Internal audit and document retention

Guided By :

Prof. G. B. Patil Sir

Department of Quality

Assurance

Presented By :

Sanchita S. Mahale

Department of Quality

Assurance

INTERNAL AUDIT AND DOCUMENT RETENTION

H. R. Patel Institute of Pharmaceutical Education And Research, Shirpur.

CONTENT :

INTERNAL AUDIT

Introduction

Definition

Objectives of Internal Audit

Difference Between IA & EA

Role of Internal Audit

Need of Internal Audit

Principle of Internal Audit

Approaches of Internal Audit

Planning of IA & Audit Program

Audit evidence

Report writing & audit report

Benefits of Internal Audit

DOCUMENT RETENTION

Storage And Retention of

Documents

Retrieval of Documents

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Conclusion References

INTERNAL AUDIT

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INTRODUCTION1,2,3 :

To monitor process of cGMP a system is required & this is possible

only through a well designed & implemented quality audit system.

Audits are designed to seek out any shortcomings in the

manufacturing activities that may result in non-compliance with

the standards laid down by regulatory agencies as well as in-house

specifications.


Quality Audit :

“A systematic and independent examination to determine

whether activities and related results comply with plannedarrangements, and whether these arrangements areimplemented effectively and are suitable to achieve the desiredobjectives”

The quality audit system may be classified in different categories.

1. Internal Audit

2. External Audit

3. Regulatory Audit


DEFINITION1 :

INTERNAL AUDIT :‘Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organisation's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.’

-The Institute of Internal Auditors (IIA)


Objectives Of Internal Audit1 :

To assist the internal control system.

Review of organizational policies & their operations.

Verify the accuracy & authenticity of errors & faults.

Detection & prevention of errors & faults.

Safeguarding the assets.

Right disposal of assets.

Helps in smooth functioning of internal check systems.

Turns a ‘have to’ compliance culture into a ‘want to’


Difference between Internal and External Audit4 :

Sr.No.

Internal Audit External Audit

1. Auditors' are part of the organization. Auditors are not part of the organization, but are engaged by it.

2. Auditors focus on future events as a result of their continuous review and evaluation of controls and processes.

Primary mission of auditors is to provide an independent opinion on the organization's financial statements, annually.

3. Independent from the audited activities.

Independent from its client, the organization, its independence being specific to liberal professions.


Sr.No.

Internal Audit External Audit

4. IA regards all the aspects regarding the organization’s internal control system.

EA regards the internal control system only from the materiality perspective, which permits them to eliminate those errors that aren’t significant, because they don’t have influences over the financial results.

5. IA performs during the entire year. EA is an activity with a yearly frequency, as a rule, at the end of the year.

6. Internal audit is concerned about the

frauds from all activities from the

organization.

External audit is concerned only about the fraud from financial areas.


Role Of Internal Audit5 :

Role in Internal Control

Role in Risk Management

Role in Corporate Governance

Role in Fraud Detection

Role in Financial Reporting


Need Of Internal Audit5 :

To ensure authenticity and

reliability of data generated.

To avoid duplication of data.

To verify the source, the

quantum and the reliability of

all records.

To ensure implementation of

control and continuous

monitoring of systems being

followed.


Principles Of Internal Audit5 :

Guidelines or standards for undertaking an IA Function.

The essentials of an internal audit are ;

a. Independence and Integrity

b. Terms of engagement

c. Strategy and approach

d. Planning of internal audit

e. Staffing and Training

f. Evaluation of Internal Systems

and Risk Assessments

g. Evidence and Analytical

Procedures

h. Report Writing, Presentation

and Follow-up


Approaches To Internal Audit5 :

Involve a combination of audit approaches and techniques.

These include ;

a. Interviews

b. Document Reviews

c. Sampling

d. Testing Of Controls

e. Analysis Of Transaction

f. Processes and Management Information.


The audit approaches selected should be the most time and

cost-effective given the objectives and scope of the audit.

The aim is to collect sufficient, reliable, relevant and useful

evidence to enable the internal auditor to come to well-

founded conclusions about the program or activity under

review and to make appropriate recommendations.


Planning of IA & Audit Program5 :

Planning an internal audit selection of audit coverage, priority

of the internal audit and estimating resources of time and

costs for the entire internal audit function.

Internal audit planning generally involves:

• The internal audit strategy and

• An Internal Audit work plan.


