Summer training project report on Internal Audit Functions and its performance of OIL

SUMMER TRAINING PROJECT

REPORT ON

“Internal Audit Functions and its Performance in OIL, Duliajan”

As a partial fulfillment of the requirement for the MBA degree

Under the organizational guidance of:

Mr. M D Gupta

Chief Manager, Internal Audit

Submitted By:

Debashish Phukan

Wilson Kikon

School Of Management Studies (SMS)

NAGALAND UNIVERSITY

DECLARATION

We undersigned hereby declare that the project entitled “Internal Audit

Functions and its Performance in Oil India Limited” is the original piece of

work submitted by us under the guidance of Mr. M D Gupta, Chief Manager

(IA), for the partial fulfillment of the requirement of MBA Degree of “SCHOOL

OF MANAGEMENT STUDIES (SMS), NAGALAND UNIVERSITY” and is

exclusively prepared and conceptualized by us and the findings in this project

report are based on the data collected by us and to the best of our knowledge and

belief this report has not been copied from any research submitted by anyone,

anywhere earlier.

_______________

Debashish Phukan

_______________

Wilson Kikon

School of Management Studies (SMS),

Nagaland University

PREFACE

The MBA is not an end in itself, but a means to an end. It is a degree

designed to give us the ability to develop our career to its fullest potential, at an

accelerated pace. To become a successful manager in this competitive era the first

and foremost task is to have a real life experience about the corporate world. We

are very much fortunate that in our syllabus there is a provision for Summer

Training of eight weeks in the public sector or private sector. We have made our

summer training at Oil India Ltd. (OIL) Head Office, Duliajan, Assam. In OIL we

have been given the necessary training regarding their organization and working

also we have been given the necessary inputs regarding our project work. It is a

splendid experience to work with the professionals. In IOL we have come to know

a lot and I believe those will pave our way during our working in the corporate

world.

I am very much glad to present our project report on “Internal Audit Functions

and its Performance in Oil India Limited”

This project is a sincere attempt to study and understand the overall Internal Audit

functions of Oil India Limited (OIL) and its prospects.

Debashish Phukan

Wilson Kikon

School of Management Studies (SMS)

NAGALAND UNIVERSIT

ACKNOWLEDGEMENT

We take this opportunity to thank all the person without whose constant

guidance, support and help, this project would not have seen completion.

We avail our self of the opportunity of offering our sincere thanks to all the

members of the Department of Business Administration, “School of management

Studies (SMS), Nagaland University for organizing the summer training in Oil

India Limited, Duliajan and also for their generous guidance and help in the

preparation of this report.

We would like to express our gratefulness to Ms. D.Borborah, Sr. Manager,

T&D and Mr. T K Das Gupta, GM (IA), OIL, for giving us the chance to carry

out our project in his organization.

We acknowledge our indebtedness to our project guide Mr. M D Gupta,

Chief Manager (IA), OIL for his insightful comments and guidance regarding the

manuscript of this report.

We also like to thank Mr. M B Chetri Sr. Manager (IA), Mr.Utpal

Kaushik Sarma Dy. Manager (IA), Mr. A K Sinha Sr. Audit Officer (IA) and all

the Officers and staff of Internal Audit Department, OIL for helping and

supporting us during the summer training.

Last but not the least, our thanks also extended to all the respondents of OIL,

who has taken the pain of filling up the questionnaire and helped us to carry out the

study on their inputs.

Debashish Phukan

Wilson Kikon

School of Management Studies (SMS),

Nagaland University

EXECUTIVE SUMMARY

Project title: Project Report on Internal Audit Functions and its Performance in

Oil India Limited

Organization: Oil India Limited, Duliajan, Assam

Organizational Guide: Mr. M D Gupta, Chief Manager (Internal Audit)

Duration: 1st June – 31

st July, 2011 (2 months)

Objectives of the study:

• To measure the overall performance of Internal Audit Department in OIL,

Duliajan

• To study the functions and roles of Internal Audit Department in OIL,

Duliajan

Research Methodology:

The study is based on survey method. The primary data is collected by personal

interviews through structured questionnaires to knowing the views, comments and

confidence regarding the performance of Internal Audit functions in OIL, Duliajan.

For the purpose of the study executives of different departments were selected and

interviewed. The secondary data is collected from the books, magazines/ journals,

websites and including OIL’s Internal Audit Department office.

Research design :

Descriptive and Exploratory type of Research

Sampling plan : In OIL executive are graded in the increasing rank as A,

B, C, C1, D, E, F, G, H, & I. This survey includes only

grade E & F in the core departments of OIL. The

sample was selected on the basis of Convenience

Sampling.

Sample Size: 50

Data source : Both Primary and Secondary data.

Schedule design : A well structured schedule comprising of close ended,

multiple choice and dichotomous questions. Sincere

efforts were made to make the schedule simple and

precise. Care is being taken to prepare the schedule

according to the structure and format. The schedule is

set according to the objective of the study.

Sample area :

The questionnaire was distributed in 26 major

departments of OIL, (Duliajan).

Method of data

collection:

Primary data were collected by face to face interview

with the help of a well structured questioner and

secondary data were collected from books,

magazines/journals, and websites.

Analysis Technique:

The data collected from the respondents were analyzed

using standard statistical methods and techniques. Pie

charts and Bar diagrams were used to reach at the

conclusion. Findings were made on the basis of

analysis. Recommendations were made on the basis of

findings drawn from various data collected.

Limitation

• The survey was limited to few departments in the organization.

• Unavailability of executives in their cabins as they were engaged in field

work at that time.

• Sampling error might have occurred because no sample in perfect

representation of a give population unless the sample size equals the

population.

• There is a possibility of occurrence of false judgment due to the biased

responses by some of the executive’s staff while giving answers.

• Since the report is based on the primary data and personal interview,

occurrence of personal biased cannot be ruled out.

TABLE OF CONTENTS

Contents

DECLARIATION

PREFACE

ACKNOWLEDGEMENT

EXECUTIVE SUMMARY

CHAPTER-1

(General observation of the Organization)

1.1 Introduction

1.2 History Of Oil

1.3 Executive Profile

1.4 Objectives

1.5 Mission And Vision

1.6 CSR

1.7 List Of Departments

1.8 Achievements

CHAPTER-2

(Introduction to Internal Audit)

2.1 Internal Audit

2.2 History Of IA

2.3 Role In Internal Control

2.4 Role In Risk Management

2.5 Role In Corporate Governance

2.6 Nature Of IA Activity

2.7 IA Report

CHAPTER-3

(Internal Audit in OIL)

3.1 Introduction

3.2 Activities of IA Department

3.3 IA Mission Statement

3.4 IA Purpose

Page No.

I

II

III

IV-VI

1-7

1

2-3

3

3-4

4-5

5-6

6

6-7

8-13

8-9

9-10

10

10

10-11

11-12

11

11-12

12-13

14-24

14

14

14

3.5 Scope and Objectives

3.6 IA Independence

3.7 Responsibilities

3.8 Authority

3.9 Relationship with Other Control Functions

3.10 Approach and Methodologies

3.11 Methodology of Risk assessment

3.12 IA Organizational Structure and Staffing pattern

3.13 Staffing

CHAPTER-4

(Analysis, Interpretation, Findings and Conclusion)

4.1 Analysis and interpretation of the Questionnaire

4.2 Findings

4.3 Conclusion

ANEXTURE—I

BILBOGRAPHY

15

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19-20

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47

CHAPTER 1:

OIL INDIA LIMITED’S PROFILE.

1.1 INTRODUCTION

The story of OIL India Limited (OIL) traces and symbolizes the development and growth of the

Indian petroleum industry. From the discovery of crude OIL in the far east of India at Digboi,

Assam in 1889 to its present status as a fully integrated upstream petroleum company, OIL has

come far, crossing many milestones.

On February 18, 1959, OIL India Private Limited was incorporated to expand and develop the

newly discovered OIL fields of Naharkatiya and Moran in the Indian North East. In 1961, it

became a joint venture company between the Indian Government and Burmah OIL Company

Limited, UK.

