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INTERNSHIP REPORT
DURATION: 8 WEEKS
NAME: FATIQ RIZWAN
REG NO: UW-20-MGT-BSAF-021
DISCIPLINE: BS (Accounting and Finance)
E-Mail: Fatiqch66@gmail.com
Contact No: 03125349839

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 PREFACE

I am a student of BS Accounting and Finance and our institute have

assigned us to do internship for the period of 6 to 8 weeks to
enhance our practical skills in the running business environment of
any organization. The objective of this internship program is to
expose our self into the practical atmosphere where we can observe,
analyse and even practice the application of the professional
knowledge that we have acquired during the course of our studies.
I was selected to do my internship in nation POF. I worked there for 6
weeks & it gave me a greater practical knowledge about business. In
the following pages I have narrated my experience, observation & all
the working activities which I observed.

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 ACKNOWLEDGEMENT
Actually this report is made possible with the help of many people.
Some of who have done as much work as they could do and all of
whom have brought their own brand of expertise to the task, so I
have many people to than. I would like to thank all my teacher and all
others who supported me.
My greatest acknowledgement is for “Pakistan ordinance Factories”
management who help me in the completion of project. Finally my
most acknowledgements goes to my instructors who gave me his
precious time. Due to his continuous supervision and cooperation I
am Succeeded in completing my project, which will prove an asset in
broadening my attitude and experience for my future.
I am grateful for the support and contributions of the above people
who have enable me gain the experience and determination needed
to compile this project.
God Bless them All.

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OVERVIEW OF ORGANIZATION
A BRIEF HISTORY
During their colonial rule, the
British built sixteen ordnance
factories in India, which at the
time of the partition in 1947 all
fell to Indian control. Pakistan’s
first Prime Minister, Liaquat Ali
Khan, issued a directive within
four months of the creation of
Pakistan to establish an ordnance
factory in collaboration with
British Royal Ordnance Factory to manufacture 0.303 calibre rifles and their
ammunition in Rawalpindi. In December 1951 Pakistan’s second Prime
Minister, Khawaja Nazimuddin, took part in the opening ceremony of the first
four POF workshops in the small town of Wah Cantonment.

INTRODUCTION
Pakistan ordinance factory found in 1951 with the objective of producing arms
for the armed forces of Pakistan. POF was established in 1951. Pakistan
Ordnance Factories is the largest defence industrial complex in Pakistan.
Pakistan Ordnance Factories or POF is a defence industrial complex producing
conventional arms and ammunition in Pakistan under the Ministry of Defence
Production.

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POF is a government organization operating under the Defence Production
Division in Pakistan’s Ministry of Defence. The Pakistan Ordnance Factories is a
complex of arms and ammunition manufacturing factories provided the
weapons and ammunitions to the Pakistan Army and all their foreign clients.
However, since POF can not produce the complete inventory of the Pakistani
Army’s armament needs, a high content of the Armed Force requirements are
imported.
More than 50 years of continuous growth and development POF is a sprawling
industrial complex of the following 14 Factories and 7 subsidiaries. All fourteen
industries of P.0.F are ISO 9001 certified while subsidiaries like Wah Nobel
Group of Companies are ISO
9002, ISO 14001 and ISO 18000 certified by internationally reputed firms like
moody International setup in UK. Awarded ISO 9001 certificates to all the
Fourteen Industries of P.0.F after inter-acting for nearly a year.

FACTORIES
1. Weapon Factory
2. Bombs and Grenades Factory
3. Tungsten Carbide Factory
4. Machine Gun Factory
5. Filling Factory
6. Propellant Factory
7. Heavy Artillery Ammo Factory
8. Small Arms Ammo Factory
9. Brass Mill
10. Tungsten Alloy Factory
11.Tank armour Factory
12. Explosive Factory
13. Medium Artillery Ammo Factory
14. Clothing Factory

SUBSIDIARIES

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 1. Wah industries Ltd.
2. Wah Nobel (Pvt) Ltd.
3. Wah Nobel Chemicals Ltd.
4. Wah Nobel Detonators Ltd.
5. Wah Nobel Acetate Ltd.
6. Attock Chemicals (Pvt) Ltd.
7. Hi-Tech Plastic (Pvt) Ltd.
Other than handling subsidiaries the chairman POF board Actions is:
1. Provide aid to teachers at Nasheman School
2. Vocational WSSO
3. Drug store
4. Izzat Ali Shah (F) hospital
5. Welfare Club (Shadi Hall)
6. POF Welfare Computer Centre
7. Day Care Centre
8. CNG Station (for Wah residents)
9. System Of Examination (system is subjective while entry tests are
objective)

