INTERIM

REPORT
Internal Audit
Performance-
STT

Shreya Shete -
21020841038
INTERNAL AUDIT PERFORMANCE -STAR TRACK TERMINALS

INTRODUCTION:

The general definition of an audit is an evaluation of a person, organization, system, process,

enterprise, project or product. Auditing is defined as a systematic and independent examination of
data, statements, records, operations and performances (financial or otherwise) of an enterprise for a
stated purpose. In any auditing the auditor perceives and recognizes the propositions before him for
examination, collects evidence, evaluates the same and on this basis formulates his judgment which is
communicated through his audit report.
The types of audit are:
1. EXTERNAL AUDIT:- independent of the organisation.
2. INTERNAL AUDIT:- an organization auditing its own systems, a self-assessment.
Internal audit is an independent, objective assurance and consulting activity designed to add value and
improve an organization'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 scope of internal audit within an organization is broad and may involve topics such as an
organization's governance, risk management and management controls over efficiency/effectiveness
of operations (including safeguarding of assets), the reliability of financial and management reporting
and compliance with laws and regulations.
Internal audit may also involve conducting proactive fraud audits to identify potentially fraudulent
acts; participating in fraud investigations under the direction of fraud investigation professionals, and
conducting post investigation fraud audits to identify control breakdowns and establish financial loss.
Internal audit is an audit conducted by an internal auditor appointed by the management of the
enterprises with a view to highlighting the weak areas of the organizations. It includes examination
and evaluation of various organizational activities and to produce the helping hand to the management
complete their responsibilities efficiently and effectively.

In this project, I have learnt & performed the internal audit processes in some areas of the Star track
terminals Pvt. Ltd.
Objectives - an internal auditor audits the accounts and other relevant records daily, regularly or on
periodical basis are to accomplish the following requirements:
1. Internal audit may be conducted to ascertain whether all rules, regulations, policies, procedures and
principles have been followed by the company or not.
2. To check whether the existing internal control system is adequate and effective and according to the
size of the organization.
3. To ensure that all the assets of organization are properly safeguarded, if not, he reports the
management about the drawback with suggestions.
4. To highlight the weak areas of the organization and give suggestion to strengthen them.
5. To check whether working of the organization is smooth, effective, efficient and economical.

CATEGORIES of INTERNAL AUDIT that I Have worked on:

 HR & Payroll Audit

The HR Audit or Human Resource Audit is often used to assess the working, execution &
maintenance of the human resource department. Managing HR tasks are enormous, ranging from
processes, documentation, policies & other systems. While an audit is going on, all such methods get
a detailed checkup. An HR audit checklist further reviews these HR aspects & finds the areas that are
going well & areas that need improvement. 
It allows us to understand that all human resources tasks contribute to the overall business success.
The human resource audit examines the internal HR processes. And also, It tells how well your HR
department is performing and if all the related policies & HR implementation strategies align with our
company’s goals.
A payroll audit is an analysis of a company’s payroll processes to ensure accuracy. Payroll audits
examine things like the business’s active employees, pay rates, wages, and tax withholdings. You
should conduct a payroll audit at least once per year to verify your process is up-to-date and legally
compliant.
Checklist
Management
 ‘Are the HR goals aligned with the organization?
 ‘Are the workweeks clearly defined?
 ‘Are the working hours clearly defined?
 Is there an open form of communication between HR and other departments?
Recruitment
 Does each position within the organization have a job description?
 ‘Are the job descriptions up to date?
 ‘Are job openings offered to current employees?
 Is the employee turnover rate monitored?
Onboarding
 Do new employees receive a contract and handbook?
 ‘Are the onboarding documents up to date?
 Do new employees receive the right training?
 Do new employees have follow up meetings?
Employee Relations
 Does your organization have a system for performance appraisal in place?
 ‘Are your practices in line with your policies?
 Do the policies and procedures comply with the federal rules and regulations?
 Is there a clear and well communicated process in place for receiving and handling employee
complaints/issues?
Payroll
 If employees past records are verified?
 If Employee classification level wise is correct?
 Paychecks delivered on time?
 Any issues in employee data report,hours worked, pay rates, overtime?
  If minimum wages as per the act are provided?
 If basic salary is constant ?
 If PF provided is fair?

