RCSML Accounts Report v1.pptx

8/18/2019 RCSML Accounts Report v1.pptx

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Accounts Department Reliance Cotton Spinning

Mills Limited – Internal Audit Report on

Checkbook and BRS process

Prepared by :

Internal Audit Department

Date: 30-March-2016


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2

Table of ontent

Particular! Pa"e #

Abstract 2

Executive Summary 3-4

Summary of Key Observations – Bank ReconciliationStatement

Summary of Key Observations – !"eck book business

#rocess

$

Summary of Key Observations – !"eck book #"ysical stocktake

%

&etaile' Re#ort (

Bank Reconciliation #rocess )-*

!"eck book business #rocess *$-*)

!"eck book +"ysical stock take 2,-2$


3/27

Ab!tract

nternal Au'it &e#artment con'ucte' an en.a.ement to revie/ t"e o#erational efficiency an' effectiveness of

Accounts &e#artment0 R!S1 nternal Au'it /as carrie' out usin. risk base' analysis of sub #rocesses ie

!"eckbook an' Bank reconciliation Evaluation of nternal !ontrols "i."li."te' certain areas /"ere 'esi.n of t"e

key controls /ere not a##ro#riately im#lemente' Key control activities relate' to t"e i'entifie' #rocesses0 control

obectives for t"ose activities an' associate' financial statement assertions /ere i'entifie' an' 'ocumente' for t"e

assessment of t"eir im#lementation 5estin. tec"ni6ues /ere7 n6uiry from Account &e#artments8 #ersonnel9

ins#ection of 'ocuments an' examination of au'it 'ocument trails9 an' /alkt"rou." of #rocesses

:avin. obtaine' in-'e#t" un'erstan'in. of t"e functions of Accounts &e#artment on t"e selecte' areas0 an

evaluation /as arrive' at re.ar'in.7 efficiency an' effectiveness of internal controls relate' to !"eckbook

1ana.ement9 an' Bank Reconciliations na'e6uacies; .a#s in t"e 'esi.n of internal control structure /ere also

i'entifie' by ma##in. un'erstan'in. of t"e ex#osure of risks to au'it functions /it" t"e existin. key controls 5"e

#ractice facilitate' i'entification of si.nificant unmiti.ate' risks an' make recommen'ations to alleviate i'entifie'

.a# an' convert after 'iscussion /it" t"e #rocess o/ners0 t"e .a#s re#ort into a /ell t"ou."t out action #lan

5"e overall conclusion 'ra/n from t"is en.a.ement states t"at t"e com#any "as not a'o#te' a 'efine' strate.y for

ac"ievement of obectives an' mana.ement of risks +rocess o/ners are entruste' /it" res#onsibility for meetin.

overall tar.ets rat"er t"an institutin. an effective internal control frame/ork /it" controls at o#erational an'

transactional level a#ses /ere i'entifie' at transactional0 o#erational an' #rocess levels0 resultin. in lack of

ac"ievement of #erformance obectives

n a''ition to executive summary0 sco#e < obectives an' back.roun' < met"o'olo.y0 t"is re#ort inclu'es7

summary of observations9 'etaile' observations on o#erational au'it of sub #rocess9 recommen'ations an' a.ree'

actions 5"e re#ort "ouses relevant annexures /"ere nee'e' to su##ort t"e observations i'entifie'


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$%ecuti&e 'ummary


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$%ecuti&e 'ummary

Audit (b)ecti&e!*ac+"round and Methodolo"y'cope

= 5"e sco#e of t"is en.a.ement /as toun'ertake a com#re"ensive internal au'it

of t"e Accounts &e#artment of R!S1 to

revie/ an' assess t"e efficiency an'

effectiveness of its follo/in. sub

#rocesses7

– !"eckbook Re6uisition0 ssuance an'

!losin.

