Final Internal Audit Report - WP - H1-2017!18!26022018

William Penn Private Limited
Final Draft Internal Audit Report
For the period: H1 of FY 2017-18
February 26, 2018

CONTENTS
1. Scope 03
2. Rating Criteria 07
3.Timelines 08
4. Summary of Audit Observations 09
5. Executive Summary 20
6. Detailed Observations 24
7. Disclaimer 80
Page 2
William Penn Private Limited – Internal Audit Report – H1 FY 2017-2018
SCOPE OF REVIEW (1 of 4)
Process Focus area
Relevant agreements with Logistic & Security partners
Insurance Coverage
Movement of stock based on requisitions
Timely delivery to respective stores
Adherence to SOP by Warehouse Team
Warehouse
Operations Review Custom clearance process
Movement of stocks related to e-com and market places
Review related to maintenance of records and registers
Review related to sub-contracting
Review of Non-moving Items
Page 3
Process Focus area
Manpower forecasting and planning
Recruitment agency - empanelment, monitoring &payouts
Sourcing, screening of resumes & selection of candidates
HR policy and Employee Engagement
Employee master data management
Recruitment Partner management
Separations and final settlements
HR & Payroll
Service provider - data privacy and controls over payroll processing
Additions / modifications to payroll data
Attendance & leave recording
Payroll processing (computation & verification)
Payroll disbursements - updating bank account numbers, authorization of transfers
Induction Process
Authentication of data between offer/increment letters and payroll master
Reimbursement to Employees(Part of CTC)
Review number of open days against each position
Review the IT declaration process by the employees
Page 4
Process Focus area
Review of Accounting policy
Review of cash and bank transactions
Expense verification
Chart of accounts maintenance
Accounting Procedures
Fixed Deposits
Finance &
Accounts Debtors & Creditors Management
Book closing procedures
Balance sheet review
Petty Cash Management
Bank Account Management
Key Reports & authenticity of data*
*Scope exclusion - ** MIS was not shared, hence we could not perform our review on Key reports and data authenticity
Page 5
Process Focus area
Review of the Framework to monitor, manage and report Statutory Compliances
Review of TDS compliance
Review of Service Tax compliance for Pre-GST period
State Acts – Karnataka Shops and Establishments Act
Central Acts – Contract Labour, Maternity benefit, Payment of gratuity, Employee provident
Statutory fund & Employee state insurance
Compliances
Review of Companies Act compliance
Other compliances – reporting and monitoring process
Review of Sales Tax Compliance
Review of Advance Tax Compliance
Review of PPL license
Review of GST compliance
Follow-up review for the pending agreed action plan

Follow-up
Page 6
RATING CRITERIA
The observation rating criteria and risk rating criteria are as per the pre-
defined parameters specified by the company’s management, as follows:
Process Observations related to absence of defined process or weakness in existing
PD
deficiency processes. Example : Absence of standard operating procedures
Root Cause
Operational OI Observations related to non-adherence to defined process .Example : Non

inefficiencies adherence to company’s policy or process
System Observations related to sub-optimal utilization of system functionalities.

SL
limitation Example: No audit trail of the attendance regularizations done in the application
Significant / major control gap which may result into severe financial impact or
High H major violation of laws and regulations
Risk rating
Deviations from controls, which may impact adversely or some weakness in

Medium M existing controls or non compliance with processes/ regulations
Low L All other observations of low risk, not falling under above categories
Page 7
TIMELINES
Audit Coverage April 2017 to September 2017
Audit conducted during the period November 24, 2017 to January 19, 2018
Draft Report issued on January 23, 2018
Management comments received on February 21, 2018
Final Report issued on February 23, 2018
Final Report circulated on To be updated
Scope Exclusion & Limitations

Testing of transactions is based on the prevailing systems and Distribution List:
procedures as on date of audit, and the exceptions noted
are included in the report. Our internal audit is generally Mr. Nikhil Ranjan Managing Director
not designed to address the risk of frauds. The
recommendations for improvement are suggestive and it Mr. Manoj Bansal Chief Operating Officer
is the prerogative of the management for
implementation.
Page 8
SUMMARY OF THE STATUS OF AGREED ACTIONS
30
Implementation
26
25 Summary
20
15
10
10
6
5
2
0
Implemented Partially Implemented Not Implemented Unable to Te st
Partially
F.Y Audit Area Total Implemented Not Implemented Unable to Test*
Implemented
2016-17 Warehouse Operations 7 3 2 2 -
2016-17 HR & Payroll 15 1 9 3 2
2016-17 Finance & Accounts 10 1 9 - -
2016-17 Statutory Compliance 12 1 6 5 -
Total 44 6 26 10 2
* We were unable to test few checks due to unavailability of data

STATUS OF FOLLOW–UP REVIEW OF AGREED ACTIONS (FY 2016-17)
Not Partially Unable to
# Observations Implemented
Implemented Implemented Test
Warehouse Operations
Anomalies in Inward Process - In 10 instances, security seal & signature
1 Y
were missing on GRPO copies
Anomalies in Outward Process- No proper serial numbering in the security
2 Y
outward register & hence difficult to reconcile stock outwards
Review of E-Sugam - No practice of reconciling E-sugam with the dispatch
3 Y
report and in one instance, e-sugam was not available
Review of Open PO - The details such as quantity pending or not received
4 Y
till date are still not available in the current Open PO report
Cycle count and Physical verification process
• There is no practice of signing by re-verifier
• In 3% instances verified for March cycle count, date & signature of verifier
is not available.
• For Zippo & other 8 misc. brands, cycle count was not done in the month
of March'17
5 Y
• During physical verification of stock on sample basis, we have noted 1
excess & 1 short for the brand of Pennline & 4 short for WP19725 (Lapis
bard)
• Damaged products have been mixed with the good products in five
instances wherein 262 damaged goods were identified but no action was
initiated.
Arrangement with logistic & other service Partners: There was no change
6 made in the agreements. The same are not legally vetted and the relevant Y
clauses for “damages during transit” were not added
Sub-contracting process
The company is sending the raw materials along with accessories to the Y
7
contractors for manufacturing of wallets based on Delivery Challans which is
resulting into non-compliance with the provisions of GST laws and rules

HR & Payroll
Non-Compliance with POSH Act, 2013
1 POSH Policy and penal consequences for non-compliance have not yet been Y
displayed at workplace
Screening & Selection process - Lack of control on documentation –
2 Y
Interview assessment forms, BGV reports
Employee Master Management - PAN was incorrectly updated, Bank account
3 Y
numbers were not updated in employee master
Payroll Process – Employee wise variance analysis not done, Payroll sheet
4 Y
mailed to bank is not password protected
Excess Incentive Payout - Incentives for Q1 FY 2017-18 were paid excess
5 Y
five instances of INR 9,000
F&F tracker not updated properly - Dates of F&F settlement, Details of
6 Y
F&F & No notice period deduction (INR 65,011)
7 HRMS Application – PayKraft issue Y
Maternity Benefit and Payment of Gratuity Act - Required registers not
8 Y
under Maternity Benefit Act & No display of the acts at workplace
Sourcing Process – agreements not signed by HR head, career option not
9 Y
enabled n website, tracker not updated properly
10 Appraisal Process – No documents shared for our review Y
Employee Personnel file management – appointment letters not available,
11 Y
resume of employee was not available
12 Employee Induction Process - No documents shared for our review Y
Non-adherence to HR policies – late comings and medical certificates for
13 Y
employees availing sick leaves

HR & Payroll
Control over IT assets –
• IT assets are not tagged against respective employee in system
14 • There is no documentation maintained for a periodic review of such Y
assets. The details viz. asset serial number, license, date of issuance of
laptop, etc are not updated in the tracker
Attendance Records –
• 60% employees had updated attendance through manual timesheet in
15 system multiple times Y
• Time-In and Time-out as per Bio-metric report and as per PayKraft
attendance report is not matching in 182 and 176 instances.

Finance and Accounts
1 Fixed Assets Register – No physical verification done, no tagging of assets Y

Long outstanding receivables from Debtors : As on September 30, 2017, an
2 Y
amount of ~INR 24.60 lakhs are pending for more than 180 days.
Long outstanding payables to vendors : As on September 30, 2017, It is
3 Y
pertinent to note that ~INR 93.29 lakh are pending for more than 90 days
Control over C-Forms & F-Forms – Pending Form F & Form C to be received
4 amounts aggregately to ~INR 12.57 crores & ~INR 3.82 crores for previous Y
three financial years respectively
Cost versus Revenue – In five stores (WP14, WP17, WP26, WP27 & WP33)
there are abnormalities in proportion of expenditure to total revenue.
5 Y
Expenditure for such stores are above 30% of the revenue contributed by the
respective stores
Rent Agreements - For WP08 store (Phoenix market city, Mumbai) an
6 amount of ~INR 10,000 of interest free refundable security deposit was Y
made short
Bank Reconciliations - Delay in reversal of stale cheques , significant delay
7 was observed in adjusting funds credited by bank, no maker checker Y
signatures available on the bank reconciliation statements
Review of Trial Balance - There is no practice of doing the physical
8 verification of stock on an annual basis, there was negative cash balance, Y
deposits with various tax authorities but recovery time not available
Manual Bills – Customer name not mentioned on manual bills, date not
9 mentioned on manual bill, mismatch in name of customer as per manual bill Y
vis-à-vis system generated bill
Access review of SAP - Absence of documented SoD, No periodic review of
access rights, User ID shared between employees, Inactive employee
10 Y
appearing as active user, Unauthorized access provided in relation to editing
of Charts of Accounts

Statutory Compliances
Non-registration under Factories Act, 1948 & Compliances under the act
1 Y
remain non-complied
2 Five statutory notices are open Y
3 Non-display of abstracts of various Acts Y

Secretarial non-compliances : Few non-compliances under secretarial
4 Y
standards & Delay in filing AOC-4
TDS Compliance : Deduction of TDS at higher rate under section 194H and
5 delay in payment of tax Y
Service Tax Compliance – Delay in filing of ST-3 return
Non-compliance with Companies Act, 2013 : E-mail address, website
address & telephone number not printed on Post GST Tax invoice & Stock
6 Y
transfer memo and CIN, telephone number & website address were not
printed on agreements (Eg. Lynx)
7 Trade Licenses were found expired for three stores Y
Non compliance with ESIC Act : The employer contribution of 4.75% on
8 quarterly incentives is not required to be deducted & few challans not Y
available
Review of Professional tax - Error in calculation, short deduction of tax,
9 Y
challans not shared
10 Delay in payment of VAT and delay in filing VAT return Y
11 Registers not maintained and returns not filed as per various Acts Y
Measurements w.r.t Health & Safety – few fire extinguishers were fond
12 expired, no display of fire evacuation plans, no smoke detectors & alarms Y
available

