the reasons there-for and
comment on any such reversals which amount to the write-off against company`s
profit.
j. Ensure that the books of account are maintained up to date and monthly
schedules are made out promptly each month.
k. Find out the External Issue Vouchers (Ex-IVs) which are not billed.
l. Review time lag between issue of Ex-IV and raising of bill and submission of bills
to the Paying Authority.
m. Review bills returned by Customers and still pending.
n. Prompt dispatch of items sold
o. Provision for bad and doubtful debts is as per Company's accounting policy.
p. Prompt adjustment of Advances.
III. Bills Payable - Inland, Foreign, Works & Services Bills:
Check
A. Inland:-
a. Liability created for accepted material / service only and without delay. Check
the supporting vouchers wherever called for. Whether Payment endorsements
are made on all the original documents and attested, recoveries affected if any
are correct and allocation of the expenditure is correct.
b. L.D is deducted for delayed delivery and GST is paid/ recovered.
c. Whether there is undue delay in passing the bills or retiring the documents.
d. If discounts available as per P. O. have been obtained.
e. Whether the pricing of GRs with reference to invoice, loading of freight,
insurance, handling charges, taxes, etc., on the material cost is correctly done.
f. Whether claims have been preferred in time on carriers/insurers for transit losses
and on the vendors for defective supplies.
g. Input Tax Credit is availed correctly.
h. ITC clearing account is properly accounted.
i. Deductions for taxes like TDS,GST TDS etc., are correct
j. Payment made to correct vendor
k. Installation certificate, wherever applicable, is available
l. Inspection certificate, wherever applicable, is available
m. Long Outstanding Advances. Rejections/ Claims against supplier are set off
n. Advances to vendors are recovered/adjusted as per PO terms
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o. Deductions like recovery of Dues. Etc., from contractors are made
p. Confirmation of balances are obtained and reconciled periodically.
q. Whether the paid invoices are cancelled by a paid stamp.
r. Whether entries are made for the purchases with reference to the original
documents and see that classification is correct.
s. Clearance of GR/IR accounts.
t. Tax codes are system driven without manual entries.
B. Foreign Suppliers Bills:
Check
a. All the relevant items mentioned under Bills Payable - Inland.
b. Appropriateness of point of time of opening of Letter of Credit and its duration.
c. Whether Customs Duty paid is as per the relevant classification in the Customs
Tariff.
d. Whether freight, clearing/forwarding charges etc., are correctly paid.
e. Whether demurrage/wharfage charges paid are justified and approved by the
competent authority and remedial measures taken to avoid the same in future.
f. Bills for technical assistance rendered by foreign collaborators for travel
expenses, insurance, license fee and royalty etc.
g. Whether the rate of exchange and Letter of Credit changes adopted by Bank are
correct and reasonable.
h. Verify the payments towards Deferred liabilities checking the timing, correctness
of the amounts and proper accounting. (Applicable to BHANUR GROUP only).
i. Clearance of GR/IR accounts.
C. Advances to Suppliers
Check
a. Whether the advances to suppliers are made strictly according to the terms of
the Purchase Orders.
b. Whether advances are adjusted as soon as the goods are received and
accepted.
c. The Advance Ledger and scrutinize the cases of old outstanding advances.
d. Aging of Supplier's is to be taken and to be analysed and reported.
D. Service Bills and Contractors Bills:
Check
a. All relevant aspects mentioned under Bills Payable (Inland & Foreign).
b. Whether the payments made to contractors for execution of works,
maintenance works, transport, handling, repairs and maintenance of
equipment are in accordance with the contract terms and BDL Works &
Contract procedure and whether the acceptance of goods/services has
been recorded in measurement books or similar permanent records.
c. Declaration to Insurance Companies, payment of premium bills and
settlement of claims by Insurance.
d. Payment of bills for electricity and water, whether correctly made and in
due time.
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E. Sundry Creditors
Check
a. Whether all the items under sundry creditors are true and correct.
b. In case of old balances whether any corresponding advance is also
outstanding under GIT/Advances to suppliers account.
c. That there are no debit balance in sundry creditors account.
d. Aging of Supplier's is to be taken and to be analysed and reported.