– Bank Statement !ollection <

Reconciliation +rocess

5o carryout nternal Au'it usin. risk base'

analysis of t"e above sub #rocesses

5o un'erstan'0 evaluate an' "i."li."t

internal controls in t"e existin. areas of

concern /"ere 'esi.n of t"e key controls

/as ineffective or not consi'ere'

= A& i'entifie' t"e #rocess o/ners as/ell as t"ose res#onsible for

#erformin. t"e key business activities

an' con'ucte' intervie/s /it"

mana.ement an' key #rocess o/ners

involve'

= On be"alf of mana.ement0 A&

i'entifie' an' 'ocumente' t"e key

control activities relate' to t"e i'entifie'

#rocesses0 control obectives for t"oseactivities an' relate' financial

statement assertions

= 5estin. tec"ni6ues a##lie' 'urin. t"e

a##raisal /ere7

– n6uiry from Accounts &e#artment

#ersonnel

– ns#ection of 'ocuments by

examinin. au'it trails

– >alkt"rou." of t"e #rocesses

= Effective controls are in #lace in t"e!"eckbook mana.ement #rocess

= Bank Reconciliation Statements are

aut"ori?e'0 #re#are' on timely basis an'

reconcilin. items are follo/e' u#


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$

Executive Summary

Summary of Key Observations – Accounts 'e#artment

,ey (b!er&ation!

*an+econciliation

Proce!!

BRS for t"e #erio' un'er revie/ is neit"er finali?e' nor revie/e' on timely basis

Back 'ate' entries /ere ma'e in t"e #erio' un'er revie/ an' t"is 'e#icts t"at cut-off is not observe'

ER+ is u#'ate' base' on Electronic Bank Statements /"ic" are not si.ne'; stam#e'

t is observe' t"at bank reconciliations an' 'isbursement activities are not se.re.ate' +ersonnel involve' in recei#ts #rocessin. int"e ER+ System is also res#onsible for u#loa'in. of Bank Statement an' BRS #rocessin.

!om#any "as not 'ocumente' stan'ar' o#eratin. #roce'ures @SO+ to follo/ u# of reconcilin. items

t is also observe' t"at BRS are not #re#are' for all bank accounts

ER+ access ri."ts are not revie/e' #erio'ically to ensure t"at access is restricte' to aut"ori?e' in'ivi'uals only


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%

Executive Summary

Summary of Key Observations – Accounts 'e#artment,ey (b!er&ation!

hec+boo+

Proce!!

A##rove' an' 'ocumente' Stan'ar' O#eratin. +roce'ures relatin. to !"eck Books are not available

!"eck Book lo. in t"e ER+ system is neit"er #re#are' nor revie/e' by Accounts &e#artment in'icatin. stock levels for eac" bankaccount

Reconciliation bet/een #"ysical stock an' ER+ recor's is not bein. carrie' out

5"ere is no a##rove' #olicy available in'icatin. t"e c"eck book stock levels to be maintaine' for eac" bank account0

Before a##rovin. t"e re6uisition for ne/ !"eck Book no aut"ority in t"e Accounts &e#artment ensures t"e necessity forre#lenis"ment

All t"ree unctional Su##ort Officers in ER+ &e#artment are aut"ori?e' to o#en !"eck Books in ER+ System

!"eck books recor's 'onCt reflect t"e status ie active or inactive c"eck books


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(

Executive Summary

Summary of Key Observations – Accounts 'e#artment,ey (b!er&ation!

hec+boo+Phy!ical

'toc+ta+e

Do 'esi.ne'; establis"e' #roce'ure exists to ensure t"at all t"e cancelle'; voi'e' c"ecks "ave been accounte' for

Recor' of !"eck Book Re6uisition Sli#s is not bein. maintaine' /"ic" can lea' to tem#tation for unaut"ori?e' use

!"eck books Re6uisition Sli#s are available in active c"eckbooks an' t"ese c"eckbooks are accessible to em#loyees

