Summer training project report on Internal Audit Functions and its performance of OIL

SUMMER TRAINING PROJECT
REPORT ON

“Internal Audit Functions and its Performance in OIL, Duliajan”
As a partial fulfillment of the requirement for the MBA degree

Under the organizational guidance of:
Mr. M D Gupta
Chief Manager, Internal Audit

Submitted By:
Debashish Phukan

Wilson Kikon

School Of Management Studies (SMS)
NAGALAND UNIVERSITY

DECLARATION

We undersigned hereby declare that the project entitled “Internal Audit
Functions and its Performance in Oil India Limited” is the original piece of
work submitted by us under the guidance of Mr. M D Gupta, Chief Manager
(IA), for the partial fulfillment of the requirement of MBA Degree of “SCHOOL
OF MANAGEMENT STUDIES (SMS), NAGALAND UNIVERSITY” and is
exclusively prepared and conceptualized by us and the findings in this project
report are based on the data collected by us and to the best of our knowledge and
belief this report has not been copied from any research submitted by anyone,
anywhere earlier.

_______________

Debashish Phukan

_______________

Wilson Kikon

School of Management Studies (SMS),
Nagaland University

PREFACE

The MBA is not an end in itself, but a means to an end. It is a degree
designed to give us the ability to develop our career to its fullest potential, at an
accelerated pace. To become a successful manager in this competitive era the first
and foremost task is to have a real life experience about the corporate world. We
are very much fortunate that in our syllabus there is a provision for Summer
Training of eight weeks in the public sector or private sector. We have made our
summer training at Oil India Ltd. (OIL) Head Office, Duliajan, Assam. In OIL we
have been given the necessary training regarding their organization and working
also we have been given the necessary inputs regarding our project work. It is a
splendid experience to work with the professionals. In IOL we have come to know
a lot and I believe those will pave our way during our working in the corporate
world.

I am very much glad to present our project report on “Internal Audit Functions
and its Performance in Oil India Limited”

This project is a sincere attempt to study and understand the overall Internal Audit
functions of Oil India Limited (OIL) and its prospects.

Debashish Phukan
Wilson Kikon

School of Management Studies (SMS)
NAGALAND UNIVERSIT

ACKNOWLEDGEMENT

We take this opportunity to thank all the person without whose constant
guidance, support and help, this project would not have seen completion.

We avail our self of the opportunity of offering our sincere thanks to all the
members of the Department of Business Administration, “School of management
Studies (SMS), Nagaland University for organizing the summer training in Oil
India Limited, Duliajan and also for their generous guidance and help in the
preparation of this report.

We would like to express our gratefulness to Ms. D.Borborah, Sr. Manager,
T&D and Mr. T K Das Gupta, GM (IA), OIL, for giving us the chance to carry
out our project in his organization.

We acknowledge our indebtedness to our project guide Mr. M D Gupta,
Chief Manager (IA), OIL for his insightful comments and guidance regarding the
manuscript of this report.

We also like to thank Mr. M B Chetri Sr. Manager (IA), Mr.Utpal
Kaushik Sarma Dy. Manager (IA), Mr. A K Sinha Sr. Audit Officer (IA) and all
the Officers and staff of Internal Audit Department, OIL for helping and
supporting us during the summer training.

Last but not the least, our thanks also extended to all the respondents of OIL,
who has taken the pain of filling up the questionnaire and helped us to carry out the
study on their inputs.

Debashish Phukan

Wilson Kikon

School of Management Studies (SMS),
Nagaland University

EXECUTIVE SUMMARY

Project title: Project Report on Internal Audit Functions and its Performance in
Oil India Limited

Organization: Oil India Limited, Duliajan, Assam

Organizational Guide: Mr. M D Gupta, Chief Manager (Internal Audit)

Duration: 1st June – 31st July, 2011 (2 months)

Objectives of the study:

• To measure the overall performance of Internal Audit Department in OIL,
Duliajan

• To study the functions and roles of Internal Audit Department in OIL,
Duliajan

Research Methodology:

The study is based on survey method. The primary data is collected by personal
interviews through structured questionnaires to knowing the views, comments and
confidence regarding the performance of Internal Audit functions in OIL, Duliajan.
For the purpose of the study executives of different departments were selected and
interviewed. The secondary data is collected from the books, magazines/ journals,
websites and including OIL’s Internal Audit Department office.

Research design : Descriptive and Exploratory type of Research

Sampling plan : In OIL executive are graded in the increasing rank as A,
B, C, C1, D, E, F, G, H, & I. This survey includes only
grade E & F in the core departments of OIL. The
sample was selected on the basis of Convenience
Sampling.

Sample Size: 50

Data source : Both Primary and Secondary data.

Schedule design : A well structured schedule comprising of close ended,
multiple choice and dichotomous questions. Sincere
efforts were made to make the schedule simple and
precise. Care is being taken to prepare the schedule
according to the structure and format. The schedule is
set according to the objective of the study.

Sample area : The questionnaire was distributed in 26 major
departments of OIL, (Duliajan).

Method of data Primary data were collected by face to face interview
collection: with the help of a well structured questioner and
secondary data were collected from books,
magazines/journals, and websites.

Analysis Technique: The data collected from the respondents were analyzed
using standard statistical methods and techniques. Pie
charts and Bar diagrams were used to reach at the
conclusion. Findings were made on the basis of
analysis. Recommendations were made on the basis of
findings drawn from various data collected.

Limitation

• The survey was limited to few departments in the organization.
• Unavailability of executives in their cabins as they were engaged in field
work at that time.
• Sampling error might have occurred because no sample in perfect
representation of a give population unless the sample size equals the
population.
• There is a possibility of occurrence of false judgment due to the biased
responses by some of the executive’s staff while giving answers.
• Since the report is based on the primary data and personal interview,
occurrence of personal biased cannot be ruled out.

TABLE OF CONTENTS

Contents Page No.

I
DECLARIATION
II
PREFACE III
ACKNOWLEDGEMENT IV-VI
EXECUTIVE SUMMARY

CHAPTER-1 1-7
(General observation of the Organization)

1.1 Introduction 1
1.2 History Of Oil 2-3
1.3 Executive Profile 3
1.4 Objectives 3-4
1.5 Mission And Vision 4-5
1.6 CSR 5-6
1.7 List Of Departments 6
1.8 Achievements 6-7

CHAPTER-2 8-13
(Introduction to Internal Audit)
2.1 Internal Audit 8-9
2.2 History Of IA 9-10
2.3 Role In Internal Control 10
2.4 Role In Risk Management 10
2.5 Role In Corporate Governance 10-11
2.6 Nature Of IA Activity 11-12
2.7 IA Report 11
11-12
12-13

CHAPTER-3 14-24
(Internal Audit in OIL)
3.1 Introduction 14
3.2 Activities of IA Department 14
3.3 IA Mission Statement 14
3.4 IA Purpose

3.5 Scope and Objectives 15
3.6 IA Independence 15
3.7 Responsibilities 15
3.8 Authority 16
3.9 Relationship with Other Control Functions 16-17
3.10 Approach and Methodologies 17-18
3.11 Methodology of Risk assessment 18
3.12 IA Organizational Structure and Staffing pattern 19-20
3.13 Staffing 21
22-24
CHAPTER-4 25-42
(Analysis, Interpretation, Findings and Conclusion)
4.1 Analysis and interpretation of the Questionnaire 24-40
4.2 Findings 41
4.3 Conclusion 42
ANEXTURE—I 42-46
BILBOGRAPHY 47

CHAPTER 1:
OIL INDIA LIMITED’S PROFILE.