F. Goods-in-Transit
Check
a. Whether the balances are correct.
b. In respect of old balances, ascertain the reasons for the delay in receipt of
goods or preparation of Goods Receipt voucher (GR).
c. In case the goods are received and rejected, ascertain that necessary
claims on vendors/carriers/insurers have been made.
d. That there is no credit balances in goods - in - transit.
G. Works & Services Bills
a. Check and report on Advances outstanding for more than 6 months and
examine the correctness of recovery of Income Tax at the rates prescribed
for the financial year including Surcharge and Education Cess if any.
b. Examine the delay in remittances of Tax deducted at source.
c. Examine the systems of accounting materials issued to contractors and
prompt recovery there-for.
d. Comment on any earnest money deposit/security deposit outstanding
which needs to be examined for reversal to Miscellaneous Income.
e. Wherever certificate of completion has been given, whether the asset is
capitalised and depreciation has been provided for.
H. Travel Expenses Journal
Check
a. The Travel Expense Reports rendered by the employees for journeys
undertaken on Company's work are processed and these expense reports are
journalised in the Transfer Expenses Journal and Journal Entries are issued
frequently by debit to the Travel Expense Account and credit to the Travel
Advances Account. Please report on Travel Advance outstanding recovery for
more than 3 months.
b. The Account "Travelling" envisages booking under sub-codes defining specific
objective heads. Please check whether TA for Foreign Training is correctly
accounted for.
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IV. Material Accounts:
A. Material Ledger
Check
a. The correctness of all transactions in the material ledger for a quarter in respect
of some items selected from different classes/inventories, with reference to the
related documents (GRs, Material Requisitions (issues), etc.).
- The pricing of receipts and issues, correctness of unit codes, material code,
specification, chargeability to correct Work Order Number, etc.
b. Whether Material Requisitions (i.e. issues) have been authorised by proper
authority.
c. The correctness of the adjustments passed.
B. Comparison of material ledger balances with bin card balances
a. Ensure that there are no difference in stock value between physical quantity and
books.
b. Ascertain the reasons for discrepancies, examine the implications and report the
deficiencies if any for remedial steps.
C. Issues to other Divisions of BDL
Check
a. Issue vouchers with reference to Inter Factory Demand/Indent of the Division
concerned.
b. The dispatch advices concerned.
c. The correctness of pricing.
d. The correctness of transfer of cost through Control Account Advice.
D. Materials issued to Sub-Contractors on loan
Check
a. Whether material issued on loan is with proper approvals.
b. Whether the transaction is reflected in the accounts correctly.
E. Materials issued to Sub-Contractors
a. It should be verified whether the quantities issued are as per the standard
consumption (including rejection allowance if any) given in the Purchase Order.
b. Whether accounting of material issued to Sub-Contractors and material
consumption statements received from Sub-Contractors along with components
is properly accounted.
c. It should be verified whether surplus material lying with the Sub-Contractors
(after completion of the Purchase Order quantity) is returned to the Company.
d. In case of excess consumption of material by the Sub-Contractors, it should be
verified whether recovery is made from their bills and whether the amount
recovered is correctly accounted.
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F. Materials received on loan from Customers & others
Check
a. The authority and necessity for taking a loan.
b. The terms and conditions for taking a loan.
c. How the receipt is accounted - whether taken to regular inventory through
Receiving Report or only a numerical account is kept in a register.
d. How the issues are accounted and how the value of issues is charged to the job.
e. How the return of material is monitored and accounted.
G. Issue of materials against Work Orders
Check
a. The correctness of issue to Work Order.
b. The correctness of pricing of issues, non-accounting of receipts, incorrect
adjustments/transfers, etc.
c. Whether heavy adjustments of customs duty, freight, etc., relating to previous
periods or withdrawal of such item during subsequent periods have been
correctly charged to the relevant jobs.
H. Reconciliation
Comparison of Inventory Values as per General Ledger with the list of
Inventory and ensure reconciliation of the variances, if any.