MODERNIZATION
The past 50 years have seen a breath taking expansion and modernization. POF
which started with the manufacture of 303 rifles and its ammunition with an
old plant of world war II vintage, has since moved into the era of state of the
art technology, computer aided design and computer aided manufacture. POF
were confined mostly to the traditional products in the first 15 to 20 years but
after passing through different phases of expansion, diversification and
consolidation, POF has come of age by taking a quantum jump to the modern
state of art manufacturing technology During the last ten years or so POF has
emerged as an armament manufacturer of international repute. POF is alive to
the emerging technologies in armament production and interacts with the
world renowned manufacturers and R&D establishments at different forums to
keep itself abreast of the latest developments.

EXPORTS

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In addition to meeting the demands of Pakistan Defense Forces, POF products
are in service with over 40 countries in Europe, Africa, Asia, the Middle East
and the Americas. Ammunition and rifles have been exported to countries such
as Iraq, Croatia and Afghanistan for their respective military establishments.
POF specializes in the manufacturing of commercial explosives, hunting
ammunition and possesses extensive facilities for the manufacture of brass,
copper and aluminium ingots. A state of the art garments factory,
manufactures military uniforms and can also cater for the needs of the civil
sector.
As of post 2010s, Pakistan has been aiming to push ahead with its export
market but facing difficulties due to international guidelines enforced by the
United Nations.
In 2017, the POF announced it will be opening a branch in the United Arab
Emirates and targeting Middle Eastern markets where it will cater not only the
needs of the host country, but throughout much of the Middle East where
demands are high.
During the Russian invasion of Ukraine, POF alleged to have provided arms and
ammunition to Ukrainian Military’s. The various type of ammunition provided
are 122mm Yarmuk HE-Frag rockets, 122mm howitzer shells,155mm artillery
shells, M4A2 propelling bag charges, M82 primers, PDM fuses,M44A2 120mm
HE mortar bombs,130mm shells, 40mm RPG7 HEAT ammo, 12.7×99 MM armor
piercing cartridges, 12.7×108 mm bullets, and 7.62×54mm bullets.

VISION
POF is the largest defense industrial complex in Pakistan under the Ministry of
Defense Production. Our Main vision is to provide the best service at the
lowest possible cost and to meet all the international standards and also to
produce best quality conventional arms and ammo, also meet the international
standards. Other than the conventional arms and ammo we specialize in
manufacturing commercial explosive and hunting ammunition.

MISSION
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  To meet the requirements of arms and ammo of defence forces during
peace and war time.
 To utilize surplus capacity for commercial and export purposes.
 To manage and administer factory affairs and run them on sound
commercial lines.

ORGANIZATIONAL STRUCTURE

 The POF Board of Directors revises the management processes every day
to make policy decisions to ensure that objectives are met by providing
the necessary feedback to follow the established plans. The POF Board of
Directors is committed to continuous improvement, control all
operations more effectively and efficiently.
 To manage the feedback, the P.O.F board has established a progress
department in each sub-division to review the daily, weekly and monthly
progress of all employees and ensure that the assigned tasks are
completed as per the set schedule.
 Managers review the daily progress of employees, summarize it and post
weekly progress from all employees to the relevant sub-unit of M.D.
 The M.D. is responsible for monthly progress reports of all staff to the
Chief P.O.F. The P.O.F Board decides on promotion based on the annual
progress of the employee.
 Effective communication and good decision making between leaders and
employees play a major role in the development of an organization. P.O.F
board has great features that motivate employees to increase
productivity. For this purpose, P.0.F has established worker welfare
committees in all units of the factory group.
 Employees elect leaders who solve major problems. Elections are held
every three years to improve employee performance, increase
productivity and motivation. The selected person acts as a liaison
between management and employees. For this the P.O.F board is
constantly improving to remove communication barriers. Between
managers and subordinate managers.

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PRODUCT
POF is producing approximately 70 major products, which it supplies to
Pakistan Army, Pakistan Navy and Pakistan Air force.

