Mid term assignment of audit and assurance

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RICE

Assignment Of

AUDIT AND ASSURANCE

Topic (Company intro, structure, departments detail with hierarchy and internal control)Submitted to: -

Sir.Khurram shahzadSubmitted by:- Group name

Friend finder (B.B.A’7’B)Group member’s names

Arslanakram 11480Ammadqadir 11482Usmanzahoor 11461Haseeb 11409Junaidwaqas 11478Irfanshabir 11442

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ContentsAcknowledgement....................................................................................3

INTRODUCTION....................................................................................4

Mission.....................................................................................................5

Vision........................................................................................................5

Core value.................................................................................................6

COMPANY STRUCTURE OF BASMA RICE.......................................7

SYSTEMS OF ACCOUNTS, AUDIT AND FINANCE DEPARTMENT.......................................................................................8

Finance...................................................................................................8

Accounts..............................................................................................10

Auditor....................................................................................................13

Hierarchy of finance department............................................................14

Hierarchy of accounts and audit department..........................................15

Internal control system............................................................................16

Reference................................................................................................18

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Acknowledgement

In the name of Allah, the most beneficent & the Merciful.

Firstly, we all likely to thank mighty Allah who provides us knowledge, energy & skills to get opportunities & to increase our knowledge & experience by completing this project.

Secondly, we especially thank to our course instructor Sir.khurramshahzadWho guides us at every step & every aspect of this assignment, so that’s competed successfully

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INTRODUCTION

BASMA Rice Mills (Pvt) Ltd – (BRM) www.basmarice.com is one of the group companies, while the flagship company is Standpharm Pakistan (Pvt) Ltd – (SPL) www.standpharm.com

The parent company of the group SPL was incorporated in 1969 and from a humble beginning today is among the top 30 Pharmaceuticals concerns out of more than 700 manufacturers including about 45 multinational companies operating in Pakistan. With a turnover in excess of PKR 700 million for 2009 and a projected turnover of over PKR 1,000 million for 2010, SPL is envisioning improving its ranking.

BRM managed a turnover in excess of PKR 760 million in the year 2009 and has projected a turnover in excess of PKR 1,200 million for 2010. The growth in turnover has been consistent though with some wavering in line with the global trends. A summary of local sales and export sales over the last 8 years is attached. The realizable value, as going concern, of fixed assets only, of BRM is in excess of PKR 500 million. The yield on average funds employed has consistently remained above 25% over the years.

Key products marketed by BRM include local bulk trade of rice, export of Basmati Brown rice, export of white rice, export of parboiled rice, export of BRM branded rice and facilitating branding for customers. Branding for customers include concept development, printing and packaging.

Markets catered to by BRM include the globe, with satisfied customers in Australia, UK, Holland, Portugal, Ireland, Germany, USA, Canada, UAE, Saudi Arabia, Oman, Mauritius and Seychelles.

We specialise in the export of different qualities of Basmati rice from brown, de-husked, sorted and graded Basmati rice to par-boiled and raw-milled 100% sorted and graded qualities. Basmati rice exported by Basma Rice Mills has a unique aroma and special taste compared to other specialised brands worldwide.

This is primarily attributed to the extremely fertile soil and climatic conditions in the region of Punjab suitable for rice production, thus ensuring that this quality of Basmati rice cannot be grown under any kind of artificially created or simulated conditions.

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Mission

To maintain the age-old traditional quality and taste of Basmati Rice By innovative

approach and advanced technology, processes and products.To become a global

supplier, delivering quality products and services resulting in customers delight.

Vision

We see ourselves as a name of best taste and quality that offers varieties of rice to

customers worldwide through focusing on customer satisfaction with our

traditional flavor and goodness. We envision setting set up ready-to-eat facility for

which 56000 mts land already been acquired to cater to authentic Pakistani food

lovers across the world. Our vision is to be a pioneer in providing healthy and

high-quality ready-to-eat rice varieties for all age0groups and sections of society.

