A Summer Internship Project Report on FINANCIAL AUDIT At ZAVERI OIL AND GAS PVT. LTD. Submitted to : B . K.

S C H O O L O F B U S I N E S S M A N A G E M E N T , AH M E D A B A D Affiliated to : G U J A R AT U N I V E R S I T Y , AH M E D A B A D In partial fulfillment of the Requirement for the degree of M AS T E R O F B U S I N E S S A D M I N I S T R AT I O N Submitted by : M a no j k u m a r C . K h a nt B . K. S c ho o l o f B u s i n e s s M a n a g e m e nt MB A Pro gra mme M AY J U L Y 2 0 1 1

Table of Contents
1. Declaration

2. Acknowledgement 3. Preface 4. Executive Summary 5. Introduction of ZOGPL 6. Introduction of Auditing 7. Objectives of Study 8. Methodology of Study 9. Data Interpretation and Analysis 10. Findings 11. Conclusion 12. Recommendations

DECLARATION
I MANOJKUMAR C. KHANT student of MBA, B.K. School of business management, hereby declare that this report on FINANCIAL AUDIT is the record original work done by me and also the record of authentic work carried out by me during the academic year of 2010-12 in Zaveri Oil and Gas Pvt. Ltd.

Place : Ahmedabad Date : 22/07/2011

MANOJKUMAR C. KHANT

Acknowledgement
Try, try and try till the goal is not achieved These were the words which were said by the great idol Swami Vivekanand. These words have helped us to move ahead in our life and now have helped in our life. The project on

FINANCIAL AUDIT at ZAVERI OIL AND GAS PVT. LTD. It has been a very interesting project for me. We would like to thank all the people who helped me in entire period of our summer project duration without the efforts of whom the project would not have been possible. Now I would like to thank Mr. K.K.SUDANI (M.D.) and Mr. N.K.SHAH (F.C.A) for their guidance and co-operation and allowing us to undertake this project work.

Preface

Practical knowledge in students life is very important. It helps a student to know the real life situation and problems of life. Same is the case with the corporate world. Theoretical knowledge is very much needed but practical knowledge is equally important. This practical knowledge to a student is given in a form of specialization project undertaken by student before becoming a Master of Management.

It helps a student to explore the depth of a subject. Here, the student learns how to apply the theoretical knowledge in practice.

Being a student of MBA it was a very valuable and memorable experience of studying the FINANCIAL AUDIT .

The project was undertaken during the period of Jun-July 2011, during the second semester of MBA Programme, B.K. School of business management for the specialization of finance in the academic year of 2011-2012.

We have tried our level best to construct this report.

EXECUTIVE SUMMARY
This study examines the system of Financial Audit at Sun pharmaceutical industries ltd.

This study proposes to analyze the system Financial audit at sun pharmaceutical industries ltd. The study also proposes to see the practical work of an organisation. To do a detailed study of audit we taken information from the departments.

The study is divided in 8 chapters. First chapter deals with the company information. Introduction of the area of Financial Audit is stated in second chapter. The objectives of study are in third chapter. Research methodology used in the study has been explained in the fourth chapter. Chapter five contains data analysis and interpretation. Findings of the study have been stated in chapter six. The recommendation is made in chapter seven. The conclusion is stated in chapter eight.

Finance department and Stores & purchase department. Finance departments audit is conducted in four quarter.

N.K.SHAH do the internal audit for them and check the detail. If there are some queries they identify it and send report to the company, gives suggestions too and after that department solve the query and inform to the auditors through report.

CHAPTER 1
Overview of ZOGPL
INTRODUCTION : Name of Industry: Zaveri Oil and Gas Pvt.Ltd. Office: 406,Ashwamegh Avenue, Nr.Ashwamegh Complex, Mayur Colony,Nr.Mithakhali Six Roads, Ahmedabad-380009 MANAGING DIRECTOR: KANTIBHAI K. SUDANI

