National Thermal Power Corporation Limited

NATIONAL THERMAL POWER CORPORATION LIMITED
MANUAL ON INTERNAL AUDIT
November 2002
A.F. FERGUSON & CO.

NEW DELHI
CONTENTS
Chapter Subject Page No.
Introduction 1
1 Objectives of Internal Audit 2
2 Period to be covered by Internal Audit 3
3 Scope of Internal Audit 4
4 Extent of Checking 5
5 Conduct of Internal Audit and Issuance of 7
Reports
6 Follow up of reports and settlement of 9
Internal Audit Paras
7 System for ensuring compliance of 10

Internal Audit Observations
Audit Guidelines for

- Works including O&M Contracts 12
- Procurement 20
- Operations
(a) Review 22
(b) Coal 24
(c) Liquid Fuels 31
(d) Gas 38
(e) Statement of Fuel Particulars 40
- Accounts
(a) Verification of Vouchers 42
(b) Cash / Bank 43
(c) Works Accounts 45
(d) Suppliers Bills Accounts 47
(e) Stores PSL 48
(f) Establishment Accounts 49
(g) Commercial Accounts 52
Manual on Internal Audit 2

Chapter Subject Page No.
(h) Review of General and Sub-Ledger 56

(i) Loan Accounts 58
- Stores Department 60
- Human Resources Department 62
- Township 63
- Guest House 65
- Hospital 67
- Debtors for the Sale of Energy 69
- Invoicing of Sales 71
- Customs Duty and Port Trust Charges 72
- Auto Base & Construction Equipment 73

INTRODUCTION
This manual describes the system of internal audit to be followed

in NTPC, covering various aspects such as objectives of internal
audit, the period to be covered, the scope and extent of
checking, the procedure for conduct of audit, issuance of reports,
the follow-up of reports, settlement of paras and the system for
ensuring compliance of internal audit observations. Detailed
guidelines in respect of all the areas to be covered by internal
audit have also been included.
The internal audit system, as described in this manual shall be

subject to a review at an interval of five years. The guidelines /
checklists shall however be subject to an annual review.

Chapter 1
OBJECTIVES OF INTERNAL AUDIT
The broad objectives of Internal Audit shall be as under:
a) to ensure that the accounting and financial management

systems are reliable and effective in design and to assess the
extent to which they are being followed;
b) to review the efficacy, adequacy and application of accounting,

financial and operating controls and thereby ensuring the
accuracy of the books;
c) to verify that the system of Internal check is effective in

design and operation, in order to ensure the prevention of and
early detection of defalcations, frauds, misappropriations and
misapplications;
d) to identify areas of significant inefficiencies in existing

systems and to suggest necessary remedial measures;
e) to confirm the existence of financial propriety in all decisions

and verify compliance to Government and statutory
requirements;
f) to review the performance of various functions in the light of

performance budgeting and to suggest cost reduction
measures, if any;
g) to associate with Line Managers / HODs / Project Vigilance

etc. in their surprise checks and inspections whenever asked
for.

Chapter 2
PERIOD TO BE COVERED BY INTERNAL

AUDIT
The following principles shall be followed:
1. Internal audit should cover the accounts of the various

accounting units for a financial year.
2. All accounting units including Corporate Centre (SCOPE and

EOC, Noida), projects, stations, Regional Headquarters,
T&CC offices and other units/divisions shall be subject to
internal audit every year.
3. The internal audit shall be conducted in two phases. The

first phase of audit shall cover the first half of the financial
year (period from April to September), the report in respect
of which shall be submitted within two months of the end of
the half year. The remaining period (October to March) shall
be covered in the second phase audit, the report in respect
of which shall be submitted within one month from the end
of the financial year.