!om#any "as establis"e' a #olicy to si.n counter folios by &1 Accounts0 but 'urin. ins#ection only fe/ counterfoils /ere foun' si.ne'by t"e &1 Accounts 5"e #ractice is not bein. com#lie' /it" fully

!ancelle' c"ecks8 counter folios /ere also not fille' an' initiate' 5"is #ractice can affect later reconciliations

&ifferences /ere i'entifie' 'urin. c"eck book #"ysical stock take an' t"e ER+ recor's #on investi.ation it /as foun' t"at ER+

recor's for c"eckbooks are not bein. u#'ate'

!"eck books /ere not stam#e' for F+ayee Account Only8

Reconciliation bet/een #"ysical stock of t"e c"eck books an' t"e ER+ recor's is not #erforme'


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Detailed .indin"! /Account!

Department

Bank Reconciliation +rocess


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*,

'ub-Proce!! (b)ecti&e

Bank Reconciliation +rocess= Bank Reconciliation Statements are com#lete an' are accurately #re#are' an'

revie/e' #erio'ically

(b!er&ation! ecommendation! e!pon!e A"reed Action

= &urin. revie/ it is foun' t"at t"e BRS is not revie/e' timely BRS for t"emont" of Oct0 Dov0 &ec0 an' Gan /ere not revie/e' at t"e time of au'it

Implication!= +robability of #otential errors in accountin. cannot be #reclu'e' Any

errors .oin. un'etecte' may lea' to financial loss to t"e com#any

= All bank accounts s"oul' be reconcile'on timely basis an' reconciliationss"oul' be revie/e' All au'it trailss"oul' be ke#t to 'emonstrate t"eeffort

= 5"e reason for 'elay /as non-availability of recourse Do/ 1r At"er A6eel is a##ointe' an' no/ itis a.ree' t"at BRS /ill be #re#are'an' revie/e' timely

= ER+ recor's are u#'ate' u#on t"e recei#t of electronic bank statementst"rou." email an' t"ese are t"en finali?e' u#on t"e recei#t of ori.inal

stam#e' bank statements or t"e follo/in. bank accounts t"e ori.inalbank statements /ere not obtaine'9

– :B-!o# Br A;c H ,%($-,,2)%24-,3 – B-!o# Br A;c ,2-$%,322%) – !iti Bank A;c 2,**3(

Implication!= Accuracy of bank balances remains uncertain= n-finali?e' bank #osition= ncom#lete recor's are #rone to r isk of error an';or frau'

= Online access is available for :Ban' B bank accounts but it isa.ree' t"at ori.inal an' stam#e'bank statements /ill be obtaine' toensure t"e com#leteness of BRS#rocess

= Back-'ate' entries /ere #erforme' for t"e #erio' un'er revie/ ie Icas" account balance /as not matc"in. /it" current account #ositionRefer to A$4$-A5

Implication!= Risk of frau'ulent transactions

= Accountin. books s"oul' be close' onmont"ly basis an' back-'ate' entriess"oul' be restricte' in t"e ER+ system

= t is a.ree' t"at no entries /ill bema'e after t"e finali?ation of BRS

e!pon!ibility &e#artmental :ea'

Internal Audit eport

Detailed .indin"!



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**



= &uties are se.re.ate' a'e6uately


= t is observe' t"at 'uties are not se.re.ate' a##ro#riately iereceivables executive is res#onsible for recor'in. of recei#ts0 fee'in.of bank statements in t"e ER+ system an' reconciliation of bankaccounts

Implication!

= ack of se.re.ation of 'uties may lea' to staff misa##ro#riatin.

recor's or frau'ulent activities

= Se.re.ation of 'uties s"oul' be 'ocumente'0observe' an' revie/e' on #erio'ic basis

= Accounts 'e#artment a.ree' /it"observation but t"ere is a lack ofrecourses Accounts 'e#artmentalso a.ree' to ensure t"eim#lications of effective controls toavoi' any inconsistency



Detailed .indin"!



