Parle Audit

Project on Audit Process of PARLE Company
CHAPTER I
Industry Overview
Biscuits: Sweet or salty, Soft or crunchy, Simple or exotic. Everybody loves munching on
biscuits, but do they know how biscuits began? The history of biscuits can be traced back to a
recipe created by the Roman chef Apicius, in which "a thick paste of fine wheat flour was boiled
and spread out on a plate. When it had dried and hardened it was cut up and then fried until crisp,
then served with honey and pepper." The word 'Biscuit' is derived from the Latin words ' Bis'
(meaning 'twice') and 'Coctus' (meaning cooked or baked).During the 17th and 18th Centuries in
Europe, baking was a carefully controlled profession, managed through a series of 'guilds' or
professional associations. To become a baker, one had to complete years of apprenticeship working through 1 the small-scale sector but there are strong possibilities of the industry being
deserved in line with the government policy of liberalization. The net effect thus would be greater
choice for the consumer as well as a check on the costs. The country production of the biscuits
during 2007-08 was 18.6 Lactones of which 1/2 were manufactured by the organized sector. The
industry turnover was 5322.7 Crores of which organized sector contributed 2519.3 crores.
GROWTH AND PRESENT STATUS OF THE INDUSTRY

Biscuit industry in India in the organized sector produces around 60% of the total production, the
balance 40% being contributed by the unorganized bakeries. The industry consists of two large
scale manufacturers, around 50 medium scale brands and small scale units ranging up to 2500
units in the country, as at 2000-01. The unorganized sector is estimated to have approximately
30,000 small & tiny bakeries across the country.
The total production of biscuits in India is estimated to be around 30 lakh MT, the organized
sector accounts for 65% and the unorganized sector accounts for 35% of the total industry
volume.
The organized sector is valued at above Rs 8000 crores.
The biscuit industry is estimated to grow over 15-17% in the next few years.
The per capita consumption of biscuits in India is 2.0 kg.
India is ranked 3rd after US and China amongst the global biscuits producers.
The export of biscuits is approximately 17% of the annual production, the export of sweet
biscuits for year 2011-12 was Rs 275.93 Cr and for year 2012-13(April-Dec) was Rs 420
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Cr, the major exporting regions were Haiti, Angola, USA, Ghana, UAE.
The imports are not significant amount as compared to the total consumption.
The penetration of biscuits in urban and rural market is 85% and 55% respectively.
The Biscuit industry employs almost 3.6 lakh people directly and 32 lakh people indirectly.
The organized biscuit manufacturing industries annual production:

Year
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
11.00
12.54
14.29
16.14
19.14
23.5
Annual
Production
(Lakh
MAIN CATEGORIES OF BISCUITS:
Glucose,
Marie,
Sweet,
Salty,
Cream & Milk.
Glucose biscuits accounts for more than 50% of the total biscuit market value, Parle G dominate
this market with more than 60% share followed by Britannia and ITC.
MAJOR BRANDS:
The Indian biscuit industry is dominated by major brands like,
Parle
Britannia
Sunfeast
Also the category has strong regional brands such as
Priya Gold-North,
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INTRODUCTION OF BAKERY AND CONFECTIONARY INDUSTRY IN
INDIA
The estimate made by the Ministry of Food Processing Industries (1998), the total market of
bakery product, bread and biscuit is estimated at 1.5mn ton and 1.1mn ton respectively. The cake
market is estimated at 0.4mn ton. The organized segment of the biscuit market is estimated to be
0.44mn tons whereas the unorganized sector accounts for the balance 0.66mn tons. Bread market
is estimated to be growing at around 7% pa in volume terms, whereas the biscuit market in the
recent years has witnessed a little higher growth at around 8-10% pa. Within the biscuit category,
cream and specialty biscuits are growing at faster pace at 20% pa, while the popular segment is
growing. Besides the industrial areas in leading metropolis the bakery product & confectionery are
carried on small- scale basis also at household level. Whereas, the confectionery industry has
developed remarkably with the international brand mingling with the domestic market toffees,
chocolates etc. produced at large scale in important industrial regions of the country. Growth
promotional activities in 1977- 78 Government reserved the confectionery bread and biscuit
manufacturing for small scale and restricted entry of large producers. During the last 2 decades,
small and unorganized players shared the growth in the industry. Currently, there are an estimated
2 million bakeries across the country engaged in production of bread, biscuits and other products.
The Indian confectionery market is segmented into sugar-boiled confectionery, chocolates, mints
and chewing gums. Sugar-boiled confectionery, consisting of hard boiled candy, toffees and other
sugar-based candies, is the largest of the segments and valued at around Rs 2,000 crore. The
confectionery industry has a current capacity of 85, 000 tonnes, the market is growing at the rate
of 10-15% per annum. The estimated annual production of bakery products in India is in excess of
3 million tonnes, of which bread accounts for nearly 50% and biscuits 37% in volume terms in the
organized sector. The bakery sector in India is one of largest segments of the food processing
industries; annual turnover in value terms is approximately $ 900 million.
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HISTORY OF BISCUITS INDUSTRY
Sweet or salty. Soft or crunchy. Simple or exotic. Everybody loves munching on biscuits, but
do they know how biscuits began? The history of biscuits can be traced back to a recipe
created by the Roman chef Apicius, in which "a thick paste of fine wheat flour was boiled and
spread out on a plate. When it had dried and hardened it was cut up and then fried until crisp,
then served with honey and pepper." The word 'Biscuit' is derived from the Latin words 'Bis'
(meaning 'twice') and 'Coctus' (meaning cooked or baked). The word 'Biscotti' is also the
generic term for cookies in Italian. Back then, biscuits were unleavened, hard and thin wafers
which, because of their low water content, were ideal food to store. As people started to
explore the globe, biscuits became the ideal travelling food since they stayed fresh for long
periods. The seafaring age, thus, witnessed the boom of biscuits when these were sealed in
airtight containers to last for months at a time. Hard track biscuits (earliest version of the
biscotti and present-day crackers) were part of the staple diet of English and American sailors
for many centuries. In fact, the countries which led this seafaring charge, such as those in
Western Europe, are the ones where biscuits are most popular even today. Biscotti is said to
have been a favourite of Christopher Columbus who discovered America! Making good
biscuits is quite an art, and history bears testimony to that. During the 17th and 18th Centuries
in Europe, baking was a carefully controlled profession, managed through a series of 'guilds' or
professional associations. To become a baker, one had to complete years of apprenticeship working through the ranks of apprentice, journeyman, and finally master baker. Not only this,
the amount and quality of biscuits baked were also carefully monitored. The English, Scotch
and Dutch immigrants originally brought the first cookies to the United States and they were
called teacakes. They were often flavoured with nothing more than the finest butter, sometimes
with the addition of a few drops of rose water. Cookies in America were also called by such
names as "jumbles", "plunkets" and "cry babies". As technology improved during the Industrial
Revolution in the 19th century, the price of sugar and flour dropped. Chemical leavening
agents, such as baking soda, became available and a profusion of cookie recipes occurred.
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INTERESTING FACTS ON THE ORIGIN OF OTHER FORMS OF