Chapter 3
SCOPE OF INTERNAL AUDIT

Internal audit in NTPC shall be as broad-based as possible and
will cover all the functions. List of functions to be covered (as
applicable) is given hereunder:
1. Works including O&M contracts (Pre-award and Execution)

2. Procurement – (Pre-award and Execution)
3. Accounts
4. Establishment
5. Stores
6. Auto Base and Construction Equipment
7. Township
8. Guest House
9. Hospital
10.Operations
11.Invoicing of Sales
12.Debtors for the Sale of Energy
13.Custom Duty & Port Charges
While conducting the internal audit, emphasis should be laid on

compliance of all the rules, regulations, policies and procedures
laid down in all the areas being audited. Compliance with the
relevant manuals, if any shall be verified as a matter of course.
Guidelines and checklists have been furnished for some of the

areas of attention in this manual. It is however emphasised that
the coverage and reporting should not be restricted to the
aspects mentioned in the guidelines alone. Professional expertise
and judgement will have to be exercised on all other areas and
aspects as well.
Apart from the areas covered above, special investigations as

entrusted from time to time by the Audit Committee, Committee
on Management Controls and the management shall also be
conducted and the findings/recommendations shall be submitted
to the appropriate authority.

Chapter 4
EXTENT OF CHECKING
Firstly, the coverage of internal audit is vast. Secondly, not all
the areas need to be checked to the extent of 100%. The extent
of check to be exercised in each area has been determined
keeping these two factors in mind. The extent of check of various
areas is given below:
Coverage
Sl.No A rea (in each
Phase)
1 WORKS INCLUDING O&M CONTRACTS (Pre-award and
execution)
(i) Contracts with value more than Rs.20 Lakh 100%
(ii ) Contracts with value Rs.20 Lakh or less 50%
(ii i) Also to comment on adequacy of the system
of placement of LOAs and execution of the
same as per Works and Procurement Policy
and various circulars
2 PROCUREMENT (Pre-award and execution)

i) Contracts with value more than Rs.20 Lakh 100%
ii) Contracts with value Rs.20 Lakh or less 50%
iii) Also to comment on adequacy of the system of
placement of POs and execution of the same as
per Works and Procurement Policy and various
circulars
3 ACCOUNTS
(i) Vouching – Cash Payment Vouchers 100%
(ii ) Vouching – Adjustment entries in Bank
accounts 100%
(ii i) Vouching – Bank Payment Vouchers 50% of

transactions
each month
(iv ) Vouching – Journal Vouchers 100%

(v) Also to verify entries in GL, Sub-ledgers and 100%
their review, Review of implementation of
Accounting Policies and Accounting
Standards

Coverage
Sl.No A rea (in each
Phase)
4 ESTABLISHMENT
(i) Test-checking of bills w.r.t rules and 50%
proprietary aspects
(ii ) Review of Subsidiary Records 100%
5 STORES
(i) Documentation and procedures 100%
(ii ) Accounting and Review of PSL and claim s 2 months
(incl. test verification of SRV valuation
(ii i) Accounting and Review of Suppliers’ Sub- 100%
ledgers
(iv ) Review of Returnable Gate-Pass system 100%
(v) Test-checking of suppliers’ bills w.r.t 100%
policies & circulars
6 AUTOBASE AND CONSTRUCTION EQUIPMENT

(i) Proprietary Aspects 100%
(ii ) Accounts 100%
7,8,9 TOWNSHIP, GUEST HOUSE AND HOSPITAL

(i) Proprietary Aspects 100%
(ii ) Accounts 100%
10 OPERATIONS
(i) PSL of Fuel 100%
(ii ) Verification of Fuel Price Adjustment 100%
(ii i) Review of Monthly Operating Results 100%
11 INVOICING OF SALES 100%
12 DEBTORS FOR THE SALE OF ENERGY 100%
13 CUSTOMS DUTY & PORT CHARGES 100%

C ha pt er 5
CONDUCT OF INTERNAL AUDIT AND

ISSUANCE OF REPORTS
The following principles shall be followed in the conduct of

internal audit and issuance of internal audit reports:
1. The audit shall be conducted in accordance with the

guidelines and checklists provided in the appendices to this
manual.
2. The results of audit should be discussed with Head of Finance

and the project in-charge in each phase and important
observations should be brought to their notice so that timely
corrective action may be taken at project / other accounting
unit.
3. The reports should be prepared after duly taking into account

the facts brought out in discussion.
4. Internal Audit Reports should be divided into three main