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*2


Bank Reconciliation +rocess= Bank Reconciliations are #re#are' an' maintaine' for all bank accounts


= t is observe' t"at BRS are not #re#are' for all bank accounts BRSis not bein. #re#are' for t"e follo/in. bank accounts

– BA: ero?/attoan Br A;c H )*,,(*,,*()2 – Bank Al-:abib t' A;! H ,,)*-,,(*-,,*2,,-,*-3 – :B-,%($-%),244)2-,3 – :B-,,,),)%),,),4,,3 – DB+-4**4*$((3

Implication!

= ncom#lete;un-finali?e' bank reconciliations are a re' fla.0 in'icatin.t"e risk of frau'

= Risk t"at +ayment;Recei#t cannot be trace' an' "ence stayun'etecte'

= A clear au'it trail s"oul' be retaine' for allreconciliations bein. #erforme' /"ic" s"o/s7/"o #erforme' t"e revie/ of reconciliationalon. /it" t"e 'ate of com#letion0 an'ex#ecte' 'ates of resolution for un-reconcilin. items

= 5"e missin. BRS are no/#rovi'e'



Detailed .indin"!



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*3


Bank Reconciliation +rocess= naut"ori?e' access to !as" 1ana.ement 1o'ule is 'eterre' an' 'etecte'


= ER+ access ri."ts are not revie/e' #erio'ically to ensure t"at accessis restricte' to aut"ori?e' in'ivi'uals only

Implication!

= naut"ori?e' access to ER+ recor's an' store' 'ata0 .rante' tomulti#le in'ivi'uals may result in misa##ro#riations falsification or'estruction of accountin. recor's

= 1ana.ement s"oul' revie/ access ri."ts#erio'ically to #revent unaut"ori?e' access tot"e system

= Accounts 'e#artment a.ree' torevie/ t"e access ri."ts#erio'ically



Detailed .indin"!



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Department

Bank Reconciliation Process

– Annexures

I t l A dit t


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*


Detailed .indin"! / Payment After Month $nd an-16

Annexures - A

*ac+ date entry on 01-March-2016

I t l A dit t


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*$


Detailed .indin"! / Payment After Month $nd an-16

Annexures - A

*ac+ date entry on 07-March-2016


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Department

!"eck book Business

+rocess



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*(


!"eck book Business +rocess= !"eck Book recor's are a##ro#riately maintaine' an' revie/e' #erio'ically


= ER+ base' recor's for c"eck books are not bein. maintaine' an'revie/e' by t"e Accounts &e#artment rat"er t"ey "ave maintaine' excelbase' recor's

Implication!= &ue to ncorrect an';or incom#lete recor's in ER+ or manual system0

actual existence can8t be ensure'

= 5"ere s"oul' be a lo. maintainin. !"eck bookstock 'etailin.9

– Stock in "an' – Re6uest raise' for ne/ c"eck books – eaves attac"e' /it" c"eck book – Revie/e' by senior #ersonnel – Aut"ori?e' by mana.er or I1

After nternal Au'it assi.nmentER+ base' c"eckbook list foractive an' inactive c"eckbooks isconfi.ure' an' is also revie/e' bynternal Au'it 'e#artment

= !"eck Book lo.s in'icatin. stock levels for eac" bank account an' t"eirstatus suc" as active0 inactive an' t"ose relate' to close' c"eck books

is neit"er #re#are' nor revie/e' by t"e Accounts &e#artment

Implication!= ack of reconciliation bet/een stock an' ER+ recor's lea' to absence

of an internal #rocess to re#ort 'eficiencies in internal control tomana.ement on a timely basis

= +olicy s"o/in. minimum0 maximum an' or'erin.levels may be formulate'

= !"eck Book Revie/; Re#lenis"ment Re.isters"oul' be maintaine'

