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An overview & analysis of fixed asset purchase procedure

at Grameenphone IT Limited

Tanim Ahsan Chowdhury

ID: 0921071

An Internship Report Presented in Partial Fulfillment of the

Requirements for the Degree Bachelor of Business Administration


November 2012

An overview & analysis of fixed asset purchase procedure

at Grameenphone IT Limited

Tanim Ahsan Chowdhury

ID: 0921071

Has been approved

November, 2012

Dr. A.N.M. Shibly Noman Khan

Assistant Professor
School of Business
Independent University, Bangladesh

Letter of transmittal

Dr. A.N.M. Shibly Noman Khan

29th November, 2012

Assistant Professor, School of Business

Independent University, Bangladesh
Subject: Submission of Internship Report.

Dear Sir,
It is a pleasure to be able to hand over the report of my internship program on
An overview & analysis of fixed asset purchase procedure at Grameenphone IT Limited.
My best efforts have been provided towards maintaining the quality of this internship
report. The internship program has provided me the opportunity to work with the
employees of Grameenphone IT Ltd, which has provided me with valuable understandings of
the corporate culture & values present in such an organization. This program really helped
me to enhance my practical knowledge regarding a professional work environment.
I, therefore, convey my sincere thanks to you for your kind cooperation, supervision and
advice in conducting and preparing this report. I have completed the whole internship
program with great enthusiasm. Despite some limitations I sincerely hope this report will be
worth reading and help you gain an insight regarding the research topic.

Yours sincerely,

Tanim Ahsan Chowdhury
ID: 0921071
Independent University, Bangladesh.

First and foremost, I would like to express my gratitude to the Almighty Allah, the
omnipresent and omnipotent, who kept me in good health and provided me with the
wisdom to complete this task in a properly and timely manner.
The accomplishment of this study has been made possible by the generous consideration of
the people at Grameenphone IT limited and my supervisor at IUB. I am happy that I am given
this opportunity to express my gratitude towards these good people.
I would like to acknowledge the valuable work experience I received during my internship
period at the Grameenphone IT limited working at the Treasury & Financial management
department. I will be forever indebted for the guidance & constant supervision provided to
me by the members of this department as well as necessary information for this research.
I would like to express my sincere gratitude to my Supervisor Dr. A.N.M. Shibly Noman Khan
for taking the time to review my progress and provide valuable feedback throughout the
course of my internship. He provided me with suggestions on how to improve my report &
what corrections were needed which proved to be quite valuable.
I would also like to thank my organization, Independent University, Bangladesh and my
mentors for providing me with the opportunity of self-development through practical
Lastly, I would like to express my thanks to the authors, researchers, article writers whose
books and articles I consulted/quoted and who helped me in every stage of the report by
providing valuable information and suggestion in respect of preparing this report.

Executive Summary
Our IT industry is currently an emerging sector in our country with a lot of potential.
However it is not quite at a place where it can be considered globally competitive.IT
company`s put the blame lack of infrastructure support while the government blames the
lack of aggressive initiative from the companies. The fact of the matter is that we have no
viable long term growth strategy in place. Even though the top IT companies are earning
hundreds of millions in revenue they are still running at a loss. Capital asset acquisition is a
major source of expenditure in any industry. In the IT industry assets are of more
complicated nature which is why proper controls need to be in place to prevent any excess
spending be it intentional (fraud) or unintentional (error).The key focus of this paper is the
identification & analysis the internal controls that are in place in the fixed asset purchase
procedure at Grameenphone IT limited. Since it is only through such analysis their
effectiveness at safeguarding the company`s assets can be assessed.

Table Of Content

Serial no.



Page no:




Origin of the report
Problem statement



Purpose of the study




Chapter 2: IT Industry overview


Chapter 3: Company overview



Corporate Profile


Global Partnership


Employee & Organization structure


Chapter 4: Literature Review


Role of accounting in todays world


The importance of Accounting Information System & IT


The Importance of internal controls

Chapter 5: Research




Research problem



Methodology of the research



Data collection process



Data Analysis Procedure



Process description



Process flowchart



Research findings/Data interpretation





Appendix 1: Interviews
Appendix 2: Forms & Indexs


An overview & analysis of fixed asset purchase procedure at Grameenphone IT Limited

Chapter 1: Introduction
1.1 Introduction
It was only some time ago the IT industry in your country consisted of pre-dominantly a
hardware sector with little presence of IT service or software firms. It is probably one reason
why we still have such a huge number of IT hardware vendors compared to software
vendors. This resulted in our pc penetration being one of the lowest in the world standing
currently at 4.5 per 1000 person in the country (source: Basis).In present time however the
scenario is changing. The government is working with both foreign and local investors to
come up with a long term framework for the IT industry which would hopefully ensure the
proper support structure in place for the unhindered growth of the IT industry.
The IT industry is an emerging industry with large and expending yearly revenue earning
which holds the potential to be one of the major foreign revenue earning sectors in our
country. As such this makes this sector particularly venerable to accounting malpractices,
mistakes, frauds etc.
Asset acquisition is a major source of revenue outflow for any company. This holds especially
true for a newly booming sector like IT. This is why companies such as GPIT Ltd must take
precautions so that unnecessary/fraudulent expenditures do not occur. The general
procedures under Bangladesh Accounting Standard (BAS) mostly designed to safeguard
against frauds, mistakes that are common to the dominant business sectors during such
expenditure procedures. This leaves sectors such as IT which makes specialized capital asset
acquisitions open to innovative fraudulent activities if strong internal controls tailored
toward such vulnerabilities are not installed & maintained.