portions namely:
a) PART I: IMPORTANT OBSERVATIONS, OBJECTIONS

AND RESERVATIONS: This part should contain all such
irregularities which auditors want to bring to the notice
of management specifying the financial implications.
This part should also bring out deviations by site from
policies, systems and procedures prescribed by NTPC.
The observations should be arranged into self-contained
Audit Paras with a suitable title.
b) PART II: COMPLIANCE REPORT: A compliance report

should be given in this part on all important aspects.
This part should also contain actions taken for
rectification of errors pointed out in the audit report of
the previous year or by the current auditors in earlier
phase/phases. It should also contain the confirmations
by site regarding implementation of policies, systems
etc. to avoid the recurrence of such irregularities in
future.

c) PART III: DETAILED REPORT: This part shall
comprise of auditors’ points on confirmations on matters
or areas specified in the guidelines for audit. However,
non-compliance of the matters/areas specified in the
guidelines should be reported in Part I of the report.
5. The report should be supplemented, in each phase, by a

statement indicating:
(i) Particulars of records along with their volume and value

checked as compared to the total volume and value of
the transactions.
(ii) A summary report indicating the important observations

for each phase and for each area.
(iii) A statement indicating the audit personnel deployed,

their designation and the period of deployment for each
phase.
6. Observations in the internal audit reports should not be

general in nature. They should be specific and to the point,
adequately supported by instances of irregularities/ non-
compliance of rules, regulation, etc. Suggestions for
improvement may however be given wherever possible.

C ha pt er 6
FOLLOW-UP OF REPORTS AND SETTLEMENT

OF INTERNAL AUDIT PARAS
The following principles shall be followed in the follow-up of

internal audit reports and settlement of internal audit paras:
1. After the audit is over, the internal audit reports shall be sent
to the accounting units seeking their compliance/ replies to
the audit observations.
2. Replies to internal audit observations shall be furnished by

sites only after approval by the head of the project/ station/
office.
3. The replies furnished by the sites shall be examined by the

Corporate Internal Audit Department. Individual paras shall be
settled if the sites have either intimated compliance with the
observations or have furnished satisfactory explanation. The
paras where action is yet to be reported or the explanation is
unsatisfactory shall be sent back to units with further
comments for compliance / further replies.
4. These further replies shall be examined by Corporate Internal

Audit Department. Action as in (2) above shall be repeated till
the settlement of all paras in an audit report.
5. The reports shall be reviewed from time to time with a view to

monitor the compliance of compliable points and status of
those which need explanation and remedial action.

C ha pt er 7
SYSTEM FOR ENSURING COMPLIANCE OF

INTERNAL AUDIT OBSERVATIONS
There exists a three-tier arrangement for ensuring compliance of
internal audit paras in NTPC. There is a system of holding
regional internal audit meetings co-chaired by Executive Director
(Finance) and Executive Director of the region. Secondly,
Chairman and Managing Director reviews the working of the
internal audit function regularly. A Board level committee meets
at least four times in a year to review all aspects of the
corporation’s working. Outstanding internal audit paras are a part
of the agenda of all these meetings. The system to be followed in
respect of such reviews is given below:
A. REGIONAL INTERNAL AUDIT MEETINGS
All outstanding paras shall be discussed in Regional Internal

Audit meetings, which shall be held annually, under the joint
chairmanship of Executive Director (Finance) and Executive
Director of the region. These meetings shall be attended by
representatives of Corporate Internal Audit, heads of units and
other offices within that region, heads of Finance and other
departments concerned. Agenda for these meetings shall include
complete details of all internal audit paras outstanding. Paras in
respect of which sites report compliance or have furnished
satisfactory replies shall be settled at the meetings. The
decisions taken at the meetings shall be taken up for
implementation / action as necessary. Action taken with regard to
decisions of earlier meetings shall be reported in the agenda of
subsequent meetings.
B. REVIEW BY CHAIRMAN AND MANAGING DIRECTOR
There is a system of review of functioning of the Internal Audit

Department regularly by the CMD. In this context, the following
items shall be included in the agenda for such meetings:
a) status of outstanding internal audit paras including the age

analysis;
b) status of conduct of internal audit of the current year;
c) details of action taken on decisions of CMD in earlier
meetings;
d) important observations from internal audit reports that
need to be brought to the notice of CMD.