Infantry Weapons
 Personal Weapons
 Sub Machine Guns
 Automatic Rifles
 Machine Gun MG3
 Machine Gun 12.7mm Type 54

Artillery Ammunition
 105 MM HOW
 120 MM SMOKE WP M44A1
 122 MM HOW HE
 130 MM HE
 155 MM HOW HE M 107
 203 MM HOW HE M 106
 ROCKET 122 MM HE
 QF 25 PDR MK1/2.

Mortar Bombs
 60 MM Mortar HE
 60 MM SMOKE WP
 60 MM ILLUMINATING SIGNA
 81 MM HE M 57 D A-2
 81 MM SMOKEWP
 81 MM ILLUMINATING/SIGN
 120 MM SMOKE WP M44A
 120 MM HE M 44A

Tank and anti ammunition

 100 mm APFSDS/T
 105 mm APFSDS/TL 64 A4
 105 mm HESH L35A3

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  125 mm APFSDS/T
 125 mm HE

Propellants and explosives

 Artillery ammunition propellant
 Mortar and rocket ammunition propellant
 Small arm ammunition propellant
 Demolition explosives

Aircraft and anti-craft ammunition

 30mm
 37mm HE/T
 12.7* 108mm
 Bomb HE AC 500 lb

Small arms and ammunition

 5.56 mm
 7.62 mm
 9 mm
 12.7* 108mm

Smoke grenades
 ARGES 84-P2A1
 Smoke discharge WP P3 MK1
 Target indication grenade

Pyrotechnics and demolition stores

 Flare (trip-wire)MK 2/2
 Shooting (pencil type)
 Demolition charge # 16 IN
 Demolition 1 OZ CE PRIMER

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COMMERCIAL PRODUCTS
POF specialize in the manufacture of wide range of copper, copper alloys,
brasses, gilding metal and offer a large variety of brass items in the form of
rods, wires, sheets, strips, Hexagonal & special sections. Rods, bars & wire
round Hexagonal, square rod, Tubes, round Square, rectangular tubes, Strips,
Foils, sheets, GMCS strip with 10% coating on either side.

SERVICES
1. TECHNICAL TRAINING
New building was constructed and TTC was shifted to the new location, now
which is known as POF Institute of Technology (POFIT).

2. MATERIAL TESTING LAB

We ensure a high standard of quality demanded in any material testing
laboratories and possess state of the art Technology to meet all your material
testing requirements.

3. POF Guest House

In 1989 POF Hotel has been developing at a varied pace into a luxury hotel.
Having the Chairman POF Board as its Patron In Chief, it has served POF as its
private guest house.

4. Ordinance club
Ordnance Club is an exclusive club for the Officers of Pakistan Ordnance
Factory and its allied departments, having more than 1,400 privileged
members.

5. POF Clothing Factory

It has the distinction of having the highest no of Quality Certificates. Factory is
equipped with latest Stitching and Cutting machines, experienced management
and manpower with an average skill of 15 years. The factory has potentials in
term of production capacity and latest techniques.

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 6. POF Hospital
POF hospital is the best health car institution providing patient treatment with
specialized staff and equipment.

REVIEW OF DEPARTMENTS OF POF

During my internship in POF I have visited following departments:

Sr No DEPARTMENT DURATION
1 IA & RM Dept. 13-07-2023 to 3-08-2023
2 Main Finance Dept. 4-08-2023 to 8-09-2023

MAIN FINANCE DEPARTMENT

ROLE OF FINANCE DEPARTMENT IN ORGANIZATION
As finance is the system or study of creating, circulating and managing money.
A company’s finance department serves a fundamental role in making financial
decisions for internal and external affairs. A business’s activities depend on the
competence of a company’s finance department and the individuals who
comprise it. A finance department is organized by, and runs according to,
specific roles and duties.
Finance section commonly known as main cash office is one of the section
functioning under deputy director personnel management in director
administration department.

HIERARCHY

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DIVISION
Finance section is involved in the job of preparation of bills of pay
& allowances/misc. payments, expenditure.
Finance section is further divided into
 Billing section: billing section is responsible for preparing of
bills, and
 Cash section: cash section is responsible for drawl of cash
and its subsequent payments.
BILLING SECTION
This section prepares pre-receipted bills for contingent payments,
over time payments and TA/Das payments after receipt of sanction,
and supporting documents. The passed bills are handed over to cash
section for payments.
Process of allocation:
First of all the funds allocation is done in different heads. After the
allocation the expenditures incurred by the authorities. Allocation of
the amount depends upon the expense incurred in the past. . If the

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expenditure is going to be increase the allocated amount increased
through the proposal.
In main finance Department very first I met sir Muhammad Sadaqat who
control the budgeting he give me information about budgeting how they are
controlling the budgeting of different departments like HRM, Supply Chain
Management, Quality insurance etc. He also told me how they ask Ministry of
Defense to give them more budget in case of double production of ammunition
and he also give me details about different funds like Public and Non-Public
Funds.

