INTERNAL AUDIT REPORT OFABC Limited PRIVATE LIMITED

4TH QUARTER A.Y. 2014-15

Company ‘s Building/ Logo’s Snap

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TABLE OF CONTENTS

Slide Page:

Executive Summary 3

 • Chapter- 1 Introduction 4• Chapter -2 Scope of Audit 5• Chapter-3 Observations 6

• Journal Vouching, 7• Ledger Scrutiny, 10• Statutory compliances : 17

• Service Tax• Works Contract Tax• TDS

• Inter-group reconciliation, 18• Bank Accounts 20

• Bank Term Loan accounts,• Current Bank accounts,

• Statutory Records. 21• General Records 22• Graphical Analysis. 26

• Chapter-4 Annexure 28

Executive Summary

While carrying on the audit we find that internal control of entity is not up to the mark as the observations raised in the previous internal audit report are still not resolved i.e. Most of the receivables and payables are still having the same balances; apart from that we found that management of receivables and payables requires more attention.

ABC Ltd., a dynamic commercial venture in collaboration with Citi Property Investors, is a business ecosystem that sets new bench marks in creating world class business environment for corporate around the globe.

A green building certified by the Leadership in energy and environmental design (LEED) Silver rating by the US Green Building Council

Spread over 44,100 sq. mtr of lan having alush green campus, the project has been designed in the form of 4 towers of approximate 3,07,260 sq.ft. LEED certified Silver Rated Green Building the park is equipped with a Club house (squash courts, yoga, gym) 250 seater auditorium, Banks & ATM’s, Multi Cuisine Food Court, Coffee Shops, Concierge, Travel & Medical Desk.

It offers more than just an invigorating climate. The three dimensional geometry of this site is such that as one approaches the site, the campus would gradually open up visually & volumetrically, positioning with a striking appreance.

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The function line for ABC Ltd. Pvt. Ltd. is to operate & develop its project named as ABC Ltd. located in ……... In this project Company is mainly engaged in the business of renting of office space.

Operation of Systems, procedures & Controls are the responsibility of entity’s management & our responsibility is to express an opinion on the weaknesses in internal controls, risk management and governance (entity level controls), framework, 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.

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The Internal Audit was conducted in accordance with generally accepted audit procedures as applicable;

It was planned and performed to obtain reasonable assurance whether the systems, processes and controls operate efficiently and effectively and financial information is free from material misstatement;

Assessing the strength, design & operating effectiveness of internal controls at process level and identifying areas of control weakness, business risks and vulnerability in the system and procedures adopted by the entity;

Assessing the accounting principles and estimates used in the preparation of the financial statements; and

Evaluating the overall entity-wide risk management and governance framework.

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Observations are divided in two parts i.e. Part A & Part B, former one contains the queries which were not resolved & the later one contains the queries which were resolved after submitting & discussing the Draft Internal audit report.

Observations

Part- A

Part- B

Former queries

4th Quarter queries

Journal Vouching

Particulars Date of Entry Voucher No. Amount (`)

Advertisement expenses 31-Mar-14 882 7,83,200/-

1. In the following cases, supporting of vouchers have not been produced for our verification –

Recommendations :For every expenses, proper supporting should be there to avoid the disallowability in the income tax assessment.

2. Legal & Professional Charges –

• Nature of Consultancy not mentioned in the bill.• Payment made to xyz Ltd., whereas debit balance outstanding has not

been adjusted.

` 25,09,000/- amount of consultancy charges paid to xyz Ltd.

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Part- A

3. During F.Y. 2011-12, a contractor for civil work, PQR Pvt. Ltd. has filed a petition claiming `46,39,441/- as final amount of retention money, as against a liability of ` 28,43,083/- booked by Company. On account of that the company had deposited ` 46,39,441 with High Court which was released during the previous year, Finally the case has been shifted from Court to Arbitration.

Based on discussion, the Management believes that there is a fair chance of decision in its favour and hence no further provision is considered in the books. Legal & professional charges were booked on 01-Sep-13 for ` 1,10,000/- & ` 50,000/- respectively for ……………for the above matter and on 22-Jan-14 for ` 1,33,370/- for Mr. SRGR Law Offices and also on 28-Mar-14 for `50000/- for ……….. for the above matter. The same should be considered for Contingent Liability.