RISK & ROOT CAUSE SUMMARY
RISK SUMMARY ROOT CAUSE SUMMARY

Areas Total High Medium Low Areas Total PD OI SL
Warehouse Operations 12 1 5 6 Warehouse Operations 16 1 11 4
HR & Payroll 9 - 8 1 HR & Payroll 9 - 9 -
Finance & Accounts 9 3 5 1 Finance & Accounts 9 1 8 -
Statutory Compliances 13 2 10 1 Statutory Compliances 14 2 12 -
Total 43 6 28 9 Total 48 4 40 4
21%
Risk Summary 8% 8%
14%
PD
High
OI
Medium
SL
Low
83%
65%
Page 15
*One observation may have multiple root cause
RISK HEAT MAP : WAREHOUSE OPERATIONS
Risk map List of control gaps
High:
1. Review of Non-moving stock
High
1 Medium:
2. Review of SAP controls
Significance of risk
3. Quality module in SAP

4. Review of Cycle Count Process and Physical verification of stock
5. Review of Open delivery challan report
6. Arrangement with logistic & other service Partners
Medium
4
2
Low:
5 7. Review of Online dispatch process
3 6 8. GRPO Process
9. Review of E-commerce timely dispatch
7 8 10. Review of Magento Website
Low
11. Review of Dispatch Process

9 11 12. Review of Online sales return
10 12
> 3 month 2 – 3 month 0 – 1 month
Implementation effort
Page 16
RISK HEAT MAP : HR & PAYROLL
High:
Nil
Medium:
High
1. Sourcing Process
2. Review of Attendance
3. Non-adherence to HR policies
4. Screening and Selection Process
5. Employee Personnel File Management
1 6. Separation and Full & Final settlement process
Medium
4 7. Employee Master Management

2 7 8. Incentive Processing
5
3 6 Low:
9. Night Shift Allowance
Low
* Timelines for point no. 8 are yet to be provided

by the respective process owners
Page 17
RISK HEAT MAP : FINANCE & ACCOUNTS
High:
1. Review of Fixed Assets
2. Receivables Management
3. Payables Management
High
1
3
2 Medium:
4. Cost versus Revenue
5. Review of Bank Reconciliation
6. Review of Manual Bills
Medium
4 7. Access review of SAP

8. Store Review
6
Low:
9. Miscellaneous
Low
* Timelines for point no. 5, 7, 8 & 9 are yet to be

provided by the respective process owners
Page 18
RISK HEAT MAP : STATUTORY COMPLIANCE
High:
1. Compliance under Factories Act, 1948
2. Review of Statutory notices details
High
2 Medium:
3. Statutory Display requirements
4. Secretarial Compliances
5. Review of TDS & VAT
6. Compliance with Companies Act, 2013
7. Compliance with GST Provisions
Medium
4 8. Review of ESIC
10
7 9. Review of Professional Tax
5 10. Statutory Compliances as per Karnataka State Enactments
3 6 11. Control over F form
12. Control over C form
Low
Low:
13. Compliance with POSH Act, 2013
* Timelines for point no. 1, 8, 9, 11, 12 & 13 are

yet to be provided by the respective process
owners Page 19
Executive Summary
(Only High Risk Observations)

PD– Process deficiency
OI – Operating Inefficiency
SL– System limitation
EXECUTIVE SUMMARY (1 of 3)
Root
Area Observations Cause Recommendations Management response
PD/ OI/ SL
 Review of Non-Moving Stock Non-moving is now monitored at
• Appropriate steps by Product
As a process, Product management team monitors non- monthly level & suitable action
management team to be
moving stock on weekly basis. The logic based on which will be taken to liquidate the stock
taken to clear non-moving
such review is performed is that stock which has not
items
moved in last 120 days. Responsibility: Ms. Shikha
• To document the policy with
• As on September 30, 2017, we noted that stocks worth Timelines : On-Going
Warehouse respect to re-order level of
of ~INR 11.11 crores (17% of the total stock) has been PD
Operations stock
recognized as “non-moving” as per the practice followed
• To explore the possibility of
(For Lapis bard & Pennline, it was found that 14% & 76%
getting the ageing report in
of respective stocks was non moving)
SAP
• Further, it is pertinent to note that currently there is no
strict policy in place with respect to re-order level of
stock and ageing of the stock is also not available in SAP
• SOP: Yet to be provided
 Review of fixed assets • Quotations: We have various
During our review fixed assets area, we noted the below parameters to be checked
mentioned anomalies: before finalizing any vendor. We
do not frequently change the
• No SOP documented for the following areas : vendor for major assets viz.
• To design and implement SOP
• Asset requisition and procurement interiors. However, for other
covering all sub-process and
• Valuation of assets assets like furniture and
roles and responsibilities of
• Tagging of asset fixtures, we have the practice
various department involved
• Asset impairment of obtaining quotations. A
Finance & • Tagging of all the fixed assets
• Asset Depreciation PD dedicated person is being
Accounts to be ensured for smooth
• Asset disposal appointed for taking quotations
fixed asset management
• Treatment/ amortization of intangible assets & doing the market survey
• Assets to be physically
• Asset componentization wherever possible
verified at regular intervals
• Asset movement • We have already started
(atleast once in 3 years)
• On our physical verification of the assets, we noted that physical verification process
there is no practice of tagging of fixed assets & updation • The break-up of assets
in Fixed assets register amounting to ~INR 47.80 lakhs
• There are no records (break-up) available for assets relates to the year prior to 2010
value being ~INR 47.80 lakh Responsibility: Mr. Subramanian
Timelines : On-going
Page 21
Root
PD/ OI/ SL
 Receivables management • Debtors with considerable • We have received full payment
• As on September 30, 2017, an amount of ~INR 24.60 balance should be monitored from Nutricia International Pvt
lakhs are pending for more than 180 days. periodically & stringent Ltd, Max Life Insurance Co Ltd
The following amounts are top five customers from follow-up should be done & ARCHIES LIMITED (Gurgaon)
whom the outstanding is for more than 180 days: • Legal actions to be taken to • From AABFL – received ~INR
1. Nutricia International Pvt Ltd (~INR 8.32 lakhs) recover the dues, if required
2. Aditya Birla Finance Limited (~INR 6.98 lakhs) 6.58 lakhs
• Provisioning & write-off of
3. Sun Pharmaceutical Industries Ltd (~INR 2.01 lakhs) • We are doing follow-up
OI bad debts after suitable legal
4. Max Life Insurance Co Ltd (~INR 1.78 lakhs) actions to be done rigorously for payment of Sun
5. ARCHIES LIMITED (Gurgaon) (~INR 1.77 lakhs) • Debts which are not expected Pharmaceutical Industries Ltd
to be received should be with the sales team
• An advance amounting to ~INR 8.88 lakhs were remain written off • For Advance: Yet to be
unadjusted for more than 90 days • Adjustment of advances provided
against respective invoice to Responsibility: Mr. Subramanian
be ensured periodically Timelines : On-going
Finance &  Payables management • For Loyalty Rewards Mgmt Pvt
Accounts • As on September 30, 2017, It is pertinent to note that Ltd – We have hold the
~INR 93.29 lakh are pending for more than 90 days to payment for clarification
be paid to various vendors. • We will clear the payment for
• Regular review of payables Sundeep Associates
Few notable payable vendors include for which should be done to ensure
payment is due over 90 days • Studio Attire Initiative Pvt Ltd
timely payment to vendors - Due to quality issue, we have
• LOYLTY REWARDS MNGT PVT LTD (~INR 1.37 lakhs), • Vendor advances should be
• SUNDEEP ASSOCIATES (~INR 5.59 lakhs) hold the payment
OI settled within stipulated
• STUDIO ATTIRE INITIATIVE PVT LTD (~INR 1.72 lakhs) timeframe • The Sailor Pen Co -
• THE SAILOR PEN CO (~INR 3.66 lakhs) • Frequent review to be in • Fisher Space Pen Co- We have
• FISHER SPACE PEN CO (~INR 6.85 lakhs) place to ensure timely cleared the payment
settlement • Majority of the advances are
• Further, it is pertinent to note that advances paid to related to new product
vendors were unadjusted for more than 180 days
development
amounts to ~INR 64.16 lakh
Responsibility: Mr. Subramanian
Page 22
Root
PD/ OI/ SL
• Registration under the • We will get it done through
 Factories Act, 1948
factories act to be obtained & some consultant
On our discussion with concerned process owner, we noted
Statutory all the compliances specified
that no registration was made under Factories Act & thus, PD
Compliance in the act to be implemented Responsibility : Mr. Joy
all the compliances under Factories Act remain non
after taking a written advise Timelines : FY 18-19
complied
from the Consultants
 Statutory notices
On our review of the pending statutory notices , we noted
that there are 4 notices open as on September 30, 2017. OI
On discussion with the process owner, it was noted that
labour department notice pertaining to WP04 was closed &
the remaining are expected to be closed shortly by
payment of nominal amount
Particulars Remarks Status

Income Tax Assessment Attended the hearings & The open notices are under the
Assessment is under
Notice (for AY 2015- 16) - submitted all the documents process of closure. We are expecting
the process
18.05.17-HO- Bangalore from our side • Timely tracking, monitoring & to close it shortly
It is in the process rectification of the errors &
of closure & it non compliances to be
Shops & Establishment Notice We have attended hearing Responsibility: Mr. Subramanian
seems that closure ensured
_04.08.17 _WP26 Store - one time. The officer asked
Mumbai for additional documents
requires presence Timelines : On-going
of managing
director
Sales Tax - Assessment Notice
We have submitted all the Waiting for Order
( For FY 2013-14)_14.07.17
documents to dept Copy
_Mumbai Branch
Trade License Notice
We have met the officer & Store has been
_03.08.17 _WP30 Store -
taken some time closed
Delhi
Page 23
DETAILED OBSERVATIONS
Area : Warehouse Operations

Root Cause Rating
PD OI SL H M L
1.1 Review of Non-moving stock

Observations Recommendations
As a process, Product management team monitors non-moving stock on weekly basis. • Appropriate steps by Product management team to
The logic based on which such review is performed is that stock which has not moved be taken to clear non-moving items
in last 120 days. • To document the policy with respect to re-order
• As on September 30, 2017, we noted that stocks worth of ~INR 11.11 crores (17% level of stock
of the total stock) has been recognized as “non-moving” as per the practice • To explore the possibility of getting the ageing
followed (For Lapis bard & Pennline, it was found that 14% & 76% of respective report in SAP
stocks was non moving)
• Further, it is pertinent to note that currently there is no strict policy in place with
respect to re-order level of stock and ageing of the stock is also not available in SAP
Refer Annexure 1.1 for details

The observation has been reported in FY_16-17 Management response
• Non-moving is now monitored at monthly level &
suitable action will be taken to liquidate the stock
• For other points: Yet to be provided
Risk/ Implications Responsibility & timeline

• Inadequate control over stock & obsolescence of stock Responsibility : Ms. Shikha
Page 25
Root Cause Rating
PD OI SL H M L
1.2 Review of SAP controls (1 of 2)

