An Kit

“TITLE OF THE PROJECT”
A SUMMER PROJECT STUDY SUBMITTED IN PARTIAL

FULFILLMENT FOR THE REQUIREMENT OF THE TWO YEAR
POST GRADUATE DIPLOMA IN MANAGEMENT (FINANCE)
BY
ANKIT GOYAL
69 / 2010-2012
LAL BAHADUR SHASTRI INSTITUTE OF MANAGEMENT, DELHI
JUNE, 2011
ALSTOM | Industry profile 1

Acknowledgement
I want to extend my gratitude to all those who have helped me in the completion of this
summer internship. First and foremost, I want to thank my project guide Mr. Manish Tekriwal
(Executive Finance) for his invaluable guidance and support extended to me in the course of
the project.
Mr. Hitesh Sharma (Finance Controller, ALSTOM Power Service), who was always so
involved in the entire process, shared his knowledge and encouraged me to think. Thank you,
Sir
Mr. Ravi Agarwal (Executive Finance) who monitored my progress and taught me so many
practical aspects of finance at Alstom. I choose this moment to acknowledge his contribution
gratefully.
I would also like to thank my friends who didn’t hesitate to provide me with suggestions and
recommendations, without which it could have been a difficult journey.
The suggestions for the further improvement of the project will be warmly welcomed.
Ankit Goyal
PGDM Finance
Lal Bahadur Shastri Institute of Management

ABSTRACT
Risk management is the identification, assessment, and prioritization of risks followed by

coordinated and economical application of resources to minimize, monitor, and control the
probability and/or impact of unfortunate events or to maximize the realization of
opportunities. Risks can come from uncertainty in financial markets, project failures, legal
liabilities, credit risk, accidents, natural causes as well as deliberate attacks from an adversary.
It encompasses methods and processes used by organizations to manage risks and seize
opportunities in relation to achievement of their business objectives. It typically involves
identifying particular events or circumstances relevant to the organization’s objectives,
assessing them in terms of likelihood and magnitude of impact, determining a response
strategy, and monitoring progress. By identifying and addressing risks and opportunities,
business enterprises protect and create value for their stakeholders.
One of the most common approaches of managing risk is through the establishment and
implementation of effective internal controls. It plays an important role in preventing and
detecting irregularities such as errors and/or fraud and protecting the organization’s resources,
both tangible (e.g., machinery and property) and intangible (e.g., reputation or intellectual
property such as trademarks).
The objective of this report is to get a holistic perspective on the various concepts and
techniques related to risk management through effective internal control procedures employed
by Alstom’s thermal service division.
The report gives special emphasis on the internal control procedures, its benefits and risk
management at Alstom’s thermal service division. Frauds and scams has marred the image of
many a companies and this has led companies to implement various controls to manage the
various risks associated with day to day business activities. There are many risks associated
with a business such as foreign-Exchange Risk, project risk, customer risk, operation risk,
information risk etc and these risks are managed through implementation of effective internal
control at Alstom.

TABLE OF CONTENTS
JUNE, 2011..........................................................................................................................................1
Acknowledgement................................................................................................................................2
ABSTRACT.........................................................................................................................................3
TABLE OF CONTENTS.....................................................................................................................4
INTRODUCTION................................................................................................................................6
Objectives.............................................................................................................................................7
RESEARCH METHODOLOGY.........................................................................................................8
Industry profile.....................................................................................................................................9
COMPANY PROFILE.......................................................................................................................12
Literature Review...............................................................................................................................23
2.1 Risk Management......................................................................................................................23
0.1.1 Scope of risk management.................................................................................................23
0.1.2 Control activities................................................................................................................23
0.1.3 Information and communication........................................................................................24
0.1.4 Monitoring..........................................................................................................................24
0.1.5 The Stages of Effective Risk Management........................................................................24
0.1.6 Methodical Risk Assessment Leads to Proper Internal Controls.......................................24
0.1.7 Prioritize Risks to Determine Internal Control Activities..................................................25
0.1.8 Managing Risk with Internal Controls...............................................................................26
0.1.9 Continually Improving Risk Management and Internal Controls......................................26
2.2 INTERNAL CONTROL...........................................................................................................26
0.1.10 Definition.........................................................................................................................26
0.1.11 Components......................................................................................................................28
0.1.12 Objectives.........................................................................................................................29
0.1.13 ENVIRONMENT OF INTERNAL CONTROL.............................................................30
0.1.14 LIMITATIONS OF INTERNAL CONTROL.................................................................31
0.1.15 INTERNAL CONTROL AND MANAGEMENT..........................................................32
It is also necessary for the auditor to study the significant features of the business carried on by
the concern the nature of its activities and various channels of goods and materials as well as
cash, both inward and outward; and also a comprehensive study of the entire process of
manufacturing, trading and administration. This will help him to understand and evaluate the
internal controls in the correct perspective.....................................................................................33
0.1.16 Describing Internal Controls............................................................................................33
0.1.17 Fraud and internal control................................................................................................34
0.1.18 Internal Controls and Improvement.................................................................................35
0.1.19 Legal Requirements.........................................................................................................35
0.1.20 Sarbanes-Oxley and Assessment of internal control........................................................36
0.1.21 Internal Control in India...................................................................................................36
1 Risk Management and Internal Control at APIL.............................................................................37
2.3 Internal Controls........................................................................................................................38
1.1.1 Corporate Ethics Policies...................................................................................................38
1.1.2 ALSTOM Reporting & Accounting Manual (RAM).........................................................39
1.1.3 ALSTOM E– book.............................................................................................................39
1.1.4 Organization Charts...........................................................................................................40
1.1.5 Segregation of Duties.........................................................................................................41

1.1.6 Legal Structure Administration..........................................................................................41
1.1.7 Tender Review...................................................................................................................42
1.1.8 Major Project Review........................................................................................................44
1.1.9 Close the Books Process....................................................................................................44
1.1.10 Management Disclosure...................................................................................................45
1.1.11 Audit Response Management..........................................................................................46
1.1.12 Impropriety Management.................................................................................................46
1.1.13 Fraud Risk Assessment....................................................................................................47
1.1.14 Security over Documents.................................................................................................49
1.1.15 Taxes & Payments to Local regulation Management......................................................50
1.1.16 Pre – numbered Documents.............................................................................................51
1.1.17 Tender Cost Estimation Back – up ..................................................................................51
1.1.18 Tender cost estimation approval......................................................................................53
1.1.19 Reconciliation of Approved Tenders...............................................................................54
1.1.20 Tender to execution continuity.........................................................................................55
1.1.21 Opportunity Plan Documentation....................................................................................56
1.1.22 Customer Order Approval................................................................................................58
1.1.23 Project Cost Estimation Process.......................................................................................59
1.1.24 Project Review Process....................................................................................................60
1.1.25 Revenue Recognition.......................................................................................................61
1.1.26 Aged receivable process...................................................................................................62
1.1.27 Invoice Issue Process.......................................................................................................63
1.1.28 Supplier Selection Process...............................................................................................64
1.1.29 Purchase Procedure..........................................................................................................67
1.1.30 Vendor bill booking process ...........................................................................................69
1.1.31 Disbursement approvals .................................................................................................71
1.1.32 Fund Release Segregation of Duties................................................................................72
1.1.33 Payroll GL account reconciliation...................................................................................73
1.1.34 Capital Expenditure and Lease Authorization.................................................................73
1.1.35 Stock ledger management................................................................................................74
1.1.36 Debt and financing transaction approval..........................................................................75
1.1.37 Opening and reporting of Bank accounts.........................................................................76
1.1.38 Bank mandate management.............................................................................................77
1.1.39 Financial Exposure Management.....................................................................................77
1.1.40 Bond & Guarantee facility Management.........................................................................78
1.1.41 Physical security of cheques............................................................................................79
1.1.42 Bank account reconciliation process................................................................................81
1.1.43 Cash storage.....................................................................................................................82
1.1.1 Cash transaction control.....................................................................................................83
1.1.1 Petty cash reconciliation....................................................................................................84
1.1.2 E-banking ID controls........................................................................................................85
1.1.3 Account Balance Review...................................................................................................86
1.1.4 Inter-company Transaction Integrity..................................................................................87
1.1.5 License reviews..................................................................................................................88
1.1.6 Information security objective management......................................................................88
1.1.7 Tax process component review..........................................................................................89

1.1.8 Corporate Tax Payment......................................................................................................90
1.1.9 Disputes and Claims Process.............................................................................................90
1.1.10 Foreign Exchange Management.......................................................................................91
Conclusion..........................................................................................................................................92
Recommendations..............................................................................................................................93
INTRODUCTION
Internal risks of a process are prepared for, with internal control. However, there are risks
some of which have more significant consequences than purely internal risks of a process do -
e.g. fire, terrorism, and epidemics. These risks apply to numerous processes. That’s why it
makes sense to treat them with tailored risk responses. A risk response is an action taken to
mitigate one or more risks that usually affect one or more processes, and which [risks] by their
nature cannot be mitigated effectively and efficiently [solely] with controls built within a
process.
It would be waste of management resources to address risks of all size with equal vigor.
Managers should concentrate on risks of biggest concern, i.e. on risks with significant
negative consequences. Such risks can be those internal to a process as well as those outside a
process. As a result, both internal control and risk management are indispensable in effective
risk mitigation.
Determination of risks is the border and the interface between risk management and internal
control. As written earlier, risks of a process are mitigated in accordance with a plan that is put
into effect in the internal control structure of the process. However, this is true only when the
determination of risks of internal control - the self-correction system of internal control - is
effective. If determination of risks is neglected so badly that an organization is exposed to
significant negative consequences, because of the risks of the process, a management
intervention is a necessity. This is a matter of risk management, too.
Risk management is determination and preparing oneself to such negative events that prevent
an organization from achieving its objectives. Negative events include all kinds of events and
neglects with negative consequences, also waste of good opportunities. Risk management is
central part of any organization’s strategic management. Its objective is to add maximum
sustainable value to all activities of the organization. It should be a continuous and developing
process. There are several alternatives to separate phases of this process. The following phases
of risk management are identified commonly: risk identification, risk analysis, risk evaluation,
and risk treatment. In the risk treatment phase an organization tries to impact the
consequences and probabilities of the negative events. This is done with risk responses. Risks
are treated with measures considered appropriate in each individual case, taking into account
the risk appetite of the organization. Risk appetite is the amount of risk, on broad level, an
entity is willing to accept in pursuit of value.

Risk responses need to be supported by internal control, as stated in COSO ERM [30]:
"having selected risk responses, management identifies control activities needed to help
ensure that risk responses are carried out properly an in a timely manner". Risk management
as a process, in order to be effective and efficient, must have internal control in place, too.
Internal control of risk management encompasses among other things taking up an attitude
that risk management must be taken seriously; ensuring that risk data is current and available
to authorized individuals - and only to them; controls to ensure that risk responses take place
as planned; and determination of neglects and shortcomings in risk management.
Objectives
The objective of this project was to:

• To study and understand Internal Controls and its importance in a MNC.
• To understand the various internal control procedures and their feasibility at Alstom’s
thermal service division.
• Suggesting Improvements or better ways implementing Internal Controls (if necessary).
• To list and analyze the various benefits of effective internal control procedures.
• To list and analyze the various risks managed through internal control.

RESEARCH METHODOLOGY
• The project started with a literature review of a few books on auditing. This gave me a clear
concept of Internal Controls, its implications, importance and legal requirements. Studying
text on Internal Controls gave direction to my approach on the topic and the project.
• After understanding the general theoretical aspects of Internal Controls, I studied the
company manual on the topic. This gave a clear understanding of what Internal Controls
mean for ALSTOM and what are its objectives.
• After a thorough understanding of the topic and its implications for ALSTOM, I was given
the set of controls applicable in the finance department. The controls were in the form of
questionnaires with explanation of each in terms of responsibility, accountability and risks
involved. In all there were 120 questions or Controls applicable in the Finance Department.
• The next step involved choosing the relevant questions for studying during the project. The
questions were chosen after a discussion with my project guide and were chosen on the basis
of complexity, access to information and relevance. The time factor and the extent of
disclosure by the company were also kept in mind while choosing the questions.
• The chosen controls / activities were studied and monitored practically for understanding the
procedures and risks managed by due to them.
• Practically understanding these controls also involved interacting with people from other
departments such as Sales, Procurement, and Tender Management etc

Industry profile
The fortunes of the heavy electrical industry have been closely linked to the development of
the power sector in India. The heavy electrical industry has under its purview power
generation, transmission, distribution and utilization equipments. These include turbo
generators, boilers, turbines, transformers, switchgears and other allied items. These electrical
equipments (transformers, switchgears, etc) are used by almost all the sectors.
Some of the major areas where these are used include power generation projects,
petrochemical complexes, chemical plants, integrated steel plants, non-ferrous metal units, etc.
India’s Economy is being hampered in its growth trajectory by lack of infrastructure that is
leading to supply side problems. India suffers woefully from a lack of roads, electricity, ports
etc. and almost a trillion dollars is going to be spent in the next few years as demand outstrips
supply. India’s Machinery and Capital Goods Industry is set to capitalize on this strong
growth and is already seeing massive orders that are 2-3 years worth of their annual revenue.
While the stock valuations of the capital goods equipment manufacturers has come down a bit
from the heavy days of 2008,they are still quite high reflecting the strong growth potential.
India’s Engineering Industry is also composed of a number of smaller manufacturers that
export light engineering equipment worth several billion dollars mostly to developing
countries. India’s Machinery Sector is composed of a mix of government owned and private
companies as well as the giant capital goods MCN conglomerates like Areva and others. Here
is a list of the major Indian equipment manufacturers.
India’s State Owned Companies
BHEL- with a market cap of around Rs. 94,000 crore, is the largest engineering &
manufacturing enterprise in India. The state owned giant is a capital goods colossus and has
the biggest market share in the electricity producing equipment industry. The company has
also been ramping up its international operations. It earned revenue of Rs. 90,000 crore with a
net profit margin of 15% (Dec ’10). BHEL’s operations are organized around three business
sectors, namely Power, Industry Including Transmission, Transportation and Renewable
Energy – and Overseas Business.
Bharat Electronics Ltd( BEL) – This is another state owned company established by the
Indian Government to meet the specialized electronic needs of the Indian defence services. A
$3 billions is the market capitalization of this company that has shown impressive stock price
appreciation. One of the best ways to play the Indian Defence Sector.. The company also

produces consumer products like Electronic Voting Machines, Solar Powered LED-Based
Traffic Signal Lights, Simputers and Set Top Boxes. BEL offers contract-manufacturing
services for both domestic and international customers. The revenue earned in Dec ’10 was
Rs.1400 crores & Net profit margin was 12%.
BEML - The Company was also known formerly Bharat Earth Movers Limited was
established as a Public Sector Undertaking for manufacture of Rail Coaches & Spare Parts and
Mining Equipment. The Company has a market capitalization of $500 million & earned
revenues of Rs. 3,500 crores (2009-10) with a net profit margin around 8% (Dec’10). Its three
major Business verticals viz., Mining & Construction, Defence and Rail & Metro.
Foreign Companies
Siemens – German Conglomerate Siemens with annual 20 Billion Euros in revenues is fast
expanding in the Indian market. The company is looking to de-list from the Indian market,
which has a $6 billion listed subsidiary. Siemens is like ABB, Alstom not only a leader in
electrical equipment but also in Lighting (OSRAM),Green Building Solutions, Energy
Transmission and Distribution
ABB - ABB, the European Giant which was formed by merger of Asea and Brown Boveri in
1989 .The company which generated over $30 billion in revenues in 2009 with a roughly 10%
Net Profit Margin is a leader in Power Systems, Network Management, Electricity
Transmission and Distribution. Like Siemens, ABB is looking to de-list its Indian arm from
the Stock Market. All MNCs are looking to ramp up their Indian operations to take part in the
growth as developed world faces low to no growth due to the GFC. Infrastructure is a
particularly lucrative sector with an estimated $500 Billion required over the next 5-10 years.
Areva - This French owned Nuclear Giant has a market cap of around $1.2 billion in India
and earned a revenue of Rs.1300 crores with a net profit margin was 6% in Dec ’10. The
company operates mainly in the transmission and distribution solutions to improve network
stability and make electricity available everywhere. The major products are Substation
equipment, such as high and medium voltage transformers, circuit breakers, disconnectors and
instrument transformers. Network management, protection and control solutions. It also
provides Network consulting and Asset Management
Indian Private Companies
Larsen & Toubro – L&T that is one of the largest companies in India with diverse interest
across sectors like construction, real estate, technology, capital goods equipment etc. is one of
the highest quality companies as well. The company has made a plan to spin off its divisions
into separate listed companies as its size has become too unwieldy. One of the best quality
construction companies in the country, it possesses skills, which other companies don’t. The
company also has high corporate governance standards and is professionally managed. L&T is
the second biggest engineering company in India with a total value of $20 billion.