The decisions taken by Chairman and Managing Director shall be
taken up for implementation / action as necessary.
C. COMMITTEE ON MANAGEMENT CONTROLS
The review of the status of internal audit and the outstanding

internal audit paras falls within the terms of reference of the
Committee on Management Controls. In this context, the
details of internal audit paras outstanding for more than two
years shall be included in the agenda for the meetings of the
committee, apart from the status of various aspects of the
internal audit function. The decisions / instructions and views of
the committee shall be taken up for implementation / action as
necessary. Action taken with regard to decisions of earlier
meetings shall be reported in the agenda of subsequent
meetings.

GUIDELINES FOR INTERNAL AUDIT
WORKS INCLUDING O&M CONTRACTS

A. PRE AWARD- General guidelines
a) Examine whether an approved list of contractors has been

drawn up, reviewed and updated once every three years as
provided in the Works and Procurement Policy.
b) Examine the incidence and reasonableness of single tender

awards
B. PRE AWARD- Checks to be exercised in respect of

files selected for examination
a) Examine whether estimates have been properly made out

and award values compared with estimates. Ascertain
whether reasonability is established before award of
contract.
b) Examine whether all parties selected for tendering hold

valid labour license, PF / sales tax registrations etc., as
applicable.
c) Ascertain whether all tendering procedures like invitation

of bids, the requirement of EMD/Bid security, specifying
bid opening date in the IFB, maintenance of tender box,
Certification by Finance of tender opening, formation of
the tender committee etc. has been followed in all cases.
d) Analyse and comment on the reasonableness of the

justification given in single tender cases.
e) Ascertain whether financial capabilities of tenderers have

been properly assessed and award of contract made to
financially sound and capable parties.
f) Verify whether the comparative statement which shows the

evaluation of the tenders has been drawn up correctly.
Examine whether non-responsive tenders have been
considered for bid-evaluation. Further, examine whether
deviations taken by the tenderers have been properly
loaded for evaluation of the bids.
g) Examine the cases where the lowest evaluated

commercially and technically responsive tenders have been

overlooked and whether the same are justifiable. Highlight
cases where the same are not considered reasonable.
Internal Auditors will also verify and report on the
compliance with G.O No.98/ORD/1 dated 24.8.2000 issued
by the Central Vigilance Commission.
h) Verify whether the Delegation of Powers have been

followed strictly at all stages – i.e., at the time of
administrative approval, calling for tenders, formation of
the tender committee, calling for negotiation and approval
of the award.
i) Examine whether awards were made after relaxing the

qualifying requirements (QR), particularly after opening of
the bids.
j) Examine whether there has been a delay in processing the

awards having financial implication to the company.
k) Examine whether the unit has complied with circulars

issued from time to time with regard to purchase
preference to bids from central PSEs and joint ventures
with PSEs.
l) Examine whether any post-bid letters/ communication have

been considered for the purpose of evaluation of bids.
Each case is to be reported.
m) Examine whether vetting of the letter of award has been

effected in accordance with systems circular of Corporate
Finance (ref: 02/2000, dated 17.02.2002)
C. EXECUTION:
a) Verify whether initial advance, interim advance,

mobilisation advance etc. have been released in
accordance with provisions of the LOA and have been
given with approval of Competent Authority and the same
are being adjusted regularly from the running account
(R/A) bills.
b) (i) Test check running account bills submitted by the

contractors for various works verifying: -
• the payments due in line with rates provided in the
contract and the quantity recorded in the
Measurement Book,