V. Costing Section:
Check
a. Direct materials booked to Work Order with reference bill of material for the job.
b. The direct labour booking to jobs with reference to the labour summaries and the
standard man hours relating to that job and find out reasons for abnormal
variation if any.
c. Whether any expenditure is booked subsequently against such closed Work
Orders.
d. Closed Work Orders and see whether there are significant variances, rejections,
etc.
e. The correctness of the accounting of the completed jobs.
f. How the cost over runs have been finally dealt with, i.e., by write off, recovery
from customers etc.
g. Whether all the prescribed registers and records have been maintained as also
the entries for correctness of classification etc.
h. The valuation of W.I.P. and finished stock with reference to the Company's
accounting policies.
i. The estimates and Fixed Cost Quotations (FCQs) prepared for various products
and examine the assumptions.
j. The Work Orders with reference to Sales Orders/Process Sheets for correctness
of labour and materials provided for therein.
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A. Cost Ledger for the Quarters ending June, September, December & March:
Check
a. The entries in Cost Ledger element wise for correctness.
b. Whether there are any long standing Work Orders appearing in the cost ledger
with booking/without booking.
c. Whether any Work Order reference, with bookings is posted/printed against
more than one component/assembly/major assembly etc.
d. If there are booking against closed Work Orders, and abnormal booking against
live Work Orders.
e. The quantities posted under rejection column and verify the accounting entries.
f. The cost ledger for closed Work Orders and closing balance of WIP and
compare with the transfer entries effecting WIP and SIT.
B. Reconciliation between attendance hours and utilised hours:
Check
a. The reconciliation statement of attendance hours and utilised hours for any
quarter with reference to labour summaries, labour bills and labour performance
statement prepared in the Industrial Engineering Department.
b. Correctness of data taken for reconciliation and whether there is a wide variation
and reasons thereof.
c. Labour Booking against plant orders, Standing Work Orders and services for
other Departments.
d. Booking of overtime hours with reference to its requirement.
- The lost hours under heads like avoidable and unavoidable.
e. Reasons for avoidable lost hours like want of material, want of tooling, want of
job, breakdown of machine, etc., and action taken by concerned agencies.
f. How the variances are adjusted.
C. Work Orders in WIP in respect of Material / Labour booking:
Check
a. Work Orders from the cost ledger for closing balance of WIP.
b. The entries with reference to labour summary and material issue
analysis/entries/MR for correctness of classification and booking.
c. The Original Work Order or bulletins and note down the component numbers,
batch quantity, SMH content and bill of material and arrive at labour cost taking
into account the current efficiency factor and man hour rate, and material cost
based on estimated rate.
d. By comparing the actual bookings with the above estimates and whether the
actual bookings are within the limit.
e. Whether the rejections exceed the permissible limit and action if any taken to
control the same.
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D. Possible anomalies in Work Orders:
Check
a. Whether correct series number is quoted in the Work Order.
b. The opening and closing date of Work Orders and if there is any abnormal delay
in closing or any duplication of Work Order.
c. Whether correct Sale Order reference and customers name is made.
d. Whether there are proper controls for issue of Work Orders and whether any
orders are issued without valid Sales Order/specific management sanction.
E. Accounting of diversions of materials from manufacturing project to
other project and from other project to manufacturing project:
Check
a. Whether accounting is made as per Corporate Office instruction/accounting
policies.
F. Amortisation of DRE/Tooling:
Check
a. The basis of fixation of amortisation rate of DRE/Tooling expenditure.
b. Whether the rate of amortisation adopted differs from rate in the FCQ.
c. Whether the total of amortisation of DRE/Tooling expenditure is within the limit of
total expenditure.
d. Whether the total of such expenditure is within the ceiling limit.
e. Whether at the end of a project total expenditure is within the limit and the total
expenditure incurred is amortised over the project.
VI. Fixed Assets:
Check
a. Whether all items requiring to be capitalized have so been done may be checked
with reference to the balances under the capital WIP of the accounts.
b. Physical verification of fixed assets and submission of Verification Report
thereon.
c. Whether additions to the fixed assets are capitalised in the same financial year
or not.