Suzlon Energy - Suzlon, the Indian Wind Turbine making company has languished in red ink
since the beginning of the Global Financial Crisis in 2008.The company started by Tulsi Tanti
in 1995 was a shining example of Asian CleanTech with a 10% global market share and
ranking amongst the top 5 Wind Turbine Makers. Suzlon buoyed by its success had bought
controlling equity stakes in Turbine Gears producer Hansen Transmission and European Wind
Turbine producer Repower. With the 2 biggest markets of USA and China dominated by
domestic players, Suzlon has become a shadow of its former self. The company continues to
operate at a below breakeven level despite order book improving slowly. RePower is a bright
spot with a good order book and gaining strong traction for its larger turbines. It has a market
cap of ~$2 billion which gives it an enterprise value of ~$2.75 billion.
Crompton Greaves - is fast growing private company present in electrical, industrial and
consumer products and solutions. The revenue as on Dec ’10 was Rs. 1,400 crores & Net
profit margin was 13%. With a market cap of $3.5 billion, the company has a diverse portfolio
of products, from high-end power and industrial equipments and solutions, to consumer
products and home appliances. CG is present in three business segments, viz. Power Systems,
Industrial Systems and Consumer Products.
Thermax Ltd. - Another major private company like Crompton and Greaves, Thermax
provides a range of engineering solutions to the energy and environment sectors. The
company has a market cap of around $1.5 billion and produces a range of boilers and thermal
oil heaters, energy chillers and exhaust gas boilers. Thermax is also a major manufacturer of
energy efficient and environment equipment such as biomass boilers. Thermax has formed
technology partnerships with global majors, like Babcock & Wilcox (USA), Kawasaki
Thermal Engineering (Japan), Balcke Durr (Germany), Eco-Tech (Canada) and Georgia
Pacific (USA). The company earned revenue of Rs. 1,200 crore with a net profit margin of 8%
(Dec ’10).
Lakshmi Machine Works Ltd. – LMW has a market cap of $500 million and a major
manufacturer of the Textile Machinery. LMW has 60% market share in the domestic Textile
Spinning Machinery Industry. It earned revenues of Rs.490 crores with a net profit margin of
9% (Dec’10). LMW’s Global presence has grown over the years, with a market presence not
only in developing countries, but also in Europe. The only company in Asia outside Europe to
manufacture OE products for Mikron of Switzerland.
Havells India - This Company is one of the largest electrical and power distribution
equipment manufacturers with products covering the entire gamut of household, commercial
and industrial electrical needs. It has a market cap of $900 million. Havells owns global
brands like Crabtree, Sylvania, Concord, Luminance, Linolite, & SLI Lighting. The company
generated revenues of Rs. 700 crores with a net profit margin of 8% (Dec’10)

COMPANY PROFILE
Alstom, a world leader in power generation and transmission and rail transport.
As a manufacturer of advanced technology, Alstom is a major market player in providing

services, products and systems for power generation and transmission and rail transport. The
Group serves infrastructure markets that ensure global economic growth and social progress.
Alstom is a global company, with a leadership position in its three core businesses and
focused on satisfying customers through its world-class project management.
• Alstom is present in around 100 countries.

• The Company is organized in three Sectors: Transport for rail transport, Power for power
generation, and Grid for power transmission.
• Group sales totaled €20,9 billion for the 2010-2011 fiscal year. The breakdown is as follows:
Europe 45%, Americas 20%, Asia-Pacific 18% and Middle East & Africa 17%.
• The Company has a global workforce of over 93,500 people.
• Patrick Kron chairs Alstom.
Alstom offers its customers innovative solutions at the cutting edge of both technology and
environmental protection, and is dedicated to sustainable development.
In the power market, Alstom enjoys a unique capacity to deliver integrated solutions, produce
clean power and provide transmission equipment.
In the transport market, Alstom holds a leading position in very high-speed rail transport and
complex signaling systems, and has an extensive track record in urban transport systems.
One in four of the world’s light bulbs is powered by equipment which uses Alstom
technology
Equipment based on Alstom technologies supplies electricity for over a quarter of the world’s
installed capacity.

• Alstom is the world leader in hydroelectric equipment (with references such as the Three
Gorges Dam in China or the Itaipu Dam in Brazil), combined-cycle power plants, energy
production services and environmental control systems.
• The Company’s competitive advantage is based on its capacity to supply equipment and
services adapted to all types of energy needs (hydraulic, fuel-oil, gas, coal and lignite, nuclear,
wind and geothermal).
• Alstom is the unchallenged leader in environmentally sound power production

(improvement in energy yield, systems for controlling dust and pollution emissions, and CO2
capture).
• With 15,000 specialists in 25 technology competency centre and more than 200 local service
centers in 70 countries, the service business provides a broad offering, spanning spare parts
and on-site services, consultancy and technical support, performance improvement and service
contracts, global service contracts and upgrading to environmental standards.
• The Power Sector employs 48,000 people.
• Among contracts won in 2010-2011:
- Gas: 3 combined-cycle power plants in Singapore

- Hydro projects in Brazil, Chile and Switzerland
- Wind contracts in UK and Brazil
- Coal: air quality control systems in South Africa
- Operation and maintenance contracts in Singapore; Taiwan and Spain; retrofit contracts in
Poland and France
Alstom, a major player in the electricity transmission global market and “smart” grids
Alstom Grid is among the top three groups specializing in electricity transmission and holds
world leading positions in products and advanced technologies such as disconnectors, gas-
insulated switchgears, high voltage direct current (HVDC) equipment. Thanks to its expertise
in key domains such as power electronics, ultra high voltage, direct current interconnections,
integration of renewables into the grid and network management solutions, Alstom Grid is a
leading contributor to the smarter grids of the future.
• Alstom Grid has four main businesses: Products (electrical equipment of the ultra-high-
voltage and high-voltage electricity transmission system, 51% of sales), with number 1
positions in disconnectors and instrument transformers; Systems (network management
systems and big turnkey projects, 34% of sales), with a leading position in HVDC solutions
(high voltage direct current); Automation (sophisticated information systems for real-time
management of electricity grids); and Service.

• The Grid Sector employs 19,000 people in over 90 manufacturing and engineering sites
worldwide.
• Among contracts won in 2010-2011:
- Offshore substation in Germany

- Gas insulated substations (GIS) in Italy, Russia and United Arab Emirates
- Energy management systems (EMS) for national grids in Sweden and Kuwait
- Contract in United States for the Smart Grid “Super Station”, a first-of-it’s kind power
transmission hub, which will interconnect America’s three primary electricity grids.
Alstom, the world leader in very high speed rail transport and a major player in urban
transport
Alstom is a world leader in equipment and services for rail transport. Alstom’s Transport
Sector offers the broadest product range in the world, from rolling stock to infrastructure,
including signaling, maintenance and integrated transport systems.
• Alstom is the global leader in very high-speed trains (300 kph (186 mph) and above). After it
set the new world rail speed record, reaching 574.8 kph*, on 3 April 2007, Alstom launched in
February 2008 its new AGV very high-speed train, with a commercial speed of 360 kph. The
company has been producing TGVs since 1978 and has sold very high-speed trains to South
Korea (KTX), Spain (AVE) elsewhere in Europe (Thalys, Eurostar) and in Morocco. With its
tilting trains (Pendolino), Alstom has gained a major market share in the very high-speed
regional train market (over 250 kph).
• Alstom is number two worldwide in urban transport. Its metro systems are used in many
major capitals, including Paris, London, New York, Washington, Caracas, Singapore, and
Shanghai. One in every four of the world’s metro trains is supplied by Alstom, and the
Company has also developed a new generation of trams that are already used in 36 large cities
around the world, including France, Italy, Spain, Ireland, Germany, Australia, Algeria and
Tunisia. One in three of the world’s tramways is supplied by Alstom.
• The Transport Sector employs 25,000 people in 60 countries.
• Among the contracts won in 2010-2011:
- Tramways: tenders won for Tours, Paris, Le Havre (France) and Tunisia
- Very high speed: 14 Duplex train sets for the Tangiers-Casablanca line (Morocco)
- Metro contracts in Chennai (India), Panama and Santo Domingo
- Regional and suburban trains: order for 12 Coradia Nordic in Sweden; maintenance contract
for 135 trains in Stockholm

• Alstom has set up a partnership with Russian rolling stock manufacturer Transmashholding
(TMH). It applies mainly to the purchase of a 25% stake in TMH’s equity, the creation of a
50/50 joint venture to develop new products and a technological support from Alstom to
modernization of TMH’s facilities.
ACTIVITIES AT ALSTOM
ALSTOM is a global leader in power generation, power service and rail infrastructure, setting
the benchmark for innovative and environmentally conscious technologies. The Group is the
only multi specialist constructor in the railway sector covering everything from rolling stock
and maintenance to signalling and infrastructures. ALSTOM provides turnkey integrated
power plant solutions and associated services for a wide variety of energy sources, including
gas, coal, hydro, nuclear and wind.
POWER GENERATION
ALSTOM Power designs, manufactures, supplies and services state-of-the-art products and
systems for the power generation sector and industrial markets. ALSTOM Power covers all
energy sources and offers the most advanced solutions available for coal- and gas-fired plants.
ALSTOM is also the leading provider of conventional islands for nuclear plants and paves the
way in renewable energy solutions through its strong position in the hydropower market and
its recent entry into the wind power market.

The group supplies, integrates and maintains all components necessary to deliver clean power
solutions - from turbines and boilers to air quality control and energy recovery systems.
ALSTOM also has extensive experience in retrofitting, upgrading, refurbishing and
modernizing existing power plant equipment.
ALSTOM Power an unrivalled expertise in project management for a variety of power

generation systems, from small to large, from single equipment to complete turnkey solutions.
The group has supplied major equipment for 25% of the worldwide installed base.
Environmentally friendly solutions are also available for noise control and effluents, which
meet the most stringent worldwide regulations.
ALSTOM power – range of products:
ALSTOM offers the broadest range of products in the industry, ensuring a variety that allows
the Group to offer integrated solutions. ALSTOM also draws on extensive expertise in power
plant refurbishment, maintenance and optimization.
Boilers
ALSTOM provides a wide variety of equipment for boilers, incorporating state-of-the-art
pulverized coal systems. The Group also manufactures circulating fluidized bed and hybrid
fluidized bed boiler technology, as well as heat recovery systems.
Turbines
ALSTOM offers an extensive range of gas turbines, hydroelectric turbines and steam turbines
for both conventional steam power plant and nuclear power plants.
Turbo generators and generators

Group provides turbo generators for coal-fired, combined-cycle and nuclear power plants and
generators for hydroelectric plants.
Air quality control systems

The scope of ALSTOM’s solutions allows customers to comply with emissions standards
governing all conventional pollutants; the Group is now focusing on the development of CO2
capture technology.
Control systems
ALSTOM supplies leading edge systems used to control, monitor and manage power plants
and equipment such as boilers and turbines.
Product retrofitting
Retrofitting is the practice of replacing older product components with state-of-the-art
technology for improved performance. The scope of retrofitting may vary from the
replacement of entire product modules to specific components. ALSTOM does retrofitting for
boilers, turbines, and generators.

Maintenance and services
The Group provides spare parts, onsite services, consultancy, technical support, performance
improvement and a full range of call out services ensuring optimal power plant operation,
underpinned by short, medium and long-term service agreements.
Refurbishment of existing plants

To rise to the challenges laid down by new environmental regulations, ALSTOM has
developed a range of cutting edge services including full refurbishment of facilities,
comprehensive plant upgrades and bespoke renovation solutions.
ALSTOM power - Turnkey solutions:
ALSTOM’s unique offerings bring real value to its customers. With innovative plant
integration concept, the company helps operators to maximize their plants’ performance,
while fully complying with environmental regulations and obligations.
ALSTOM Power covers all energy sources and offers the most advanced solutions available
for coal- and gas-fired plants. ALSTOM is also a leading provider of conventional islands for
nuclear plants and paves the way in renewable energy solutions through its strong position in
the hydroelectric market and its recent entry into the wind power market through the
acquisition in 2007 of Spanish wind turbine company, Ecotécnia.
Gas-fired power plants

ALSTOM offers unparalleled technological expertise and experience in gas-fired plants,
including simple & combined-cycle and cogeneration solutions.
Coal-fired (steam) power plants

ALSTOM has strong technological experience and expertise along with a product portfolio
that spans the full range of customer needs, ensuring the highest standards in performance and
reliability while helping protect the environment.
Conventional islands for nuclear power plants

ALSTOM is the world leader in conventional islands for nuclear power plants, offering skills
that cover all stages of a project, from design and supply of equipment to maintenance
operations.
Hydroelectric power plants

The Group has supplied 30% of the world’s installed hydroelectric capacity. All key
components are manufactured at sites run by ALSTOM Hydro, a joint venture between
ALSTOM and Bouygues.
Wind farms
ALSTOM can provide the turnkey construction of wind farms which includes: civil works,
electrical infrastructure, supply & installation of wind turbines, start up and commissioning,
provisional reception test, operation & maintenance.

Refurbishment of existing plants
To rise to the challenges laid down by new environmental regulations, ALSTOM has
developed a range of cutting edge services including full refurbishment of facilities,
comprehensive plant upgrades and bespoke renovation solutions.
Maintenance and services

ALSTOM is providing solutions that make existing plants more competitive and
environmentally compliant thanks to innovative solutions in plant efficiency optimization and
life-cycle extension.
POWER SERVICE
ALSTOM Power Service Sector is addressing every challenge that arises in the electric power
industry with exceptional skills, experience and technology. As an Original Equipment
Manufacturer (OEM), they are the best qualified to maintain, upgrade and repair their installed
base-as well as components and systems from third-party suppliers. Their people are
committed to delivering unparalleled results for their customers.
A complete service offer

ALSTOM Power Service Sector has the industry’s widest range of services on offer,
including:
Power Plant Management: Tailored service packages including operation and maintenance
agreements for plants’ full life cycles (O&M)
Consulting and Support: Technical services, assessment, training, monitoring and
diagnostics, performance analysis
Performance Improvement: Modernization, upgrades and lifetime extension
Field Service: Outage management, field repairs, erection, commissioning, construction and
supervision
New Spare Parts and Reconditioned Components
ALSTOM Power Service is active in every plant area: gas turbines; steam turbines;
generators; boilers; balance of plant; instrumentation, control and electrical equipment;
environmental equipment.
Gas Turbines
Performance package upgrades help plant owners produce more power with less fuel while
reducing emissions. Extending the operation intervals between major outages enables more
production time and reduces maintenance costs. The innovative reconditioning uses the latest
technology to keep engines competitive throughout their lifetimes.
Steam Turbines
Power Service’s lifetime extension and upgrade solutions are perfect for today's ageing
installed base. Their product line features the economic engineering solutions to improve

steam path efficiency, for example, by reducing pressure loss in valves. Cold-end solutions
also contribute significantly to overall performance improvement of the thermal cycle.
Generators
Power Service offers an in-depth knowledge of all types of generators as well as an extensive
catalogue of products and services for generator components, including rotors and stators. As
the leader in fast rewind solutions, the ‘time-to-restart’ is excellent, as is their record in
harnessing the latest winding technologies to increase per-unit output, reliability and
availability.
Boilers
World leader in steam generation for over a century, ALSTOM brings its experience,
capabilities and responsive service to boiler island equipment. ALSTOM's expertise in power
engineering and process design, together with their relationships with key suppliers, enables
them to continuously propose the latest product upgrades for all major brands of coal
pulverizes, low-emission burners, pressure parts and ash-handling equipment.
Environmental Equipment
ALSTOM specializes in developing cost-effective solutions to upgrade and extend the life of
environmental systems, thereby reducing costs letting plant operators, focus on their core
businesses. Environmental services cover electrostatic precipitators, fabric filters, flue gas
desulphurization and, more globally, the entire flue gas line.
Monitoring & Diagnostics

Plant operators need effective risk management at both plant and component levels. ALSTOM
has developed monitoring and diagnostics systems, which gather data about a plant's past and
current performance. By recognizing degraded equipment and planning maintenance, a plant
can minimize unplanned shutdowns, extend equipment life and optimize performance.
Instrumentation & Balance Of Plant

Because of ALSTOM expertise in integrating modern control architectures into existing
systems, every balance of plant subsystem can maintain or improve its original performance
and efficiency. ALSTOM's know-how spans all the disciplines required for plant operation
and maintenance. From mechanical, hydraulic, electrical or electronic equipment, to
engineering conception and custodial care, they have the people and experience customers
have come to rely on.
Powering Technology Performance
Due to competitive market conditions, the economic viability of a power plant often declines
over time. As a result, owners run the risk of no longer generating electricity at competitive
prices.
ALSTOM Power Service has the technologies and experience to determine the timing and
scope of improvement programs, including their professional realization.

With experience in modernizing power plants, ALSTOM has the ability to assist each client in
every aspect of the project, from initial studies to new technology selection and project
execution.
Services range from traditional spare part handling and field service support for individual
power plant components up to and including full power plant management.
The benefits of plant improvements include:
• Performance improvements
• Availability and reliability improvements
• Maintenance/inspection optimization
• Emissions reduction
• Maintenance cost reduction
• Plant life extension
• Plant operation flexibility
• Increased operating safety
• Plant fuel flexibility
In-house expertise is available for the whole plant and all technologies including:
• Gas turbines
• Steam turbines
• Generators
• Boilers
• Balance of plant
• I&C and electrical equipment
• Environmental equipment
RAIL TRANSPORT
ALSTOM Transport develops and markets a complete range of systems, equipment and
service in the railway industry. A promoter of sustainable mobility, ALSTOM Transport
develops and markets the most complete range of systems, equipment and service in the
railway market. The company is one of the leaders in the world transport market.
The growing complexity of technical solutions and infrastructure projects is leading increasing
numbers of customers to demand complete solutions. Present in over 60 countries, with
26,000 employees, ALSTOM Transport’s strength lies in its ability to manage entire transport
systems, taking in rolling stock, signaling, infrastructure and maintenance, and to offer
“turnkey” solutions.