BUDGETING:
 They have a proper chart of account in which they set up a proper list of
financial accounts in which they record the total assets and total
liabilities of the company
 POF Produce ammunition for Any on large scale for defence purpose but
sometimes Army needs double amount of ammunition, so they do the
future planning and also do the planning related to budgeting like how
much budget they need if they produce double amount of ammunition.
 When they need more budget for production of ammunition on large
scale, they send the details to Ministry of Defense and they allow them
to buy more raw materials to fulfill their needs.
 Government also give them money for new building, factory or office.
 Government also take the GP Funds from their employees, Government
take the 5% from employees pay and then invest it in different projects
and when employees need it government give them their money back
with a profit basically government giving them the interest on their
money.
 Government also running the different schemes, they cut 5% from every
employee salary and then give them Pension after the retirement,
Government also cut for benola funds means after the death of
employee government gives money on monthly basis to their families,
they also give money to their employees for children marriage and also
give scholarships.

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  They make budgeting for Admin coord, HRM, Supply Chain Management,
Quality Assurance, Civil Work and also they have a outlet in Karachi
which handle all the shipments.

BILLING
After meeting with sir Muhammad Sadaqat I met sir Aurangzeb who is E.O
(Establishment Officer), he give me information about the Billing. He is
handling the pays of 16 above scale employees.
They make a proper Bill slip for employee’s salary and they are handling the
16 Scale above officers’ bill. They make a bills of different funds like PN
Package Bill, Salary Bill, Medical and visa bill etc. They give allowances
according to the employees scale and their basic pay.
When they make a proper bill they send it to account department and then
account department send it for Auditing and when they make a pay slip
they send it to state bank and after verification state bank send it back to
national bank where they pay the salary to the employee.
If someone attendance is short then they hold his salary and check the
reasons behind his short attendance before giving him allowances or
making a bill.
After meeting Sir Aurangzeb I met Sir Nasir Abbas who is Upper Division
Clerk (UDC), he told me about additional payments, like Traveling
allowances, Hoteling Expenses and food expenses etc.
Other than the transport they also deals with Miscellaneous funds, these
funds are not the mandatory like salaries, these funds are additional
payments which they give to their employees e-g if some employee is ill and
doctor suggest him to buy medicines than POF will pay for employee
medicines.
They also give payment for Passport fee and also for visa fee, means if POF
send employee to foreign for foreign assignment they will pay for it. They
also make a bill for stationary items which they buy
If some employee is working over time they also make a bill for him, how
much he earn due to his extra working hours.

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 They are also giving the Travelling and Daily Allowance to their employees,
means when they send employee to Karachi, Lahore or Islamabad etc. They
give them some money for expenses (Food, Hoteling and Travelling
Expense).
Every financial year budget is allocated to them and then they pay other
additional allowances from the budget. They ask for the demands other
than the medical because we don t know when someone is ill.

SOURCES OF FUND
The Pakistan Ordnance Factory (POF) generates funds through various means,
primarily related to its production and sale of military and defense-related
products and services. Here are some of the key ways POF generates funds:

1. Government Funding: POF may receive funding from the government of

Pakistan to support its operations and research and development
activities.
2. Manufacturing and Sale of Weapons and Ammunition: POF is primarily
involved in the manufacturing of firearms, ammunition, explosives, and
other defense-related equipment. They generate revenue by selling
these products to the Pakistan Armed Forces and potentially to other
allied nations.
3. Exporting Defense Products: POF may export its defense products to
other countries, generating revenue through international sales and
collaborations.
4. Research and Development Contracts: POF may engage in research and
development projects, either independently or in collaboration with
other defense organizations, receiving funding for innovative projects.
5. Maintenance and Repair Services: POF may provide maintenance,
repair, and upgrade services for defense equipment, generating revenue
from these services.
6. Licensing and Technology Transfer: POF may license its technology or
collaborate with other defense companies, receiving royalties and fees
for the use of its intellectual property.