1.1 INTRODUCTION

The story of OIL India Limited (OIL) traces and symbolizes the development and growth of the
Indian petroleum industry. From the discovery of crude OIL in the far east of India at Digboi,
Assam in 1889 to its present status as a fully integrated upstream petroleum company, OIL has
come far, crossing many milestones.

On February 18, 1959, OIL India Private Limited was incorporated to expand and develop the
newly discovered OIL fields of Naharkatiya and Moran in the Indian North East. In 1961, it
became a joint venture company between the Indian Government and Burmah OIL Company
Limited, UK.

In 1981, OIL became a wholly-owned Government of India enterprise. Today, OIL is a premier
Indian National OIL Company engaged in the business of exploration, development and
production of crude OIL and natural gas, transportation of crude OIL and production of LPG.
OIL also provides various E&P related services and holds 26% equity in Numaligarh Refinery
Limited.

The Authorized share capital of the Company is Rs. 500 Cr. The Issued, Subscribed and Paid
share capital of the company is Rs. 240.45 Cr. At present, The Government of India, the
Promoter of the Company is holding 78.43% of the total Issued & Paid-up Capital of the
Company. The balance 21.57% of the Equity capital is held by others.

OIL has over 1 lakh sq km of PEL/ML areas for its exploration and production activities, most of
it in the Indian North East, which accounts for its entire crude OIL production and majority of
gas production. Rajasthan is the other producing area of OIL, contributing 10 per cent of its total
gas production.

Additionally, OIL’s exploration activities are spread over onshore areas of Ganga Valley and
Mahanadi. OIL also has participating interest in NELP exploration blocks in Mahanadi Offshore,
Mumbai Deepwater, Krishna Godavari Deepwater, etc. as well as various overseas projects in
Libya, Gabon, Iran, Nigeria and Sudan.

In a recent CRISIL-India Today survey, OIL was adjudged as one of the five best major PSUs
and one of three best energy sector PSUs in the country.

1.2 HISTORY OF OIL INDIA LIMITED

The story of OIL exploration in India began in the dense jungles and swamps of Assam in the
19th century. United by geography with Burma and caught up in the cross-currents of history,
the region had the common blessing of commercial OIL.

Digboi Well No-1(1889-1890)

The well, started in September 1889, was completed in November 1890 as a producer at a total
depth of 662 ft, with an initial production of 200 gallons per day. The decision to drill was taken
by the Directors of the AR&T Co. in 1888 under the direction of Mr. W L Lake, an employee of
the company and an OIL enthusiast.

Uphill and Downhill (1890 – 1920)

After the successful completion of the first well, Digboi Well No-2 was started in February 1891
in the same area, only to be abandoned as dry at 720 ft. The drilling activities of AR&T
progressed satisfactorily with 11 wells yielding OIL in 1894. A new firm - the Assam OIL
Company (AOC), led by the same Chairman, Lord Ribblesdale - was promoted in 1899 to take
over the petroleum interests of AR&T, including the Digboi and Makum concessions.

The AOC inherited 14 producing wells, with a total production of 50 barrels of OIL per day.
Almost immediately on inception, the company expanded the concessional area of the field by
purchasing the rights of the Assam OIL Syndicate. In 1912 the rotary system was introduced,
Well 47 being the first well to be drilled by this method.

Production almost trebled from 43 bpd in 1901 to 120 bpd in 1902, rising steadily to 247 bpd in
1911, and reaching a maximum of 435 bpd in 1917. By 1920, the AOC had completed 80 wells
with a total average production of 350 bpd.

Aftermath of Success (1953 – 1959)

The Nahorkatiya OILfield was discovered in 1953. However, by 1956 only 16 wells had been
drilled, and evidence suggested subsurface faults which could have acted either as barriers or
conduits to OIL movement. Despite this meager evidence, the AOC announced in September
1956 that proved and probable reserves in the Nahorkatiya area were sufficient to plan a
production target of nearly 2.5 million tons of OIL per year with 45 million cubic feet of gas per
day. On the basis of this assurance, fortified later in the year by new discoveries at Hugrijan and
Moran, a public sector refinery was initiated in 1959 at Guwahati with help from Romania. It
was commissioned in 1962.

The success of Nahorkatiya Well No-1 set in motion a series of activities. The Burma OIL

Company signed a Promotion Agreement with the Government of India (GoI) in January 1958 to
form a company - OIL India Private Limited (OIL) - to take over the management of the AOC-
discovered fields of Nahorkatiya and Moran. OIL was incorporated on 18 February 1959, with
two-thirds of the shares held by BOC and the rest by GOI. The Agreement assured Burmah OIL
a dividend of 10% and Digboi Refinery 1.3 million barrels of OIL per year. Mr W P G
Maclachlan, a key player in the negotiation, became the first Chairman of OIL.

Growth, dynamism, adaptability and technological awareness have marked the activities of OIL
from 1959 till today.

1.3 EXECUTIVE PROFILE

Chairman & Managing Director: Mr.NayanMani Borah

Director (Finance): Mr.T.K Ananth Kumar

Director (Exploration &Development): Mr. B.N Talukdar

Director (Human Resources and Business Development): Mr. Nripendra Kumar Bharali

Director (Operations): Mr.Satchidananda Rath

Government Nominee Director: Mr.D.N. Narasimha Raju

Government Nominee Director: Dr. (Smt.) Archana Saharya Mathur

Independent Director: Mr.Ghanshyambhai Hiralal Amin

Independent Director: Mr.Sushil Khanna

Independent Director: Mr.Arun Kumar Gupta

Independent Director: Mr. AlexanderK Luke

Independent Director: Mr.Vinod Kumar Misra

Independent Director: Mr.Pawan Kumar Sharma

1.4 OBJECTIVES OF OIL INDIA LIMITED

Basic Objectives:
• To achieve self sufficiency in Hydrocarbon resources.
• To get adequate return on capital.

• To promote training and development in Hydrocarbon Exploration.
• To encourage technological advantage for import use of Non conventional energy
resources.
• To built excellent management team.
• To built and project an efficient corporate image.

Objectives towards employees:
• To establish personnel policies for the well being of its employees.
• To induct and develop competent persons at all levels.
• To provide training and development opportunities to enhance skills for optimum
contribution.
• To evolve a system of closer association in involvement of employees to encourage
sports, culture and other activities.

Objectives towards people:
• Social and community development
• Development of ancillary and small scale industry
• Promotion of population environment
• Health interaction with the users and business associates

OIL’s corporate objectives:
OIL believes “Superlative efforts precede superlative results.” To serve that very purpose, OIL
has set the highest challenges for itself to measure up to. Its organizational agenda is to:

• Accelerate exploratory efforts in order to increase Hydrocarbon reserves.
• Speedy development of discovered fields and increase recovery from depleting and
develop fields.
• To augment crude OIL and Gas production.
• Ensure adequate return on capital by capacity utilization, cost effectiveness and optimum
productivity.
• Ensure proper development and effective utilization of Human Resources
• Diversify into the field of OIL field services: indigenous and overseas.
• Undertake overseas venture in exploration, development of OIL and material gas
resources.
• Promote OIL related research and development activities.
• Maintain a professional and efficient corporate character.
• Maintain and promote environmental friendly measures.
• Enhance safety measures in operations.

1.5 MISSION AND VISION OF OIL

Core Purpose:
“The fastest growing energy company with a global presence value to the shareholders.”