In 1981, OIL became a wholly-owned Government of India enterprise. Today, OIL is a premier

Indian National OIL Company engaged in the business of exploration, development and

production of crude OIL and natural gas, transportation of crude OIL and production of LPG.

OIL also provides various E&P related services and holds 26% equity in Numaligarh Refinery

Limited.

The Authorized share capital of the Company is Rs. 500 Cr. The Issued, Subscribed and Paid

share capital of the company is Rs. 240.45 Cr. At present, The Government of India, the

Promoter of the Company is holding 78.43% of the total Issued & Paid-up Capital of the

Company. The balance 21.57% of the Equity capital is held by others.

OIL has over 1 lakh sq km of PEL/ML areas for its exploration and production activities, most of

it in the Indian North East, which accounts for its entire crude OIL production and majority of

gas production. Rajasthan is the other producing area of OIL, contributing 10 per cent of its total

gas production.

Additionally, OIL’s exploration activities are spread over onshore areas of Ganga Valley and

Mahanadi. OIL also has participating interest in NELP exploration blocks in Mahanadi Offshore,

Mumbai Deepwater, Krishna Godavari Deepwater, etc. as well as various overseas projects in

Libya, Gabon, Iran, Nigeria and Sudan.

In a recent CRISIL-India Today survey, OIL was adjudged as one of the five best major PSUs

and one of three best energy sector PSUs in the country.

1.2 HISTORY OF OIL INDIA LIMITED

The story of OIL exploration in India began in the dense jungles and swamps of Assam in the

19th century. United by geography with Burma and caught up in the cross-currents of history,

the region had the common blessing of commercial OIL.

Digboi Well No-1(1889-1890)

The well, started in September 1889, was completed in November 1890 as a producer at a total

depth of 662 ft, with an initial production of 200 gallons per day. The decision to drill was taken

by the Directors of the AR&T Co. in 1888 under the direction of Mr. W L Lake, an employee of

the company and an OIL enthusiast.

Uphill and Downhill (1890 – 1920)

After the successful completion of the first well, Digboi Well No-2 was started in February 1891

in the same area, only to be abandoned as dry at 720 ft. The drilling activities of AR&T

progressed satisfactorily with 11 wells yielding OIL in 1894. A new firm - the Assam OIL

Company (AOC), led by the same Chairman, Lord Ribblesdale - was promoted in 1899 to take

over the petroleum interests of AR&T, including the Digboi and Makum concessions.

The AOC inherited 14 producing wells, with a total production of 50 barrels of OIL per day.

Almost immediately on inception, the company expanded the concessional area of the field by

purchasing the rights of the Assam OIL Syndicate. In 1912 the rotary system was introduced,

Well 47 being the first well to be drilled by this method.

Production almost trebled from 43 bpd in 1901 to 120 bpd in 1902, rising steadily to 247 bpd in

1911, and reaching a maximum of 435 bpd in 1917. By 1920, the AOC had completed 80 wells

with a total average production of 350 bpd.

Aftermath of Success (1953 – 1959)

The Nahorkatiya OILfield was discovered in 1953. However, by 1956 only 16 wells had been

drilled, and evidence suggested subsurface faults which could have acted either as barriers or

conduits to OIL movement. Despite this meager evidence, the AOC announced in September

1956 that proved and probable reserves in the Nahorkatiya area were sufficient to plan a

production target of nearly 2.5 million tons of OIL per year with 45 million cubic feet of gas per

day. On the basis of this assurance, fortified later in the year by new discoveries at Hugrijan and

Moran, a public sector refinery was initiated in 1959 at Guwahati with help from Romania. It

was commissioned in 1962.

The success of Nahorkatiya Well No-1 set in motion a series of activities. The Burma OIL

Company signed a Promotion Agreement with the Government of India (GoI) in January 1958 to

form a company - OIL India Private Limited (OIL) - to take over the management of the AOC-

discovered fields of Nahorkatiya and Moran. OIL was incorporated on 18 February 1959, with

two-thirds of the shares held by BOC and the rest by GOI. The Agreement assured Burmah OIL

a dividend of 10% and Digboi Refinery 1.3 million barrels of OIL per year. Mr W P G

Maclachlan, a key player in the negotiation, became the first Chairman of OIL.

Growth, dynamism, adaptability and technological awareness have marked the activities of OIL

from 1959 till today.

1.3 EXECUTIVE PROFILE

Chairman & Managing Director: Mr.NayanMani Borah

Director (Finance): Mr.T.K Ananth Kumar

Director (Exploration &Development): Mr. B.N Talukdar

Director (Human Resources and Business Development): Mr. Nripendra Kumar Bharali

Director (Operations): Mr.Satchidananda Rath

Government Nominee Director: Mr.D.N. Narasimha Raju

Government Nominee Director: Dr. (Smt.) Archana Saharya Mathur

Independent Director: Mr.Ghanshyambhai Hiralal Amin

Independent Director: Mr.Sushil Khanna

Independent Director: Mr.Arun Kumar Gupta

Independent Director: Mr. AlexanderK Luke

Independent Director: Mr.Vinod Kumar Misra

Independent Director: Mr.Pawan Kumar Sharma

1.4 OBJECTIVES OF OIL INDIA LIMITED

Basic Objectives:

• To achieve self sufficiency in Hydrocarbon resources.

• To get adequate return on capital.

• To promote training and development in Hydrocarbon Exploration.

• To encourage technological advantage for import use of Non conventional energy

resources.

• To built excellent management team.

• To built and project an efficient corporate image.

Objectives towards employees:

• To establish personnel policies for the well being of its employees.

• To induct and develop competent persons at all levels.

• To provide training and development opportunities to enhance skills for optimum

contribution.

• To evolve a system of closer association in involvement of employees to encourage

sports, culture and other activities.

Objectives towards people:

• Social and community development

• Development of ancillary and small scale industry

• Promotion of population environment

• Health interaction with the users and business associates

OIL’s corporate objectives:

OIL believes “Superlative efforts precede superlative results.” To serve that very purpose, OIL

has set the highest challenges for itself to measure up to. Its organizational agenda is to:

• Accelerate exploratory efforts in order to increase Hydrocarbon reserves.

• Speedy development of discovered fields and increase recovery from depleting and

develop fields.

• To augment crude OIL and Gas production.

• Ensure adequate return on capital by capacity utilization, cost effectiveness and optimum

productivity.

• Ensure proper development and effective utilization of Human Resources

• Diversify into the field of OIL field services: indigenous and overseas.

• Undertake overseas venture in exploration, development of OIL and material gas

resources.

• Promote OIL related research and development activities.

• Maintain a professional and efficient corporate character.

• Maintain and promote environmental friendly measures.

• Enhance safety measures in operations.

1.5 MISSION AND VISION OF OIL

Core Purpose:

“The fastest growing energy company with a global presence value to the shareholders.”

OIL's Vision

• OIL India is the fastest growing Energy Company with highest profitability.

• OIL India delights the customers with quality products and services at competitive prices.

• OIL India is a Learning Organization, nurturing initiatives, innovations and aspirations

with best practices.

• OIL India is a team, committed to honesty, integrity, transparency and mutual trust

creating employee pride.

• OIL India is fully committed to safety, health and environment.

• OIL India is a responsible corporate citizen deeply committed to socio-economic

development in its areas of operations.

OIL’s Mission:

• Balance between our investment in the E & P section and other low risk diversification

opportunities with the objective of optimizing our asset portfolios.

• Continuously upgrade manpower skills, processes and technologies and thereby

consistently improve operational and financial performance which adhering to the highest

standards business conducts.

• Grow with unwavering concern for the community and all over stick holders.

• Have unstinted faith in our employees to enable them to make quick and informed

decision through adequate training and to improve then to do so.

1.6 CORPORATE SOCIAL RESPONSIBILITY:

Since its inception OIL has always given top priority towards the all-round development of the

people residing in and around the Company’s area of operation. OIL management understands

that there is a need to strike a balance between the overall objectives of achieving corporate

excellence vis-à-vis the corporate responsibility towards the community. It is this twin objective

of business and social commitment that has prompted OIL to embark upon massive programmes

of educational, health and infrastructural development endeavors; an attempt to invest

technology with a human face.