4. An order has been issued from Customs, Central Excise & Service Tax, Noida for show cause notice dated 03-Oct-12 on account of service tax default:

ParticularsAmount (`)

Demand (with interest)1,75,02,594/-

Penalty1,76,64,976/-

Interest 1,24,984/-Based on discussion, the management believes that the show cause notice was not

maintainable and they will appeal to higher authority and hence no further provision is considered in the books. Legal & professional charges were booked for ` 1,50,000/- in the credit of Ram & Co. for preparation of reply of show cause notice. The same should also be consider for Contingent Liability

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5. Fixed Assets –

Building Phase II ` 52,90,558 –

The above addition relates to previous years. Hence depreciation should be charged from the date of completion of Building instead of payment of bills.

DG Set II

The DG Set was purchased in F.Y. 2012-13 and depreciation was provided in 2012-13 on DG Set. Additional installation amount ` 439719 paid on 15-6-2013. Therefore depreciation of previous year should be charged.

DG Set I ` 51,05,154 –

Ledger Scrutiny-

1. Interest on FDR –` 44,49,482.00/- for FDR (Margin Money –

BG)` 7,84,81,321.70/- for FDRs` 15,000.00/- for FDR (Sales Tax)

a. Provision of interest receivable as on 31st March14 has not been made.b. Interest received on FDR matured of ` 64,10,000Vijaya Bank has not been

adjusted from accrued interest.

2. Diesel Exp. –

Stock of Diesel as on 31st Mar 14 has not been credited in diesel expenses.

3. Provision for Income tax for F.Y. 2010-11 ` 81,18,825 and for F.Y. 2011-12 ` 66,46,339 to be reversed.

4. Insurances documents were not provided for verification -Insurance Building ` 1,193.00

5. Interest Accrued on statutory Dues ` 1,36,142/- has not been paid till now.

6. IFRSD-Indian Pollution Control Association, ` 5,000/- is received 04-Sep-08. Why amount is outstanding so long?

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7. The following expenses have not been booked in the accounts from the date mentioned against each –

Particular Date

Flower Exp. After Sep.2013

Yoga Exp. Oct.13 to Nov.13

Internet Access Charges Jan.14 to Mar.14

Facility Management Charges Oct.13 to Nov.13

8. Audit Fee payable –

Audit fee payable to E & Y for 2011-12 ` 70,966/- has not been paid. Hence excess provision should be reversed.

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10. The following are the parties outstanding due to retention money or some other reasons held at the time of execution of contract. The same are outstanding since the date mentioned against each, you are kindly requested to look into. Retention money outstanding more than three years should be written off, if not claimed :-

Particulars

Closing Balance as on 31-March-

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Outstanding Since

Creditors against Retention Money :

Ram 2,60,919.00 Cr

20-07-12Shyam 14,36,980.00 Cr

09-12-09Hari

Mohan 3,500.00 Cr

01-10-13Raju

14,250.00 Cr

01-01-14

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S.No. ParticularsClosing

Balance as on 31.03.2014

Receiviable from

1. Barclays Shared Services Pvt. Ltd. (BC) 68,783.00 Dr 01-05-112. Citizen Media (P) Ltd. 7,000.00 Dr 21-04-123. HCL Security Ltd. 51,086.79 Dr 16-02-134. Perfect Maintenance Service 7,732.00 Dr 14-05-125. Mohd.Ahsan Khan 10,000.00 Dr 17-09-106. Alamdar Fabricator Pvt Ltd 20,00,370.00 Dr 20-11-097. Ion Exchange Services Ltd 4,15,490.00 Dr 23-07-098. Shiv Refrigeration Works 9,596.00 Dr 08-05-099. Aadhunic Technology Pvt. Ltd. 2,71,306.00 Dr 01-06-09

10. Rapid Cool 3,66,562.00 Dr 09-12-0811. Yash Industrial Solutions 7,610.00 Dr 09-10-1012. Sterling & Wilson Electrical Mob. Advance 5,71,312.00 Dr

08-09-07

Accounts Receivable management should be improved.

11. Debit Balances stated below are receivable since long period which should be written off, out of which balances stated in serial no. 5 to 12 should be adjusted against the provision for doubtful debts which is standing in books from 31-March-2011 for ` 38,22,240/- and provision of 7,805/- created against the debit balance of Sevcon (India) Pvt. Ltd. should be reversed as this amount is adjusted during the period :-

13. Sundry Debtors (having Dr. Balances) as on 31-Mar-14. In the following cases, Rent is due for more than one month realization of rent be made by 10th of the every month as per the Agreement.