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 7. Government Contracts: POF can secure contracts from the government
for various defense-related projects and services, generating income
from these contracts.
8. Joint Ventures and Partnerships: Collaborating with domestic and
international defense companies in joint ventures or partnerships can
also bring in funds.
It’s important to note that the specific revenue sources and financial structure
of POF may vary over time and depending on government policies and defense
needs.

CLASSIFICATION OF FUNDS

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Centralized Funds:
Centralized funds are managed and controlled from a single, central
authority or entity within an organization or system. In a centralized
system, decisions regarding the allocation and use of funds are made by
a central governing body or management team. This approach often
prioritizes uniformity, consistency, and centralized oversight of financial
resources. It can be efficient in ensuring that funds are allocated
according to the organization’s strategic priorities and policies.
However, it may be less flexible in responding to specific needs at the
local or departmental level.

DECENTRALIZED FUNDS
Decentralized funds involve distributing financial resources and
decision-making authority to various units, departments, or
entities within an organization. In a decentralized system,
individual units or teams have more autonomy in managing their
funds and making financial decisions. Decentralization can lead to
more personalized approaches to resource allocation.

Types of expenditures:
 Centralized
 Decentralized

CENTRALIZED EXPENDITURE
Following centralized expenditures are as follows:
 Employee death
 Scholarship to students
 Marriage grant
 Umrah and haj package

Decentralized expenditures:

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Following are Decentralized expenditures:
 Employee death
 Family Member death
 Blood donation
 Spectacles
 Cash handling allowance
 Eid-Milad-Un-Nabi

CASH SECTION
This section basically deals with two types of funds:

1. Public fund
2. Non- public fund
Public fund:
The source of income of public fund is Government allocations. Public funds
can be drawn after the bill is passed and the bank gives the credit. The un-
spent amount is deposited back in Govt. Treasury through T.R at the end of the
month. All the cash transactions are reflected in cash ledgers and each entry is
attested by AM.

Types of accounts:
There are three types of public fund
1. Public fund account
2. Imprest account
3. Miscellaneous receipt account

Public fund account:

Following payments are made from this account:
 Pay and allowances
 TA/DA
 GP fund

Imprest account:

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 This account is also known as Revolver account.
Money is maintained as reserve in this account to meet petty expenses such
as:
 Repair and maintenance
 Purchasing (cash is drawn from this account for the purchase of stock
and non stock items)
 If the amount is more than Rs.5000, cross cheque will be drawn.

Miscellaneous receipt account:

 One way account
 It includes only receipts
 Payments are not included

Non- public fund:

The source of income of non-public funds may or may not be the Govt.
allocations. These are non- auditable and spent at the discretion of
competent authorities without observing the normal formalities of Public
funds. The unspent amount can be carried forward.

Types:
There are two types of non public fund
 Group welfare fund
 Group sports fund

Group welfare fund:

This fund involves following expenditures
 Blood donation
 Self death
 Family Member death

Maintenance of non-public accounts:

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So far Maintenance of non-public accounts is concerned, main cash office acts
as custodian of following non-public accounts:
 Chairman POF board special fund
 POF special fund
 Central welfare fund
 Group welfare fund
 Central sports fund
 Al-Behbood shopping plaza fund.
Non-public funds are non auditable and are maintained on the pattern of
regimental funds.

Maintenance of financial discipline:

On the financial discipline side, main cash office is responsible for arranging:
Quarterly audit of non-public funds (group welfare fund &group sports fund) of
all the factories/groups. The objective of reviewing the financial transactions
and control of public resources is to safeguard the interest of organization.
Main finance conduct audit of non public fund and audit of public fund conduct
by CMA .the audit reports of all the factories, along with observations
/recommendations of the audit teams are submitted by main cash office, in a
consolidated form, to chairman POF board for information. Thereafter, the
instruction of the chairman is communicated to the concerned heads of
department for rectification etc.
The functions that I learnt in POFs Main Finance department are as follows.
 Budget allocation in POF
 TA/DA
 Basic Pay Scale (BPS)
 Pay Bills
 GP (Government Provident) Fund
 Casual Leaves and Leave Pending Retirement

Cash Handling
TA:

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 Traveling allowance is a kind of compensatory allowance granted to a
government servant to meet personal expenditures necessitated by the special
circumstances in which duty is performed.