BISCUITS:
The recipe for oval shaped cookies (that are also known as boudoir biscuits, sponge biscuits,
sponge fingers, Naples biscuits and Savoy biscuits) has changed little in 900 years and dates
back to the house of Savoy in the 11th century France. Peter the Great of Russia seems to
have enjoyed an oval-shaped cookie called "lady fingers" when visiting Louis XV of France.
The macaroon - a small round cookie with crisp crust and a soft interior - seems to have
originated in an Italian monastery in 1792 during the French Revolution. SPRING-uhr-lee,
have been traditional Christmas cookies in Austria and Bavaria for centuries. They are made
from a simple egg, flour and sugar dough and are usually rectangular in shape. These cookies
are made with a leavening agent called ammonium carbonate and baking ammonia. The
inspiration for fortune cookies dates back to the 12th & 13th Centuries, when Chinese soldiers
slipped rice paper messages into moon cakes to help co-ordinate their
defence against,
Mongolian invaders.
BISCUIT INDUSTRY IN INDIA - AN OVERVIEW
Biscuit industry in India in the organized sector produces around 60% of the total production,
the balance 40% being contributed by the unorganized bakeries. The industry consists of two
large scale manufacturers, around 50 medium scale brands and small scale units ranging up to
2500 units in the country. The unorganized sector is estimated to have approximately 30,000
small & tiny bakeries across the country. The annual turnover of the organized sector of the
biscuit manufacturers is Rs. 4,350 crores. In terms of volume biscuit production by the
organized segment in 2001-02 is estimated at 1.30 million tonnes and in 2012-13 it is 1.714
million tonnes. The major Brands of biscuits are - Britannia, Parle Bakeman, Priya Gold, Elite,
Cremica, Dukes, Anupam, Horlicks, Craze, Nezone, besides various regional/State brands.
Biscuit industry which was till then reserved in the SSI Sector, was unreserved in 1997-98, in
accordance with the Govt. Policy, based on the recommendations of the Abid Hussain
Committee. The annual production of biscuit in the organized sector continues to be
predominantly in the small and medium sale sector before and after de-reservation. The annual
production was around 7.4 Lac tonnes in 1997-98 in the next five years, biscuit production
witnessed an annual growth of 10% to 12%, up to 2004-05 and in the year 2012 -13 it is 6.25%
at 17.14 lack tonnes.
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The Union Budget for 2012-13 granted 50% reduction in the rate of Excise Duty on Biscuit
i.e. from 16% to 8%. The Federation's estimate for the current year indicates a growth of
approximately 8% to 9%.Though dereservation resulted in a few MNCs, i.e. Sara Lee,
Kelloggs SmithKline Beecham, Heinz etc entering the biscuit industry in India, most of them,
with the exception of SmithKline Beecham, have ceased production in the country.However,
recent imports from china industries cheaper verities of biscuit, needs to be examined with
cautions, especially in the context of the price as the low margin based domestic industry,
which is operating at 60 % of the total installed capital. Exports of biscuits from India have
been to the extent of 5.5% of the total production. Exports are expected to grow only in the
year 2003-04 and beyond.Biscuit is a hygienically packaged nutritious snack food available at
very competitive prices, volumes and different tastes. According to the NCAER Study, biscuit
is predominantly consumed by people from the lower strata of society, particularly children in
both rural and urban areas with an average monthly income of Rs. 750.00.
Biscuit can he broadly categorized into the following segments:
(Based on productions of 2012-13)
Glucose 44%
Marie 13%
Cream 10%
Crackers 13%
Milk 12%
others 8%.
FBMI (Federation of Biscuit Manufacturers of India) is an association of all the biscuit
manufacturers of India. Major players include Britannia, Parle, ITC, Priyagold, Windsor etc.
In recognition of industry's obligations towards the community, being a part of it, biscuit
manufacturers supply biscuits to the social welfare agencies in all States for the benefit of
school children, senior citizens and other needy sections of the society. FBMI (Federation of
Biscuit Manufacturers of India) Members have always responded positively to our appeal as
also by the Government, to rush truck loads of biscuits to the people affected by earthquakes,
floods, famine etc. These members have also participated in supplying biscuits to the people
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of war ravaged Afghanistan and presently to the Iraqi people, under the aegis of the UN.
As regards the consumption pattern is concerned. surveys and estimates by industry from time
to time indicate the average consumption scenario in the four Zones have been more or less
close to each other, as below:
1.
Northern States: 28%
2.
Southern States: 24%
3.
Western States: 25%
4.
Eastern States: 23%

Consumption of Biscuits
23%
28%
25%
24%
1234
Though India is considered as the third largest producer of Biscuits after USA and China, the
per capita consumption of biscuits in our country is only 2.1 Kg., compared to more than 10
kg in the USA, UK and West European countries and above 4.25 kg in south east Asian
countries, Le. Singapore, Hong Kong, Thailand, Indonesia etc. China has a per capita
consumption of 1.90 kg, while in the case of Japan it is estimated at 7.5 kg.
In view of the meagre per capita consumption even as penetration of biscuits manufactured by
the organised sector, into rural areas in India, has been very good during the last 10 years, as
also in the metro and other cities, small towns etc. However, in spite of this, the industry has
not been able to utilize about half of their installed capacities.
Biscuit is a comparatively low margin food product in the PMCG (Packaged Mass
Consumption Goods) sector. The commodity is also price sensitive, as a consequence of
which, even when the Excise Duty was doubled on biscuits in 2000-01 biscuit manufacturers,
including the major brands, were not able hike MRPs to the extent of the steep increase in the
Duty. Taxation, both Central Excise Duty as also State Sales Tax, other miscellaneous levies
i.e. turnover tax, local area tax, mandi taxes, purchase tax, Octroi etc., has been a major
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deterrent in the growth of the biscuit industry. The CII Study Report has identified Biscuit as
one of the products that should treated as "Merit Good for the purpose of liberal tax policy
both by the Centre and States.Besides lack of technology up gradation in manufacturing,
packaging etc has also been a factor affecting our industry, along with inadequate financial
credit and support particularly for the medium and small scale biscuit units.
On the other hand, the Government of India has identified food processing industries as a
priority area to be encouraged for growth and development and created the Ministry of Food
Processing Industries (which was till then a Dept in the Ministry of Agriculture), headed by
an Ministry of State with Independent charge.Biscuit manufacturing as well as other bakery
products like Bread etc are agro based industries, with the major inputs - wheat flour/atta
sugar, milk vanaspati/vegetable oil etc all being agriculture produces.Industries such as
Biscuit are also languishing as they are not able to achieve their potentials for higher
production, in the absence of the concrete food Processing Industry Policy. FBMI in close
coordination with other organizations and apex Chambers, initiated to urge the Govt of India
to formulate a comprehensive Policy Document, for smooth growth and harmonious
development of the industry. The Food Processing Industry Policy, which has been evolved as
a result of various workshops, deliberations and representations by a large cross section of
food processing industries, is yet to be finalized. It is hoped that the Ministry of Food
Processing Industries, GOI would initiate action for implementation of the Policy
expeditiously.
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Industry Framework
Explanation:
The above framework of biscuit industry shows that consumer generate demand of biscuits
through four factors that is brand recall, quality of biscuits, nutrition contents and price of the
biscuits. They deliver the flow of money to manufacturers to satisfy their above demand.
Manufacturer produces the biscuit by keeping in mind the demand of consumers. Then the flow
of the biscuits (goods) reach to the market through three factors i.e. distribution, factory location
and market knowledge. In the final stage goods reach to the final consumer.
Biscuit Industry life cycle:
Life cycle models are not just a phenomenon of the life sciences. Industries experience a similar
cycle of life. Just as a person is born, grows, matures, and eventually experiences decline and
ultimately death, so too do industries. The stages are the same for all industries, yet industries
cycle through the stages in various lengths of time. Even within the same industry, various firms
may be at different life cycle stages. Strategies of a firm as well as of competitors vary depending
on the stage of the life cycle. Some industries even find new uses for declining products, thus
extending the life cycle. Others send products abroad in hopes of extending their life. The growth
of an industry's sales over time is used to chart the life cycle. The distinct stages of an industry life
cycle are: introduction, growth, maturity, and decline. Sales typically begin slowly at the
introduction phase, and then take off rapidly during the growth phase. After levelling out at
maturity, sales then begin a gradual decline. In contrast, profits generally continue to increase
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throughout the life cycle, as companies in an industry take advantage of expertise and economies
of scale and scope to reduce unit costs over time. The marketing mix decisions in the decline
phase will depend on the selected strategy. For example, the product may be changed if it is being
rejuvenated, or left
unchanged
if it
is being harvested or liquidated. The price may be
maintained if the product is harvested, or reduced drastically if liquidated. If we see the overall
biscuit industry of India in the life cycle stage we find that it is in the Growth stage because it is
growing at the rate of 15 to 17% every year. It is well established industry in India. It has a very
large number of players in the organized as well as many players in unorganized sector. It is also
well established in local areas of all the parts of the country. It has also acquired a very large
amount of potential sales of biscuit in the country. Biscuit is such product which is highly
consumed by people of all age. The industry is facing good competition in the country. Four
major players of the industry i.e. Parle, Britannia, Sunfeast and PriyaGold are fighting hard to
acquire market share of the industry. And if we see the particular brands of biscuits than they are
in different stages of life cycle. For example the Parles Parle G, Parle Monaco and Krackjack is
at its Maturity stage by capturing most of Indias market. But on the other hand its biscuits like
Parle Hide and Seek and Parle Hide and Seek Milano are in the growth and introduction stage
respectively.
Biscuit Making Process
MIXING: This is a process where all ingredients are put together in right proportion for dough
formation. These ingredients are then fed into Mixers where mixing is done and dough is
prepared for moulding/cutting .Major ingredients are flour, fat, sugar and others
as per the product one would like to have.
MOULDING: In this section we laminate the dough into sheet, which then passes down to
gauge rollers, and sheet thickness is achieved for moulder/cutter. Here we have a cutter or
moulder as per the variety where one gets the shape and sizes of biscuits.
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BAKING: This is the area where we pass these moulded wet biscuit into baking oven. The
biscuits are baked on desired temperatures. Various type of heating are available now days as
per the convenience and cost. Different type ovens are available.
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History of Parle Company

