FEDERAL URDU UNIVERSITY OF ARTS, SCIENCE & TECHONOLGY ISLAMABAD

DEPARTMENT OF BUSINESS ADMINISTRATION BBA-6th Project Topic To study the Internal control system of fixed assets of Manufacturing company Subject Auditing SUBMITTED TO Ms Ayesha Shahid SUBMITTED BY Muhammad Azam Abdul Rauf Bokhena Zafar Hameed Shah Sikandar Khan

Table of Contents
Acknowledgement ........................................................................................................................................ 2 Abstract ......................................................................................................................................................... 3 Introduction................................................................................................................................................... 4 History .......................................................................................................................................................... 5 Data Collection Method ................................................................................................................................ 6 SWOT Analysis ............................................................................................................................................ 6 I. II. III. IV. Strengths ........................................................................................................................................... 6 WEAKNESSES ................................................................................................................................ 7 OPPORTUNITIES ........................................................................................................................ 7 THREATS..................................................................................................................................... 7

Conclusion .................................................................................................................................................... 8 Recomendations ............................................................................................................................................ 9 References................................................................................................................................................... 10 Appendix........................................................................................................................................................ I Appendix A ............................................................................................................................................ I Appendix B ........................................................................................................................................... II Appendix C .......................................................................................................................................... III Appendix D .......................................................................................................................................... IV Appendix E ........................................................................................................................................... V Appendix F........................................................................................................................................... VI Appendix G ......................................................................................................................................... VII Appendix H ........................................................................................................................................ VIII Appendix I ........................................................................................................................................... IX Appendix J ............................................................................................................................................ X Appendix K .......................................................................................................................................... XI

Acknowledgement
It has been a great source of information and learning for us to work on this Project. I am grateful to my Allah for providing me all the skill and support to be able to comprehend andconduct this task. I owe many thanks to Lecturer Miss AYESHA SHAHID the Guide of the project for guiding and correcting various documents of mine with attention andcare. We would also like to express our deepest feelings of gratitude to our respected faculty for their cooperation and for the facilities provided by the department to the students in the form of lectures and discussions, Business Department, Federal Urdu University of Arts, Science and Technology Islamabad. We want to express our deepest feelings of love to our sweet and sincere university friends for their co-operations and moral supports.

Abstract
Internal control system of fixed assets is the process, affected by an entity's Board of Trustees, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories: Reliability of financial reporting, Effectiveness and efficiency of operations, Compliance with applicable laws and regulations & Sale and Purchase of fixed assets. We have selected Pakistan Tobbaco company for checking the internal control system of fixed assets is effective or not.The company which we have selected is located at G.T.Road Jhelum. We have adopted three methods to collect the required information, these methods includes Questionnaires, Interview and Internet. After getting data we have got result that is showing the internal control system of fixed assets of Pakistan tobbaco company is effective.

Introduction
Pakistan Tobacco Company Limited was incorporated in 1947 immediately after partition, when it took over the business of the Imperial Tobacco Company of India which had been operational in the subcontinent since 1905. The company prides itself in being the first multi-national company to begin its operations in Pakistan. Our parent company, British American Tobacco has been in business for over 100 years now with a presence in over 180 countries. The Group has built an international reputation for making and marketing high quality brands for the millions of informed adults who choose to consume tobacco. From being just a single factory operation to a company which is involved in every aspect of cigarette production, from crop to consumer, we have evolved into one of the leading corporations in Pakistan. We run two state of the art factories and employ more than 1,700 people while indirectly providing livelihoods to more than a million people who are involved in various aspects of the business. We are market leaders and contribute more than Rs. 30 billion in excise duties and taxes to the Government. Our strategy reflects our vision, being the champions of growth, productivity, responsibility and a winning organization. We, as a company, work towards broader goals beyond the benefit of the shareholders and demonstrate support for communities, high standards of ethical behaviour and greater transparency and accountability. We are committed to continuous improvement and to keeping an open mind. We have learnt that companies can rarely act alone; almost all our contributions to society involve working constructively with others and by engaging and listening to our stakeholders. By matching our words with our actions, we aim to demonstrate the behaviour of a responsive and responsible tobacco company.