Vision Statement “OIL is a Responsible Corporate Citizen deeply committed to socio-economic development in its

areas of operations.”

Philosophy: “To promote the awareness and practice of Good Corporate Citizenship, by business becoming

an integral part of societal process where people have access to resources to make informed

choices and decisions towards a more humane and compassionate society.”

Strategy:

“To mobilize core competencies and resources of business, public organisations and Government

Institutions…to facilitate their working in partnership on projects that benefit communities.”

1.7 DEPARTMENTS OF OIL INDIA LIMITED

Table 1.1

Sl. No Departments Sl. No Departments

1 Administrative 18 Electrical

2 Civil 19 Geophysics

3 Chemical 20 Employee relation

4 Drilling 21 Information technology

5 Drilling TS 22 Land

6 Contracts 23 Material

7 Finance and accounts 24 Medical

8 Geology and reservoir 25 Personnel

9 General engineering 26 Mechanical engineering

10 Instrumentation and Field Communication 27 Planning

11 L.P.G 28 Research and development

12 Production OIL & GAS 29 Security

13 Pipeline 30 Safety and Environment

14 Personnel 31 Training And Development

15 R&D 32 Transport

16 Well Logging 33 Field Engineering

17 Internal Audit 34 Vigilance

1.8 ACHIEVEMENTS

OIL India bags three Petrofed Awards

OIL India Limited bagged three Petrofed OIL & Gas Industry awards for the year 2009.

Instituted by Petrofed the OIL & Gas industry Awards were given away by the Hon'ble Union

Minister of Petroleum & Natural Gas, Shri Jaipal Reddy at a packed function at New Delhi on

May 10, 2011, in presence of Captains and leaders of the petroleum industry in India.

OIL India received the OIL & Gas Pipeline Transportation Company of the year award, Special

Commendation award for Innovator of the Year-Team and Mrs Rupshikha Saikia Borah, General

Manager (Treasury), OIL India Limited, received the special commendation award for Woman

of the Year in The OIL & Gas Industry. It is indeed a proud moment for all in OIL India limited

to have been recognized for their efforts. The awards have strengthened the resolve of the

Company’s employees to perform even better.

OIL bags India Pride Awards

OIL India Limited received the silver award in the OIL & Gas category of India Pride Awards -

Dainik Bhaskar group. The award was received by Shri N.M. Borah, Chairman & Managing

Director, OIL India Limited, at a glittering ceremony, from Hon’ble Finance minister of India,

Shri Pranab Mukherjee in front of many PSU leaders and business magnates.

OIL Receives PSU award

OIL India Limited received the “Heavyweight Miniratna” PSU award at the 2nd, Dalal Street

Investment Journal PSU Award 2010, ceremony at New Delhi on 6th April, 2010. The award

was presented to Shri N.M.Borah, Chairman & Managing Director, OIL India Limited, by

Hon’ble Union Minister of Steel, Shri Virbhadra Singh at a glittering ceremony in presence of

CEOs of other PSUs and dignitaries. The award was given taking into account the Company’s

Net Sales, Operating profit, Net Profit and Balance Sheet size.

OIL bags "PSU with the highest Book Value" award

OIL India Limited was conferred with the “PSU with the highest Book Value” award by Dalal

Street, the renowned Financial and Investment Journal. The award was given away by the

Hon’ble Chief Minister of Delhi Shrimati Sheila Dikshit at a glittering ceremony at New Delhi

on 24th March, 2009.

Oil India Limited received the certificate conferring the NAVRATNA Status

Oil India Limited received the certificate conferring the NAVRATNA Status by Govt. Of India

at New Delhi on 16.11.2010. The certificate was presented to Shri N.M.Borah, Chairman &

Managing Director, Oil India Limited by the Hon'ble Minister of Heavy Industries and Public

Enterprises, Shri Vilasrao Deshmukh at a ceremony in new Delhi organized by ASSOCHAM.

the ceremony was attended by several dignitaries. OIL was conferred the Navratna Status in

April, 2010.

Oil India lists at 8% premium

New Delhi: Shares of staterun northeast explorer Oil India Ltd settled at over 8% over their issue

price , the day of debut on the Bombay Stock Exchange. The scrip closed at Rs 1,140, though it

had opened marginally down. The stock hit an intraday high of Rs 1,156 and touched a low of Rs

1,019. On the NSE, the scrip settled at Rs 1,135, up 7.48%. The stock during market hours

climbed to a high of Rs 1,156.70 and had also slipped to a low of Rs 1,090 a share. With the

debut on the stock market, Oil India has joined the club of country's top 40 companies in terms

of market capitalisation, with a valuation of Rs 27,424.52 crore. In its maiden run, over 2.84

crore shares changed hands on both the bourses. The issue price for IPO of 2.64 crore shares had

been fixed at Rs 1,050 per share. TNN

CHAPTER 2:

INTRODUCTION TO 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. Internal auditing is a

catalyst for improving an organization’s effectiveness and efficiency by providing insight and

recommendations based on analyses and assessments of data and business processes. With

commitment to integrity and accountability, internal auditing provides value to governing bodies

and senior management as an objective source of independent advice. Professionals called

internal auditors are employed by organizations to perform the internal auditing activity.

Internal Audit is not a discipline of Accountancy; External Audit is related to Accountancy, but

Internal Audit is an entirely separate discipline more closely related to Enterprise Risk

Management. Internal Audit does, of course, cover financial risk amongst its portfolio, but this is

one very minor element of the role. Significant misunderstandings in this area have resulted in

many organisations recruiting accountants with external audit experience to staff an internal

audit function; this is usually detrimental to the quality and completeness of assurance provided

to the Non-Executive Directors/Board, and may, in part, have contributed to corporate failures

where key operational risks that were not directly related to financial statements remained

unidentified and/or unmanaged by the Executive Management. When IIA and ACCA signed the

Global Memorandum of Understanding, IIA President David A. Richards said, "The IIA and

ACCA are both long-standing, highly respected professional associations, each with members

from all around the world. Although we represent two distinctly different professions, our codes

of ethics and perspectives on enhanced professionalism, ongoing education, and quantifiable

research mirror one another."

The scope of internal auditing within an organization is broad and may involve topics such as the

efficacy of operations, the reliability of financial reporting, deterring and investigating fraud,

safeguarding assets, and compliance with laws and regulations.

Traditionally, internal auditing involved measuring compliance with the entity's policies and

procedures. However, internal auditors are not responsible for the execution of company

activities; they advise management and the Board of Directors (or similar oversight body)

regarding how to better execute their responsibilities. As a result of their broad scope of

involvement, internal auditors may have a variety of higher educational and professional

backgrounds. Developments in internal auditing have moved away from "compliance" which is a

function of management control, towards Risk Based Internal Auditing (RBIA) which results in

monitoring and evaluation of the risk based control framework to manage enterprise risk. The

modern approach seeks to ensure that key risks are identified, a risk appetite is defined, and

controls are instigated in a fit for purpose way to manage risk according to the risk appetite of the

organisation.

Publicly-traded corporations typically have an internal auditing department, led by a Chief Audit

Executive ("CAE") who generally reports to the Audit Committee of the Board of Directors,

with administrative reporting to the Chief Executive Officer.

Other definitions

The definition above (first sentence of this page) is in essence the IIA's definition. A similar

definition has been developed by the accounting profession and adopted by the government

auditors: the ISA 610 and the INTOSAI’s standard ("ISSAI") 1003 define the Internal audit

function as "An appraisal activity established or provided as a service to the entity. Its functions

include, amongst other things, examining, evaluating and monitoring the adequacy and

effectiveness of internal control."

2.2 History of internal auditing

The Internal Auditing profession evolved steadily with the progress of management science after

World War II. It is conceptually similar in many ways to financial auditing by public accounting

firms, quality assurance and banking compliance activities. Much of the theory underlying

internal auditing is derived from management consulting and public accounting professions.