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An overview & analysis of fixed asset purchase procedure at Grameenphone IT Limited

1.2 Origin of the Report

This report has been prepared as a means of completion of the requirements of the
Internship program of school of Business of Independent University, Bangladesh. This report
is the conclusion of three-month internship program. Grameenphone IT Limited is the
organization where I gathered experience about the operations of the Treasury & Financial
management department. I worked under the close supervision of Dr. A.N.M. Shibly Noman
Khan. He approved the topic on which I prepared this internship report.

1.3 Problem Statement

As with any newly emerging industry the IT industry holds the potential for financial
mismanagement & accounting malpractices and so on. This is due to the fact that the
accounting systems in place to safeguard the companys assets have not been thoroughly
tested through repeated use, refined thorough detection of mistakes, fraud etc as it happens
in older and more mature industries. This is why proper internal accounting internal control
is crucial to prevent fraud, mistakes, errors etc. The key issue this research paper tries to
address is whether the internal controls in place regarding the fixed asset purchase
procedure are effective at preventing such things and if how far have they matured in the
course of past few years.

1.4 Purpose of the study:

The first and main purpose of this report is to fulfill the partial requirement of the internship
program. The aim of this research is to provide an accurate overview of how the purchase
procedure (fixed asset) at Grameenphone IT Limited is carried out & analyze the degree of
effectiveness of the internal controls regarding the process those are in place. To accomplish
this aim three key objectives have been deemed necessary. These objectives can be

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An overview & analysis of fixed asset purchase procedure at Grameenphone IT Limited

regarded as sequential objectives as without the accomplishment of one the next cant be
The three key objectives are given below:
o To collect data regarding the fixed asset purchase procedure
o To craft an overview of the fixed asset purchase procedure based on the data
o To evaluate the effectiveness of the internal controls regarding the procedure

1.5 Limitations:
Although I will be trying to the best of my ability to make this research free from error and
accurate there are some there is some limitations. Some of the effects of such limitations
have been minimized while others were present due to the nature of the study itself thus
they cannot be avoided. As stated before the key basis of this research will be my
observations & the interviews with the experienced personal at Grameenphone IT limited.
The quality of both depends upon my proper execution which might be hindered due to my
lack of experience in conducting interviews business environment. The limitations that I
faced during the course of my internship are summarized below:
o Lack of practical work experience may lead to oversight of some of the factors
o Accuracy of research will be questionable due to the vast nature of the organization
o Some of the data being used are of sensitive in nature as such not all the information
which would aid in this study were made available
o The analysis of the information gathered is subjective thus may lead to different
conclusions if assessed by some other individuals

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An overview & analysis of fixed asset purchase procedure at Grameenphone IT Limited

Chapter 2: IT Industry overview

Although the IT industry is relatively new in Bangladesh, It holds great potential and has
commended the attention of both foreign & local companies. Currently there are over 800
ITES (IT Enabled service) & Software firms and few hundred more unregistered IT based firms
working in the country. The firms are currently catering to both local and foreign clients,
earning a yearly industry revenue amounting to Taka 1800 crore. (USD 250 Million)

Chart 1: Snapshot of the IT industry

The industry currently employees around 30,000 professionals, while in itself that doesnt
sound like much but keep in mind these are considered high quality employment (average
salary ranging from BDT 15,000+).This in itself makes the IT industry one of the top
employers of graduate students in the country. (Source: Basis)
Our country`s key strength lies in the deeply rooted origins in the English language over
many centuries used in all areas of life. This coupled with the fact that we have an
abundance of graduates willing to work at a fraction of the wage of their foreign
counterparts makes it an ideal destination for software & IT services outsourcing.

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An overview & analysis of fixed asset purchase procedure at Grameenphone IT Limited

Chapter 3: Company overview

3.1 Corporate Profile:
Grameenphone IT Ltd. (GPIT) is the leading fastest growing IT Company in the country; it is
registered with the Registrar of the Joint Stock Companies and Firms of Bangladesh under
the Companies Act 1994. It is a 100% subsidiary company of Grameenphone Ltd and was
incorporated on 28 January 2010 with the objective of providing IT related services to GP
and other external parties. As a leading IT company, GPIT is providing end to end solutions
for Bank, Financial Institute, FMCG, Pharmaceuticals and Telecom Industry further
highlighted in the table below. They bring a team of talented individuals dedicated to
creativity, service and efficiency to their customer. Purely devoted to bringing clients
noticeable transformations in their operational efficiency and GPIT strive to provide
inventive end-to-end IT solutions which are unsurpassed in value and quality.
GPIT Products

GPIT Integration & Managed Services

Banking & Financial

Business Support


Human Resource Management System

Mobile Banking


Contact Center

Approval Management System

Internet Banking


IP Telephony

GPIT Crystal
(Logistics distribution tracking system)

Loan Origination

& Content Management

Enterprise Resource Planning (ERP)


Video Conferencing

Server &
Oracle Exadata
& Exalogic


Chart 2: Product & ITES services of GPIT

3.2 Global Partnership:

GPIT is looking forward for other partnership opportunities with large and medium sized
companies that have worked with relevant portfolios and sectors for adding more value to
the business. Retaining the existing partnerships and expanding them in a large scale will be
there focus in validating and aligning the company.
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The existing partners of GPIT include IBM, Dell,HP, Wipro, Huawei, Microsoft, Cisco and
other global giants from whom GPIT leverages extensive product/solution.

3.3 Employee & Organization structure:

GPIT continues to drive development and learning through encouraging a structured
approach towards capability analysis and ensuring development initiatives. Currently GPIT
employees close to 400 people. In orders to ensure productivity and cost efficiency GPIT
introduced innovative and cost-effective Such as utilizing working from home concept and
flexible hour mechanisms. Currently its working on the process of building people and
process capacity for achieving ISO and CMMI certification and maturity alignment.

