HWSM

Haseeb Waqas Sugar Mills LTD Presented by: Shazil Ahmad M.Naqeeb Arshad Komal Ashraf Ali Kamal Pasha M.Saad Siddiq Usman Ashraf Fahad Zakria

Acknowledgment
We would like to express the deepest appreciation for my teacher and mentor, Mr. Abdul Rafay, who has shown the attitude and the substance of a genius: he continually and convincingly conveyed a spirit of adventure with regard to research, and an excitement with reference to teaching. He has been the motivation behind our extensive research and without his guidance and persistent help this project would not have been possible. We are also very thankful to Mr Amir Hanif (Sr. Manager internal Audit Group) in Haseeb Waqas Sugar Mills. He gave us his important time to guide us all about the internal audit activities of Haseeb Waqas Sugar Mills.

Audit
An audit is an official examination(of financial statements) of the accounts(or accounting systems) of an entity(by an auditor). The main objective of an audit is to enable an auditor to give an opinion as to whether or not the financial statements of an entity are prepare accounting to an applicable financial framework. The applicable financial reporting frame work is decided by: Legislation within each individual country, and Accounting Standards(for example IAs/IFRS)

Internal Audit
Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes

INTRODUCTION

Introduction
HWSML is one of the largest white refined sugar manufacturer in Pakistan with a Sugar Cane Crushing Capacity Of 10,000 M. Haseeb Waqas Sugar Mill developed and used state of the art technology for cane preparation with a split cane carrier system for the first time in the country. This brought a revolution into the sugar industry in Pakistan. The Company is listed in Karachi and Lahore Stock Exchange. The price of per stock is 20.95

HWSC

Internal Audit

Audit Department

Qualification
Appointment - Audit Committee Chairman & CEO Chartered Accountant Starters assistant manager Audit Head : 4year Articles, Post Experience of 5 years

Audit Committee
M.Irfan Hussain Butt Mr .Sohail Ahmed Butt Mr Raza Mustafa (Chairman) (Member) (Member)

Continued ..
The statutory auditors or the persons associated with them have not been appointed to provide other services except in accordance with the listing regulations and the auditors have confirmed that they have observed IFAC guidelines in this regard.

Interviewee
Our interview was conducted on Monday the 22nd of November 2010. Our interviewee was Mr. Amir Hanif, whose designation is the senior manager internal audit of the Haseeb Waqas Sugar Mills Ltd. He is a CA finalist and maintains a 13 year post article experience and has devoted the last 4 years of work at Haseeb Waqas Sugar Mills Ltd.

Statement of Compliance with the code of Corporate Governance:

The Board has formed an Audit Committee. It comprises three members, all non-executives directors including the Chairman of the Committee. The meetings of the Audit Committee were held at least once every quarter prior to approval of interim and final results of the Company and as required by the Code. The terms of reference of the committee for compliance.

Continued

..

The board set up an effective internal audit function managed by suitably qualified and experienced personnel who are conversant with the policies and procedures of the Company and are involved in the internal audit function on a full time basis.

The statutory auditors of the Company have confirmed that they have been given a satisfactory rating under the Quality Control Review program of the Institute of Chartered Accountants of Pakistan (ICAP), that they or any of the partners of the firm, their spouses and minor children do not hold shares of the Company and that the firm and all its partners are in compliance with the International Federation of Accountants (IFAC) guidelines on code of ethics as adopted by ICAP.

Vision Statement
HWSM internal audit department is to provide management with information, facilitation and advice to ensure that there is an appropriate balance of control, risk and governance throughout the organization.

Guiding Principles of Internal Audit

INTEGRITY Work with honesty, diligence and should observe law and regulations. Should not be part of illegal activity.

CONFIDENTIALITY Shall be prudent in the use and protection of information acquired in the course of their duties. Shall not use information for any personal gain

Role of Internal Audit

To attain managements goals and objectives by bringing disciplined and systematic approach to enhance the following: Risk management Control processes Governance

Use of Internal Audit to Management

An effective Internal Audit Department can help management to ensure that: Standards goals and objectives are achieved. The company s policies, procedures and instructions are being followed. Records are reliable, so that management decisions are based on accurate information. Legal requirements are satisfied.

Key Areas of focus

Receivables Payables Reconciliations

Internal Audit Review

Not done by external auditor But they have the coordination They check internal audit reports If there s any shortfall That area is checked by external auditors

Who does internal auditor report to?

Internal Auditor must be independent of the activities which it audits. Its direct responsibility is to the Chief Executive/ Managing Director.

Internal Audit Plan

Internal Audit Plan is prepared using a risk based methodology. It identifies any significant changes in the company s operations and the environment it operates in. Prepares a detailed risk analysis and determined the priority of coverage to be devoted to each audit area. These risk assessments are also discussed with relevant levels of management.

Types of Internal Audit performed by Internal Auditor

COMPLIANCE REVIEW of existing systems of internal controls to ensure that they are operating as planned. OPERATION REVIEW which helps management to improve productivity, efficiency and effectiveness. PRE AND POST IMPLEMENTATION REVIEW of newly established systems to ensure adequacy and effectiveness of controls before and after implementation of the system.