Products
Rail vehicles-The product range includes High and Very High Speed Trains, Trams, Metros,
Commuter Trains, Intercity Trains, Tilting trains, Locomotives.
Rail infrastructure- ALSTOM designs, produces and installs infrastructure for the rail
network to upgrade safety and performance of existing networks, or as part of new turnkey
solutions. This includes Information solutions, Electrification, Communication systems, Track
laying, Station utilities, Workshops & depots.
Turnkey systems- The Company provides light rail systems including tramways with or
without electric overhead lines, metro systems and air-rail links (traditional and automatic).
Services- Renovations with technological upgrades and short- or long-term maintenance of

any type or brand of mass transit rail vehicle, and spare parts service are also offered.
ALSTOM IN INDIA
ALSTOM has been associated with India ’s progress for over a century and has been a part of
the country ’s economic history. As new economic reforms shape a globally resurgent India,
ALSTOM helps to provide the country the much-needed technological expertise. With a
strong focus and commitment dovetailed with a passion for excellence, ALSTOM looks
forward to contributing to India’s future growth.
ALSTOM in India has full capabilities in engineering, manufacturing, project management

and supply of power generation equipment .It also has a significant presence in the transport
sector in India providing railway equipment and technology solutions. ALSTOM combines
local presence and knowledge with global resources to deliver world-class services and
solutions that meet each project’s needs. APIL is listed both in BSE and NSE with one-third
of its equity share held by public.
Alstom India Statistics

• Employees: 4,000 people in India and almost 100% growth in employee base in last 5 years
Two R & D Centres

• Alstom Infosys R&D Centre in Bengaluru
• Hydro Global Technology Centre in Vadodara
Four Manufacturing Units

• Hydro Equipment manufacturing facility in Vadodara
• Boilers in Durgapur and Shahabad

• Rolling Stock Traction & Signalling Components Manufacturing unit in Coimbatore
• Upcoming one of the largest integrated facility for turbine, generators and auxiliaries
manufacturing at Mundra, Gujarat
• Registered office in Mumbai

• Metro & Railway Signalling Engineering and Software Centre in Bengaluru.
• ALSTOM Projects India Limited is listed on Bombay Stock Exchange and National Stock
Exchange

Literature Review
2.1 Risk Management
Risks are uncertain future events that could influence the achievement of a company’s
strategic, operational, and financial and compliance objectives. Risks are an unavoidable part
of the business process, but good risk management at least protects an organization against
avoidable losses. Risk management is the process of deciding which risks to avoid, control,
transfer or tolerate.
The overall responsibility for risk management, which includes internal controls, rests with
the board of directors. The board is responsible for ensuring that a formal risk assessment is
undertaken at least annually for the purposes of making its public statement on risk
management, including internal control. The board should acknowledge, in this statement, its
responsibility for the risk management process and for reviewing its
effectiveness. Management is accountable to the board for designing, implementing and
monitoring the process of risk management, and integrating it into the day-to-day activities of
the company. Management is also accountable to the board for providing assurances that it has
done so.
Risk management is multi-faceted and requires a team-based approach. Boards are

encouraged to appoint dedicated committees to oversee the risk management process.
Members of a risk committee should be executive directors and senior management who are
involved with the operational functions of the organization in addition to non executive
directors with relevant skills or experience.
0.1.1 Scope of risk management
Risk management aims to create a disciplined, structured and controlled environment within
which risks to the organization can be anticipated and maintained within predetermined,
acceptable limits. Risk assessment is a continuous process requiring regular review as internal
and external changes influence the company’s strategies and objectives. Circumstances
demanding close attention include substantive changes to the operating environment, new
personnel, new or revamped information systems, rapid growth, new technology, products or
activities, corporate restructuring, acquisitions and disposals, and foreign operations.
0.1.2 Control activities
Control activities such as approvals, authorizations, verifications, operating reviews and

reporting, and division of duties should be implemented in order to try and avoid risks
materializing.

0.1.3 Information and communication
Relevant information should be communicated in an appropriate and timely way in order to

enable employees to properly carry out their responsibilities. The communication system
should ensure that all information, positive and negative, reaches senior management without
delay.
0.1.4 Monitoring
The monitoring process assesses the quality of control systems over time.This may be
accomplished through ongoing monitoring activities, separate evaluations or by a combination
of the two.
Using risk management techniques is an important component in creating the internal control
required for compliance with Sarbanes-Oxley (SOX) Section 404. Risk management includes
all the activities associated with identifying and reducing risk, as well as coping with negative
events should they occur. Identifying risks and creating systems and safeguards to ameliorate
them is one way to create a basic internal control system.
0.1.5 The Stages of Effective Risk Management

Risk management can seem like an overwhelming and daunting task – but only if you try to
envision, predict, and prevent every imaginable risk all in one swipe. The trick to successful
risk management is to break it down into manageable stages and tasks. Using a continual
improvement method, identify and mitigate high priority risks first, and then continually
improve your risk management by regularly reviewing and prioritizing risks and addressing
them according to your organizational needs.
The basic steps of risk management include:
• Understand the Mission.
• Perform risk assessment to identify and categorize risks.
• Prioritize risks and activities.
• Design processes, training, and checks/metrics (controls) for top level risks.
• Monitor internal control effectiveness and improve as required.
0.1.6 Methodical Risk Assessment Leads to Proper Internal Controls

The first step in conducting effective risk management is understanding the mission. Clearly
identifying and articulating the mission makes recognizing the risks to mission success much
easier and much more effective. In terms of Sarbanes-Oxley and SOX Section 404 –
understanding the mission is easy. The SOX mission is to create accurate financial statements
and avoid a material misstatement.

Once you identify the mission, begin risk assessment by listing the possible risks to accurate
financial statements (i.e. improperly listing assets). There are several approaches to listing
possible risks, but the most effective ones employ a methodical technique. For example, for
financial statements a methodical risk assessment approach could be to identify inputs to your
financial statements, and then work backwards to consider input sources, processes, etc;,
listing possible reasons for incorrect information. It also might be useful to consider typical
categories of risk such as system/process problems or weaknesses, human error, and fraud.
0.1.7 Prioritize Risks to Determine Internal Control Activities

When trying to assess possible risks the goal is to be exhaustive. You may end up with a
sizable list, but that is an expected risk assessment outcome – don’t let it intimidate you.
Think of it as useful information. It is unlikely that you will be able to address all the listed
risks from your risk assessment at once. The goal should be to identify high priority risks and
focus on those first. Now you are creating an internal control system that complies with
Section 404 Sarbanes Oxley.
Fig. 1: List risks, and then plot them according to impact and likelihood
Creating a matrix or graph of risks by likelihood versus impact is a great tool in finishing the
risk assessment task and moving toward risk management. For example, you could have the
risk/internal control committee rank every risk item on the list for probability and impact.
Then average them and plot them as R1, R2, R3, etc;, as they are plotted on Figure 1.
Obviously, after plotting risks, those with highest probability of occurrence and the highest
potential impact (or in terms of financial statements – materiality) should be addressed first.

How many risks are addressed at one time depends on the size and capability of the
organization. A large organization with lots of resources might focus risk management on the
top 12 or 15. A small organization might only be able to set a goal of attending to the top
three or top six risks in the first pass.
0.1.8 Managing Risk with Internal Controls

Now that you have identified the most important risks to manage, the next step is to identify
the best way to mitigate them. A typical method is to create well-defined processes that help
minimize the risk. The process should account for the inputs, outputs, as well as process
activities, but the process should also incorporate metrics and check-steps. This builds in the
capacity to monitor the process’ effectiveness right into the process itself. Once your process
is defined, then it is communicated through policies and procedures, training, and work
instructions. We will go into more detail about the role of policies and procedures for a SOX
Section 404 internal control system in next week’s article.
0.1.9 Continually Improving Risk Management and Internal Controls

Once in place, processes should be monitored by regularly verifying that process checks are
functional and that process metrics demonstrate effectiveness. Corrections are made as
required. Once these processes are fully operational and demonstrated effective, it is time for
Step 6: repeat the risk assessment / risk management process in order to address the next level
of risks. Be sure to begin with listing and plotting risks at the start of every iteration. (It will
be easier each time through.) Internal situations and operational environments change over
time, so risks and their priorities change as well.
If you are having trouble envisioning your internal control system, risk management
techniques can get the ball rolling. These risk management activities also improves other
components of an internal control system as listed by COSO: the Control Environment,
Control Activities, Information and Communication, and Monitoring. Congratulations, you
are slowly and surely building an effective internal control system by prioritizing and
addressing your risks.
2.2 INTERNAL CONTROL
0.1.10 Definition
Internal control is a company’s system, defined and implemented under its responsibility.
It comprises a set of resources; patterns of conduct, procedures and actions adapted to the
individual characteristics of each company which:
• Contributes to the control over its activities, to the efficiency of its operations and to the
efficient utilization of its resources, and
• Enables it to take into consideration, in an appropriate manner, all major risks, be they
operational, financial or compliance.

The system more particularly designed to ensure that:
a) Laws and regulations are complied with;
b) The instructions and directional guidelines fixed by Executive Management or the
Management Board are applied;
c) The company’s internal processes are functioning correctly, particularly those implicating
the security of its assets;
d) Financial information is reliable.
Internal control is therefore not limited to a set of procedures nor simply to accounting and
financial processes.
Nor does it embrace all of the initiatives taken by the executive bodies or by management,
such as defining company strategy, fixing objectives, management decisions, dealing with the
risks or monitoring performance.
The formality and nature of a company’s system of internal control will generally vary with
the size of the company and the level of public interest in it. Since profits are in essence the
reward for successful risk-taking by a company, the purpose of an internal control system is to
help manage and control risk appropriately rather than to eliminate it. Control mechanisms
should be incorporated into the business plan and embedded in the day-to-day activities.
The environment in which a company operates and the risks it faces are continually evolving;
the challenge for the board remains to ensure that the company’s system of internal control
remains relevant and is effective in managing the risks confronting the company at any given
time. The system of internal control should be capable of responding quickly to the needs of
the business arising from factors within the company and changes in the internal and external
business environment. It should include procedures for reporting to appropriate levels of
management any significant control failings or weaknesses that are identified.
An effective system of internal control should enable the company to:
• Identify key objectives and those risks that may impact their delivery.
• Measure performance of staff, policies, systems and processes in managing these risks.
• Manage the process through timely and meaningful communication of relevant information
Available via workable and effective reporting structures.
Monitor the effectiveness with which risk is identified, measured and managed.
“The plan of organization and all the methods and procedures adopted by the management of
an entity to assist in achieving management’s objective of ensuring, practicable, the orderly
and efficient conduct of its business, including adherence to management policies, the
safeguarding of assets, prevention and detection of fraud and error, the ac completeness of the
accounting records, and the timely preparation of reliable financial information”–– AAS-6
(Revised)

0.1.11 Components
Control Environment - The control environment sets the tone of an organization, influencing
the control consciousness of its people. It is the foundation for all other components of
internal control, providing discipline and structure. Control environment factors include the
integrity, ethical values and competence of the entity's people; management's philosophy and
operating style; the way management assigns authority and responsibility, and organizes and
develops its people; and the attention and direction provided by the board of directors.
• Risk Assessment - Every entity faces a variety of risks from external and internal sources
that must be assessed. A precondition to risk assessment is establishment of objectives,
linked at different levels and internally consistent. Risk assessment is the identification and
analysis of relevant risks to achievement of the objectives, forming a basis for determining
how the risks should be managed. Because economic, industry, regulatory and operating
conditions will continue to change, mechanisms are needed to identify and deal with the
special risks associated with change.
• Control Activities - Control activities are the policies and procedures that help ensure
management directives are carried out. They help ensure that necessary actions are taken to
address risks to achievement of the entity's objectives. Control activities occur throughout
the organization, at all levels and in all functions. They include a range of activities as
diverse as approvals, authorizations, verifications, reconciliations, reviews of operating
performance, security of assets and segregation of duties.
• Information and Communication - Pertinent information must be identified, captured and
communicated in a form and timeframe that enable people to carry out their responsibilities.
Information systems produce reports, containing operational, financial and compliance-
related information, that make it possible to run and control the business. They deal not only
with internally generated data, but also information about external events, activities and
conditions necessary to informed business decision-making and external reporting. Effective
communication also must occur in a broader sense, flowing down, across and up the
organization. All personnel must receive a clear message from top management that control
responsibilities must be taken seriously. They must understand their own role in the internal
control system, as well as how individual activities relate to the work of others. They must
have a means of communicating significant information upstream. There also needs to be
effective communication with external parties, such as customers, suppliers, regulators and
shareholders.
• Monitoring - Internal control systems need to be monitored--a process that assesses the
quality of the system's performance over time. This is accomplished through ongoing
monitoring activities, separate evaluations or a combination of the two. Ongoing monitoring
occurs in the course of operations. It includes regular management and supervisory activities,
and other actions personnel take in performing their duties. The scope and frequency of
separate evaluations will depend primarily on an assessment of risks and the effectiveness of
ongoing monitoring procedures. Internal control deficiencies should be reported upstream,
with serious matters reported to top management and the board.

0.1.12 Objectives
Internal controls are a system’s capability to prevent or detect material data processing errors
or fraud and provide for correction on a timely basis. Common internal controls include
segregation of accounting & operations duties, two signatures on every check, 2 approvals on
any requisitions, etc. The objectives of Internal controls are as follows:
1) Optimize use of Company Resource
• Prevent unnecessary duplication and waste.

• Possible conflict between safeguarding of assets and providing reliable information
and optimizing use of resources.
2) Prevent and detecting error and fraud
3) Safeguard company's assets
• Adequate controls necessary to prevent theft, misuse or accidents.
4) Maintain reliable control systems
• Necessary to produce accurate information to carry out operations.

• Information must be timely and reliable.
More specifically Management needs to ensure the following:
• Validity – recorded transactions are valid and documented (purchases are supported
by purchase orders, receiving documents, and invoices)
• Completeness – all valid transactions are recorded and none are omitted (all receiving
documents are matched to purchase orders)
• Authorization – transactions are authorized according to company policy (if purchase
is greater than $500 it must be signed off by the department head)
• Accuracy – transaction dollar amounts are properly calculated (receipts of inventory
are correctly recorded in the accounting system)
• Classification – transactions are properly classified in accounts (purchases of assets
are correctly capitalized and amortized, purchases of inventory are correctly recorded
as inventory)
• Accounting – transaction accounting is complete (all purchase orders are captured in
the system, are matched to receiving documents and invoices as the goods are
received)
• Proper period – transactions are recorded in the proper period (goods that have been
received and there is no invoice yet received are accrued for at year end)

0.1.13 ENVIRONMENT OF INTERNAL CONTROL
The environment in which internal control operates has an impact on the effectiveness of the
specific control procedures. The control environment means the overall attitude awareness and
actions of directors and managements regarding the internal control system and its importance
in strong control environment, for example, one with tight budgetary controls and an effective
internal audit function can significantly complement specific control procedures. However, a
strong environment does not, by itself, ensure the effectiveness of the overall system of
internal control. The internal control environment may be affected by:
• Organizational structure: The organizational structure of an entity serves as a framework

as practicable, to preclude an individual from overriding the control system and should
provide for the segregation of incompatible functions. Functions are incompatible if their
combination may permit the commitment and concealment of fraud or error. Functions that
typically are segregated are access to assets, authorization, execution of transactions, and
record keeping.
• Management supervision: Management is responsible for devising and maintaining the

system of control. In carrying out its supervisory responsibility, management should review
the adequacy of internal control on a regular basis to ensure that all significant controls are
operating effectively. When an entity has an internal audit department, management may
delegate to it some of its supervisory functions, especially with respect to the review of
internal control. This particular internal audit function constitutes a separate component of
internal control undertaken by specially assigned staff within the entity with the objective of
determining whether other internal controls are well designed and properly operated.
• Personnel: The proper functioning of any system depends on the competence and honesty of
those operating it. The qualifications, selection and training as well as the personal
characteristics of the personnel involved are important features in establishing and
maintaining a system of internal control.
It is clear from above that internal control means not only internal check and internal audit
but it ‘encompasses the whole system of accounting as well as non-accounting controls
established by management in order to carry on the business of the company in an orderly
manner, safeguard its assets and secure as far as possible the accuracy and reliability of its
records. It also follows that a good system of internal control should comprise among other
the following:
 The proper allocation of functional responsibilities within the organization;
 The proper operating and accounting procedures to ensure the accuracy and
reliability of accounting data, efficiency in operation and safeguarding of assets;
 Quality of personnel commensurate with their responsibilities and duties; and finally

 The review of the work of one individual by another whereby the possibility of fraud
or error in the absence of collusion is minimized.
Further, it is clear from the definition that the scope of internal control can be extended
beyond accounting and financial matters. However, financial and accounting controls
primarily concern an accountant and the other administrative controls installed by the
management may have only an indirect significance for him. Non-financial control may
include quality control of the products, plant maintenance programme, operating reports,
statistical analysis, personnel training programme, etc.
Accounting and financial controls include budgetary control, standard costing, bank
reconciliation, self- balancing ledgers, periodical operating statements, internal auditing, etc.
0.1.14 LIMITATIONS OF INTERNAL CONTROL
Management, including the Company’s Chief Executive Officer and Chief Financial Officer,
does not expect that the Company’s internal controls will prevent or detect all errors and all
fraud. A control system, no matter how well designed and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the inherent
limitations in all control systems, no evaluation of internal controls can provide absolute
assurance that all control issues and instances of fraud, if any, have been detected. Also, any
evaluation of the effectiveness of controls in future periods are subject to the risk that those
internal controls may become inadequate because of changes in business conditions, or that
the degree of compliance with the policies or procedures may deteriorate. The Limitations are:
-
• Judgment: The effectiveness of controls will be limited by decisions made with human
judgment under pressures to conduct business based on the information at hand.
• Breakdowns: Even well designed internal controls can break down. Employees sometimes
misunderstand instructions or simply make mistakes. Errors may also result from new
technology and the complexity of computerized information systems.
• Management Override: High-level personnel may be able to override prescribed policies

and procedures for personal gain or advantage. This should not be confused with
management intervention, which represents management actions to depart from prescribed
policies and procedures for legitimate purposes.
• Collusion: Control systems can be circumvented by employee collusion. Individuals acting

collectively can alter financial data or other management information in a manner that
cannot be identified by control systems.