With the implementation in the United States of the Sarbanes-Oxley Act of 2002, the

profession's growth accelerated, as many internal auditors possess the skills required to help

companies meet the requirements of the law.

2.3 Role in internal control

The role of internal audit is to provide independent assurance that an organization’s risk

management, governance and internal control process are operating effectively. Internal auditor’s

deal with issues that is fundamentally important to the survival and prosperity of any

organization. Unlike external auditors, the look beyond financial risks and statements to consider

wider issues such as the organizations reputations, growth, its impact on the environment and the

way it treats its employees.

Internal auditors have to be independent people who are willing to stand up and be counted.

Their employers value them because they provide an independent, objective and constructive

view. To do this they need a remarkably varied mix of skills and knowledge. They might be

advising the projective running a difficult change programme one day, or investigating a

complex overseas fraud the next.

From very early on in their careers, they talk to executives at the very top of the organization

about complex, strategic issues, which is one of the most challenging and rewarding parts of

their role

Internal auditing activity is primarily directed at improving internal control. Under the COSO

Framework, internal control is broadly defined as a process, affected by an entity's board of

directors, management, and other personnel, designed to provide reasonable assurance regarding

the achievement of objectives in the following internal control categories:

• Effectiveness and efficiency of operations.

• Reliability of financial reporting.

• Compliance with laws and regulations.

Management is responsible for internal control. Managers establish policies and processes to

help the organization achieve specific objectives in each of these categories. Internal auditors

perform audits to evaluate whether the policies and processes are designed and operating

effectively and provide recommendations for improvement.

2.4 Role in risk management

Internal auditing professional standards require the function to monitor and evaluate the

effectiveness of the organization's Risk management processes. Risk management relates to how

an organization sets objectives, then identifies, analyzes, and responds to those risks that could

potentially impact its ability to realize its objectives.

In larger organizations, major strategic initiatives are implemented to achieve objectives and

drive changes. As a member of senior management, the Chief Audit Executive (CAE) may

participate in status updates on these major initiatives. This places the CAE in the position to

report on many of the major risks the organization faces to the Audit Committee, or ensure

management's reporting is effective for that purpose.

2.5 Role in corporate governance

Internal auditing activity as it relates to corporate governance is generally informal,

accomplished primarily through participation in meetings and discussions with members of the

Board of Directors. Corporate governance is a combination of processes and organizational

structures implemented by the Board of Directors to inform, direct, manage, and monitor the

organization's resources, strategies and policies towards the achievement of the organizations

objectives. The internal auditor is often considered one of the "four pillars" of corporate

governance, the other pillars being the Board of Directors, management, and the external auditor.

A primary focus area of internal auditing as it relates to corporate governance is helping the

Audit Committee of the Board of Directors (or equivalent) perform its responsibilities

effectively. This may include reporting critical internal control problems, informing the

Committee privately on the capabilities of key managers, suggesting questions or topics for the

Audit Committee's meeting agendas, and coordinating carefully with the external auditor and

management to ensure the Committee receives effective information.

2.6 Nature of the internal audit activity

Based on a risk assessment of the organization, internal auditors, management and oversight

Boards determine where to focus internal auditing efforts. Internal auditing activity is generally

conducted as one or more discrete projects. A typical internal audit project [14]

involves the

following steps:

1. Establish and communicate the scope and objectives for the audit to appropriate

management.

2. Develop an understanding of the business area under review. This includes objectives,

measurements, and key transaction types. This involves review of documents and

interviews. Flowcharts and narratives may be created if necessary.

3. Describe the key risks facing the business activities within the scope of the audit.

4. Identify control procedures used to ensure each key risk and transaction type is properly

controlled and monitored.

5. Develop and execute a risk-based sampling and testing approach to determine whether

the most important controls are operating as intended.

6. Report problems identified and negotiate action plans with management to address the

problems.

7. Follow-up on reported findings at appropriate intervals. Internal audit departments

maintain a follow-up database for this purpose.

Project length varies based on the complexity of the activity being audited and Internal Audit

resources available. Many of the above steps are iterative and may not all occur in the sequence

indicated.

By analyzing and recommending business improvements in critical areas, auditors help the

organization meet its objectives. In addition to assessing business processes, specialists called

Information Technology (IT) Auditors review information technology controls.

2.7 Internal audit reports

Internal auditors typically issue reports at the end of each audit that summarize their findings,

recommendations, and any responses or action plans from management. An audit report may

have an executive summary; a body that includes the specific issues or findings identified and

related recommendations or action plans; and appendix information such as detailed graphs and

charts or process information. Each audit finding within the body of the report may contain five

elements, sometimes called the "5 C's":

1. Criteria: What is the standard? The standard may be a company policy or other

benchmark.

2. Condition: What is the particular problem identified (difference between criteria and

actual status)?

3. Cause: Why did the problem occur (which control over risk was missing - design

effectiveness failure; or which control did not execute as planned -operating effectiveness

failure)?

4. Consequence: What is the risk/consequence (or opportunity foregone) because of the

finding?

5. Corrective action: What should management do about the finding? What have they

agreed to do and by when?

The recommendations in an internal audit report are designed to help the organization achieve its

goals, which may relate to operations, financial reporting or legal/regulatory compliance. They

may relate to effectiveness (i.e., whether goals were met or compliance with standards was

achieved) or efficiency (i.e., whether the outputs were generated with minimum inputs).

Audit findings and recommendations also relate to particular assertions about transactions, such

as whether the transactions audited were valid or authorized, completely processed, accurately

valued, processed in the correct time period, and properly disclosed in financial or operational

reporting, among other elements.

2.8 Developing the plan of engagements

Internal auditing standards require the development of a plan of audit engagements (projects)

based on a risk assessment, updated at least annually. The input of senior management and the

Board is typically included in this process. Many departments update their plan of engagements

throughout the year as risks or organizational priorities change.

This effort helps ensure the audit activity is aligned with the organization’s objectives, by

answering two key questions: First, what goals are the organizations trying to accomplish in the

upcoming period? Second, how can the Internal Audit Department assist the organization in

achieving these goals?

Internal auditors often conduct a series of interviews of senior management to identify potential

engagements. Changes in people, processes, or systems often generate audit project ideas.

Various documents are reviewed, such as strategic plans, financial reports, consulting studies,

etc. Further, the results of prior audits and resolution of open issues are considered. The

preliminary plan of engagements is documented and prioritized. Audit resources and expertise

are then considered and a final plan is presented to senior management and the Audit Committee.

CHAPTER 3:

INTERNAL AUDIT IN OIL

3.1 INTRODUCTION

In OIL, internal audit of pipelines, Kolkata Office, BEP & KG and partly the fields headquarter

Duliajan are carried out by Internal Audit Department located at Duliajan, Assam. In respects of

rest of the project/ offices of the company, the same is outsourced through Chartered

Accountants Firms.

Internal Audit is an independent department having executives & staff of Finance and Accounts

discipline. Presently the department is headed by GM- Internal audit who reports to the Director

(Finance).

3.2 Activities of Internal Audit Department

The scope and areas to be covered by Internal Audit is decided at the beginning of the year

through Annual audit program which is approved by audit committee.

The main areas covered by Internal audit are as follows:-

a) Scrutiny of Contracts and Purchases Proposal awarding contracts and purchase orders.

b) Payment of contractors and suppliers bill.

c) Deduction of sales tax, income tax and deposit thereof.

d) Establishment payment like- salary/ wages, tour claims, medical bill claim, etc.

e) Documentation and payment of advances and recovery.

f) Physical verification of assets.

g) Monitoring of capital work-in-progress.

h) Audit of billing of crude OIL, natural gas, LPG and scrap sale.

Liaise with Comptroller and auditor General (C&AG) and statutory Auditor

Audit Committee

The audit committee is established with the aim of enhancing confidence in the integrity of an

organization’s processes and procedures relating to internal control and corporate reporting

including financial reporting. Audit Committee provides an ‘independent’ reassurance to the

board through its oversight and monitoring role. Among many responsibilities the boards entrust

the Audit Committee with are the transparency and accuracy of financial reporting and

disclosures, effectiveness of external and internal audit functions, robustness of the systems of

internal audit and internal controls, effectiveness of anti-fraud, ethics and compliance systems,

review of the functioning of the whistleblower mechanism. Audit Committee may also play a

significant role in the oversight of the company’s risk management policies and programs.