Characteristics of an Internal Auditor

Independency of an Internal Auditor
Independency is essential to ensure objectivity. Internal Auditor is impartial when performing reviews because it has no vested interest in any activity that it audits. Internal Audit is usually an Chartered Accountant but internal audit can also be done by a person who possess valuable knowledge and insight about the functions of audit. Internal auditor does not review the performance of an individual operating in the organization but it reviews the operation of an entity.

OVERVIEW OF AUDIT ACTIVITES

Planning and scheduling audit Conducting document review Preparing for on-site activities Conducting audit Prepare audit report Conducting follow-up
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AUDIT ACTIVITIES
Forming an audit team and assign roles and responsibility and agreed on the scope Conducting document review  Review documents (SOPs, audit findings, corrective action/preventive action, etc.), check the integrity of the quality system and various controls are effective Preparing for the on-site audit activities  Preparing audit plan  Assigning work to the audit team  Preparing work documents (eg. audit checklists, sampling plans, forms for recording information; questionnaires)
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AUDIT DOCUMENTATION
Audit plan  should be sent to auditee prior to audit activity  findings from the last audit should be also mentioned Audit note should include  an audit questionnaire  all records and comments during the audit Audit report is an  official document to report the audit findings
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EXAMPLE OF AN AUDIT CHECKLIST

General format for an audit checklist

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Internal Control the 5 key components

5. 4. 3. 2. 1.
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Internal Control the 5 key components

Control Activities Policies/procedures that ensure management directives are carried out. Range of activities including approvals, authorizations, verifications, recommendations, performance reviews, asset security and segregation of duties.

Control Environment Sets tone of organization influencing control consciousness of its people. Factors include integrity, ethical values, competence, authority, responsibility. Foundation for all other components of control. 30

Risk Assessment Risk assessment is the identification and analysis of relevant risks to achieving the entitys objectives forming the basis for determining control activities.

Internal Control the 5 key components

Monitoring Assessment of a control systems performance over time. Combination of ongoing and separate evaluation. Management and supervisory activities. Internal audit activities. Control Activities Policies/procedures that ensure management directives are carried out. Range of activities including approvals, authorizations, verifications, recommendations, performance reviews, asset security and segregation of duties.

Control Environment Sets tone of organization influencing control consciousness of its people. Factors include integrity, ethical values, competence, authority, responsibility. Foundation for all other components of control. 31

Risk Assessment Risk assessment is the identification and analysis of relevant risks to achieving the entitys objectives forming the basis for determining control activities.

Internal Control the 5 key components

Monitoring Assessment of a control systems performance over time. Combination of ongoing and separate evaluation. Management and supervisory activities. Internal audit activities. Control Activities Policies/procedures that ensure management directives are carried out. Range of activities including approvals, authorizations, verifications, recommendations, performance reviews, asset security and segregation of duties.

Information and Communication Pertinent information identified, captured and communicated in a timely manner. Access to internal and externally generated information. Flow of information that allows for successful control actions from instructions on responsibilities to summary of findings for management action. 32

Control Environment Sets tone of organization influencing control consciousness of its people. Factors include integrity, ethical values, competence, authority, responsibility. Foundation for all other components of control.

Risk Assessment Risk assessment is the identification and analysis of relevant risks to achieving the entitys objectives forming the basis for determining control activities.

All five components must be in place for a control to be effective.

Relationship with Management

Challenge is balancing advising and counselling management with fiduciary duty to monitor and oversee management To build trust, need strong, open two way communication channels Clear understanding on where management s responsibilities end and committee s begin Management should seek committee s input in advance of key decisions Evaluate management s performance and assess bench strength

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Relationship with external auditors

Auditors should report directly to the committee Audit Committees have a role in
Selecting, or reappointing, external auditors Evaluating auditors performance Ensuring auditors independence

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Minutes:
As internal audit committee is the nonexecutive member of the minutes. They attend all the minutes so that they can know the real position of the company. The minutes are held very month.

Where do Ideas come from?

There are many sources, both within and outside the Internal Audit Department. External Sources includes : Chief Executive/Managing Director Managers at all Levels External Auditors(Qadeer & Company)

Fraud as a risk to internal audit

Internal audit serves as a function to detect fraud within an organization Internal audit serves as a critical defense against the threat of fraud, with a focus on assessing and monitoring controls designed to prevent and detect fraud. Internal auditors can be part of fraud deterrence by examining the adequacy of the system of internal controls.

Fraud management in HWSM through internal Audit

HWSM being a sugar mill, faces minimal risk in their type of business Only fraud susceptible area is the buying of sugar cane, as it includes 90 % of their product buying To minimize this, a committee is set up, which includes a member from the internal audit, and two loyal members of the organization. Who regulate and oversee a fair and transparent process.

SWOT Analysis OF Internal Audit Department

Strengths