0.1.15 INTERNAL CONTROL AND MANAGEMENT
In any business, the management is vested with the responsibility of carrying on the business,
safeguarding its assets and recording the transactions in the books of account and other
records. ASS 1 on “Basic Principles Governing an Audit” also states that, the management is
responsible for maintaining an adequate accounting system incorporating various internal
controls to the extent appropriate to the size and nature of the business”. It should also be
appreciated that in every business organization, small or big, simple or complex, some sort of
control is perceptively or otherwise in operation. It ensures uniform treatment and operation. It
outlines the broad line of authority and specifies each one’s task. The form and details,
however, may vary from organization to organization. It is also important to bear in mind that
the system installed needs review by the management to ascertain:
• Whether the prescribed management policies are being properly interpreted by the
employees and are faithfully implemented;
• Whether the prescribed procedures need a revision because of changed circumstances
whether they have become obsolete or cumbersome; and
• Whether effective corrective measures are taken promptly when the system appears to break
down.
• It is desirable that the management also installs an internal audit system as an independent
function to check, amongst other things, the actual operation of the internal control system
and report to it the deviations and non-compliances.
• To facilitate the accumulation of the information necessary for the proper review and
evaluation of internal controls, the auditor can use one of the following to help him to know
and assimilate the system and evaluate the same:
 Narrative record;
 Check List;
 Questionnaire; and
 Flow chart.
The Narrative Record

• This is a complete and exhaustive description of the system as found in operation by the
auditor. Actual testing and observation are necessary before such a record can be developed.
It may be recommended in cases where no formal control system is in operation and would
be more suited to small business. The basic disadvantages of narrative records are:
• To comprehend the system in operation is quite difficult.
• To identify weaknesses or gaps in the system
• To incorporate charges arising on account of reshuffling of manpower, etc.
A CHECK LIST
This is a series of instructions and/or questions which a member of the auditing staff must
follow and/or answer. When he completes instruction, he initials the space against the
instruction. Answers to the check list instructions are usually Yes, No or Not Applicable.
This is again an on the job requirement and instructions are framed having regard to the

desirable elements of control. The complete check list is studied by the
Principal/Manager/Senior to ascertain existence of internal control its implementation and
efficiency.
Internal Control Questionnaire
This is a comprehensive series of questions concerning internal control. This is the most
widely used form for collecting information about the existence, operation and efficiency of
internal control in an organization.
An important advantage of the questionnaire approach is that oversight or omission of
significant internal control review procedures is less likely to occur with this method. With a
proper questionnaire, all internal control evaluation can be completed at one time or in
sections. The review can more easily be made on an interim basis. The questionnaire form
also provides an orderly means of disclosing control defects. It is the general practice to
review the internal control system annually and record the review in detail. In the
questionnaire, generally questions are so framed that a ‘Yes’ answer denotes satisfactory
position and a ‘No’ answer suggests weakness; provision is made for an explanation or
further details of ‘No’ answers. In respect of questions not relevant to the business, ‘Not
Applicable’ reply is given.
The questionnaire is usually issued to the client and the client is requested to get it filled by
the concerned executives and employees. If on a perusal of the answers, inconsistencies or
apparent incongruities are noticed, auditor’s staff further discusses the matter with the
client’s employees for a clear picture. The concerned auditor then prepares a report of
deficiencies and recommendations for improvement.
A Flow Chart
It is a graphic presentation of each part of the company’s system of internal control. A flow
chart is considered to be the most concise way of recording the auditor’s review of the
system. It minimizes the amount of narrative explanation and thereby achieves a
consideration or presentation not possible in any other form. It gives bird’s eye view of the
system and the flow of transactions and integration and in documentation, can be easily
spotted and improvements can be suggested.
It is also necessary for the auditor to study the significant features of the business carried on
by the concern the nature of its activities and various channels of goods and materials as well
as cash, both inward and outward; and also a comprehensive study of the entire process of
manufacturing, trading and administration. This will help him to understand and evaluate the
internal controls in the correct perspective
0.1.16 Describing Internal Controls

Internal controls may be described in terms of: a) the objective they pertain to; and b) the
nature of the control activity itself.
Objective categorization

Internal control activities are designed to provide reasonable assurance that particular
objectives are achieved, or related progress understood. The specific target used to determine
whether a control is operating effectively is called the control objective. Control objectives
fall under several detailed categories; in financial auditing, they relate to particular financial
statement assertions, but broader frameworks are helpful to also capture operational and
compliance aspects:
• Existence (Validity): Only valid or authorized transactions are processed (i.e., no invalid
transactions)
• Occurrence (Cutoff): Transactions occurred during the correct period or were processed
timely.
• Completeness: All transactions are processed that should be (i.e., no omissions)
• Valuation: Transactions are calculated using an appropriate methodology or are
computationally accurate.
• Rights & Obligations: Assets represent the rights of the company, and liabilities its
obligations, as of a given date.
• Presentation & Disclosure (Classification): Components of financial statements (or other
reporting) are properly classified (by type or account) and described.
• Reasonableness-transactions or results appear reasonable relative to other data or trends.
Management is responsible for implementing appropriate controls that apply to transactions in
their areas of responsibility. Internal auditors perform their audits to evaluate whether the
controls are designed and implemented effectively to address the relevant objectives.
Activity categorization
Control activities may also be described by the type or nature of activity. These include (but
are not limited to):
• Segregation of duties - separating authorization, custody, and record keeping roles to limit
risk of fraud or error by one person.
• Authorization of transactions - review of particular transactions by an appropriate person.
• Retention of records - maintaining documentation to substantiate transactions.
• Supervision or monitoring of operations - observation or review of ongoing operational
activity.
• Physical safeguards - usage of cameras, locks, physical barriers, etc. to protect property.
• Analysis of results, periodic and regular operational reviews, metrics, and other key
performance indicators (KPI’s).
• IT Security - usage of passwords, access logs, etc. to ensure access restricted to authorized
personnel.
0.1.17 Fraud and internal control

Internal control plays an important role in the prevention and detection of fraud. Under the
Sarbanes-Oxley Act, companies are required to perform a fraud risk assessment and assess
related controls. This typically involves identifying scenarios in which theft or loss could
occur and determining if the existing controls procedures effectively manages the risk to an

acceptable level. The risk that senior management might override important financial controls
to manipulate financial reporting is also a key area of focus in fraud risk assessment.
0.1.18 Internal Controls and Improvement

If the internal control system is implemented only to prevent fraud and comply with laws and
regulations, then an important opportunity is missed. The same internal controls can also be
used to systematically improve businesses, particularly in regard to effectiveness and
efficiency.
0.1.19 Legal Requirements

Compliance to Internal Controls was not a legal requirement till 2002. However, a set
framework existed to guide and support companies who wished to implement controls.
A variety of complex factors created the conditions and culture in which a series of large
corporate frauds occurred between 2000 and 2002. The spectacular, highly publicized frauds
at Enron, WorldCom, and Tyco exposed significant problems with conflicts of interest and
incentive compensation practices. The analysis of their complex and contentious root causes
contributed to the passage of SARBANES OXLEY ACT in 2002.
• Auditor conflicts of interest: Prior to SARBANES OXLEY ACT, auditing firms, the
primary financial "watchdogs" for investors, were self-regulated. They also performed
significant non-audit or consulting work for the companies they audited. Many of these
consulting agreements were far more lucrative than the auditing engagement. This presented
at least the appearance of a conflict of interest. For example, challenging the company's
accounting approach might damage a client relationship, conceivably placing a significant
consulting arrangement at risk, damaging the auditing firm's bottom line.
• Boardroom failures: Boards of Directors, specifically Audit Committees, are charged with
establishing oversight mechanisms for financial reporting in U.S. corporations on the behalf
of investors. These scandals identified Board members who either did not exercise their
responsibilities or did not have the expertise to understand the complexities of the
businesses. In many cases, Audit Committee members were not truly independent of
management.
• Securities analysts' conflicts of interest: The roles of securities analysts, who make buy
and sell recommendations on company stocks and bonds, and investment bankers, who help
provide companies loans or handle mergers and acquisitions, provide opportunities for
conflicts. Similar to the auditor conflict, issuing a buy or sell recommendation on a stock
while providing lucrative investment banking services creates at least the appearance of a
conflict of interest.
• Banking practices: Lending to a firm sends signals to investors regarding the firm's risk. In
the case of Enron, several major banks provided large loans to the company without
understanding, or while ignoring, the risks of the company. Investors of these banks and
their clients were hurt by such bad loans, resulting in large settlement payments by the
banks. Others interpreted the willingness of banks to lend money to the company as an
indication of its health and integrity, and were led to invest in Enron as a result. These
investors were hurt as well.
• Internet bubble: Investors had been stung in 2000 by the sharp declines in technology
stocks and to a lesser extent, by declines in the overall market. Certain mutual
fund managers were alleged to have advocated the purchasing of particular technology

stocks, while quietly selling them. The losses sustained also helped create a general anger
among investors.
• Executive compensation: Stock option and bonus practices, combined with volatility in
stock prices for even small earnings "misses," resulted in pressures to manage
earnings. Companies did not treat stock options as compensation expense, encouraging this
form of compensation. With a large stock-based bonus at risk, managers were pressured to
meet their targets.
0.1.20 Sarbanes-Oxley and Assessment of internal control
The most contentious aspect of SOX is Section 404, which requires management and the
external auditor to report on the adequacy of the company's internal control over financial
reporting. Under Section 404 of the Act, management is required to produce an “internal
control report” as part of each annual report. The report must affirm “the responsibility of
management for establishing and maintaining an adequate internal control structure and
procedures for financial reporting”. The report must also “contain an assessment, as of the end
of the most recent fiscal year of the Company, of the effectiveness of the internal control
structure and procedures of the issuer for financial reporting.” To do this, managers are
generally adopting an internal control framework such as that described in COSO.
To help alleviate the high costs of compliance, guidance and practice have continued to
evolve. Both management and the external auditor are responsible for performing their
assessment in the context of a top-down risk assessment, which requires management to base
both the scope of its assessment and evidence gathered on risk. This gives management wider
discretion in its assessment approach.
0.1.21 Internal Control in India

In India, there are no legislations in place that makes it mandatory for companies to
implement internal controls. However, The Institute of Chartered Accountants of India (ICAI)
has laid down certain guidelines for Indian companies regarding Internal Controls. Moreover,
after the Satyam and Citibank fiasco, more and more companies are using a control
framework to ensure that no such incidents occur in future.
The formality and nature of a company’s system of internal control will generally vary with
the size of the company and the level of public interest in it. Since profits are in essence the
reward for successful risk-taking by a company, the purpose of an internal control system is to
help manage and control risk appropriately rather than to eliminate it. Control mechanisms
should be incorporated into the business plan and embedded in the day-to-day activities.
The environment in which a company operates and the risks it faces are continually evolving;
the challenge for the board remains to ensure that the company’s system of internal control
remains relevant and is effective in managing the risks confronting the company at any given
time. The system of internal control should be capable of responding quickly to the needs of

the business arising from factors within the company and changes in the internal and external
business environment. It should include procedures for reporting to appropriate levels of
management any significant control failings or weaknesses that are identified.
An effective system of internal control should enable the company to:
• Identify key objectives and those risks that may impact their delivery.
• Measure performance of staff, policies, systems and processes in managing these risks.
• Manage the process through timely and meaningful communication of relevant information
Available via workable and effective reporting structures.
• Monitor the effectiveness with which risk is identified, measured and managed.
1 Risk Management and Internal Control at APIL.

Alstom, as part of the operational activities the Group is confronted by a number of risks both
external and internal.
Its approach to internal control is risk-based. It has therefore put in place an organization,
procedures and processes with the objective of identifying, quantifying and mitigating risk and
allocating resources to manage and control risk in accordance with its business objectives,
both operational and strategic.
As part of its risk management principles, the Group has established a common language for
identifying and dealing with risk. This involves risk identification, consistent definitions and
management within the Budget and three-year planning processes on an annual basis under
which responsibilities for the management of risk are defined. Each Sector has established risk
review procedures consistent with the Group’s principles.
The Group’s risk assessment process allows the Group to take into consideration the impact
that potential events may have on the achievement of business objectives. Such events are
considered from two perspectives, likelihood and impact. Likelihood represents the possibility
that a given event will occur and impact represents its effect. A combination of qualitative and
quantitative methods is used in making the assessment.
Data from past events are used in making risk assessments as it provides a more objective
basis than entirely subjective assessments. Detailed information on potential impact and
likelihood of occurrence is checked and assessed. Potential events are assessed both
individually and as part of a sequence or combination of events.
The interrelationship of likelihood and impact is integrated into the risk assessment process.
Risk is also considered from a Group, Sector-wide, or portfolio perspective.

Taken together, risks in different businesses may exceed the sum of the individual risks or
conversely risks may be able to be offset across the Group or a Sector.
The time horizon used to assess the impact of risk is three years, which ensures that identified
mitigation actions are embedded in the budget and three-year plan. Any major risks assessed
outside the three-year period are kept under review.
Sector and Corporate Management update the risk assessments as part of the budget and three-
year plan process. Detailed documentation for each risk category is produced, highlighting the
causes of the risks, potential consequences and the actions taken to mitigate them.
For each Sector, the management team under the control of the Sector President should
approve the risk assessments. The relevant Senior Corporate officer should approve risk
assessments for transverse corporate activities. Group, Sector and Corporate risk assessments
should be reviewed and approved by the Risk Committee under the chairmanship of the
Chairman and Chief Executive Officer.
The risk management approach should be undertaken as a benefit to the achievement of

business objectives and embedded in the Performance Management of the Group.
Risk assessments are used in the setting of the internal audit plan, in the internal control
scoping and risk assessment, as part of the budget and three year plan evaluations, to facilitate
the work of the Risk Committee and to provide information on risks to the Legal Department
to assist in the production of the Risk Factors for the Annual Report and Accounts.
The Group risk management processes thus identify and quantify risks, consider mitigation,
including any insurance impacts, set mitigation action plans and consider reputational and
other non-financial impacts. Risk is also compared over time.
2.3 Internal Controls
The controls studied at Alstom Projects India Ltd (APIL) are listed below:-
1.1.1 Corporate Ethics Policies

The ALSTOM Code of Ethics, as stated in their “e-book”, compulsorily included as part of
induction pack of each employee and specific confirmation that he/she has read and
understood is obtained. The Code of Ethics is required to be provided as and when a new
employee joins. A formal receipt of acceptance of the booklet and acceptance to follow the
code is obtained from the employee.
The activity is to be performed and recorded by the Location HR manager and a copy of the
acceptance receipt is attached in the records.

Benefits
• This control ensures that all employees have understood the Ethical policies of the company.
It also ensures that all employees show similar and consistent ethical conduct. Alstom is
culturally and geographically diversified company with employees from different races and
societies so Code of Ethics helps in forming a uniform culture in the organization.
Risks Managed
• Loss of trust and confidence of business partners, clients and investors.

• Lack of employees’ engagement.
• Unethical work environment.
1.1.2 ALSTOM Reporting & Accounting Manual (RAM)
The finance team at each location is provided with the copy of the ALSTOM RAM. Further,
online link to the RAM has been advised to members of the finance team. Relevant extracts to
the other non-finance team members are provided periodically.
The activity has to be performed by the Senior Accounts Officer and performed by the
regional Finance Controller. The performer needs to inform the finance team and other
relevant non – finance members through e – mail. A copy of the mail is saved for future
references. The link also needs to be saved on the intranet and the finance portal.
Benefits
RAM is required to prepare books of accounts as per IFRS. The books are prepared for a
centralized reporting which involves all ALSTOM entities throughout the globe. Compliance
with RAM ensures that the books are being prepared as per global requirements. The Finance
Team needs to be well versed with RAM to avoid ambiguity and ensure consistency.
Risks Managed
• Ambiguity in preparation of Accounts.
1.1.3 ALSTOM E– book

This is included/ mentioned in the letter of appointment, and is part of the induction pack.
Further, each employee is provided the link to the E-book on the ALSTOM intranet. An
annual confirmation that the e-book has been read and understood is required. All employees
are required to read and understood relevant portions of the E – book every year. The E-Book
contains procedures for various activities that help employees to plan their actions.
The activity is performed and recorded by the location HR manager and approved by the
country HR manager. A copy of the link is to be sent to all departments through e – mail.
Benefits
ALSTOM is a MNC operating in more than 70 counties. Each country has its own corporate
culture that is reflected in the way its employees behave. A single set of guidelines in the form
of an E – book ensure that there is a common procedure followed throughout all ALSTOM
entities globally.
The detailed E – book provides details in all areas and activities. This helps the employees to
perform their activities more efficiently and effectively. It lists all procedures that help
employees in achieving corporate goals.
Risks Managed
• Ambiguity faced by employees for different procedures and functions.

• Waste of time in performance of duties.
1.1.4 Organization Charts
The chart of organization are prepared/ changed by the respective Functional Heads, and
reviewed / approved by the country MD. After approval, these charts are released by the
concerned Functional Heads. The regional HR department maintains an update chart of the
organization. The filing of charts is electronic, in a section marked for it on the ALSTOM
portal.
A copy of the organization is maintained on the intranet and is accessible to all. A copy of the
chart is provided to all departments through e – mail.
Benefits
• Employees throughout the globe are aware of the existing hierarchy and the corresponding
powers of each position. This allows them to contact the right person for a specific job, thus
reducing wastage of time and resources.
• This control clearly defines the responsibility and authority of each individual and acts as a
guide to all employees.

Risks Managed
• Waste of time.
• Ambiguity of authority and responsibility.
• Bottlenecks in performance of various duties and functions.
1.1.5 Segregation of Duties
The organization in ALSTOM India is based on processes, which on a macro basis is founded
on segregation of duties.
A document containing the names of employees and their assigned duties is prepared by each
department and recorded. ALSTOM Power Service MD must approve this segregation. A
copy of the approved format is circulated in all departments in all regional offices.
Benefits
• Clearly defined duties and roles.

• Defined authority and domain of work.
• Avoids wastages and duplication.
• Responsibilities are assured
Risks Managed
• Duplication of work
• Wastage of resources
• Ambiguity and confusion
1.1.6 Legal Structure Administration
In ALSTOM India, creation /change of any legal entity is done upon receipt of approval from
the corporate legal. Any appointment of Directors or change therein is also done upon receipt
of approval from the Corporate Legal. Local formalities are completed with the Legal
department. Updation of records to the ALSTOM Company database is done by Country
Secretarial Department based in Mumbai.

This activity is performed by the CFO, recorded by the Country Secretarial Department and
approved by the Corporate Legal. There is no specific routine or time – frame attached. This
activity is performed as and when the need arises.
Benefits
• All legal issues are handled from a single legal department ensuring that all such activities
are under the supervision of the central department.
• Saves cost in legal actions by economies of scale.
Risks Managed
• Liability arising due to failure of compliance to law.