OIL's Vision

• OIL India is the fastest growing Energy Company with highest profitability.
• OIL India delights the customers with quality products and services at competitive prices.
• OIL India is a Learning Organization, nurturing initiatives, innovations and aspirations
with best practices.
• OIL India is a team, committed to honesty, integrity, transparency and mutual trust
creating employee pride.
• OIL India is fully committed to safety, health and environment.
• OIL India is a responsible corporate citizen deeply committed to socio-economic
development in its areas of operations.

OIL’s Mission:

• Balance between our investment in the E & P section and other low risk diversification
opportunities with the objective of optimizing our asset portfolios.
• Continuously upgrade manpower skills, processes and technologies and thereby
consistently improve operational and financial performance which adhering to the highest
standards business conducts.
• Grow with unwavering concern for the community and all over stick holders.
• Have unstinted faith in our employees to enable them to make quick and informed
decision through adequate training and to improve then to do so.

1.6 CORPORATE SOCIAL RESPONSIBILITY:

Since its inception OIL has always given top priority towards the all-round development of the
people residing in and around the Company’s area of operation. OIL management understands
that there is a need to strike a balance between the overall objectives of achieving corporate
excellence vis-à-vis the corporate responsibility towards the community. It is this twin objective
of business and social commitment that has prompted OIL to embark upon massive programmes
of educational, health and infrastructural development endeavors; an attempt to invest
technology with a human face.

Vision Statement
“OIL is a Responsible Corporate Citizen deeply committed to socio-economic development in its
areas of operations.”

Philosophy:
“To promote the awareness and practice of Good Corporate Citizenship, by business becoming
an integral part of societal process where people have access to resources to make informed
choices and decisions towards a more humane and compassionate society.”

Strategy:

“To mobilize core competencies and resources of business, public organisations and Government
Institutions…to facilitate their working in partnership on projects that benefit communities.”

1.7 DEPARTMENTS OF OIL INDIA LIMITED

Table 1.1

Sl. No Departments Sl. No Departments
1 Administrative 18 Electrical
2 Civil 19 Geophysics
3 Chemical 20 Employee relation
4 Drilling 21 Information technology
5 Drilling TS 22 Land
6 Contracts 23 Material
7 Finance and accounts 24 Medical
8 Geology and reservoir 25 Personnel
9 General engineering 26 Mechanical engineering
10 Instrumentation and Field Communication 27 Planning
11 L.P.G 28 Research and development
12 Production OIL & GAS 29 Security
13 Pipeline 30 Safety and Environment
14 Personnel 31 Training And Development
15 R&D 32 Transport
16 Well Logging 33 Field Engineering
17 Internal Audit 34 Vigilance

1.8 ACHIEVEMENTS

OIL India bags three Petrofed Awards
OIL India Limited bagged three Petrofed OIL & Gas Industry awards for the year 2009.
Instituted by Petrofed the OIL & Gas industry Awards were given away by the Hon'ble Union
Minister of Petroleum & Natural Gas, Shri Jaipal Reddy at a packed function at New Delhi on
May 10, 2011, in presence of Captains and leaders of the petroleum industry in India.

OIL India received the OIL & Gas Pipeline Transportation Company of the year award, Special
Commendation award for Innovator of the Year-Team and Mrs Rupshikha Saikia Borah, General
Manager (Treasury), OIL India Limited, received the special commendation award for Woman
of the Year in The OIL & Gas Industry. It is indeed a proud moment for all in OIL India limited

to have been recognized for their efforts. The awards have strengthened the resolve of the
Company’s employees to perform even better.

OIL bags India Pride Awards
OIL India Limited received the silver award in the OIL & Gas category of India Pride Awards -
Dainik Bhaskar group. The award was received by Shri N.M. Borah, Chairman & Managing
Director, OIL India Limited, at a glittering ceremony, from Hon’ble Finance minister of India,
Shri Pranab Mukherjee in front of many PSU leaders and business magnates.

OIL Receives PSU award
OIL India Limited received the “Heavyweight Miniratna” PSU award at the 2nd, Dalal Street
Investment Journal PSU Award 2010, ceremony at New Delhi on 6th April, 2010. The award
was presented to Shri N.M.Borah, Chairman & Managing Director, OIL India Limited, by
Hon’ble Union Minister of Steel, Shri Virbhadra Singh at a glittering ceremony in presence of
CEOs of other PSUs and dignitaries. The award was given taking into account the Company’s
Net Sales, Operating profit, Net Profit and Balance Sheet size.

OIL bags "PSU with the highest Book Value" award
OIL India Limited was conferred with the “PSU with the highest Book Value” award by Dalal
Street, the renowned Financial and Investment Journal. The award was given away by the
Hon’ble Chief Minister of Delhi Shrimati Sheila Dikshit at a glittering ceremony at New Delhi
on 24th March, 2009.

Oil India Limited received the certificate conferring the NAVRATNA Status
Oil India Limited received the certificate conferring the NAVRATNA Status by Govt. Of India
at New Delhi on 16.11.2010. The certificate was presented to Shri N.M.Borah, Chairman &
Managing Director, Oil India Limited by the Hon'ble Minister of Heavy Industries and Public
Enterprises, Shri Vilasrao Deshmukh at a ceremony in new Delhi organized by ASSOCHAM.
the ceremony was attended by several dignitaries. OIL was conferred the Navratna Status in
April, 2010.

Oil India lists at 8% premium

New Delhi: Shares of staterun northeast explorer Oil India Ltd settled at over 8% over their issue
price , the day of debut on the Bombay Stock Exchange. The scrip closed at Rs 1,140, though it
had opened marginally down. The stock hit an intraday high of Rs 1,156 and touched a low of Rs
1,019. On the NSE, the scrip settled at Rs 1,135, up 7.48%. The stock during market hours
climbed to a high of Rs 1,156.70 and had also slipped to a low of Rs 1,090 a share. With the
debut on the stock market, Oil India has joined the club of country's top 40 companies in terms
of market capitalisation, with a valuation of Rs 27,424.52 crore. In its maiden run, over 2.84
crore shares changed hands on both the bourses. The issue price for IPO of 2.64 crore shares had
been fixed at Rs 1,050 per share. TNN

CHAPTER 2:
INTRODUCTION TO INTERNAL AUDIT

Internal auditing is an independent, objective assurance and consulting activity designed to add
value and improve an organization's operations. It helps an organization accomplish its
objectives by bringing a systematic, disciplined approach to evaluate and improve the
effectiveness of risk management, control, and governance processes. Internal auditing is a
catalyst for improving an organization’s effectiveness and efficiency by providing insight and
recommendations based on analyses and assessments of data and business processes. With
commitment to integrity and accountability, internal auditing provides value to governing bodies
and senior management as an objective source of independent advice. Professionals called
internal auditors are employed by organizations to perform the internal auditing activity.

Internal Audit is not a discipline of Accountancy; External Audit is related to Accountancy, but
Internal Audit is an entirely separate discipline more closely related to Enterprise Risk
Management. Internal Audit does, of course, cover financial risk amongst its portfolio, but this is
one very minor element of the role. Significant misunderstandings in this area have resulted in
many organisations recruiting accountants with external audit experience to staff an internal
audit function; this is usually detrimental to the quality and completeness of assurance provided
to the Non-Executive Directors/Board, and may, in part, have contributed to corporate failures
where key operational risks that were not directly related to financial statements remained
unidentified and/or unmanaged by the Executive Management. When IIA and ACCA signed the
Global Memorandum of Understanding, IIA President David A. Richards said, "The IIA and
ACCA are both long-standing, highly respected professional associations, each with members
from all around the world. Although we represent two distinctly different professions, our codes
of ethics and perspectives on enhanced professionalism, ongoing education, and quantifiable
research mirror one another."