Chart 3: Tier 1 Organogram of GPIT

As it can be seen above in the chart 3 is the tier 1 organogram of Grameen Phone IT limited
highlighting the first level management team.The two exceptions being the director for
strategic busines devolopement who works on forming strategic partner alliances &
cordination specialist who cordinates the Chief executive officer activites.

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An overview & analysis of fixed asset purchase procedure at Grameenphone IT Limited

Chart 4: Tier 2 Organogram of GPIT (Finance Department)

Above in chart 4 is the tier 2 organogram specifically of the GPIT Finance department as it
can be seen the finance department is sub-divided into five additional sub-departments each
working under a sub-department head. The functional scopes of each of the
sub-departments are describes in brief below:
a) Corporate Strategy & Business performance: Business planning, Operational
efficiency program, Target setting, Investment planning & approval, Management
b) Treasury & Financial Management: Accounting, Financial reporting, Cash
management, Fiscal compliance, Tax & Vat compliance
c) Legal & Corporate Affairs: Legal & Regulatory compliance, handling regulatory
approvals, Stakeholder management
d) Business Excellence: International standardization (ISO 20000),Service Management
Policies, procedure and guidelines preparation risk management
e) Sourcing: Sourcing policies, Supplier relationship management, Supply chain

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Chapter 4: Literature Review

4.1 Role of accounting in todays world:
In the modern world that we live in, accounting is one such discipline that every one needs
to have some knowledge about regardless of job position. Its concepts are in everywhere
regardless of job specialty, its importance has been promoted in recent years, and it is useful
in peoples everyday lives. Firstly, some basic accounting knowledge is important because it
can be applied in all job specialties. Secretaries must use accounting skills to manage the
company check book and orders, auditors have to study financial statements to evaluate the
accuracy and integrity of the business, and executives need to judge the success of their
business using accounting statements from the past and present.
Secondly, knowledge of accounting is more crucial now days because in recent years, people
in the business world have been held more accountable for their financial practices. Since
the crises such as Enron, WorldCom when independent auditor Arthur Anderson failed to
report illegal accounting practices, the SEC has been monitoring public corporations more
closely. Thus, companies require some basic knowledge of accounting to avoid any future
misstatements unintentionally occurring. (
The modern business environment has changed drastically in a short time. Business
technology has advanced business functions and operations to levels not previously believed
possible. Although accountants and the accounting profession have retained their
fundamental roles they have grown into various branches of the profession, which have
developed their own specializations such as performance benchmarking, Forecasting,
Compliance testing, Fraud detection etc. responsibilities.

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4.2 The importance of Accounting Information System & IT industry:

Accounting Information System (AIS) is vital to all organizations (Rahman et al.,
1988;Wilkinson et al., 2000) and perhaps, each organization either profit or nonprofitoriented need to maintain the AIS (Wilkinson, 2000). On the other hand, an AIS is the whole
of the related components that are put together to collect information, raw data or ordinary
data and transform them into financial data for the purpose of reporting them to decision
makers (Mahdi Salehi, Vahab Rostami & Abdolkarim Mogadam, 2010). To better understand
the term Accounting Information System, the three words constitute AIS would be
elaborated separately. Firstly, literature documented that accounting could be identified into
three components, namely information system, language of business and source of
financial information (Wilkinson, 1993). Secondly, information is a valuable data processing
that provides a basis for making decisions, taking action and fulfilling legal obligation. Finally,
system is an integrated entity, where the framework is focused on a set of objectives (Bhatt,
2001; Thomas and Kleiner, 1995). Accounting literature argues that strategic success is
considered an outcome of Accounting Information Systems (AIS) design (Langfield-Smith,
Several, studies have analyzed the role of AIS in strategic management, examining the
attributes of AIS under different strategic priorities (Ittner and Larcker, 1997; Bouwens and
Abernethy, 2000).
It has also been analyzing the effect on performance of the interaction between certain
types of strategies and different design of AIS (e.g. different techniques and information).
The appropriate design of AIS supports business strategies in ways that increasing the
organizational performance (Chenhall, 2003).
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Increasing AIS investment will be the leverage for achieving a stronger, more flexible
corporate culture to face persistent changes in the environment. Innovation is the incentive
with which a virtuous circle will be put in place, leading to better firm performance and a
reduction in the financial and organizational obstacles, while making it possible to access
capital markets.
Accounting Information Systems (AIS) are a tool which, when incorporated into the field of
Information and Technology (IT), were designed to help in the management and control of
topics related to firms economic-financial area. But the stunning advance in technology has
opened up the possibility of generating and using accounting information from a strategic
viewpoint. Since this is important for all firms, it is more important even for medium-sized
and small ones which need this information to deal with a higher degree of uncertainty in
the competitive market (El Louadi, 1998)
The main advantages of an optimal use of AIS in an industry such as IT are: better adaptation
to a changing environment, better management transactions and a high degree of
competitiveness. There is also a boost to the dynamic nature of firms with a greater flow of
information between different staff levels and the possibility of new business on the
network and improved external relationships for the firm, mainly with foreign customers
accessed through the firms web. With the existence of more intercommunication there are
increased chances for diversification of traditional businesses. Nonetheless, excessive use of
these tools may decouple the quality of interaction between workers and customers with a
consequent reduction in productivity. Therefore, there are authors who defend the need for
a profound change in firms organizational culture to make these installations productive
(McGrath, 2006).
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Despite of some authors who postulate that the direction of the cause-effect relationship is
only that companies achieve a high performance when they can afford the implementation
of certain technological developments (Damanpour, 2001). Others indicate that firm
performance drops just after the implementation, taking several years to realize the benefits
from IT adoptions (Wah, 2000). There are several research works, which, in the widest sense,
have studied relationships between performance indicators and IT, and how IT impact on
firm performance achieving inconclusive results.
For the first time in 1966, the American Institute of Certified Public Accountants (AICPA)
stated that: Accounting actually is information system and if we be more precise,
accounting is the practice of general theories of information in the field of effective
economic activities and consists of a major part of the information which is presented in the
quantitative form. In the above definition, accounting is a part of a general information
system of an economic entity. Boochholdt (1999) defines accounting information systems as
systems that operate functions of data gathering, processing, categorizing and reporting
financial events with the aim of providing relevant information for the purpose of score
keeping, attention directing and decision-making. Recently several studies have asserted
that AIS plays a proactive role in the strategy management, acting as a mechanism that
enables organizational strategy (Chenhall, 2003; Gerdin and Greve, 2004). Strategy has been
examined using different typologies, such as Porter (1985) or Miles and Snow (1978). The
latter has been extensively used in management literature (Zajac and Pearce, 1990). In the
present study it is assumed that the organizational performance is a function of the financial
performance, performance management and the AIS. Fitness will exist in the combination of
strategy and AIS that contribute to financial performance.

