Haseeb Waqas Group of Companies Internal Audit

8/3/2019 Haseeb Waqas Group of Companies Internal Audit

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HWSMHaseeb Waqas Sugar Mills LTD

Presented by:

Shazil Ahmad

M.Naqeeb Arshad

Komal Ashraf

Ali Kamal Pasha

M.Saad Siddiq

Usman AshrafFahad Zakria


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Acknowledgment

We would like to express the deepest appreciation for myteacher and mentor, Mr. Abdul Rafay, who has shown theattitude and the substance of a genius: he continually and

convincingly conveyed a spirit of adventure with regard toresearch, and an excitement with reference to teaching. He hasbeen the motivation behind our extensive research and withouthis guidance and persistent help this project would not havebeen possible. We are also very thankful to Mr Amir Hanif (Sr.

Manager internal Audit Group) in Haseeb Waqas Sugar Mills. Hegave us his important time to guide us all about the internalaudit activities of Haseeb Waqas Sugar Mills.


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Internal Audit

Internal auditing is an independent, objective

assurance and consulting activity designed to add

value and improve an organization's operations.

It helps an organization accomplish its objectives by

bringing a systematic, disciplined approach to

evaluate and improve the effectiveness of risk

management, control, and governance processes


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INTRODUCTION


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Introduction

HWSML is one of the largest white refined sugarmanufacturer in Pakistan with a Sugar Cane CrushingCapacity Of 10,000 M.

HaseebWaqas SugarMill developed and used stateof the art technology for cane preparation with asplit cane carrier system for the first time in thecountry. This brought a revolution into the sugarindustry in Pakistan.

The Company is listed in Karachi and Lahore StockExchange.

The price of per stock is 20.95


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HWSC

Internal Audit


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Audit Department


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Qualification

Appointment - AuditCommittee Chairman & CEO

Chartered Accountant

Starters assistant manager

Audit Head : 4year Articles, Post Experience of 5years


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Audit Committee

M.Irfan Hussain Butt (Chairman)

Mr .Sohail Ahmed Butt (Member)

M

r RazaM

ustafa (M

ember)


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Continued..

The statutory auditors or the persons

associated with them have not been

appointed to provide other services except in

accordance with the listing regulations and

the auditors have confirmed that they have

observed IFAC guidelines in this regard.


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Interviewee

Our interview was conducted onMonday the 22nd of

November 2010.

Our interviewee wasMr. Amir Hanif, whose

designation is the senior manager internal audit of

the Haseeb Waqas Sugar Mills Ltd.

He is a CA finalist and maintains a 13 year post articleexperience and has devoted the last 4 years of work

at Haseeb Waqas Sugar Mills Ltd.


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Statement of Compliance with the

code of Corporate Governance:

The Board has formed an Audit Committee. It

comprises three members, all non-executives

directors including the Chairman of the

Committee.

The meetings of the Audit Committee were held

at least once every quarter prior to approval of

interim and final results of the Company and asrequired by the Code. The terms of reference of

the committee for compliance.


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Continued..

The board set up an effective internal audit function managedby suitably qualified and experienced personnel who areconversant with the policies and procedures of the Companyand are involved in the internal audit function on a full timebasis.

The statutory auditors of the Company have confirmedthat they have been given a satisfactory rating under theQuality Control Review program of the Institute ofChartered Accountants of Pakistan (ICAP), that they orany of the partners of the firm, their spouses and minorchildren do not hold shares of the Company and that thefirm and all its partners are in compliance with theInternational Federation of Accountants (IFAC) guidelineson code of ethics as adopted by ICAP.


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Vision Statement

HWSM internal audit department is to provide

management with information, facilitation

and advice to ensure that there is an

appropriate balance of control, risk and

governance throughout the organization.


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Guiding Principles of Internal Audit

CONFIDENTIALITY

Shall be prudent in the use and

protection of information

acquired in the course of their

duties.

Shall not use information for any

personal gain

INTEGRITY

Work with honesty, diligence

and should observe law and

regulations. Should not be part

of illegal activity.


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Role of Internal Audit

To attain managements goals and objectives by

bringing disciplined and systematic approach to

enhance the following:

Risk management

Control processes

Governance


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Use of Internal Audit toManagement

An effective Internal Audit Department can help

management to ensure that:

S

tandards goals and objectives are achieved. The companys policies, procedures and

instructions are being followed.

Records are reliable, so that managementdecisions are based on accurate information.

Legal requirements are satisfied.


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Key Areas of focus

Receivables

Payables

Reconciliations


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Internal Audit Review

Not done by external auditor

But they have the coordination

They check internal audit reports

If theres any shortfall

That area is checked by external auditors


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Who does internal auditor report to?

Internal Auditor must be independent of the

activities which it audits. Its direct

responsibility is to the Chief Executive/

Managing Director.


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Internal Audit Plan

Internal Audit Plan is prepared using a risk basedmethodology.