i BACKGROUND OF THE COMPANY Zaveri Oil and Gas Pvt. Ltd. Began in 2008.The managing director of company is Mr.Kantibhai K. Sudani. What We Do The Zaveri Oil and Gas Pvt. Ltd. assists member states efficiently maximize oil and natural gas resources through sound regulatory practices while protecting our nation's health, safety and the environment. The Companys various committees and workgroups initiate and sustain innovative projects with the sole purpose of advancing our nation's energy future. Comprised of member governors, state oil and gas regulators, industry and the environmental community, these committees work diligently to resolve issues surrounding the much-needed resources found in the United States. The Zaveri Oil and Gas Pvt. Ltd. is the nation's only dedicated forum for governors, state appointees and key policy staff focusing on key oil and natural gas issues. Through the Company, member states are able to: y Access resources nationwide for more effective practices, as well as lessons learned from other states grappling with similar issues; y Receive inclusive information about what is stirring in other states. y Obtain assistance to initiate innovative programs or further develop and enhance current programs; y Learn about emerging national trends.

Current Projects Currently company having three projects. First,at Sanand near TATA NANO PLANT. They are doing this project from last august. Second,at Baroda in ADANI GROUP.They are doing this project from last January, Third,at Rajkot in GSPL.They will start this project from august. Vision The ZAveri Oil and Gas Pvt. Ltd. will be viewed as the authority on domestic oil and gas issues. Mission The Zaveri Oil and Gas Pvt. Ltd. is a agency that promotes the conservation and efficient recovery of domestic oil and natural gas resources while protecting health, safety and the environment. Core Values Passion-advancing the quality of life Integrity-minimizing environmental impact Credibility-advising our nation's leaders Innovation-finding creative solutions Efficiency-wisely maximizing our nation's energy Inclusion -collectively representing member states

A. ENERGY TERMS Development Well: A well drilled within the proved area of an Oil and Gas reservoir to the depth of a horizon known to be productive. Exploratory Well: A well that is not a development well, a service well, or a stratigraphic test well i.e. well drilled in an unproved area for the purpose of finding and producing Oil or Gas. Appraisal Well: A well drilled as part of an appraisal drilling programme, which is carried out to determine the physical extent of oil and gas reserves & characteristics thereof and the quantity of recoverable Petroleum therein. Producing Property: These may be defined as the value assigned to crude oil or gas reserves which can be produced from existing facilities. Unit Of Production Method: The method of depreciation (depletion) under which depreciation (depletion) is calculated on the basis of the number of production or similar units expected to be obtained from the asset by the enterprise. Condensates: Liquid hydrocarbons produced with natural gas, separated by cooling and other means. Development: Following discovery, drilling and related activities necessary to begin production of oil or natural gas. Enhanced Recovery: Techniques used to increase or prolong production from oil and natural gas fields. Exploration: Searching for oil and/or natural gas, including topographical surveys, geologic studies, geophysical surveys, seismic surveys and drilling wells. Integrated Petroleum Company: A company engaged in all aspects of the industry from exploration and production of crude oil and natural gas (upstream) to refining, marketing and transportation products (downstream). Liquefied Natural Gas (LNG): Gas that is liquefied under extremely cold temperatures and high pressure to facilitate storage or transportation in specially designed vessels. Liquefied Petroleum Gas (LPG): Light gases, such as butane and propane that can be maintained as liquids while under pressure. Natural Gas Liquids (NGL): Separated from natural gas, these include ethane, propane, butane and natural gasoline. Heavy Cut: These are heavier hydrocarbons obtained in fractionation unit of Kerosene Recovery Process, where NGL is processed to yield Aromatic Rich Naphtha and Superior Kerosene Oil. Oil Equivalent Gas (OEG): The volume of natural gas that can be burnt to give the same amount of heat as a barrel of oil (6,000 cubic feet of gas equals one barrel of oil). Reserves: Oil and Natural Gas contained in underground rock formations called reservoirs. Proved reserves are the estimated quantities that geologic and engineering data demonstrate can be produced with reasonable certainty from known reservoirs under existing economic and operating conditions. Reserve estimates change as additional information becomes available. Recoverable reserves are those that can be produced using all known primary and enhanced recovery methods. Mining Lease: The license issued for offshore and onshore properties for conducting development and production activity. Petroleum Exploration License: The license issued for offshore and onshore properties for conducting exploration activity Work-Over: Remedial work to the equipment within a well, the well pipe work or relating to attempts to increase the rate of flow.