Particulars Amount `

Receivable from (in months)*

Affiliated Computer Services of India Pvt. Ltd. 2,64,876.000.25

Amalgamated Bean Coffee Trading Co. Ltd. 1,71,487.74 2.50A M Tader& Services(Subway) 76,532.00 1.00Barclays Shared Services Pvt. Ltd. 90,99,344.00 1.00BhartiAirtel Ltd. 3,94,687.78 6.25BhartiAirtel Ltd.(Mobality) 89,803.00 1.75EPCOS India Pvt. Ltd. 1,54,451.00 0.50F & S Hotels Pvt. Ltd. 8,81,851.00 5.75Idea Cellular Ltd. 13,080.00 1.00IFS Solutions India Pvt.Ltd. 4,03,590.00 0.50Intel Mobile Communications India Pvt. Ltd. 1,45,327.14 0.25ION Trading India Pvt. Ltd. 81,40,515.00 3.50Locon Solutions Pvt. Ltd. 2,78,298.00 0.50Pitney Bowes Software India Pvt. Ltd. 23,50,201.00 0.50Quark India Pvt. Ltd. 15,452.00 0.25Samsung Heavy Industries India Pvt.Ltd. 1,00,43,595.0

0 4.25Samsung India Electronics Pvt. Ltd. 97,71,671.00 0.25Shiv Shanker& Co. 1,85,736.00 4.50Spectranet ISP Network Pvt. Ltd. 14,640.00 5.25Ubico Networks Pvt. Ltd. 66,663.00 1.5Vodafone 27,713.00 3.75

Every time when bill are raised to the debtors, a reference is given but when any amount received against the same bill, sometimes it is given as against reference & sometimes it is recorded as On account receipt, when recorded as On account, the bill which was raised as giving a reference no. shows it as still receivable. So, it is recommended that every time receipts should be recorded as against to the reference for which bill was raised.* Receivable months are calculated on approximate basis 14

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Statutory Compliances

Service Tax

Service tax payable on realization basis stands in the books as ` 37,886.83/- from 31-Jan-13, Let us know entries against which it is still outstanding, the payment for the bills against it was booked is received or not & if not the action taken to receive the same.

Service tax return should be revised & the same should be given for verification. Cenvat credit on reverse charge of `22,109 booked without payment of service tax but as per Rule

4(7) of CCR 2004 input shall be allowed after payment of service tax. Service tax payable A/c Under reverse charge is ` 1,17,918/- as on 31st March 14. But amount

were paid ` 95,809/- till date. Balance amount still not paid 15/07/14. Interest due `1,156/- upto 15th July 2014.

Works Contract Tax

WCT Under Protest for A.Y. 2007-08 paid on 28-Sep-12 for ` 1,24,992/- was shown in advance recoverable in cash or kind, no appeals & letters were provided kindly let us know the status.

WCT payable amount is ` 2,21,778/- as on 31st Mar.14 but amount were paid ` 1,61,460/- till date. Balance amount still not paid 23/06/14. Interest due ` 2,627.29 /- upto 15th July 2014

TDS

26Q Return should be revised & revised return is required for verification. No TDS has been deducted on Lease rent `38,75,781.00 paid to Noida Authority.

Inter-group Reconciliation

1 . Status of Inter-company balances as on 31st Mar. 2014 was as follows :

Company name

Balance as per ABC Ltd. Pvt.

Ltd.

Balance as per Related Company

Differences if any Remarks

4,05,76,056

.00 Dr 5,04,30,124.00 Cr

-

Tallied A/C

should be One    1,48,54,068.00 Dr

    50,00,000.00 Cr

2,799,031.0

0 Dr 2,799,031.00 Cr - Tallied

1,521,203.0

0 Dr 1,521,202.00 Cr

1.00 Cr Not Tallied

9,90,150.00 Cr 9,90,150.00 Dr -   Tallied 16

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2. The following Inter-company balance outstanding since long, you are requested kindly look into:

Company name Balance as per ABC

Ltd. Pvt. Ltd. Balance as per

Related Company Differences if

any Remarks

. 11,550,000.00 Dr 11,550,000.00 Cr -   Tallied

2. We have verified the Bank Balances of the following Current Accounts, Status is as under :

S.No.

Particulars

Balance as per Books as on 31st Mar.

2014

Balance as per Bank Statement as on 31st Mar. 2014

1

Bank of Baroda A/C No.26290200000744 (18,68,030.00)

(18,68,030.00)

2

Syndicate Bank 90951010001776 8,12,206.56 8,12,206.56

3

Vijaya Bank 712600301000203 13,77,931,.00 13,77,931,.00

4 Kotak Mahindra Bank 01812000001623 (Non Op) 49,889.70 Statement not provided

Remarks: Kotak Mahindra Bank balance is outstanding since long period. No account statement has been provided.