History
From being the first multinational to set up its business in Pakistan in 1947 and beginning operations out of a warehouse near Karachi Port, we have come a long way. From being just a single factory operation to a company which is now involved in every aspect of cigarette production, from crop to consumer, we have evolved and grown with Pakistan. However, what is significant about these 62 years is the effort that Pakistan Tobacco Company has demonstrated in the development of the country. By being instrumental in the campaign for modern agricultural and industrial practices, we have helped in the development and progress of the agricultural and industrial sector in the country. We have been supporting and contributing to various causes of national interest. Educating growers in the latest techniques and technology in agriculture, afforestation and free health care in designated areas are but a few examples. Throughout these 62 years, our continuous investment in people, brands, technology, innovation and the communities in which we operate has borne fruit in many ways. We are deemed as a partner of choice by many, our Environmental, Health and Safety standards are a source of inspiration for local companies, our industrial relations practices have led and influenced local practices, and as a result of all these, our managers are highly valued and sought after people in the Pakistani corporate world based on the training and exposure we give them from very early on in their careers. Suffice it to say that the history of the Pakistan Tobacco Company is closely linked with the development and history of the areas in which we operate. Be it corporate practices, social investments, advancements in agricultural techniques, or establishing new ways of marketing and distribution, we have always been instrumental in establishing the benchmarks against which others are measured.

Data Collection Method

The techniques that we have used for data collection method includes through questionnaires, asking direct questions in interview and taking data from internet. During interview we have asked scheduled questions. These questions were prepared under the supervision of our instructor. Company has provided sufficient information according to our questions however there was inadequate information regarding some topics. Then we have distributed questionnaires in the specific department of the company. The purpose of distributing questionnaires was to get that information that we cannot get by asking direct questions during interview. There were some information that were vague and more information was required to explain it, so we have used internet to clarify those information.

SWOT Analysis
I. Strengths

Economies of scale in production Enterprise resource management for quick and cost effective operations Efficient management Marketing efficiency and capital effectiveness Business process re-engineering PTCs own reputation as a dynamic enterprise. Offering superior quality brands has helped the company in carving out an image for itself both in the market and in the hearts of the consumers thus winning the trust of both. Highly competent and diverse work force throughout the ranks of the company. Major contributor to the national revenue of the state. Major contributor to numerous causes such as forestation campaign, free mobile dispensaries, training schools and the companys concern for the eco system. A highly advanced and systematic distribution network and supply chain. Utilization of highly creative and state of the art marketing tools. Excellent corporate culture, which is more growth, oriented. A strong interactive communication system.

II.

WEAKNESSES

Very minimum marketing as compare to its competitors. Workers are always under threat because of downsizing. Improper distribution of work Wastage of material in production. Failure of PTC to file a strong case against lower quality brands whose producers do not pay any tax to the government and yet have maintained a prominent presence in the market. Cutting back on such cost may be difficult, because of which in recent years the company has done extensive across the board retrenchment.

III.

OPPORTUNITIES
Greater opportunity of promoting lower brands in rural region. PTC has the potential to further improve the cost reduction method. Create a better work environment in GLT department because of more hazards inthis department. Lowering the downsizing will create a good image in the eye of regulatory authoritiesand government. Export of premium brands Growing demand of cigarettes despite such anti smoking campaigns.

IV.

THREATS
Some of its competitors are also producing high quality brands like Marlboro byLackson. Internationally some countries are continuously promoting anti-smoking slogans like the ban of smoking in Bhutan in 2002. Better marketing campaigns by rivals. Their well-established brands are highly copied by some local manufacturer. The political, economic situation is not stable in Pakistan. Limitation of their product Decline in tobacco growth Tobacco being a controversial product, governments enforce strict regulatory measures from time to time to discourage its mass production which is also a genuine threat for the company. Imposition of high taxation on tobacco related products especially, cigarettes.

Conclusion

Average
0 0%

5, 20, 22%

1, 4, 4% 2, 8, 9%

No of choices 3, 23, 26% 1 2 3

4, 35, 39%

4 5

The pie chart is showing above the results of our findings. The reponse of ten people which we have selected randomly is showing the internal control system of fixed assets is effective in PTC because our findings showing overall 61% are agree and 13% are not agree.26% people have neutral responce.Employees and staff members of Pakistan Tobbaco company are satisfied by the internal control system of fixed assets. Because they have a separate department which is working on further improvements to detect & prevent errors and frauds of fixed assets.