• Liability arising due to lack of authority and responsibility.
• Lack of directions.
1.1.7 Tender Review

Tender approval directive/ instruction exists for ALSTOM Power Service – India, within the
framework of such Directive as issued by the Regional Department based in Malaysia. The
approval rules are reviewed from time to time as per the business needs. The process is
initiated by the Proposal Manager and is approved by the respective authority as per the
directives.
The process flows through the CRM where all concerned departments and authority record
their inputs with regard to the project. The authority varies with the amount of the project

/tender. A higher value project commands approval from a higher authority as compared to a
lower value proposal.
Detailed process for each price slab is circulated in the concerned department.
Benefits
The complexity of a project increases with the monetary value associated with it that demands
greater expertise for determining the costs and risks of the project. The approval process
ensures that higher authorities review a complex project that helps in deploying greater
management resources for determining the feasibility of the project and avoiding any future
loss arising in respect to the project. Higher authorities are more aware of the financial
condition of the company and its capacity to meet the project requirements.
Risks Managed
• Conflict of interest is managed, as more management personnel are involved in bigger

projects
• Loss arising due to lack of vision.
• Loss of reputation on non-completion of the project on time.
• Loss arising due to lack of in-depth analysis by lower level managers
• Liability arising out of project clauses.

1.1.8 Major Project Review
In accordance with the procedure issued for Power Service – India, the major projects for
>INR 20 millions are formally reviewed, once in quarter, and report is issued. The major
construction projects are reviewed during quarter closing; the major spares and service orders
are reviewed in between the months, with a gap of three months.
A standard template for review is issued to all concerned departments. The process is
performed by the regional Project Manager, recorded by the Location Controller and approved
by the India Finance Director. The project review is conducted according to the set format and
the findings are recorded.
Benefits
• This ensures that all project are on schedule

• Helps identify deviations
• Helps to record cost and revenue
• Evaluation of risk
• Cash Flow forecasting
• Cost control
Risks Managed
• Deviations occurring in the project.
• Cost overrun.
• Liability arising due to non-completion of the project on time.
1.1.9 Close the Books Process

The close the book process is structured, planned, monitored and documented, in accordance
with a set procedure. It is essential that the monthly book close process, which eventually
culminates in release of reports, management Report and also for meeting any statutory
requirements for filing, be organized, with duties distributed to allow correct and complete
processes.
The agreed timetables, individual team members who are responsible to carry out, check,
verify and approved the results of, the identified tasks, must be set up in advance. The
complete list of tasks leading to the close of books must be agreed upon. The cut off
procedures, independent confirmations, etc., are part of the Book close process.

The Power Service – India Controller is responsible to ensure that the correct, complete,
reliable and timely reports including those to meet statutory requirements are issued after a
structured and well-controlled accounting/ financial process with help of the Location
Controllers.
Benefits
Timely and complete closure of books, ensure timely reporting to the central unit. This also
ensures that all statutory requirements are taken care of.
Risks Managed
• Incorrect financial outputs/ reports

• Incorrect statutory filings
• Incorrect impact on tax payments
• Failure to delay the timetable for release of reports, statutory filings, deposit of tax, etc.,
• De-motivated teams.
• Financial and other commercial consequences due to inability to meet the reporting and
other deadlines
1.1.10 Management Disclosure

The financial information issued to management is largely based on Analytical outputs, which
are already controlled. Other information, commercial information is issued by the concerned
person, which is review/ verified by his supervisor before release to management.
The process is performed by Functional Heads, recorded by the country Finance Director and
approved by the MD. The commentary file and the MOM are circulated to the concerned
departments.
Benefits
• Helps management to plan and execute actions depending on the information received.
• Information is received through a proper channel, which helps in determining accountability
in case of errors.
• Information is received from individual departments and any disparity therein helps in
determining errors and fraud.
• Helps the Management to exert decentralized control.
Risks Managed

• Lack of management control.
• Frauds and errors.
• Accountability and responsibility.
1.1.11 Audit Response Management
The Internal Audit reports are issued, as a system, to the Corporate, Sector, Region and Unit
Management, which are followed up regularly for actions.
Same way, the statutory audit reports are also issued to (and actually, signed, by senior
management - Directors) of the unit/ company. This activity is performed and recorded
annually by the country Finance Director and approved by the MD or the CFO.
Benefits
• It helps to ensure that all processes are in place as per legal requirements.
• Helps in improving processes and identify scope of improvement.
• Helps in removing process bottlenecks.
• Justification of deviations from statutory requirements.
Risks Managed
• Failure to meet statutory requirements.
• Liability arising due to non-compliance to laws
• Loss of investors’ trust
1.1.12 Impropriety Management

Any instances of potential improprieties have been raised and investigated on a timely basis,
and all discovered frauds and thefts have been formally reported and investigated as per
corporate instructions.
Definitions
For the purpose of this document fraud (fraudulent conduct) comprises both the use of
deception to obtain an unjust or illegal advantage and intentional misrepresentations affecting
the financial statements by one or more individuals among management, employees, or third
parties. Fraud may involve:
• Falsification or alteration of accounting records or other documents,

• Misappropriation of assets or theft,
• Suppression or omission of the effects of transactions from records or documents,
• Recording of transactions without substance,
• Intentional misapplication of accounting policies, or
• Willful misrepresentations of transactions or of the entity’s state of affairs
Error refers to:
• Mathematical or clerical mistakes in the underlying records and accounting data,

• Oversight or misinterpretation of facts,
• Unintentional misapplication of accounting policies
It is the responsibility of Unit Management to take such steps as are reasonably open to them
to prevent and detect fraud. This includes:
• Taking steps to provide reasonable assurance that the activities of the entity are conducted
honestly and that its assets are safeguarded
• Establishing arrangements designed to deter fraudulent or other dishonest conduct and to
detect any that occurs
• Ensuring that, to the best of their knowledge and belief, financial information, whether used
in the entity or for financial reporting, is reliable
Benefits
• Defining errors and frauds helps in determining the follow-up actions to be initiated.
• Procedure helps to deal with the delicate issue of fraud and error efficiently.
• Defining authority and responsibility.
• Encouraging honesty and ethical conduct in financial matters.
Risks Managed
• Management uninformed about frauds and errors occurring in financial units.
1.1.13 Fraud Risk Assessment

Areas that deserve special attention are:
• Management override of controls
• Revenue recognition

• Segregation of duties
• Collusion with suppliers
• Cash transactions
• Unusual journal entries
• Accounts involving judgement and estimate
• Complex accounting procedures
Procedure
Where any person becomes aware of, or suspects that there may be, instances of error or
fraudulent conduct, they should document their findings and discuss them with the appropriate
level of management. In the case of fraud, or a suspected fraud Unit Management should
immediately: -
• Establish the details of what has taken place, over what period of time, the person or persons
involved and an estimate of the amount of the fraud/theft.
• Inform the Region VP Finance who should notify the Sector SVP Finance and Corporate
Internal Audit Department of the incident.
• There should be no communication with any person implicated in the events under
investigation
• Either, assign at least two senior members of staff not connected with the department or
function concerned to investigate the matter and make a preliminary report to the
management of the company and/or engage external forensic accountants to conduct the
investigation and prepare the report.
• Consult with the entity’s lawyer as to the legal consequences of any fraudulent conduct.
• Involve HR department at an early stage so that disciplinary procedures can be followed if
needed. It may be necessary for employee/s suspected of committing a fraud or theft to be
suspended whilst an investigation into the incident is conducted.
• Inform the local police that a suspected fraud/theft has taken place if criminal proceedings
are to be instigated by the company.
• Commence steps for recovery of the property where possible.
• Receive regular reports from the staff members/consultants that are assigned to the
investigation of the progress being made.
• Implement changes to controls when and if it becomes apparent that procedures have been
breached or not followed.
• Prepare detailed report for Corporate Internal Audit Department, Region VP Finance and
Sector SVP Finance setting out brief history of the event, the steps taken by Management of
the unit since the discovery of the fraud, the view of outside sources such as the police and

the changes that have been made to the Unit’s controls as a result of the discovery of the
fraud.
Benefits
• Procedure helps to deal with the delicate issue of fraud and error efficiently.
• No one’s reputation is harmed since proofs are collected before exercising legal actions.
• Recovery of loss if possible.
• Alteration of policies to avoid any misconduct of duties in future.
• Involvement of lawyers helps in formulating steps carefully before taking legal actions so
that it doesn’t harm the company’s reputation and objectives.
Risks Managed
• De-motivated employee for allegedly committing a fraud or error.
• Lack of authority and responsibility.
1.1.14 Security over Documents
Electronic Access Control has been implemented at Noida and Baroda office. In rest of the
places, these documents are kept under lock and key. Location Controller and Admin In-
charge are responsible to arrange secure, adequate and accessible (as allowed) storage of the
documents. There is an instruction that all statutory/ commercial documentation must be
retained at least for a period of eight years, from the end of the financial year they concern.
This process is the responsibility of the Quality Department and should be approved by the
Location controller.
Benefits
This control ensures that all documents are protected from physical damage. It also ensures
that there is no unauthorized access of the documents.
Risks Managed
• Physical Damage
• Leak of information and trade secrets
• Tender details, if leaked can lead to loss of sales
• Legal Issues

1.1.15 Taxes & Payments to Local regulation Management
The Accounts officer compiles, and the location / Regional Controller checks and verifies the
payments, etc to be made for applicable taxes. Monthly Compliance Report is being sent to
corporate office.
All taxes, duties and other statutory duties must be correctly calculated and paid on time. The
Location Controller is to maintain a control sheet covering all such payments along with dates
by which these are payable and actually paid.
Any changes in the rates, values, applicable taxes and dates by which these are payable are
advised by the Corporate Taxes Responsible (Indirect and Direct Taxes). The Control Sheet is
kept up to date to reflect the current position on statutory payments.
Control/verification Check:
• Account officer calculates all statutory liabilities that are checked by senior account officer.
• Once the statement is checked by Senior accounts Officer (Recorder), Location finance
controller (Approver) ensure to make payment with in due time after verifying the
calculations. Presently the TDS is paid by electronic transfer; Sales Tax/ VAT by cheque and
Service Tax through Corporate finance.
• A Control Sheet is maintained to monitor the due date, due amounts etc.
• Apart from aforesaid procedure as per Corporate requirements, the location sends on
monthly basis, a Compliance report, certified by Location Controller, certifying that all
statutory payment are deposited well in due dates.
Document Preservation:
The Control sheet along with the calculations/ GL sheets, month by month is maintained.
Further, the challans for payment of statutory dues are kept in the same file. These are kept
under lock and key, under the custody of the Senior Accounts Officer/ Location Controller
delegate.
Benefits
• Centralized Reporting facilitates the central unit to tackle all legal matter related to taxation.
• It also ensures timely compliance to statutory requirements.
• It helps in avoiding legal confrontations and liability arising therein.
Risks Managed
• Non – compliance to statutory requirements.

• Monetary liabilities arising due to non-compliance to law.

1.1.16 Pre – numbered Documents
The Control Activity only applies to cheques.

• Cheques are generated from SAP. The sequence is maintained in SAP.
• A control sheet is maintained every quarter and kept in the closing binder.
• As far as invoices, expense vouchers, Journal Voucher etc are concerned; SAP maintains a
sequence of numbering automatically.
This process is performed and recorded by the cashier and approved by the Local Finance
Controller in each region.
Benefits
• Fully automated process – reduces human effort.

• Reduces Error in numbering and maintaining cheques.
• Consecutively numbered documents make it relatively easy to spot a missing document.
• Reduces the likelihood of unauthorized transactions.
• Reduces the likelihood of embezzlements.
• It is very hard to issue a false document.
Risks Managed
• Duplication of documents
• Missing documents
• Duplication of payments
• Embezzlements
• Loss of reputation due to mismanagement.
1.1.17 Tender Cost Estimation Back – up

Detailed, supportable and verifiable estimates for all different cost elements in tenders are
maintained (where possible benchmarked with similar recent products to verify / support cost
estimates). Firm offers / inputs (back up documents) are to be obtained from the suppliers

(SECs / Vendors / local ALSTOM entities / local Power Service units) as applicable, for
different cost elements in tenders during offer preparation stage.
The back - up documents for different cost elements in tenders is the responsibility of the
concerned Proposal Manager.
Upon receipt of the enquiry and completion of enquiry feasibility review, concerned
Tendering / Proposal Manager shall issue the enquiry to:
• Procurement Department / Concerned SEC / local ALSTOM entities for spare parts.
• Concerned SEC for service jobs involving experts.
• Sub – vendors for service jobs.
• Power Service Workshop for workshop repair jobs.
The offers received shall be checked for the offered terms and conditions vis-à-vis. tender
requirements (to be offered to the customer) and benchmarked with similar recent products to
verify / support the input cost. The key terms and conditions that are subjected to verification
are:
• Scope of offering
• Customer scope / responsibilities
• Delivery period
• Taxes and Duties
• Terms of payment
• Liquidated Damages
• Warranty conditions
Benefits
• The cost for a particular project is ascertained and validated by back up documents.
• Supplier’s quotation helps in determining the estimated price to bid for the tenders.
• Helps in avoiding future losses.
• Internal suppliers could be made aware of the existing market price, which in result helps
them to increase productivity and efficiency.
Risks Managed

• Exposing the company to unwarranted, avoidable and expensive risks where such back up
documents is missing.
• Market price fluctuations.
• Future losses due to cost over-run.
1.1.18 Tender cost estimation approval

Prior to submission of tenders, all cost calculations for each element of the project costs is
reviewed and signed off by the person functionally responsible. The cost calculations for each
element of the project cost is reviewed and vetted by the concerned Tender Team and Finance
group, prior to submission of the tenders.
• Upon receipt of offers / inputs for different cost elements in the tender from the suppliers
(Vendors / SECs / local ALSTOM entities/ local Power Service units), as applicable, the
concerned Proposal Manager shall prepare the cost and price calculation sheet as per the
forma and the draft of the offer to the customer.
• The offers / inputs received from the suppliers along with the cost & price calculation sheet
and draft offer shall be forwarded by the concerned Proposal Manager to the concerned
group for review and vetting.
• The Concerned Tender Team and Finance group shall review and forward their comments /
acceptance to the Proposal Manager in Hard paper copy / electronic form.
• Any comments from Tender Team and Finance group shall be clarified / incorporated in the
cost calculation / draft offer by the concerned Proposal Manager. If required, clarifications
shall be obtained from the concerned supplier.
Benefits
• Cost Analysis from experts helps to provide a clear picture of price fluctuations during the
course of the project.
• Helps to determine to exact price for quotation of tenders.
• Approval process helps in avoiding conflict of interests.
Risks Managed
• Exposing the company to unwarranted, avoidable and expensive risks where such review
mechanism is missing.

• Cost over-run.
• Loss of profit margin.
• Conflict of interests.
1.1.19 Reconciliation of Approved Tenders
All approved tenders are to be reconciled to “situation zero” for:
1) Sales price
2) Scope, terms and conditions,
3) Cash flow
4) Margin
5) Provisions for risks and contingencies
All differences are to be documented and explained.
The Company, Sector, Region and the unit management Directive/ procedures require that
keeping in view the size, complexity, nature of offering to the customer, etc., all tenders
including subsequent amendments, are approved at appropriate levels.
It is the responsibility of the Unit Management to secure that the review/ control is put in
place to secure reconciliation between “As Sold” position and “As Approved” position. Any
differences must be documented and fully explained/ reviewed/ approved. Within the Unit
Management, General Manager- Sales and Business Development are responsible to ensure
that this is done.
Procedures
• Upon receipt of order, “As Sold” Cost sheet is approved as per applicable Approvals rules
and order is uploaded in SAP after that.
• Any discrepancies would need the approvals by the persons who approved the tender.
• The key matters that are subjected to reconciliation are:
- Scope of offering
- Customer scope/ responsibilities
- Delivery period
- Price
- Taxes and Duties
- Terms of Payment
- Liquidated Damages

- Warranty period/ attendant conditions
- Provisions for risks and contingencies
- Cash flow
- Margins
Benefits
• Helps to identify reasons for discrepancies.
• Avoid conflict of interests
• Approval from higher authorities helps to minimize frauds and errors.
Risk Managed
An absence of reconciliation mechanism securing that the “As sold” position is same “as
approved” may potentially lead to the following:
• Circumventing the approval procedures for Tender Approvals

• Exposing the Company to unwarranted, avoidable and expensive risks where such
reconciliation mechanisms (including mitigating controls) are missing
• There may be loss of opportunities for certain cost savings that may be probable once the
reconciliation and review is carried out.
1.1.20 Tender to execution continuity

For all tenders there is a continuity of project management during the tender phase into the
execution phase, or a documented process for hand over from the tender team to the project
team that is respected in all cases (including verification of financial information). Following
an order intake, concerned Sales Manager / Proposal Manager shall hand over the complete
set of document of the said order along with the format to the concerned Project Manager.
The handing over should take place as soon as possible but not later than 3 days of the receipt
of the clear / amended order. This activity is performed by the concerned Sales / Project
Manager, recorded by the Project Manager and approved by the Regional Project Manager.
The key documents that are to be handed over to the concerned Project Manager are:
• Customer’s Order.
• Customer’s enquiry.
• Our offer and subsequent pre- order correspondence with the customer.

• Last approved (As Sold) Cost and price calculation sheet.
• Risk review carried out during offer preparation stage.
• Offers and inputs of the suppliers (SEC / vendor / local ALSTOM entity / local Power
Service unit).
• Technical and commercial vetting by the concerned Product group.
• Approval of the tender from the appropriate authority.
Benefits
• All the documents are transferred to the project manager, who executes the work in the
manner as desired by the contractual party.
• Documents are necessary for the in-depth study of the project.
• Transfer of responsibilities to the project manager.
Risks managed
Absence of timely and proper order transmittal to Project Management group may potentially
lead to the following:
• Delay in start of the order execution process leading to delay in completion and levy of
associated penalties.
• Lack of planning for execution of the order.
• Validity of suppliers offer may expire in case of delay in order transmittal leading to
unwarranted and avoidable cost inflation.
1.1.21 Opportunity Plan Documentation
Adequately documented plans exist to support opportunities for both cost savings and
additional revenue built into the tender. These plans have to be submitted and approved by the
appropriate level of management.
During the execution of the Power Service Jobs, the Project Management function identifies
the opportunities towards:
• The cost savings in terms of supplier / vendors’ costs, establishment cost, etc. with respect to
budgeted cost and the action is initiated towards the same.