Bank Accounts

1. We have verified the Bank Statement of Term Loan from Vijaya bank, which was reconciled. Details are as under :

S.No. ParticularsBalance as per

Books as on 31st Mar. 2014

Balance as per Bank Statements

as on 31st Mar. 2014

Status

1Vijaya Bank Loan-712608381000027

85,95,99,951.04 85,95,99,951.04

Tallied

2Vijaya Bank Loan-712608391000019

22,25,76,418.00 22,25,76,418.00

Tallied

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Statutory Records

Minutes of the Board Meeting for quarter January 2014 to March 2014 were not provided to us for verification.

Register u/s 301 of Companies Act, 1956 were not provided to us for verification. Board resolution is not provided for the increase in Director’s remuneration of Mr. Ram from ` 10 lac

to ` 15 lac during the period 01-Jan-14 to 31-Mar-14. Appointment of C.S. under section 383A of Companies Act is required.

General Records Books of Accounts should be prepared as per Revised Schedule VI of Companies Act, 1956. We have conducted Internal Audit upto Journal Voucher no. 897.

Rectification1. Rectification of name in bills of JV.

Entry Date Voucher No. Amount `

28-Mar-14 780 11,12,880/-

28-Mar-14 785 39,050/-

29-Mar-14 791 11,24,712/-

01-Jan-14 575 44,000/-

31-Jan-14 657 5,300/-

25-Jan-14 637 15,150/-

22-Jan-14 630 23,850/-

13-Jan-14 616 13,505/-

10-Jan-14 610 22,000/-

06-Jan-14 598 9,000/-

31-Mar-14 837 3,381/-

Before making Payments, the accountant should check whether those bills are in the name of the Company or not.

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Part- B

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2. Rectification in debit note for electricity receipts have been wrongly entered in books while amount of debit note raised differs –

Date Party name Debit note raised Actually `

Debit note raised in tally `

31-Jan-14 5,02,587/- 5,01,718/-

31-Mar-14 20,877/- 17,176/-

Care should be taken while entering the debit notes in the books.

4. Rectification in Date is not mentioned in Cash Voucher -

S. No. Date Particular Amount `

1 31-Mar-14 Repair & Maintenance 1,500/-

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-

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000 9

6,63

4,31

1

34,

560,

816

28,

924,

904

630

,750

293

,500

4,4

59,4

26

923

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540

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371

,019

398

,155

102

,177

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35,

027,

421

30,

503,

906

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50

326

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4,0

14,2

11

916

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225

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611

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83,

154,

834

33,

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169

26,

772,

577

1,9

55,7

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404

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18

903

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540

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249

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193

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85,

839,

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32,

227,

217

26,

046,

021

1,8

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50

1,2

63,2

28

1,1

78,9

63

983

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540

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288

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233

,869

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

Graphical analysis of income of each quarter for the year

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5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

45,000,000

35

,65

7,2

21

30

,62

2,6

81

2,0

00

,00

0

2,3

78

,51

7

80

5,8

60

1,5

73

,05

3

17

,34

0

0 76

2,4

48

30

1,2

12

65

9,4

21

3,9

20

,82

1

15

0,6

04

2,9

88

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3

0

41

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3,8

68

39

,33

2,6

61

3,0

00

,00

0

4,0

20

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1

1,8

37

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0

3,4

40

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9

1,3

92

,60

5

3,3

05

,46

0

37

6,7

18

48

6,6

54

1,0

83

,97

3

1,7

31

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5

24

3,1

10

0 51

0,0

00

39

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8,0

38

30

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1,5

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3,0

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,00

0

1,3

59

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9

1,6

10

,05

0

4,1

89

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2

86

5,1

06

3,5

38

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8

38

4,1

27

80

4,7

50

55

6,5

57

1,7

61

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4

40

2,3

34

2,2

85

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9

3,9

60

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4

44

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2,4

49

40

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5,4

99

5,5

00

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0

4,0

91

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7

3,5

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5

3,4

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1

2,5

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4

1,8

15

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5

1,3

05

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1,0

89

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3

93

6,9

36

73

0,4

52

54

3,8

25

1,1

93

0

1st Quarer

2nd Quarter

3rd Quarter

4th Quarter

Graphical analysis of expenses of each quarter for the year

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