 Performance Audit or Operational Audit:-

It assesses whether the activity, programme or body has been managed economically and/or
efficiently and/or effectively.
Operational audit is the type of audit service that the review is mainly focused on the key processes,
procedures, system, as well as internal control which the main objective is to improve productivity, as
well as efficiency and effectiveness of the operation. Before the review could be performed, an
internal audit needs to identify the audit-able areas, and process first. Those could be identified by
obtaining input from the management of the companies. The process of operational auditing is not
much different from other audits performed by the internal auditor. Those include planning,
execution, reporting, and follow-up.Operational audits focus on the review and assessment of single
or multiple business processes.

Checklist
 What was the date and purpose of the previous audit?
 What was the number of audit findings and conclusions from the previous audit?
 Are there any outstanding audit findings from the previous audit, how many?
 Since the previous audit, are there any indication of : high turnover of managerial staff? -
[YES/NO] high turnover of staff, flight crew or maintenance? – [YES/NO] changes in scope,
size, aircraft and type of service? - [YES/NO] any additional OPS SPECs authorized? -
[YES/NO]
 Does the company have proof of liability insurance?
 Certification limitations and operating limitations?
 Is SOP updated & followed?

 Compliance Audit:-
It evaluates the how well the organization conforms and adherences with relevant policies, plans,
procedures, laws, regulations, and contracts. Usually all audits include the compliance element,
because the auditor uses the laws, policies and regulations as a yardstick to measure the performance
of the organization. Therefore these guidelines do not contain separate section for compliance audit,
but the aspect is included in all audit instructions later in these guidelines.
Process:
Planning: To obtain an understanding of the business as well as its operation. Then, make an
assessment and target which key operation should they perform.
Execution: Validating the key control and operation involve obtaining the key documents, observing
how certain key control is performing and inspecting certain documents like sales invoices, goods
delivery note.
Reporting: Once the key operation and control are validated, the report needs to be prepared and
submit to the audit committee.
Follow up: Same as other internal audits, any key findings, and recommendations that prepare by the
auditor need to follow up whether those key findings are mitigated by related management or
department.

Checklist:

 If all acts are followed by the organisation?

 If all documents/ forms are maintained?
 Any non-compliances?

Methodology to internal audit for all areas:

1 - Planning an Internal Audit

a) Internal audit plan should cover areas such as obtaining knowledge of legal and regulatory
framework within which the entity operates, obtaining knowledge of the entity’s accounting and
internal control systems and policies, determining the effectiveness of internal control procedures
adopted by the entity, determining the nature, timing and extent of procedures to be performed,
identifying activities warranting special focus based on materiality and criticality of such activities,
and their overall effect on operations of the entity, identifying and allocating staff to different
activities to be undertaken.
b) Planning process includes obtaining knowledge of business, establishing the audit universe,
establishing the objectives of engagement, establishing scope of the engagement, deciding resource
allocation, preparation of audit programed.
c) Plan to be finalised in consultation with the appropriate authority before commencement of the
work.
2. Data Collection & Documentation
Initially data must be collected from the organisation and have the process walkthrough. In case of
queries and need for clarification client meetings must be conducted & observations must be recorded.
a) Internal audit documentation should be designed and properly organized to meet the requirements
and circumstances of each audit. To formulate policies for standardization of internal audit
documentation.
b) It should be sufficiently complete and detailed for an internal auditor to obtain an overall
understanding of the audit.
c) It should cover engagement all the acceptance, assessment of internal important engagement
controls, aspects of planning, evidence an engagement viz., risk assessment and obtained and
examination / evaluation carried out, review of the findings, communication and reporting and follow
up.
3. Analysis:
From the data & client meets form analysis of the queries unsolved & obsevations & then record it
into the audit draft report.
4. Reporting
a) To review and assess the analysis drawn from internal audit evidence obtained as the basis for his
conclusion on the efficiency and effectiveness of systems, processes and controls including items of
financial statements.
b) Report clearly expressing significant observations, suggestion / recommendations based on the
policies, processes, risks, controls and transaction processing taken as a whole and managements
responses.
c) Report includes basic elements such as title, addressee, report distribution list, period of coverage
of the report, opening or introductory paragraph, objectives paragraph, scope paragraph (describing
the nature of an internal audit), executive summary (highlighting key material issues, observations,
control weaknesses and exceptions), observations, findings and recommendations made by the
internal auditor, comments from the local management, action taken report – action taken / not taken
pursuant to the observations made in the previous internal audit reports, date of the report, place of
signature and Internal auditor’s signature with membership number.

