Internal Audit Checklist – Part B – Internal Audit of Specific Functions
- Checklist for Inventory and Stores Management
Checking of stores and inventory management is to ensure optimum investment and that material is stored properly, safely and there is no damage/wastage/pilferage of items.
Documentation
- The policy of the organisation for inventory and stores management.
- Storage plan and insurance.
- Location wise inventory records.
Legal Compliance
- Factories Act, 1948 regarding storage.
- Central Excise and Customs Act in case of a bonded warehouse.
- Fire Safety Act.
Authorisation Matrix
- Requisition for stores/ direct debit items.
- All material receipt notes (MRN) and rejection/ return of material.
- Addition/ deletion of any item as store stock
Compliance with Accounting Standards and Standards on Auditing
Procedures/ Controls
Recording of Transactions
- Receipt and issue of material.
- Rejection of goods.
- Material sent on a returnable basis.
Quality/ Good Governance
- Review of items that are out of stock and excess.
- Review of items that are non-movable/ deadstock with age and plan for its disposal.
Reporting
- Checklist for Human Resources and Payroll Processing
Payroll is the process by which employers pay employees for the work that they have done. It involves many aspects including statutory obligations like payment ESI, PF, income tax deduction, and professional tax from the salary.
Documentation
- The policy of the organisation for inventory and stores management.
- Check the process of employment, training and safety of manpower.
- Whether incentive/ bonus and other benefits to employees have been documented and disclosed to them.
- Maintain & Scrutinize master data of the employees, including name, address, the cost to the company (CTC), the breakup of salary, attendance, and existing and new documents like copy of PAN, Qualification certificates ID proofs, etc.
Legal Compliance
- Computation of income tax liability of each employee done correctly and deduction of tax has been made accordingly.
- Insurance policies have been reviewed.
- Medical policies and medical claims have been reviewed.
- TDS computation of the employee is being done and TDS has been deposited and accounted for.
Authorisation Matrix
- Whether proper authorization in relation to appointment, resignation, termination, and retrenchment of employees is there.
- Whether loan to employees and deductions are as per approval.
- Advance payments to employees are properly authorized.
Compliance with Accounting Standards and Standards on Auditing
Procedures/ Controls
Recording of Transactions
- Proper recording of in-time and out-time punching in machine software or in case of manual recording, the register is maintained.
- Check for guest employees and deputed employees have been maintained.
- The movement of temporary employees from one department to another has been recorded.
Quality/ Good Governance
Reporting