The scope of internal auditing within an organization is broad and may involve topics such as the
efficacy of operations, the reliability of financial reporting, deterring and investigating fraud,
safeguarding assets, and compliance with laws and regulations.

Traditionally, internal auditing involved measuring compliance with the entity's policies and
procedures. However, internal auditors are not responsible for the execution of company
activities; they advise management and the Board of Directors (or similar oversight body)
regarding how to better execute their responsibilities. As a result of their broad scope of
involvement, internal auditors may have a variety of higher educational and professional
backgrounds. Developments in internal auditing have moved away from "compliance" which is a
function of management control, towards Risk Based Internal Auditing (RBIA) which results in
monitoring and evaluation of the risk based control framework to manage enterprise risk. The
modern approach seeks to ensure that key risks are identified, a risk appetite is defined, and

controls are instigated in a fit for purpose way to manage risk according to the risk appetite of the
organisation.

Publicly-traded corporations typically have an internal auditing department, led by a Chief Audit
Executive ("CAE") who generally reports to the Audit Committee of the Board of Directors,
with administrative reporting to the Chief Executive Officer.

Other definitions

The definition above (first sentence of this page) is in essence the IIA's definition. A similar
definition has been developed by the accounting profession and adopted by the government
auditors: the ISA 610 and the INTOSAI’s standard ("ISSAI") 1003 define the Internal audit
function as "An appraisal activity established or provided as a service to the entity. Its functions
include, amongst other things, examining, evaluating and monitoring the adequacy and
effectiveness of internal control."

2.2 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. Much of the theory underlying
internal auditing is derived from management consulting and public accounting professions.
With the implementation in the United States of the Sarbanes-Oxley Act of 2002, the
profession's growth accelerated, as many internal auditors possess the skills required to help
companies meet the requirements of the law.

2.3 Role in internal control

The role of internal audit is to provide independent assurance that an organization’s risk
management, governance and internal control process are operating effectively. Internal auditor’s
deal with issues that is fundamentally important to the survival and prosperity of any
organization. Unlike external auditors, the look beyond financial risks and statements to consider
wider issues such as the organizations reputations, growth, its impact on the environment and the
way it treats its employees.

Internal auditors have to be independent people who are willing to stand up and be counted.
Their employers value them because they provide an independent, objective and constructive
view. To do this they need a remarkably varied mix of skills and knowledge. They might be
advising the projective running a difficult change programme one day, or investigating a
complex overseas fraud the next.

From very early on in their careers, they talk to executives at the very top of the organization
about complex, strategic issues, which is one of the most challenging and rewarding parts of
their role

Internal auditing activity is primarily directed at improving internal control. Under the COSO
Framework, internal control is broadly defined as a process, affected by an entity's board of
directors, management, and other personnel, designed to provide reasonable assurance regarding
the achievement of objectives in the following internal control categories:

• Effectiveness and efficiency of operations.
• Reliability of financial reporting.
• Compliance with laws and regulations.

Management is responsible for internal control. Managers establish policies and processes to
help the organization achieve specific objectives in each of these categories. Internal auditors
perform audits to evaluate whether the policies and processes are designed and operating
effectively and provide recommendations for improvement.

2.4 Role in risk management

Internal auditing professional standards require the function to monitor and evaluate the
effectiveness of the organization's Risk management processes. Risk management relates to how
an organization sets objectives, then identifies, analyzes, and responds to those risks that could
potentially impact its ability to realize its objectives.

In larger organizations, major strategic initiatives are implemented to achieve objectives and
drive changes. As a member of senior management, the Chief Audit Executive (CAE) may
participate in status updates on these major initiatives. This places the CAE in the position to
report on many of the major risks the organization faces to the Audit Committee, or ensure
management's reporting is effective for that purpose.

2.5 Role in corporate governance

Internal auditing activity as it relates to corporate governance is generally informal,
accomplished primarily through participation in meetings and discussions with members of the
Board of Directors. Corporate governance is a combination of processes and organizational
structures implemented by the Board of Directors to inform, direct, manage, and monitor the
organization's resources, strategies and policies towards the achievement of the organizations
objectives. The internal auditor is often considered one of the "four pillars" of corporate
governance, the other pillars being the Board of Directors, management, and the external auditor.

A primary focus area of internal auditing as it relates to corporate governance is helping the
Audit Committee of the Board of Directors (or equivalent) perform its responsibilities
effectively. This may include reporting critical internal control problems, informing the
Committee privately on the capabilities of key managers, suggesting questions or topics for the
Audit Committee's meeting agendas, and coordinating carefully with the external auditor and
management to ensure the Committee receives effective information.

2.6 Nature of the internal audit activity

Based on a risk assessment of the organization, internal auditors, management and oversight
Boards determine where to focus internal auditing efforts. Internal auditing activity is generally
conducted as one or more discrete projects. A typical internal audit project [14] involves the
following steps:

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 control procedures used to ensure each key risk and transaction type is properly
controlled and monitored.
5. Develop and execute a risk-based sampling and testing approach to determine whether
the most important controls are operating as intended.
6. Report problems identified and negotiate action plans with management to address the
problems.
7. Follow-up on reported findings at appropriate intervals. Internal audit departments
maintain a follow-up database for this purpose.

Project length varies based on the complexity of the activity being audited and Internal Audit
resources available. Many of the above steps are iterative and may not all occur in the sequence
indicated.

By analyzing and recommending business improvements in critical areas, auditors help the
organization meet its objectives. In addition to assessing business processes, specialists called
Information Technology (IT) Auditors review information technology controls.

2.7 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. Criteria: What is the standard? The standard may be a company policy or other
benchmark.
2. Condition: What is the particular problem identified (difference between criteria and
actual status)?
3. Cause: Why did the problem occur (which control over risk was missing - design
effectiveness failure; or which control did not execute as planned -operating effectiveness
failure)?
4. Consequence: What is the risk/consequence (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 its
goals, which may relate to operations, financial reporting or legal/regulatory compliance. They
may relate to effectiveness (i.e., whether goals were met or compliance with standards was
achieved) or efficiency (i.e., whether the outputs were generated with minimum inputs).

Audit findings and recommendations 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.

2.8 Developing the plan of engagements

Internal auditing standards require the development of a plan of audit engagements (projects)
based on a risk assessment, updated at least annually. The input of senior management and the
Board is typically included in this process. Many departments update their plan of engagements
throughout the year as risks or organizational priorities change.

This effort helps ensure the audit activity is aligned with the organization’s objectives, by
answering two key questions: First, what goals are the organizations trying to accomplish in the
upcoming period? Second, how can the Internal Audit Department assist the organization in
achieving these goals?

Internal auditors often conduct a series of interviews of senior management to identify potential
engagements. Changes in people, processes, or systems often generate audit project ideas.

Various documents are reviewed, such as strategic plans, financial reports, consulting studies,
etc. Further, the results of prior audits and resolution of open issues are considered. The
preliminary plan of engagements is documented and prioritized. Audit resources and expertise
are then considered and a final plan is presented to senior management and the Audit Committee.

CHAPTER 3:

INTERNAL AUDIT IN OIL

3.1 INTRODUCTION

In OIL, internal audit of pipelines, Kolkata Office, BEP & KG and partly the fields headquarter
Duliajan are carried out by Internal Audit Department located at Duliajan, Assam. In respects of
rest of the project/ offices of the company, the same is outsourced through Chartered
Accountants Firms.

Internal Audit is an independent department having executives & staff of Finance and Accounts
discipline. Presently the department is headed by GM- Internal audit who reports to the Director
(Finance).

3.2 Activities of Internal Audit Department

The scope and areas to be covered by Internal Audit is decided at the beginning of the year
through Annual audit program which is approved by audit committee.