• recoveries on account of income-tax/ works tax
deducted at source,
• materials issued on loan,
• retention of liquidated damages in case of delays,
• recovery for excess consumption of construction
materials etc.,
• certificate from Field Quality Assurance (FQA),
wherever applicable,
• material reconciliation statement,
• examine on test verification, whether escalations bills
are paid as per applicable indices, with reference to
the formulae mentioned in LOA.
• recoveries on account of rent, electricity, hire charges
on equipment etc.
• approval of Competent Authority has been obtained.
(ii) Verify the net payments released in line with the above
and comment on deviations from provisions of LOA.
c) Review the postings in the job cost cards, WIP ledger etc.
with reference to the work executed for the various
contracts executed and under execution and comment on
findings. Comment on the works on which there has been
no progress for a long period.
d) Examine the reasonableness of insurance coverage and

indemnity bonds furnished by the contractors for adequacy
and renewal for material issued to them.
e) Review the Bank Guarantee Register and identify cases of

expired Bank Guarantees. Ascertain and comment on the
action taken for revalidation of expired Bank Guarantees
and also verify the compliance to rules regarding release,
invocation etc. Highlight details of the cases where
recoveries could not be effected due to inability to invoke
Bank Guarantees.
f) Review in detail, on the basis of approval notes, letter of

award, bill of quantities, for compliance to Works and
Procurement Policy and Delegation of Powers, the
payments on account of escalation and extra claims due
to:
(i) Changes in item rates/duties/Taxes.

(ii) Changes in quantities executed.
(iii) Changes in scope of work.
(iv) Changes in payment terms.

g) Review in detail, the release of any advances against
hypothecation of equipments, secured advance payment
against despatch under L/C and otherwise, payments
against receipt at site, final payments after PG test and
Payment of erection price / Civil works in line with Letter
of Award, General Conditions of Contract, approval notes
and performance reports of contractors.
h) Review in detail the release and adjustment of any

advances not provided for in the LOA.
i) Verify whether material lying with Contractors have been

taken over in time after execution of the contract.
Highlight cases of materials not taken over.
j) Verify whether recoveries have been effected, for

equipment hired out and materials issued, at higher rates
as specified in the relevant guidelines, where the same has
not been provided in the contract.
k) Verify whether hiring of construction equipment and issue

of material has been done with the approval of the
Competent Authority.
l) Examine whether liquidated damages have been levied for

delays in completion of the works and/or deviations from
prescribed performance parameters. If leviable liquidated
damages are waived, whether the reasons recorded for
waiver are justifiable
m) With respect to Supply Contracts examine whether supplies

have been effected as provided in the schedule of supply
sequentially and comment on cases of delay on this
account.
n) Review and comment on the progress of completion of

various contracts completed and those under execution
with reference to scheduled completion periods provided in
the respective contracts.
o) Analyse the pending final bills and comment on their

pendency along with reasons.
p) Review of closed contracts: Examine whether contract

closing is done in accordance with the existing system and
whether proper recoveries have been made in respect of
any relaxations in the conditions of the LOA. (Examples-
waiver of specific tests; excess consumption of steel and

cement; relaxation of specifications for the materials, etc.)
Indicate the status of contract closing for all contracts due
for closure.
q) Examine all awards placed on post facto basis and

comment thereon.

PROCUREMENT
A. General guidelines
a) Examine whether an approved list of suppliers has been

drawn up, reviewed and updated once every three years as
provided in the Works and Procurement Policy.
b) Examine the incidence and reasonableness of single tender

awards.
B. Checks to be exercised in respect of files selected for

examination
a) Examine the basis adopted for determining the quantities to

be procured from the point of view of their availability in
stores/other projects, quantity discounts etc.
b) Ascertain whether all tendering procedures like invitation of

bids, the requirement of EMD/Bid security, specifying bid
opening date in the IFB, maintenance of tender box,
Certification by Finance of tender opening, formation of the
tender committee etc. has been followed in all cases.
c) Verify whether the comparative statement which shows the

evaluation of the tenders has been drawn up correctly and
has been signed by representatives of both Materials and
Finance Departments. Examine whether late tenders /
delayed tenders and post-bid offers have been accepted.
d) Examine the cases where the lowest evaluated commercially

and technically responsive tenders have been overlooked and
whether the same are justifiable. Highlight cases where the
same are not considered reasonable. Internal Auditors will
also verify and report on the compliance with G.O
No.98/ORD/1 dated 24.8.2000 issued by the Central Vigilance
Commission.
e) Examine whether non-responsive tenders have been

considered for bid-evaluation. Further, examine whether
deviations taken by the tenderers have been properly loaded
for evaluation of the bids.