In 1929 a small company by the name of Parle products emerged in British dominated India.
The intent was to spread joy and cheer to children and adults alike, all over the country
with its sweets and candies. The company knew that it wouldnt be an easy task, but they
decided to take the brave step. A small factory was set up in the suburbs of Mumbai, to
manufacture sweets and toffees. A decade later it was upgraded to manufacture biscuits as
well. Since then, the Parle name has grown in all directions, won international fame and has
been sweetening people's lives all over India and abroad.
In confectionery, they have a range of toffees and hard-boiled candies available in
chocolate, mint, cola, and tropical fruit flavors. Some of these are double layered toffees
and center filled candies packed in rolls or pillow packs, or have single or double twist
wrapping.
Almost all of their products are market leaders in their category and as recognition of their
quality, have won Gold, Silver and Bronze Monde Selection medals since 1971. The
immense popularity of Parle products in India was always a challenge to our production
capacity. Now, using more modern techniques for capacity expansion, they have begun
spreading their wings and are going global. Parle biscuits and confectionaries are fast
gaining acceptance in international markets, such as, Middle East, Africa, South East Asia
and the more sophisticated economies like U.S.A., UK, Canada, Australia and New
Zealand now relish Parle products.
As part of the efforts towards a larger share of the global market, Parle has initiated
the process of getting ISO 9000 certification. The Parle name symbolizes quality, health
and great taste. And yet, they know that constantly innovating and catering to new tastes
have built this reputation. This can be seen from the success of its new brands such as Hide
& Seek, Mango bite etc. Today, the Parle brands have found their way into the hearts and
homes of people all over India & abroad. The Parle Biscuit brands, such as, Parle-G,
Monaco, Krackjack, Marie Choice, Hide & Seek and confectionery brands, such as,
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Melody, Poppins, Rolacola, Mango bite enjoy a strong imagery and appeal amongst
consumers across the world.
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PARLE G THE EVOLUTION
It has been a strong household name across India. The great taste, high nutrition, and the
international quality, makes Parle-g a winner. No wonder, its the undisputed leader in the
biscuit category for decades. It is consumed by people of all ages, from the rich to the poor,
living in cities & in villages. While some have it for breakfast, for others it is a complete
whole some meal. For some its the best accompaniment for chai, while for some its a way of
getting charged whenever they are low on energy. Because of this, Parle-G is the worlds
largest selling brand of biscuits. Launched in the year 1939, it was one of the first brands of
Parle products. It was called Parle Glucose Biscuits mainly to cute that it was a glucose
biscuit. It was manufactured at the Mumbai factory, Vile Parle and sold in units of half and
quarter pound packs.The incredible demand led Parle to introduce the brand in special
branded packs and in larger festive tin packs. By the year 1949, Parle Glucose biscuits were
available not just in Mumbai but also across the state. It was also sold in parts of North India.
The early 50s produced over 150 tons of biscuits produced in the Mumbai factory. Looking at
the success of Parle-G, a lot of other me-too brands Mumbai factory. Looking at the success of
Parle-G, a lot of other me-too brands were introduced in the market and these brands had
names that were similar to Parle Glucose Biscuits so that if not by anything else, the
consumer would err in picking the brand. This forced Parle to change the name from Parle
Glucose Biscuits to Parle-G.
Originally packed in the wax paper pack, today it is available in a contemporary, premium BOPP pack
with attractive side fins. The new airtight pack helps to keep the biscuits fresh and tastier for a longer
period. Parle-G was the only biscuit brand that was always in short supply. It was heading towards
becoming an all-time great brand of biscuit. Parle-G being started advertised in the 80s. It was
advertised mainly through press ads. The communication spoke about the basic benefits of energy and
nutrition. In 1989, Parle-G its released its Dadaji commercial, which went on to become one of the
most popular commercial for Parle-G. The commercial was run for a period of 6years. Parle-G grew
bigger by the minute. In the year 1997, Parle-G sponsored the tale-serial of the Indian superhero,
Shaktimaan that went on to become a huge success. The personality of the superhero matched the
overall superb benefits of the brand. Parle extended this association with Shaktimaan and gave away a
lot of merchandise of Shaktimaan, which was supported by POS and press communication.
The children just could not get enough of Parle-G and Shaktimaan. In the year 2002,
it was decided to bring the brand to the child who is a major consumer. A national level
promo Parle-G Mera Sapna Sach Hoga was run for a period of 6 months. The promo
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was all about fulfilling the dreams of children. There were over 5 lakhs responses and of
that, over 300 dreams were fulfilled. Dreams that were fulfilled ranged from trips to
Disneyland at Paris & Singapore; free ride on a chartered plane; 20 scholarships worth Rs
50,000; a special coaching etc. The year 2002 will go down as a special year in Parle-Gs
advertising history. A year that saw the birth of G-Man a new ambassador for Parle-G.
Not just a hero but also a superhero that saves the entire world, especially children from all
the evil forces. A campaign that is not just new to the audiences but one that involves a
completely new way of execution that is loved by children all over the world-Animation. To
make the brand much more interesting and exciting with children, it was decided to launch a
premium version of Parle-G called Parle-G Magix in the year2002. ParleG Magix is
available in two tastes. The year 2002 also witnessed the launch of Parle-G Milk Shakti,
which was the nourishing combination of milk and honey, especially launched for the
southern market. Growth and development of the organization over the years, Parle has
grown to become a multi-million US Dollar company. Today, Parle enjoys a 40% share of
the total biscuit market and a 15% share of the total confectionary market, in India.
The Parle Biscuit brands, such as, Parle-G, Monaco and Krackjack and
confectionery brands, such as, Melody, Poppins, Mango bite and Kismi, enjoy a strong
imagery and appeal amongst consumers. Then the Parle representatives includes the
production officer and the operations head made students exposed to the production unit
followed by the manufacturing unit and packaging. The extensive distribution network, built
over the years, is a major strength for Parle Products. Parle biscuits & Sweets are available
to consumers, even in the most remote places and in the smallest of villages with a
population of just 500.The Parle marketing philosophy emphasizes catering to the masses.
Most Parle offerings are in the low & mid-range price segments. This is based on our
cultivated understanding of the Indian consumer psyche. The value-for-money positioning
helps generate large sales volumes for the products.
However, Parle Products also manufactures a variety of premium products for the
up- market, urban consumers. And in this way, caters a range of products to a variety of
consumers. In nutshell, the Parle name conjures up fond memories across the length and
breadth of the country.
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About Bhuj Plant:
The earth quack of 26th January 2001 had shot up Kachchh badly. For redevelopment of
Kachchh, it was desirable to invite big industries to generate industrial development and
possibilities of employment. Mr. Amul Chauhan, the director of the Parle Products Pvt. Ltd.
Had get idea of starting a new manufacturing plant in Kachchh.
This plant was started in 2003. Parle company has 10 mother unites of production and this
unit is one of them. Parle Bhuj is situated 12 kms from Bhuj on Bhuj-Gandhidham State
highway, Campus is surrounded by farms, totally pollution free environment. Mundra Port &
Kandla ports are in the range of 56 to 70 kms. Plant is designed in such a way that material
follows one path from Raw material Input to Final product and it is totally atomized process
for biscuit manufacturing starting from Raw material Input to Finished product. In Bhuj plant
there are two major plants. One for glucose biscuit and other for Monaco biscuit. Daily 20 to
25 trucks of capacity 9 tone biscuits are dispatched from the unit. Monthly 40 to 50 trucks of
printing material are dispatched to Mumbai.
Vision:
To be the leaders in our business, we will stand apart from the competition by being the
first in the market to innovate.
Mission:
We will be the leaders in our business by maintaining high quality, introducing new and
innovative product, reaching every part of India, remaining custom, centric, constant by
upgrading our knowledge & skill.
ORGANIZATION STRUCTURE
An organizational structure defines how activities such as task allocation, coordination and
supervision are directed towards the achievement of organizational aims. It can also be
considered as the viewing glass or perspective through which individuals see their
organization and its environment. Organization structure is teamwork of the formal
relationship that has been established. The purpose of the structure is to assist in regulating
and directing the efforts of an organization so that they are co-ordinate and consistent with
organization.
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Organization structure of the company shows the interrelationship between
employer and employee or vice- versa. It shows a clear cut line of authority, responsibility
and accountability. Among the various types of organization structure Parle has adopted
vertical management structure. An organization can be structured in many different ways,
depending on their objectives. The structure of an organization will determine the modes in
which it operates and performs. Organizational structure allows the expressed allocation of
responsibilities for different functions and processes to different entities
as
such
the branch, department, workgroup and individual. Organizational structure affects
organizational action in two big ways. First, it provides the foundation on which standard
operating procedures and routines rest. Second, it determines which individuals get to
participate in which decision-making processes, and thus to what extent their views shape
the organizations actions.
Director
GM
Unit Head
Deputy Manager
Assistant Manager
Executive
Officer
Assistant Officer
Worker
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CHART OF DEPARTMENTS
Mr. D.K. Pundir
(Manager Operation)
AccountsEngineering
HRDPurchase
Production
Accounts
Excise
Stores
BSRQ&A
Flour Handling
Corrugation
Mechenical
Electrical
IT
Mixing
Rotary
Oven
Packing
PQS
CSR
Security
Canteen
Medical
Printing
5S WORK PLACE MANAGEMENT