• Identification of additional works / claims with respect to the contract and settlement with
client to achieve additional revenue.
The responsibility of this activity lies with the Project Management Group of Power Service
India.
Procedures
Cost Savings:
On receipt of the PO from the client and order transmittal from the Sales, the concerned
Project Manager reviews the scope and forwards the indent to Procurement or the enquiry to
various approved vendors / suppliers. The bids of the vendors are evaluated and negotiations
(mostly verbal / over phone) are conducted to arrive at the most competitive cost.
During the execution of the job, the Project Manager / Site Manager reviews the job schedule
in details at Site during the execution with the vendor’s representative, plan to achieve /
reduce the schedule to save the establishment cost. Any delay on account of client’s input is
immediately identified by the site manager and intimation towards the time extension is issued
by Site / Project Manager.
Additional Revenue:
The Site Manager / Service Engineer during the execution of work identify the additional /
extra work and intimate the Project Manager. The Project Manager reviews the same with
reference to contract scope and relevant clauses, and obtains client’s concurrence for the same.
To work out the additional price, either the Project Manager / Sales Manager initiate the offer
preparation by obtaining the offers from the vendors / suppliers.
In case of exigencies / urgency of work and considering the client’s relationship, the Regional
Project Manager may decide to go ahead with the execution of extra / additional work pending
settlement with client at later date. The Regional Project Manager is authorised to take such
decision for a value equal to or less than Rs 1.0 Lac and for above this value, the case should
be referred to the Project Management GM. No case, which has financial implication of, more
than Rs 2.5 lacs should be entertained without prior approval and commercial settlement with
client.
Benefits
• Continual review of the project helps in determining new cost savings and additional
revenue generation opportunities.
• Relations with the parties are maintained since both the sides account for variations.
• Additional work expenses have to be charged to the relevant party and this procedure helps
in identifying those expenses.
• Future contingencies and liabilities are recognized and dealt with.
Risks Managed
If the additional work is not identified and agreed with the client there is a risk of:
• Margin Erosion

• Imposition of LD / Penalty
• Loss of opportunity
1.1.22 Customer Order Approval
Customer orders, subsequent modifications and order cancellations are approved in

accordance with approval levels set out in the approval matrix – recorded accurately in the
accounting records, and are reconciled to “Orders in Hand” as reported in the system.
On receipt of Orders, Project Management follows the following procedures:
- Compare the order with the approved documents and scope defined in the tender /
offer.
- Acceptance is accorded / non-compliance with respect to offer is registered.
- Change in order value is reconciled and intimated to Finance Department for reporting in the
system.
Project Manager reviews the scope and detects deviation / alteration of the order with respect
to offer and subsequent clarification / confirmation given at tender stage. Discrepancies /
ambiguities are intimated to Sales function as well as Customer and clarification / correction
on order from client is obtained.
During the execution, the addition / deletion in scope are identified by the Site Manager /
Service Engineer and the same is reported to Project Manager. Project Manager obtains the
cost of modification / cancellation from vendor / Procurement Department and accordingly
prepares cost sheet for approval as per Power Service guidelines.
Upon receipt of approval Project Manager takes up the matter with customer in order to reach
to a settlement on account of compensation against cancellation or amendment towards order
modification as the case is deemed fit.
Necessary revision arisen out of modification / cancellation is intimated to the Finance
Department for reporting in the system.
India.
Benefits
• Disputes are settled with the concerned party without affecting the relationship.
• Modification or cancellations of order are charged by compensation to cover up the lost
opportunities and initial expenses.
• Terms & conditions that are detrimental to the company are negotiated.
• Avoidance of financial losses.

Risks Managed
• In case of downward revision of contract value, cost over run on account of establishment
cost may take place.
• Cancellation of order without financial compensation may lead to cash loss situation.
• Critical terms & conditions such as Terms of Payment, Warranty, etc. have significant
financial impact in the contract.
1.1.23 Project Cost Estimation Process
Detailed, supportable, and verifiable estimates for all different cost elements are updated at
least quarterly (and reviewed by senior unit finance staff) to ensure accuracy of project cost to
complete calculations shown in the project review and used for accounting purposes.
Project Manager reviews various cost elements of the Project and forward the same to GM
Project Management every month indicating budgeted cost, cost incurred, cost booked and
forecast to complete to have control over Project financials.
The concerned Project Manager reviews all the projects under execution (except AMC jobs,
Spares from SACs etc, where the risk elements are minimum) in terms of cost incurred and
‘cost to complete’. The necessary documents towards the cost incurred are kept in records and
the estimate towards the ‘cost to complete’ is obtained. For all the Major Projects (i.e. >10
MINR) the detailed financial report is prepared and forwarded to Regional Controller and GM
Project Management for review.
Once in quarter, the cost incurred and the ‘cost to come’ is reconciled with the Finance for all
the Major Projects under execution and completed within the quarter.
Verifiable Estimates:
In order to place Order on Vendor, Project Manager / Procurement Team floats enquiry to
normally three or more approved Vendor qualified for the specific job and evaluates the same.
Upon evaluation and negotiation with the identified Vendor, the papers related to vendor
evaluation are forwarded for approval.
On receipt of the approval PO is issued on Vendors at agreed price & terms & conditions to
enable them to undertake the work.
India.
Benefits
Cost is periodically assessed to control the cost on the project and maintain the profit margin.

Risks Managed
In case remedial measures are not taken towards cost control there is a possibility of cost over
run / margin slippage.
1.1.24 Project Review Process
This process is implemented to ensure that contracts are reviewed in terms of costs, cash flow,
revenue, risks and opportunities, provisions, and contingencies at least quarterly. Reviews are
properly authorized and evidenced as per the requirements of the ALSTOM Reporting and
Accounting Manual and Internal Controls Manual.
The Project Management function of Power Service carries out the detail review of the each
and every job under execution towards its cost, cash flow, revenue, risks & opportunities,
provisions and contingency every month. These are then reconciled with Finance once every
quarter.
Projects value < 10 MINR

Concerned Project Manager every month reviews all the jobs under execution and the status in
terms of revenue realised, revenue planned / forecast and outstanding collections. This is then
forwarded in MIS form to Regional Project Manager, Regional Controller and Head Project
Management. Any technical / commercial issues encountered are also addressed / taken up
with concerned group / person by the project manager for resolution.
Projects value > 10 MINR
The Project Manager carries out the review of each project under execution and a detailed
report is forwarded to Regional Project Manager, Regional Controller & Head –Project
Management. The report which contains project details, present status, completion targets,
Risks & Opportunities, detailed financial report is reviewed every month by the GM – Project
Management.
The AMC order, standard spares supply from SAC does not form part of the above limits.
Regional Project Manager and Head- Project Management may decide in case to case basis
the any such order to include in the review process.
Power Service India Controller & MD review the major Projects under execution once in
quarter.
Every quarter the Financial Reports are reconciled with Finance and final reconciliation for
each major contract takes place on completion of the contract.
India. The review result formalize through physical sign off.
Benefits
• Structured review of projects.
• Maintenance of cash flow.

• Deviations are analyzed and dealt with.
• Complexity of projects needs review from higher authority that brings in more expertise at
decision-making.
Risks Managed
The Project Review is carried out to mitigate the following risks:

• Negative cash flow
• Cost over run
• Warranty (Performance / Delays)
• Technical issues
1.1.25 Revenue Recognition
Revenue is recognized in line with the ALSTOM Reporting and Accounting Manual and
appropriate Sector guidelines based on milestones established “at situation zero” - that are
periodically reviewed for appropriateness.
The location finance ensures that all revenue is recognized in line with RAM. This process is
to be performed monthly by the Project Manager, recorded by Accounts Officer and
Approved by the Location Finance Controller.
Benefits
• Compliance to statutory regulations.
• Revenue is one of the key performance indicators and it is assessed as per the company law
of the concerned country.
Risks Managed
Revenue is among the key performance indicator that affects several other KPIs including
margin, profit, etc. An incorrect statement of revenue can seriously affect the credibility of the
Unit/ Company and invite negative publicity as well as actions from statutory authorities.

1.1.26 Aged receivable process
A detailed aged accounts receivable trial balance (aging based on payment due date) is
maintained and reconciled to the sub-ledger on a monthly basis (including investigation and
clearance of reconciling items). Actions are promptly taken to recover overdue balances.
Procedures
• After all the invoices and collections have been booked at the end of month, the Accounts
officer extracts from SAP, a list of invoices which are aged in defined time brackets.
• Presently, a complete list of unpaid invoices is maintained on excel sheet by the Accounts
officer, which is reconciled with the SAP output, duly distributing the amounts in the period
brackets.
• A collection plan is issued by the location controller for the concerned unit, for all aged
accounts, based on the reports received from the Project Managers.
• Further, a weekly statement is being used to monitor the progress on collections, day by day.
• At least once in a year, a formal meeting to review the receivable accounts is conducted
(participants, inter alias GM Projects, Financial Controller, concerned project manager/s, and
the location controller) in which collections plans agreed. Provisioning for doubtful debts, as
may be necessary, is also discussed. In the event there are concerns that certain invoices may
not be collected in full or partially, the management approval process for provisioning for
doubtful debts or bad debts is initiated. This may also be requested earlier, during monthly
review/ setting up of collections targets.
It is the responsibility of the Unit Finance Controller to ensure that the account receivables are
aged on a monthly basis, duly reconciled with the sub-ledger. General Manager Projects is
responsible for timely action to recover overdue balances.
Benefits
• Planned and effective collection policy.

• Regular follow – up of older receivables.
• Helps in managing the working capital.
• Saves interest cost.
• The older, the debt, the more are the chances of its going bad so collection policy helps in
reducing bad debt.
• Every loss has to be accounted in the books as soon as possible and timely collection helps
in identifying the actual bad debts and provisions required thereof.

• Helps in getting more orders, as the customers are psychologically reluctant to provide
orders to a company whom they already owe a lot.
Risks Managed
• Rising bad debts.

• Working capital requirements.
• Loss of orders.
1.1.27 Invoice Issue Process
All invoices are prepared and sent on a timely basis and in accordance with all supporting
documents and contractual requirements, and are recorded in the general ledger promptly.
On receipt of order and during the execution of the Power Service Jobs, the Project
Management function identifies the documents that are required to be submitted along with
the invoice.
Procedures
Invoicing:
Project Manager (PM) reviews the following:
• Terms & conditions of contract
• Terms of payment
• Identifies the milestone for invoicing
• During the execution of the job:
• Site Manager / Procurement Team reports the progress
• Project Manager forwards Billing request with all the supporting documents to Regional
Finance Controller (RFC) / Finance Representative
• Finance Dept. raises the Invoice, based on the PBR (Project billing request in SAP) and
which is dispatched to the customer by the concerned Project Manager
• Site Manager/PM follow up with customer for invoice processing
• SM/PM collects the payment
Every month Project Manager reconciles the Revenue / collections with finance.
The responsibility of this activity lies with the Project Management Group and Regional
Finance Controller of Power Service India.

Benefits
• Timely submission of the invoice with proper documents
• Fast realization of payment from the customer
• Maintenance of positive cash flow
• Timely release of payments to the suppliers/vendors
Risks Managed
• Delayed payment from the customer.

• Negative cash flow.
• Delayed payment to the vendors / loss of good vendors / Increased cost.
• Increased financing cost.
1.1.28 Supplier Selection Process
A structured supplier selection process is in place for PSIN. The process is performed and
recorded by procurement engineers and approved by Procurement – GM.
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The process is followed at most times and proper documentation is maintained. However, at
times only one single vendor is short listed without asking for quotes from 2 – 3 suppliers.
This is justified to maintain trade secrecy. Involving more vendors would mean sharing of
blueprints and drawings of ALSTOM manufactured equipment. This is risky as the same
supplier may deal with ALSTOM’s competitors.
Benefits

• Best buy at the best possible price.
• Increasing competition for the internal suppliers since external suppliers are involved.
• The approval chart helps to avoid conflict of interests.
• Helps in combating market price fluctuations.
Risks Managed
• Market price fluctuations
• Conflict of interests
• Bad buying decision
1.1.29 Purchase Procedure
The purpose of this Management System Procedure is to establish a standard delegation of

authority within the Segment in India in connection with all procurement of job / project
related material or services, capital equipment / material, Tools & Plants. However general
purchase and stationeries are excluded.
The scope is:

• All purchases / procurement in connection with the execution of an Order received. These
will include purchases of materials, Tools and Plants, engagement of a sub-contractor,
settlement of claims, variations or other adjustments with suppliers or sub-contractors.
• Capital Equipment / Material whether specific to a job or otherwise.
Sourcing Manager along with the concerned controllers is responsible for ensuring the
compliance with the procedure. Power Service Controller is responsible for issue, amendment
and maintenance of the procedure.
Procedure
Basic Operating Conditions
The following shall be followed as basic operating conditions:
• All procurement (except stationary) should be through Power Service Procurement (PSPR).
However, purchase related to Power Service Work Shop (PSWS) operation shall remain
with PSWS. Any urgent procurement at site during the execution of a job/ project shall be
the responsibility of Power Service Project Management (PSPM).
• All procurement related to Capital Expenditure need separate approval, as per country
Management Instruction (M.I.). The procurement department will follow the normal process
of procurement, based on the approval, in consultation with the location finance department.

• Qualification of bidders shall be as per QMS guidelines as issued and amended from time to
time. Evidence of qualification shall be maintained for key suppliers except internal and
very reputed suppliers.
• Minimum two/ three bids to be obtained from qualified bidders for comparative purpose
except when purchasing from SEC or internal ALSTOM supplier. In exceptional cases, such
as monopoly supplier, supplier in line with customer’s preference, critical item / service
from a proven supplier etc. order can be placed on single bid basis.
• The comparative statement set up for analyzing the offers from the third party subcontractors
/ suppliers shall include in the minimum, the scope of work, similar experience whether with
the Group /Company / Segment, price, Taxes & Duties, Freight & Insurance, LD, delivery,
performance guarantees, Terms of Payments, validity, deviations, if any. For order on SEC
or internal ALSTOM, the key statement shall include price, Taxes & Duties, Freight &
Insurance, LD, delivery, performance guarantees, Terms of Payments, validity.
• Recommendation / short listing based on technical & commercial evaluation of bids.
Depending on the complexity, size and nature of the procurement, participation of respective
product group, PSPM and Power Service Sales & Proposal (PSSP) will be encouraged.
Where technical risks are higher and the value of the order to be placed with a third party is
2.5 MINR or more, then respective product group’s participation is necessary. Among other
things, the controller must ensure that the release of orders etc., are within the approved
project costs, are in accordance with the essential conditions of contracting including
performance / advance bank guarantees, LD, taxes, terms of payment etc.
• When the intended procurement is for tools and plants or measuring & testing equipment, it
is mandatory that the requisition is first issued to PSPM in order to maximize the usage of
internally available items, where available. PSPM to promptly (in no more than 2 working
days) advise on availability or otherwise of the required items.
• If the source of supply is available within ALSTOM group, subject to meeting / matching
the pricing, delivery and other factors, as far as possible the order should be placed on
ALSTOM group entity subject to fulfillment of Power Service business strategy.
Benefits
• Systematic procedure helps in ascertainment of duties and responsibilities.
• Increases efficiency of units by employing proper resources to each project.
• Delegation of power helps in increasing pace of the project work.
• More in-depth knowledge of the experts helps in taking better decisions for a project.
• Increases intra-sales since focus is more on group entity transfers
• In case of intra sales, the buying department can negotiate price with the supplying
department.
Risks Managed
• Confusion of authority and responsibility.

• Decision based on asymmetric information.
• Avoidance of wastages.
• Monopoly of supplier.
• Loss due to Intra-sales.
1.1.30 Vendor bill booking process
Payments and liabilities are recorded at the correct amounts, in the appropriate accounts, and
in the appropriate accounting period.
Steps for Timely booking of Bill:
Vendor Bill Booking (With PO & Material Received Advice)
• The following process is being followed for bill booking where purchase orders are raised.
• Bills raised by the supplier or service provider are directly sent to the finance department of
respective location.
• Bills received at the location are entered into the Inward register by the inward clerk /
security officer.
• Bills are stamped with the date of receipt and a unique tracking number is written on the face
of the bill.
• The Accounts officer enters the relevant details (name of the Vendor, description of
material / services) in the Bill Authorization Sheet and attaches it with the bill.
• The bill along with the Bill Authorization Sheet is sent to the Project Manager for preparing
the MRA (Material Received Advice) / SE (Service Entry).
• The Project Manager prepares the MRA / SE after confirmation from the end user that the
material is delivered or the services are rendered.
• When the Project Manager prepares the MRA/SE in SAP, an entry is generated in the system
debiting the particular GL code specified in the PO and credit entry is posted to the Clearing
account.
• The Project Manager signs the MRA / SE and sends the entire set back to the finance
department along with the bill.
• On receipt of the bill from Project Manager, the Accounts officer verifies the bill with the
purchase order and MRA / SE for quantity, rate, value, applicable taxes, and terms of
payment, deductions, Sale-Order and Cost-Centers.

