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PROPO S AL FOR IN T E R NAL A UDIT
ZENOTECH LABORATORIES LTD., (ZLL)HYDERABAD
MALHOTRA RAJIV & CO (MRC)CHARTERED ACCOUNTANTS454, TOWER B2, SPAZE I-TECH PARK, SECTOR 49, SOHNA ROAD GURGAON-122001+91-9884048080124-4036462
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I N D EX
S. NO. PARTICULARS PAGE NO.1. Objective of the Internal Audit 32. Scope and limitation 33. Responsibility Matrix 44. Service Delivery Framework 45. Reporting 46. Commercials 5
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1. O B JE CT I V E O f THE I NT E R NA L A U D I T :
To review the internal control system as a service to the organization. It objectively examines, evaluates and reports on the adequacy of key controls and ensuring implementation of adequate control environment and governance.
2. S C O PE & L IM I T A T IO N :
2.1 Scope of the work:
Internal audit will have the following broad components
Audit of primary and subsidiary records i.e. cash book, bank and cash, vouchers, journal vouchers, invoices, suppliers ledgers, fixed assets registers, sundry debtors and creditors etc.
Inventory audit (includes periodic physical verification two times a year). Review of systems and procedures and internal control across various
departments to ascertain their continued adequacy, effectiveness and efficiency.
Detailed scope document in annexure A. Management desires that scope of internal audit is extended to cover
designing and implementation of a “Management Information System (MIS)”.We will be pleased to implement the same per requirement of the management.
2.2 Scope Restriction: Fields of internal audit and internal control are distinct. Any system of
internal audit presupposes the existence of system of proper and effective internal checks. Internal Checks is the responsibility of the line supervisors in all departments. The appraisal of these internal checks will be one of the functions of internal audit.
If there is any issue involved is complex, requiring detailed analysis and research, a separ te scope and fee for the assignment will be discussed and mutually agreed with the client, before the start of the assignment. We would normally propose issuing a separate statement of work for any such substantial advisory work.
The scope of work outlined above is based on our understanding as discussed in the aforesaid background. If there is a change in facts/our understanding, our scope of work shall necessitate appropriate changes.
We will rely upon management representations, records produced and information provided by the management and other concerned personnel of the company.
MRC is not in any manner responsible to any party who is relying on the report except the management of ZLL.
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3. R E S PO N SI B ILITY M ATR I X :
The activity based responsibility matrix for the above mentioned process is tabulate as under:
S.No
Activity Responsible Remarks
1. Policies & Procedures (IncludingDelegation of Authority)
ZLL Company will Provide itspolicies and procedures (SOPs) for various 2. Review of Effectiveness in the
controlZLL Under the supervision of
the3. Check the effectiveness in the
controlMRC Will do checks according to
company’s policies andprocedures (SOPs)
4. Reporting MRC Will give monthly and a Quarterly Report to CEO/Head Finance.
4. S ER V ICE D E L I V E R Y F R A ME W O R K :
4.1 T eam S t ru c t ure
ZLL and MRC respectively establish a Single point of contact (SPOC) from their end that they represent and interact to get the things delivered as per the objectives of this proposal. Based on the discussion and workload, MRC will allocate the resources under the SPOC to achieve the purpose of the assignment.
4.2 W O R K L O C A T IO N
The entire back office activity will be executed from MRC premises at Hyderabad. The field work will be done at the client’s at Factory Location in Turkpally. Upon their visit to the office, Client will provide the necessary infrastructure such as seating area workstation etc in their premises to that audit team to perform their job efficiently.
5. R E P O RT I N G
There will be two types of Reports i.e.Monthly and Quarterly.6.1 Monthly Report:
It is for Management Review, Primarily the coverage will the procedural aspects including all Bank and cash transactions, sales, purchases, journal vouchers, statutory compliances,related party transactions, forex transactions. Any special report required by the management.
6.2 Quarterly Report:
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It is a report for Audit Committee, covering all the significant observations, especially the policy deviations in the Monthly Reports of the quarter and comparison with the previous quarter. It also covers any specific/special areas as per the observa tions or recommendations of the Audit Committee.Frequency of Audit will be Monthly & Quarterly.
5.1 Q u a r t e r l y R ep o r t :
It is a report for management, covering all the significant observations especially the policy deviations and comparison with the previous quarter including Analysis Review Documents. It also covers any specific /special areas as per the observation or recommendation of the audit committee.
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6. C O MME R C I A LS:
6.1 Quarterly Fee
The quarterly fee for the audit is of Rs 45,000 per quarter. (Plus Service Tax) and no other re-imbursement of any kind will be given over and above this amount of Rs 45000/- per quarter. The fees for the quarter will accrue & become due only on successful submission of the report for the quarter.
6.2 Billing Methodology
We raise the quarterly service bill by the following month after quarter end.
Annexure A:
Monthly Audit ReportS.No Activity Dates Remarks Responsibilit
y1. Quarterly input/Books
Closure7th of thefollowing month
An Intimation in Advanceshall be send by ZLL “ READY FOR FIELD WORK” to MRC
ZLL
2. Field Work 9th to 16th ofthe following month
A Team of Audit staff will be deployed at Factory Work as per the Standard Audit Program for Quarter. Scope will be agreed with the management.
MRC
3. First Draft Report with AuditObservations
20th of thefollowing month after month Ends
Draft report will be deliveredfor the internal review by the Management and Comments/ Explanations
MRC
4. Comments/ Explanations byMgt
25th of thefollowing month after month Ends
Memorandum of Comments/Explanations from theManagement
ZLL
5. Final Report 30th of thefollowing month after month Ends
Final Print Report will be issued highlighting key issues/weaknesses observed during the quarter.
MRC
Quarterly Audit Work
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1 Quarterly input/Books
Closure
7th of thefollowing month after Quarter Ends
An Intimation in Advanceshall be send by ZLL “ READY FOR FIELD WORK” to MRC
ZLL
2 Field Work 9th to 20th ofthe following month after Quarter Ends
A Team of Audit staff will bedeployed at Factory Work as per the Standard Audit Program for Quarter. Scope will be agreed with the management.
MRC
3 First Draft Report with AuditObservations
25th of thefollowing month after Quarter Ends
Draft report will be deliveredfor the internal review by the Management and Comments/ Explanations
MRC
4 Comments/ Explanations byMgt
27th of thefollowing month after Quarter Ends
Memorandum of Comments/Explanations from theManagement
ZLL
5 Final Report 30th of thefollowing month after Quarter Ends
Final Print Report will beissued highlighting key issues/weaknesses observed during the quarter.
MRC
Should further discussions be required, management will duly inform MRC.
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Quarterly Audit Committee(AC) Meeting
1 Advance intimation/Notice ofAC
As per theMgtSchedule
Notice of the AC Meeting ZLL
2 Attending AC Meeting On the dateof AC Meeting
As per the Agenda in relationto Internal Audit
ZLL &MRC
3 Review of the Minutes of AC& Preparation Action TakenReports(ATR)
Within 10workingdays after the date of AC meeting
Based on the Audit CommitteeObservations/ Recommendations, ATRs shall be prepared to present in next quarter AC
ZLL &MRC
Note: Assumptions:
1. Month is considering as Calendar Month
2. Factory Holidays and Public Holidays to be adjusted to the above schedule dates.