The main areas covered by Internal audit are as follows:-

a) Scrutiny of Contracts and Purchases Proposal awarding contracts and purchase orders.
b) Payment of contractors and suppliers bill.
c) Deduction of sales tax, income tax and deposit thereof.
d) Establishment payment like- salary/ wages, tour claims, medical bill claim, etc.
e) Documentation and payment of advances and recovery.
f) Physical verification of assets.
g) Monitoring of capital work-in-progress.
h) Audit of billing of crude OIL, natural gas, LPG and scrap sale.

Liaise with Comptroller and auditor General (C&AG) and statutory Auditor

Audit Committee
The audit committee is established with the aim of enhancing confidence in the integrity of an
organization’s processes and procedures relating to internal control and corporate reporting
including financial reporting. Audit Committee provides an ‘independent’ reassurance to the
board through its oversight and monitoring role. Among many responsibilities the boards entrust
the Audit Committee with are the transparency and accuracy of financial reporting and
disclosures, effectiveness of external and internal audit functions, robustness of the systems of
internal audit and internal controls, effectiveness of anti-fraud, ethics and compliance systems,
review of the functioning of the whistleblower mechanism. Audit Committee may also play a
significant role in the oversight of the company’s risk management policies and programs.

Audit Committee has thus become one of the main pillars of the corporate governance system in
Indian public companies. In steering companies through today’s complex business environment,
boards are going to need strong leadership from their audit committees. Expanding the field of
vision, clearly defining who’s tracking the company’s risk radar, and taking a step back to re-
evaluate its own performance are some of the important steps every Audit Committee should
consider.
This section of the site includes a range of useful publications relating to the audit committee’s
operations and oversight responsibilities.

Section 292A of Companies Act Vs Clause 49 of Listing Agreement

The Companies (Amendment) Act (2000), among other things, provides for the formation and
functioning of audit committees (section 292A). Similar requirements for audit committees are
prescribed under clause 49 of the Listing Agreement issued by SEBI. In India, perhaps the 1992
stock market scam and liberalizations of the economy contributed more to the introduction of
these requirements than did Enron. Be that as it may, these scams and corporate failures have
shaken investors’ confidence and the whole world is watching intently the steps being
undertaken by the various statutory authorities in this respect. Below is a comparison between
the regulations governing the audit committee. It points to a few prominent differences between
the regulations in both.

Base of Diff. Section 292A Clause 49

Applicability Section 292A applies to all pubic Clause 49 of the Listing
companies with a paid-up capital of Agreement covers most of the
Rs. 5 crore or more. listed companies

Constitution and Section 292A requires that the audit Clause 49 requires a minimum of
independence of committee shall consist of not less three members, all being non-
the audit than three directors and such number executive directors, with the
committee of other directors as the board may majority of them being
determine. Two-thirds of the total independent directors*, with at
number of the audit committee shall least one director having financial
be directors other than the managing and accounting knowledge.
or whole-time directors.

Role and powers Section 292A gives the audit Clause 49 gives specific powers to
of the audit committee the authority to investigate the audit committee to investigate
committees into any matter in relation to the items any activity within its terms of
specified in this section or referred to reference, seek information from
it by the board. The audit committee any employee, and obtain outside
has full access to information legal or professional advice. The

contained in the records of the role of audit committee has also
company and may take external been clearly defined under the
professional advice, if it deems clause 49.
necessary.

* Independence of audit committee members: Clause 49 defines ’independent directors’ as
directors who, apart from receiving directors’ remuneration, do not have any other material
pecuniary relationship or transactions with the company, its promoters, its management or its
subsidiaries, which in the board’s view may affect their independent judgment.
It may be noted that clause 49 has listed the powers of the audit committee while section 292A
has left it to the discretion of the board. Minimum four meeting is required to be held during a
financial year.

OIL Audit Committee.
Members:

1. CA Pawan Kumar Sharma, Chairman. (Independent Director)

2. Sri. Vinod K Misra, member. (Independent Director)

3. Dr. (Smt) Archana S Mathur, member. (Govt. Director)

Permanent Invitee.

1. Shri T.K. Ananth Kumar D (F)

Secretary of the meeting
Company secretary (presently Sh. S.R.Krishanan) is the secretary to the audit committee who
convinced the meeting of the audit committee in consultation with the chairman audit
committee.

Generally HOD of Internal audit department is also invited in the meeting. Whenever
directed by the audit committee, Internal Audit department arrange the presentation of the
audit reports of different spheres of the OIL. The outsourced portion of the audit is being
presented by the concerned auditors however the in-house audit reports is being presented by
the HOD (IA). The other issues raised during the audit committee meeting is also been
conveyed to the concerned departments and the action taken on the matters are reported to
the committee.

3.3 Internal Audit Mission Statements

The mission of the internal audit is to provide independent and objective assessment and
consulting services to add value and improve the OIL`s operations. The internal audit
accomplishes its objectives by using a systematic, disciplined approach to evaluate and improve
the effectiveness of control, risk management and governance processes.

3.4 Internal Audit Purpose
The purpose of OIL’s internal audit is to determine whether its controls, risks management and
governance process, as designed and implemented by management are adequate and effective
and functioning to ensure;
- Risks are appropriately identified and managed
- Interactions with the various governance groups as needed
- Financial, managerial and operating information is accurate, reliable and timely
- Employees actions are in compliance with OIL’s policies and procedures and applicable
laws and regulations
- Resources are acquired economically, used efficiently and adequately protected
- Plans and objectives are achieved
- Quality and continuous improvement are fostered in the OIL’s control process
- Significant legislative and regulatory issues having impact in OIL’s operations are
recognized and timely addressed appropriately

3.5 Scope and Objectives:

The objective of internal auditing is to assist all members of the organization in the effective
discharge of responsibilities by furnishing them with analysis, appraisals, recommendations and
pertinent comments concerning the activities reviewed. The internal auditor is concerned with
any phase of business activity where he/she may provide service to the organization. This scope
involves going beyond the accounting and financial records to obtain a full understanding of the
operations under review. The attainment of this overall objective involves such activities as;
- Reviewing and appraising the correctness, adequacy and application of accounting ,
financial and other operating controls and promoting effective control at reasonable cost
- Ascertaining the extent of compliance with established policies ,plans and procedures
- Ascertaining the extent to which company assets are accounted for and safeguarded
from losses of all kinds
- Ascertaining the quality of performance in carrying out assigned responsibilities
- Recommending operational improvements

3.6 Internal Audit Independence:
Internal auditing is an advisory function having independent status within the organization. The
head of internal audit-

- Shall be directly responsible to the chief executive/director (finance) and be independent
of any other section, branch or officer, and shall have direct access to all documents,
records and departments/ operations for which a suitable authority letter is to be issued
by the chief executive so that the assignments can be carried out independently
- Shall have no executive powers , functions or duties except those relating to the
management of the internal audit office
- Shall not be responsible for the detailed development and/ or implementation of new
systems but should be consulted during the system development process on the control
measures to be incorporated in new or amended systems , and be advised of approved
variations or new developments

3.7 Internal Audit Responsibilities:

The head of internal audit shall be responsible functionally to the audit committee and
administratively to the chief executive /director (finance) of OIL, for the functional control of
audit activities in relation to:
- Development, implementation and oversight of internal audit methods and procedures
- Development and control of an efficient internal audit program
- Scope and boundaries of audits
- Fulfilling the objectives of internal audit
- Utilizing the internal audit resources to maximize the efficiency and effectiveness of the
internal audit function and
- Maintenance of appropriate auditing standards

3.8 Internal Audit Authority:

The general scope of audit coverage is organization-wide and no function, activity, or unit of the
OIL or a related organization with OIL (like joint venture; JV) is exempt from audit and review.
No officer or staff member should interfere with or prohibit internal auditors from examining any
record of OIL or its subsidiaries/ JVs or interviewing any employee that auditors believe is
necessary to carry out their duties. Additionally the head of internal audit has the authority to
review and audit the accounts and financial reports submitted to the management for its
reliability and genuineness.