5-s refers to the work place management which is fully implemented in company.
Various committees and group are formed to make the process smoother.
1S SEIRI SEGREGATION
Organization has to sort out unnecessary item in the work place and apply
stratification management to discard them. Items that need to be discarded must be
discarded in such a way that this will not harmful to society, environment, and even
animals. Use red tag for unnecessary items and yellow tags for the items, which are extra
and should be sent to stores.
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2S SERTON - NEATNESS
Put the thing in decided marked place and put label on each item. Arrangement of
item should be in such a way that it can be picked easily for use. During storage of any
item its height, weight, size, shape, safety, etc. should be kept in mind.
3S SEISO CLEANING
Here cleaning is in the form of inspection. When they are doing cleaning, they are
inspecting simultaneously. Clean your work place completely so that there should not be
any dust on floor, walls, windows, desk, table, machinery etc. Cleaning should be done in
Macro first and then in micro level for individual items.
4S SEIKETSU STANDARDIZATION
Here again they have to think as why this had become dirty. What is the system of
cleaning, can we develop new cleaning equipment or change the equipment / way of
cleaning, and can we arrest the source by which area has become dirty. All this will give
some solution through Brain storming. Try to find out good solutions and standardize the
system. Apply visual Management for easy to follow the system.
5S SHITSUKE - DISCIPLINE
This means whatever system we are having or developed by us under 4-S to be
followed in such a way that, standard practices become a part of our life. This will help to
maintain high level of work place organization at all the time.
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CHAPTER II
MEANING OF AUDITING
The word audit is derived from the Latin word audire which means to hear. It is an important
tool of management. It is concerned with making an analytical and critical analysis of the
books of accounts, checking and verification of evidence in support of entries appearing in
the books of accounts, and ascertaining the authenticity of the financial statements. It is also
concerned with the examination of accounting data to determine the extent of an audit
examination is too made on the basis of evidential document such as invoice, money receipts
and other records by the authorized representative of the client. Auditor has used to send for
the accountants and hear whatever they had to say in connection with the accounts. The
auditor has to look into the facts behind figures and he must certify their accuracy. Auditing is
to ascertain the balance sheet and profit and loss account that they show a true and fair view
of the financial state of affairs of a concern. The Institute of Charted Accountants of India has
issued a number of statements of standard auditing practices and accounting standards for
guidance of Auditor of India.
DEFINITION OF AUDITING
According to DICKSEE, An audit may be said to be such an examination of the books,
accounts and vouchers of a business, as will enable the auditor to satisfy himself that the
balance sheet is properly drawn up, so as to exhibit a true and fair value of the state of the
affairs of the business, whether the profit and loss account gives a true and fair value of the
profit and loss for the financial year. According to the best of his information and
explanations given to him and as shown by the books, and if not, in what respect he is not
satisfy.
Origin of Auditing
Auditing has its origin in the necessity in the development of some system to put a check on
the persons whose duties were to record receipts and disbursements of money on the behalf
of owners. In the ancient days auditing was confined to public accounts only. With the
development of trade and commerce, the need for recording transactions was felt by
businessman. This had necessitated the development of some system of check upon the
persons who recorded such transactions on the behalf of businessman
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RELATION OF ACCOUNTING AND AUDITING
Both accounting and auditing are closely related with each other as auditing reviews the
financial statements which are nothing but a result of the overall accounting process. It
naturally calls on the part of the auditor to have a thorough and sound knowledge of GAAP
before he can review the financial statements.
In fact, auditing as a discipline is also closely related with various other disciplines as there is
lot of linkages in the work which is done by an auditor in his day-to-day activities. To begin
with, it may be noted that the discipline of auditing itself is a logical construct and everything
done in auditing must be bound by the rules of logic. The knowledge of language is also
considered essential in the field of auditing as the auditor shall be required to communicate,
both in writing as well as orally, in day-to-day work .For example, if the business has really
earned a profit but because of wrong accounting, the annual accounts show a loss, the
proprietor may take the decision to sell the business at a loss. Thus from the point of view of
the management itself, authenticity of financial statements is essential. It is more essential for
those who have invested their money in the business but cannot take part in its management,
for example, shareholders in a company, such persons certainly need an assurance that the
annual statements of accounts sent to them are fully reliable. It is auditing which ensures that
the accounting statements are authentic. In todays economic environment, information and
accountability have assumed a larger role than ever before. As a result, the independent audit
of an entitys financial statements is a vital service to investors, creditors, and other
participants in economic exchange.
Aspects to be covered in Audit
The principal aspects to be covered in an audit concerning final statements of
accounts are as follows: An examination of the system of accounting and integral controls to ascertain whether
it is appropriate for the business and helps in properly recording all transactions.
Reviewing the systems and procedures to find out whether they are adequate and
comprehensive.
Check the arithmetical accuracy of books of accounts by the verification of postings,
balances etc.
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Functions of Auditing
Important functions of auditing can be summed up as follows:
Reviewing systems and procedures of business.
Examining documentary evidence to establish the accuracy of recorded transactions.
Reviewing the system of accounting and Internal Controls.
To verify the valuation and existence of assets.
To examine the mathematical accuracy of accounting statements.
To see whether the statutory requirements have been complied with.
Reporting as to what extent, accounts exhibit true and fairness.
To make recommendations for improvement in Internal Control and Accounting
System.
To verify the distinction between capital and revenue items.
Principles governing an Audit
Principle of Independence The audit work should be independent from accountancy and the
auditor should examine the books of accounts indifferently and independently. He should be
free from any such interests which may affect his integrity and objectivity.
Principle of Objectivity The audit work should be based on evidence and should be done
impartially and in an unbiased way.
Principle of Materiality The principle of materiality is and has always been fundamental to
the whole process of counting. An auditor has also to be quiet concerned regarding the
concept of materiality. The auditor has to analyze and take decisions regarding various items
whether they are material or not during the course of audit. In case the auditor finds that an
Page 22