!"eck book lo. is no/ maintaine'ER+

= &aily c"eck book status re#ort is #re#are' by 'e#uty mana.er accounts/"ic" s"o/s t"e c"eck books issue' to accounts executives0 'urin.ins#ection it /as i'entifie' t"at t"is re#ort /as last u#'ate' on *2-,2-*$Recor' u#'ation /as la..in. be"in' by ** 'ays

Implication!= ack of reconciliation bet/een existence an' ER+ recor's lea' to

un'etecte' anomalies

= +"ysically reconciliation s"oul' be #erforme' byaccounts 'e#artment to verify t"e recor's areu#'ate' timely

nternal au'it 'e#artment revie/e't"e recor's an' foun' t"at &e#uty1ana.er Accounts u#'ate' allrecor's t"at /ere #en'in. 'ue tointerim au'it



Detailed .indin"!

!"eck book Business +rocess


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Department

!"eckbook #"ysical stock take



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22


!"eckbook #"ysical stock take= Strin.ent voi'e' c"eck #roce'ures are im#lemente' an' key controls #ut in #lace

relatin. to #ayments returne' or cancelle' c"ecks


= Do #roce'ures are available to ensure t"at all t"e cancelle'; voi'e'c"ecks "ave been accounte' for an' voi'e' #ro#erly in t"e ER+system t /as observe' 'urin. #"ysical count t"at some voi'e'c"ecks in t"e ER+ system /ere re-use' t"rou." 'ummy c"ecknumbers

– Ref7 :B A;! H %,,,,434*%c"eck H (4%*)2*0 (4%*)4

= Accounts &e#artment "as not maintaine' a lo. t"at coul' easily trace

voi';cancelle' c"eck containin. c"eck numbers an' t"e 'ate ofaction= Do reconciliation is bein. #re#are' for voi'e' c"ecks in ER+ an'

#"ysically cancelle' c"ecks to ensure t"at all cancelle' c"ecks are#ro#erly voi'e' in ER+ an' vice versa or instance0 some #"ysicallycancelle' c"ecks /ere not voi'e' in t"e ER+ system Refer toAnne%ure A5

Implication!= !ancelle' c"ecks may .o unaccounte' for0 or stay un-cancelle' in

t"e ER+ !"eck Re.ister= naccurate ER+ recor's t"at mi."t lea' to risk of unaut"ori?e';

unsanctione' use of c"eck

= A #roce'ure s"oul' be 'evise' to ensure#ro#er 'ocumentation of cancelle' c"ecksan' u#'atin. of ER+ !"eck Re.ister /"erec"ecks are cancelle'

= Accounts 'e#artment a.ree' toreconcile ER+ an' #"ysicallycancelle' ; voi'e' c"ecks#erio'ically



Detailed .indin"!




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23



= +"ysical stock count of !"eck Books matc" /it" t"e ER+ recor's


= Reconciliation bet/een #"ysical stock an' ER+ recor's is not bein.carrie' out ER+ base' c"eck book recor's are not u#'ate' timelynternal Au'it &e#artment con'ucte' #"ysical stock count an' foun't"at some c"eck books /ere available in stock but /ere not availablein c"eck book recor's Reference Anne%ure *5

Implication!

= naccurate ER+ recor's t"at mi."t lea' to risk of unaut"ori?e';unsanctione' use of c"ecks

= ER+ ; !"eck book recor's s"oul' be u#'ate'on t"e timely basis

= !"eckbooks s"oul' not be o#ene' in t"eER+ /it"out aut"ori?ation

= Accounts 'e#artment a.ree' tocon'uct #erio'ic reconciliations toensure t"at c"eckbooks #"ysicalstock matc"es /it" ER+ recor's



Detailed .indin"!