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Core valueQuality Control

Quality is strategic to our strength. We have a strong commitment towards providing homogeneous quality to our buyers, which is why quality management in the company starts at the grassroots level and continues till the product finally reaches the consumer. Quality control processes are religiously adhered to in order to ensure uniformity, which we achieve in three ways:

Quality Control through Procurements

We select the best farmers in the rice growing area of Punjab. Our field staff constantly monitors paddy fields from sowing to harvesting. They advise the farmers on the correct application of fertilizers and pesticides to produce healthy grains of rice without chemical residue. After harvesting and husking, hundreds of samples are drawn from the fields and examined in our labs for final selection. After procurement, the selected stock is stored for aging till the rice attains maturity. All stocks are numbered and a record is maintained even after processing and export.

Quality Control System

Samples are drawn during different stages of processing and milling at regular hourly intervals and tested in the lab to constantly monitor the uniformity in whiteness degree, moisture content, average grain length (AGL), broken percentage and colour. These hourly lab results are entered into the computer and are available to buyers on request.

Quality Control through Grading &Colour Sorting

The grading system consists of five graders installed in three different stages of milling and processing. This enables them to ensure uniformity in grain length and also control the broken percentage according to the specific requirements of our buyers. In order to obtain uniformity in grain colour, we have installed a color sorter – a computerized, state-of-the-art machine considered throughout the world to be the top-of-the-line colour sorter.

Custom Branding and Packaging

Our expertise is restricted not only to providing excellent quality Basmati rice but also providing our valued international customers with their desired brands and customized packaging. After all, the company’s products have to compete all over the world and packaging forms an important part of the product image in the consumer’s mind. Special care is therefore taken to make the packaging distinctive, attractive and hygienic, ensuring complete safety against moisture, pests, insects and dust.

It is the collective effort of our professional team which changes Basmati rice from a commodity to a high grade product of international standard. We pack our product under the brand name of

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RICEour buyer’s choice in environment-friendly, bio-degradable cotton, paper and cardboard in 1, 2, 5, 10 & 20kg sizes.

COMPANY STRUCTURE OF BASMA RICE

BASMA has a dedicated team of professionals who have years of experience under their arm which is ably supported by layers of an operating team consisting of nearly 100 members, in the chain of procurement, production and marketing process. A profile of the key Management / Professional team members is as under.

Mr. farooq a. alvi – chief executive of basma rice mills (pvt.) ltd. and chief executive of standpharmPakistan (pvt.) ltd.

Mr. Alvi joined the group operations in 1986 as Chief Executive of Standpharm. Mr. Alvi is a Professional Accountant with experience spanning over a period of 15 years. As a professional accountant, he was associated with Auditors of international standing and was exposed to the operations of various national and multinational mega companies. Mr. Alvi is responsible for the group’s export business, mainly of rice.

M.zafarullah – director of basma rice mills (pvt.) ltd.

Mr. Zafarullah is a post graduate in Economics. He has served the companying industry for over a period of 30 years with two decades in the Middle East. He has last worked as the unit head of the Islamic companying group with the Saudi British Company, a subsidiary of HSBC.

Col. (R) Zafar H. Gill – General Manager ProcurementMr Gill graduated in Agriculture from the University of Agriculture, Faisalabad in the year 1963. After completing education, he had worked as Agriculture Farm Manager for 5 years before getting commission in the Pakistan Army. While working as Farm Manager, he had looked after about 1000 Acres cultivation of Rice, Wheat & Jute. He had served the Army until 1992 and retired as a Lieutenant Colonel. Thereafter, he joined Army Welfare Trust Rice Mills as Manager till 1998. In 1998 he joined Basma Rice Mills and looked after construction of the Mills building & installation/erection of machinery. He also worked as the Head of Production while his current responsibilities include purchasing of paddy/rice.

Asifrana- General Manager, Finance & Corporate Services and Company Secretary

Asifrana is responsible for the delivery of financial and corporate services, including finance and accounting, IT and business systems, governance risk and compliance, facilities and office services, and management of the Export Efficiency Powers.

Naveedakram- Finance & Corporate Services Coordinator

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RICENaveedakramis PA to the General Manager for Finance & Corporate Services and Company Secretary and also provides administrative support to the whole team.

Hammadaltaf - Finance Manager

Hammadaltaf is responsible for all aspects of financial accounting and the management of the accounts receivable, accounts payable and companying functions. In addition the role is responsible for payroll, privacy issues and the preparation of the basma statutory accounts.

Muhammad Ali - Management Accountant

Muhammad Ali is responsible for the development, monitoring and reporting of R&D and marketing programs. This includes monthly, quarterly and annual reporting of actual performance against budgets and forecasts.

