Efficiency and Effectiveness of Key Processes and Controls

1. The Terms of Reference of the Internal Audit ofClient Name for the year 2011-12 required the following areas to be covered at ( Unit ) in February 2012
2. Inventories

1. The objective of the audit was to assess the Entity’s status in relation to the following

• Efficiency and Effectiveness of key processes and controls
• Accuracy of transactions
• Adequacy, comprehensiveness, relevance and compliance with established policies and practices.

1. Our broad coverage of inventories included the following

• Controls over receipts
• Controls over issues
• Storage and Stacking norms
• Physical verification protocols
• Inventory valuation

1. We adopted a transaction testing ( or Risk Based ) approach for this audit. Our methodology also covered a combination of procedures such as discussions, walk through reviews, inquiries, tests of compliance and substantive checking of various transactions to validate existence of satisfactory controls, commensurate with the size and nature of operations of the unit.

1. We understand that operation of systems, procedures and controls are the responsibility of the entity’s management. Our responsibility is to identify certain weaknesses in internal controls, risk management and governance framework and highlighting any exceptions and cases of non-compliance and suggest or recommend improvements in the design and operations of controls based on the internal audit in respect of areas detailed in this report.

1. Our audit work complies with the generally accepted audit procedures in India, as applicable for internal audits. Our audit procedures were limited to the subject areas stated in Scope of Work detailed in this report. We have not conducted an audit to express opinion on the financial statements or specified elements, accounts or items thereof. Accordingly, we have not expressed any such opinion in the reports issued to the management during the period.

1. Our audit presented findings on significant control weaknesses in design as well as operating effectiveness in the control environment noted by us during the course of engagement, impact of such weakness, recommendations for addressing the control weaknesses, mitigating risks and for strengthening the control environment in respect of areas covered during the period, detailed under Scope of Work.

1. The audit field work in relation to the above areas was conducted during ______, 2012 to ______, 2012 and the draft report containing our preliminary findings was issued to the management on ______, 2012. The results of our work have been discussed with the relevant personnel and their comments in relation to the same have been included in this final report issued on ______. We would like to thank the personnel of the unit for their support during the audit. Our audit procedures were limited to the subject areas stated in audit coverage.

1. We have not conducted audit to express opinion on the financial statements or specified elements, accounts or items thereof. Accordingly, we have not expressed any such opinion.

1. The audit report is attached with pages _ to _ serially numbered for identification

Signed

Member / Partner Name

Mem No

Firm Name

Firm Reg Number

Observation

Observation / audit finding is written here

Impact

The impact of the point

Recommendation

The recommendations that would address the issue

Management Comment

All management comments should start with Agreed, and give the comments on why it happened and that they will take care and the following box is also added

End of the report

At the end of the report, the same has to be signed by the Partner, CEO / CFO of the business and the audit department Head. A format is attached as under:

Firm name, chartered accountants, LocationPage 1