Internal Audit for COST CONTROL:

Cost control and reduction refers to the efforts business managers make to monitor, evaluate, and trim
expenditures. These efforts might be part of a formal, company-wide program or might be informal in
nature and limited to a single individual or department. Cost control is the practice of managing
and/or reducing business expenses. Cost controls starts by the businesses identifying what their costs
are and evaluate whether those costs are reasonable and affordable.
Then, if necessary, they can look for ways to cut costs through methods such as cutting back, moving
to a less expensive plan or changing service providers. The cost control process seeks to manage
expenses ranging from phone, internet and utility bills to employee payroll and outside professional
services. To be profitable, companies must not only earn revenues, but also control costs. If costs are
too high, profit margins will be too low, making it difficult for a company to succeed against its
competitors. In the case of a public company, if costs are too high, the company's may find that its
share price is depressed and that it is difficult to attract investors.

Methodology:
The following are some simple successful cost control methods:
Review and Modify Business Model:-
There is a great, economically and commercially successful business model, that is used to lay down
the foundations of any company. The business model must be however subject to small and big
changes. It means as a manager, you should subject the business model to changes according to your
competitors actions and markets status. By the term change, I also mean that you should be upgrading
and improving all possible business operations. You need to come up with new process and
procedures to reduce costs.
Daily Updates:-
One of the best ways to start controlling costs it to have daily updates of production, all possible long
and short term expenditures. Divide all these expenditures, even the ones such cost of machinery or
insurance, and sales, by the number of working days. This will give you a concrete figure of the total
amount that has been spent. Similarly after sales of your goods or services, you may also divide the
total amount of sales by the number of working days. This will give you a micro figure about the daily
expenditure and sales. It will definitely help you to zero down on all possible cost problems that you
incur.
Uniformity:-
Cost control management is all about deriving the best outputs in a least cost. Hence, set up a highly
efficient and specialized stores department which will oversee all purchases. You may also take a risk
and make long term agreements regarding the quality and quantity of materials that are being supplied
to your manufacturing process. This uniformity will ensure a timely, cheap and assured supply of raw
materials.
Time Planning:-
Time is money! Well divide the amount of wages that you give out with the number of work hours per
month. Explain to the employees per hour expenditures that you incur, and hence the necessity for
time management. You may also install good cost control systems, in order to help your employees to
manage their work hours well. A cost control software will also work wonders in the finance and
accounting department.
Renegotiate all Contracts Annually:-
For whatever reason, businesses presume that multiple year contracts will result in lower costs.
Maybe sometimes, but not always. A smart company policy is not to have the life of a contract exceed
one year. This forces annual bidding or at least renewal discussions with the current suppliers. Almost
always these discussions will result in lower cost of goods. A multi-year contract will usually favor
the vendor. Of course this is a lot of work, but it sure pays out.
Ask your Customers:-
Annual planning sessions with customers have many benefits. Naturally these discussions primarily
should focus on ways to grow the business. But too often these discussions fail to address costs. By
discussing costs holistically up and down the combined supply chains, customers often can
recommend ways to reduce costs. For example, how to take wasted steps out of the process, or how to
plan jointly to smooth production, or maybe even how to change the product mix to get rid of costly
items and replace them with some that are more profitable. Talking to the customer is never a bad
thing. But talking about how to jointly improve business deepens the relationship, shows them you
care, and helps reduce costs for both parties.
Match terms with turns:-
Each item in your inventory moves at a different rate, and yet suppliers normally apply a one size fits
all approach to payment terms. You can reduce your working capital to zero if payment terms were
matched with the inventory turns of each item. By negotiating this into your contracts it incents the
suppliers only to sell the best moving items and to work with you to improve inventory productivity.
The results will free up cash that can be deployed elsewhere in the business and improve profits.
Ask Vendors to own their Inventory:-
Better even than matching terms with turns is to have the vendors keep title to their inventory until
sold. Normally inventory acquired from a vendor is held in your warehouse for use in manufacturing
conversion or resale to your customers. But why think of it as your inventory, it hasn’t been used yet
so why isn’t it their inventory. Best planning results in “just-in-time” delivery so there is no inventory.
But this isn’t always possible, for instance, in industries like retail where that inventory is necessary
for your own customers. But again, why are you paying them and then sitting on their inventory. They
need to own the inventory until time of sale. This is commonly referred to as “scan based trading” or
“just-in-time trading.”