item is quiet material in nature he would have to give careful consideration to its checking
and would care for more evidence in support.
LIMITATIONS OF AUDIT
At this stage, it must be clear that the objective of an audit of financial statements is to enable
an auditor to express an opinion on such financial statements. In fact, it is the auditors
opinion which helps determination of the true and fair view of the financial position and
operating results of an enterprise. It is very significant to note that the AAS-2 makes it a
subtle point that such an opinion expressed by the auditor is neither an assurance as to the
future viability of the enterprise nor the efficiency or effectiveness with which management
has conducted affairs of the enterprise. Further, the process of auditing is such that it suffers
from certain inherent limitations, i.e., the limitation which cannot be overcome irrespective of
the nature and extent of audit procedures. It is very important to understand these inherent
limitations of an audit since understanding of the same would only provide clarity as to the
overall objectives of an audit. The inherent limitations are :- (i) First of all, auditors work
involves exercise of judgment, for example, in deciding the extent of audit procedures and in
assessing the reasonableness of the judgment and estimates made by the management in
preparing the financial statements. Further much of the evidence available to the auditor can
enable him to draw only reasonable conclusions there from. The audit evidence obtained by
an auditor is generally persuasive in nature rather than conclusive in nature. Because of these
factors, the auditor can only express an opinion. Therefore, absolute certainty in auditing is
rarely attainable. There is also likelihood that some material misstatements of the financial
information resulting from fraud or error, if either exists, may not be detected
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MEANING OF AUDITOR
The person conducting audit is known as the Auditor;he makes a report to the person
appointing him after due examination of the accounting records and the accounting statement
in the form of an opinion on the financial statements. The opinion that he is called upon to
express is whether the financial statement reflect a true and fair view. Auditing, especially of
companies and for public purposes has become the preserve of persons having recognized
professional training and qualification. In India, under the authority of the Companies Act,
1956, only Chartered Accountants are professionally qualified for the audit of the accounts of
companies... Chartered Accountants are in a position to undertake auditing of almost any
accounting aspect, unlike cost accountants whose sphere has been restricted to audit of the
cost accounting records and statements. It is C.A. or a firm whose all partners are Chartered
Accountants who act as auditors in India.
TYPES OF AUDITORS:Functional Classification of Auditors : Internal vs. External Auditors
External auditors are the persons who practice the profession of accountancy having qualified
in the professional examination and are external vis--vis the organizational which they audit
the accounts. The Internal auditors, on the other hand, may also be professionally qualified
and are internal vis--vis the organization in which they are appointed to perform specific
work.
Powers of Auditors The rights of the company auditor can not be limited or abridged in any
way. Any resolution limiting the powers of the auditor or any such provision in articles of
association will be void. Following are powers/rights of auditors:Access to books and vouchers Every auditor of company shall have a right to access at all
times to the books and accounts and vouchers, whether kept at head office of company or
elsewhere. Auditor is not required to wait for the closing of accounts for conducting the audit.
The words all times means only the normal business hours. All types of documents,
agreements, correspondences, financial books, statistical books, memorandum books, etc are
covered. Right to obtain information and explanations Auditor may require the officers of the
company to provide such information as he may think necessary for the permanence of his
duties. It will be obligatory for the officers of the company to furnish without delay the
relevant information to the auditors.
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CHAPTER III
Main activity of accounting department of parle company
As a body cannot run without blood a company cannot run without finance. Finance is the
life cycle of a company. This is the department where the cash is maintained. The entire
success of a company depends upon how well account department is managed by a
company... Main activity of the account department include is as under:-
1) PURCHASE DEPARTMENT
Purchasing is the formal process of buying Goods and Services. The Purchasing
Process can vary from one organization to another, but there are some common key
elements. The Process usually starts with a Demand or requirements this could be for a
physical part (inventory) or a service. A requisition is generated, which details the
requirements (in some cases providing a requirements specification) which actions the
procurement department. A request for Proposal (RFP) or Request for Quotation (RFQ) is
then raised. Suppliers send their quotations in response to the RFQ, and a review is
undertaken where the best offer (typically based on price, availability and quality) is given
the purchase order.
Purchase orders (PO) can be of various types, including:
Standard a onetime buy;
Planned an agreement on a specific item at an approximate date
Blanket an agreement on specific terms and conditions, date and quantity and
amount are not specified.
Purchase orders are normally accompanied by Terms and Conditions which form the
contractual agreement of the Transaction. The Supplier then delivers the products/service
and the customer records the delivery (in some cases this goes through a Goods Inspection
Process.) An invoice sent by the supplier which is cross checked with the Purchase Order
and Document which specifying that the goods received.
Page 25

IN PARLE
In Administration, Purchase Department is covered which is associated with the Purchase
of all the required materials for the Company. Purchase Department have to deal with the
purchase of the requirement. There are requirement of all type of materials. From raw
material to the stationary and engineering items.
Generally major two decision of purchase are taken by this department.
1. Raw material
Mr. Hitendrasinh Jadeja
2. Service and operation
Ms. Beena Rathod
PROCESS OF MATERIAL PURCHASE:

When employee of any department has a need of any type of goods first of all they
asks from the stores whether that particular goods is available or not.
If the goods are not available in the stores then the particular Department has to fill
up the indent which is the slip of the demand for the particular product. If the item
required is capital item called capex. Here they have given codes to each item as
well as a list of approved suppliers for all the item is provided to all the units.
As per this indent purchase department have to purchase the goods after comparing
the price of the different quotation of different companies and the quotation having
the low rate and good quality will be passed by the operation manager.
Next Step after the approval of quotation is making the P.O. i.e. Purchase order which
contains the party name. Material code & Description. Decided rate, Date of the
Order, lead time for the supply of the material etc.
This P.O. is having two copies and having the sign of the manager. From which one
will be sent to the supplier along with the advance Payment if any 2nd copy is sent to
Purchase Department. As per PO Supply will be made according to the Description
in PO within given time lag along with the Invoice.
This bill will be passed to the accounts department and the amount will be checked.
If the amount is according to the Purchase order ( When Purchase order is sent to the
Party the amount is fixed) the Payment will be made, But if there is a difference
between the Rate in bill and in the Po the Performa will be passed and as per the rate
of Performa payment will be made.
Page 26

2) BILL BOOKING SYSTEM
Main Purpose of bill passing is to enter the amount of purchase bill and verify the
quantity of materials whether it is as per bill or not. There are three types of bill:
Coded
Manual
Coded items:
Raw materials are considered as coded items all having their own codes and when
entries are made particular coded is used to make the transaction smooth.
Manual:
Payment for servicing or payment for the amount less than Rs 500 is made with the authorization of
the Head of Departments with supporting vouchers/documents.
1) BANK PAYMENT
After bill passing, all data are transferred to cash department through system. If
there is any change between bill and purchase order amount then Performa (Payment
Advice) will be made and finally payment will be made as per Performa.
Account department keeps one copy of Payment advice and other is attached with
the Cheque so the party can know against, which bill company makes the payment. The
Cheque is sent to the party through courier after making an entry in register at Reception.
At the end of the month reconciliation of bank statement is done. Main purpose is
to verify the amount of Cheque debited and credited. To know changes and income from
various sources.
2) CASH PAYMENTS & CASH RECEIPTS
Cash Payments are made for the miscellaneous expenses like petrol traveling.
Fridge ticket expenses of the application.
Cash Payment for IOU is also made for employee etc. without any interest charges
against which bill can also be issued. Cash receipt are made for the cash sale of 1 kg
biscuits to local stores and one copy of cash receipt are kept for records cash department
also handles scrap s ales and Sales of polybags.
Page 27