f) Examine whether proprietary and standardised purchases
have been properly regulated as provided in the Procurement
Policy. Comment on the reasonableness of the rates against
proprietary and standardised purchases.
g) Highlight cases of increased cost due to delay in processing

of purchase indents.
h) Analyse the reasonableness of the justification furnished in

single tender cases.
i) Examine whether the actual cost compared with the

estimates and their reasonableness established before
placing purchase orders. Highlight cases of substantial
variations between award values and estimates not supported
by price justification.
j) Examine whether proprietary Article Certificates have been

issued in line with the Works and Procurement Policy.
k) Examine the cases of repeat orders for compliance to the Delegation of

Powers and quantities to be procured. Comment on incidence of
such repeat orders.
l) Examine the payments for supplies in line with the terms of

payment as per the purchase order and highlight the
deviations on this account.
m) Examine all cases of purchase order placed on post facto

basis.
n) Examine whether claims for liquidated damages for delay in

supplies / shortfall in performance of various equipments
compared to guaranteed parameters have been lodged and
realised in time in full.
o) Verify whether the Delegation of Powers have been followed

strictly at all stages i.e., at the time of administrative
approval, calling for tenders, formation of tender committee,
calling for negotiation & approval for placement of purchase
order.
p) Examine whether the unit has complied with circulars issued

from time to time with regard to purchase preference to bids
from central PSEs and joint ventures with PSEs.

OPERATIONS
1. REVIEW OF OPERATIONS
a) From the monthly generation data, review the actual

physical parameters – Availability Factor, Generation, Plant
Load Factor, Auxiliary Power Consumption percentage,
Heat Rate from each source (coal, oil, gas) and Specific Oil
Consumption in the case of coal stations, with reference to
budget, previous year’s actuals and tariff parameters.
b) Comment on the adverse variances, bringing out the

financial implications of such adverse variances and the
reasons contributing thereto.
c) Review the minutes of the Operations Review Team (ORT)

meetings and comment on any abnormalities.
2. OTHER ITEMS TO BE CHECKED
a) Examine whether stores records for all operational inputs

and spares have been properly maintained and comment
on findings on this account.
b) Examine whether scrap, by-products arising from

operations and other obsolete / non-moving items of
operational activities have been identified and duly
disposed off.
c) Examine and comment on the effectiveness of cost control

measures. Suggest specific steps for their improvement.
d) ENERGY SENT OUT: Test check the figures of energy sent

out and auxiliary power consumption with reference to the
logbooks maintained at respective places. Verify
calibration reports of various meters.
e) Comment on the findings in the internal audit programme

of coal, liquid fuel(s) and gas.
f) Compare the maintenance schedules in terms of number of

days as planned with actual maintenance as done.

Examine the adverse variances and corrective action taken
in these cases.
g) Examine and comment on the control maintained by the

project over replacement of high value spares and replaced
items as indicated in the respective log-books. Examine
whether the actual life of spares is as per the norms given
by the supplier. Examine and comment upon the
corrective/recovery action taken by the unit in case of
deficiencies.
h) Examine records maintained in the sub-stores and

comment on abnormalities.
i) Verify the procedure for drawal of the sample at the

consumption end to arrive at calorific value of coal on fired
basis. Test check calculations made for determining monthly
calorific value of coal on fired basis used for the purpose of
billing.

OPERATIONS – FUEL – COAL
A. RECEIPTS
a) Test check, for each method of delivery, whether proper
weighments have been undertaken throughout the period.
b) For each weighment, ensure adequate supporting

documentation e.g., weighbridge print-out [road/rail] train
reception report, bill of loading and unloading details.
Ensure consistency of tare weights for comparable types of
delivery. Examine whether the weighbridges are being
calibrated as per the provisions of coal supply agreements.
Also examine whether quantities of coal supplied are
ascertained in line with coal supply agreements in case the
weighing machines are out of order.
c) Assess the accuracy of advised quantities by test checking,

for each method of delivery, the suppliers’
advice/delivery notes against weighbridge print-outs.
Ensure that all differences in weights are recorded and
that receipt documents have been signed by the
appropriate official.
d) Compare quantities shown on suppliers’ and haulers’