B. Financial Terms Recouped Cost: It refers to Depreciation, Depletion, Impairment and Amortisation charged in accounts. These are non-cash costs. a) Depreciation: A measure of the wearing out, consumption or other loss of value of a depreciable asset arising from use, efflux of time or obsolescence through technology and market changes.. b) Depletion: A measure of exhaustion of a wasting asset (Producing Properties) represented by periodic write off of cost It is computed with reference to the amortisation base by taking the related capital cost incurred divided by hydrocarbon reserves and multiplied by production. c) Impairment: An impairment loss is the amount by which the carrying amount of an asset exceeds its recoverable amount. d) Amortisation: It refers to the Dry wells and Survey expenditure expensed in the accounts is the Significant Accounting Policies. Royalty: It is a levy imposed under The Petroleum and Natural Gas Rules, 1959 payable to the respective State or Central Government granting the lease (Central Government in case of offshore) on crude oil and natural gas. Cess: It is a levy imposed under The Oil Industry (Development) Act, 1974 on crude oil produced and payable to the Central Government. Exploration Costs: Costs incurred in exploring property. Exploration involves identifying areas that may warrant examination and examining specific areas, including drilling exploratory wells. Development Costs: Costs incurred in preparing proved reserves for production i.e. costs incurred to obtain access to proved reserves and to provide facilities for extracting, treating, gathering and storing oil and gas. Production Costs: Costs incurred in lifting the oil and gas to the surface and in gathering, treating and storing the oil and gas. Abandonment Cost: Abandonment costs are the costs incurred on discontinuation of all operations and surrendering the property back to the owner. These costs relate to plugging and abandoning of wells, dismantling of wellheads, production and transport facilities and to restoration of producing areas. Abandonment Cost is recognized in the accounts as per para 8 of the Significant Accounting Policies. Absorption Costing: A method whereby the cost is determined so as to include the appropriate share of both variable and fixed costs. Accounting Policies: The specific accounting principles and the methods of applying those principles adopted by an enterprise in the preparation and presentation of financial statements. Accrual Basis of Accounting: The method of recording transactions by which revenues, costs, assets and liabilities are reflected in the accounts in the period in which they accrue. The accrual basis of accounting includes considerations relating to deferrals, allocations, depreciation and amortisation. This basis is also referred to as mercantile basis of accounting. Balance Sheet: A statement of the financial position of an enterprise as at a given date, which exhibits its assets, liabilities, capital, reserves and other account balances at their respective book values. Book Value: The amount at which an item appears in the books of account or financial statements. It does not refer to any particular basis on which the amount is determined e.g cost, replacement value, etc. Capital Commitment: Future liability for capital expenditure in respect of which contracts have been made.

Capital Employed: The finances deployed by an enterprise in its net fixed assets, investments and working capital. Capital employed in an operation may, however, exclude investments made outside that operation. Capital Reserve: A reserve of a corporate enterprise which is not available for distribution as dividend. Contingent Asset: An asset the existence, ownership or value of which may be known or determined only on the occurrence or non-occurrence of one or more uncertain future events. Contingent Liability: An obligation relating to an existing condition or situation which may arise in future depending on the occurrence or non-occurrence of one or more uncertain future events. Current Assets: Cash and other assets that are expected to be covered into cash or consumed in the production of goods or rendering of services in the normal course of business. Deferred Expenditure: Expenditure for which payment has been made or a liability incurred but which is carried forward on the presumption that it will be of benefit over a subsequent period or periods. This is also referred to as deferred revenue expenditure. Diminishing Balance Method: A method under which the periodic charge for depreciation of an asset is computed by applying a fixed percentage to its historical cost or substituted amount less accumulated depreciation (net book value). This is also referred to as written down value method. Dividend: A distribution to shareholders out of profits or reserves available for this purpose. Earning Per Share: The earnings in monetary terms attributable to each equity share, based on net profit for the period, before taking into account prior period items, extraordinary items and adjustments resulting from changes in accounting policies but after deducting tax appropriate thereto and preference dividends, divided by the number of equity shares issued and ranking for dividends in respect of that period. Expenditure: Incurring a liability, disbursement of cash or transfer of property for the purpose of obtaining assets, goods and services. Expense: A cost relating to the operations of an accounting period or to the revenue earned during the period or the benefits of which do not extend beyond that period. Extraordinary Item: Gain or loss which arises from events or transactions that are distinct from ordinary activities of the enterprise and which are both material and expected not to recur frequently or regularly. This would also include material adjustments necessitated by circumstances, which, though related to previous periods, are determined in the current period. Fictitious Assets: Item grouped under assets in a balance sheet which has no real value (e.g. the debit balance of the profit and loss statement). First In, First Out (FIFO): Computation of the cost of items sold or consumed during a period as though they were sold or consumed in order of their acquisition. Fixed Assets: Assets held for the purpose of providing or producing goods or services and that is not held for resale in the normal course of business Fixed Cost: The cost of production which by its very nature remains relatively unaffected in a defined period of time by variations in the volume of production. Fundamental Accounting Assumptions: Basic accounting assumption which underline the preparation and presentation of financial statements. They are going concern, consistency and accrual. Usually, they are not specifically stated because their acceptance and use are assumed. Disclosure is necessary if they are not followed.

