it may helpfull for preparing the audit report

1. The Managing Director
ARCOTECH LTD
PLOT NO. 181, SECTOR -3
HSIDC GROWTH CENTRE, BAWAL
DISTT. REWARI (HARYANA)
Date:
Dear Sir,
We wish to inform you that we have completed the Concurrent Audit for the
three months ended 30th June 2010 and are submitting the Audit Report for
your kind perusal and attention. We hope that our report provides valuable
inputs for decision making process and also on the working of Accounts
Department & Stores.
We have checked the books of account maintained in Tally.
We would also like to take this opportunity to thank the members of the
Accounts Department for their co-operation and assistance. In case any
further clarification or information is required on any of the points in our
report kindly call us.
Thanking you,
Yours faithfully,
For DHAR TIKU
& CO.
Chartered Accountant
(M.S. MEHER)
PARTNER

2. Internal Audit Report for the Period 01.04.2010 - 30.06.2010
1 VOUCHING
1.1 Observation: Payments in excess of Rs. 20,000/- in cash
It was observed that no expenditures were incurred in respect
of which payment in excess of Rs. 20,000 was made otherwise
than an account payee cheque or account payee draft.
1.2 Observation: Unaccounted Entries in the Bank:
We have checked the reconciliation of the Bank accounts for
the quarter ended on 30th June 2010. It was observed that there
were no unrecorded entries.
2 SALES AND OTHER INCOME
2.1 Scope:
We have checked the sales order, sales invoice, supporting
with transport bills & cross checked the entries in sales ledger
on a cent percent basis.
2.2 Observations:
a) Sales reported to different authorities:
We reconciled the sales as reported in the Sales Tax Return,
books of account and quarterly profit & loss account
published. We noticed difference in the sales reported to
different authorities, which are detailed below:
2

3. (Rs. In lacks)
Month Sales as per Sales as per Sales as per
books of vat return quarterly
account financial
statement
Up to 30th
June 2010 3134.76 3133.78 3135.08
Risk:
The Sales reported to the various Government account. In
the present case, the sales reported to Sales Tax and
published profit & loss account are different than the sales
as per books. Hence the Correct Sales figure cannot be
ascertained. Also if the Company has reported incorrect
sales to government authorities, it is liable to penalties and
prosecution.
Suggestion:
The sales reported at the different places should be reconciled
immediately and revised returns should be submitted
wherever necessary.
b) In checking of sales invoice we observe that in most of the
cases transporter’s bills ware not attached with the invoice.
Some invoices with which transport bill was not attached
are as:
3

4. Date Invoice no.
12/05/2010 371 to 379
17/05/2010 402 to 407
18/05/2010 401 to 412
20/05/2010 423 to 424
20/06/2010 516 to 519
23/06/2010 523 to 536
24/06/2010 539 to 544
Suggestion:
Transportation bills should be attached with the invoice.
c) We observe that in some of the cases sale value (amount)
under invoice is different as in transport bill. Following are
the cases in which sales value is different.
Date Invoice no. Sales value Sales value
as per sales as per
invoice transport
bills
4

5. 30/06/2010 597 & 598 101610/- 665867/-
d) During our audit we observe that company’s policy in
respect of consignment sale is goods are invoices to the
consignee at invoice price and booked sale as per account
sale prepared by consignee. But up to finalization of our
report concern department has not received any account
sale from the consignees and booked consignment sale as
normal sales (i.e. stock with consignee were not taken in
account).
Risk: Profit given by profit and loss account is overstated.
Suggestion: The necessary account sale should receive on
timely basis and necessary correction made in books of
account at earliest.
Observation: Sales Return accounted for but supporting
vouchers are not available:
In course of checking of sales return voucher it is observe
that sales return has been accounted for without supporting
vouchers (i.e. debit note issued by customer) relating to that
sales return.
Date Voucher no. Amount
10-06-2010 CR/001/2010-11 329675.92
10-06-2010 CR/002/2010-11 320077.47
23-06-2010 CR/003/2010-11 130655.18
23-06-2010 CR/004/2010-11 174546.35
5