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4.3 The Importance of internal controls :

There is currently considerable interest in the topic of internal audit and its contribution to
exact management of any business economic resources (Kantzos and Chondraki, 2006;
Rittenberg, 2006).
This developing role of the internal auditing is also reflected in its current definition, i.e.
Internal control is the system of internal administrative and financial checks and balances
designed by management, and supported by corrective actions, to ensure that the goals and
responsibilities of the organization are achieved (Cahill, 2006).
In accordance with the above, growth in international financial markets has given companies
the opportunity to design new products and to provide a wide range of services, there can
be noticed an increase in associated risks (Palfi and Muresan, 2009).
Simultaneously, there is growing management recognition of the importance of
implementing a good internal control system as some of the recent reports on institutional
failures have highlighted fraud and negligence as the major contributory factors
(Chan, 1995).
In other words, the activities of internal audit are now seen as critical elements in the
assurance process. Strong internal control systems have long been seen as particularly
relevant to a company because of their vulnerability to fraud and the links between
information systems and money (Cahill, 2006).
As it is mentioned before, internal auditing is a critical component of an organizations
management and a foundation for its safe and sound operations (Drogalas et al., 2005;
Karagiorgos et al., 2010)
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An overview & analysis of fixed asset purchase procedure at Grameenphone IT Limited

Chapter 5: Research
5.1 Research Problem:
The key problem this report tries to assess is that is whether the internal controls regarding
fixed asset purchase procedure at Grameenphone IT limited are effective enough to prevent
things such as:
o Unnecessary/Excess spending on asset purchase
o Loss of assets due to internal theft
o Misrepresentation of the asset value in the books
o Lack of reliability of the financial information generated

5.2 Methodology of the Research:

This research has been carried out through the use qualitative techniques & personal work
observation. Interviews (Appendix 1) have been conducted with at least one employee from
each of the key departments involved in the fixed asset purchase procedure. Summative
content analysis technique was used to extract relevant data from the interviews. The
gathered data was used to frame a process description of the fixed asset purchase procedure
of Grameenphone IT limited. The process description was then used as a basis to craft the
process flowchart to visualize the problem. The data then have been analyzed on the basis of
five key internal control activities focusing on few key activity criteria`s to determine the
overall effectiveness of the internal controls the are in place. Depending on the level of
criteria effectiveness GPIT has been rated on 5 stage scale (Poor, Below Average, Average,
Good, Excellent) & ranked overall.

5.3 Data Collection process:

For the purposes of this research qualitative data have been gathered through the following
means. Primary data have been gathered through interviews, observations of the staff and
hands on work experience in different sub-divisions of the finance department at
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Grameenphone IT limited. Rapport building has been used as a tool to gain further insights
and improve quality of the information gathered. Secondary data have been collected from
publications, journals on the subject matter & GPIT SharePoint knowledge database.

5.4 Data Analysis Procedure:

The data analysis procedure has been carried using a content analysis method on the basis of
five internal control activities & their key criteria which are described below:
A) Transaction authorization: Transaction authorization is the basis by which the authority
to complete the various stages of a transaction is delegated. These stages include the
processes of Recording (initiate, submit, process) & Approving (pre-approval, post entry
review). The key criteria`s and best possible execution for this internal control activity is
given below:

Documentation of level of authority: The proper documentation of the level of

authority is crucial as it creates an expectation of responsibility and accountability.
Best possible execution: Organizational policies and procedures are clearly
documented identifying type of authority granted to each employee


Authorization knowledge: Refers to the possession of the required knowledge to

properly authorize the transactions under review & being able to verify the
supporting documentation for transaction validity
Best possible execution: Employees are properly trained and informed of related
departmental procedures related to internal controls

B) Documentation: Documentation such as accounting records, journals, and supplier

invoice, delivery log provide a financial evidence of each event or activity related to the
business, and therefore ensures the accuracy and completeness of transactions.
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This includes expenses, revenues, inventories, personnel transactions. The key criteria`s and
best possible execution for this internal control activity is discussed on the below.