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Planning Audit

Conducting Document

Review

Preparing For On-site Activities

Conducting Audit

Prepare Audit Report

Conducting Follow-up

The internal audit work plan include:

1. Audit title

2. Functional and Operational Area to be covered

3. Director and manager responsible

4. Type and scope of internal audit

5. The benefit expected by the audit procedure

6. Resources allocation for the purpose of the audit

7. Proposed duration and timelines for completion


The key stakeholders of internal audit :

Chief Executive

Board of Directors

Audit Committee

Senior management

External auditor

Other reviewers


Audit Evidence5 :

Any information used by the auditor to determine whether the

information being audited is stated in accordance with

established criteria and to arrive at the conclusions on which

the audit opinion is based.

Internal Audit Evidence includes any data, information,

process flows, vouchers, bills, memos, contracts or

transactions.


The internal audit evidence collected would be dependent on

the following:

1. Audit procedures to use –specific procedures should be

spelled out for instruction during the audit.

2. Sample size –how many items should be tested for each

audit procedure.

3. Items to select –determine which items in the population

should be selected.

4. Timing –timing can vary from beginning of the accounting

period to closure of it.


Report Writing and Audit Report5 :

Internal Audit reports should be accurate, objective,

constructive, clear, concise, and timely.

Each Audit Report should include an overall internal control

rating based on the audit findings.

Commonly accepted ratings are as follows:

i. Satisfactory

ii. Needs Improvement

iii. Unsatisfactory


An Internal Audit Report should ideally include the following :

1. Audit Name and Report Issuance Date.

2. Audit Report Addressee(s).

3. Report Distribution List.

4. Scope and Objective of the Audit.

5. Auditor’s Conclusions and Internal Control Rating.

6. Narrative overview.

7. List and detailed explanation of various findings.

8. Internal Auditor's Recommendation.

9. Management Response.

10. Target Completion Date.

11. Comment Owner.


Benefits Of Internal Audit6 :

It identifies the areas for improvement and strengthening

controls

Understanding and assessing risks.

Ensuring proper and timely identification of problems to avoid

any big problem.

Continuous improvement.

Achieve better allocation of resources


DOCUMENT RETENTION

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Storage And Retention of Documents7 :

Except where legislation require longer retention periods, the

complete records pertaining to each batch, should be retained

for at least ONE year after expiry date of each batch.

OR

Where there is no expiry date, for SIX years after the date of

manufacture or batch.

Master documents should be properly secured against theft

loss and alteration of information.


Records may be retained on microfilms. The responsibility for photo reduction should be delegated to specific person and following procedures adopted.

i. Ensure that all documents have been photo reduced.

ii. Ensure that photo reduced copies showing all information present in original documents.

iii. Ensure that all photo reduced records should be available as readable.

iv. All the photo reduced records should be retained for specified period of time.

Papers or films records should be stored to restricted access area.

Records may be retained by computer storing systems.


Retrieval of Documents7

All the documents should be stored in such manner that their

retrieval is easy.

A total list (preferably alphabetical) of documents should be

made.

The list shows –name of document, location availability etc.

Retrieval of any important document should be possible only

on proper authorization.

The expired documents must be destroyed by QA manager

with proper records by a suitable method.


CONCLUSION :

Internal Audit Findings are the combination of observations, recommendations and results that the internal audit team collects in the course of audit and by the conclusion of the investigation and audit.

The internal audit can help to identify, review, and provide recommendations for key controls associated with the project.

Records should be kept for each delivery. They should include the description of the goods, quality, quantity, supplier, supplier’s batch number, the date of receipt, assigned batch number and the expiry date.

Permanent information, written or electronic, should exist for

each stored material or product indicating recommendedstorage conditions, any precautions to be observed and retestdates.

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REFERENCES :

1. Manohar A. Potdar, “cGMP-current Good Manufacturing Practices for pharmaceuticals”,

Pharmaceutical Press, Page Nos. : 727 &728.

2. D. H. Shah, “Q A manual”, Business Horizons, First edition, pharmaceutical publisher, Page Nos. :

183-184.

3. Frank M. Gryna, Richard C. H. Chua, Joseph A. DeFeo, “Juran’s Quality Planning And Analysis – For

Enterprise Quality”, Tata McGraw Hill Education Private limited, Fifth Edition, Page Nos. : 520-522

& 526.

4. Atanasiu Pop, Cristina Boţa-Avram, Florin Boţa-Avram, “The Relationship Between Internal And

External Audit”, Page Nos. : 5 & 6.

5. J.K. Budhiraja, “Exposure Draft - Guidance Note On Internal Audit Of Pharmaceutical Industry”,

Page Nos. : 2-8, 13-20, 28-32,37, 57 & 60.

6. Elizabeth Prichard ,Vicki Barwick, “Quality assurance in analytic chemistry”, Willey publication, page

No. : 234.

7. Manohar A. Potdar, “Pharmaceutical Quality Assurance”, Nirali Prakashan, Second edition, Page

Nos. : 7.4 & 7.5

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