Observations
On our review of SAP controls pertaining to warehouse operational activities, we noted the following discrepancies :
• The reference number defined, for generating invoices in a sequential manner, for all the online sales other than WP online sales is ONL1718
(series starting with 5) & for WP online sales, it is WPONL (series starting with 95). On our review of invoice processing for online sales in
SAP, we have noted that reference no. is not automatically mapped for WP online sales & sales through other online market places. Thus, it
requires manual updation of reference number while invoicing in SAP. Such manual updation leads to the following inconsistencies :
i. In two instances (0.02%) out of 88 of Flipkart online sales, reference no. used is WPONL (95 series) instead of ONL1718 (5 series)
ii. In 16 instances (0.13%) out of 122 of WP online sales, reference no. used is ONL1718 (5 series) instead of WPONL (95 series)
• In the process of creating GRPO, the PO created by product managers shall be converted to GRPO document. In this process, we noted that
after converting the PO to GRPO, all the fields in the GRPO were editable & no restriction was made to avoid manual errors committed by
person who is creating GRPO. For e.g., fields such as item description, courier charges, discount availed, price of item etc are editable
• Similarly for generating invoice from SO, Reference no. is editable & even a manual no. can be updated while generating the invoice
• In one instance (Inv no: 502726, Customer name: Amazon), we noted that invoice was generated without customer name
• We have verified the tax invoice for WP online sales on sample basis (122 invoices) and noted that in all the instances (100%), tax invoice
details for online sales extracted from SAP is reflecting incorrect invoice amount in both invoice copy as well as system generated report.
Thus, there is difference amounting to ~INR 4.67 lakhs between hardcopies of invoice & the amount reflected in the report. As informed,
the same is happening due to some technical glitch in SAP
Page 26
Root Cause Rating
PD OI SL H M L
1.2 Review of SAP controls (2 of 2)

Risk/ Implications Management response
• Difficulty in tracking the invoices based on the document numbers • Only one series can be set as default in one login
• Editable fields while may result in manual errors and hence manually changing the series is the only
• Unable to track the customer name to whom the billing was made option. Will take care to avoid errors
• Unable to reconcile the invoice details generated from SAP & the invoice document • Have raised the issue with IT to get it corrected
• Warehouse error-Will be taken care
• There was a print layout issue which is corrected
Recommendations
• The invoice serial numbers to be automatically updated without manual change Responsibility & timeline
• The fields shall be made such that system operator can't edit fields as specified in
Responsibility : Mr. Rahul Raj & Mr. Durai
the observation to avoid manual errors
Timelines :Immediate
• The SAP control to be implemented to make the field of customer name mandatory
before generating invoice
• The SAP to be configured to ensure that report generated from SAP to reflect
accurate amount of invoice
Page 27
Root Cause Rating
PD OI SL H M L
1.3 Quality module in SAP

As per the current process, after taking inward of goods by generating GRPO in SAP, it • Quality module to be added to SAP in order to
takes 5-15 days for completion of quality check depending upon the volume of inward make the product managers know about the
in Warehouse. The product manager at head office prepares allocation plan and inwards which are pending for quality check so
update the same in SAP on weekly basis so that the goods can be picked & make ready that allocation shall be done only for the stock for
for dispatch to stores. which QC has been done
In this scenario, product manager prepares allocation report for the products for
which quality check was still pending, as there is no such indication in SAP to reflect
whether the quality check has been completed or not. Hence, as there is a possible
chance that goods may be rejected after performing QC. Hence, the allocation report
may not be fully addressed & the product manager has to allocate again the same
product in the subsequent allocation resulting in redundancy of allocation Management response
• IT team is working on this module

• Allocation report prepared by product managers may not be fully addressed & this Responsibility : Mr. Rahul Raj
will result in redundancy in allocating the same product Timelines : March 2018
Page 28
Root Cause Rating
PD OI SL H M L
1.4 Review of Cycle Count Process and Physical verification of stock

Cycle Count: On verification of cycle count process for August'17 & September'17, we • Strict adherence to SOP
have noted the following anomalies : • Cycle count to be performed such that each item
For the month of August'17 : shall be physically verified at least once in a
• In six instances, date of conducting physical verification was not available month
• In four instance, signature of re-verifier, in case of discrepancies in stock count • Cycle count shall be performed for all the brands
noted, was not available to ensure system stock accurately reflects the
• In five instances, physical verification was not done completely as many of the line physical stock
items in stock count sheet were left unchecked • Timely identification & adjustment of stock
• Cycle count was not conducted for 3 prime brands (Sheaffer, Zippo & Lamy) & mismatches to be ensured in SAP
miscellaneous 126 brands
For the month of September'17 :
• In 19 instances, signature of re-verifier, in case of discrepancies in stock count Management response
noted, was not available
• In two instances, physical verification was not done completely as many of the line • Cycle count couldn't be done for few weeks during
items in stock count sheet were left unchecked the season due to increased loads
• Cycle count was not conducted for 3 prime brands (Sheaffer, Zippo & Lamy) & • Manual errors will be corrected going forward
miscellaneous 121 brands • Regarding the mis-matches noticed by the
Refer Annexure 1.3 & 1.4 for details auditors, the count was done during the day while
Physical Verification of stock: While doing physical verification as on December 04, the dispatches were happening simultaneously
2017, for sample 3 brands & online warehouse, we noted that for one brand "Lapis Audit Remarks: For the differences due to
bard", there was an excess of 20 qty of physical stock amounting to ~INR 1.82 lakh in dispatches. No dispatch slip was shown at the time
main Warehouse. Refer Annexure 1.5 for details of review
The observation has been reported in FY_16-17
Risk/ Implications
Responsibility & timeline
• Non compliance with SOP & inadequate control over the stock
• Risk of not adjusting stock mismatches periodically & subsequently resulting in Responsibility : Mr. Rahul Raj
substantial differences between physical & system stock Timelines : Immediate
• Risk of shortage & mismatch in the stock
• Incorrect recording of the physical stock
Page 29
Root Cause Rating
PD OI SL H M L
1.5 Review of Open delivery challan report

As per Warehouse SOP on Delivery challan, any DC raised shall be closed within 30 • Proper follow up to be ensured to receive back the
days. On review of open Delivery challan report as on September 30, 2017, we noted goods sent on delivery challan timely
the following :
• In 484 instances, 2,005 no's of goods were sent on DC for the purpose of job work,
samples, testing & servicing. But the goods were remained unreturned with a delay
ranging from 2 - 13 months. Out of these instances, in one instance (DC no. :
200569), the goods (202 quantity) were sent to vendor for job work in the month of
November 2016 and the same were still lying with vendor. The value of such good
are not available in the system
Refer Annexure 1.6 for details Management response

• Follow ups are done on a regular basis & reviewed
every week during weekly meeting
Risk/ Implications
• Risk of obsolescence of stock
• Long term holding of the product received from customer for servicing results in Responsibility : Mr. Rahul Raj
customer dissatisfaction Timelines : Immediate
• Input GST availed on goods sent on job work basis shall be reversed if the input
goods/capital goods were not received within 1/3 years
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1.6 Arrangement with logistic & other service Partners

Logistic partners: Company is having logistic arrangement with transporters. Blue-Dart • Standard agreement terms & conditions should be
& Spot-On are surface/air transporter, whereas Excellent & Sindhu Cargo are customs formulated and vetted by the legal team
house agents (CHA). During our review related to engagements with several logistics
partners, we noted the following :
• Absence of a legally vetted agreement: There is no legally vetted agreement in

place with the transporters till date. Rates are generally finalized through mail
communication with the logistic partners. Rate cards involving commercial terms
and conditions are in place, however the same is not countersigned by the
authorized authority of concerned logistic partner
• Absence of relevant clauses in the agreed rate cards with the logistic partner: Management response
Integral clauses such as “damages during transit” are not included in the rate cards
agreed with the logistic partners • None of the transporters are ok for a legal
agreement instead they are ok with mutually
The observation has been reported in FY_16-17 agreeable terms & conditions signed on letter head
Risk/ Implications
• Possible dispute with vendor
• In absence of agreement, no legal action can be initiated in case of dispute Responsibility : Mr. Rahul Raj
• Validity of the agreement can be challenged in the absence of authorized signatures Timelines : On-going
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1.7 Review of Online dispatch process

The company is generating online sales revenue through two ways where one is • Proper filing of invoices to be ensured
through in-house e-commerce website & other way is through online market places • Robust checking & review of security register must
such as Flipkart, Amazon, Snapdeal & Paytm be done by security
On review of WP online sales dispatches for the month of September'17 (139 orders),
we noted the following deviations :
• In four instances, physical copies of invoices were not filed
• In one instance, Invoice no. was wrongly captured in the outward register
(captured as 951543 instead of 951541)
On review of Flipkart order dispatches for the month of June'17 (90 orders), we noted
the following deviations : Management response
• In one instance, security register no. captured on invoice is not matching with
outward register (updated as 4017 instead of 4016) • Will ensure proper filing of records
• In one instance, Invoice no. was wrongly captured in register (captured as 500792 • Manual errors in registers will be taken care
instead of 500793)
• In two instances, the orders were placed on Flipkart website, but invoicing was
done to Amazon instead of Flipkart amounted to INR 3,385
Risk/ Implications
• Difficulty in tracking of receipt of goods & to perform three way match
Responsibility : Mr. Nataraj & Mr. Rajeev
Timelines : Immediate
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1.8 GRPO Process

On review of inward process at Central Warehouse located in Bengaluru including • Strict adherence to SOP
Goods Receipt Purchase Order (GRPO) Process for 105 inward entries in the months of • Periodic review of GRPO tracker in order to find
August & September 2017, we noted the following discrepancies : delays and deviations
• In three instances, physical copies of GRPO were not available • Robust checking must be done by security and seal
• On review of quality control sheet, we noted the following anomalies : & signature must be affixed. GRPO should be done
• In 18 instances, date of conducting QC was not available in system only if such valid seal & signature is
• In three instances, "QC verified by" signature was not available appearing on GRPO dockets
• In six instances, Authorized signature was not available
• In three instances, quantity rejected field on QC sheet was not updated despite
the quantity was rejected & debit note was raised
• In four instances, after the quality check, few changes were made by person other
than person who has done QC and such changes made in QC sheet were not Management response
reflected in total qty rejected & rejected qty is not matching with debit note
raised. Moreover, such changes made in QC sheet was not signed by person making • Proper filing of records will be taken care
the changes • Manual errors will be corrected
• In three instances, security seal & signature were not available • Will be reviewing the records once a month to find
• In four instances, Quality control sheets were not available errors at warehouse end
• In one instance (Doc. No 101805), date on GRPO was captured incorrectly as 26-
08-2017 instead of 26-07-2017
• In one instance (Doc. No 101803), security inward register no. was not captured
on GRPO

• Non compliance with SOP Responsibility : Warehouse Team
• Difficulty in tracking of receipt of goods Timelines : Immediate
• Difficulty to perform three way match (PO-GRPO-Invoice
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1.9 Review of E-commerce timely dispatch