Inventory: Tangible property held for sale in the ordinary course of business, or in the process of production for such sale, or for consumption in the production of goods or services for sale, including maintenance supplies and consumables other than machinery spares. Investment: Expenditure on assets held to earn interest, income, profit or other benefits. Materiality: An accounting concept according to which all relatively important and relevant items, i.e., items the knowledge of which might influence the decisions of the user of the financial statements are disclosed in the financial statements. Net Assets: The excess of the book value of assets (other than fictitious assets) of an enterprise over its liabilities. This is also referred to as net worth or shareholders funds. Net Profit: The excess of revenue over expenses during a particular accounting period. When the result of this computation is negative, it is referred to as net loss. The net profit may be shown before or after tax. Net Realisable Value: The actual/estimated selling price of an asset in the ordinary course of the business less cost of completion and cost necessarily to be incurred in order to make the sale. Obsolescence: Diminution in the value of an asset by reason of its becoming out-of-date or less useful due to technological changes, improvement in production methods, change in market demand for the product or service output of the asset, or legal or other restrictions. Prior Period Item: A material charge or credit which arises in the current period as a result of errors or omissions in the preparation of the financial statements of one or more prior periods. Profit and Loss Statement: A financial statement which presents the revenues and expenses of an enterprise for an accounting period and shown the excess of revenues over expenses (or vice versa). It is also known as profit and loss account. Provision: An amount written off or retained by way of providing for depreciation or diminution in value of assets or retained by way of providing for any known liability the amount of which cannot be determined with substantial accuracy. Provisions for Doubtful Debts: A provision made for debts considered doubtful of recovery. Straight Line Method: The method under which the periodic charge for depreciation is computed by dividing the depreciable amount of a depreciable asset by the estimated number of years of its useful life. Sundry Debtor: Person from whom amounts are due for goods sold or services rendered or in respect of contractual obligations. Also termed as debtor, trade debtor, account receivable. Surplus: Credit balance in the profit and loss statement after providing for proposed appropriations, e.g., dividend or reserves. Useful life: Life which is either (i) the period over which a depreciable asset is expected to be used by the enterprise; or (ii) the number of production or similar units expected to be obtained from the use of the asset by the enterprise. Wasting Asset: Natural resource which is subject to depletion through the process of extraction or use e.g. mines, quarries.

Working Capital: The funds available for conducting day-to-day operations of an enterprise. Also represented by the excess of current assets over current liabilities including short-term loans. Work in Process: Work in Process includes all materials which have undergone manufacturing or processing operations, but upon which further operations are necessary before the product is ready for sale. Net Present Value: NPV is the present (discounted) value of future cash inflows minus the present value of the cash outflows. Participating Interest: The share expressed as a percentage in the rights and obligations of each party to a Production Sharing Contract (PSC).

CHAPTER 2
INTRODUCTION OF AUDITING

Audits are performed to ascertain the validity and reliability of information; also to provide an assessment of a system's internal control. The goal of an audit is to express an opinion on the person / organization / system (etc.) in question, under evaluation based on work done on a test basis. Due to practical constraints, an audit seeks to provide only reasonable assurance that the statements are free from material error. Hence, statistical sampling is often adopted in audits. In the case of financial audits, a set of financial statements are said to be true and fair when they are free of material misstatements - a concept influenced by both quantitative (numerical) and qualitative factors. Auditing is a vital part of accounting. Traditionally, audits were mainly associated with gaining information about financial systems and the financial records of a company or a business.. However, recent auditing has begun to include non-financial subject areas, such as safety, security, information systems performance, and environmental concerns. With nonprofit organizations and government agencies, there has been an increasing need for performance audits, examining their success in satisfying mission objectives. As a result, there are now audit professionals who specialize in security audits, information systems audits, and environmental audits.