6. Suggestion:
The necessary debit notes need to be attached with respective
invoices at the earliest.
3 PURCHASE VOUCHING
a) Raw materials:
Scope: We have checked the Purchase bills on a cent percent
basis and found that all the entries for purchases were
supported by bills of the parties from whom the material
were purchased.
We have also checked the bills with the purchase orders for
purchases above Rs. 50000. Our observations are given
below.
Observations:
a) Difference in quantity ordered and quantity received:
6

7. In a few of cases it was observed that there were differences in
quantity ordered and quantity received. No written instruction
is produced to us to this effect.
Risk:
The Company prepares the Purchase Order based on its
production requirements as identified by the Design and
Development Dept. and the Stores Department. When the
Company accepts higher quantity of material than specified in
P.O. it is unnecessarily blocking funds and storage space .It
also becomes difficult to check the bill with the purchase
order.
Suggestion:
A revised purchase order should be issued in such cases.
b) Difference in quantity as per purchase bill and quantity
transported to company as per transport bills:
In the course of checking of purchase of raw material it was
observe that in the few of the cases quantity of raw material
purchase as per purchase invoice is different than the quantity of
material transported to the company under same invoice. And
also material receipt note issued as quantity received was for
quantity as in purchase invoice these both are contradictory.
Following are the cases in which quantity difference are
reported:
7

8. S. Invoice Date Suppliers Quantity Quantity
No. No. as per as per
Invoice Transport
bill
49 45 27/04/2010 Neel 1318.53 1358.3
Kamal
Enterprises
64 02 04/05/2010 Metal 593 543
traders
Suggestion:
Quantity of material should be checked and cross verifies the
same with the transportation bill while receiving the material.
c) Purchase order not issued:
In the course of checking of purchase of raw material it was
observe that in the following cases purchase order had not been
issued for ordering supplies.
Date Invoice No. Suppliers Amount
18/04/2010 380 Srinisons 1660499/-
wiring system
Pvt. Ltd.
Suggestion:
Purchase order should be issued in all order of supplies.
d) Transportation bills were not attached with invoice:
In the course of checking of purchase of raw material it was
observe that in the few of the cases transportation bills were not
attached with the purchase invoice.
8

9. S. No. Invoice Date Suppliers Amount
No.
01 01 01/04/2010 S.R. 2777404.45
International
02 02 01/04/2010 S.R. 2975173.95
International
10 01 4/04/2010 Shiva meta 4367613.00
12 03 6/04/2010 Nihon sales 2203585.00
13 04 7/04/2010 Nihon sales 2163458.00
26 972 9/04/2010 Neel kamal 621628.00
Enterprises
32 08 10/04/2010 Goodwill 204104.00
Metal &
alloys
39 15 20/04/2010 M S Metal 245220.00
40 21 21/04/2010 Neel kamal 999238.00
Enterprises
43 203 23/04/2010 Modvak 1056924.00
Engineering
44-47 63-66 24/4/2010 S.K. -----------
Enterprises
55 552 24/04/2010 S.R. 1758222.90
International
Suggestion:
Transport bills should be attached with the purchase invoice to
ensure that the right quantity & value of material received.
9

10. e) Supplementary bills issued by suppliers not recorded in
books of accounts:
In the course of checking of purchase of raw material it was
observe that in the few of the cases supplementary bills issued by
suppliers not recorded in books of accounts. Following are the
cases in which entries are not made:
Date Bill No. Amount (Rs.)
04/05/2010 11 79394
04/05/2010 12 62400
04/05/2010 13 84756
12/05/2010 22 20803
Risk:
Supplementary bills were issued in case of mistake or something
was omitting in original bills. So it should be recorded in books of
account on timely basis.
Suggestion:
It is advised to record unrecorded entries at the earliest.
b) Consumable:
Scope:
We have checked the consumables bills on a cent percent
basis and found that all the entries for purchases were
10