Document design standardization: This refers the consistency of design of

departmental supporting/source document template & forms which ensures
transactions are recorded properly. Standardized designs also make them easy to
decipher for external parties
Best possible execution: Documentation relating to a transaction can be filled up
accurately & efficiently. External parties & other department is able to extract
relevant information from documents quickly


Preservation of audit trail: The audit trail refers to the auditors ability to trace any
transaction from financial statement all the way back to the source documents.
Best possible execution: Audit trail of economic activities are well preserved and
requested records can be fetched for any given transaction quickly and accurately

C) Independent Verification: This refers to verification procedures consisting of independent

checks of the information from multiple sources to identify and rectify errors and
misrepresentations. The key criteria`s and best possible execution for this internal control
activity is discussed below

Validity of transaction activity: Refers to the transaction processing systems ability to

provide the tools to verify transaction activities are being carried out for the correct
purpose and amount.
Best possible execution: The validity of the transaction activity can be verified on the
basis of support documents and records from multiple independent sources
(E.g. procurement departments P.O being matched against suppliers delivery log)
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Error correction : Refers to the detection & rectification of intentional(fraud) or

unintentional errors in a timely manner
Best possible execution: Recorded transactions & filed source documents are
reviewed by the appropriate departments. Expectations for timeliness of error
rectification have been clearly established.

D) Security & Access control: This refers the activities that ensure only authorized persons
have access to the assets & related records of the firm. Access may be direct (physical) or
indirect (electronic records) these two categories are further explained below
o Physical security: This is the protection of physical records and assets from loss by
theft or damage. Uses of Locks, Surveillance etc.
o Technical security: This is the protection of electronic records from loss by theft,
damage, or loss in transport
e) Segregation of duties: Segregation of duties is the means by which no one person has sole
control over the lifespan of a transaction. Ideally, no one person should be able to initiate,
record, authorize and reconcile a transaction. Segregation of employee makes it difficult to
conduct fraud. The key criteria for this activity is the proper segregation of critical duties in
the asset purchase process such as
o Whether Asset acquisition request is kept separate from asset acquisition
o Whether asset custody is separate from asset transaction processing
o Weather validation of transaction record is kept separate from transaction payment
o Whether these measures makes it impossible to perform fraud without the collusion
of multiple individuals with incompatible responsibilities
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5.5 Process description:

This process description attempts to summarize the fixed asset purchase procedure at
Grameenphone IT limited into a set to action steps for easier understanding and analysis.
The action steps needed to complete a fixed asset purchase & recording are given below.
1. The fixed asset purchase procedure begins when the user department (BM) asses the
need for new asset and requests capital expenditure approval from top management
(usually finance department head/C.F.O).Once granted the next step is to fill the
Purchase requisition (appendix 2) containing the details of the asset acquisition. This
is then sent to the Sourcing (Procurement unit) department for validation.
2. Sourcing department (Procurement unit) runs basic verification tasks once the
purchase requisition (appendix 2) is received. If verification check passes then
Sourcing department (Procurement unit) checks vendor list for a suitable vendor &
cross checks for any prior agreement with the vendor regarding the purchase, if not
the assets may be purchased directly or a new contract is to be formed. At this point
sourcing department (Procurement unit) processes the purchase requisition & raises
purchase order & simultaneously places the order with the supplier from the supplier
list. The purchase order is then forwarded to the service & operations dept.
(Warehouse unit)
3. The supplier checks his inventory for the goods required against the purchase order
and verifies whether they can meet the contractual demand.
4. At this point the supplier sends over the goods along with the sales invoice and
delivery log (indicating the goods being sent & their value)
5. The service & operations dept. (Warehouse unit) takes the necessary steps to make
the necessary entries to receive the goods system wise & physically.
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6. Once the good arrives from supplier service & operation dept. (Warehouse unit)
checks the delivery log, sales invoice is checked against the purchase order & goods
are physically verified & goods are stored in the warehouse awaiting move order
from the user dept. (BM). A goods received note (GRN) is issued & forwarded with
other supporting documents to the Finance & Operations dept. (OTC unit) & sourcing
7. Upon receipt of the documents first accounting entry is made by sourcing dept.
(Capital inventory receiving DR, Supplier liability accrual CR).
8. At this point the user department (BM) issues move order to retrieve the asset from
warehouse. Once the move order is in effect the second accounting entry is made by
sourcing dept. (Capital inventory IT DR, Capital inventory receiving CR).
9. Once the move order is complete sourcing makes third accounting entry (WIP DR,
Capital inventory IT CR).
10. At this point the Finance & Operations (OTC validation unit) department performs
verification of the attached documentation (Vat Chillan, delivery log, GRN, Po). Upon
validation provides the invoice with a unique identifier number (OTC code).
11. The Finance & Operations (OTC processing unit) department attaches the necessary
documents and Stamps it approved by the OTC. They then upload the transaction
to the system database & provide then vendor with a tentative payment date. After
which the documents are sent to the business manager (the user/department who
raises the Purchase requisition) & the Treasury & Financial management dept.

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12. Upon receipt of the compiled supplier invoice the User Dept. (BM) checks suppliers
compliance with the agreement terms and ensure sufficient explanation of the
transaction is provided. After which the billed amount is checked and comments are
made on any correction required. The compiled documents are then forwarded to
Sourcing (SCM unit).
13. At this point the Sourcing (SCM unit) ensures the accounting entries properly
matches, applies relevant adjustments (Prepayment, Vat, Tax charges) and forwards
the validated documents to (Validation unit) Treasury & Financial management
14. Treasury & Financial management (Validation unit) reviews transaction merit based
on the received documents ensures compliance with existing vat & tax
rules/regulation. After ensuring necessary controls being performed on the invoice,
GRN & other relevant documents, the invoice is stamped approved by Treasury.
After approval by the Treasury & Financial management (Validation unit) two
accounting entries are made to first to initiate asset capitalization procedure (IT
assets DR & WIP CR) and second to record the liability into proper books (Accrual DR,
Supplier liabilities CR).After this the approved documents are forwarded to the
Treasury & Financial management (Payment Unit).
15. Payment unit firstly ensures there are sufficient funds available in the bank to meet
the expenses and uploads the payment data into the online banking software. After
which it double checks online banking data with the data in the system. At this point
the Payment entry (Supplier liabilities DR, Bank A/C CR) is made.
16. The bank sends the checks to the payment unit as per request bringing the
transaction process to a close.
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5.6 Process Flowchart:

For easier understanding and visualization of the process description a process flowchart has
been created using the process description given in the next page. This flowchart not only
helps to understand the steps required but also helps identify the decisions involved more
accurately. From the process flow chart four out of the five internal control activities can be






(I.V),Documentation, Segregation of duties The legend for the symbols involved in the
process is given below.