In cost accounting, it is a process for verifying the cost of manufacturing or producing of any article, on the basis of accounts measuring the use of material, labor or other items of cost. In simple words the term, cost audit, means a systematic and accurate verification of the cost accounts and records, and checking for adherence to the cost accounting objectives. An audit must adhere to generally accepted standards established by governing bodies. These standards assure third parties or external users that they can rely upon the auditor's opinion on the fairness of financial statements, or other subjects on which the auditor expresses an opinion. The Definition for Auditing and Assurance Standard (AAS) 1 by ICAI - "Auditing is the independent examination of financial information of any entity, whether profit oriented or not, and irrespective of its size or legal form, when such an examination is conducted with a view to expressing an opinion thereon."

CHAPTER 3
OBJECTIVES OF THE STUDY
1. Who should conduct the audit? 2. How should it be conducted? 3. How is follow-up and correction done? 4. To know more about Audit.

5. To understand the procedure of Audit at company. 6. To understand the relationship between Auditing and Finance. 7. To understand, Is Audit helps to display the clear picture of firm. 8. To see whether Audit is necessary for Reliability of financial data.

CHAPTER 4
METHODOLOGY OF THE STUDY
SCOPE OF STUDY: The study covered the Audit detail of Zaveri Oil and Gas Pvt. Ltd.. As on 31/3/2011. The audit is conducted in the beginning of financial year. USEFULNESS:  The study will be useful to increase my knowledge.  It can also be used as secondary data for further research purpose. RESEARCH DESIGN TYPE OF RESEARCH: The study involves exploratory research. The exploratory research focuses on the discovery of ideas and is generally based on the secondary data. It is preliminary investigation which does not have a rigid design. PERIOD OF STUDY: The period of study is one years i.e. from 2010to 2011. DATA COLLECTION TOOL: Only secondary data is used for the purpose of this study. SOURCE OF DATA: The secondary data has been collected through mainly Annual Report, Auditors Report, Company documents, internet, Books, newspaper, magazines, journals etc.

CHAPTER 5
DATA INTERPRETATION AND ANALYSIS i DEFINITION & MEANING OF AUDIT Auditing along with other discipline such as accounting and law, equips you with all the knowledge that is required to enter in to auditing as a profession. No business or institution can effectively carry on its activities without the help of proper records and accounts, since transactions take place at different points of time with numerous persons and entities. The effect of all transactions have to be recorded and suitably analysed to see the result as regards the business as a whole. Periodical statements of account are drawn up to measure the success or failure of the activities in achieving the objective of the organization. This would be impossible without a systematic record of transaction. Financial statements are often the basis for decision making by the management and for corrective action so as to even closing down the organization or a part of it. All this would be possible only if the statements are reliable; decision based on wrong accounting statements may prove very harmful or even fatal to the business. For example, if the business has really earned a profit but because of wrong accounting, the annual accounts show a loss, the proprietor may take the decision to sell the business at a loss. It is more essential for those who have invested their money in the business but can not take part in its management, for example, shareholders in a company, such persons certainly need an assurance that the annual statements of accounts sent to them are fully reliable. It is auditing which ensures that the accounting statements are authentic. In todays economic environment, information and accountability have assumed a larger role than ever before. As a result, the independent audit of an entitys financial statement is a vital service to investors, creditors, and other participants in economic exchange. Historically, the word auditing has been derived from latin word audire which means to here. In fact, such an expression conveyed the manner in which the auditing was conducted during ancient time. However, over a period of time, the manner of conducting has undergone revolutionary change. According to Dicksee, traditionally auditing can be understood as an examination of accounting records undertaken with a view to establishing whether they completely reflect the transactions correctly for the related purpose. But this is not the end of matter. In addition the auditor also expresses his opinion on the character of the statements of accountants prepared from the accounting records so examined as to whether they portray a true and fair picture. Information contained in the statement of accounts of a business are primarily intended for the owners. However, many others make use of the information for different purposes. Management of the business uses it for decision-making purposes, lenders and creditors examine it to establish the degree of safety of their money. Government levies tax putting a prima facie reliance on the