11. supported by bills of the parties from whom the material
were purchased.
We have also checked the bills with the purchase orders for
purchases above Rs. 50000. Our observations are given
below.
Observation:
a) Quotation not invited properly:
In the course of checking quotation invited or not for
consumable we found that there were only in few of the cases
for recurring item contract with suppliers exist. Quotation is
not invited for regular item instead purchase order is place on
the basis of old contracted price. No contracts were made
every year.
For non recurring item quotations were received via email.
Then comparable statement was prepared as low cost to
company. But in most of the cases comparable statements
were not approved by authorized authority in such case also
order is placed.
Suggestion:
Company should invite quotation for regular item of
consumable at beginning of the each year for purchase to be
made during the year. Also for non recurring item it is
advised to made comparable statement approved by
respective authority for each order to be placed.
b) Material receipt note were not attached:
11

12. In the course of checking consumable we found that in some
of the cases material receipt note were not attached with the
purchase invoice.
S. No. Bill No. Date Creditors Amount(Rs.)
41 3088 5/04/2010 Mohit 53200/-
Traders
47 872 08/04/2010 Amit 17156/-
traders
48 873 08/04/2010 Amit 21693/-
traders
49 876 08/04/2010 Amit 21313/-
traders
180 588 01/05/2010 Aggrwal 330/-
gas
183 756 1/05/2010 MRR 22366/-
Enterprises
197 302 3/05/2010 Shakti Sales 11000/-
Corporation
Suggestion:
It is advised to attach copy of material receipt note with the
purchase invoice.
c) Purchase order were not available:
In the course of checking consumable we found that in some
of the cases purchase order were not available for checking
12

13. whether order had been place or not. But reference of
purchase order was given in invoice. In the following case
purchase order was not available.
P.O. No. Date Suppliers Amount
25 01/04/2010 Ajanta 24272/-
Controls
26 01/04/2010 Amit traders 11040/-
44 05/04/2010 Amit traders 17156/-
99 30/04/2010 Pankaj 68002/-
electrical
94 01/05/2010 MRR 22366/-
Enterprises
Suggestion:
It is advised to keep the copy of purchase order in place.
4 INCOME TAX
4.1 Observation:
We have checked the TDS liability on all payments. The
Company had made payment towards salary, commission &
brokerage, professional charges & to contractor on which
TDS has to be deducted. We observe that TDS is deducted
but the same was not deposited in the account of government.
Our observations are as:
13

14. TDS on Salary:
Month Amount Due on Paid on Delay in
Rs. number of
days
April-10 65443/- 07-05-2010 Still unpaid N.A.
as on
31-07-2010
May-10 65443/- 07-06-2010 Still unpaid N.A.
as on
31-07-2009
June-10 0 0 N.A. N.A.
TDS on Contractor:
Amount Due on Paid on Delay in
Month Rs. number of
days
April-10 9031/- 07-05-2010 Still N.A.
unpaid
as on
31-07-20
10
May-10 20215/- 07-06-2010 Still N.A.
unpaid
as on
31-07-20
09
June-10 39540/- 07-07-2010 Still N.A.
unpaid
as on
14

15. 31-07-20
10
TDS on Legal & Professional Fees:
Month Amount Due on Paid on Delay in
Rs. number of
days
April-10 6412/- 07-05-2010 Rs. 4700/-
paid
during the
m/o N.A.
April-10
itself,
Remainin
g unpaid
up to
31/07/10
May-10 32942/- 07-06-2010 Rs. 4412/- N.A.
paid as on
18/05/10
Remainin
g unpaid
as on
31-07-10
June-10 1614 07-07-2010 Still N.A.
unpaid as
on
31-07-10
Risk:
15

16. Interest has to be paid for late Payment which is not allowed
as deduction under the Income Tax Act, 1961.
Suggestion:
Company should not default in payment of TDS dues to the
authorities.
4.2 Observation: Not furnishing the quarterly return of TDS
As per provision of Income Tax-1956, after deducting &
depositing the same to the credit of central Government
quarterly return is also required to be furnished within 15
days from the end of the quarter.
It was observed that quarterly return of TDS was not
furnished at all relating to TDS of relevant quarter till the
date of finalization of our Audit Report.
Risk:
Interest has to be paid for late filing of Return which is not
allowed as a deduction under the Income Tax Act, 1961.
Suggestion:
The Company should not default in furnishing the return of
TDS on due date.
16