• For bill booking PO No. is entered in SAP which displays the open items for the selected
PO. The open items corresponding to the MRA / SE are selected and simulated for booking.
• Actual bill booking ensures that amounts in clearing account are cleared and posted to the
vendor account.
• Hence all goods received or services rendered but not billed are accrued at the period end in
the books.
• Retention, if any, is shown separately on the Bill Authorization Sheet that is deducted while
releasing the payment.
• The system generates a unique entry number for bills booked. This unique number is used
for filing and tracing the documents.
• The entire set of documents is checked and signed by the Location Controller.
Vendor Bills Booking (Without PO & MRA)
The process followed for bill booking in the case of small value purchases or expenses like
Telephone, Electricity, Taxi hiring, stationary, common expenses is as follows:
• Bills raised by the supplier or service provider are directly sent to the Admin department of
respective location.
• Bills received at the location are entered into the Inward register by the inward clerk /
security officer.
• Bills are stamped with the date of receipt and a unique tracking number is written on the face
of the bill.
• The Admin In-charge certifies the bill for material received or services rendered.
• The Admin In-charge attaches the payment approval voucher and fills in the details like
name of the vendor, description of material supplied or services rendered and forwards it to
the finance department.
• The Accounts officer verifies the bill with requisition for quantity, rate, value, applicable
taxes, and terms of payment, deductions, gate inward entry, Sale Order No, and cost-centre.
• The Accounts officer puts the relevant GL and SL code on the payment voucher and
forwards it to the location controller for signature.
• The entire set of documents is checked and signed by the Location Controller.
• The bill is booked in SAP debiting the expense head and crediting the vendor account.
Benefits
• Proper channelization of vendor bills.

• Proper inspection of material supplied as per the bill.

• Proper documentation of bills.
• Helps in accounting of expenses.
• Record of suppliers is maintained for any future discrepancies.
• Helps in authentication of expenses.
• Helps in payment of expenses as per terms and conditions established at the time of contract.
• Timely payment of expenses helps in building reputation with the vendors/suppliers.
Risks Managed
• Misplaced vendor bills.

• Fraud and theft.
• Loss of goodwill.
• Unauthenticated expenses.
1.1.31 Disbursement approvals
Disbursements (cheques, electronic bank transfers, etc) are approved by two signatures, with
one signature from Finance, unless specific authorization has been received from the Sector
Senior Vice President Finance. These are recorded in the period in which they are issued.
All disbursements are subject to following Rules:
• The person who has incurred or paid the concerned expenditure issues request for payment.
• Self-approval is prohibited.
• The approvals for incurring or committing any expenditure must be compliant with the
delegation of authority, which according to the nature and amount of expenditure may
require higher levels of authority.
• The Cashier receives the request for payment, along with completed documents. He verifies
the request is complete, approved, and as applicable to the transaction, applies/ checks the
codes applicable, including statutory deductions.
• He then presents the request for payment/ disbursement voucher to the location controller for
his review/ approval.
• Disbursement is made after the location controller has signed.
• No disbursement can be made in cash for an amount in excess of Rs. 2,500 (except for
Travel Advance where the limit is Rs. 5000) except when authorized by the Power Service
India Finance Controller or Director considering exceptional conditions necessitating this.

• All payments by cheque or bank transfers, without exception, need two signatories one of
who is from the Finance Department.
• Cash, Bank and other payments are promptly recorded in the period when made. This is
controlled by Bank reconciliation, cash reconciliation and review of subsequent period
transactions.
• Electronic transfers are allowed only for Tax payments, wherein the same rule applies that in
case of cheque transfer.
• Cheques are sent to vendors/beneficiaries through courier/Speed Post. Administration
department sends and keep records of all cheques sent in dispatch register.
All documents in relation to disbursements are properly controlled and kept by the Cashier
under the control / supervision of location controller.
Benefits
• This control minimizes the risk of theft / fraud.
• Helps in cash management.
Risks Managed
• Any employee with the power of signing cheques can transfer funds in his own name.
• If Finance department is not involved, it will be difficult to keep a track of payments.
1.1.32 Fund Release Segregation of Duties

Physical cheques are to be sent by Administration department, who also keeps a record of the
same in the dispatch register.
This control is followed on a daily basis for all outgoing cheques. A register is maintained
which records all details about the outgoing cheques.
This process is performed by the Administration department, recorded by the accounts officer
and approved by the Location Controller.
Benefits
This control helps to maintain inter – departmental check on movement of cheques. It is

assumed that it is difficult to form collusion between multiple departments.
Risks Managed
• Cheques may be issued for personal use.

• Unrecorded payments.

1.1.33 Payroll GL account reconciliation
Accounts reconciliation is performed at least quarterly for all payroll general ledger accounts,
and is reviewed by an individual other than the preparer. Reconciling items are resolved in a
timely manner.
Procedures
• HR prepares the payroll data and sends to an external agency for payroll processing.
• The external agency processes the payroll and sends the Journal that is uploaded in SAP
automatically.
• A quality review aiming at explaining month-to-month variances is made to ensure
coherence of postings.
• Monthly reconciliation is made to ensure HR calculations are in line with SAP entries.
• It is the responsibility of the Power Service HR Manager to ensure that a reconciliation of all
payroll general ledger accounts is performed with reference to pay rates, employee numbers,
employee names etc.
This process is performed by Location HR head, recorded by the Accounts Officer and
approved by Regional Controller monthly.
Benefits
Timely and accurate payment of employees’ salaries
1.1.34 Capital Expenditure and Lease Authorization
All capital expenditure needs prior approval of competent authority. The approval follows
separate guideline/instruction issued by APIL-India.
At first the finance team checks the availability of the budgetary provision, and then they
forward the same for approval. On receipt of approval, SAP asset number generated/ allocated
by location finance.
The depreciation and write-off/ scrap follow the country tax laws/ statutory requirements.
On a yearly basis, the location finance and admin team performs the 'Physical verification' of
the assets and later compare with the assets register (automated- SAP output).
This process is performed by Requisitioner / Functional Head, recorded by the Finance
Controller and approved by Region - 4 head based in Malaysia.
Benefits
• Systematic approach helps in better decision making in case of capital expenditure

• Control on all capital equipment

• Regular physical verification of capital equipment
Risks Managed
• Fraud / theft
• Unnecessary demand for capital equipment
1.1.35 Stock ledger management

The stock ledger is reviewed monthly to investigate and clear abnormal quantities or unit
values, zero valued items, and to ensure accuracy of the stock listing. Wherever possible,
stock consumption is reviewed for abnormal movement.
Since there is no manufacturing activity or “stock to sell” positions within Power Service
India, there are usually no inventories holding events. Purchases of trade goods are typically
for and against specified orders in hand, and the goods so purchased are generally transported
to the customers directly.
Further, there is no warehouse for Power Service activities.
Only in exceptional conditions there may be occasions triggering procurement of some special
items, like electronic cards/ controllers that may be needed over the next few months, on one
or more jobs/ projects.
Inventories also include Job Work in progress (WIP). WIP is reviewed, for major items on
monthly basis.
Procedures
In accordance with the receipt of goods, the concerned Purchase officer records the receipt of
“stock and sell” goods, along with details of
• Date of receipt of items
• Item name, code (if any), description and quantity
• Supplier name/ invoice number
• Upon issue of items (in accordance with applicable approvals), against specific job/ project,
the concerned Purchase officer would make the following entries in the register
• Date of issue of items
• Subject job/ project reference against which items are released.
• Balance of items
• The Location Controller will arrange physical inventory and reconciliation with books of
accounts.

• Any discrepancies between books of account and physical inventory will be dealt with as
follows:
o Up to value <5000, by the location controller and the GM Procurement/ PSPR
o All other cases, with the approval of PS Finance Controller and PS Director
o Job WIP is reviewed on monthly basis. At the time of result analysis major jobs are
reviewed for WIP situations. All costs are reviewed for accuracy and consistency.
Power Service Procurement Team (PSPR)/ GM Procurement is responsible to:

• Assume the physical custody of such items procured for (exceptional) stock holding.
• Arrange safe keeping of such items (in accordance with the application conditions of
preservations, etc)
• Insurance, and security and safety
• An officer within PSPR (other than the one taking physical custody of goods) will maintain
the Stock Register.
Finance Department/ Location controller is responsible to ensure correct accounting, physical

inventory and reconciliation and reporting.
Benefits
• It enables the stock records to be centralized in case of an organization like Alstom that has a
number of depots.
• The accuracy of depot can be mechanically tested more accurately.
• The records are clearer and neater. Also the recurring cost of maintaining them is much less
than those kept manually.
• If up to date records are available the management will be able to exercise a greater control
over quantities held in stock from time to time which may result in a great deal of saving in
both the amount of investment in stock and their cost.
Risks managed
• Loss of inventory due to theft
1.1.36 Debt and financing transaction approval
APIL does not have any borrowings from bank. The only utilization of limits is Non funded
limits. All the deposits are kept as fixed deposits. In case there would be any debt or financing
transactions, ALSTOM already has sanctioned limits from Banks as per the sanction letters
and for the overall borrowing limits, approval from Board of Directors is also in place.

This activity is performed and recorded by Treasury Executive and approved by the Board
monthly.
Documents to be filed:
• Sanction Letter from banks for various limits
• Bank Confirmation for Fixed Deposits
• Investment Report
• Board Resolution for Approval
Benefits
• Helps in controlling the raising of short-term debts from the banks.

Risks managed
• Fraud and thefts.

• High borrowing of short-term debts.
1.1.37 Opening and reporting of Bank accounts
All the bank accounts are opened with proper authorization such as Board resolution as per
local laws and also approval is taken from SVP as per Corporate Instructions. Opening and
closing of Bank accounts are moved through the bank database. All the existing Bank
accounts and changes are regularly updated in the ALSTOM Bank account database.
This process is performed by regional Finance Department quarterly, recorded by the treasury
Executive and approved by Treasurer and Director.
• Email request from Respective Business for opening of Bank account and change in
signatories.
• Confirmed receipt of documentation received by Bank for opening of Bank Account.
Benefits
• This Control helps to minimize theft and fraud.
Risks Managed
• Any employee or group of employees can open a bank account and misuse it for personal
gains.

1.1.38 Bank mandate management
Signatories to the various Bank accounts consists of existing/current employees and as soon as
the employee, who is a signatory, leaves the organization, another employee is designated as a
signatory for the Banks accounts by a request made by the Business duly approved by the
Business/Finance Head and then the same is forwarded to the Bank after being duly approved
by Country CFO and Country MD as per the Board Resolution passed .It is also being
regularly updated in the Bank Account database for Corporate Treasury to view.
Regional controller, recorded by the treasury and accounts Executive and approved by
Treasurer and then country CFO and country MD perform this process.
• Request from the respective business for change in signatories with reason.
• Confirmation from the Bank on receipt of letter enclosing all the relevant documents.
Benefits
This Control helps to minimize theft and fraud.
Risks Managed
Any employee or group of employees can open a bank account and misuse it for personal
gains.
1.1.39 Financial Exposure Management
Based on the request from Business, Forward covers are booked with the Bank. The Forward
covers that are maturing during the month are either utilized or cancelled or rolled over after
discussion with the respective businesses and accordingly reported in FIRST by the respective
business.
This process is performed by regional controller, recorded by the Treasury Executive and
approved by the Treasurer.
• E mail from respective businesses
• Consolidated file for Forward cover
Risks Managed

If forward cover is not sought – the company may incur losses because of exchange rate
fluctuations.
1.1.40 Bond & Guarantee facility Management
All bonding and guarantee facilities are managed in terms of timely cancellation, reduction
and returns, and are accurately recorded in the Bonds and Guarantees database.
Bank guarantee limits/ facilities are negotiated/ arranged by Corporate Finance India/ SSC.
The bank guarantees are needed in connection with tender submissions, for receipt of advance,
and also to be issued as “Contract Performance Guarantee”.
These represent contingent liabilities for the Company, and must be regularly monitored that:
• Guarantees are issued only in the form as approved with defined and limited time, as
applicable, for such values, but not exceeding as permitted, necessary for the bids/ contracts.
• The details of the guarantees, when issued, extended, cancelled/ returned must be updated in
the Bond & Guarantee (BG) database. The Location Controller is responsible to secure this.
The Cashier / Accounts officer is responsible for posting correct entries in the BG database.
• The Cashier / Account officer generates every month a list of Bonds & Guarantees
outstanding from the BG Database. The list is reviewed / validated for any BG issued but not
entered into the database. The expired BG retrieved from the customer is sent to the Bank for
cancellation and accordingly such Bonds & Guarantees are also removed from the database.
• The Senior Accounts officer checks and confirms that all data changes during the month are
correct and valid. All such changes during a month are also reviewed and approved by the
Location Controller.
• The list is also reviewed for all overdue/ expired bonds & Guarantees that must be retrieved
back from the parties to whom these have been issued. The Senior Accounts Officer issues
communication to the concerned Project Manager/ Sales Area Manager responsible for
collection of expired Bonds & Guarantees.
• A report of all bonds & Guarantees expired, but not retrieved, for more than 6 months are
reported on a quarterly basis to the GM Project Management/ Sales and to the PSIN Finance
Director.
• Wherever it is not possible to retrieve an expired Bond or Guarantee from the party from
whom it has been issued, such Bond or Guarantee is removed from the database based on the
written declaration from the customer that all the warranty provisions have been completed
OR based on the advice from the issuing bank that the Bond or Guarantee is ineffective and
expired as per Bank’s records.

• It is the responsibility of the Cashier under the supervision of the Senior Accounts Officer, to
secure that complete documents in support of issues, amendments, cancellations and
retrieval of bank guarantee is systematically maintained.
Reconciliation Statement of Bank Bonds, as reconciling with the Bank statement/

confirmation must be issued at least once in a year:
• Issued by Senior/ Accounts Officer
• Verified/ Approved by the Location Controller
Benefits
• Bonds and guarantees issued on projects are properly documented and database is updated
regularly.
• All bonds and guarantees are retrieved once the project is completed which helps in avoiding
any future liability.
Risks Managed
• Loss of goodwill if the guarantee is not renewed on date of maturity.
• Financial loss if the guarantee is not cancelled on completion of project.
1.1.41 Physical security of cheques

Cheques are physically secured, numerically controlled, never issued "to bearer" (or "cash"),
never signed blank, and not signed without evidence of proper support.
Safe keeping of Bank Chequebooks is very critical to protect the Company from any
unauthorised, improper and/or even fraudulent use. An improper/ unauthorised use of cheques
can cause loss of company property. A proper control over safekeeping and usage of
chequebooks is without exception and must be secured at all times.
Procedures
• Control over pre-numbered cheque books:

• For each bank account, a list of all cheques issued during the month will be extracted from
the SAP (by the Cashier), and reconciled with the physical cheque books/ cheques used
during the month (by the Senior Accounts Officer). Any cancelled cheques must not be
destroyed and kept, after proper defacing, for future reference. A list of such cancelled
cheques should be maintained (by the Cashier) and checked by the Senior Accounts Officer.
Both these documents will be, after being satisfied, signed by the Location Controller
confirming completeness of all pre-numbered cheques, received, issued (and cancelled, if
any) and in hand.
• The Company/ Unit will not requisition any bearer cheques from the Bank, except one
chequebook that must be used only for drawing of cash from the Bank. No bearer cheque
can be issued except for the purpose of withdrawal of cash for official usage. The Location
Controller will specifically control the receipt, usage and balance of the cheques from out of
the Bearer Cheque Book.
• Under no circumstances any blank cheques will be signed.
• Cheques can be signed only after proper and adequate support is available, along with the
necessary approval for release of subject payments. The Signatory from the Finance
Department must ensure this as lead responsible for this.
• The following documents must be retained:
• Carbon copy of cheques issued, along with the Bank Payment Voucher
• All cancelled cheques, duly defaced for any usage (in a separate file, with cashier)
• Reconciliation statement of control over pre-numbered cheques and cheque books (in
monthly book close file)
• Cheque issued list, duly checked and approved (in monthly book close file)
• All unused cheques/ cheque books under lock and key.
Location Controller is responsible to ensure safe and reliable retention of above.
Benefits
• Helps in maintaining a proper record of all cheques.

• The scope for committing fraud or theft is minimized.

• Physical security of cheques is prioritized.
Risks managed
• Misuse of cheque
• Risk of theft / fraud
Findings
This control is being followed as per requirements and all necessary documents are in place.
1.1.42 Bank account reconciliation process

All bank accounts are reconciled with bank statements at least monthly, are performed by an
employee independent of the cash receipt and disbursements functions, and are reviewed and
approved by a supervisor. Actions to clear reconciling items are quickly initiated and there
should be no reconciling items over 3 months. The Bank Reconciliation process is one of the
most important control processes. This applies to all bank accounts that are in the name of the
Company.
Procedures
Within two working days of close of every month, the Accounts Officer shall prepare the
Bank Reconciliation Statement (BRS) for each of the Bank Accounts covered by the
concerned Reporting Unit.
• The Cashier will arrange the bank Statement from the concerned Bank.
• Any bank charges will be accounted for, subject to normal approval/ delegation authority.
• The Cashier will confirm that all entries for collections, disbursements and bank charges (if
any) have been made in the SAP.
• The Accounts Officer will have the Bank Statement (as received from the Bank), along with
SAP output of bank transactions, and Bank vouchers.
• The Accounts Officer will particularly check any entries over the last two or three days of
the month for any irregularity etc.
• The Accounts Officer will then prepare the BRS either manually or through SAP. Any
reconciling items will be separately listed.
• All reconciling items – that are to be removed- must be approved by the location controller
for removal.
• Each BRS will be reviewed and approved by the Location Controller.

Copies of BRS, bank statements must be received within two working days of close of month
from the Site Accountant, which must be completely checked by the Accounts Officer, and
reviewed and approved by the Location Controller.
It is the responsibility of the Location Controller to make sure that Bank Reconciliation
statement is prepared, reviewed and approved for each bank account, at least once in a month.
Further the location controller must ensure that no reconciling items stay for more than three
months, these must be identified and reviewed and appropriate action must be taken.
Benefits
• Bank charges are properly accounted for.

• Bank charges can further be reviewed and choosing the bank with minimum cost for a
particular transaction could minimize bank cost.
• Comparing the bank statement with company’s statement helps in detecting suspicious
activities and errors.
• Mandatory maintenance of BRS is important to restrict room for any leniency.
Risks Managed
• Unusual bank charges levied by bank.