Recomendations
The internal control system of fixed assets should be continuously monitoring to ensure that it remains effective. There should be timely checking on the day to day activities so that the chances of errors and frauds can be eliminated. There should be a proper check and balance of fixed assests to remain effective internal control system. Accounting staff member who makes journal entries should not access to ledger accounts. An employee should be transfered from department to department on regular basis. Too much confidence should not be placed in any staff member. Management should protect their fixed assets against missuse, Frauds & carelessness.

References
www.googlescholar.com www.msn.com www.ptc.com.pk www.scribd.com www.slideshare.net

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Appendix
Appendix A Internal control system of fixed assets is updated with new technologies

Question #1
No of choices, 0, 0% 1, 0, 0% 2, 1, 10% 3, 1, 10% 5, 5, 50% 4, 3, 30% No of choices 1 2 3 4 5

This graph is showing that 80% people are agree that the internal control system of fixed assets is updated with new technologies and 10% people have neutral response on this. Only 10% people believe that the internal control system of fixed assets is not update with new technologies. So we can conclude that most of the people agree on this

Appendix B The internal control system of fixed assets is cost effective

Question #2
0 0% 5, 1, 10% 1, 0, 0% 2, 2, 20% No of choices 4, 3, 30% 1 2 3 3, 4, 40% 4 5

In this pie the response of 40% people is that the internal control system is cost effective and 40% people have neutral response on this. 20% people believe that it is not cost effective. So we can conclude that it is cost effective because some people have no response on it.

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Appendix C Employees and other staff are satisfied by the internal control system of fixed assets

Question #3

1, 0, 0% 0 0% 2, 0, 0%

5, 3, 30%

3, 3, 30% No of choices 1 2 3 4 4, 4, 40% 5

This pie chart is showing that 70% people believe that employees and other staff member by the internal control system of fixed assets are satisfied. 30% people have no response on it. No one has disagreed on this. So we can conclude that many of the people are satisfied by the internal control system of fixed assets.

III

Appendix D Internal control system of fixed assets enables minimum wastage of resources

Question #4
0 0% 5, 1, 10% 1, 0, 0% 2, 2, 20% No of choices 4, 3, 30% 1 2 3 3, 4, 40% 4 5

In this pie chart 40% people are agree that internal control system of fixed assets enables minimum wastage of resources and 40% people have no response on it. Only 20 % people are not agreeing on it. So we can conclude that the ratio of agreed people is more than disagreed.

IV

Appendix E A specific department works on further improvements of the internal control system of fixed assets

Question #5
0 0% 5, 1, 10% 1, 1, 10% 2, 1, 10% No of choices 4, 3, 30% 1 2 3 3, 4, 40% 4 5

In this pie chart 40% people believe that a specific department working on further improvement of the internal control system of fixed assets. And 40% people have neutral response on it. Only 20% people believe that no department is working on it. So we can conclude that only some people are not agreeing on it.

Appendix F Accounting policies and procedures are flexible to adopt changes in enviroment.

Question #6
0 0% 1, 0, 0% 2, 1, 10% No of choices 3, 3, 30% 1 2 3 4, 4, 40% 4 5

5, 2, 20%

This pie chart is showing that 60% people believe that accounting policies and procedures are flexible to adopt changes in environment.30 % people have neutral response on it. Only 10% people are disagreeing on this. So we can conclude that most of the people are agree to adopt changes

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Appendix G Vouchers for sale and purchase of fixed assets are maintained

Question #7
0 0% 5, 2, 20% 1, 0, 0% 2, 0, 0% 3, 2, 20% No of choices 1 2 3 4 4, 6, 60% 5

This pie chart is showing that 80% people are agree that vouchers for sale and purchase of fixed assets are maintained and 20% people have neutral response on it. So we can conclude that most of the people believe that they maintained their vouchers of sale and purchase of fixed assets

VII

Appendix H Daily reports are received from branches / factories for purchase and sales fixed assets

Question #8
0 0% 5, 1, 10% 1, 0, 0% 2, 1, 10% 3, 2, 20% No of choices 1 2 3 4, 6, 60% 4 5

This pie chart is showing that 70% people agree that daily reports are received from branches for purchase and sales of fixed assets and 20% people have neutral response on it. Only 10% people have disagreed on it.