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Chart 5: Fixed Asset purchase process flowchart

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5.7 Research Findings:

Given below is the analysis of the process related data according to the activity criterias &
personal observations.

a) Transaction authorization & Approval: While my time at Grameenphone IT limited it

has come to my attention that it has policy of creating authority hierarchy for approval of all
significant actions within the company. This hierarchy is well documented via the company
documents (e.g. business travel manual, divisional f.a.q handbooks,).
However during my interviews & work with the GPIT staff the thing that become apparent
employees seem to be lacking concrete knowledge of inter-departmental actions relating to
transactions under review. They often rely on assistance from the related department during
verification which may dampen the authenticity of their validation of document/transactions
In the Fixed asset purchase procedure there is several layers of transaction approval aimed
at increasing the validity of the transaction. These include primary transaction authorization
for capital expenditure by top management (chart 5). There is also a secondary approval
layer(chart 5) which is also crucial according to Mr Adnan Kabir a senior executive at
procurement unit of sourcing dept. (Appendix 1,Interview: A) If a Purchase requisition fails
verification check the asset acquisition process is halted
Given the above mentioned scenario the following can be concluded that authorization
documentation criteria of this control activity is well executed meaning the structure for the
proper control enforcement of is in place. However authorization knowledge criteria is
somewhat lacking therefore this control activity can be rated average on the internal
control effectiveness scale (appendix 2)

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b) Documentation: Documentations that support the validity of a transaction must be well

preserved as well as being easily understandable. At GPIT they utilize a self-created web
knowledge database known as GPIT SharePoint here templates & forms relating to major
actions (Business travel advance, purchase requisition, leave request etc) are categorically
made available here. The standardized design have been adopted to the forms with the key
information being kept at the top most portion of the forms & validation stamps, signature
being kept at the left portion or the bottom. This helps the user getting used to filling out the
forms & can quickly understand forms which are form another department as well.
The preservation of the audit trail depends on not only what supporting documents that are
being issued but also how easily accessible they are on request. According to Miss Nusrat
Sharmin (appendix 1: Interview B) The unique identifier number or OTC code assigned to an
invoice helps track the transaction throughout the entire process giving access to all the
related information. This makes the all the relevant document of the transaction retrieval at
a single place making it easier to trace through the audit trail back to the source.
Throughout the asset acquisition procedure supporting documents are being issued,
received & archived. A total of six accounting entries are made to record the asset into the
proper books & to settle the liability payment. As mentioned before the system places the
transaction at a central location to entries made by sourcing is immediately reflected in the
transaction file and can be viewed by the related departments.
Given the above mentioned scenario the following can be concluded the documentation
procedures and controls are quite effective making tasks simpler. Given that Document
design standardization & Preservation criterias are both being fully met this control can be
rated at an excellent on the internal control effectiveness scale (appendix 2).
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c) Independent verification: Independent verification are crucial to the timely detection

and rectification of errors & fraudulent activities in the process
During the Fixed asset acquisition procedure at GPIT independent verification is occurring in
two instances. Firstly, (Process description: Step 6) When the Warehouse unit of service &
operations receives the Purchase order from sourcing (source 1) & Sales invoice, Delivery log
from the supplier (source 2) which can be cross examined to detect any discrepancies.
Secondly, the validation unit of the treasury & financial management cross examines
documents received from the OTC (source 1), Goods received note from warehousing
(source 2) & Purchase order forwarded from sourcing (source 3) before the final approval of
payment. The rectification of errors is dependent at which phase the error is detected
According to Mr. Mohammad Touhidul Islam (appendix 1: Interview D) an executive at
Treasury & Financial management If an error is detected in the OTC then invoice submitted
in the system can be canceled and rectified however if it is detected at an later phase in the
treasury finance department where payment entries are made in batch the entire batch must
be canceled This leaves some room for improvement in the latter phase.
Given the above mentioned scenario the following can be concluded the independent
verification procedures occurring at two instances are adequate at detecting errors meaning
the validity of transaction criteria is well executed. This makes the act of fraud difficult
without multiple incompatible parties being involved. However it should be noted that
execution of error rectification criteria while being adequate can still be improved further
this leads me to rate this control activity at good on the internal control effectiveness scale
(appendix 2).

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d) Security & Access control: According to Mr Tawsif Kabir (appendix 1: Interview E) an

executive at Security & IT service operations Security is a top priority at Grameenphone IT
limited physical records are stored at locked cabinets & as you saw departments can`t be
accessed with HID panels requiring proper identification.
Physical access to high security areas is controlled with strong identification and
authentication techniques. Several measures are implemented to ensure physical safe
custody of assets. Access to the warehouses is very limited & each asset is given a unique
asset tag to track it through its lifespan leading up to disposal.
Technical security is ensured by a secure log-on Procedure. Inactive sessions are shut down
after a defined period of inactivity electronic records are kept in an encrypted system
maintaining a hierarchical method of access control. Access control standards are
create/revised by management periodically. Procedures for registration/deregistration of
users are well documented. Access to all systems have to be authorized by the owner of the
system and such access, including the appropriate access rights (or privileges), are recorded
in an Access Control List.
The above mentioned protocols apply also during the Fixed asset acquisition procedures
ensuring that fixed assets & there records are kept safe both physically and electronically.
Therefore as the Physical & Technical security criteria of this internal control activity are
being met fully I can rate this control activity at excellent on the internal control
effectiveness index (appendix 2).