VII. GENERAL:
Check
a. Provision for redundancy is maintained by Divisions in terms of Accounting
Policy. The computation of the provision may be checked with reference to
existing instructions on the subject.
b. Need for retention of provisions for doubtful claims, future charges etc., to be
examined.
c. Check whether all statutory liabilities have been provided for and discharged
within due date.
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d. Report on items which will attract provisions in CARO.
e. Vouching of all Cash and Journal Transactions as deemed necessary.
f. Test check whether Cash and Journal Vouchers are approved by the Competent
Authority.
g. Vouching of Purchase Bills
h. Vouching of Sales Invoices
i. Correctness of classification and accounting of fixed assets
purchased/sold/transferred/impaired/condemned, etc.
j. Correctness of the adjustments in respect of Stores declared
Surplus/Unserviceable/redundant.
k. Whether shortages observed during physical verification have been written off
under proper authority.
l. Whether stock adjustment account is cleared within 3 months for
shortage/overage of inventory, etc. If not, please enclose a statement.
m. Whether appropriate treatment was given to the events occurring after 31st
March of the relevant financial year i.e., Balance Sheet date and prior period
adjustments.
n. Whether the items in GIT, CWIP and Machinery in Inspection are reviewed and
justification for retention of items over six months may be reviewed.
o. Whether review of the material ledger with particular reference to non - moving
inventory, non - priced inventory, etc., made. Report may be enclosed on this.
p. Whether the subsidiary registers are properly maintained and periodically
reviewed and balances reconciled with the Control account/general ledger and
what are the differences and how are they dealt with in Accounts.
q. Verification of Purchase proposals on random basis (high value) and to report
deviations from Delegation of Powers/Purchase procedure.
r. To verify whether purchases are made based on requirements taking in to
account existing stocks, ordering levels etc.
s. Whether assurances given to Government/Statutory/Internal Systems Audit in
the previous year have been complied with. If not, important points in brief may
be reported.
t. Whether the accounting policies and instructions are correctly followed.
u. Area and scope for Systems improvement, Reduction in paper work, Cost
Reduction, Tax saving, etc.
v. Applicability of Income Tax Deduction at Source: The aspect whether TDS is
affected at applicable rates wherever applicable may please be verified.
w. Repairs to Plant & Machinery, Building, etc.: The aspect whether any
expenditure of capital nature is booked correctly as `capital expenditure' may
please be verified. To ensure that no capital expenditure is booked as `revenue
expenditure'.
x. Payment of GST: Wherever GST is applicable and the same is collected and
paid, whether the payment of GST to the service provider is only for taxable
services and is as per the terms of contract between BDL and the service
providers, may please be verified.
y. The status of compliance of the observations made by Internal Auditors up to the
previous quarter audit is to be clearly stated in the report.
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SCOPE OF WORK NON-PRODUCTION DIVISIONS
In addition to SoW stated under Production Divisions following specific areas to be
covered.
IV. Centralised Cash Section:
A. Receipts.
a. Verify whether all receipts posted in the Cash Book are supported by cheque
credit vouchers duly signed by the officer authorised according to the limits
prescribed with correct head of account number and details of the amount
received.
b. Verify whether pre-numbered official receipts are issued in acknowledgement
of all monies received and accounted for in the cash book.
c. Verify whether all the cheques, demand drafts, pay orders, etc., received
have been sent to the bank on the same day or the next day for collection
and credit to Company's account with the bank.
d. Verify whether inordinate delay in crediting the Company's account by the
bank has been taken up with the bank.
B. Payments.
a. Verify whether cheque payment vouchers are approved by the appropriate
authorities of the respective Finance Departments, as per the powers
delegated to sign the payment vouchers and are pre-audited as per the
norms of the company
b. Verify whether Officers who signed the cheques have also initialed on the
payment vouchers and counterfoils of cheques with date.
c. Verify whether cheques payment vouchers are numbered serially and filed in
chronological order.
d. Check whether cancelled cheques are linked to the counterfoils and filed in
the cheque book. Cancellation shall be attested by the officer-in-charge of
the Cash Section. Wherever cheques entered in the cash book are cancelled
it should be ensured that cheque credit vouchers have been prepared for the
cancelled cheques. Similarly in respect of stale cheques also, check whether
cheque credit voucher has been prepared. Wherever cancellation of the
cheque is at the instance of the other accounting sections like Bills Payable,
Payroll, etc., cheque credit voucher should be initiated by the concerned
Divisional Finance Department only.
e. Verify whether there is any abnormal delay in the preparation of cheques
against payment vouchers.