statements and regulates the socio-economic state of affairs on a summary view of the information contained in various accounting statement made available to it. Investors review the information for making investment decision and the financial analysts can use the information to assess the performance of an entity. Financial statements are of great significance to workers as well; they want to be assured that reasonable and legitimate share of the revenue earned by the organization has been paid to them as bonus and the distribution pattern has not violated the norms of social justice. You will realize, from the above importance and utility of statements of account and the need for their reliability. To ensure the acceptable degree of reliability and accuracy of the financial statements, examination and appraisal of accounts and the financial picture by an independent expert is necessary. This is what all about auditing and why it is necessary.

i TYPES OF AUDITORS

External auditor / Statutory auditor External Auditors is an independent Public accounting firm engaged by the client subject to the audit, to express an opinion on whether the company's financial statements are free of material misstatements, whether due to fraud or error. For publicly-traded companies, external auditors may also be required to express an opinion over the effectiveness of internal controls over financial reporting. External auditors may also be engaged to perform other agreed-upon procedures, related or unrelated to financial statements. Most importantly, external auditors, though engaged and paid by the company being audited, are regarded as independent auditors. The most used external audit standards are the US GAAS of the American Institute of Certified Public Accountants; and the ISA International Standards on Auditing developed by the International Auditing and Assurance Standards Board of the International Federation of Accountants

Internal auditors Internal Auditors are employed by the organization they audit. They perform various audit procedures, primarily related to procedures over the effectiveness of the company's internal controls over financial reporting. Due to the requirement of Section 404 of the Sarbanes Oxley Act of 2002 for management to also assess the effectiveness of their internal controls over financial reporting (as also required of the external auditor), internal auditors are utilized to make this assessment. Though internal auditors are not considered independent of the company they perform audit procedures for, internal auditors of publicly-traded companies are required to report directly to the board of directors, or a sub-committee of the board of directors, and not to management, so to reduce the risk that internal auditors will be pressured to produce favorable assessments. The most used Internal Audit standards are those of the Institute of Internal Auditors

Consultant auditors Consultant Auditors are external personnel contracted by the firm to perform an audit following the firm's auditing standards. This differs from the external auditor, who follows their own auditing standards. The level of independence is therefore somewhere between the internal auditor and the external auditor. The consultant auditor may work independently, or as part of the audit team that includes internal auditors. Consultant

auditors are used when the firm lacks sufficient expertise to audit certain areas, or simply for staff augmentation when staff are not available.
y

Quality auditors Quality Auditors may be consultants or employed by the organization. Quality audits are performed to verify conformance to standards through review of objective evidence. A system of quality audits may verify the effectiveness of a quality management system. This is part of certifications such as ISO 9001. Quality audits are essential to verify the existence of objective evidence showing conformance to required processes, to assess how successfully processes have been implemented, for judging the effectiveness of achieving any defined target levels, providing evidence concerning reduction and elimination of problem areas and are a hands-on management tool for achieving continual improvement in an organization.

i AUDITING SYSTEM AT ZAVERI OIL AND GAS PVT.LTD.

 

Internal Auditing is done in three departments. Auditors are N.K.SHAH. Audit is conducted in the beginning of each financial year. And finance departments audit is categories in four quarter.

i AUDITOR OF ZOGPL N.K.SHAH (BCom ,F.C.A.)

i PROCEDURE OF AUDIT

 Procedure of Auditing is begins with the Mail. Auditors sends mail to the departmental head and asks for the convenient date for Audit.  The departmental head reply and give the convenient date for Audit.  In Auditing auditors verify all the data which are recorded in ERP System.  After verification they send report to the company in which they mention the query and suggestions.  Departmental head have to solve that queries as soon as possible and then have to send Report back to Auditors.

i SCOPE OF INTERNAL AUDIT

 Transportation charges / Freight Bills Contracts, One off transactions, Recording, Creating payable, Control over duplicate, Competitive rates, Comparison with other locations, Use of ERP.  Reimbursement of Expenses Terms for reimbursement and eligibility, Creation of Payable / use of ERP, Comparative study across various locations.