invoices with advice notes.
e) Test check prices charged for fuel and transport with Fuel
Price Bulletins.
f) Examine records relating to claims for short

weights/deliveries and missing wagons. Ascertain whether
all such claims have been pursued to a proper
conclusion and settlement. Investigate and report where
this has not been done. In case of claims against railways
not settled within the period prescribed under rules,
examine whether these claims have been taken up for
approval to the railway claims tribunal.
g) Ascertain the adequacy and integrity of the coal sampling

procedure both as regards calorific value and for other
specified requirements. The sampling procedure should be
as per provisions of the coal supply agreements. Ensure
that an adequate number of representative samples have
been taken from each source of supply.

h) (i) Check results of sampling evaluation with advices to
Coal Handling/Coal Efficiency Cell under O&M Deptt. of
the Project.
(ii) Compare sampling results with supplier’s analysis.
(iii) Ensure that appropriate adjustments have been made

in accordance with the sampling results or adequate
explanations have been recorded where no action has
been taken. Calculate the GCV on receipt basis and
compare it with GCV on fired basis.
i) Examine the weighing and sampling equipment

maintenance records for frequency of checks and ascertain
whether corrective action has been taken wherever
necessary.
j) To check the implementation of provisions of Coal Supply

Agreements with regard to lodging and realisation of
claims against coal companies for stones / extraneous
materials and excessive moisture content, if any.
k) Examine whether payments are released strictly in

accordance with the provisions of the coal supply
agreements.
l) Examine whether the procedure as specified is complied

with for ascertainment of the weight of coal at the
receiving end.
m) Verify whether calibration of the equipment used for such

weighment is being done periodically.
B. CONSUMPTION:
a) Assess the adequacy of the system of obtaining the figure
for Fuel Consumption and the circumstances in which any
alternative methods are used.
b) Test check entries in Fuel Register from records of

gravimetric feeder belts readings, delivery advices or other
records. Examine whether periodical calibration of
gravimetric feeder belts is being carried out.
c) Enquire into and record explanations for adjustments made

to weigher readings or other records.

d) Confirm that there is a satisfactory method for calculating
and adjusting for changes in bunker stock levels.
C. RECORDS:
a) Test check posting of fuel delivery advices into station fuel

records.
b) Test check posting of coal deliveries in the stock register.
c) Ascertain figures for “coal in transit”. Enquire into and

record, any long outstanding items.
d) Examine whether physical stock verification is being done

in accordance with the system laid down in this regard and
that discrepancies found on such verifications are being
investigated into.
e) Check the quantities in SRVs with reference to station fuel

records.

INTERNAL CONTROL QUESTIONNAIRE: COAL
1. GENERAL:
(1.1) Obtain diagrams of coal plant and stocking areas including

directional diagram of conveyors and location of weighing
and sampling equipments.
(1.2) Ascertain the organisation of the fuel section:
2. R ECE I PTS :
SL.No Particulars Yes No Comments
(2.1) Is coal received by
a) water transport
b) Road
c) Railway wagons
d) Merry Go Round Systems
(2.2) Is coal received from Govt.

Collieries or other suppliers?
(2.3) Is all coal weighed on receipt

[complete weighbridge control
questionnaire]?
(2.4) Are visual checks for contents of

delivery vehicles undertaken both
before and after delivery?
(2.5) Are regular checks undertaken in

order to verify the security and
accuracy of the weighing system?
(2.6) Is an individual record of advised

delivery kept?
(2.7) Are such records checked against

weighment tickets for all deliveries?
(2.8) Are all differences in weights

recorded?
(2.9) Are claims made for shorts

weights/deliveries?
(2.10) Are all such claims pursued to a

proper conclusion?

Sl.No Particulars Yes No Comments
(2.11) Are price bulletins received and that
these are used for checking prices
charged?
(2.12) Are there procedural instructions
regarding the collection of coal
samples?
(2.13) Have arrangements been made to

ensure that adequate numbers of
representative samples have been
taken from all sources of supply?
(2.14) Are the results of sampling

evaluations correctly and promptly
advised to Coal Efficiency Cell under
the O&M Deptt. of the project.
3. CONSUMPTION:

(3.1) Are figures for coal consumed
obtained from belt-weigher readings?
(3.2) Are belt weighers regularly

maintained and checked?
(3.3) Are adjustments made to weigher

readings, properly authorised?
(3.4) Are bunker stock levels taken into

consideration in determining the
amount of coal consumed?
(3.5) Is there a satisfactory method for

accurate assessment of bunker stock
levels?