C. Other points for verification
a. Verify whether bank charges, LC debits, interest charges, if any, etc., debited
by the bank are correctly done as per the rates agreed to by BDL with the
banks.
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b. Verify whether the authorised officials, whose specimen signatures are
lodged with the bank, have only signed the cheques depending upon the
cheque amount by verifying the copy of cheque.
c. Check the authorisation letters to banks for retirement of documents and
payments made against LCs opened, with the bank statement entries and
cheque payment vouchers prepared by Cash Department to regularise the
direct debits to bank account.
d. Check whether BRS is prepared on a daily basis and necessary entries are
passed with narration. Undue delay in adjustments of unaccounted items by
the Bank/Cash Section should be highlighted and reasons for such undue
delay should be recorded.
e. Verify the unused cheque leaves and cheque books for availability of leaves
in continuous nos.
f. Verify whether the advices of the receipts/payments summaries are sent to
the concerned Finance Departments on daily basis.
g. Verify whether fidelity guarantee is available for miscellaneous transactions.
h. Verify that all cheque books and receipt books are maintained properly and
that books in use as well as that not in use are kept in proper custody.
i. Verify whether all records of Cash Section are preserved and maintained as
per statutory requirements.
j. Ensure that all payment instructions to Bank, other than through cheques,
should be counter signed by Cash Section in charge, duly serially numbered,
with a copy marked to him.
k. Ensure that all stop payment instructions are routed through Cash Section.
l. Policy of the Company is to effect all payments to outside parties through
bank (RTGS/NEFT, etc.). Hence, verify whether any payments to outside
parties have been made by cheque and report the same.
m. Check whether there are any vouchers entered in the system but not
authorised for more than one week from the date of voucher. Action taken on
such vouchers may be ascertained and reported.
V. Central Pay Rolls Department (CPRD):
A. Salaries & Wages Journal
Check
a. Whether the Journal is prepared by debiting to the respective expense accounts
and crediting to accrued salaries account Division wise.
b. Whether all the Journal Entries are in order.
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B. Leave Records
Check
a. Carry-over of leave for correctness / maximum limits.
b. Whether leave encashment has been debited in the leave account.
c. Whether Income Tax has been deducted at source where necessary.
C. Medical Bills:
a. The total medical reimbursement expenditure of the Company is to be audited
cent percent. The following are the types of medical expenses to be covered:
b. Bills submitted by the approved hospitals for both Company employees and
CISF personnel.
c. Bills submitted for medical tests by approved diagnostic centers.
d. Bills submitted for dental treatment by dental hospitals.
e. Bills submitted for post discharge treatment.
f. Bills submitted for spectacles by employees.
Check
a. The certification of P&A Officer with regard to dependents.
b. Certification of Medical Officer regarding the medicines used, duration of stay,
requirement of surgery, etc.,
c. Date of referral letter, date and time of admission, date and time of discharge. If
any ambiguity is there, it should be discussed to know the genuineness of the
case.
d. The bills with the approved tariff in respect of the following:
1. Room rents
2. Consultations
3. Investigations
4. Surgery
e. Whether any of the claims which is not within the period of stay at hospital, if so,
the same is disallowed.
f. Whether any discount is to be obtained.
g. Whether the taxes, duties, etc., are in line with the statutory provisions.
h. Whether photocopy of MRI/CT Scans enclosed or not. If not enclosed those
amounts are to be disallowed.
i. Whether Case Sheet is enclosed or not. If not enclosed, bills are disallowed.
j. Whether consultation charges are reasonable or genuine depending upon the
case history.
k. Whether there are any irregularities in the claim.
l. Whether the hospitals submit the bills immediately in the following month.
m. Chronic cases of hospitalisation.
n. Verify whether the bills submitted by the hospitals are signed by the concerned
employee.
o. Offer suggestions for improving the system.