Audit Committee has thus become one of the main pillars of the corporate governance system in

Indian public companies. In steering companies through today’s complex business environment,

boards are going to need strong leadership from their audit committees. Expanding the field of

vision, clearly defining who’s tracking the company’s risk radar, and taking a step back to re-

evaluate its own performance are some of the important steps every Audit Committee should

consider.

This section of the site includes a range of useful publications relating to the audit committee’s

operations and oversight responsibilities.

Section 292A of Companies Act Vs Clause 49 of Listing Agreement

The Companies (Amendment) Act (2000), among other things, provides for the formation and

functioning of audit committees (section 292A). Similar requirements for audit committees are

prescribed under clause 49 of the Listing Agreement issued by SEBI. In India, perhaps the 1992

stock market scam and liberalizations of the economy contributed more to the introduction of

these requirements than did Enron. Be that as it may, these scams and corporate failures have

shaken investors’ confidence and the whole world is watching intently the steps being

undertaken by the various statutory authorities in this respect. Below is a comparison between

the regulations governing the audit committee. It points to a few prominent differences between

the regulations in both.

Base of Diff. Section 292A Clause 49

Applicability Section 292A applies to all pubic

companies with a paid-up capital of

Rs. 5 crore or more.

Clause 49 of the Listing

Agreement covers most of the

listed companies

Constitution and

independence of

the audit

committee

Section 292A requires that the audit

committee shall consist of not less

than three directors and such number

of other directors as the board may

determine. Two-thirds of the total

number of the audit committee shall

be directors other than the managing

or whole-time directors.

Clause 49 requires a minimum of

three members, all being non-

executive directors, with the

majority of them being

independent directors*, with at

least one director having financial

and accounting knowledge.

Role and powers

of the audit

committees

Section 292A gives the audit

committee the authority to investigate

into any matter in relation to the items

specified in this section or referred to

it by the board. The audit committee

has full access to information

Clause 49 gives specific powers to

the audit committee to investigate

any activity within its terms of

reference, seek information from

any employee, and obtain outside

legal or professional advice. The

contained in the records of the

company and may take external

professional advice, if it deems

necessary.

role of audit committee has also

been clearly defined under the

clause 49.

* Independence of audit committee members: Clause 49 defines ’independent directors’ as

directors who, apart from receiving directors’ remuneration, do not have any other material

pecuniary relationship or transactions with the company, its promoters, its management or its

subsidiaries, which in the board’s view may affect their independent judgment.

It may be noted that clause 49 has listed the powers of the audit committee while section 292A

has left it to the discretion of the board. Minimum four meeting is required to be held during a

financial year.

OIL Audit Committee.

Members:

1. CA Pawan Kumar Sharma, Chairman. (Independent Director)

2. Sri. Vinod K Misra, member. (Independent Director)

3. Dr. (Smt) Archana S Mathur, member. (Govt. Director)

Permanent Invitee.

1. Shri T.K. Ananth Kumar D (F)

Secretary of the meeting

Company secretary (presently Sh. S.R.Krishanan) is the secretary to the audit committee who

convinced the meeting of the audit committee in consultation with the chairman audit

committee.

Generally HOD of Internal audit department is also invited in the meeting. Whenever

directed by the audit committee, Internal Audit department arrange the presentation of the

audit reports of different spheres of the OIL. The outsourced portion of the audit is being

presented by the concerned auditors however the in-house audit reports is being presented by

the HOD (IA). The other issues raised during the audit committee meeting is also been

conveyed to the concerned departments and the action taken on the matters are reported to

the committee.

3.3 Internal Audit Mission Statements

The mission of the internal audit is to provide independent and objective assessment and

consulting services to add value and improve the OIL`s operations. The internal audit

accomplishes its objectives by using a systematic, disciplined approach to evaluate and improve

the effectiveness of control, risk management and governance processes.

3.4 Internal Audit Purpose

The purpose of OIL’s internal audit is to determine whether its controls, risks management and

governance process, as designed and implemented by management are adequate and effective

and functioning to ensure;

- Risks are appropriately identified and managed

- Interactions with the various governance groups as needed

- Financial, managerial and operating information is accurate, reliable and timely

- Employees actions are in compliance with OIL’s policies and procedures and applicable

laws and regulations

- Resources are acquired economically, used efficiently and adequately protected

- Plans and objectives are achieved

- Quality and continuous improvement are fostered in the OIL’s control process

- Significant legislative and regulatory issues having impact in OIL’s operations are

recognized and timely addressed appropriately

3.5 Scope and Objectives:

The objective of internal auditing is to assist all members of the organization in the effective

discharge of responsibilities by furnishing them with analysis, appraisals, recommendations and

pertinent comments concerning the activities reviewed. The internal auditor is concerned with

any phase of business activity where he/she may provide service to the organization. This scope

involves going beyond the accounting and financial records to obtain a full understanding of the

operations under review. The attainment of this overall objective involves such activities as;

- Reviewing and appraising the correctness, adequacy and application of accounting ,

financial and other operating controls and promoting effective control at reasonable cost

- Ascertaining the extent of compliance with established policies ,plans and procedures

- Ascertaining the extent to which company assets are accounted for and safeguarded

from losses of all kinds

- Ascertaining the quality of performance in carrying out assigned responsibilities

- Recommending operational improvements

3.6 Internal Audit Independence:

Internal auditing is an advisory function having independent status within the organization. The

head of internal audit-

- Shall be directly responsible to the chief executive/director (finance) and be independent

of any other section, branch or officer, and shall have direct access to all documents,

records and departments/ operations for which a suitable authority letter is to be issued

by the chief executive so that the assignments can be carried out independently

- Shall have no executive powers , functions or duties except those relating to the

management of the internal audit office

- Shall not be responsible for the detailed development and/ or implementation of new

systems but should be consulted during the system development process on the control

measures to be incorporated in new or amended systems , and be advised of approved

variations or new developments

3.7 Internal Audit Responsibilities:

The head of internal audit shall be responsible functionally to the audit committee and

administratively to the chief executive /director (finance) of OIL, for the functional control of

audit activities in relation to:

- Development, implementation and oversight of internal audit methods and procedures

- Development and control of an efficient internal audit program

- Scope and boundaries of audits

- Fulfilling the objectives of internal audit

- Utilizing the internal audit resources to maximize the efficiency and effectiveness of the

internal audit function and

- Maintenance of appropriate auditing standards

3.8 Internal Audit Authority:

The general scope of audit coverage is organization-wide and no function, activity, or unit of the

OIL or a related organization with OIL (like joint venture; JV) is exempt from audit and review.

No officer or staff member should interfere with or prohibit internal auditors from examining any

record of OIL or its subsidiaries/ JVs or interviewing any employee that auditors believe is

necessary to carry out their duties. Additionally the head of internal audit has the authority to

review and audit the accounts and financial reports submitted to the management for its

reliability and genuineness.

In performing their work, internal auditors have neither direct authority over/ nor responsibility

for any of the activities reviewed. Internal auditors do not develop and install procedures, prepare

records, make management decisions, or engage in any other activities that could be reasonable

construed to compromise their independence or impair their objectivity. Therefore, internal audit

reviews do not, in any way substitute for or relieve any officials or staff of OIL from their

assigned responsibilities.

Internal auditors of the organization shall:

- Have access at all reasonable times to all books , documents, accounts, property ,

vouchers ,records , correspondence and other data of the organization which are

necessary for the proper performance of the internal audit function and

- Have the right at reasonable times to enter any premises of the organization and to

request any officer to furnish all information and such explanations deemed necessary

for them to form an opinion on the probity of action, adequacy of systems and/ or of

controls. The officer concerned shall respond promptly to such inquiries.

It is incumbent on all the officers and staff that they shall render assistance to the

internal auditors in carrying out their audit duties.

3.9 Relationship with Other Control Functions:

Relationship with vigilance department:

The internal audit department shall have no formal relationship with the vigilance department.