 Overseas Freight and Clearing & Forwarding Contract , Verification vis--vis actual delivery & quantity / volume / value, System of recording, Timely creation of Payable in ERP. Reconciliation of provision for freight & Clearing & Forwarding charges.  Factory Expenses Scrutiny of Repairs and consumables incl. Engineering items, Local purchases and project related purchases / expenses with emphasis on :       Frequency of expenses Justification & genuineness Authorization Comparison across unit (rates, quantity, tax, volume etc.,) Consumption pattern Inventory Record, control etc., in case of items like Bearings etc.,

 Excise Optimum utilization of Cenvat Credit, Correctness of credit availed/ utilised, Reply to Excise Authorities and compliance.  Service Tax Credit Proper ailment of transfer  Fixed Assets Physical verification & Reconciliation with F.A. Register. Checking of correctness of depreciation provision with emphasis on ensuring that no provision is made for assets fully depreciated. Verification of Transfer of Assets and reconciliation.

 Inventory System of physical verification. Reporting of shortages / excess, detailed reason of thereof & how dealt with, Authorization for adjustment of excess / shortage in books, Treatment of Rejected Inventory.  Old outstanding balances Scrutiny of outstanding and unsettled balances, follow up & remedial action. Special attention to goods / purchase returns effect in creditors account.  Scrap Source, Trend and past history, Procedure followed, Record keeping, Manner of disposal, Vendors selection, Manner of collection, Control, Authorization.

 Returnable Material System of recording, Follow up, Review, Sticky cases, Action, Confirmation of recipient.  Gifts / Promotional Items Flow of documents, Budget, Intending by whom, Purchase process, Inventory records, Physical verification, Manner of distribution & dispatches, Control over and evidence for delivery etc.

 Finance System/SOP audit of Foreign Exchange including Forward Contracts, Exchange difference and premium/discount thereon, Investment, Parking of Funds, Authorization process, Interest / income receipt, Documentation.  Insurance Cover vis--vis Risk, Claim records, Monitoring and status, MIS for exception.  Investment

Physical verification and matching with books.

 Project Verification of accounting as per Item Code in ERP, Quantitative records and reconciliation of major item.  TDS Compliance with special emphasis on applicability & classification (viz, Contract or Hire charges)  Travelling Expenses Air tickets, Usage proof, Cancellation credit, Open ticket and usage.  ERP Usage Whether all the required reports are taken out from ERP, if not list out with reasons. These are the scope of audit 2010-11.

i FORMAT OF AUDITORS REPORT

 Executive summary  Introduction  Internal Audit Scope

If Auditors found some query then the departmental head of that department has to solve query and have to send report to the Auditors. And that Format also same.

i QUERY OF AUDIT ANALYSE BY THREE MEASURES If some query is found then they measure it in three ways:  High  Medium  Low

High = Indicates that the company needs to take action Immediately. Medium = Indicates that the company needs to introduce Control. Low = Indicates that less attention is required.

CHAPTER 6
Findings
Internal Audit is held in ZOGPL Audit is conducted on yearly basis. Finance audit is categories in four quarter. Only three department's Audit is Conducted in ZOGPL . Auditors are selected by the management of the company. Auditor's Report helps management in decision making. Auditing procedure is very simple at SPIL. It starts with the mail and ends with the solution of query. In each Audit auditors found some queries because data recording is very poor at ZOGPL. Auditors give suggestions also to the Company. Audit helps to define the clear picture of firm. For a particular firm accuracy and reliability of financial data is necessary. Audit helps to make data accurate and reliable, so audit and finance is related with each other. Auditors analyze queries in three measures: (1)High (2)Medium (3)Low

CHAPTER 7
Recommendations
Based on our study we would like to give some recommendations: The company should have to record data properly. so that will helps them at the time of Audit. Auditors should have to take some action or have to give some penalty for errors. The company should have to add more people in Finance Department. so that Recording of data is properly done at a time and helps to reduce the errors.

CHAPTER 8
Conclusion

The project focused on the time period 2009 to 2010. The system of Auditing is good at ZOGPL but they have to make some changes like fixed time duration for solving query. Accuracy and reliability of data Auditing is necessary.