In performing their work, internal auditors have neither direct authority over/ nor responsibility
for any of the activities reviewed. Internal auditors do not develop and install procedures, prepare
records, make management decisions, or engage in any other activities that could be reasonable
construed to compromise their independence or impair their objectivity. Therefore, internal audit
reviews do not, in any way substitute for or relieve any officials or staff of OIL from their
assigned responsibilities.

Internal auditors of the organization shall:
- Have access at all reasonable times to all books , documents, accounts, property ,
vouchers ,records , correspondence and other data of the organization which are
necessary for the proper performance of the internal audit function and
- Have the right at reasonable times to enter any premises of the organization and to
request any officer to furnish all information and such explanations deemed necessary
for them to form an opinion on the probity of action, adequacy of systems and/ or of
controls. The officer concerned shall respond promptly to such inquiries.
It is incumbent on all the officers and staff that they shall render assistance to the
internal auditors in carrying out their audit duties.

3.9 Relationship with Other Control Functions:

Relationship with vigilance department:
The internal audit department shall have no formal relationship with the vigilance department.
However, during the conduct of the proposed audits if the internal audit department personnel
come across any cases where a mollified intention is suspected the same should be reported to
the audit committee/CMD who should decide whether to report the same to the vigilance
department. Only the audit committee/ CMD should give copies of the internal audit reports to
the vigilance.

Relationship with statutory auditors:
The head of internal audit is responsible for liaisoning with the audit committee for coordinating
internal and statutory audit efforts to ensure adequate audit coverage, minimize duplication of
audit efforts and achieve synergy of the efforts.

Co-ordination of audit efforts involves;
- Periodic meetings with audit committee and statutory auditors regarding the company`s
audit universe, risk assessment updates, audit plans and the annual audit schedule.
- Periodic meeting`s between head of internal audit , audit committee and statutory
auditors regarding the plans of the statutory auditors and the desired level of direct or
indirect assistance to the audit committee that may be required.
- Access to each other’s detailed audit programs, internal controls documentation, and
work papers. Such access is important in order for the internal auditor to be satisfied as
to the propriety for internal audit purposes of relying on the external auditors work and
for the external auditors to be satisfied as to the propriety, for external audit purposes, of
relying on the internal auditors work.
- Communications regarding announcements when audits are scheduled to begin and the
specific audit objectives that have been established.

- Exchange of information related to audit observations that may have an impact on the
financial statement of the company and which need to be reported to the company’s
audit committee.

Relationship with government auditors:
The internal audit department should perform the following tasks while coordinating their work
with the government and statutory auditors;
- Share annual audit plan- the internal audit department should meet the above two
agencies at least once in six months to discuss their plans for the next six months to
ensure that there is no duplication of efforts .
- Share audit issues- during the meetings all three agencies should exchange major audit
issues that they may have observed in the past to help others appreciate the same when
they cover the area in the future.
-
Relationship with technical operations auditors:
Considering that there is an already existing group of technical officers in OIL that reports to the
directors in respect of technical issues, it should be necessary for the internal auditors to co-
ordinate their efforts with this group. They need to share their respective audit plans with one
another and identify areas where duplicity of work could be avoided. Further, the internal audit
department should review the following in respect of the technical audits conducted by this
group and comment on the same;
- Level of implementation of the recommendations made by the technical audit group
- Whether the coverage of the group was adequate and whether they were able to perform
all audits that had been planned.
- How is the group keeping itself updated in respect of the advancements in technology in
respect of operational methodologies?

As with the review of safety auditors, the purpose of auditing the technical audit group is not to
review their decisions or the quality of work that has been done by them but to ensure that their
working is effective and efficient for operational improvement in OIL as a whole.

3.10 Approach and methodologies

To identify the areas that used to be audited by internal audit, it is essential to carry out a relative
risk ratings. This exercise will basically provide internal audit with an audit universe detailing
areas that need to be audited and their frequency. This exercise is termed as risk assessment.

3.11 Methodology of risk assessment
The risk assessment methodology includes the following;

(i) Understanding the business objectives- being a senior management team of OIL, the
head of internal audit is well aware of the existing systems, the control environment and risk
factors of each operation / activity in OIL. As a head of the function, he has access to various
reports of OIL, internal publications, reports issued by internal audit/technical audit, statutory
auditor’s govt. auditors and frame up his perception of various risks associated in each function.
- he should also visit to projects /sites and regularly interact with senior key functionary
or process personnel to assess the risk involved in each project.
- To review of the existing process manuals and available documentations which will
help to develop the risk assessment systems.

(ii) Interaction with senior management- with the objective of preparing risk based
strategy for internal audit interaction with senior management is necessary in order to obtain an
understanding of their perception of the nature of risks and exposures that OIL faces today and in
time to come or in due course.
The areas normally discussed with senior key personnel are;
- Critical challenges faced by OIL.
- Significant risks and exposures
- Control environment
- Technology issues
- Suggested areas of focus for internal audit
Based on the responses the audit universe is modified along with a risk rating for each
audit area.
(iii) Finalization of the audit universe;
Based on the experience and understanding gained during the visits of various locations/
activities and discussions with senior managerial personnel, the audit universe of the OIL may be
finalized. The audit universe contains the list of audit areas to be covered by the internal audit
department/ technical audit department, frequency of each skill set required for conducting the
audits.
On the basis of the audit universe, number of auditors required based on skills and number of
audits required to be carried out in a year, is ascertained.

(iv) Assigning a risk rating to each audit universe process/area;
Risk rating is used to prioritize auditable entities and to estimate the internal audit hours
considered necessary for an internal audit function to address the identified risks.
Risk rating is allotted to each audit area in the audit universe based on interaction with key
personnel, understanding the systems and controls, materiality mapping.

The likelihood rating represents the likelihood of an event or risk, which may occur. The
materiality rating represents the exposure to the organization should the event or risk occurs.
A risk assessment rating for both likelihood and materiality is determined for each audit area
included in the audit universe.

(v) Assigning frequency for each audit area;
The frequency of each audit is determined based on the likelihood and materiality rating of each
audit.
The following parameters are normally used for arriving the frequency of each audit area.
Table 3.1
SI. No. Likelihood Rating Materiality Rating Frequency of Audit
1 high High Yearly
2 high Medium Every alternate year
3 high Low Every 2nd alternate year
4 medium High Every alternate year
5 medium Medium Every 2nd alternate year
6 medium Low Every 3rd alternate year
7 low High Every 2nd alternate year
8 low Medium Every 3rd alternate year
9 low Low Once in four years

(vi) Assigning number of auditors, time and skills required for each audit;
The number of auditors, time and skill sets required for carrying out each audit should be
assessed appropriately at the time of preparing audit universe. The assessment is to be based on
the understanding of the business of the company, nature of complexity involved, locations /
activities to be covered, estimated time required for collection of data, time required for planning
the commencement of audit and report writing.

(vii) Estimating systems understanding and documentation- the auditor should assess
the existing systems and documentation work before begins/commencing the audit work of the
department. While carrying out such study, the following should be looked into-
- understand departmental philosophy and operating style.
- identify business objectives of the department
- understand existing systems and procedures in the department
- perform risk analysis of the functions performed in the department
- Identify critical areas that needed to be audited
- identify the level of assignment of authority and responsibility
- understand the level of information technology risk in the functions.