As per shipping policy available in William Penn website, any order placed used to get • Proper tracker for dispatch of WP online sales to
delivered in 7 business days. But, on our review of delivery tracker for the month of be maintained to ensure timely dispatch for the
September 2017, we noted that in 14 instances (0.12%) out of 122, there was a delay customers
of more 10 days (ranging from 11 to 93 days) in delivery of products.
Further, it is pertinent to note that dispatch tracker is being maintained at Warehouse
to ensure that product was delivered to customer or not. But, whether it is delivered
within the timeline agreed to customer was no where getting tracked.
Management response
• Delays happen for products which are recalled
from out locations
• Analysis will be done to understand the delays in
delivery
Risk/ Implications
• Customer dissatisfaction
• No tracking to follow up with the service provider who is responsible for delayed Responsibility : Mr. Rahul Raj
dispatch Timelines : Immediate
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1.10 Review of Magento Website

• On our review of report being maintained for WP online sales, we noted that the • System report to be generated for online sales
same is being prepared manually & the process owner is not able to generate sales • Automatic alert/notification to the customers mail
report from the Magento website (service provider for online website). As it is ID providing a reason which the customer
prepared manually, it is imperative that the below mentioned manual mistakes appreciates honestly
subsist & cannot be avoided : • Offer of alternative similar products which makes
i. In three instances, date of order was not available (Order no's : 000001981, customer happy and this gives you a chance to
000002387, & 000002397) avoid the loss of sale
• In case of stock out situations on company online website, there is no option to get
notification in case of stock replenishment on website

• There is an option to generate the report with all
the details. We will train warehouse team
accordingly
Risk/ Implications
• Errors/mistakes are inevitable due to manual updation
• Time consuming & low productivity Responsibility : IT team & Mr. Ram Gopal
• Risk of loosing sales revenue through stock out situations Timelines : Immediate
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1.11 Review of Dispatch Process

• Review of stock dispatch process to stores: • Proper filing of the documents to be ensured
On our review of stock transfer process on sample basis for the month of September • Proper tracking of the dispatches to be ensured
2017, we have noted the following :
• For store WP26, in five instances, invoice copies were not available
• For store WP10, in two instances, invoice copies were not available

• Review of Dispatch Tracker:

All the dispatches from warehouse are being tracked to ensure that the goods have
reached the destination. On review of dispatch tracker, we have noted the following Management response
:
• For stock transfer to WP10, for three instances, no tracking has been done & in • Manual errors will be corrected
one instance, delivered date is before the dispatch date • Tracking of all dispatches are done and reported
• In the case of online sales dispatches, in five instances, no tracking has happened, on a weekly basis
dispatch register (excel sheet) was not updated
Risk/ Implications
• Risk of improper tracking & lack of audit trail to ensure who has approved the
transfer Responsibility : Warehouse Team & Mr. Alex
• Improper tracking results in instances where the product not reached the desired Timelines : Immediate
destination
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1.12 Review of Online sales return

• There was no practice of filing credit notes for online sales returns for the purpose • Filing the credit notes for return of the online
of tracking the inward of returned product, the status of the product whether in sales to be implemented
good condition or damaged & the consequent adjustment in SAP whether the same • The layout of credit note while printing shall be
has been moved to Main warehouse or Damaged warehouse. configured to include the security inward register
number
• Moreover, the layout for printing credit note doesn't contain security register no. to
track the inwards through inward security register.
Management response
• Credit Notes are filed now for record purpose
Risk/ Implications
• No audit trial for verifying whether the product return has been acknowledged by
concerned process owner & in warded into the warehouse or not Responsibility : Mr. Nataraj
• Unable to track the inward date, if the security inward register number was not Timelines : Immediate
captured
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Area : HR & Payroll

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PD OI SL H M L
2.1 Sourcing Process

Currently, the Company has made the agreements with three consultants for resource • To ensure to make the correct payment to the
recruitment. On reviewing the agreements, we noted the below mentioned anomalies: vendor
• In two instances, there was an excess payment of INR 11,297 made to one vendor • All agreements should be signed by HR head
i.e. PeopleSource. Refer Annexure 2.1 for details • To update the source of tracker properly with all
• One agreement was not signed by HR Head: PeopleLogic – dated Sept 01, 2017 adequate required field viz. date of joining, date
• Career Option is not enabled on company's website which at times may help in of exit, reason
saving the recruitment cost • Career option could be made available on
• The authorized signatory is not captured in DOA company's website
• The tracker of source of recruitment maintained by HR team does not contain the
important fields viz. Date of joining, date of exit, reason of exit. In the absence of
these details, it is difficult to verify the applicability of replacement clause for the
vendor before making next payment. Management response
• In one instance, it was mentioned in the tracker that one employee (Ankit Sharme,
Chandigarh) has been recruited through the vendor PeopleLogic. However, as per • Payment was done as per the revised invoice
our discussion, we noted that no one was recruited through this vendor yet. Hence, • The signed copy of the agreement was shared with
the tracker is not updated properly the vendor but missed to update the same in our
documents. Now all the agreements are signed
The observation has been reported in FY_16-17 • Career Option - Corrected and enabled
• Tracker - Updated now
• The tracker is updated correctly and Ankit was
hired through People logic – To be discussed with
Sushmita
Risk/ Implications
• Excess payment to the vendor
• Difficulty in applying the replacement and other similar clauses if the tracker or Responsibility : Ms. Susmita
source of recruitment is not updated Timelines : Immediate
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2.2 Review of Attendance

On our review of attendance register as per ePeople and whoisin report for the month • Regularisation of attendance through manual
of September 2017, we noted the below mentioned anomalies: entries should be strictly prohibited unless the
biometric device is not working on any particular
• We did not receive the details of in-time and out-time as per ePeople Attendance day for a location which should be immediately
report. So, we are unable to compare the actual in-time and out time with Whoisin communicated to employees through revised
report. Further, we noted that 287 out of 325 employees (88%) have regularized policy
their attendance in ePeople for the month of September 2017. On further analysis, • To deactivate the bio-access of exited employees
we noted that 85 employees (26%) have regularized their attendance in ePeople for without any delay
more than 20 days in Sept'17.
Refer Annexure 2.1(a) & 2.1(b) for details
• On review of whoisin register, we noted that the attendance of three exited Management response
employees were captured - Response not clear in Annexure
• The punch in and out was not properly done by
Refer Annexure 2.1(c) for details employees
• Regularization of timesheet by employees have
been reduced and also communicated the same to
the employees
• Rejoinee case, duplicate entry
Risk/ Implications
• Excess payout to employees
• Delay in deactivation of bio-metric access may lead to potential fraud risk Responsibility : Ms. Susmita
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2.3 Non-adherence to HR policies

• Late Comings: • The punching out should be made mandatory for
On our sample analysis of whoisin report for five days for the month of September the employees to ensure the discipline and to
2017, we noted the below mentioned anomalies: capture the correct attendance
• In 113 instances, the employees are not punching in bio-metric device while • HR should strictly adhere to SOP and bring an
leaving from office. There is no out-time mentioned still the full day salary has action against the policy breakers
been paid to these employees.
Refer Annexure 2.3(a) for sample cases
• In 40 instances, the employees are coming late and not serving 9 hours a days and
still they have been paid for full day.
Refer Annexure 2.3(b) for sample details
Management response
• Medical Certificate: There is still no process of obtaining the medical certificates
from the employees who have availed sick leaves for more than 2 days. Further, we • The Whoisin was down during the punched in time
noted that as per the policy of the Company, an employee can avail sick leave of 12 • Employees have completely worked for 9 hours,
days and there are no casual leaves assigned to the employees. So, when an but somehow last punch in did not get captured.
employee wants to take leave for some occasion or for some other reasons, he is The same is rectified and resolved
having an option to either apply sick leave or privileged leave which will again be • Recommended for CL category leave to the
difficult for him to justify that he was on casual leave as he has to apply SL/PL only management and collection of medical documents
in system is followed now
Risk/ Implications
• Non compliance with HR Employee manual
• Regularization leads to time theft resulting in excess company payroll cost Responsibility : Ms. Susmita
• Risk of increasing misusage of employee sick leave entitlement Timelines : Immediate
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2.4 Screening and Selection Process

On our sample review of 16 employee files who have joined during the period Apr - • Documentation of background verification checks
Sept'17, we noted the below mentioned anomalies: is highly recommended
• Interview assessment forms are still not documented in the employee files • Adequate documentation should be done while
• Employee educational documents are still not self attested by the employees selecting a candidate
• BGV is done by the in-house HR team of William Penn and the same is documented
on mails. The reports are still not maintained in the employee files. Further, BGV
reports were not provided for our verification for seven employees (out of 16)
Refer below table for details for details
Sl. No. Employee ID Employee Name DOJ
1 001388 Deepa AJ 24-Apr-17 Management response
2 001390 Loma Mehta 20-Apr-17 • Due to extensive hiring, the process is not possible
3 001426 17-Aug-17 in the current situation
Shikha Mallik • Mostly received through courier and corrective
4 001432 Anantharaj Ramgopal 23-Aug-17 action is taken
• BGV - Now strictly followed
5 001435 Mohammad Iftekharul Islam 4-Sep-17
6 001438 Ravi Kumar 11-Sep-17
7 001444 Shekhar Yadav 21-Sep-17
Risk/ Implications
• Inappropriate checks relating to background verification results in placing a wrong Responsibility & timeline
person at wrong place
• Incomplete documentation Responsibility : Ms. Susmita
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2.5 Employee Personnel File Management

We have verified the employee files for 16 employees who have joined during the • Keen and safe documentation of the employee
period Apr - Sept'17 and noted the following: personal file should be practiced.
• In six instances, resume was not available in the employee file
• Appointment letter is not signed by HR in all cases
• In 13 instances, Offer letter is not available
• In one instance, photograph of employee is not available (WP01388)
• For all instances, employer's signature is not available on PF forms and Gratuity
Forms
• In one instance (WP001444), Educational qualification documents (certificates) were
not available
• In five instances, copy of PAN card was not available (WP001388, WP001405, Management response
WP001431, WP001432, WP001444). Out of these five, the PAN of three employees
are updated in employee master (WP001388, WP001432, WP001444) • Corrective action taken for resume
• In eight instances, relieving letter was not available • The process of keeping offer letter has started
Refer Annexure 2.4 for details since October 2017
• Photograph - Received single copy and shared for
Further, the employees files for below mentioned two employees were not provided id card. Now corrective action taken
for our review: • Signature & Qualification docs - Corrective action
1. Employee ID : 001382 (Rakesh R) taken
2. Employee ID: 001393 (Upendra Prasad Jugran B) • PAN Card - Received the soft copy later
The observation has been reported in FY_16-17 • Relieving Letter - Did not receive from the last
company
• Corrective action taken for employee files now
Risk/ Implications
• Difficulty in tracking of employee details and documents relating to the employee Responsibility & timeline
Responsibility : Ms. Susmita
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2.6 Separation and Full & Final settlement process