Kashifsattar - Assistant Accountant

Kashifsattar is responsible for accounts receivable including invoicing.

Saadjaveed khan - Corporate Accountant

Saadjaveed khan is responsible for payroll processing, reconciliations and companying. In addition, Joseph acts as assistant to the Finance Manager.

Faiza Khan - Internal Audit Manager

Faiza khans check the account and make auditor report.

Majidsaleem - Office Services Manager and Export Licensing Officer

Majidsaleem is responsible for basma facilities management, purchasing and reception services. He also manages the administration of the Export Efficiency Powers, including issuing licenses, reviewing compliance and assisting in the review of these powers

SYSTEMS OF ACCOUNTS, AUDIT AND FINANCE DEPARTMENT

FinanceDaily Bank Position

Arrange cash in our bank accounts according to issued Cheques Call to all banks on 09:30 am and confirm the available balances, after that call to all

head cashiers to deposit the cash in the banks where we need it. Coordinate with store head cashiers and reconcile the cash on daily basis.

Working on Accounts Payable Module:

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RICE Check and approve all kind of accounts payable vouchers in Oracle Financials. Booking of monthly expenses of all locations and head office in Oracle Financials. Open and close the accounting periods in oracle financials. Validation of payables in Oracle Financials. Create accounting and processing payables work to general ledger module. Fetching of all credit and cash invoices from Navision to integration and then from

integration to oracle financials. Maintaining the supplier’s ledgers.

Working on General Ledger Module:

Check and approve all kind of journal vouchers. Booking of expenses in Oracle Financials. Posting of all entries to their respective heads.

Working on Accounts Receivable Module:

Booking of receivables from our all parties in Receivable module.

Working on Trial Balance

After completion of all processes from payables and general ledger module update the trial balance on monthly basis.

Export trial balance from oracle for making the monthly profit and loss account. Summarize the trial balance data head wise for monthly and annual accounts.

Working On fixed Assets Module:

Addition and deletion of company fixed assets. Booking of fixed assets in Oracle Financials

Working On Microsoft Navision:

Open new vendor account in Navision on request of buyers and then update in oracle. Update the daily sales report on daily basis. Analyze and summarize different kind of reports from Navision.

Conduct Stock Takes For All locations:

Stock takes of all locations on random basis. On stock take night before starting post all un-posted documents in Navision. Freeze data for the required divisions. Update the database before punching data in laptops. After completion of stock counting item wise scanning and punching of stock in laptops. As the data punching completes then collect data from both laptops and compile in a

master file.

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RICE Execute query after completion of all data and save in excel Make a report with respect of divisions and difference in value. These reports are hand over to store manager for verification of data and then update the

report after all kind of verifications. Filter the data from verified report and send to it for upload in Navision. As the data upload then after verification of correct validation post in Navision to update

the inventory.

Working on salaries and over time

Checking and Booking:

Provide deductions from employees issued against provident fund and against salary to HR department on Monthly basis.

Checking and booking of Salaries Department wise in Oracle. Checking and booking of Social Security Department wise in Oracle. Checking and booking of Employee’s Old Age Benefit Department wise in Oracle. Checking and booking of Over Time Department wise in Oracle. Booking of recovery from employees in form of mess, phone, salary and update the

ledgers by booking of entries in Oracle.

Payment of Salaries from Banks:

Transfer salaries to employee’s bank accounts through bank transfer letter printed on Company letter head which have the following detail,

Title of Account Bank Account Number  Payable amount Signed by two signing authorities

Payment to SNS and Consignment Parties:

Monthly Payments of Vendors. Monthly Payments of Consignment Vendors. Cost of goods sold against above vendors Rental income from above parties

Assist to Manager Finance:

Reporting on daily basis Making on monthly accounts At the time of annual audit

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RICEAccountsSales Posting

At early morning confirm the sales amount from store cashiers. Match the sales amount shown in Navision with actual cash figure at all stores. After confirmation of sales post it in Navision.

Sales Cash deposits and direct payments to vendors:

Reconcile the sales cash according to vendor payments and used for store. After reconciling cash on excel post all transactions to Oracle Financial All the transactions consist of following natures, Actual Sales amount post in oracle. Sales cash deposit in bank post in oracle. Credit sales transfer to alfalah bank post in oracle. All petty expenses at store posted in oracle. Post all payments to vendors in oracle.