However, during the conduct of the proposed audits if the internal audit department personnel

come across any cases where a mollified intention is suspected the same should be reported to

the audit committee/CMD who should decide whether to report the same to the vigilance

department. Only the audit committee/ CMD should give copies of the internal audit reports to

the vigilance.

Relationship with statutory auditors:

The head of internal audit is responsible for liaisoning with the audit committee for coordinating

internal and statutory audit efforts to ensure adequate audit coverage, minimize duplication of

audit efforts and achieve synergy of the efforts.

Co-ordination of audit efforts involves;

- Periodic meetings with audit committee and statutory auditors regarding the company`s

audit universe, risk assessment updates, audit plans and the annual audit schedule.

- Periodic meeting`s between head of internal audit , audit committee and statutory

auditors regarding the plans of the statutory auditors and the desired level of direct or

indirect assistance to the audit committee that may be required.

- Access to each other’s detailed audit programs, internal controls documentation, and

work papers. Such access is important in order for the internal auditor to be satisfied as

to the propriety for internal audit purposes of relying on the external auditors work and

for the external auditors to be satisfied as to the propriety, for external audit purposes, of

relying on the internal auditors work.

- Communications regarding announcements when audits are scheduled to begin and the

specific audit objectives that have been established.

- Exchange of information related to audit observations that may have an impact on the

financial statement of the company and which need to be reported to the company’s

audit committee.

Relationship with government auditors:

The internal audit department should perform the following tasks while coordinating their work

with the government and statutory auditors;

- Share annual audit plan- the internal audit department should meet the above two

agencies at least once in six months to discuss their plans for the next six months to

ensure that there is no duplication of efforts .

- Share audit issues- during the meetings all three agencies should exchange major audit

issues that they may have observed in the past to help others appreciate the same when

they cover the area in the future.

-

Relationship with technical operations auditors:

Considering that there is an already existing group of technical officers in OIL that reports to the

directors in respect of technical issues, it should be necessary for the internal auditors to co-

ordinate their efforts with this group. They need to share their respective audit plans with one

another and identify areas where duplicity of work could be avoided. Further, the internal audit

department should review the following in respect of the technical audits conducted by this

group and comment on the same;

- Level of implementation of the recommendations made by the technical audit group

- Whether the coverage of the group was adequate and whether they were able to perform

all audits that had been planned.

- How is the group keeping itself updated in respect of the advancements in technology in

respect of operational methodologies?

As with the review of safety auditors, the purpose of auditing the technical audit group is not to

review their decisions or the quality of work that has been done by them but to ensure that their

working is effective and efficient for operational improvement in OIL as a whole.

3.10 Approach and methodologies

To identify the areas that used to be audited by internal audit, it is essential to carry out a relative

risk ratings. This exercise will basically provide internal audit with an audit universe detailing

areas that need to be audited and their frequency. This exercise is termed as risk assessment.

3.11 Methodology of risk assessment

The risk assessment methodology includes the following;

(i) Understanding the business objectives- being a senior management team of OIL, the

head of internal audit is well aware of the existing systems, the control environment and risk

factors of each operation / activity in OIL. As a head of the function, he has access to various

reports of OIL, internal publications, reports issued by internal audit/technical audit, statutory

auditor’s govt. auditors and frame up his perception of various risks associated in each function.

- he should also visit to projects /sites and regularly interact with senior key functionary

or process personnel to assess the risk involved in each project.

- To review of the existing process manuals and available documentations which will

help to develop the risk assessment systems.

(ii) Interaction with senior management- with the objective of preparing risk based

strategy for internal audit interaction with senior management is necessary in order to obtain an

understanding of their perception of the nature of risks and exposures that OIL faces today and in

time to come or in due course.

The areas normally discussed with senior key personnel are;

- Critical challenges faced by OIL.

- Significant risks and exposures

- Control environment

- Technology issues

- Suggested areas of focus for internal audit

Based on the responses the audit universe is modified along with a risk rating for each

audit area.

(iii) Finalization of the audit universe;

Based on the experience and understanding gained during the visits of various locations/

activities and discussions with senior managerial personnel, the audit universe of the OIL may be

finalized. The audit universe contains the list of audit areas to be covered by the internal audit

department/ technical audit department, frequency of each skill set required for conducting the

audits.

On the basis of the audit universe, number of auditors required based on skills and number of

audits required to be carried out in a year, is ascertained.

(iv) Assigning a risk rating to each audit universe process/area;

Risk rating is used to prioritize auditable entities and to estimate the internal audit hours

considered necessary for an internal audit function to address the identified risks.

Risk rating is allotted to each audit area in the audit universe based on interaction with key

personnel, understanding the systems and controls, materiality mapping.

The likelihood rating represents the likelihood of an event or risk, which may occur. The

materiality rating represents the exposure to the organization should the event or risk occurs.

A risk assessment rating for both likelihood and materiality is determined for each audit area

included in the audit universe.

(v) Assigning frequency for each audit area;

The frequency of each audit is determined based on the likelihood and materiality rating of each

audit.

The following parameters are normally used for arriving the frequency of each audit area.

Table 3.1

SI. No. Likelihood Rating Materiality Rating Frequency of Audit

1 high High Yearly

2 high Medium Every alternate year

3 high Low Every 2nd

alternate year

4 medium High Every alternate year

5 medium Medium Every 2nd

alternate year

6 medium Low Every 3rd

alternate year

7 low High Every 2nd

alternate year

8 low Medium Every 3rd

alternate year

9 low Low Once in four years

(vi) Assigning number of auditors, time and skills required for each audit;

The number of auditors, time and skill sets required for carrying out each audit should be

assessed appropriately at the time of preparing audit universe. The assessment is to be based on

the understanding of the business of the company, nature of complexity involved, locations /

activities to be covered, estimated time required for collection of data, time required for planning

the commencement of audit and report writing.

(vii) Estimating systems understanding and documentation- the auditor should assess

the existing systems and documentation work before begins/commencing the audit work of the

department. While carrying out such study, the following should be looked into-

- understand departmental philosophy and operating style.

- identify business objectives of the department

- understand existing systems and procedures in the department

- perform risk analysis of the functions performed in the department

- Identify critical areas that needed to be audited

- identify the level of assignment of authority and responsibility

- understand the level of information technology risk in the functions.

3.12 Internal Audit (IA) Organizational Structure and Staffing Pattern

1. Internal audit structure and reporting relationships

IA is an independent appraisal activity established by the management. IA will not have any

line responsibility for the activities it reviews. It must be independent of management who

has direct responsibility for developing and/or implementing control systems.

The head of IA department (HOD) should report to the CEO/Director (Finance)

administratively and to the Audit Committee functionally. The HOD should meet the Audit

Committee and its chairman on a regular basis and have the opportunity to communicate

without management being present.

There should be regular meetings, both formal and informal- with senior management. This

will serve both to maintain the profile of IA and to ensure that IA is working alongside

management to achieve the objectives of the organization.

2. Reporting structure of internal audit department.

Given below is the proposed organization structure of the internal audit department.

Chart 3.1

CMD/Director

(Finance)

Audit Committee

General Manager

(IA)

Head Internal

Audit

Deputy General

Manager (Tech.

Managers/Dy.

Managers/ Sr.

Managers/

Officers/ Asst.

Officers

Dy. Chief/

Suptding/ Sr.

Suptding/ Sr. Tech

Auditors/ Auditors/

Asst. Auditors

3.13 Staffing

The staffing of the IA department is based on factors like quantum and nature of operations,

number of auditable sites, number of employees in the various work centers/ Projects, number of

areas required to be covered by IA department and number of audits to be conducted in a final

year.

The following staff strength is estimated based on the nature and volume of operations carried

out by OIL and various changes made in the company’s act and the accounting standards made

mandatory applicable to the company. The corporate Governance is also become mandatory. IA

will be playing a major role to ensure appropriate implementation of corporate Governance in the

company.