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Appendix I An accounting staff member making journal entries have access to make Ledger accounts

Question #9
0 0%

5, 4, 40%

1, 3, 30% No of choices 1 2 3 2, 0, 0% 4, 3, 30% 3, 0, 0% 4 5

This pie chart is showing that 70% people have agreed that an accounting staff member making journal entries have access to make ledger accounts. And 30% people have neutral response on it. No one has disagreed on it. So we can conclude that most of the people are agree that accounting staff have access on ledger accounts

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Appendix J Questionaire On Internal control system of fixed assets of manufacturing company

Dear Sir/Madam, I am conducting a survey on Internal control system of fixed assets of manufacturing company. Kindly spare some of your valuable time to go through the questionnaire & give your view on this topic. The information provided by you would be kept confidential & only be used for study purpose.

Job Title Time duration

Shift

Morning

Evening

1-4 years

5-8 years

9-12 years

13-16 years

(1) Strongly Disagree (2) Disagree (3) Neither Agree nor Disagree (4) Agree (5) Strongly Agree 1. internal control system of fixed assets is updated with new technologies 2. The internal control system of fixed assets is cost effective. 3. Employees and other staff are satisfied by the internal control system of fixed assets. 4. internal control system of fixed assets enables minimum wastage of resources A specific department works on further im5. provements of the internal control system of fixed assets 6. accounting policies and procedures are flexible to adopt changes in enviroment.

7.

Vouchers for sale and purchase of fixed assets are maintained

8.

Daily reports are received from branches / factories for purchase and sales fixed assets

9.

An accounting staff member making journal entries have access to make Ledger accounts

Appendix K Questions for interview 1. Who is responsible person for fixed assets for Pakistan Tobacco Company? Ans: . Mr Nadeem is responsible person for fixed assets for Pakistan tobacco company. 2. If this person is unavailable then who is acting authorized person? Ans: If this person is unavailable then Mr.sadaqat is authorized person 3. What are your fixed assets? Ans: Land Furniture Vehicles Godown Fixtures & Fittings Office Equipment Computers Back up Generators Crushing Machine Shredding Machine Tobacco Cutter Threshing Machine Tobacco screening spreader

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 Filter making Machine Paper making machine Double tube cigarette rolling machine cigarette making Machine cigarette Packing Machine Wrapping Machine Cottoning Machine Loader 4. What is the Procedure for Sale of fixed assets( direct selling or through broker) Ans: The company sales their fixed assts through bid 5. Do you maintain the record of sales of fixed assets on register? Ans: yes we have maintained the record of sale of fixed assets on separate register. 6. What is Procedure for purchase of fixed assets? Ans: When we purchase fixed assets we contact with the direct foreign companies then they submit their quotations by our requirements of specifications and also with prices then we choose best from these. After this we submit their dues in advance and wait for their delivery. 7. Do you maintain the record of Repairing of fixed assets? Ans: Obviously we maintain the record of repairing of fixed assets. 8. Is a voucher used for all purchases of fixed assets? Ans: yes a voucher is used for all purchases of fixed assets. 9. Have you maintained the records of fixed assets when you have sold through broker? Ans: We have maintained the record of fixed assets when we sell through broker. 10. Is your purchasing department is separate & who is responsible for this? Ans: Yes our purchasing department is separate and Mr.Ehsan is responsible for this department. 11. Do you compare cash book and bank reconciliation statement? Ans: We compare cash books and bank reconciliation statements monthly.

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12. Is a voucher used for Selling of fixed assets? Ans: Yes voucher is used for Selling of fixed assets. 13. Does your organization have an up to date accounting policies and procedures manual? Ans: Yes our organizations have an up to date accounting policies and procedures manual. 14. What type of depreciation method used in your company? Ans: Straight line method is used in our company. 15. Is there any specific department in this company which is working on further improvement of the internal control system of fixed assets? Ans: Yes this company has a specific department that work on further improvement of the internal control system of fixed assets.

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