3.12 Internal Audit (IA) Organizational Structure and Staffing Pattern

1. Internal audit structure and reporting relationships

IA is an independent appraisal activity established by the management. IA will not have any
line responsibility for the activities it reviews. It must be independent of management who
has direct responsibility for developing and/or implementing control systems.

The head of IA department (HOD) should report to the CEO/Director (Finance)
administratively and to the Audit Committee functionally. The HOD should meet the Audit
Committee and its chairman on a regular basis and have the opportunity to communicate
without management being present.

There should be regular meetings, both formal and informal- with senior management. This
will serve both to maintain the profile of IA and to ensure that IA is working alongside
management to achieve the objectives of the organization.

2. Reporting structure of internal audit department.

Given below is the proposed organization structure of the internal audit department.

Chart 3.1
CMD/Director Audit Committee
(Finance)

General Manager
(IA)

Head Internal Deputy General
Audit Manager (Tech.

Managers/Dy. Dy. Chief/
Managers/ Sr. Suptding/ Sr.
Managers/ Suptding/ Sr. Tech
Officers/ Asst. Auditors/ Auditors/
Officers Asst. Auditors

3.13 Staffing

The staffing of the IA department is based on factors like quantum and nature of operations,
number of auditable sites, number of employees in the various work centers/ Projects, number of
areas required to be covered by IA department and number of audits to be conducted in a final
year.

The following staff strength is estimated based on the nature and volume of operations carried
out by OIL and various changes made in the company’s act and the accounting standards made
mandatory applicable to the company. The corporate Governance is also become mandatory. IA
will be playing a major role to ensure appropriate implementation of corporate Governance in the
company.

Table 3.2

Level of Officers Sanctioned Present Status
Strength as at
year 2000
General manager - 1
Head (IA) -
1
1
Chief Manager
Sr. Manager 2 1
Manager 2 -
Dy. Manager 1

9
Sr. Officers/ Officers 5*

Secretary - -
Steno 2 2
Office Staff 3 2

Office Boy 2 1

Tea Boy 1 0
Total 22 14

*One Audit Officer has been posted at corporate office Noida.

CHAPTER 4:
ANALYSIS, INTERPRETATION FINDINGS AND CONCLUSION
INTERPRETATION,

4.1 ANALYSIS OF THE QUESTIONNAIRE

Q.1. Have you ever requested specific services of the Internal Audit function?
specific

Option No. of Respondent Percentage of respondent
Yes 5 15.625 %
No 27 84.375%
Total 32 100%

Percentage of Respondent

15.63%

Yes

No
84.38%

INTERPRETATION

Nearly 85% respondents said No
Only 15% respondent reques service of IA function.
request

Q.2. How will you judge OIL’s present Internal Audit activities towards improving the
performance of the organization?

Good 8 25%
Average 21 65.625%
Poor 2 6.25%
Does not 1 3.125%
Comment
Total 32 100%

Percentage of Respondents

Good
80%
65.63% Average
60%

40% Poor
25%
20%
Does not
6.25%
0% 3.13% Comment
Good Respondents
Average
Poor
Does not
Comment

INTERPRETATION
Only 25% of respondent response as Good
Nearly 66% said Average
Only 6% response comes as Poor
Rest 3% did not comment anything

Q.3. Taking into consideration the scope/objectives/structure and
scope/objectives/structure
responsibilities of the internal Audit functions, to what extent do you feel that
Internal Audit meets expectations?
Meet Expectations 23 71.875%
Does not meet 4 12.5%
expectations
Does not comment 5 15.625%
Total 32 100%


Meet
80.00% 71.88%
Expectations
70.00%
60.00%
Does not meet
50.00%
expectations
40.00%
30.00%
15.63% Does not
20.00% 12.50%
comment
10.00%
0.00%
Meet Does not meet Does not
Expectations expectations comment

INTERPRETATION

72% respondents said that IA Meet Expectations

Only 12% said that IA Does not Meet Expectations
The rest of 16% did not comment anything.

Q.4. How confident are you relying on the conclusions reached or
u
recommendations made by the Internal Audit function?

Completely Confident 0 0%
Somewhat confident 31 96.875%
Not at all confident 0 0%
Does not comment 1 3.125%
Total 32 100%


96.88%
100% Completely
Confident
80%

60% Somewhat
confident
40%

20% 0% Not at all
0% 0% 3.13% confident

Does not
comment

INTERPRETATION

97% respondents were somewhat confident.
Rest 3% respondents did not comment anything.

Q.5. To what extent do you believe that the work of internal Audit improves
the overall internal control of the organization?
trol

Greatly improves 0 0
Somewhat improves 21 65.625%
Does not improve 2 6.25%
Don’t know/ not 9 28.125%
sure
Total 32 100%

65.63% Greatly
70%
improves
60% Somewhat
50% improves
Does not
40%
28.13% improve
30% Don’t know/
20% not sure
6.25%
10%
0%
0%
Greatly Somewhat Does not Don’t know/
improves improves improve not sure

INTERPRETATION

No one comment as Greatly Improve on above statement.
66% respondent comment as somewhat improves.
Only 6% of them comment as Does not improve
The rest 28% respondents have no idea or not sure.

Q.6.Do you believe that the work of Internal Audit helps in identi
Do identifying and
improving the overall risk of the organization?

Agree 11 34.375%
Neutral 14 43.75%
Disagree 7 21.875%
Total 32 100%


Agree
21.88%
34.38%

Neutral

Disagree

43.75%

INTERPRETATION

34% respondents Agreed with the above statement.
44% respondents remains neutral
22% respondents Disagreed

Q.7. Do you appreciate that internal audit team is proactive?

Agree 1 3.125%
Neutral 25 78.125%
Disagree 4 12.5%
Did not respond 2 6.25%
Total 32 100%

Response

Agree
78.13%
80.00%
Neutral
60.00%

40.00% Disagree
20.00%
3.13% 12.50% Did not
0.00% 6.25% respond
Agree Response
Neutral
Disagree
Did not
respond

INTERPRETATION

Only 3% respondent Agreed with the statement
78% respondent remains Neutral
13% respondent Disagreed
Rest 6% did not comment anything.

Q.8. Do you feel that Audit report issued by Internal Audit department help
issued
the department to improve the work of department?

Agree 6 21.875%
Neutral 17 53.125%
Disagree 8 25%
Not respond 1 3.125%
Total 32 100%


60.00% 53.13%
Agree
50.00%
Neutral
40.00%
Disagree
25%
30.00% 21.88%
Not respond
20.00%

3.13%
10.00%

0.00%
Agree Neutral Disagree Not respond

INTERPRETATION
Only 22% respondent agreed the statement
53% respondents remains neutral
3% respondents did not comment anything

Q.9. How do you rate the quality of Internal Audit report issued by Internal
Audit Department?

Excellent 0 0%
Good 10 31.25%
Average 20 62.5%
Poor 2 6.25%
Very Poor 0 0%
Total 32 100%

Quality of IA Report

70% 62.50% Excellent

60%
Good
50%
Average
40%
31.25% Poor
30%

20%

6.25%
10%
0%
0%
Excellent Good Average Poor

INTERPRETATION

No one comment as Excellent
31% respondents comment as Good
63% respondents said Average
The rest 6% respondent said Poor

Q.10.Do you think that Internal Audit have the right reporting structure?
Do

Agree 5 15.625%
Neutral 21 65.625%
Disagree 5 15.625%
Total 32 100%


80.00% Agree
65.63%
60.00%
Neutral
40.00%
15.63% Disagree
20.00% 15.63%

0.00% 3.13% Not respond
Agree Response
Neutral
Disagree
Not respond

INTERPRETATION

16% respondents agreed
Rest 3% did not comment anything

Q.11.Do you appreciate that audit work was efficiently performe according
Do performed
to planning period?