DA:
Daily allowance is a uniform allowance for each day of absence from head
quarters and is intended to cover the ordinary daily charges incurred by a
government servant in consequence of such absence
Daily allowance will be admissible only for the actual night at the out station
for which daily allowance is claimed. Where night stop is not involved and if
absence from head quarters exceeds four hours half, daily allowance will be
allowed.

Pay bills:
Pay bill is prepared for the employees, who are appointed recently on the job.

GP fund:
GP fund is deducted from basic pay of employees each year. It is compulsory
for every Government employee.
When a person gets GP fund in advance he will get 80% of total then he has to
return this fund in installments.

Cash handling (Salaries and Wages):

In main finance department I learnt about Cash Handling that how payment
and receipts are made. Payments are made directly to the employees, who are
below 16 scales. Payments are made to the accounts of the employees, who
are above 16 scales. When payment is made to the employee he makes an
entry to ledger that shows that payment has been made.
The procedure of cash handling is as follows:
Contingent bill is prepared by billing section of Main Finance department.
Then this bill is sent to Accounts office for auditing.

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After auditing cheque slip is prepared. This cheque slip is sent to commercial
bank (National bank). One copy of this slip is placed in the records of Main
Finance cash section.

AUDIT DEPARTMENT
DEFINITION
An audit is a systematic and independent examination, review, or evaluation of
financial records, transactions, processes, systems, or activities within an
organization to ensure accuracy, compliance with regulations, and the
reliability of financial information. Audits are typically conducted by qualified
professionals (auditors) who provide an objective assessment of the subject
matter, often producing audit reports that communicate their findings and
recommendations to stakeholders, management, or regulatory authorities.
Audits can serve various purposes, including financial statement audits,
internal audits, operational audits, and compliance audits, each focusing on
different aspects of an organization’s activities.

ROLE OF AUDIT
The audit department in an organization plays a crucial role in ensuring
financial transparency, compliance, and accountability. Its main functions
include:
1. Financial Oversight: Auditors review financial records, transactions, and
statements to verify their accuracy and completeness, helping to detect
errors, fraud, or discrepancies.
2. Compliance Assurance: Auditors ensure that the organization complies
with relevant laws, regulations, and internal policies, reducing legal and
regulatory risks.
3. Risk Assessment: They assess financial and operational risks, helping
management identify potential threats and implement mitigation
strategies.
4. Internal Control Evaluation: Auditors review and enhance internal control
systems to safeguard assets, prevent fraud, and improve operational
efficiency.

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 5. Performance Evaluation: Auditors analyze business processes and
operations to identify areas for improvement, cost-saving opportunities,
and increased efficiency.
6. Fraud Detection: They investigate suspicious activities, detect fraudulent
transactions, and recommend measures to prevent future fraud.
7. Reporting: Audit departments communicate findings and
recommendations to management, the board of directors, and
stakeholders through audit reports.
8. Assurance: They provide independent assurance that financial
information is reliable, which enhances investor and stakeholder
confidence.
9. Continuous Improvement: Auditors help organizations learn from past
mistakes, improve processes, and adapt to changing business
environments.
Overall, the audit department helps maintain financial integrity, reduce risks,
and promote good governance within the organization.

TYPES OF AUDITS
Financial Audit: Examines financial statements to ensure accuracy and
compliance with accounting standards and regulations.
A financial audit is a comprehensive examination of an organization’s financial
statements and related financial information by an independent auditor or
audit firm. The primary objective of a financial audit is to provide assurance to
stakeholders, such as shareholders, investors, lenders, and regulators, that the
financial statements are presented fairly and accurately in accordance with
generally accepted accounting principles (GAAP) or International Financial
Reporting Standards (IFRS).
Key aspects of a financial audit include:
1. Examination of financial statements: Auditors review a company’s
balance sheet, income statement, cash flow statement, and
accompanying notes to ensure they accurately represent the company’s
financial position and performance.

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 2. Testing of transactions: Auditors perform tests on various financial
transactions to verify their accuracy and compliance with accounting
standards.
3. Internal controls assessment: Auditors assess the effectiveness of the
company’s internal controls over financial reporting to identify
weaknesses or deficiencies that could lead to financial misstatements.
4. Verification of assets and liabilities: Auditors confirm the existence and
valuation of assets and liabilities, including cash, accounts receivable,
inventory, and long-term investments.
5. Audit opinion: At the conclusion of the audit, auditors issue an audit
opinion that expresses their professional judgment on whether the
financial statements are presented fairly and in accordance with
applicable accounting standards. The most common types of opinions
are unqualified (clean), qualified, adverse, or disclaimer.

