To,

__________________________
R/Sir,
Sub: - Scope of Internal Audit
The following are the broad areas covered during our monthly internal audit of
__________________ Pharma Pvt. Ltd. in respect of __________________ Division. We have
taken up the assignment of __________________ unit and Mumbai office from the F.Y.
______________________. We have kept of Internal Audit for the __________________ unit in
lines with the __________________ unit. However as per the requirement of the Management in
addition to the below mentioned scope we have included the half yearly physical verification of
stock and valuation of the same in our scope. In the case of Mumbai office there will be greater
emphasis on verification of custom related documents, E way bills and verification of
documentation regarding incentives and licenses related to exports.

SCOPE OF INTERNAL AUDIT

Scope of Work
Sr. No. Scope of Work
1 PURCHASES: Verify all purchases domestic as well as imports with respect to
raw materials, packing material, stores and spares, other consumable purchases.
In respect of the said Purchases it is verified whether there is a valid PO for the
same duly signed and authorized by requisite authority, the rates and other
description of the material supplied is in conformity in respect to terms of PO.
Again whether the material as per the quantity & quality ordered has been
received by the stores and in case of any discrepancy whether the said has been
taken care of by issue of necessary Debit/ Credit notes.

2 SALES: Verify all sales invoices with their respective delivery orders and
ensure that all supporting documents are provided and authorized and accounted
for 100% checking of sales bills.
Periodic review of overdue accounts and action taken against overdue
 outstanding/defaulting customers.
3 CASH: Audit of all the receipt and payments with respect to their effective
custodial accountability procedures and Physical safeguard. Surprise check with
respect to physical verification of cash to be carried on at periodic intervals.

4 RECEIVABLES: Audit of all receivables, their billing and collection and their
recording to proper customer accounts. Periodical age wise analysis of all
receivables.

5 FIXED ASSETS:
A. Verify that authorized individuals initiate all productive asset transactions
following proper procedure for procurement with authorization by the
designated authority.
B. Check proper records are maintained including Fixed Asset Register and
Depreciation is properly calculated and accounted for.
6 BANK : Verify whether all Cheque disbursement are prepared on the basis of
adequate and approved documentation and are compared with supporting data
and are properly approved, signed, mailed and properly recorded. Periodical
preparation of Bank Reconciliation and passing corrective entries thereof
7 REVENUES, COST AND EXPENSES: Verify whether matching concept has
been followed and also whether all revenues, cost and expenses are
appropriately classified and described in the statement of income.
8 ADVANCES :
A. Verify whether all advances received from parties are properly
accounted for and properly adjusted against the respective bills.
B. Verify all advances paid are properly authorized, adequately squared off
by subsequent financial transactions, properly documented/ accounted
for and properly reconciled.
9 PROVISIONS: check whether the provisions made with respect to debtors,
Stock, Fixed Assets and others expenses are adequate and necessary and are
properly authorized.
 Stock Verification: - To verify the maintenance of stock records and physical
verification of sample stock items on periodical basis.
10 POSTING: Verify whether all transactions are properly posted in the respective
ledgers and time to time reconciliation is carried on, on periodical basis. With
respect to Debtors, Creditors reconciliation is carried on periodically by getting
the balances and confirmations from the parties.
11 Verification of payments
a. Verification regarding whether proper procedure for disbursement of all
payments laid down by the Management is followed.
b. Payments are approved and signed by the designated authority and are
within the sanctioned limits laid down by the Management.
c. Procedure regarding vendor payment is properly observed.
d. Advance to Suppliers are properly authorized and subsequently settled.
e. Review of Credit terms given to/by Suppliers/Customers to make the
payments.

12 Foreign Exchange Transaction

a. Review of foreign exchange transactions their valuation and
treatment/accounting.
b. Verification of accounting treatment of foreign exchange gains/losses.
c. Verification of claims and the accounting of the same in respect of
incentives as per the applicable statutes.
d. Verification of accounting of custom duties and insurance provisions in
respect of exports.
13 Legal/Statutory Compliances – Review & verification of records, calculations
and proper deductions of the following:
a. Provident Fund
b. Profession Tax
c. GST
d. Tax Deducted at Source(TDS)
e. Companies Act, 2013
14 Ensure company accounts are made in accordance with the accounting
principles & standards under various statutes applicable to corporation.
15 Prepare draft report of audit observations including report on compliances under
various statues on monthly or audit term basis and discuss with Finance Head
for finalization of Audit report for submission to Higher Management.
16 Identify non compliances & weak areas and assist in correction for the same for
greater efficiency and meet changing requirements of corporation.
17 Alert management when concern arise, offer recommendation or salutation to
problems as and when required by the Management.
18 Efficiency/Wastage:- To identify the areas where the efficiency can be
improved and also check the wastage so that organization works efficiently in
economical manner.
19 Attending monthly review meeting for analysis of the performance of the
Company and making suggestion for correction/improvement whenever
required.