• Documentation of exited employees: We have requested for documents of 10 • Resignation letters should be filed in the exit
exited employees, however, the documents of only five employees were provided employee files
for our review. As informed, the two employees were absconded, hence no • The policy should be strictly adhered to with
documents were available for them. respect to serving the notice period
Refer Annexure 2.5 for details. • To ensure to update the F&F tracker properly
On verifying the files for five employees out of 41 employees who have exited • To ensure to pay the leave encashment to the
during the review period, we noted the below mentioned anomalies: eligible employees to avoid disputes in future
• In four instances, the resignation letter was not available in the employee exit file
• In three instances, employees have not served minimum notice period as per the Management response
policy and there was no approval for such cases for relieving them prior to serving
the notice period provided for our verification. Refer Annexure 2.5 for details • Manager did not submit the documents of three
• F&F Tracker: employees. Now the process is made strict
• The dates of F&F settled cases are not updated in the tracker which makes it • The process of resignation has been changed now
difficult to track the duration between date of exit of employee and final • For notice period not served by employees, there
settlement done was mutual agreement for two cases and for one
• In nine instances, details of F&F were not updated in the tracker case, it was due to the medical emergency
• In five instances, employees who have not served the notice period, no deduction • We have now updated the details of exited
is made during F&F settlement. Total amount not deducted amounts to INR employees in F&F Master
65,011. Refer Annexure 2.6 for details • Employees not served for notice period but Salary
• Leave Encashment: In three instances, leave encashment is not paid to employees not deducted for Shorter period served: Employees
during F&F settlement amounting to INR 9,353. Refer Annexure 2.5 for details were exited on mutual grounds and didn’t want to
hold them
The observation has been reported in FY_16-17 • Leave Encashment not paid: Recovery and leave
got adjusted in NP
• Difficulty in tracking of exited employee details Responsibility : Ms. Susmita
• Difficult to track the duration between date of exit of employee and final Timelines : Immediate
settlement done
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2.7 Employee Master Management

CTC Master • To ensure to update the master data properly
• On our sample verification of 16 employees, we noted that the CTC Master is not • To update the PAN of employees in the employee
updated in one instance. The gross monthly salary of one employee (WP001435 - master
Mohammad Iftekharul Islam) is INR 35,123 as per the offer letter, however, as per • A process of periodic review of employee master
the CTC Master, the gross monthly salary of the employee was mentioned as INR may be implemented
33,873. An amount of INR 1,250 for medical reimbursement was updated as 'zero'
instead of INR 1250 in CTC Master.
PAN details of employees
• In 51 instances PAN of employee is not updated in employee master but updated
in Pay register for the month of September 2017
• In 127 instances PAN of employee is neither updated in Employee master nor in
pay register. Refer Annexure 2.7 for details
Bank Account Master Management response
On review of bank master and bank advices for the month of August and September
2017, we noted the following: • CTC Master - Corrective action taken through
• The payroll sheet being mailed to Bank for salary processing is not password ePeople
protected & is in editable format • All Pan card numbers are updated now
• In the month of August 2017, 10 employees were paid salary in their non-salary • For bank accounts updation, we are updating the
accounts & bank details of five employees are not updated in bank master but the same in a separate master when an employee
salary is credited to their bank accounts opens a salary account
• In the month of September 2017, three employees were paid salary in their non-
salary accounts, bank details of six employees are not updated in bank master but
the salary is credited to bank accounts & payment details are not available for 15
instances. Refer Annexure 2.8 for details
The observation has been reported in FY_16-17 Responsibility & timeline
Risk/ Implications Responsibility : Ms. Susmita/ Mr. Naveen
Possibility of wrong payouts
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2.8 Incentive Processing

• To ensure to recover the excess amount paid to
• On reviewing the incentive policy and the calculation of incentives for Q1 FY 2017- the employees from the salary payout for next
18, we noted that in five instances, there was an excess payment of INR 9,000 of month
incentives made to the employees (for SIS)

Management response

Risk/ Implications
Responsibility : Mr. Joy / Mr. Pooviah
• Excess payout of incentives to employees Timelines :
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2.9 Night Shift Allowance

As per the employee manual, Employees working during midnight shift at the airport • To ensure to make the payments as per policy only
will be eligible for an additional Night Shift Allowance @ INR 2000/month and will get • To update the policy with respect to timings for
paid based on actual number of days worked in the night shift. On our review of the night shifts
pay register, we noted the below mentioned anomalies:
• In five instances, employees working at locations other than airport stores were
paid night shift allowance amounting to INR 6,365
• In three instances, employees were paid night shift allowance of INR 3,149 and INR
4,288 as against maximum limit of INR 2,000 per month
• Further, we noted that there is no timings defined for night shift allowances in the
employee manual
Management response
• Paid as per the calculation sent by AOM's
• Only applicable for airport store which has a
separate policy

Risk/ Implications
• Non compliance with SOP Timelines : On-going
• Excess payout to employees
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Area : Part A - Finance and Accounts

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3.1 Review of Fixed Assets

During our review fixed assets area, we noted the below mentioned anomalies: • To design and implement SOP covering all sub-
process and roles and responsibilities of various
• No SOP documented for the following areas : department involved
• Asset requisition and procurement • Tagging of all the fixed assets to be ensured for
• Valuation of assets smooth fixed asset management
• Tagging of asset • Assets to be physically verified at regular intervals
• Asset impairment (atleast once in 3 years)
• Asset Depreciation
• Asset disposal Management response
• Treatment/ amortization of intangible assets
• Asset componentization • For SOP – Yet to be provided
• Asset movement • 'Quotations: We have various parameters to be
• On our physical verification of the assets, we noted that there is no practice of checked before finalizing any vendor. We do not
tagging of fixed assets & updation in Fixed assets register frequently change the vendor for major assets viz.
• There are no records available for assets value being ~INR 47.80 lakh interiors. However, for other assets like furniture
and fixtures, we have the practice of obtaining
The observation has been reported in FY_16-17 quotations from various vendors. A dedicated
person is being appointed for taking quotations &
doing the market survey wherever possible
• We have already started physical verification
process
Risk/ Implications • The break-up of assets amounting to ~INR 47.80
lakhs relates to the year prior to 2010
• Absence of documented and approved Standard Operating Procedure (SOP) may
hinder smoother functioning of operational activities/ may result in inconsistencies Responsibility & timeline
of processes followed
• Difficulty in tracking of assets procured & their location and performing physical Responsibility Finance
Timelines : March 2018
verification of assets
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3.2 Receivables Management

• As on September 30, 2017, following receivables are due from customers . It is • Debtors with considerable balance should be
pertinent to note that INR 24.60 lakhs are pending for more than 180 days. monitored periodically & stringent follow-up
should be done regularly
Note: Crossword group is excluded in the analysis of debtors • Legal actions can be taken to recover the dues, if
required
The following amounts are top five customers from whom the outstanding is for • Debts which are not expected to be received
more than 180 days: should be written off
1. Nutricia International Pvt Ltd (~INR 8.32 lakhs) • Adjustment of advances against respective invoice
2. Aditya Birla Finance Limited (~INR 6.98 lakhs) to be ensured periodically
3. Sun Pharmaceutical Industries Ltd (~INR 2.01 lakhs)
4. Max Life Insurance Co Ltd (~INR 1.78 lakhs) Management response
5. ARCHIES LIMITED (Gurgaon) (~INR 1.77 lakhs)
• We have received the full payment from Nutricia
• An advance amounting to ~INR 8.88 lakhs were remain unadjusted for more than 90 International Pvt Ltd, Max Life Insurance Co Ltd &
days ARCHIES LIMITED (Gurgaon)
• From Aditya Birla Finance Limited – received ~INR
Refer Annexure 3.1 & 3.2 for details 6.58 lakhs)
The observation has been reported in FY_16-17 • We are doing follow-up rigorously for payment of
Sun Pharmaceutical Industries Ltd with the sales
team on weekly basis for recovery of the same

• Blocking of funds effecting the working capital Responsibility : Mr. Subramanian
• Additional interest burden borne to meet external financing needs Timelines : On-going
• Fictitious debit & credit balances of debtors will be disclosed instead of net off
during the ageing analysis, if adjustment of advances invoice wise was not done
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3.3 Payables Management

• As on September 30, 2017, It is pertinent to note that ~INR 93.29 lakh are pending • Regular review of payables should be done to
for more than 90 days to be paid to various vendors. ensure timely payment to vendors
• Vendor advances should be settled within
Few notable payable vendors include for which payment is due over 90 days stipulated timeframe
• LOYLTY REWARDS MNGT PVT LTD (~INR 1.37 lakhs), • Frequent review to be in place to ensure timely
• SUNDEEP ASSOCIATES (~INR 5.59 lakhs) settlement
• STUDIO ATTIRE INITIATIVE PVT LTD (~INR 1.72 lakhs)
• THE SAILOR PEN CO (~INR 3.66 lakhs)
• FISHER SPACE PEN CO (~INR 6.85 lakhs)
Management response
• Further, it is pertinent to note that advances paid to vendors were unadjusted for
more than 180 days amounts to ~INR 64.16 lakh • For LOYLTY REWARDS MNGT PVT LTD – We have
hold the payment for clarification
• We will clear the payment for SUNDEEP
Refer Annexure 3.3 & 3.4 for details ASSOCIATES
The observation has been reported in FY_16-17 • STUDIO ATTIRE INITIATIVE PVT LTD- Due to quality
issue, we have hold the payment
• THE SAILOR PEN Co -
• FISHER SPACE PEN CO- We have cleared the
payment
• Majority of the advances are related to the new
product development

• Reputational damage in market Responsibility : Mr. Subramanian
• Vendor dissatisfaction Timelines : On-going
• Blocking of working capital incase of late settlement
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3.4 Cost versus Revenue

• On our in-depth examination of expenditure incurred at a store level basis and • To have a proper monitoring mechanism on
synchronizing the same with the Revenue contributed by the stores, we have variable costs of the outlets with the revenue
understood that approximately 30% is the proportion of total expenditure incurred generated from such in order to verify whether the
to stores on total revenue contributed by such stores on an average (Figures store is working above the breakeven point and
considered are for the period April – September 2017) necessary actions to be initiated in case of adverse
results
• We have observed five stores (WP14, WP17, WP26, WP27 & WP33) wherein there is
abnormalities in such proportion of expenditure to total revenue. Expenditure for
such stores are about 38.40%, 36.47%, 30.63%, 49.59% & 37.8% respectively on the
revenue contributed by the respective stores

• We are monitoring the same through monthly MIS
Risk/ Implications
• Increase in salary costs which is not in sync with the revenue which may lead to
blocking of working capital and has an impact on the bottom line of the Responsibility : Accounts Team
organization. Further, continued instances of such may have an impact on the long Timelines : On-going
term feasibility of the business if the same is not reviewed and appropriate action is
not initiated
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3.5 Review of Bank Reconciliation