Table 3.2

Level of Officers Sanctioned

Strength as at

year 2000

Present Status

General manager - 1

Head (IA)

Chief Manager

1

-

1

Sr. Manager 2 1

Manager 2 -

Dy. Manager

Sr. Officers/ Officers

9

1

5*

Secretary - -

Steno 2 2

Office Staff 3 2

Office Boy 2 1

Tea Boy 1 0

Total 22 14

*One Audit Officer has been posted at corporate office Noida.

CHAPTER 4:

ANALYSIS, INTERPRETATION

4.1 ANALYSIS OF THE QUESTIONNAIRE

Q.1. Have you ever requested sp

INTERPRETATION

� Nearly 85% respondents said No

� Only 15% respondent reques

84.38%

Percentage of Respondent

Option No. of Respondent

Yes

No

Total

ANALYSIS, INTERPRETATION, FINDINGS AND CONCLUSION

4.1 ANALYSIS OF THE QUESTIONNAIRE

Q.1. Have you ever requested specific services of the Internal Audit function?

Nearly 85% respondents said No

Only 15% respondent request service of IA function.

15.63%

84.38%


No. of Respondent Percentage of respondent

5 15.625 %

27 84.375%

32 100%

ecific services of the Internal Audit function?

Yes

No

Q.2. How will you judge OIL’s present Internal Audit activities towards improving the

performance of the organization?


Good

Average

Poor

Does not

Comment

Total

INTERPRETATION

� Only 25% of respondent response as Good

� Nearly 66% said Average

� Only 6% response comes as Poor

� Rest 3% did not comment anything

0%

20%

40%

60%

80%

GoodAverage

25%

65.63%

Percentage of Respondents


performance of the organization?


8 25%

21 65.625%

2 6.25%

1 3.125%

32 100%

Only 25% of respondent response as Good

Nearly 66% said Average

Only 6% response comes as Poor

Rest 3% did not comment anything

RespondentsAverage

PoorDoes not

Comment

65.63%

6.25%3.13%



Percentage of respondent

Good

Average

Poor

Does not

Comment

Q.3. Taking into consideration the scope/objecti

responsibilities of the internal Audit functions, to what extent do you feel that

Internal Audit meets expectations?

INTERPRETATION

� 72% respondents said that IA Meet Expectations

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

Meet

Expectations

71.88%


Option

Meet Expectations

Does not meet

expectations

Does not comment

Total

Q.3. Taking into consideration the scope/objectives/structure and


Internal Audit meets expectations?

72% respondents said that IA Meet Expectations

Does not meet

expectations

Does not

comment

12.50%15.63%


Meet

Expectations

Does not meet

expectations

Does not

comment


23 71.875%

4 12.5%

5 15.625%

32 100%

ves/structure and


Meet

Expectations

Does not meet

expectations

Does not

comment


� Only 12% said that IA Does not Meet Expectations

� The rest of 16% did not comment anything.

Q.4. How confident are you relying on the conclusions reached or

recommendations made by the Internal Audit function?

INTERPRETATION

� 97% respondents were somewhat confident.

� Rest 3% respondents did not comment anything.

0%

20%

40%

60%

80%

100%

0%

96.88%


Option

Completely Confident

Somewhat confident

Not at all confident

Does not comment

Total

Only 12% said that IA Does not Meet Expectations

The rest of 16% did not comment anything.

u relying on the conclusions reached or


97% respondents were somewhat confident.

Rest 3% respondents did not comment anything.

96.88%

0% 3.13%



0 0%

31 96.875%

0 0%

1 3.125%

32 100%

u relying on the conclusions reached or

Completely

Confident

Somewhat

confident

Not at all

confident

Does not

comment


Q.5. To what extent do you believe that the work of internal Audit improves

the overall internal control of the organization?

INTERPRETATION

� No one comment as Greatly Improve on above statement.

� 66% respondent comment as somewhat improves.

� Only 6% of them comment as Does not improve

� The rest 28% respondents have no idea or not sure.

0%

10%

20%

30%

40%

50%

60%

70%

Greatly

improves

Somewhat

improves

0%

65.63%



Greatly improves

Somewhat improves

Does not improve

Don’t know/ not

sure

Total


trol of the organization?

comment as Greatly Improve on above statement.

66% respondent comment as somewhat improves.

Only 6% of them comment as Does not improve

The rest 28% respondents have no idea or not sure.

Somewhat Does not

improve

Don’t know/

not sure

65.63%

6.25%

28.13%


Greatly

improves

Somewhat

improves

Does not

improve

Don’t know/

not sure


0 0

21 65.625%

2 6.25%

9 28.125%

32 100%


Greatly

improves

Somewhat

improves

Does not

improve

Don’t know/

not sure


Q.6.Do you believe that the work of Internal Audit helps in identi

improving the overall risk of the organization?


Agree

Neutral

Disagree

Total

INTERPRETATION

� 34% respondents Agreed with

� 44% respondents remains neutral

� 22% respondents Disagreed

43.75%

21.88%


Do you believe that the work of Internal Audit helps in identi



11 34.375%

14 43.75%

7 21.875%

32 100%

34% respondents Agreed with the above statement.

44% respondents remains neutral

22% respondents Disagreed

34.38%


Do you believe that the work of Internal Audit helps in identifying and


Agree

Neutral

Disagree

Q.7. Do you appreciate that internal audit team is proactive?


Agree

Neutral

Disagree

Did not respond

Total

INTERPRETATION

� Only 3% respondent Agreed with the statement

� 78% respondent remains Neutral

� 13% respondent Disagreed

� Rest 6% did not comment anything.

0.00%

20.00%

40.00%

60.00%

80.00%

AgreeNeutral

3.13%

78.13%

Q.7. Do you appreciate that internal audit team is proactive?


1 3.125%

25 78.125%

4 12.5%

2 6.25%

32 100%

Only 3% respondent Agreed with the statement

78% respondent remains Neutral

13% respondent Disagreed

Rest 6% did not comment anything.

ResponseNeutral

DisagreeDid not

respond

78.13%

12.50%

6.25%

Response


Agree

Neutral

Disagree

Did not

respond

Q.8. Do you feel that Audit report issu

the department to improve the work of department?


Agree

Neutral

Disagree

Not respond

Total

INTERPRETATION

� Only 22% respondent agreed the statement

� 53% respondents remains neutral


� 3% respondents did not comment anything

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

Agree Neutral

21.88%

53.13%


Q.8. Do you feel that Audit report issued by Internal Audit department help

the department to improve the work of department?


6 21.875%

17 53.125%

8 25%

1 3.125%

32 100%

Only 22% respondent agreed the statement

53% respondents remains neutral


3% respondents did not comment anything

Neutral Disagree Not respond

53.13%

25%

3.13%


ed by Internal Audit department help


Agree

Neutral

Disagree

Not respond

Q.9. How do you rate the quality of Internal Audit report issued by Internal

Audit Department?

INTERPRETATION

� No one comment as Excellent

� 31% respondents comment as

� 63% respondents said Average

� The rest 6% respondent said Poor

0%

10%

20%

30%

40%

50%

60%

70%

Excellent Good

0%

31.25%

Option

Excellent

Good

Average

Poor

Very Poor

Total

you rate the quality of Internal Audit report issued by Internal

No one comment as Excellent

31% respondents comment as Good

63% respondents said Average

The rest 6% respondent said Poor

Good Average Poor

31.25%

62.50%

6.25%

Quality of IA Report


0 0%

10 31.25%

20 62.5%

2 6.25%

0 0%

32 100%

you rate the quality of Internal Audit report issued by Internal

Excellent

Good

Average

Poor


Q.10.Do you think that Internal Audit have the right reporting structure?


Agree

Neutral

Disagree

Not respond

Total

INTERPRETATION

� 16% respondents agreed



� Rest 3% did not comment anything

0.00%

20.00%

40.00%

60.00%

80.00%

AgreeNeutral

15.63%

65.63%


Do you think that Internal Audit have the right reporting structure?


5 15.625%

21 65.625%

5 15.625%

1 3.125%

32 100%

65% respondent remains Neutral


Rest 3% did not comment anything

ResponseNeutral

DisagreeNot respond

65.63%

15.63%

3.13%


Do you think that Internal Audit have the right reporting structure?


