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| Internal Audit |
About Client
- A Multinational company in the Health Care Industry. The company distributes its products through channel partners who claim margins for sales made by them.
- In India, the Client operates through Distributors which contribute to more than 60% of total sales. Since this is a sizeable chunk involving compliance exposures as well, the need for Distributor management was felt
- Client was receiving several complaints and instances of whistle blowing on account of malpractices in the market. This created exposure to compliance risks and thereby additional costs to the company. Company needed to achieve better control over compliance
- To improve controls over processing of claims from customers thereby reducing exposure to Revenue leakages.
- Improving the competitive edge of the company.
- To manage the compliance exposures at Distributor levels which are spread across the country with multi divisions
- To have more visibility on the stocks at Distributor end thereby improve controls over Inventory
- Investigating specific whistle blowing cases
- Investigating potential cases of Revenue leakages identified during the claims process review.
Our Scope
- Review of existing system of claims processing including levels of approvals and identifying areas of improvement
- Review of the cycle time involved in processing of claims
- Defining polices and procedures including streamlining levels of approvals for claim processing.
- Periodic review of claims processed with adherence to policies and procedures.
- Review of existing system and identifying areas of improvement for Distributor network (500+ distributors throughout the country).
- Conducting regular Distributor audits and assessing the levels of stocks maintained.
- Periodic assessment of level of compliance with policies and procedures laid down by company
- Periodic assessment of compliance level with applicable regulations (Health Care Compliance & FCPA)
- Review of existing system of areas under investigation including potential Red flags.
- Conducting Field visits including meeting various parties and detailed investigations of the allegations made.
- Suggesting controls over the gaps identified to reduce the probabilities of future occurrences.
Benefits for Client
- Improved controls over claim processing and assurance on revenue leakage
- Improvement in cycle time thereby enhancing the market standing of the client
- Reduction in Cash discount offered to customers from 2% to 1%
- Streamlining operations and reducing cost of operations.
- Improved visibility over inventory movements at Distributors end resulting in improved Inventory planning and reducing carrying cost.
- Improved levels of compliance with regulations thereby reducing compliance costs
- Reduction of Distributors by 20% in numbers thereby reducing the cost of servicing Distributors.
- Inventory levels at Distributor end reduced from 3 to 2 months. This facilitated in better negotiation for Distributor margins.
- Available database over distributors facilitating strategic expansion.
- Greater assurance over Revenue leakages areas resulting in savings in bottom line through stronger controls.
- Number of such fake claims reduced subsequently thereby reducing the cost of processing such claims.
- Reduction in exposure to various regulatory compliances and thereby reduced cost of compliance
- The process was streamlined and the process design was changed. This resulted in reduction in the cycle time for processing claims and thereby improving the image of the company in the market.
- Reduction in instances of complaints over period of time.
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About Client
- The client is the largest Auto Ancillary group with a turnover of over US$ 2.2 billion.
- The company also has the distinction of being India's leading two wheeler tyre manufacturer , rolling out over 9 million tyres annually and enjoying highest share with Vehicle manufacturer backed by a strong network of over 2050 Dealers and 20 Depots across the country.
- An entity Level Risk Assessment was conducted by the client. The board wanted to have a detailed review of the areas identified as most riskier. Following were the needs with reference to these specific areas.
- Efficiency in raw material consumption and issues in accounting for consumption and wastage at various stages.
- Manual planning for material procurement leading to issues like procurement of unwanted material and shortage of required material.
- Inadequate accounting for machinery and labour hours leading to difficulties in monitoring.
- Difficulties in project monitoring and project assessment.
Our Scope
- Conduct a Process Based Internal Audit of the process in the organization coupled with risk assessment.
Benefits for Client
- Scientific measurement of risk and exposure thereby fulfilling governance reporting requirement of the board.
- Assurance towards adoption of company policy and procedure.
- Statutory non compliance identified.
- Purchase planning was done manually and various internal control issues on authorization, data verification, communication were noticed. It was recommended to classify the items based on the procurement lead time, Cost, seasonal consideration etc and recommended for appropriate planning like statistical inventory control, forecast planning etc. unutilized provisions in ERP was explored and appropriate usage recommended.
- Key cause for difference in the Input vs out put and difference in the data captured a various points were identified in production which was a perennial problem. Correction of this was recommended through ERP.
- Subsequent to the audit, the need for complete usage of ERP was felt and the implementation was made in all modules including, Production, Inventory, Maintenance etc. As a result MIS reports were also correct which was inaccurate earlier.
- Deficiencies in the Layout leading to increased lead time and decreased control over material movement was highlighted. This being perused for changes currently
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About Client
- Client is a company with diversified business, multi SBU company with its shares listed in leading stock exchanges in India. There was a need to review the Internal Controls and scientifically comment on the risk profile of the organization. As a fast growing company, the Board felt the need for streamlining its operations and for an effective internal control system in various SBUs and adopt the best practices.
- With different product line in its portfolio, there was a need to customize the audit approach based on the requirements of each such product line.
- The management also wanted us to comment on the performance of the SBU in comparison to its peers within the company and in the general industry.
- To perform a comprehensive review of their in-house developed software application in VB/VB.Net on MS SQL Server before implementing across all the locations
Our Scope - Process Auditing
- Conduct a Process Based Internal Audit of the process in the organization coupled with risk assessment.
- Conduct review of compliance with statutory norms & internal policy and verify the accuracy of transaction
reflected in accounting records on a monthly basis for selected key areas.
- Regular review of the implementation of various actions initiated out of the audit.
- Identify and review the key performance indicators.
Our Scope - IT Auditing
- Assessed the capability of the software in meeting the business requirements of Client
- Reviewed the effectiveness of the application controls built into the application modules
- The scope includes the coverage of the business process carried out at the 5 geographic locations of the company and across all the business units
Benefits for Client - Process Auditing
- Scientific measurement of risk and exposure thereby fulfilling governance reporting requirement of the board. The risk exposure levels reduced year on year.
- Assurance towards adoption of company policy and procedure.
- Statutory non compliance identified.
- With a humble start the organization is above their peers in various operational parameters. Value addition in terms of cost reduction to the tune of Rs. 1 Crore and Rs. 2.5 Crores in the past two years.
- Regular monitoring has helped the organization in taking corrective action for deviation identified at a very early stage. Few example of the internal control issues identified and corrected as below.
- Seed cane supplied to the Ryots more than the required Qty and huge difference between estimated cane yield Vs Actual cane supply leading possibility of cane seed/ cane unauthorized cane diversion.
- Analysed and recommended planning & deployment of Casual Workers thereby decreasing their engagement. Unauthorised payment of wages was also identified and curtailed.
- Physical Verification of Assets was carried out to determine the physical existence, control over their movement and condition of the asset for valuation purpose. Unutilized asset to the extent of Rs. 1.08 crores was identified and appropriate action taken.
Benefits for Client - IT Auditing
- Clear understanding of the gaps that were not addressed in the application with prioritization based on the criticality of the requirements to facilitate development / fine-tuning and implementation
- Application controls that were not adequately addressed in the application with the ranking of their risk levels to prioritize the same.
- Necessary IT infrastructure requirements were recommended to implement the application across all the location with centralized server setup.
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