On our review of BRS, we noted the below mentioned anomalies: • Periodic reversal of stale cheques to be ensured
• Periodic adjustment of entries in BOA to be
• Kotak Mahindra Bank - Payment made on May 31, 2017 was adjusted on August 12, ensured
2017 amounting to INR 18,982 delaying by 73 days
• In Kotak Mahindra - 7611740301 bank 14 cheques issued amounting to ~INR 4.39
lakh was adjusted with delay ranging between 45 days to 175 days

Management response
• Yet to be provided

• No periodic reversal of stale cheques Responsibility : Mr. Subramanian
• No periodic adjustment of credit entries in books of accounts Timelines :
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3.6 Manual Bills

Out of 50 manual bills verified for the month of July WP02, we have noted the • Proper review & control over manual bills to be
following discrepancies : implemented
• In 22 instances (44%), name of the customer was not available on the manual bills,
but captured on the regularized bills
• In 25 instances (50%), mode of payment was not captured on the manual bills, but
captured on regularized bills
• In eight instances (16%), store manager or the cashier's signature was not available
on the manual bills
• In all the instances (100%), AOM's signature was not available on the manual bills
which were regularized
• In 28 instances (56%), amount in words field was not filled
• In two instances, a delay of 11 & 27 days was observed in regularizing the manual Management response
bill due to discount issue in e-shopaid
• In 24 instances, regularized bills were not attached to the manual bills • We have captured the mobile numbers, we can
• In one instance (Manual No.1139), white colored bill was not available with the trace the customer name in system through m no.
booklet, even though the same was cancelled • For mode of payment, we capture the details in
DSR report
Refer Annexure 3.7 for details • At the time of GST implementation, all billing was
The observation has been reported in FY_16-17 done from HO, hence, no system generated bill
was raised
• For other points: Yet to be provided

• Risk of no control over proper maintenance of manual bills Responsibility : Mr. Subramanian / Mr. Pooviah
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3.7 Access review of SAP

We reviewed user access rights of SAP which is used as ERP platform for operations • Documentation of SoD matrix
like accounts related activities, procurement activities, inventory management etc. • Regular review of SoD and access rights
and noted the following: • Authorization of access to required personnel only
• Absence of documented SoD (Segregation of duty) matrix: Currently, there is no
documented and approved SoD matrix in place
• No periodic review of access rights: Based on the discussion with concerned
department, it was noted that currently there is no practice of conducting periodic
review of access rights in SAP
• Shared User ID: For 7 out of 42 user IDs, it is been shared by two or more
employee/personnel as per SAP access list leading to improper accountability of the
Management response
activities performed
• DIS 3: User ID created for Delhi location but is not used from long time
• Unauthorized access provided in relation to editing of Charts of Accounts: As per the
discussion with concerned department, charts of account is used by Senior Manager
(Finance). However, it was noted that the same access is given to SAP shared user
IDs "PRD, CRM1" & 'Manager' as well
• SAP access tracker not updated: We noted that in two cases for SAP shared user IDs
"PRD1" & "CRM1" are assigned to "Rashmi/Jayanth" & "Chitra/Siva". But the
employees Rashmi & Chitra has left the organisation and the same is allotted to
Shikha and Jayanthi respectively but the same is not updated in the tracker
maintained for SAP access rights
• Conflict in Segregation of Duty : We noted sample instances wherein there exists
conflict of segregation of duty as per SAP access list. For e.g., SAP user “ACC1”,
“ACC2”, “LOG2”, "LOG3" etc. has authorization of GRPO as well as AP invoices; SAP
user “LOG1” has authorization for PO as well GRPO. Refer Annexure 3.8 for Responsibility & timeline
details. The observation has been reported in FY_16-17
Risk/ Implications Responsibility : IT Team
Timelines :
• Leads to segregation of duty conflict
• Effective utilisation of ERP and other applications not done
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3.8 Miscellaneous Observations

Review of prepaid expensing : • To ensure that prepaid expenses are accurately
• In one instance (Doc.no : 501352), monthly apportionment was made incorrect & accounted
thus expense was accounted short by INR 993 & carry forward balance was • ICoFR framework should be developed which maps
calculated excess to INR 993 the risk & controls within the organization
• In another instance (Doc.no : 501344), one invoice amounting to ~INR 6,267 (period
: 22-09-17 to 30-09-17) was apportioned from July to September, instead of booking
the entire expense in September 2017
The observation has been reported in H2 FY_16-17
Internal Controls over Financial Reporting for FY 16-17

Management response
• Rule 8(5)(viii) of the companies (Accounts) Rules, 2014 requires the board report of • Yet to be provided
all companies to state the details in respect of adequacy of internal financial
controls with reference to the financial statements.
It has been observed that such required comments have been provided in the
respective Auditors & Directors Report of FY 16-17. However, as per the discussion
with the accounts team, currently, company does not have documented ICoFR
framework in place for FY 17-18 which is required for BOD to comment in the
Directors Report
Risk/ Implications
`
• Incorrect expense amount for MIS purpose
• As per section 134 (8) the company shall be punishable with fine upto twenty- five
lakh rupees and every officer of the company in default shall be punishable with
imprisonment upto three years for a term which may extend to three years or with
Responsibility : Mr. Subramanian
fine which shall not be less than fifty thousand rupees but which may extend to five
Timelines :
lakh rupees, or with both
Page 56
Area : Part B – Stores Visit

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3.9 Store Visit on December 21, 2017

Garuda Mall – Mantri Square
Sl. No. Observations
WP03 Mall – WP4
1 Are Lansa pricing available on all products?

2 Is the CCTV working and footage can be viewed?
3 Is Trade License certificate available at Store?
4 Is GST Registration certificate available at Store
5 Is the photo catalogue updated?
6 Are head counts done daily?
7 Store opening and closing register maintaining correctly?
8 Is the signage clean, lights working?
9 Are the Brandings available for all brands
10 Are tester pens available and in good condition?
We have visited two stores on December 21, 2017 and noted various anomalies. Pls refer enclosed
file for details
Store Visit
Compliant Non compliant

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Discrepancies noted during Store Visit on December 21, 2017
WP03-
Garuda Mall
Dalvey - No price tag Pennline - No price Tag Sailor - No Price Tag

(Displayed outside store)
WP04-Mantri
Square Mall
Head Count not done after December 18, 2017
Branding not available

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Area : Statutory Compliance

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4.1 Compliance under Factories Act, 1948

As per Factories Act, 1948 - • Registration under the factories act to be obtained
Section - 2(m): Factory means any premises including the precincts thereof, whereon & all the compliances specified in the act to be
twenty or more workers are working, or were working on a day of the preceding implemented after taking a written advise from
twelve months, and in any part of which a "manufacturing process" is being carried on the Consultants
without the aid of power, or is ordinarily so carried on, and
Section - 2(k) : Manufacturing Process includes the term "Packing".
On our review of processes in warehouse, packing is the major process that is been
carried out & thus, the Factories Act is applicable to the company.
On our discussion with concerned process owner, we noted that no registration was
made under Factories Act & thus, all the compliances under Factories Act remain non
complied. Management response
The observation has been reported in H2 FY_16-17 • Yet to be provided

• Non registration in Factories Act, will lead to multi-faced fines and penalties. The Responsibility : Mr. Joy Ganguly / Mr. Rahul Raj
penalties in the act are divided in sections ranging from general offenses and
leading upto contravention of individual offenses which were incorporated in Timelines :
sections 92 - 108 of Factories Act, 1948
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4.2 Review of Statutory notices details

On our review of the pending statutory notices , we noted that there are 4 notices • Timely tracking, monitoring & rectification of the
open as on September 30, 2017. On discussion with the process owner, it was noted errors & non compliances to be ensured
that labour department notice pertaining to WP04 was closed & the remaining are
expected to be closed shortly by payment of nominal amount
Management response
• The open notices are under the process of closure.
We are expecting to close it shortly

• Possibility of incurring liability under the assessments Responsibility : Mr. Subramanian
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Statutory notices details
Received
Sl No Notice From For The Location Remarks Current Status
date
Attended the Hearings &

Income Tax Assessment Notice (for
1 18.05.17 HO- Bangalore Submitted all the documents Assessment is under the process
AY 2015-16)
from our side
We have attended hearing one It is in the process of closure & it
WP26 Store - seems that closure requires
2 Shop & Establishment Notice 04.08.17 time. The officer asking for
Mumbai presence of managing director
further documents
Sales Tax - Assessment Notice ( For We submitted the all the
3 14.07.17 Mumbai Branch Waiting for the Order Copy
FY 2013-14) documents to Dept
We met the officer & taken the
4 Trade License Notice 03.08.17 WP30 Store - Delhi Store has been closed
time
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4.3 Statutory Display requirements

On our visit to Warehouse as on August 22, we noted that the abstract of following • Proper display to be ensured at the conspicuous &
acts were not displayed at Warehouse & Head office : convenient place in the premises
- Factories Act
- Payment of wages Act
- Minimum Wages Act & Minimum Wages Schedule, Karnataka
- Equal Remuneration Act
- Payment of Gratuity Act
- Maternity Benefit Act
- Payment of Bonus Act
- The Karnataka shop & commercial establishment rules
- The industrial employment (Standing Order) act 1946 schedule 2
Management response
• We have displayed all the abstracts now as
suggested

• Risk of incurring penal fees of ~INR 1.39 lakh under various acts Responsibility : Ms. Susmita
• Risk of imprisonment which varies as per different Acts Timelines : January 23, 2018
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4.4 Secretarial Compliances (1 of 2)

Observations
On review of the secretarial compliances, we noted the following anomalies:
• Review of MOA:
i. In MGT-7 & AOC-4, Principle business activity is disclosed as "Manufacture" in MOA whereas in the tax audit report, nature of business was
disclosed as "Trading". Thus, there is a conflict between Annual Return (MGT-7) & Tax audit Report (3CD)
• Review of application of Secretarial Standards:
i. As per Secretarial standard 1 (On Board meetings), the following are the non compliances observed :
• Notice for organizing the board meeting does not contain serial number of the meeting held in the respective financial year & the same
is not being signed by Managing Director
• Pages of the Minutes Books were not consecutively numbered & were not signed by chairman of the meeting
• Attendance register has not been signed by attendees & serial number of the meeting was not mentioned
ii. As per Secretarial standard 2 (On General meetings), the following are the non compliances observed :
• In the notice of AGM, day and full address of the venue of the general meeting were not captured
• Pages of the Minutes Books were not consecutively numbered & were not signed by chairman of the meeting
• Other miscellaneous observations :

i. AOC-4 has been filed on November 29, 2017 with a delay of one day & resulting in penal charges of INR 2,400
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4.4 Secretarial Compliances (2 of 2)

• Difference between MGT-7 & Form 3CD • We are going to amend the MOA & AOA as per new
• Non compliance with secretarial standards companies act, 2013 on February 15, 2018
• Incorrect details disclosed in the annual filings • We ensure the adherence of secretarial standards
• Risk of incurring pen al charges for delay in filing • The delay is due to MCA website was down on the
date of filing
Recommendations
• Nature of business disclosed in the various statutory reports to be unique and it Responsibility & timeline
should be ‘Trading’ & Moreover, MOA to be amended as per Table A specified in the
MCA schedule Responsibility : Mr. Ramesh & Consultant
• Compliance with secretarial standards to be ensured Timelines : February 2018
• AOC-4 shall disclose the true & accurate details of the company
• Ensure timely filing of the annual reports
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4.5 Review of TDS & VAT

• Review of TDS • The rates at which TDS to be deducted shall be as
i. TDS under section 194 H deducted at higher rates: per rates specified by Finance act for respective
AS per Section 194 H, TDS shall be deducted @ 5%, but TDS is deducted @ 10% year & proper care to be taken while processing
leading to excess deduction of INR 6,041 statutory dues
• Ensure no excess tax paid & in case of such
ii. TDS under section 194 C deducted at incorrect rates: instances, claim for refund has to be made timely
TDS deducted @2% for Creative PRO (AQSPD1872D) Instead of 1% in the month of
July & September resulting excess deduction of TDS amounting to INR 3,013 &
INR 5,704

The observation has been reported in H2 FY_16-17 Management response
• We have rectified rate in system from Oct’17
• Review of VAT
We noted that there is an advance outstanding amounting to ~INR 9,878 in Delhi as
per June VAT Return. The same has not been claimed for refund.