It identifies any significant changes in the

companys operations and the environment itoperates in.

Prepares a detailed risk analysis and determinedthe priority of coverage to be devoted to each

audit area.

These risk assessments are also discussed withrelevant levels of management.


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Types of Internal Audit performed by

Internal Auditor

COMPLIANCE REVIEW of existing systems ofinternal controls to ensure that they areoperating as planned.

OPERATION REVIEW which helps management toimprove productivity, efficiency andeffectiveness.

PRE AND POST IMPLEMENTATION REVIEW of

newly established systems to ensure adequacyand effectiveness of controls before and afterimplementation of the system.


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Characteristics of an Internal Auditor

Independency of an Internal AuditorIndependency is essential to ensure objectivity. Internal Auditor is

impartial when performing reviews because it has no vested interest in any

activity that it audits.

Internal Audit is usually an Chartered Accountant but internal audit can

also be done by a person who possess valuable knowledge and insight

about the functions of audit.

Internal auditor does not review the performance of an individual

operating in the organization but it reviews the operation of an entity.


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OVERVIEWOF AUDIT ACTIVITES

Planning and scheduling audit

Conducting document review

Conducting audit

Prepare audit report

Conducting follow-up

Preparing for on-site activities


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Forming an audit team and assign roles andresponsibility and agreed on the scope

Conducting document review

Preparing for the on-site audit activities

Review documents (SOPs, audit findings,corrective action/preventive action, etc.),check the integrity of the quality systemand various controls are effective

Preparing audit plan Assigning work to the audit team

Preparing work documents

(eg. audit checklists, sampling plans, forms forrecording information; questionnaires)

AUDIT ACTIVITIES


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AUDIT DOCUMENTATION

Audit report is an

official document to report the audit findings

Audit plan

should be sent to auditee prior to auditactivity

findings from the last audit should be alsomentioned

Audit note should include

an audit questionnaire all records and comments during the audit


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EXAMPLE OF AN AUDIT CHECKLIST

General format for an audit checklist


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Internal Control the 5 key components

5.

4.

3.

2.

1.


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Control Activities

Policies/procedures that ensure

management directives are carried

out.

Range of activities including

approvals, authorizations,

verifications, recommendations,

performance reviews, asset security

and segregation of duties.

Risk Assessment

Risk assessment is the identification

and analysis of relevant risks to

achieving the entitys objectives

forming the basis for determining

control activities.

Control Environment

Sets tone of organization

influencing control consciousness ofits people.

Factors include integrity, ethical

values, competence, authority,

responsibility.

Foundation for all other components

of control.


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Monitoring

Assessment of a control systems

performance over time.

Combination of ongoing and

separate evaluation.

Management and supervisory

activities. Internal audit activities.

Control Activities



out.






Risk Assessment





control activities.

Control Environment





responsibility.


of control.


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Monitoring

Assessment of a control systems

performance over time.

Combination of ongoing and

separate evaluation.

Management and supervisory

activities. Internal audit activities.

Information and Communication

Pertinent information identified,

captured and communicated in a

timely manner.

Access to internal and externally

generated information.

Flow of information that allows for

successful control actions from

instructions on responsibilities to

summary of findings for management

action.

Control Activities



out.






Risk Assessment





control activities.

Control Environment





responsibility.


of control.

All five components must be in

place for a control to be effective.


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Relationship withManagement

Challenge is balancing advising and counselling management with

fiduciary duty to monitor and oversee management

To build trust, need strong, open two way communication channels

Clear understanding on where managements responsibilities endand committees begin

Management should seek committees input in advance of key

decisions

Evaluate managements performance and assess bench strength


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Relationship with external auditors

Auditors should report directly to the committee

Audit Committees have a role in

Selecting, or reappointing, external auditors Evaluating auditors performance

Ensuring auditors independence


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Minutes:

As internal audit committee is the non-

executive member of the minutes.

They attend all the minutes so that they canknow the real position of the company.

The minutes are held very month.


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Where do Ideas come from?

There are many sources, both within and

outside the Internal Audit Department.

ExternalS

ources includes : Chief Executive/Managing Director

Managers at all Levels

External Auditors(Qadeer & Company)


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Fraud as a risk to internal audit

Internal audit serves as a function to detect

fraud within an organization

Internal audit serves as a critical defenseagainst the threat of fraud, with a focus on

assessing and monitoring controls designed to

prevent and detect fraud.

Internal auditors can be part of fraud

deterrence by examining the adequacy of the

system of internal controls.


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Fraud management in HWSM through

internal Audit

HWSM being a sugar mill, faces minimal risk intheir type of business

Only fraud susceptible area is the buying of

sugar cane, as it includes 90 % of their productbuying

To minimize this, a committee is set up, which

includes a member from the internal audit,and two loyal members of the organization.

Who regulate and oversee a fair andtransparent process.


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SWOT Analysis

OFInternal Audit Department


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Strengths

Haseeb Waqas Group of Companies Internal Audit

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