3) MAINTAIN RECORDS
At the month ending all records will be sent for binding and are kept in their record room.
Company is having all the records data month and year wise.
4) RECONCILIATION OF BANK STATEMENT

A bank reconciliation statement is a statement prepared by organizations to
reconcile the balance of cash at bank in a companys own records with the bank statement
on a particular date. This statement is the most common tool used by organization for
reconciling the balance as per books of company with the bank statement and is made at the
end of the every month. The main objective of reconciliation is to ascertain if the
discrepancy is due to error rather than timing .
The difference between the two records on a given date may arise because of the
following:-
1)
2)
3)
4)
5)
6)
7)
Cheque drawn but not yet presented to the bank

Cheque received but not yet deposited in the bank
Interest Credited and not recorded in the organization books
Bank charges debited but not recorded in the organizations book
Balance of book
Balance of Bank statement
Difference
- (+) Add
- (-) Less
- (+) Add
- (-) Less
0.00
Bank reconciliation statement process is being outsourced to professional

accounting firms by large organizations. This helps them have an accurate view and also
ensure that the companys bookkeeping is good. Accounting firms make monthly
reconciliation statements for clients and help them determine any discrepancy.
Page 28

Advantages:
Faster processing
Requirement of less manpower
Easy identification of errors
3) LEDGER SCRUTINY
Ledger scrutiny is the overall assessment of accounts of a concern. It is a process
initiated with a view to ensure true and fair concept. Any irregularity (Whether it may be
error or a statutorily noncompliance) may be bought into light. Just by scrolling down the
transaction that has occurred in an account with adequate narrations, could be very helpful in
the process of scrutiny for identifying whether accounts reflect true and fair view. Before
resorting to ledger scrutiny, the auditor should ascertain the extent to which it can be
adopted. It can detail or restricted to some class of accounts.
Ledger scrutiny reveals undue pattern of accounts, if any For example an amount
outstanding for more than 2 years is suddenly paid; it may create suspicion whether it is
actually paid. First of all opening balance of all the accounts will be checked from previous
finalized trial balance.
In Parle:
In order to maintain right record is scrutinize the ledger of partys timely. So if any
mistake in ledger can be rectified.
4) PETTY CASH
Petty Cash is a small amount of discretionary funds in the form of cash used for
expenditures where it is not sensible to make the disbursement by check, because of the
inconvenience and cost of writing, signing and then cashing the check. The most common
way of accounting expenditures is to use the imp rest system. The initial fund would be
created by issuing a check for the desired amount. Usually $100 would be sufficient for
most small business needs. The entry for this initial fund would be to debit Petty cash and
credit cash.
As expenditure is made, the custodian of the fund will reimburse employees and secure a
petty cash voucher in return. At any given time the total of cash on hand plus reimbursed
Page 29

voucher must equal the original fund. When the fund gets low the custodian submits the
vouchers for reimbursement. Assuming the vouchers must equal the original fund In Parle
In particular day how much amount of cash is spend and under that head is
maintained in Cash department and they maintain daily base record. Petty cash is one of the
most important day-to-day activities the help of which one can directly view the cost
increment or decrement.
5) TAX DEDUCTED AT SOURCE
Tax deducted at source is one of the modes of collecting Income-tax from the
addresses in India. In tax deducted at source under use rules & regulation. In follow that
type statement under two part about company & personal than after select one type. If select
any on then after apply condition if no/invalid pan card. And show that type column and
take maximum per.
In any of company there remain some provisions for the payment of taxes. Such
payments are compulsory for a company to pay. This department handles the entire working
of TDS. What amount of tax is to be paid to the government deposited in prescribed time
limit?
6) EXCISE DUTY, SERVICE TAX & VAT/CST

Central excise duty is an indirect tax which is charged on such goods that are
manufactured in India and are meant for domestic consumption. The taxable fact is
manufacture and the liability of central excise duty arises as soon as the goods are
manufactured. The tax is on manufacturing, it is paid by a manufacturer, which is then
passed on to the customer.
In Parle
As per the government rule company has to pay 6% basic excise duty on biscuits,
4% on corrugated boxes and 10% on plastic Wrapper at the time of removal. But the Parle
company is not paying excise duty on biscuits because as per new budget biscuits are
exempted as MRP is less than 100 Rs. per Kg. Earlier, the plant was established in BHUJ to
avail the benefit of excise duty exemption for 5 years and has availed the benefit of excise
duty on 09.10.2008. But now onwards unit is paying excise duty only on plastic wrappers
and C-boxes as biscuits are exempted from excise.
Page 30

SERVICE TAX
Company is paying 10.3% service tax on monthly basis as they are covered under
GTA (Goods Transport Agency) Service.
VAT/CST
Vat is indirect tax on the consumption of the goods, paid by its original producers
upon the change in goods or upon the transfer of the goods to its ultimate consumers. It is
based on the value of goods, added by the transferor and not just a profit.
In Parle
Company is paying VAT/CST on biscuits, Snacks. Confectioneries & Scraps e.g.
15% on biscuits & snacks (12.5% basic + 2.5 additional tax), 5% on Confectionaries &
Scraps (4% basic
+1% additional tax).
CST % for each and every product is 2% against form C.
7) COSTING
Costing means expenses incurred at the time of production. Cost sheet are being
regularly prepared by the company. This based on the details given by the production
department.
There is income of the scrap sale of materials that is deducted from total cost.
At the time of calculating closing stock. The stock of the production, stock of floor
and the stock of stores are considered. At the end of the month production department gives
details and it is recorded in the cost sheet. Cost sheet is making as not only as per products
but also as per packing size.
8) BALANCE CONFIRMATION
Company checks all companys ledger account check then after company write a
letter against other party about balance confirmation and on a companys letter paid and
send to a letter with ledger copy.
Then after other party match ledger and match balance so, party will send a reply otherwise
Page 31

not match amount so, party will send his ledger copy and solve his problem this is main
purpose of balance conformation letter.
9) TRIAL BALANCE CONFIRMATION
A trial balance is a list of all the nominal ledger (general ledger) accounts contained
in the ledger of a business. This list will contain name of the nominal ledger account and the
value of that nominal ledger account. The value of the nominal ledger will hold either a debit
balance value or a credit value balance. The debit balance values will be listed in the debit
column of the trial balance and the credit value balance will be listed in the credit column.
The profit and loss statement and balance sheet and other financial reports can then be
produced using the ledger account listed on the trial balance.
Parle Company maintain at the end of financial year. Company verifies and check
all the ledger balance of the other party and pass necessary provision and correct the trial
balance on which balance sheet is prepared.
10) BUDGETING
Account Department prepares budget for the several activities like maintenance of
Canteen, for production etc. And Account Department makes a plan and prepares a
proposal of the requirement of fund, sends it to the Corporate Office.
Page 32
Material request form
Material Not available
Material Available
PURCHASING PROCESS
Basic Price
Find Resources
Taxation Per.
Quotation
Qty.
Quotation Comparison
Purchase Order (PO)
Quality Perfection
Bargaining
Gate entry
Delivery Address
Quality Approve
Payment Terms
Page 33

Receiving of Material
Q.A.
Accept
Reject
GRN
Qty.
P.O.
Account Department
GRN no.
Due date Payment
Date receive
Payment Voucher
Ch Qty/Accept
Ledger Reconditions
Balance Conformation
Cash Payment
Manual
Bank Payment
Coded
Capex
Page 34
BASIC PRINCIPLES OF AUDIT

AAS-1 describes the basic principles, which govern the auditor's professional
responsibilities and which should be complied with whenever an audit is carried out.
These are:1. Integrity, objectivity and independence:
The auditor should be straightforward, honest and sincere in his approach to his
professional work. He must be fair and must not allow prejudice or bias to override his
objectivity. He should maintain an impartial attitude and appear to be free of any interest
which might be regarded. Whatever its actual effect, as being incompatible with integrity
and objectivity.
2. Confidentiality:
The auditor should respect the confidentiality of information acquired in the course of his work and
should not disclose any such information to a third party without specific authority or unless there is
legal or professional duty to disclose. It is remarked that an auditor should keep his ears and eyes open
but his mouth shut.
1. Skill and competence:

The audit should be performed and the report prepared with due professional care by
persons who have adequate training, experience and competence. This can be acquired
through a combination of general education, technical knowledge obtained through study and
formal courses concluded by a qualifying examination recognized for this purpose and
practical experience under proper supervision.
2. Work performed by others:
When the auditor delegates work to assistant or uses work performed by other
auditors or experts, he will continue to be responsible for forming and expressing his
opinion on the financial information. At the same time he is entitled to rely on work
Page 35

performed by others provided he exercises adequate skills and care and is not aware of any
reason to believe that he should not have relied. The auditor should carefully direct,
supervise & review work delegated by assistants. He should obtain reasonable assurance
that work performed by other auditors or experts is adequate for this purpose.
3. Documentation:
The auditor should document matters, which are important in providing evidence
that the audit was carried out in accordance with the basic principles.
4. Planning:
The auditor should plan his work to enable him to conduct an effective audit in an
efficient and timely manner. Plans should be based on knowledge of client's business. They
should be further developed and revised, if required, during the course of audit.
5. Audit evidence:
The auditor should obtain sufficient appropriate audit evidence through the
performance of compliance and substantive test procedure. It will enable him to draw
reasonable conclusions there from on which he has to base his opinion on the financial
information.
6. Accounting system & internal control:
The auditor should gain an understanding of the accounting system and related
internal controls. He should study and evaluate the operation of those internal controls
upon which he wishes to rely in determining the nature, timing and extent of other audit
procedures.
7. Audit conclusions and reporting:
The auditor should review and assess the conclusions drawn from the audit evidence
obtained and from his knowledge of business of the entity as the basis for the expression of
his opinion on the financial information. The audit report should contain a written expression
of opinion of the financial information. It should comply with the legal requirements. In case
of a qualified opinion, adverse opinion or disclaimer of opinion is given or reservation on
any matter is to be made reasons thereof.
Page 36

TEST CHECKING
Examination in Depth means examination of a few selected transactions from thebeginning to the end through the entire flow of the transaction. It involves studying the
recording of transactions the various stages through which they have passed.
Aspects of Verification:
(a) At each stage, relevant records and authorities are examined; it is also judged whether the
person who has | exercised the authority in relation to the transactions is fit to do so in terms
of- the prescribed procedure.
(b) While auditing in depth, the Auditor reviews all the accounting and operational aspects of
the| transaction from the origin to the end. This enables him to have an overall view and
evaluate the procedures through selected transactions.
Example: Audit in depth of transactions relating to purchase of goods involves verification
of the following:
1) Purchase Requisition - pie-printed, pre-numbered and authorized;
2) Invitation of quotations and analysis of the same;
3) Official Purchase Order, sequentially pre-numbered, authorized and placed with
approved suppliers only;
4) Receipt of goods, together with Delivery Challan / Advice Note;
5) Admission of goods to stores after verification of quality, quantity etc.;
6) Entry in Stores Records;
7) Receipt of Supplier's Invoice and Statement;
8) Approval of Purchase Invoice regarding compliance for specification, quantity and
quality;
9) Entries in Purchases day book;
10) Postings to Purchase Ledger and Purchase Ledger Control Account;
11) Payment of Cheque in settlement of invoice after availing discounts; if any;
12) Entry for payment in Cash / Bank Book;
13) Posting from Cash Book to Ledger and Control Accounts.
Page 37
Test Checking means to select and examine a representative sample from a large
number of similar items.
Test Checking is an accepted auditing procedure wherein instead of checking all

transactions, only a part of it is checked in detail to form an opinion on the whole.
THE AUDITOR CAN SUSPECT FRAUD UNDER THE FOLLOWING

CIRCUMSTANCES:
When vouchers, invoices, Cheque, contracts are missing etc.
When control account does not agree with subsidiary books
When there are greater fluctuation in G.P. and N.P. ratios.
When there is difference between the balance and the confirmation of the balance by
the parties.
When there is difference between the stock as per records and the stock physically
counted.
When the explanation given by the client is not satisfactory.

When there is a overwriting of some figures.
When there is a contradiction in the explanation given by different parties.
VOUCHING
Vouching means the examination of documentary evidence in support of entries to
establish the arithmetic accuracy. When the
auditor checks
the entries
with some
documents it is called vouching. Vouching is the acid test of audit. It tests the truth of the
transaction recorded in the books of accounts. It is an act of examining documentary
evidence in order to ascertain the accuracy and authenticity of the entries in the books of
accounts. According to Dicksee "Vouching consists of comparing entries in the books of
accounts with documentary evidence in support thereof." From the above it becomes clear
that vouching means testing the truth of entries appearing in the primary books of accounts. In
short, vouching means to examine the evidence in support of any transaction or entry
recorded in the books of accounts. Vouching does not merely see that the entries and
transactions are supported by proper documentary evidence. The auditor should be satisfied
Page 38

that they are properly maintained, they are supported by all evidence and they are correctly
recorded in the books of accounts.
VOUCHER
Any documentary evidence supporting the entries in the records is termed as a voucher.
Any document, which supports the entries in the books of accounts and establishes the
arithmetical accuracy, is called a voucher.
THE SPECIAL CONSIDERATIONS TO BE BORNE IN MIND BY THE AUDITOR
IN THE COURSE OF VOUCHING:
1) Date of the voucher
2) The name of the party
3) Tick and audit rubber stamp
4) Authorization by the authorized person
5) Revenue stamp of Re. 1 if it exceeds Rs.5000/6) Transaction relates to business
7) Revenue and capital
8) Amounts in words and figure
9) Account head
10) No assistance of member of clients staff to be taken for checking receipts
11) Not to accept receipted invoice
12) Missing vouchers
13) Important documents
14) Vouching of cash transaction
15) Proper filing
16) Signature of payee
17) Nature of payment
18) Noting in the audit note book
19) Alteration
20) Voucher control number
Page 39
Page 40

ACCOUNTING CONCEPT RELEVANT TO AUDITING
The purpose of this standard is to establish standards on the concept of materiality

and its relationship with audit risk.
The auditor should consider materiality and its relationship with audit risk when
conducting an audit.
MATERIALITY:
Information is material if its misstatement (i.e., omission or erroneous Statement)

could influence the economic decisions of users taken on the Basis of the financial
information.
Materiality depends on the size and Nature of the item, judged in the particular
circumstances of its misstatement. Thus, materiality provides a threshold or cut-off
point rather than being a primary qualitative characteristic which the information
must have if it is to be useful.
The objective of an audit of financial information prepared within a framework of

recognized accounting policies and practices and relevant statutory requirements, if
any, is to enable the auditor to express an opinion on such financial information.
The assessment of what is materiality of professional judgment.
The concept of materiality recognizes that some matters, either individually or in

the aggregate, are relatively important for true and fair presentation of financial
information in conformity at both the overall financial information level and in
relation to individual account balances and classes of transactions. Materiality may
also be influenced by other considerations, such as the legal and regulatory
requirements, non-compliance with which may have a significant bearing on the
financial information, and consideration relating to individual account balances and
relationships. This process may result in different levels of materiality depending on
the matter being audited.
Although the auditor ordinary establishes an acceptable materiality level to detect

quantitatively material misstatements, both the
amount
(quantity) and nature
(quality) of misstatements need to be considered. An example of a qualitative

misstatement would be the inadequate or improper description of an accounting
policy when it is likely that a user of the financial statements
Page 41