Agree

Neutral

Disagree

Not respond

Q.11.Do you appreciate that audit work was efficiently performe

to planning period?

INTERPRETATION

� Only 9% Agreed



� Remaining 3% did not comment anything

9.38%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

Agree


Option

Agree

Neutral

Disagree

Not respond

Total

Do you appreciate that audit work was efficiently performe

t remains Neutral


Remaining 3% did not comment anything

71.88%

15.63%

3.13%



Agree

Neutral

Disagree

Not respond


3 9.375%

23 71.875%

5 15.625%

1 3.125%

32 100%

Do you appreciate that audit work was efficiently performed according

Agree

Neutral

Disagree

Not respond


Q.12.Do you consider that internal audit report was issued in a useful time?

INTERPRETATION

� 63% respondents remains Neutral


� 6% did not comment anything.

31.25%


Option

Neutral

Disagree

Not respond

Total

Do you consider that internal audit report was issued in a useful time?

63% respondents remains Neutral


6% did not comment anything.

62.50%

6.25%



20 62.5%

10 31.25%

2 6.25%

32 100%

Do you consider that internal audit report was issued in a useful time?

Neutral

Disagree

Not respond


Q.13. Do you appreciate that internal Audit department is maintaining the

appropriate auditing standards?

INTERPRETATION

� Only 6% Agreed

� 75% remains Neutral

� 6% Disagreed

� Remaining 13% did not comment anything

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

Agree Neutral

6.25%


Option

Agree

Neutral

Disagree

Not respond

Total


e auditing standards?

Remaining 13% did not comment anything


75%

6.25%

12.50%



2 6.25%

24 75%

2 6.25%

4 12.5%

32 100%


Agree

Neutral

Disagree

Not respond


Q.14.Do the Auditors motivate you to

their suggestions?

INTERPRETATION

� Only 6% respondent agrees that Auditors motivate them in improving their performance

� Nearly 47% respondent remains neutral with the statement

� Rest 47% disagree the statement.

46.88%


Option

Agree

Neutral

Disagree

Total

Do the Auditors motivate you to improve on your performance

Only 6% respondent agrees that Auditors motivate them in improving their performance

remains neutral with the statement.

the statement.

6.25%

46.88%



2 6.25%

15 46.875%

15 46.875%

32 100%

performance with

Only 6% respondent agrees that Auditors motivate them in improving their performance.

Agree

Neutral

Disagree


Q.15. Does IA function has

INTERPRETATION

� Only 34% of the respondents Agree that IA functi

in OIL

� Nearly 47% of the respondents remain Neutral

� 18% respondent don’t believe that IA functions has a appropriate status in

OIL

46.88%

18.75%

IA function has appropriate status in OIL


Agree

Neutral

Disagree

Total

function has appropriate status in OIL?

Only 34% of the respondents Agree that IA functions has appropriate status

of the respondents remain Neutral

18% respondent don’t believe that IA functions has a appropriate status in

34.38%

18.75%



11 34.375%

15 46.875%

6 18.75%

32 100%

ons has appropriate status

18% respondent don’t believe that IA functions has a appropriate status in

Agree

Neutral

Disagree



Details of respondents-

INTERPRETATION

� More than 90% of the total respondents were Male


SEX No. of Respondent

Male

Female

Total

More than 90% of the total respondents were Male

90.63%

9.38%



29 90.625%

3 9.375%

32 100%

Male

Female


INTERPRETATION

� More than 90% of the total respondents

service in OIL.

90.63%

Service length of Respondents in OIL

Length of Service

in OIL

1-5 years

5-10 years

More than 10 years

Total

More than 90% of the total respondents have an experience of more than 10 years of

3.13% 6.25%

90.63%

Service length of Respondents in OIL

1-5 years

5-10 years

More than 10 years


1 3.125%

2 6.25%

29 90.625%

32 100%

experience of more than 10 years of

5 years

10 years

More than 10 years


4.2 FINDINGS

Major findings based on primary data collected from the respondents are stated as follows:

� Internal Audit Department is an independent department

� Internal Audit activities averagely improves the performance of the organization

� The expectations of the internal customers were meet by the internal audit functions

� Respondents are not fully confident to rely on the conclusions reached or

recommendations made by the Internal Audit function

� The overall internal control of the organization is improves to some extent by work of Internal Audit

� The report issued by IA department helps in improving the performances of the departments

� The quality of IA report can be rated as average.

� The executives of different departments have only few knowledge on the functions of Internal Audit

Department

4.3 CONCLUSION

A Project report on “Internal Audit Functions and its Performance in Oil India limited” is the

topic for my study. It is a brief study of understanding about the IA functions of the organization.

From the report it can be well identified that the organization has adopted a well and distinguish

Internal Audit functions. The IA department working independently and reporting to the Audit

Committee in a regular basis.

We have felt that the company has come forward to apply new skills and techniques in order to

improve the Functions of IA.

The project work is very beneficial for us and the guidance and support receive from all during

the course of my project was very encourage

ANEXTURE I

Questioner

Respected Sir/ Madam,

As a part of the partial fulfillment of MBA Degree, we the student of

School of Management Studies (SMS), Nagaland University, are in process to

carry out a study on the topic “Internal Audit Functions and its Performance in

Oil India Limited”

So, in this regard, we need your kind cooperation and support with your

valuable views on the topic to do the research. We assure you that the information

provided by you shall be kept strictly confidential and shall be used for academic

purpose only. Your help will go a long way in assisting us to complete our project.

Thanking you.

Yours sincerely,

Debashish Phukan

Wilson Kikon

School of Management Studies,

Nagaland University

Please tick off only one answer of the following questions.

1. Have you ever requested specific services of the Internal Audit function?

a) Yes b) No

2. How do you judge OIL’s present Internal Audit activities towards improving

the performance of the organization?

a) Excellent b) Good c) Average

d) Poor e) Very poor

3) Taking into consideration the scope/objectives/structure and responsibilities

of the internal Audit functions, to what extent do you feel that Internal Audit

meets expectations?

a) Exceeds Expectations b) Meets Expectations

c) Does not meet expectations

4) How confident are you relying on the conclusions reached or


a) Completely confident b) Somewhat Confident

c) Not at all confident

5) To what extent do you believe that the work of internal Audit improves the

overall internal control of the organization?

a) Greatly Improve b) Somewhat improves

c) Does not improves d) Not sure/ don’t no

6) Do you believe that the work of Internal Audit helps in identifying and


a) Strongly agree b) Agree c) Neutral

d) Disagree e) strongly disagree

7. Do you appreciate that internal audit team is proactive?

a) Strongly Agree b) Agree c) Neutral


8. Do you feel that Audit report issued by Internal Audit department help the

department to improve the work of department?



9. How do you rate the quality of Internal Audit report issued by Internal Audit

Department?

a) Excellent b) Good c) Average

d) Poor e) Very Poor

10. Does Internal Audit have the right reporting structure?


d) Disagree e) Strongly Disagree

11. Do you appreciate that audit work was efficiently performed according to

planning period?


d) Disagree e) Strongly disagree

12. Do you consider that internal audit report was issued in a useful time?



13. Do you appreciate that internal Audit department is maintaining the

appropriate auditing standards?



14. Do the Auditors motivate you to improve on your performance and with

their suggestions?



15. Does IA function have appropriate status in OIL?


d) Disagree e) Strongly Disagree

16. If any Suggestions:

…………………………………………………………………….............................

.....................................................................................................................................

.....................................................................................................................................

Details of the Respondent:

Name (Optional):________________________________

Sex: a) M b) F

Department: ______________________Designation:______________________

Length of the service in OIL:

a) Less than 1 year.

b) 1-5 years.

c) 5-10 years.

d) More than 10 years

_______________________

Signature of the respondent

Thank you for your time and the honesty of your answers.

BIBLIOGRAPHY

Books:

C R Kothari- Research Methodology (New Age International Publishers)

Annual Report OIL

Audit Manual OIL

OIL magazines

Internet:

www.wekipedia.com

www.oil-india.com

www.google.com