• Excess deduction of tax may result in conflict with the vendor Responsibility : Mr. Ramesh
• Non Compliance with the TDS provisions of the Act Timelines : Immediate
• Loss of advance VAT paid
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4.6 Compliance with Companies Act, 2013

As per Sec 12(3)(c) of Companies Act 2013, Every company shall get its Corporate • To ensure indication of CIN, telephone number &
Identity Number(CIN), Registered Office address, telephone number and website Website address on all agreements
addresses, printed in all its business letters, billheads, letter papers and in all its • To ensure indication of E-mail address, Website
notices and other official publications. address & telephone number on Post GST Tax
invoice & Stock transfer memo
On review of Company documents, we noted the below mentioned anomalies:
• E-mail address, Website address & telephone number not printed on Post GST Tax
invoice
Management response
• We have already informed IT team to incorporate
the same

• Violation of the said section gives penalty of one thousand rupees for every day Responsibility : Mr. Subramanian
during which the default continues but not exceeding one lakh rupees. Timelines : Immediate
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4.7 Compliance with GST Provisions

Observations Risk/ Implications
GST Input wrongly availed • Risk of paying interest @15% amounting to INR
As per Sec 17 of Central GST Act, 2017, input GST cannot be availed on the following 4,879 along with tax subsequently
expenses, however, the same has been accounted in books as input GST. • Incorrect details furnished in GST return
1. Membership fees paid to club or association etc., (~INR 27,810)
2. Expenses relating to food & beverages unless the same are used in providing Recommendations
taxable outward supplies (~INR 4,713)
Refer Annexure 4.2 for details • Input GST shall be availed as per provisions of GST
and wrongly availed input GST shall be paid
Short claiming of Input GST subsequently along with interest before issuance
On review of GST input as per the books of accounts and GST-3B returns, we noted of notice to avoid penalty
that in six instances GST input as per the books of accounts are not matching with • Any incorrect details provided shall be corrected
input actually claimed as per GST-3B return. by filing revised GST-1
3. In three instances input GST was claimed shortly in the month of August 2017 in
the states of Delhi, Gujarat and Karnataka amounting to INR 5,509, INR 1,662 & Management response
INR 5,663 respectively
• For input GST, we have already taken corrective
4. GST input was claimed shortly in two instances in the states of Delhi and Haryana
action from Aug’17
amounting to INR 24,480 and INR 451 and in one instance GST input was claimed
• For the pending clarifications while filing GST-3B,
in excess of INR 23,036 in Karnataka for the month September 2017
the difference is noted. We have taken care of the
same and have filed in GSTR1
GST Payable
• DHC Remarks: We will validate the same in H2
5. On review of sales register and GST-3B returns, we noted that in 13 instances GST
review
payable as per the books is higher than GST payable as per GST-3B return
• GST Payable: we have taken care of the same and
• In seven instances in the month of August 2017, GST payable as per books of
have filed in GSTR1
accounts is more than the return amounting to ~INR 4.32 lakh
• In the month of September 2017, in six instances, GST payable as per books of
accounts is more than the return amounting to ~INR 2.93 lakh Responsibility & timeline
2. In one instance GST payable for the month of Sept’17 as per books of accounts is
Responsibility : Mr. Subramanian
less than the return amounting to ~INR 0.78 lakh in the state of Uttar Pradesh
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4.8 Review of ESIC

• As per sec 22 of ESIC Act, 1948, ESIC to be calculated on wages which is paid or • ESIC to be calculated on the daily incentives which
payable in cash to an employee if the terms of the contract of employment, is disbursed every month with salary.
express or implied, were fulfilled and other additional remuneration if any, paid at • ESIC not to be calculated on the component of
intervals not exceeding two months. From the month of August 2017, it has been travel allowance
started to calculate ESIC on incentives which includes both the daily & quarterly • ESIC to be calculated accurately & timely payment
incentives. Thus, the employer contribution of 4.75% on quarterly incentives is not of ESIC to be ensured
required to be deducted.
• ESIC has not been calculated on incentives & night shift allowances for the months
of April, May, June & July 2017. But, the same has been started calculating from
the month of August'17
• We noted that an amount of ~INR 82,797 as ESIC others for H1 FY 17-18 but no
explanation has been provided as to why such amount is required to be paid Management response
• We have noted in the month of July 2017 that ESIC arrears has been paid
amounting to ~INR 19,700. But the detailed working file for arriving such amount • Details required as per the specific format are not
has not been shared with us for review available
• ESIC Challan for the month of April 2017 has not been provided for our review & it
is required to pay an amount of ~INR 1.64 lakh for that respective month
Risk/ Implications
• Non compliance with the ESIC act and potential impact on salary expenditure which Responsibility & timeline
is relatively higher than previous financial year
• Excess payout of ESIC employer contribution and risk of incurring penal charges for Responsibility : Ms. Susmita / Mr. Naveen
short payment of ESIC and employees contribution of 1.75% will be disallowed to be Timelines :
deducted as an expense as per Section 36(1)(va) of Income Tax act, 1995, which
leads payment of 30% tax on such ESIC contribution
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4.9 Review of Professional Tax

• Review of Professional Tax: • Timely payment of professional tax to be ensured
• As per definition of salary, Bonus is specifically excluded from the definition in the • PT to be calculated accurately on the salary
states of Maharashtra, Gujarat, Tamilnadu & Telangana. However, on our review, components as per rules defined for each state
we noted that bonus is included while calculating the professional tax for the • The documentation to be properly made for all the
employees working in the said states challans
• In 27 instances, professional tax has been deducted incorrectly consequently the • Slab rates to be applied accurately for all the
same resulted in short payment of ~INR 989 employees in different states
• Çhallans were not shared for our review for the states of Kerala & Tamilnadu for
our review for H1 FY 17-18 & for the month of April 2017 for all the states

Management response
• In our earlier system PayKraft, incentives was not
considered for deducting PT. The same has been
rectified now
Risk/ Implications
• Risk of incurring penal fees under respective state acts in case of delay in payment
of professional tax Responsibility & timeline
• Risk of deducting excess professional tax from the employee which affects
employee-employer relationship Responsibility : Ms. Susmita / Mr. Naveen
• Risk of payment of incorrect professional tax amount Timelines :
• Risk of incurring penal charges for deducting short amount
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4.10 Statutory Compliances as per Karnataka State Enactments (1 of 3)

Observations
On our review, the following compliances have not been followed,
• The Karnataka Shops & Commercial Establishments Rules, 1963:
i. Form F - Register of Leave with Wages not maintained
ii. Form H - Leave Register with Wages Book not maintained
iii.Form T - Combined Muster Roll cum Register of Wages
iv. As informed, the third party vendor is in the process of preparing the above mentioned three registers.
v. Form P - Notice of Holiday not displayed
vi. Form R - Permission to allow women to work after 8 PM - On verifying the whoisin report for Phoenix Marketcity (WP17), we noted that one
women is working after 8 PM, however, no such permission is taken in Form R for working after 8 PM
• The Employees’ State Insurance Act,1948
i. Form 01(A) - Form of Annual Information - As required under the Act, the employer is required to submit yearly return in Form 01A in
respect of their factory/establishment every year (Due date of filing the return is January 31). (http://www.esickar.gov.in/employer-guide-
duties.html). However, the same was not filed for FY 2016-17 till date i.e. January, 2018 and for FY 2017-18 also, the return is yet to be
filed for which the due date is very nearby.
ii. Form 11 - Accident Book - As informed, the same has been prepared by the third party vendor, however, it was not shared with us for our
review
iii.Form 5 - Half yearly return for H1 FY 17-18 was not filed. The due date of submission of the same was November 12, 2017THE
EMPLOYMENT EXCHANGES (COMPULSORY NOTIFICATION OF VACANCIES) Rules, 1960
• The Employment Exchanges Act (Compulsory notification of vacancies) Rules, 1960
• Form ER-I : Quarterly Return under section 6 - As informed, the vendor is filing the said return from September 2017, however, no return was
shared with us for our verification
• Form ER-II : Biennial Occupational Return - The same is to be filed once in two years, As informed by the vendor, the same is not applicable
from April 2017, however, there is no such notification available in Act, nor any notification shared with us by the vendor for the non-
applicability of the said return
• The Payment of Bonus Act,1965
i. Form C - Bonus Paid Statement - No such statements were provided for our review and there was no response from the vendor on the
mentioned form
ii. Form D - Annual Return for Bonus paid to employees was not filed for FY 2016-17- The due date of filing such return was November 30,
2017 and there is no response provided by the vendor on this matter
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Observations
• The Minimum Wages Act, 1948:
Following details/ documents/ records not maintained:
i. Form I Register of Fines (Rules 21(4))
ii. Form II Register of Deductions (Rule 21(4))
iii.Form IV Overtime Register for Workers (Rule 25(2))
iv. Form V Register of wages (Rule 26(5))
v. Form VI Wage slips
As informed, the third party vendor is in the process of preparing the above mentioned registers.
• The Payment of Wages Act, 1936
i. Form I - Register of Fines, Deductions for Damages or Loss and Advances
ii. Form III - Register of Wages
There are no such registers provided for our review and no response provided by the vendor on the same
• Equal Remuneration Act, 1976
i. Register in Form D is required to be maintained by the employer, As informed, the third party vendor is in the process of preparing the
register
• The Karnataka Labour Welfare Fund Rules, 1968
i. Annual Statement in form D for the contributions made by the employer was not provided for our verification. As informed, the same has
been prepared by the third party vendor
• Maternity Benefit Act, 1961
i. Muster Roll in form A not prepared. As informed, the same has been prepared by the third party vendor, however, it was not shared with us
for our review
• The Karnataka Lifts, Escalators and Passenger Conveyors Act, 2012
i. 'License to use Lift' from Chief Electrical Inspector was not available
• The Karnataka Industrial Employment (Standing Orders) Rules, 1961
i. Form 1 - No Application made for certifying standing orders - There was no response provided by the vendor on the same
• EPF Act 1952
i. Proof of document showing settlement made for exited employees not provided for our review
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• Risk of incurring penal consequences under respective acts • The required documents/registers are maintained
by our third party vendor
Recommendations
• Proper Maintenance of documents & timely filing of annual returns to be ensured Responsibility & timeline
under various acts
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4.11 Control over Form F