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D. Others
Check
Various earnings, which are partly classified as under and whether they are paid
as per the applicable rules, circulars, eligibility criteria based on attendance
factor, etc.:
i) Basic
ii) DA
iii) HRA
iv) Perquisites and Allowances
v) Telephone Reimbursement
vi) Incentives
vii) Stitching Charges
Whether various recoveries (both Statutory and Non-statutory) are effected as
per the statutory provisions/rules and regulations.
Statutory : PF, Pension, ESI and Income Tax.
Non-statutory: House Rent, various loan recoveries like Car loan, Computer
loan, Festival advance, various recoveries for remittances
like Housing loan, Court Attachments, LIC Premium, Postal
Savings, Etc.
a. Whether all recoveries are remitted within the due dates.
b. Whether transfer grant, settlement allowance, transportation charges etc. are paid
and settled as per the TA / DA rules of the Company.
c. The interest calculations in case of deferment of recoveries due to insufficient
salary.
d. The supplementary payment bills.
e. The regularisation of loss of pay cases.
f. The pay fixation cases in respect of promotions, etc.
g. The name master as to whether it is updated every month correctly.
h. Whether the total amount of production and target incentives are as the approved
scheme.
i. Reconciliation all the changes in Payroll data each month as compared to the
previous month and ensure the correctness of the same.
j. The transfer of share of Payroll expenditure to the individual Divisions.
k. The correctness of interest calculations in the case of interest bearing advances
made by the Company to the employees such as Vehicle Loan, Computer Loan, etc.
l. Accounting entries with reference to the Payroll outputs. The registers maintained in
the Department are to be test checked for individual postings.
m. The submission of various Returns to the statutory authorities in the prescribed
forms on the due dates.
n. Provisions made towards VL, if any and for other expenses (like PLAI, Incentives,
etc.) as of 31st March.
o. Whether schedules pertaining to Payroll Accounts are in agreement with General
Ledger.
p. Whether there is a deferment of recoveries.
q. To offer suggestions for improving the system.
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VI. Corporate Finance Department.
A. Corporate Cash Section.
1. Verify whether cheque payment vouchers are approved by the appropriate
authorities as per the powers delegated to sign the payment vouchers.
2. Verify whether Officers who signed the cheques have also initialed on the payment
vouchers and counterfoils of cheques with date.
3. Verify whether cheque payment vouchers are numbered serially and filed in
chronological order.
4. Check whether cancelled cheques are linked to the counterfoils and filed in the
cheque book. Cancellation shall be attested by the officer-in-charge of the Cash
Section. Wherever cheques entered in the cash book are cancelled it should be
ensured that cheque credit vouchers have been prepared for the cancelled cheques.
Similarly in respect of stale cheques also, check whether cheque credit voucher has
been prepared.
5. Verify whether there is any abnormal delay in the preparation of cheques against
payment vouchers.
6. Verify that all the cheques are promptly dispatched and that they are not handed
over directly to the parties.
7. Verify whether bank charges, LC debits, interest charges, if any, etc., debited by the
bank are correctly done as per the rates agreed to by BDL with the banks.
8. Verify whether the authorised officials, whose specimen signatures are lodged with
the bank, have only signed the cheques depending upon the cheque amount by
verifying the copy of cheque.
9. Check the authorisation letters to banks for retirement of documents and payments
made against LCs opened, with the bank statement entries and cheque payment
vouchers prepared by Cash Department to regularise the direct debits to bank
account.
10. Check whether BRS is prepared on a daily basis and necessary entries are passed
with narration. Undue delay in adjustments of unaccounted items by the Bank/Cash
Section should be highlighted and reasons for such undue delay should be
recorded.
11. Verify the unused cheque leaves and cheque books for availability of leaves in
continuous nos.
12. Verify that the cash book is updated on the same day and put up to the concerned
authority next day.
13. Verify that all cheque books are maintained properly and that books in use as well
as that not in use are kept in proper custody.