APPENDIX

Annexure 1 SYNOPSIS

STATEMENT OF THE TOPIC:

FINANCIAL AUDIT

DESCRIPTION OF THE TOPIC: The study would be done for the better understanding of the Auditing and to know how it is done in manufacturing firm. OBJECTIVES OF THE STUDY: 1. To know more about Audit. 2. To understand the procedure of Audit at ZOGPL. 3. To gain knowledge how auditors identify errors. 4. To understand how firms solves query and adopt the suggestions. 5. To know why Audit is necessary. 6. To understand the relationship between Auditing and Finance. 7. To understand, Is Audit helps to display the clear picture of firm. 8. To see whether Audit is necessary for Reliability of financial data.

SCOPE OF STUDY: The study covered the Audit detail of Sun pharmaceutical industries ltd. As on 31/3/2011. The audit is conducted in the beginning of financial year. Main three departments audit is done that is Finance, HR and stores and purchase. Finance Audit is classified in four quarter.

USEFULNESS:  The study will be useful to increase my knowledge.  It can also be used as secondary data for further research purpose. RESEARCH DESIGN TYPE OF RESEARCH: The study involves exploratory research. The exploratory research focuses on the discovery of ideas and is generally based on the secondary data. It is preliminary investigation which does not have a rigid design. PERIOD OF STUDY: The period of study is one years i.e. from 2008-09 to 2009 -10. DATA COLLECTION TOOL: Only secondary data is used for the purpose of this study. SOURCE OF DATA: The secondary data has been collected through mainly Annual Report, Auditors Report, Company documents, internet, Books, newspaper, magazines, journals etc. The secondary data will be collected from four websites y y y y www.icai.org www.google.com www.yahoo.com www.wikipedia.com

DATA ANALYSIS AND INTERPRETATION The secondary data is collected and analyzed and based on collected information conclusion is derived

PHYSICAL Quantity Sold (Other than Trading) Crude Oil (MMT) Natural Gas (MMM3) LPG (000'Tonnes) Naptha/ARN (000'Tonnes) Ethane/Propane (000'Tonnes) Superior Kerosene Oil (000'Tonnes) Quantity Sold (Trading) Superior Kerosene Oil (000'KL) HSD (000'KL) Motor Spirit (000'KL) FINANCIAL Income from Operations (Turnover) Statutory Levies Operating Expenses Exchange Loss Purchases (Trading) Profit Before Interest Depreciation & Tax (PBIDT) Recouped Costs Operating Income (PBIT) Interest(Net) (Profit before Tax and Extraordinary Items Extraordinary Items Profit before Tax Corporate Tax Net Profit (PAT) Dividend Tax on Dividend Share Capital Net Worth Borrowings Working Capital Capital Employed Internal Resources Generation Plan Expenditure Contribution to Exchequer Expenditure on Employees Number of Employees FINANCIAL PERFORMANCE RATIOS PBIDT to Turnover (%) PBDT to Turnover (%) Profit Margin(%) Contribution to Exchequer to Turnover (%) ROCE(PBIDT to Capital Employed) (%) Net Profit to Equity (%)

22.88 20,534 1,029 1,545 497 153 441 1,742 273 650,494 118,013 123,812 3,819 85,166 319,684 120,849 198,835 (40,314) 239,149 658 239,807 78,544 161,263 68,444 11,632 21,389 780,848 267 334,949 640,583 172,449 218,201 280,496 47,396 33,035 49.1 55.3 24.8 43.1 49.9 20.7

BALANCE SHEET RATIOS Current Ratio Debt Equity Ratio Debtors Turnover Ratio(Days) PER SHARE DATA Earning Per Share (Rs.)- before extraordinary items Earning Per Share (Rs.)- after extraordinary items Dividend (%) Book Value Per Share(Rs.)

2.26:1 0.0003:1 23 75.19 75.40 320 365

REFERENCES
Board of studies the institute of chartered accountants of India, Auditing and Assurance , The publication Department on behalf of CA.R.Devarajan, Additional Director of Studies, The institute of chartered accountants of India, A-94/4, Sector-58, NOIDA 201 301, India

Websites:
y y y y www.icai.org www.google.com www.yahoo.com www.wikipedia.com