Page 28 - ENGLISH MARCH final 2018

Value Adding
By: Lalit Dua
Recognizing Internal Audit
Contributions
IA professionals have been advocating
and proclaiming value additions by IA
for decades. However, periodic reminders
are required for management and other
stakeholders regarding the same. The IA
26 INTERNAL AUDITOR - MIDDLE EAST
processes, approach, techniques and styles
have undergone change over a period of
time and even definition of IA has changed.
The changes were pertinent to keep pace
with changing business scenarios and
Value Adding
IA contributions to different departments/ • Review of processes for recording of In one case I reported to the MD of a
processes of a company, especially a attendance, its updating and review by company that a 250 gram product is being
manufacturing company. The detail of
packed in 500gram packing under sales
HR staff concerned
value additions highlighted here below
is not exhaustive and much more can be • Compilation and verification of all team pressure, since 250 gram packing
was not in stock. This minor deviation,
required data needed for Payroll
written about it.
according to sales team, could have
The contributions included here are the processing like loss of pay, deductions affected brand value of the product as well
ones as per my experience while working of different accounts, change in salary questions could have been raised on good
with diversified business groups in India details etc. governance.
and abroad. • Verification of returns, statements and
other relevant documents to ensure
1. Human Resource statutory compliance 3. Procurement
The activities and processes of this
Though some of the activities of this
function are not to be audited because of 2. Sales and Marketing department have always been subject to
confidentiality of personal data such as high risk of fraud. This could start from
pay package and benefits to employees, Though the working of this department is the process of determining quantities to
however there are many areas which can be very dynamic and policies and guidelines be procured. IA can subject the following
subject to audit. These are - change frequently according to marketing critical areas to regular audits-Maintaining
requirement, still IA can play a pivotal
• Organization charts of each department role to not only keep a check on misuse required number of approved vendors for
and its updating with increase/decrease of policies but also make pertinent A and B category products and seeking
of employees and change of position and recommendations. quotations from these vendors only. The
roles, exceptions are to be approved by higher
IA can highlight inappropriate activities authority.
• recruitment as per approved manpower and approaches of marketing the products/
budget; and documentation and updating services like putting a hoarding of a high 1. Adherence to approved authority
of career growth plans and availability end premium product at low income group matrix for approval of PO and
of the same with each function head and housing societies or doing roadshows amendments to any terms, including
employee are important to be reviewed of FMCG products on weekdays. The quantity
and will add value. biggest setback a company can have when 2. Verifying rating of vendors as per
extensive marketing activities have been
The HR documents a training calendar done but products are not available for approved criteria and guidelines and
every year but many a time fails to sale in required quantities. IA can even taking required action as per policy
adhere to the same. A timely review of proactively highlight this scenario to 3. Closure of POs in the system against
its documentation, based on requests management based on projected sale vs. which quantities to be delivered are
received from functional heads after annual available stock. pending but not executed for long.
performance reviews, and non-adherence
will highlight to the management areas IA can contribute significantly by doing Such open POs can be used for fraud..
which need timely action. concurrent audit of correct applicability The effectiveness of procurement
of discounts and other incentives, timely
The following are some of other important updating of changes in commercial policies processes can contribute significantly in
areas where the reviews will add great in the system, fixation of prices considering reducing cost of production and enhance
value. These are - budgeted margin, change in taxes etc. The profitability and IA can ensure this.
sales team is always under pressure to meet
• Documentation and updating of its periodic targets. The worst situation
IA professionals have indeed done this operating manuals, HR policies and their for a company can be when discounts and 4. Quality Assurance and Controls
alignment with splendor. adherence incentives are being provided at a predicted The QA and QC department not only
This article is an attempt to highlight • Review of engaging contract labor and time like last week of the month. The ensure that processes are followed but also
contributions of IA towards company verification of wage bills as per terms of customer will wait and book his order only ensure that the output is as per defined
objectives. The article will attempt to cover agreement during that period. I quality standards.
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