• Undetected errors or fraud.
Findings
1.1.43 Cash storage
Cash is kept in the most appropriate secure storage device and location in consideration of
local security environment and practical disbursement needs.
There are certain disbursements that need to be paid out in cash and accordingly cash is kept
at each location to be able to meet these requirements.
Cash disbursements must be minimised both in terms of nature and volume. Cash handling
inherently has certain risks on account of physical loss, etc.
Cash, which should be at the minimum levels, must be kept in the appropriate device.
Procedures
• The location controller determines the minimum and maximum limits on physical cash
needed at each location and/ or Site Office.

• The Power Service India Financial Controller will formally approve such cash limits.
• The location controller shall ensure, in consultation with the local Administration / HR, that
a secure storage device, preferably permanently fixed, is installed for cash keeping.
• Insurance will be taken for cash in hand.
• Daily cash in hand report would be drawn up on a monthly basis, to review for revision for
cash limits. Such cash balance report will be part of monthly book close file.
• It is the responsibility of the Location Controller to:
• Evaluate the value of cash disbursements from each location, and accordingly fix minimum
and maximum cash that should be maintained at the location. Max limit is necessary for the
insurance purposes too. Formal note fixing these values should be kept.
• Cash must be kept in a permanently fixed (fireproof) steel box, duly locked (which is bought
and installed in consultation with the local Admin responsible).
Benefits
• Authorization for cash management helps in delegating responsibility and accountability.
• Cash limits forecast helps in preventing any cash embezzlement and cash shortage.
• Insurance of cash helps in reducing risk of cash loss due to unexpected happenings.
• Daily monitoring of cash prevents errors and frauds.
• Cash is kept at a secured place in a fireproof box to prevent it from fire.
Risks Managed
• Theft
• Inability to meet daily cash requirements
1.1.1 Cash transaction control
Cash is restricted to defined transactions with limits, which are regularly reviewed, as are
alternative safer methods of payment.
The number, types and value of cash transaction must be kept to the minimum considering the
inherent Risks Managed in handling of physical cash. There are statutory restrictions, which
require put limits on cash transactions.
Authorization to make cash payments is supported by the approval matrix. These transactions
are formally documented. The custody and accounting for these transactions follow the
Segregation of Duties Chart.
The number, types and value of cash transaction must be kept to the minimum considering the
inherent Risks Managed in handling of physical cash. There are statutory restrictions, which
require put limits on cash transactions.

Procedures
Any cash disbursement can be made only for such transactions, within such limits, as
authorized. Location Cashier and the Location Controller are to ensure that payments are
made as per list for the purpose. Any specific deviation (such as visiting remote project/
service sites where banking and credit card facility is limited) is to be approved with specific
reason by the location controller.
This process is performed by the cashier, recorded by accounts officer and approved by
Location Controller. All cash vouchers are to be maintained in the records.
Benefits
• Helps in minimizing embezzlement of cash.
• Cash payments are tried to be minimized with various restrictions, as lot of risk is involved
in maintaining cash.
Risks Managed
• Cash is more likely to attract fraudulent payments

• No record of transactions in cash
• Non – compliance with statutory requirements
1.1.1 Petty cash reconciliation
All petty cash amounts are physically checked at least monthly, closing balances reconciled to
opening balances; transactions are performed by an employee independent and are reviewed
and approved by a supervisor.
Procedure
• After the closing hours of the last day of the month, the Senior Accounts officer physically
counts the cash in the presence of the Cashier. A Physical Cash Verification report is then
made and signed by both the Cashier and the Senior Accounts Officer.
• The balance as per books/ SAP output is printed. The Cash Verification Report and the book
balance are then compared/ reconciled, and Reconciliation statement is issued. The Location
Controller verifies and approves the same.
• The place of the Cashier is within the Finance department who receives and disburses Cash
during the specified office timings on a daily basis. The balance of cash is kept in separate

locked room in a proper safe (having two sets of keys one with the cashier and one with
Regional Finance Controller).
• Further, ad hoc cash verification is carried out by the Financial Controller to reinforce the
accuracy on the Cash.
• The Cash Reconciliation statement is kept in the monthly book close file.
Benefits
• This control helps to manage on-site expenditure more effectively.

Risks Managed
• Lack of proper record can lead to unnecessary petty expenses.

Findings
1.1.2 E-banking ID controls
In APIL, there is a Cash Management System for which the User ids and access rights to the
Corporate Banking are very limited. Besides the same it is statutory to make all the Tax
payments through electronic mode. Accordingly most of business units are being given access
for their respective bank accounts to make the tax payment.
This process is performed and recorded by Executive - Treasury and approved by the
Treasurer.
–– Authorization letter for Passwords

Benefits
• Proper security over transfer of funds from bank.
• Minimizes the scope for committing frauds.
Risks Managed
• Unauthorized access to bank accounts.
• Unauthorized transfer of funds.

1.1.3 Account Balance Review
A quality review is performed on account balances to ensure balances are reasonable,

accurate, and compliant with prescribed accounting policies – ALSTOM Reporting and
Accounting Manual.
Responsibility and Procedure
It is the responsibility of the location controller to review the movements of all the key
accounts, along with the closing balances. Procedures such as following will be undertaken:
• Draw financial trial balance, which also shows the movement during the month.
• Check the General Expense accounts, in relation to previous months’ trend, etc.
• Check the balances of suppliers’ accounts in relation to the confirmation (if available).
Check the “ageing profile” of suppliers account. Focus on movements on generally non-
moving accounts. Relate with any report from the GM Procurement.
• Customer Balances: Compile “ageing profile”. Refer to any review report on receivable
accounts. Customer balance confirmations, if available. Reconcile/ relate with the reports
from project managers. Check that the doubtful debts/ bad debts are correctly evaluated.
Liquidated damages/ penalties and recoveries by customers are recorded.
• Other Account receivable accounts are fully listed, aged and purpose known, along with
when these should be liquidated. The responsibility against each item, for collection should
be available.
• Bank/ cash balances: Complete reconciliation available in files.
• Depreciation: Check rates of depreciation, correct capitalisation.
• Expenses are correctly accrued.
• Employee advances should be reviewed. Confirmations as planned should be secured.
• Project results, cost to come/ WIP to be in accordance with the Project Reviews, if any, for
which the reports have been released.
• Travelling expenses fully and completely recorded/ provided for.
• Employees Costs and accruals are validated.
Benefits
• Proper control over accounts.
• Prevention of error.
• Detection of frauds.
• Complete review of a month’s transaction.

• A compilation of the standings of all the accounts as on date of month end.
• Variation in accounts are accounted for and rechecked for errors.
• Periodical review keeps the employees on their toes and they tend to finish the work as and
when it accrues.
• Debtors and creditors are managed properly and the ageing accounts are given the priority.
Risks managed
• Frauds and errors are detected.
• Default risk is minimized as ageing accounts are reviewed periodically.
1.1.4 Inter-company Transaction Integrity
All inter-company transactions are supported by appropriate documentation. Inter-company

transactions are reviewed and invoiced regularly. Most of the inter-company balances
(from/to) are recorded in the intranet and disputes are followed up in a timely and effective
manner. However, transactions payable within India and those countries, which are not
covered in the intranet, are excluded from it.
Monthly inter-company confirmation and reconciliation process is implemented, as part of the
closing process, through ICS, prior to the release of the Finance reporting.
Inter-company Integrity:
All inter-company transactions are booked on receipt of full/appropriate documentation and it
is reviewed & accounted for once it confirmed from Execution/ PSPM department.
The Project management requests the issue of Invoice, after the underlying supplies or works
have been supplied/ rendered, as per the Purchase order.
All supporting documents are attached along with invoice raised, and separate file is
maintained for the Inter-company transactions.
Benefits
• Proper documentation serves as a proof in case of disputes and misunderstanding between

the group companies.
• Reviews of inter-company transactions become easier as separate files are maintained for
inter-company transactions.
• Helps for future references.
Risks managed
• Lack of documents for resolving disputes or misunderstandings.

1.1.5 License reviews
All software are procured and managed by IT SSC India and the procedure for licenses
compliance and monitoring is formulated.
The tool used for monitoring the usage of software is Altiris Asset Management System
(CMDB). The tool is recently implemented in India. The list of software identified for review
is updated and a report for the same has been generated. All evidence relating to proof of
purchase, installations are taken for said software.
The Customer Support Team monthly performs this process. It is recorded by Customer
Support Manager and approved by the IT SSC Representative.
Benefits
• Authorization of software prevents claims for theft.
• Full access to the software’s functionality helps in better utilization of the software.
Risks Managed
• Termination of software causes loss of work.
• Claims for software theft.
1.1.6 Information security objective management

This control describes the information security policy of Power Service India. This policy
elaborates the responsibilities of end users and IT management and also guides them to use the
information within and outside PSIN including third party contractors, temporary project
students, consultants & end users of all locations including sites who access APIL information
systems. The purpose of this policy is to ensure that the data and information of the
organization are used effectively and not misused. This policy covers not only protection of
information from external personnel but also internal personnel. The perimeter security is
taken care by the Global team.
The IT Security policy is applicable to all employees of ALSTOM Projects, all Locations
including sites, who are involved in the planning, managing, developing, purchasing, and use
of IT resources. These IT resources are intended for official use only.
The objectives of "Information Systems Security Policies and Standards" are:
• To prevent unauthorized disclosure of information stored or processed on the Company’s

systems (CONFIDENTIALITY).

• To prevent the accidental or unauthorized deliberate alteration of information
(INTEGRITY).
• To prevent the accidental or unauthorized deliberate destruction or deletion of information
necessary to operations (AVAILABILITY).
This process is performed and recorded by the PSIN – IS coordinator quarterly. It is approved
by the PS Sector IS controller/ Country ITC.
Benefits
• It prevents misuse of valuable information that might be harmful for the company if leaked.
• No one will be able to access the data without proper authority to do so.
• Data can be preserved in its original form without being altered.
Risks Managed
• Misuse of Information
• Unauthorized access to data
• Alteration of information
• Destruction / deletion of information
1.1.7 Tax process component review
The nature of regulations as a part of the listing agreement requires a set of financials to be
drawn up on a quarterly basis. At every closing the tax is reassessed and deposited
accordingly as a part of the advance tax on the immediately succeeding date for payment of
advance tax. The tax return requires certain adjustments that are subjected to an audit with a
true and correct certification by the auditors except few adjustments that are directly derived
from disclosures in the financial statements. Accordingly the tax process risk is minimized.
These tax returns and auditor’s certificate are retained in the tax folder.
This process is performed and recorded by Regional Finance Department quarterly and
approved by the CFO.
• Deposit Challans
• Papers regarding Assessment Proceedings
• Appeal Papers

Risks Managed

• Interest and Penalty for non – compliance of Income Tax
Findings
1.1.8 Corporate Tax Payment
• Corporate Advance Tax that is a quarterly payment is estimated on the basis of profitability
forecast from all business units that is further validated by the Finance Controller and
checked by the Director Finance.
• Corporate Fringe Benefit payment is also a quarterly payment that is estimated on the basis
of actual expenditure incurred further enhanced by 20% that is further validated by the
Finance Controller and checked by the Director Finance.
• These payments are validated after close of financial year on the basis of actual figures as
per SAP and the short payments, if any, are duly deposited.
Benefits
• Timely payment of advance tax
• Avoidance of liability for non-compliance to Income Tax regulations
Risks Managed

• Interest and Penalty for non – compliance of Income Tax
1.1.9 Disputes and Claims Process
All disputes and claims are referred immediately to the company Legal Dept.
• Under their advice, all such settlement is looked into in accordance with the terms of the
Contract and/or Agreement. If there is no such provision in the contract/Agreement, then
action is initiated

• Apart from internal opinion/clearance, opinions of external Solicitors / Counsels are sought
where the disputed amount is substantial.
• As regards claims under Insurance Policies, losses are notified to the Insurers forthwith
together with claim application. Other steps like lodging of complaint with Police, obtaining
final police report, etc. Are initiated simultaneously.
This process is performed by business Finance Controller, recorded by the Legal Manager and
approved by Director – Legal
Benefits
• Centralized Process for all legal issues
1.1.10 Foreign Exchange Management
Alstom is involved in export and import of goods & services and therefore it needs to manage the
risk arising out of foreign exchange rate.
Procedure
In case of purchase of goods or service.
• After the purchase order is placed, the purchase order copy is sent to the finance unit by the
procurement department.
• Finance unit updates the required information into the system and request for the hedge
against the bill amount. (The bill amount must be higher than Euro 25000/-).
• The hedge request is mailed to the corporate office where the treasury head deals in the
market and issues the hedged rates to the respective divisions.
• When the contract expires and the payment is made with respect to the purchase order the
hedge taken is cancelled and the loss or profit on hedge is booked.
In case of sale of goods or service.

• After the sales order is received, the sales copy is sent the finance unit by the by the project
department.
• Finance unit updates the required information into the system and request for the hedge
against the bill amount. (The bill amount must be higher than Euro 25000/-).
• The hedge request is mailed to the corporate office where the treasury head deals in the
market and issues the hedged rates to the respective divisions.

• When the contract expires and the payment is received with respect to the purchase order the
hedge taken is cancelled and the loss or profit on hedge is booked.
Benefits
• Centralized process for the entire hedge instruments traded in.

• The risk of forex loss is minimized.
• Forex loss may affect the profit in a big way if not managed properly.
Risks managed
• Loss due to foreign currency fluctuations
Conclusion
The purpose of risk management is to secure positive development of earnings of the

Company and the continuation of the business by implementing risk management cost
effectively and systematically throughout the different businesses.
Risk management is part of the Company's strategic and operative planning, daily decision
making process and internal control system. Business objectives, risks and risk management
operations are combined through risk management as one chain of events.
Internal control is a process applied by the Board of Directors, management and all levels of
personnel in the Group to ensure that management has reasonable assurance that
operations are effective, efficient and aligned with strategy,
financial reporting and management information is reliable, complete and timely made, and
the Group is in compliance with applicable laws and regulations as well as the Company's
internal policies and ethical values including sustainability.
Alstom’s internal control framework consists of:

• The internal control, risk management and corporate governance policies and principles set
by the Company's Board of Directors;
• Management overseeing the implementation and application of the policies and principles;

• Finance function, internal control and business controllers monitoring the efficiency and
effectiveness of the operations and reliability of the financial and management reporting;
• Enterprise risk management process identifying, assessing and mitigating risks threatening
the realization of the Company’s objectives;
• Compliance procedures making sure that all applicable laws, regulations, internal policies
and ethical values (including sustainability) are adhered to;
• Effective control environment at all organizational levels including control activities tailored
for each process and creating group minimum requirements for business and geographical
areas;
• Shared ethical values and strong internal control culture among all employees, and
• Internal audit assignments reviewing the effectiveness of the internal controls as needed.
Recommendations
• Filing of many a document is unnecessary and the company should lay down clear policy on
what information should be kept in physical forms.
• A questionnaire should be developed that covers the ethical policies of the company. All the
employees to make sure that they have read the code of ethics must answer the
questionnaire.
• A physical copy of the organization chart should be pasted at all the offices. This will help to
motivate the employees, as they will be inspired to move to the top hierarchy.
• The project approval system is based on the project amount but the complexity of a project
cannot be judged just by its amount so the company should think of altering this policy
based on the complexity rather than the amount of a project.
• The Company should empower the risk assessing employees to assess the risk based on their
expertise rather than on a prescribed percentage method.
• Periodic reviews of all controls to ensure that no controls are being violated and loopholes
being identified.
• Modifying those controls that are not being followed to better suit the business needs.
• Reviewing those controls that need sharing of critical information with third parties.

• Devising a method or a test to ensure that no employee makes false claims on following the
controls.
• Supplier selection process can be made more transparent and a consistent control is required
at all levels and across all departments.

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“TITLE OF THE PROJECT”

A SUMMER PROJECT STUDY SUBMITTED IN PARTIAL

LAL BAHADUR SHASTRI INSTITUTE OF MANAGEMENT, DELHI

ALSTOM | Industry profile 1

ALSTOM | Industry profile 2

Risk management is the identification, assessment, and prioritization of risks followed by

ALSTOM | Industry profile 3

ALSTOM | Industry profile 4

ALSTOM | Industry profile 5

ALSTOM | Industry profile 6

The objective of this project was to:

ALSTOM | Industry profile 7

ALSTOM | Industry profile 8

India’s State Owned Companies

ALSTOM | Industry profile 9

Indian Private Companies

ALSTOM | Industry profile 10

ALSTOM | Industry profile 11

As a manufacturer of advanced technology, Alstom is a major market player in providing

• Alstom is present in around 100 countries.

ALSTOM | Industry profile 12

• Alstom is the unchallenged leader in environmentally sound power production

• The Power Sector employs 48,000 people.

• Among contracts won in 2010-2011:

- Gas: 3 combined-cycle power plants in Singapore

ALSTOM | Industry profile 13

• Among contracts won in 2010-2011:

- Offshore substation in Germany

• The Transport Sector employs 25,000 people in 60 countries.

• Among the contracts won in 2010-2011:

ALSTOM | Industry profile 14

ALSTOM | Industry profile 15

ALSTOM Power an unrivalled expertise in project management for a variety of power

ALSTOM power – range of products:

Turbo generators and generators

Air quality control systems

ALSTOM | Industry profile 16

Refurbishment of existing plants

ALSTOM power - Turnkey solutions:

Gas-fired power plants

Coal-fired (steam) power plants

Conventional islands for nuclear power plants

Hydroelectric power plants

ALSTOM | Industry profile 17

Maintenance and services

A complete service offer

ALSTOM | Industry profile 18

Monitoring & Diagnostics

Instrumentation & Balance Of Plant

Powering Technology Performance

ALSTOM | Industry profile 19

ALSTOM | Industry profile 20

Services- Renovations with technological upgrades and short- or long-term maintenance of

ALSTOM in India has full capabilities in engineering, manufacturing, project management

Alstom India Statistics

Two R & D Centres

Four Manufacturing Units

ALSTOM | Industry profile 21