14. Policy of the Company is to effect all payments to outside parties through bank
(RTGS/NEFT, etc.). Hence, verify whether any payments to outside parties have
been made by cheque and report the same.
15. Verify whether all the amounts received by direct credit to the bank account are
transferred to the respective Divisions. Examine if there are any amounts received
without being transferred to any Division.
B. Deposit of surplus funds in Fixed Deposits.
Check
- Whether the Deposits are made as per the decision of Investment Committee.
22
a. Whether interest is collected at the agreed rates and for the correct period.
b. Fixed Deposit Certificates.
C. Corporate Tax
a. Whether Advance Income Tax is paid as per the provisions of the Income Tax
Act including the time of payment.
b. Calculations of Deferred Tax (Asset/Liability) and Provision for Tax.
D. Goods and Service Tax
a. Whether taxes are paid on time
b. Whether input tax credit is taken correctly.
E. Corporate Governance
- Whether all the Guidelines/Statutory requirements are complied with.
F. Compilation of Quarterly/Annual Accounts, Budgets, MIS etc.
a. Verify the compilation as to the correctness and adherence to rules, statutes and
procedures.
b. Whether presentation is in the proper form.
c. Correctness of data may be counter checked.
VII. GENERAL:
Check
a. Provision for redundancy is maintained by Divisions in terms of Accounting
Policy. The computation of the provision may be checked with reference to
existing instructions on the subject.
b. Need for retention of provisions for doubtful claims, future charges etc., to the
examined.
c. Check whether all statutory liabilities have been provided for and discharged
within six months. Report on items which will attract provisions in CARO.
d. Vouching of all Cash and Journal Transactions as deemed necessary.
e. Test check whether Cash and Journal Vouchers are approved by the Competent
Authority.
f. Vouching of Indigenous bills with particular reference to discounts given, timing
of payment, GST Charged etc.
g. Vouching of imports bills with particular reference to payment of customs duty,
freight and insurance and inclusion in the value of materials and conversion of
foreign currency.
h. Correctness of classification and accounting of fixed assets
purchased/sold/transferred/declared impaired/condemned, etc.
i. Correctness of the adjustments in respect of Stores declared
Surplus/Unserviceable/redundant.
j. Whether Stock Adjustment account is reconciled within 3 months for
shortage/overage of inventory, etc. If not, please enclose a statement.
k. Whether shortages observed on physical verification have been written off under
proper authority.
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l. Whether appropriate treatment was given to the events occurring after 31st
March of the relevant financial year i.e., Balance Sheet date and prior period
adjustments.
m. Whether the items in GIT, CWIP and Machinery in Inspection are reviewed.
n. Justification for retention of items over six months may be reviewed.
o. Whether review of the material ledger with particular reference to non - moving
inventory, non - priced inventory, etc., made. Report may be enclosed on this.
p. The cost monitoring/control procedure followed may be commented upon to
know how effectively the variation between estimated value of the Work Order
and actuals are dealt with.
q. Whether the subsidiary registers are properly maintained and periodically
reviewed and balances reconciled with the Control account/general ledger.
r. Verification of Purchase proposals on random basis (high value) and to report
deviations from Delegation of Powers.
s. To verify whether purchases are made based on requirements taking in to
account existing stocks, ordering levels etc.
t. Whether accounting of scrap and income out of scrap sales is correctly made.
u. Whether assurances given to Government/Statutory/Internal Systems Audit in
the previous year have been complied with. If not, important points in brief may
be reported.
v. Whether the accounting policies of the Company and applicable accounting
standards are correctly followed.
w. Sufficiency of the existing accounting policies may be reviewed.
x. It may be ensured that the accounting policies are in line with the applicable
accounting standards.
y. Area and scope for Systems improvement, Reduction in paper work, Cost
Reduction, Tax saving, etc.
- Applicability of Income Tax Deduction at Source: The aspect whether TDS is
effected at applicable rates wherever applicable may please be verified.
- Repairs to Plant & Machinery, Building, etc.: The aspect whether any
expenditure of capital nature is booked correctly as `capital expenditure' may
please be verified. To ensure that no capital expenditure is booked as `revenue
expenditure'.