Verification of Sales Cash used at stores:

Before posting all transactions in oracle, verify the following things, Casting of all petty expenses. All store expenses should be signed by store manager and store cashier. The signed expenses should be approved by Regional retail manager  Cash Reconciliations: After booking of all store receipts and payments reconcile the cash in oracle financial. The closing balance of oracle financial should be equal to the amount issued to store

for  petty expenses and for till cash. If is there any difference the store cashier will explain the reason of tendency.

Checking of Reconciliation from Finance Manager:

The cash reconciliation statement should be checked and signed by finance manager.Filling of company Expenses and Z-Reports:

All the store expense vouchers should be filed with respect of their month and voucher number assigned from oracle financial.

Z-Reports received from store should attach with the statement printed from Navision and then punched in the file with respect of store and month.

Accounting/Bookkeeping

Cash – consecutive record of cash receipts and payments General Journal General Ledger Subsidiary ledgers shall be reconciled with the general ledger at least monthly.

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RICE There will be adequate and appropriate supervision of employees with sufficient

employee backup to ensure that accounts and ledgers are adequately maintained. The Accounts & Finance Manager to sight and review all receipt reversals, journals,

credit notes, and other transactionsCash Received

Cash received shall be recorded by an entry for each individual transaction. The invoices record shall indicate the mode of payment, Cheques, cash, Receipts shall be issued in numerical sequence

Banking

Cash received by an officer or employee of BASMA must be paid into a BASMA bank account.

Cash received by or on behalf of BASMA must be banked as soon as possible on or after the day of receipt.

Banking shall be reconciled with receipts. In the intervening periods between banking, Cash received will be deposited in the safe.

Bank Accounts

Bank accounts will be operated exclusively for the purpose of conducting BASMA business. Those presently approved:

Chief Executive Officer  Financial Manager At least two authorized bank signatories are required to disbursements

of cash from bank accounts. All accounts will be in the name of BASMA Corporation (Pvt) Limited accounts can only

be opened with the approval of the Chief Executive Officer and Director  Bank reconciliation for each bank account operated by BASMA shall be prepared

monthly.Accounts for Payment and Disbursements

All accounts for payment shall be certified by an Authorized Officer as to: The receipt of the goods and services being in accordance with the Relevant Purchase order  The prices charged being fair and reasonable The calculations and additions being correct The allocation of the payment to the correct ledger account Payments/disbursements is to be made by the crossed Cheques Cheques shall be on BASMA stationery, pre-numbered and issued in numerical sequence Unused Cheques shall be in the custody of the Accounts Payable Officer who shall

maintain a register Purchasing

Procurement will be undertaken by BASMA in a way which:

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RICE Encourages purchases being made from a registered Suppliers or from Open Markets All the purchases must be made according to the demand Proper documentation must be made by the purchase managers All the purchase Orders Must be signed by the departmental purchaser  All the Purchases Orders must be matched by the Good received Notes Salaries and Wages Payroll Records will be maintained in respect all employees of Q-Mart showing Gross salary

or wages Tax and details of all other payments and deductions Sick, annual, long service and other leave available and taken Allocation of time worked on jobs Salaries and wages will be paid on the basis of attendance recorded on an approved

timesheet, except for employees on “no fixed hours” Contracts Time sheets will be mailed by the store Manager to the H.R manager  All claims for payment of overtime must be authorized by the relevant manager

before being paid.

Auditor

Purpose internal auditing department

To provide independent objectives assurance and consulting services designed to add value and improve the organizations operations.

To help the organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectives of risk management, control and governance processes.

Present auditor

The present auditor faiza khan retire and being eligible, officer for reappointment. The auditor has recommended their reappoint as auditors of the company.

Audit committee

The audit committee was established to assist the director in discharging their responsibilities towards company. Audit committee’s responsibilitiesincludes, reviewing reports of the company’s financial results, monitoring internal audit functions and compliance with relevant statutory requirements, to assist the board in discharging its responsibilities for safeguarding of company’s assets,development and implementation of effective internal control system

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RICEThe committee consists of three members, including the chairman of the committee who are non-executive directors.