INTERNAL AUDIT
Internal auditors are employed by the organizations they audit. They work for government
agencies (federal, state and local); for publicly traded companies; and for non-profit
companies across all industries. The internationally recognized standard setting body for
the profession is the Institute of Internal Auditors - IIA. Thus professional internal auditors
provide independent and objective audit and consulting services focused on evaluating
whether the board of directors, shareholders, stakeholders, and corporate executives have
reasonable assurance that the organization's governance, risk management, and control
processes are designed adequately and function effectively. Internal audit professionals
(Certified Internal Auditors - CIAs) are governed by the international professional
standards and code of conduct of the Institute of Internal Auditors. While internal
auditors are not independent of the companies that employ them, independence and
objectivity are a cornerstone of the IIA professional standards; and are discussed at length
in the standards and the supporting practice guides and practice advisories. Professional
internal auditors are mandated by the IIA standards to be independent of the business
activities they audit. This independence and objectivity are achieved through the
organizational placement and reporting lines of the internal audit department. Internal
auditors of publicly traded companies in the United States are required to report functionally
to the board of directors directly, or a sub-committee of the board of directors (typically the
audit committee), and not to management except for administrative purposes. As described
often in the professional literature for the practice of internal auditing (such as Internal
Auditor, the journal of the IIA), or other similar and generally recognized frameworks for
management control when evaluating an entity's governance and control practices; and
apply COSO's "Enterprise Risk Management-Integrated Framework" or other similar and
generally recognized frameworks for entity-wide risk management when evaluating an
organization's entity-wide risk management practices. Professional internal auditors also
use Control Self- Assessment (CSA) as an effective process for performing their work
Consultant auditors are external personnel contracted by the firm to perform an audit
following the firm's auditing standards. This differs from the external auditor, who follows
their own auditing standards.
Page 42

HISTORY OF INTERNAL AUDITING
The Internal Auditing profession evolved steadily with the progress of management
science after World War II. It is conceptually similar in many ways to financial auditing by
public accounting firms, quality assurance and banking compliance activities. While some
of the audit technique underlying internal auditing is derived from management consulting
and public accounting professions, the theory of internal auditing was conceived primarily
by Lawrence Sawyer (1911-2002), often referred to as "the father of modern internal
auditing", and the current philosophy, theory and practice of modern internal auditing as
defined by the International Professional Practices Framework (IPPF) of the Institute of
Internal Auditors owes much to Sawyer's vision. With the implementation in the United
States of the Sarbanes-Oxley Act of 2002, the profession's exposure and value was
enhanced, as many internal auditors possessed the skills required to help companies meet the
requirements of the law. However, the focus by internal audit departments of publicly traded
companies on SOX related financial policy and procedures derailed progress made by the
profession in the late 20th century toward Larry Sawyer's vision for internal audit.
Beginning in about 2010, the IIA once again began advocating for the broader role internal
auditing should play in the corporate arena, in keeping with the IPPF's philosophy.
INTERNAL AUDIT EXECUTION
1. Establish and communicate the scope and objectives for the audit to appropriate
management.
2. Develop an understanding of the business area under review. This includes
objectives, measurements, and key transaction types. This involves review of
documents and interviews. Flowcharts and narratives may be created if necessary.
3. Describe the key risks facing the business activities within the scope of the audit.
4. Identify management practices in the five components of control used to ensure each
key risk is properly controlled and monitored. Internal Audit Checklist can be a
helpful tool to identify common risks and desired controls in the specific process or
industry being audited.
5. Develop and execute a risk-based sampling and testing approach to determine
whether the most important management controls are operating as intended.
6. Report issues and challenges identified and negotiate action plans with management
to address the problems.
Page 43

INTERNAL AUDIT REPORTS
Internal auditors typically issue reports at the end of each audit that summarize their
findings, recommendations, and any responses or action plans from management. An audit
report may have an executive summary; a body that includes the specific issues or findings
identified and related recommendations or action plans; and appendix information such as
detailed graphs and charts or process information. Each audit finding within the body of the
report may contain five elements, sometimes called the "5 C's":
1. Condition: What is the particular problem identified?
2. Criteria: What is the standard that was not met? The standard may be a company
policy or other benchmark.
3. Cause: Why did the problem occur?
4. Consequence: What is the risk/negative outcome (or opportunity foregone) because
of the finding?
5. Corrective action: What should management do about the finding? What have they
agreed to do and by when?
The recommendations in an internal audit report are designed to help the organization
achieve effective and efficient governance, risk and control processes associated with
operations objectives, financial and management reporting objectives; and legal/regulatory
compliance objectives. Audit findings and recommendations may also relate to particular
assertions about transactions, such as whether the transactions audited were valid or
authorized, completely processed, accurately valued, processed in the correct time period,
and properly disclosed in financial or operational reporting, among other elements. Under
the IIA standards, audit process is the preparation of a balanced report that provides
executives and the board with the opportunity to evaluate and weigh the issues being
reported in the proper context and perspective. In providing perspective, analysis and
workable recommendations for business improvements in critical areas, auditors help the
organization meet its objectives.
STATUTORY AUDIT
Page 44

A legally required review of the accuracy of a company's or governments financial
records. The purpose of a statutory audit is the same as the purpose of any other audit - to
determine whether an organization is providing a fair and accurate representation of its
financial position by examining information such as bank balances, bookkeeping records
and financial transactions.
It is a compulsory audit done by outside agency at least once, at least once, at the
end of the financial year. As per SEBI guidelines public limited companies are required to
have the companies accounts after every three months. Only registered Chartered
Accountant Auditors are authorized to audit the accounts and sign it.
The following are the reason to have statutory auditing:
1. All public limited companies must have their accounts auditing by external auditors.
2. All government departments and Government owned companies must get their
accounts audited from external Government
approved
auditors (usually A.G.
Office).
3. All Government funded organizations, corporations, societies; corporation must get
their accounts audited.
4. All registered societies, which collect donations from public, must get their
accounts audited from external auditors.
5. Any company which intends to borrow money from government or financial
institutions must get their accounts audited. Any other company may be asked to get
their accounts audited from external auditors.
Page 45

DIFFERENCE BETWEEN INTERNAL AUDIT AND
STATUTORY AUDIT
1. Appointment
The management of the organization makes the appointment of an internal auditor. The
statutory auditor is appointed by different authorities. First statutory auditors are appointed
by the shareholders in the annual general meeting.
2. Qualification
Qualifications of the statutory auditor are prescribed in the companies act, 1956.
Essentially a person should be a practicing chartered accountant to be appointed as a
statutory auditor. There are no fixed qualification for the position of an internal auditor.
3. Objects
The main object of the statutory audit is to form an opinion on the financial statement of
the organization auditor has to state that whether the financial statements are showing the
true and fair view of the affairs of the organization or not. The main object of the internal
audit is to detect and prevent the errors and frauds.
4. Scope
The scope of the statutory audit is fixed by the companys act 1956. It cannot be changed
by mutual consent between the auditor and the management of the audited business unit.
The scope of the internal audit is fixed by the mutual consent of the auditor and the
management of the unit under audit.
5. Remuneration
Remuneration of the statutory auditor is fixed by the appointing authority, I e in case of
first auditors, the auditors the directors fix the Remuneration in case of the subsequent
auditors the company in its general meeting fixes the remuneration. In case of internal
auditor the management who appoints him fixes his Remuneration.
Page 46

Parle Audit

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Project on Audit Process of PARLE Company

GROWTH AND PRESENT STATUS OF THE INDUSTRY

The organized sector is valued at above Rs 8000 crores.

The per capita consumption of biscuits in India is 2.0 kg.

Project on Audit Process of PARLE Company

The organized biscuit manufacturing industries annual production:

Cream & Milk.

Also the category has strong regional brands such as

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INTERESTING FACTS ON THE ORIGIN OF OTHER FORMS OF

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Northern States: 28%

Southern States: 24%

Western States: 25%

Eastern States: 23%

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is being harvested or liquidated. The price may be

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History of Parle Company

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the branch, department, workgroup and individual. Organizational structure affects

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5S WORK PLACE MANAGEMENT

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Principles governing an Audit

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Purchase orders (PO) can be of various types, including:

Standard a onetime buy;

Planned an agreement on a specific item at an approximate date

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Mr. Hitendrasinh Jadeja

2. Service and operation

Ms. Beena Rathod

PROCESS OF MATERIAL PURCHASE:

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4) RECONCILIATION OF BANK STATEMENT

Cheque drawn but not yet presented to the bank

Bank reconciliation statement process is being outsourced to professional

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Requirement of less manpower

Easy identification of errors

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6) EXCISE DUTY, SERVICE TAX & VAT/CST

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Material request form

Material Not available