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24


!"eckbook #"ysical stock take= Recor' of !"eck Book Re6uisition Sli#s is maintaine' for accountability an' safe

custo'y of !"eck Books


= Recor' of !"eck Book Re6uisition Sli#s is not bein. maintaine'/"ic" can lea' to tem#tation for unaut"ori?e' use an' lack ofaccountability an' control over !"eck Book Re6uisition Sli#s

= !"eck books Re6uisition Sli# /ere available in active c"eck booksan' t"ese c"eck books are in access of em#loyees Availability ofre6uest leaves in t"e active c"eck books may lea's to unaut"ori?e'use

= &urin. #"ysical count it is observe' t"at c"eck book re6uest leaves

/ere not available /it" t"e follo/in. c"eck books As recor's are notmaintaine' for re6uest leaves unaut"ori?e' usa.e may remainsuni'entifie'

– :B A;c H %,,,434*%c"eck books (4%2,,* – (4%2%,, @% c"eck books

Implication!= De/ c"eckbooks can be obtaine' by usin. re6uest leaf /it"out

intimation; unaut"ori?e' re6uest= Access of re6uest leaves to users may lea's ex#osure to frau'ulent

activity= Dot availability of Re6uest leaves for ne/ c"eck book raises t"e risk

of unaut"ori?e' use

= Recor' of !"eck Book Re6uisition Sli#ss"oul' be maintaine' for accountability an'safe custo'y

= 1issin. re6uisition sli# "as beentrace' out from Karac"i

= 1ana.er Accounts insiste' onkee#in. t"e Re6uisition Sli#attac"e' in t"e c"eck book


p

Detailed .indin"!




25/27

2


!"eckbook #"ysical stock take= !ounterfoils are fille' an' initiale' by t"e aut"ori?e' si.natories


= !om#any "as establis"e' stan'ar' o#eratin. #roce'ure to si.ncounter folios by &e#uty 1ana.er Accounts0 &urin. ins#ection it /asi'entifie' t"at t"e #ractice is not fully com#lie' /it" as many counterfoils /ere not si.ne' by t"e &e#uty 1ana.er Accounts

Implication!= As c"ecks are #rinte' manually rat"er #rintin. automatically base' on

'etails of #ayment vouc"er t"rou." ER+ /it"out revie/in. it cannotbe ensure' t"at all c"ecks are use' for business #ur#ose

= 1ana.ement s"oul' establis" controls tofollo/ com#any #olicy to si.n t"e counterfoilsan' to kee# track of recor's

= &e#uty 1ana.er accounts a.ree'to si.n t"e counterfoils

= !"eck Books /ere not stam#e' or crosse' for J+ayee A;! onlyrat"er t"an crossin. t"e c"ecks for A;! +ayee only at t"e time of!"eck Book recei#ts &urin. #"ysical count it /as observe' t"at t"efollo/in. c"eck books /ere not crosse'

– DB+ A;! H 4**4*$((3 $$**)4*-$$**), @* c"eck book

– aysal A;! H ,,,*342)3,,2%)(,)3%)-%)(,4%( @* c"eck book

– :B A;c H %,,,434*%(4%2,,* – (4%2%,, @% c"eck books

Implication!= t cannot be ensure' t"at counterfoil information is correctly fille'

All !"eck Books are no/ stam#e'for J+ayee A;! only an' &e#uty1ana.er Accounts a.ree' to ensuret"e #ractice in future


p

Detailed .indin"!




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2$

Detailed .indin"! / hec+ boo+ phy!ical count

Annexures - A

*an+ hec+ #

DB A;! H 3*,4* 3(4%()43

Samba A;! H ,$%,,,,,%34 )$(*(*

Samba A;! H ,$%,,,,,%34 )$(*(3

B A;! H ,2-$%,322%) *$2()%32

1ee?an A;! H ,*,,$,*) 4%*2,2((

GS A;! H ,,,**3(4( *3%,$,,

B+ A;! H 2,3,,,3)$4,,,* 2,*2$

Askari A;! H ,*,*,,2,$* 42**2

DB+@slamic Bankin. A;! H

2,2%,2,,,,*(),*

%,$,22

S!B A;! H ,*,2*,$4,* 3),4,4*


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RCSML Accounts Report v1.pptx

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