Agree 3 9.375%
Neutral 23 71.875%
Disagree 5 15.625%
Total 32 100%

Percentage of respondent
80.00%
71.88% Agree
70.00%
Neutral
60.00%

50.00% Disagree
40.00% Not respond
30.00%
15.63%
20.00%
9.38%
10.00%
3.13%
0.00%

INTERPRETATION
Only 9% Agreed
t
Remaining 3% did not comment anything

Q.12.Do you consider that internal audit report was issued in a useful time?
Do

Neutral 20 62.5%
Disagree 10 31.25%
Not respond 2 6.25%
Total 32 100%


6.25%
Neutral

31.25%
Disagree

62.50%
Not respond

INTERPRETATION

63% respondents remains Neutral
6% did not comment anything.

Q.13. Do you appreciate that internal Audit department is maintaining the
appropriate auditing standards?
e

Agree 2 6.25%
Neutral 24 75%
Disagree 2 6.25%
Not respond 4 12.5%
Total 32 100%


80.00% 75%
Agree
70.00%

60.00% Neutral
50.00%
Disagree
40.00%

30.00% Not respond
20.00% 12.50%
6.25% 6.25%
10.00%

0.00%

INTERPRETATION
Only 6% Agreed
75% remains Neutral
6% Disagreed
Remaining 13% did not comment anything

Q.14.Do the Auditors motivate you to improve on your performance with
Do
their suggestions?

Agree 2 6.25%
Neutral 15 46.875%
Disagree 15 46.875%
Total 32 100%


6.25%

46.88% Agree

46.88%
Neutral

Disagree

INTERPRETATION
Only 6% respondent agrees that Auditors motivate them in improving their performance
performance.
Nearly 47% respondent remains neutral with the statement
statement.
Rest 47% disagree the statement.

Q.15. Does IA function has appropriate status in OIL?

Agree 11 34.375%
Neutral 15 46.875%
Disagree 6 18.75%
Total 32 100%

IA function has appropriate status in OIL

18.75%
34.38% Agree

Neutral

46.88% Disagree

INTERPRETATION
Only 34% of the respondents Agree that IA functions has appropriate status
functions
in OIL
Nearly 47% of the respondents remain Neutral
18% respondent don’t believe that IA functions has a appropriate status in
OIL

Details of respondents-

SEX No. of Respondent Percentage of respondent
Male 29 90.625%
Female 3 9.375%
Total 32 100%


9.38%

Male

90.63% Female

INTERPRETATION

More than 90% of the total respondents were Male

Length of Service No. of Respondent Percentage of respondent
in OIL
1-5 years 1 3.125%
5-10 years 2 6.25%
More than 10 years 29 90.625%
Total 32 100%

Service length of Respondents in OIL

3.13% 6.25%

1-5 years
5

5-10 years
10
90.63%

More than 10 years

INTERPRETATION

More than 90% of the total respondents have an experience of more than 10 years of
service in OIL.

4.2 FINDINGS
Major findings based on primary data collected from the respondents are stated as follows:

Internal Audit Department is an independent department
Internal Audit activities averagely improves the performance of the organization
The expectations of the internal customers were meet by the internal audit functions
Respondents are not fully confident to rely on the conclusions reached or
recommendations made by the Internal Audit function
The overall internal control of the organization is improves to some extent by work of Internal Audit
The report issued by IA department helps in improving the performances of the departments
The quality of IA report can be rated as average.
The executives of different departments have only few knowledge on the functions of Internal Audit
Department

4.3 CONCLUSION

A Project report on “Internal Audit Functions and its Performance in Oil India limited” is the
topic for my study. It is a brief study of understanding about the IA functions of the organization.

From the report it can be well identified that the organization has adopted a well and distinguish
Internal Audit functions. The IA department working independently and reporting to the Audit
Committee in a regular basis.

We have felt that the company has come forward to apply new skills and techniques in order to
improve the Functions of IA.

The project work is very beneficial for us and the guidance and support receive from all during
the course of my project was very encourage

ANEXTURE I

Questioner

Respected Sir/ Madam,

As a part of the partial fulfillment of MBA Degree, we the student of
School of Management Studies (SMS), Nagaland University, are in process to
carry out a study on the topic “Internal Audit Functions and its Performance in
Oil India Limited”

So, in this regard, we need your kind cooperation and support with your
valuable views on the topic to do the research. We assure you that the information
provided by you shall be kept strictly confidential and shall be used for academic
purpose only. Your help will go a long way in assisting us to complete our project.

Thanking you.

Yours sincerely,

Debashish Phukan
Wilson Kikon
School of Management Studies,
Nagaland University

Please tick off only one answer of the following questions.

1. Have you ever requested specific services of the Internal Audit function?

a) Yes b) No

2. How do you judge OIL’s present Internal Audit activities towards improving
the performance of the organization?

a) Excellent b) Good c) Average

d) Poor e) Very poor

3) Taking into consideration the scope/objectives/structure and responsibilities
of the internal Audit functions, to what extent do you feel that Internal Audit
meets expectations?

a) Exceeds Expectations b) Meets Expectations

c) Does not meet expectations

4) How confident are you relying on the conclusions reached or
recommendations made by the Internal Audit function?

a) Completely confident b) Somewhat Confident

c) Not at all confident

5) To what extent do you believe that the work of internal Audit improves the
overall internal control of the organization?

a) Greatly Improve b) Somewhat improves

c) Does not improves d) Not sure/ don’t no

6) Do you believe that the work of Internal Audit helps in identifying and
improving the overall risk of the organization?

a) Strongly agree b) Agree c) Neutral

d) Disagree e) strongly disagree

7. Do you appreciate that internal audit team is proactive?

a) Strongly Agree b) Agree c) Neutral


8. Do you feel that Audit report issued by Internal Audit department help the
department to improve the work of department?



9. How do you rate the quality of Internal Audit report issued by Internal Audit
Department?

a) Excellent b) Good c) Average

d) Poor e) Very Poor

10.Does Internal Audit have the right reporting structure?


d) Disagree e) Strongly Disagree

11.Do you appreciate that audit work was efficiently performed according to
planning period?


d) Disagree e) Strongly disagree

12.Do you consider that internal audit report was issued in a useful time?



13.Do you appreciate that internal Audit department is maintaining the
appropriate auditing standards?



14. Do the Auditors motivate you to improve on your performance and with
their suggestions?



15.Does IA function have appropriate status in OIL?


d) Disagree e) Strongly Disagree

16.If any Suggestions:
…………………………………………………………………….............................
.....................................................................................................................................
.....................................................................................................................................

Details of the Respondent:

Name (Optional):________________________________

Sex: a) M b) F

Department: ______________________Designation:______________________

Length of the service in OIL:

a) Less than 1 year.

b) 1-5 years.

c) 5-10 years.

d) More than 10 years

_______________________
Signature of the respondent

Thank you for your time and the honesty of your answers.

BIBLIOGRAPHY

Books:
C R Kothari- Research Methodology (New Age International Publishers)

Annual Report OIL

Audit Manual OIL

OIL magazines

Internet:
www.wekipedia.com

www.oil-india.com

www.google.com

Summer training project report on Internal Audit Functions and its performance of OIL

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