FINANCIAL AUDIT
Financial audits are typically required for publicly traded companies to
maintain transparency and investor confidence. However, they may also be
performed voluntarily by private companies or organizations seeking to provide
stakeholders with an additional level of assurance about their financial
reporting.

Compliance Audit:
A compliance audit is a systematic review of an organization’s adherence to
specific laws, regulations, industry standards, or internal policies and
procedures. The primary goal of a compliance audit is to ensure that the
organization is operating within the bounds of applicable rules and standards
and to identify any areas of non-compliance or potential risks.
Key features of a compliance audit include:
1. Assessment of legal and regulatory requirements: Auditors evaluate
whether the organization is complying with federal, state, and local laws,
industry-specific regulations, contractual agreements, and internal
policies.
2. Documentation and record inspection: Auditors examine relevant
documents, records, and processes to verify compliance with established
standards. This may involve reviewing contracts, financial records,
personnel files, and other documentation.
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 3. Testing of controls: Auditors assess the effectiveness of the organization’s
internal controls, procedures, and processes related to compliance to
identify any weaknesses or deficiencies.
4. Identification of non-compliance: Any instances of non-compliance or
deviations from established standards are documented, and
recommendations for corrective actions may be provided.
5. Reporting and recommendations: At the conclusion of the compliance
audit, auditors typically issue a report summarizing their findings. This
report may include recommendations for remedial actions to address
areas of non-compliance or to enhance compliance efforts.
Compliance audits are common in various industries, including finance,
healthcare, environmental, and manufacturing, to ensure that organizations
operate ethically, legally, and in accordance with industry-specific regulations.
These audits help organizations identify and rectify compliance issues, mitigate
risks, and maintain the trust of stakeholders, regulators, and the public.

COST AUDIT
Cost audit is a systematic examination of a company’s cost accounting records,
processes, and systems to verify their accuracy and compliance with relevant
regulations and standards. It helps ensure that a company’s cost data is reliable
and that cost-related decisions are made based on accurate information. Cost
audits are often conducted by external auditors or internal audit teams to
enhance transparency and control over a company’s cost structure. If you have
specific questions about cost audits or need more information, feel free to ask.

Scrap audit
A scrap audit is a process in which a company examines and evaluates the
management, accounting, and handling of scrap materials or products within
its operations. The primary purpose of a scrap audit is to ensure that scrap is
properly accounted for, tracked, and managed to prevent losses and improve
efficiency. Key objectives of a scrap audit may include:

1. Identifying the sources of scrap materials or products.

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2. Determining the reasons for scrap generation (e.g., production defects,
overproduction, obsolete inventory).
3. Verifying that scrap materials are disposed of or recycled in an
environmentally responsible manner.
4. Assessing the accuracy of scrap accounting and reporting.
5. Recommending improvements in processes or procedures to minimize scrap.
The results of a scrap audit can help a company reduce waste, cut costs, and
enhance its environmental sustainability efforts.

RISK MANAGEMENT
Risk management involves three ways:

1. External coordination in audit involves interactions and

communication between the audit department or auditors and external
parties outside the organization being audited. These interactions are
essential to ensure the audit process is conducted effectively and to
meet various regulatory and reporting requirements.
2. A local audit typically refers to an examination or review of financial
records, processes, or activities conducted by a government agency or
organization at the local level, such as a city or county government. The
purpose of a local audit is to ensure transparency, accountability, and
compliance with laws and regulations. Local audits may cover various
areas, including budgeting, expenditures, tax collections, and adherence
to policies and procedures. The specific scope and objectives of a local
audit can vary depending on the entity’s needs and priorities.
3. A commercial audit, also known as a financial audit or external audit,
is an independent examination of a company’s financial statements and
related financial information. This type of audit is typically conducted by
a certified public accountant (CPA) or a professional auditing firm that is
not affiliated with the company being audited. The primary purpose of a
commercial audit is to provide assurance to stakeholders, such as
investors, lenders, and shareholders, that the company’s financial
statements are accurate and reliable.

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During a commercial audit, auditors assess the company’s financial records,
transactions, internal controls, and accounting practices. They review income
statements, balance sheets, cash flow statements, and other financial
documents to determine if they present a true and fair view of the company’s
financial position and performance. Auditors also check for compliance with
accounting standards and legal requirements.

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