- Payment of GST : Wherever GST is applicable and the same is collected and
paid, whether the payment of GST to the service provider is only for taxable
services and is as per the terms of contract between BDL and the service
providers, may please be verified.
- The status of compliance of the observation made by Internal Auditors up to
previous quarter audit is to be clearly stated in the report.
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APPENDIX - B
Physical Verification of Fixed Assets
Areas to be covered are:
a. Physical verification of Fixed Assets.
i. Coverage: Physical verification and reconciliation of assets which
include Land & Building, Plant & Machinery, Furniture & Fixtures
(including Office equipments). The auditors are required to physically
verify the assets at different locations and reconcile the same with the
Asset Register.
b. Assets disposed off.
c. Capital Work-in-progress (CWIP)
d. Physical verification of all Assets Capitalized during the period under audit.
e. Physical verification of 20% of all Assets capitalized (by original value and
whose WDV is not equal to Rs.1/-) prior to current financial year and not
covered in immediate previous two audits, so that entire assets are covered
under physical verification over a period of 5 years.
f. Action Taken Report (ATR) on previous Audit Reports relating to Fixed
Assets.
g. Internal Control Systems and Suggestions
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APPENDIX - C
PHYSICAL VERIFICATION OF INVENTORY/STOCKS:
Norms for Physical Verification
Sl. EXTENT/
PARTICULARS
No. PERIODICITY
I Inventory (Raw Materials, components, Stores, Spares, Semi
Finished Goods, Finished Goods etc.,)
(1) Whose value exceeds Rs.10,000/- each Once in a year (i.e.
100% every year)
(2) Whose value is more than Rs.3500/- Once in two years
each but less than Rs.10000/- each (i.e. 50% every year)
(3) Whose value is less than Rs.3500/- Once in three years
each (i.e. 331/3% every
year)
(4) OTHERS
(a) Hand Tools in Stores Once in a year
(b) Stationery Once in a year
(c) Transport spares Once in a year
(d) Medical Items Once in a year
(5) Items without Price Once in three year
(i.e. 33.33% every
year)
(6) Special tools and Equipment Cycle time of 5 years
(7) Unserviceable / damaged stores Periodical review
(8) Canteen Periodical review
(9) Surprise check of Coupons, Stamps, Once in a month
Stamp papers
(10) Surprise check of canteen coupons Once in a year
Inventory of completed projects and Review of Status on disposal / issue of Surplus
Inventory to be carried out once in a year.
Action Taken Report (ATR) on previous Audit Reports.
Internal Control Systems and Suggestions.
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APPENDIX - D
Areas to be covered are:
I. General IT System:
a. Verification and validation of Audit Trails.
b. Verification and validation of data base controls.
c. Verification and validation of data control access.
d. Verification and validation of security and protection of data base system.
e. Evaluation of the report generated by the system.
f. Evaluation of the effectiveness of the system.
II. Planning:
Procedure of raising Procurement Advice and various reports generated.
III. Store:
Verification of Module pertaining to Purchase, Receipt inspection and issue of
material.
IV. Evaluation of effectiveness and implementation of IT Policy of BDL with regard to
Policy for PC / Laptop Users
a. Policy for Server Maintenance
b. Policy for Network Maintenance
c. IT Services Like AMC / Visitor Policy
d. Policy for Portable Media
e. Password Policy
f. Software and Hardware Procurement and Disposal Policy
g. Virus Protection Policy
h. E-mail Use Policy
i. Access / Authorization Control Policy
j. Business Continuity and Management Process Policy
k. Policy for CAD/CAM (R&D)
V. The auditor should comment in respect of the following points:
a. Systems.
b. Critical comment and recommendations for improvement.
c. Effectiveness of ERP/IT internal control system existing in the Company
VI. Evaluation of Internal Control in IT Systems and suggestions.
VII. Action Taken Report (ATR) on previous Audit Reports.
VIII. Review of Status of compliance to Advisory / Guideline issued by Cyber
Security Group Under MOD, Department of Defence Production.
IX. Internal Control Systems and Suggestions.
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