The internal audit function should be an integral part of any strategic cost reduction program because
it can ensure the redesigned business processes, activities and structures (if any) remain responsive to
the risks, and are embedded in the business methods and practices. The value that can be achieved by
the inclusion of the internal audit function is immense, as it can support a number of strategic
objectives, including the following:
1. Achieving buy-in to the cost reduction program from a broader group of stakeholders.
2. Improving visibility at management, executive and board levels by ensuring internal audit reports
include commentary on the cost cutting initiatives.
3. Identifying the risks and implications of cost reduction initiatives.
4. Providing valuable input and insight into the key processes and activities that drive certain costs.
5. Identifying critical improvement drivers to keep the business focused on priority areas.
6. Bringing a process and control capability to the overall program.
7. Monitoring and evaluating key performance indicators on a continuous basis.
8. Developing regular reviews as part of the annual internal audit plan to support sustainability.
9. Providing an objective view point on the proposed initiatives prior to, during and after the
introduction of the cost cutting program.
10. Reporting on the benefits realized by the program.

Learnings:
In this Project, I learnt the basics of auditing & its performance in various areas of an organisation.
 Identifying the steps needed to prepare, perform, report and follow-up, and closure.
 Identifying types of audit evidence needed to verify conformance to requirements.
 Using checklists and other working papers
 Collecting audit evidence 
 Determining when a practice or situation represents a nonconformance or finding
 Determining methods to analyze and classify nonconformities or findings
 Writing nonconformity statements
 Reporting results of the audit
 Follow-up and verification of the actions taken
 I gained the insights of entire HR audit process, yard operations audit process & compliance
audit process & the link between internal audit & cost control.
 I also learnt to communicate with clients & identify potential risks & observations so as the
organisation can work on it & improve its efficiency.
Challenges faced during project execution: As I lacked business knowledge, I faced difficulty in
understanding certain terms & processes of internal auditing. Also identifying the key risks &
observations involved in the process.
Aa there are time deadlines you have an audit plan, and you have to execute and deliver on that plan,
balancing the objectivity of reporting items found with the fairness of reporting them in the right way.
That becomes challenging.

Steps Taken : Going through the previous audit reports, & observations & checklists & reading more
about internal audit has helped me understand the process & the means of identification of potential
risks & areas of improvement.
Time management & guidance given by reporting managers have helped me to work within deadlines.

BIBLOGRAPHY:
1) AUDITING books of ICAI.
2) COSTING books of ICWAI.
3) www.wikipedia.com
4) www.icai.org
5)www.protipedia.com
6) https://www.startuphrtoolkit.com/hr-audit-checklist/
7) https://smallbusiness.chron.com/reconcile-payroll-46213.html