The audit committee meets at least four time in a year and additional meetings can be convened by the chairman of the committee whenever necessary.

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General Manager, Finance & Corporate Services and Company Secretary

Finance & Corporate Services Coordinator

Finance Manager

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Hierarchy of finance department

General Manager, Finance & Corporate Services and Company Secretary

Asifrana is responsible for the delivery of financial and corporate services, including finance and accounting, IT and business systems, governance risk and compliance, facilities and office services, and management of the Export Efficiency Powers.

Finance & Corporate Services Coordinator

Naveedakram is PA to the General Manager for Finance & Corporate Services and Company Secretary and also provides administrative support to the whole team.

Finance Manager

Hammadaltaf is responsible for all aspects of financial accounting and the management of the accounts receivable, accounts payable and companying functions. In addition the role is responsible for payroll, privacy issues and the preparation of the basma statutory accounts.

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Management Accountant

Office Services Manager and Export Licensing Officer Assistant Accountant

Corporate Accountant

Internal Audit Manager

RICE

Hierarchy of accounts and audit department

Muhammad Ali - Management Accountant

Muhammad Ali is responsible for the development, monitoring and reporting of R&D and marketing programs. This includes monthly, quarterly and annual reporting of actual performance against budgets and forecasts.

Kashifsattar - Assistant Accountant

Kashifsattar is responsible for accounts receivable including invoicing.

Saadjaveed khan - Corporate Accountant

Saadjaveed khan is responsible for payroll processing, reconciliations and companying. In addition, Joseph acts as assistant to the Finance Manager.

Faiza Khan - Internal Audit Manager

Faiza khans check the account and make auditor report.

Majidsaleem - Office Services Manager and Export Licensing Officer

Majidsaleem is responsible for basma facilities management, purchasing and reception services. He also manages the administration of the Export Efficiency Powers, including issuing licenses, reviewing compliance and assisting in the review of these powers

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Internal control system

The scope of Audit and Risk Review Group (A & RRG), independent from line management, inter-alia includes, review and assessment of the adequacy and effectiveness of the control activities across the Company as well as to ensure implementation of and compliance with all the prescribed policies and procedures. All significant and material findings of the internal audit reviews are reported to the Audit Committee of the Board of Directors. The Audit Committee actively monitors implementations to ensure that identified risks are mitigated to safeguard the interest of the Company.

Operations Group is entrusted with the responsibility of expediting rectification of irregularities and control lapses in company’ operations and various controlling offices pointed out through audit reviews. Vigorous efforts are made by Operations Group to improve the Control Environment at grass root level by continuous review & streamlining of procedures to prevent & rectify control lapses as well as imparting training at various levels. The Compliance Group, through its regional offices, ensures adherence to the regulatory requirements and Company’s internal policies and procedures, with specific emphasis on KYC/AML.

The Company’s internal control system has been designed to provide reasonable assurance to the Company’s management and Board of Directors. All Internal Control Systems, no matter how well designed, have inherent limitations that they may not entirely eliminate misstatements. Also projections of evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. However, control activities are ongoing process that includes identification, evaluation and management of significant risks faced by the Company.

Recognizing it to be an ongoing process, the Management of BASMACompany has adopted an internationally accepted Internal Control COSO Framework, in accordance with guidelines on Internal Controls from the State Company of Pakistan. BASMA Company has completed the first four stages of the internal control program as per these guidelines, which include mapping

Internal control

The company management is responsible to establish and maintain an adequate and effective system of internal controls and procedures. The management is also responsible for evaluating the effectiveness of the company internal control system that covers material matters by identifying control objective and reviewing significant policies and procedures.

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RICEand documentation of AS-IS processes and controls in the form of detailed process flow charts, identification of gaps and requisite recommendations, development of remediation plans and management testing plans. In addition, the management testing framework and entity selection criteria have also been developed for ensuring an ongoing operating effectiveness of the key controls. Currently the Company is in the phase of implementing the management testing plans and project initiatives, as planned. This will be followed by quality assurance and validation of the initiatives completed.

The Board of Directors being ultimately responsible for the internal control system endorses the management evaluation and efforts to adopt above mentioned internationally accepted standards in improving controls and processes to ensure better risk mitigation.

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Reference

http://basmarice.com/

Or

Personally visit of BASMA