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E) Segregation of duty: At Grameenphone IT limited segregation of duty is well enforced.

During the asset acquisition procedure beginning from the transaction initiation to the
supplier payment the whole process is divided up into numerous task & responsibilities
which are assigned to different units in different departments. The key separations are in the
fixed asset acquisition procedure is highlighted below:

Asset acquisition request (handled by the business manager/user) is kept separate

from asset acquisition authorization (handled by senior management, procurement)


Asset custody (handled by warehouse unit) is kept separate from the Asset
transaction processing (handled by sourcing , otc unit)


Asset acquisition transaction verification (handled by various validation units) is kept

separate from Payment for asset acquisition (handled by treasury payment unit)


As mentioned before this measures makes involvement of multiple departments a

requirement for successful collusion

Given that most of the criterias for this internal control activity is being met I can rank this
internal control activity at good on the internal control effectiveness scale (appendix 2)

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Chapter 6: Conclusion
It is important that newly formed companies such as Grameenphone IT limited have strong
internal controls as they are the essential to the success of business operations. According to
the data analysis most of the internal control activities related to the fixed asset purchase
procedure have been rated at a good to excellent level with only one average rating. Overall
by the internal controls averaging the internal control activity ratings regarding the asset
purchase procedure at Grameenphone IT Limited can be ranked at a good level. What this
basically means is that the internal control processes are adequate enough to prevent most
common errors & misrepresentation activities while it still hasnt been truly tested against
innovative attempts at fraudulent activities. This makes it hard for management to
determine how well the internal controls are actually working. A company`s size effects how
it should asses/enhances internal control. This makes it easier for GPIT to work on improving
its internal control given its still a newly formed company.

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Appendix 1: Interviews
Several interviews have been conducted in a Q & A format on the key departments related
to the purchase procedure which is given below.
Interview A (Mr. Adnan Kabir): The first interview conducted was with Mr. Adnan Kabir a
senior executive in Sourcing (Procurement Unit) .He was asked questions regarding the
scope of the department and there part in the purchase procedure:
Tanim Ahsan: Thank you for taking the time to speak to me, the first question I would like to
ask is what is scope the work that the procurement unit in the sourcing department is
involved in?
Mr. Adnan Kabir: Firstly, Let me give you a brief idea of how the procurement unit is actually
organized. The procurement unit does not work as a whole rather it is divided into several
small teams catering to different suppliers of Grameenphone IT. We are mainly involved in
initiation of contractual agreement procedures with vendors, deciding optimal vendors for
procurement, running basic verifications on acquisition related documents from other
Tanim Ahsan: So would it be correct to say your unit is mainly concerned with purchase
related tasks?
Mr. Adnan Kabir: You could say that but a vendor you conduct purchases from can also
become someone you sell to in the future and its up to us to provide judgments related to a
vendors reputation, credit worthiness etc.
Tanim Ahsan: So vendor relations are an important part of your work, one more questions
could you explain whats your units role exactly is in the fixed asset purchase procedure?
Mr. Adnan Kabir: Well the first thing you`d notice that asset acquisition is a bit different
then good acquisition as it is categorized as a capital expenditure. The Business manager that
is the department that will use the assets simply cant raise a purchase requisition and
forward it to us. They must first seek capital acquisition approval either from the C.F.O or
C.E.O depending on the expenditure amount. After we receive a purchase requisition form

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We put it through basic verification checks & if it passes then we move on to the main
procurement tasks. The procurement phase is crucial as we must first select a vendor which
will be suitable for the need and will ensure we get the maximum cost savings regarding our
acquisitions. Once we select the vendor we form check for prior contracts if absent we will
form a new contract and place the order. The other thing we do here is process the
purchases requisition form and include new information regarding the supplier, order etc
and fill out the purchase order form. We forward the purchase order form to warehouse unit
and they continue the process from there.
Tanim Ahsan: Would it be correct to say after primary approval from the top management
the verification checks serve as a secondary approval for asset acquisition transactions?
Mr. Adnan Kabir: Yes you could say that if a Purchase requisition fails verification check the
asset acquisition process is halted.
Tanim Ahsan: Warehouse unit is that part of the sourcing department?
Mr. Adnan Kabir: No, it works offsite, part of the service & operations department they work
on a separate system then the rest of the company.
Tanim Ahsan: So would it be correct to say your unit is mainly concerned with purchase
related tasks?
Mr. Adnan Sabir: You could say that but a vendor you conduct purchases from can also
become some you sell to in the future and its up to us to provide judgments related to a
vendors reputation, credit worthiness etc.
Interview B (Miss Nusrat Sharmin): The second interview conducted was with Miss Nusrat
Sharmin an executive at Over the counter (OTC) unit of finance and operations
Tanim Ahsan: I know OTC unit is very busy so Ill try to keep this brief let me begin by asking
what the key functions of the OTC unit are?
Miss Nusrat Sharmin: The OTC department basically deals with bill processing, invoice
screening & registration in the system.
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Tanim Ahsan: Can you tell me what the OTC units role in the fixed asset purchase process?
Miss Nusrat Sharmin: Our work basically begins once we receive the billing related
documents from the supplier. The unit is divided into two separate teams. First team deals
with validating the submitted supplier documents & provides the sales invoice with a unique
number for easier tracking. The second team processes the validated documents and
provides a tentative payment date. They then forward the processed invoice to the Business
Manager (user) & Treasury dept. This team also scans the documents and inputs the entry it
to the system.
Tanim Ahsan: What is the purpose of this unique identifier number?
Miss Nusrat Sharmin: The unique identifier number or OTC code assigned to an invoice
helps track the transaction throughout the entire process giving access to all the related
Tanim Ahsan: I noticed the OTC unit is located on the ground floor far from the other finance
unit is there a reason for that?
Miss Nusrat Sharmin: Mostly because its more convenient for the suppliers but it also helps
keep our contact with other dept. to a minimum to ensure there is no interference in our
validation judgments.
Interview C (Mr. Sheikh Muniruzzaman): The third interview was conducted with Mr. Sheikh
Muniruzzaman the head of the sourcing department at Grameenphone IT limited.
Tanim Ahsan: Alright so first thing I would like to ask is how the Sourcing department is
organized? With the number of units working it all seems rather confusing.
Mr. Sheikh Muniruzzaman: Well some of the units are not totally a part of Grameenphone IT
alone such as the OTC department it works for both Grameenphone & Grameenphone IT.