Form F : • Ensure that all the pending F forms are filed to
Form F are pending to be received on stock transfers/ consignments amounts avoid the differential tax liability and interest
aggregately to ~INR 12.57 crores for previous three financial years liability on the same
Region/Year FY_15-16 FY_16-17 FY_17-18 Total
Karnataka - 29,078,450 13,229,024 42,307,474

Management response
Tamilnadu 27,735,167 32,234,336 6,474,847 66,444,350
Kerala 8,044,858 6,797,418 2,101,261 16,943,537
Total 35,780,025 68,110,204 21,805,132 125,695,361
Risk/ Implications
• As a result of pending F forms, the company have to bear the unpredicted liability
of differential sales tax and interest on the above said pending receivables Responsibility : Mr. Subramanian
Timelines :
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4.12 Control over Form C

Form C : • Stringent recovery process should be in place
As per Rule 12(7) of The Central Sales Tax (Registration and Turnover) Rules, 1957, • Ensure that all the pending C forms are filed to
the organization is required to obtain a declaration in Form C for inter-state sales avoid the differential tax liability and interest
from recipient of goods and submit it to Sales tax Department within a period of liability on the same
three months after end of the period to which such declaration relates.
Form C are pending to be received on interstate sales amounts aggregately to ~INR

3.82 crores for previous three financial years
Region/Year FY_14-15 FY_15-16 FY_16-17 FY_17-18 Total

Management response
Karnataka 3,528,421 2,444,903 5,503,395 6,947,329 18,424,048 • Yet to be provided
Maharashtra 56,336 217,139 1,817,703 1,826,827 3,918,005
Delhi 644,163 5,116,007 10,056,712 21,10,895 15,816,882
Total 4,228,920 7,778,049 17,377,810 8,774,156 38,158,935
Risk/ Implications
• As a result of pending C forms, the company have to bear the unpredicted liability
of differential sales tax and interest on the above said pending receivables Responsibility : Mr. Subramanian
• Non-compliance is punishable under rule 12 (12) of “The Central Sales Tax Timelines :
(Registration and Turnover) Rules, 1957” rules with a fine which may extend up to
INR 50,000
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4.13 Compliance with POSH Act, 2013

• Review of Compliance of POSH policy • To display the required abstracts in the HO and
• The POSH Policy and penal consequences for non-compliance have not yet been Warehouse immediately and to keep the copies of
displayed at workplace (i.e. both HO and Warehouse). Even the required these abstracts in the stores as well
documents are not yet kept in the files in stores.
• Workshops and Awareness programs have been conducted on October 27, 2017.
Management response
Risk/ Implications
• Non compliance with POSH Act, 2013
Timelines :
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Data not provided for below mentioned points during H1 review
Area Observations Data not provided for review
Review of depreciation calculation, FAR as

per CARO requirements & under/over FAR
insurance of fixed assets
Review of Form C & F Details not provided
Review of MIS & Budget MIS & Budget
Store wise cost vs. revenue COGS details of individual stores
Finance & Accounts Validation of Access rights of PayKraft and Access rights of PayKraft and Wooqer
Wooqer
Balance confirmation from vendors As suggested, we will cover the same in H2 review
MSMED Confirmation As suggested, we will cover the same in H2 review
Form 26 vis-à-vis Books of Accounts As suggested, we will cover the same in H2 review
• Professional Tax challans were not
shared for our review for the states of
Kerala & Tamilnadu for H1 FY 17-18 & for
Statutory Compliances
the month of April 2017 for all the states
• ESIC Challan for the month of April 2017
has not been provided for our review
• Appraisal Process: The details of half
yearly appraisal were not provided for
our review, so we are unable to
comment on the same
HR & Payroll • Induction details for the review period
• Deactivation details of bio-metric access
for exited employees
• Evidence for the Induction conducted
during the review period
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DISCLAIMER
Baker Tilly DHC Pvt. Ltd (Earlier known as DH Consultants Pvt Ltd) is an independent member of Baker Tilly International. Baker Tilly
International Limited is an English company. Baker Tilly International provides no professional services to clients. Each
member firm is a separate and independent legal entity and each describes itself as such. Baker Tilly DHC Pvt. Ltd is not Baker
Tilly International’s agent and does not have the authority to bind Baker Tilly International or act on Baker Tilly International’s
behalf. None of Baker Tilly International, Baker Tilly DHC Pvt. Ltd nor any of the other member firms of Baker Tilly
International has any liability for each other’s acts or omissions. In addition, neither Baker Tilly International nor any other
member firm has a right to exercise management control over any other member firm.
Baker Tilly DHC Pvt. Ltd. is a private limited company incorporated in India.
Baker Tilly DHC Private Limited (referred to in this disclaimer as “DHC” or “we” or “us”), has relied upon the documents,
information and explanations provided to us by the management of the Company for the purpose of forming our observations
and views in this Report. The responsibility, at all times, for the design and implementation of the related internal controls
including adequate disclosures, will be of the management of the Company including the maintenance of adequate records,
systems and internal controls, selection and application of the internal policies and safe guarding the assets of the Company.
The management of the Company will be responsible for correcting control lapses, if any. We are not aware of any
information/record to the contrary which would lead us to believe that the conclusions stated in this Report are no longer
valid. We have assumed that no changes, modifications of whatsoever nature have been made to the policies and procedures
implemented by the Company, whether oral or in writing, subsequent to the date of review specified in our Report. Any
observations stated in this Report are to the best knowledge of DHC and such knowledge shall mean the actual knowledge of
the employees of DHC. In the course of preparing this Report:
We have presumed the accuracy of all statements, information, documents and clarifications which were provided to us;
We have not obtained any formal translations of any documents or records other than those made available for our review in the
English language;
We have assumed the genuineness of all signatures on, and the authenticity and completeness of all documents, the copies of which
alone have been reviewed by us;
We have assumed the conformity to originals of all documents supplied to us as photocopies;
We have assumed that the documents submitted to us in connection with any particular issue are the only documents relating to
such issue;
Page 79
DISCLAIMER
There are no other facts, matters or documents which would, or might, affect this Report and which were not revealed by the
documents examined or by the information provided to us; and
All documents or extracts of documents submitted to us as copies or unexecuted copies in portable document format (PDF) conform
to the originals and the original documents of which such copies of or PDFs have been supplied to us, were authentic and
complete.
Limitation of Liability
In no event DHC and/or its directors and/or its employees shall be held liable for any direct, indirect, consequential, special,
incidental or loss, damages or expenses (including, without limitation, damages for loss of profits, opportunity cost, loss of
goodwill, indemnification, etc..) arising out of this Report, even if we have been advised of their possible existence. Any
decision to depend on our Report is to be made by the Company and no communication by DHC should be treated as an
invitation or inducement to engage the Company to act as per the suggested advice in the Report.
Circulation of Report
The above Report is for the sole and exclusive benefit of the management of the Company and may not be relied upon by any other
person. The Company agrees not to modify, distribute, circulate, reproduce, copy or disclose to third parties or derive
commercial use or benefit from the Report without the prior written permission of DHC.
Page 80
Thank you

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William Penn Private Limited

Final Draft Internal Audit Report

For the period: H1 of FY 2017-18

February 26, 2018

4. Summary of Audit Observations 09

Follow-up review for the pending agreed action plan

Operational OI Observations related to non-adherence to defined process .Example : Non

System Observations related to sub-optimal utilization of system functionalities.

Deviations from controls, which may impact adversely or some weakness in

Scope Exclusion & Limitations

* We were unable to test few checks due to unavailability of data

William Penn Private Limited – Internal Audit Report – H1 FY 2017-2018

William Penn Private Limited – Internal Audit Report – H1 FY 2017-2018

William Penn Private Limited – Internal Audit Report – H1 FY 2017-2018

William Penn Private Limited – Internal Audit Report – H1 FY 2017-2018

Finance and Accounts

1 Fixed Assets Register – No physical verification done, no tagging of assets Y

William Penn Private Limited – Internal Audit Report – H1 FY 2017-2018

3 Non-display of abstracts of various Acts Y

William Penn Private Limited – Internal Audit Report – H1 FY 2017-2018

RISK SUMMARY ROOT CAUSE SUMMARY

3. Quality module in SAP

11. Review of Dispatch Process

> 3 month 2 – 3 month 0 – 1 month

4 7. Employee Master Management

> 3 month 2 – 3 month 0 – 1 month

* Timelines for point no. 8 are yet to be provided

4 7. Access review of SAP

> 3 month 2 – 3 month 0 – 1 month

* Timelines for point no. 5, 7, 8 & 9 are yet to be

> 3 month 2 – 3 month 0 – 1 month

* Timelines for point no. 1, 8, 9, 11, 12 & 13 are

William Penn Private Limited – Internal Audit Report – H1 FY 2017-2018

Particulars Remarks Status

Area : Warehouse Operations

William Penn Private Limited – Internal Audit Report – H1 FY 2017-2018

1.1 Review of Non-moving stock

Refer Annexure 1.1 for details

Risk/ Implications Responsibility & timeline

1.2 Review of SAP controls (1 of 2)

Refer Annexure 1.2 for details

1.2 Review of SAP controls (2 of 2)

1.3 Quality module in SAP

Risk/ Implications Responsibility & timeline

1.4 Review of Cycle Count Process and Physical verification of stock

1.5 Review of Open delivery challan report

Refer Annexure 1.6 for details Management response

1.6 Arrangement with logistic & other service Partners

• Absence of a legally vetted agreement: There is no legally vetted agreement in

1.7 Review of Online dispatch process

Refer Annexure 1.7 for details

1.8 GRPO Process

Risk/ Implications Responsibility & timeline

1.9 Review of E-commerce timely dispatch

Refer Annexure 1.9 for details

1.10 Review of Magento Website

Refer Annexure 1.9 for details Management response

1.11 Review of Dispatch Process

Refer Annexure 1.10 for details

• Review of Dispatch Tracker:

Refer Annexure 1.11 for details

1.12 Review of Online sales return