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Date: Fri, 30 Apr 2021 22:56:34 +0430
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[10:52 pm, 30/04/2021] Salman Khattak: Observation 5:  No internal audit
function

We have noted that there is no internal audit function operating within the
Organization. An internal audit department exists to aid management control
over the business and assist in the identification of matters requiring
their attention. As a result of the multiple locations from which the
Organization is planning to operate, and the dilution of control which
ultimately arises, this is increasingly important.

As part of the formation of an internal audit department it is important
that a suitably experienced professional is employed to perform the function
and sufficient resources are allocated to the department to gain maximum
benefit from its operation.

Risk

In the absence of internal audit department chances of fraud may increase
and cannot be implemented the governance system, if an organization do not
follow its own policies, then organization is exposed to many kind of risks
and it will not grow in market.

Recommendation

We recommend that management review the requirement for the implementation
of an internal audit function based on the current and future expected
activities of the Organization. The department would focus initially on
areas that are of concern to management and in which there may be a lack of
control with a view to ensuring that key management objectives and
strategies are achieved. The function must be given adequate resources, both
financial and operational, and a clear reporting structure should be
formalized and documented for reporting the findings to the Board of
Directors on which they can base decisions.

[10:52 pm, 30/04/2021] Salman Khattak: 2

[10:52 pm, 30/04/2021] Salman Khattak: Observation 4: Cash count

During the course of audit, we observed that no cash count is conducted on a
specified date and finance department is not conducting of physical cash
count weekly or monthly basis.

Risk

The absence of cash count practice indicates weak internal control over the
most liquid asset. Lack of such procedure may, therefore, expose the
organization to threat of misappropriation of funds.

Recommendation

Cash count policy must be formulated and implemented throughout the
organization to ensure strong control over cash, and protect the
organization from the aforementioned threat.

Management comments

[10:55 pm, 30/04/2021] Salman Khattak: 3

[10:55 pm, 30/04/2021] Salman Khattak: 2.5       Observation Risk Register:

The risk register is not updated and do not incorporate all the existing
risks of the organization.

Risk:

All the existing organizational risk may not be incorporated in the risk
register and the proper actions and strategies to confront the
organization's risks may not be taken. This leaves the organization prone
risks without mitigation.

Recommendation:

The organization is maintaining a very sophisticated system for recording
the risk register but we found that few more risks can be incorporated like

.            Internal compliance and assurance

.            Selection of beneficiaries specially for seasonal or
winterization program (fraud/ mall practices has already been identified by
the M&E Department in Jalalabad. such events may occur in future.)

.            High employees turnover rate is incorporated in the risk
register but this is very general statement but it can be revised to a
specific percentage.

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link=3D"#0563C1" vlink=3D"#954F72"><div class=3DWordSection1>[10:52 pm, 30/04/2021] Salman =
Khattak: Observation 5:&nbsp; No internal audit =
function&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp=
;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;=
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&=
nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; =
<o:p></o:p>We have =
noted that there is no internal audit function operating within the =
Organization. An internal audit department exists to aid management =
control over the business and assist in the identification of matters =
requiring their attention. As a result of the multiple locations from =
which the Organization is planning to operate, and the dilution of =
control which ultimately arises, this is increasingly =
important.<o:p></o:p>As part of the formation of an internal audit department =
it is important that a suitably experienced professional is employed to =
perform the function and sufficient resources are allocated to the =
department to gain maximum benefit from its =
operation.<o:p></o:p>Risk<o:p></o:p>In the absence of internal audit department chances of =
fraud may increase and cannot be implemented the governance system, if =
an organization do not follow its own policies, then organization is =
exposed to many kind of risks and it will not grow in =
market.<o:p></o:p>Recommendation<o:p></o:p>We recommend that management =
review the requirement for the implementation of an internal audit =
function based on the current and future expected activities of the =
Organization. The department would focus initially on areas that are of =
concern to management and in which there may be a lack of control with a =
view to ensuring that key management objectives and strategies are =
achieved. The function must be given adequate resources, both financial =
and operational, and a clear reporting structure should be formalized =
and documented for reporting the findings to the Board of Directors on =
which they can base decisions.<o:p></o:p>[10:52 pm, 30/04/2021] Salman =
Khattak: 2<o:p></o:p>[10:52 pm, 30/04/2021] Salman Khattak: Observation 4: Cash =
count<o:p></o:p>During the course of audit, we observed that no cash count =
is conducted on a specified date and finance department is not =
conducting of physical cash count weekly or monthly =
basis.<o:p></o:p>Risk<o:p></o:p>The absence of cash count practice indicates weak internal =
control over the most liquid asset. Lack of such procedure may, =
therefore, expose the organization to threat of misappropriation of =
funds.<o:p></o:p>Recommendation<o:p></o:p>Cash count policy must be =
formulated and implemented throughout the organization to ensure strong =
control over cash, and protect the organization from the aforementioned =
threat. <o:p></o:p>Management comments<o:p></o:p>[10:55 pm, 30/04/2021] Salman =
Khattak: 3<o:p></o:p>[10:55 pm, 30/04/2021] Salman Khattak: =
2.5&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Observation Risk =
Register:<o:p></o:p>The risk register is not updated and do not incorporate =
all the existing risks of the organization.<o:p></o:p>Risk:<o:p></o:p>All the existing organizational =
risk may not be incorporated in the risk register and the proper actions =
and strategies to confront the organization&#8217;s risks may not be =
taken. This leaves the organization prone risks without mitigation. =
<o:p></o:p>Recommendation:<o:p></o:p>The organization is maintaining a =
very sophisticated system for recording the risk register but we found =
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p;&nbsp;&nbsp; Internal compliance and assurance =
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winterization program (fraud/ mall practices has already been identified =
by the M&amp;E Department in Jalalabad. such events may occur in =
future.)<o:p></o:p>&#8226;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbs=
p;&nbsp;&nbsp; High employees turnover rate is incorporated in the risk =
register but this is very general statement but it can be revised to a =
specific percentage.<o:p></o:p></div></body></html>
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