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Tanim Ahsan: Ah I see I already talked to someone over at the procurement unit of the
department he gave me an idea of what his unit does. What would you say is the main
purpose of the Sourcing Dept.?
Mr. Sheikh Muniruzzaman: The sourcing dept. is there to ensure a timely supply of
equipment & services are provided to GPIT at the best achievable market rate.
Tanim Ahsan: What kind of work is involved in the sourcing department?
Mr. Sheikh Muniruzzaman: To put it simply sourcing mainly works on creating/managing
sourcing policy, procedures, supplier relationship management and supply chain
Tanim Ahsan: How is supply chain management tasks handled by sourcing department?
Mr. Sheikh Muniruzzaman: We have a separate unit that works on SCM tasks. Supply chain
management is vast subject involving multiple areas of focus starting from suppliers to
things within the company.
Tanim Ahsan: Could you tell me where does the supply chain management come in exactly
in the purchase procedure?
Mr. Sheikh Muniruzzaman: Well after the business manager ensures documents related to
transactions have sufficient explanation and meets complaints they forward it to the SCM
unit. The SCM unit checks whether prior entries made are correct, they also made any
corrections request by the business manager and apply tax, vat adjustments before
forwarding the invoice to Treasury & Financial management department.
Tanim Ahsan: So besides the Treasury & Financial management department other
departments also make accounting entries?
Mr. Sheikh Muniruzzaman: Yes sourcing units makes some of the accounting entries where

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Interview D (Mr. Mohammad Touhidul Islam): The fourth interview conducted was with
Mr. Mohammad Touhidul Islam an executive at the treasury & financial management
Tanim Ahsan: Let me start with a basic question could you describe what is the scope of
operations of the treasury & financial management dept.?
Mr. Mohammad Touhidul Islam: The treasury & financial department deals with major
financial matters such as payables management, revenue Management, fixed asset
management, fiscal compliance, accounting & financial reporting.
Tanim Ahsan: Alright could you tell me where does this departments role is in the purchase
Mr. Mohammad Touhidul Islam: The work of the treasury and financial department is at the
near the end of the payment process in two units Validation & Payment. The validation unit
of the treasury & financial management dept. receives forwarded documents from several
sources it is only when SCM dept. forwards there approved system invoice that the
validation process for a transaction begins firstly we check for compliance with government
regulations and ensure internal controls have been properly applied. After which we make
two accounting entries in the books first to initiate the capitalization of asset & second to
record the liabilities to the proper books.
Tanim Ahsan: You mentioned two entries what are they?
Mr. Mohammad Touhidul Islam: To initiate capitalization IT assets DR & WIP CR, To record
liability into books Accrual DR & Supplier liabilities CR
Tanim Ahsan: Ok regarding validation what if an error is detected during validation process
how will it be rectified?
Mr. Mohammad Touhidul Islam: Well it will depend on which phase of the process the error
is detected If an error is detected in the OTC then invoice submitted in the system can be
canceled and rectified however if it is detected at an later phase in the treasury finance
department where payment entries are made in batch the entire batch must be canceled.

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Tanim Ahsan: You mentioned the payment unit?

Mr. Mohammad Touhidul Islam: Yes Im getting to that after validation is completed the
payment unit uploads the payment data into the online banking software & double checks
uploaded data with the data in the system. After which the final payment entry which is
supplier liabilities DR & Bank CR is made after which bank sends the cheques as requested.
Interview E (Mr. Tawsif Kabir): The fifth interview was conducted with Mr. Tawsif Kabir an
executive at Security and IT Service operations. He was inquired about the physical &
electronic security measures in place regarding protection of sensitive documents & records.
Tanim Ahsan: I wanted to know how secure the records & important documents being kept
at the office are?
Mr. Tawsif Kabir: Well security is a top priority at Grameenphone IT limited physical records
are stored at locked cabinets & as you saw departments can`t be accessed with HID panels
requiring proper identification. We try to limit the amount of hard documents kept to ensure
greater security as IT records are easier to control.
Tanim Ahsan: Alright could you give me a brief idea what kind of IT security that are in
Mr. Tawsif Kabir: We employ a secure log in system across the system so you could say a
strong password is the first line of defense. We restrict what a user can access through
robust access control system limiting users to accessing only what is related to his job
Tanim Ahsan: What about security of assets how do you prevent things such as theft etc.?
Mr. Tawsif Kabir: Well thats more of a warehouse dept. responsibility; few people have
access to the warehouses where the assets are kept. We also use asset tagging to track an
asset throughout its lifespan to ensure its security.

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