4. RECORDS:

(4.1) Is information from prime documents
like invoice/delivery advices posted
promptly to
memorandum coal records?
(4.2) Are coal receipts and consumption

accounted for in accordance with the
laid down procedures?
(4.3) Are records maintained which show

quantity of coal-in-transit?
(4.4) Is there a system for ensuring that

claims are lodged for all long
outstanding items?
(4.5) Are records maintained to enable

wagon standage or other
extraneous charges to be checked?
(4.6) Are memorandum coal records

reconciled with Coal Stock A/C in the
Financial Ledger at the end of each
Financial Review period?

5. STOCKS:

(5.1) Are coal stocks physically verified at
frequent intervals?
(5.2) Is there an official annual physical

stock verification arranged
independently?
(5.3) Is there a prescribed method for

determining stock densities?
(5.4) Are densities determined

independently of the location?
(i) During official annual verification

(ii) During other verifications.
(5.5) Are quantities as established by

physical verification compared with
book stocks?
(5.6) Are stock discrepancies investigated

and adjusted in the books after
approval of Competent Authority?

OPERATIONS – LIQUID FUELS
A. RECEIPTS:
a) Ensure that the procedure being followed in respect of
receipt, unloading, issue and accountal of liquid fuels is in
conformity with the system laid down in this regard.
b) Scrutinize the available documentary evidence to ensure

that proper checks on quantities have been undertaken as
mentioned in the above-mentioned circular at the location
in respect of all methods of delivery and ensure that
receipt documents have been duly signed by appropriate
employees.
c) Where weighment has been undertaken, test, deliveries

with weigh tickets and test check conversion of weights
to volume. Consider whether the conversion factor used is
appropriate. Examine tare weights of similar vehicles for
inconsistencies.
d) Test check, for each method of delivery, suppliers’

advice/delivery notes against meter readings, record of
tank dips, vehicle capacities or other available evidence.
Confirm that any differences in volume have been recorded
and the reasons ascertained.
e) Verify that all delivery advices have been signed, both on

behalf of NTPC and of the suppliers, at the points of
discharge.
f) Compare quantities shown on supplier’s invoices with

advice notes.
g) Test Check prices charged with suppliers agreed prices.
h) Examine records relating to claims for short

weights/deliveries, missing wagons and the temperature
Variance. Ascertain whether all such claims have been
pursued to finality. Investigate and report on cases where
not done. In case of claims against railways not settled
within the period prescribed under rules, examine whether
these claims have been taken up for approval to the
railway claims tribunal.

i) Ascertain the adequacy and integrity of the sampling
procedures. Check that appropriate action has been taken
where quality differs from specification. Calculate the GCV
on receipt basis and compare it with GCV on fired basis.
j) Witness the delivery procedures for weighing, discharge,
measurement and sampling of oil and comment on
findings.
k) To check the implementation of provisions of Purchase

Orders with regard to lodging and realisation of claims
with oil companies for shortages etc.
l) Examine whether payments are released strictly in

accordance with the provisions of the Purchase Orders.
m) Check the reconciliation of accounts with oil suppliers.
B. CONSUMPTION:
a) Assess the adequacy of the system of obtaining the fuel
consumption figure and the circumstances in which any
alternative methods are used.
b) Test check entries in Fuel Register from records of meter

readings or other available records.
c) Enquire into and record explanations for adjustment made

to consumption records.
d) Ascertain that each grade of oil has only been used for the
purpose for which it was purchased.
C. RECORDS:
a) Test check postings of delivery advices to station fuel
records and Priced Stores Ledgers. Test check valuation of
SRVs with reference to base records.
b) Test check allocation between oil used for generation and

for non-generation purposes.
c) Ascertain figures for oil in transit. Enquire into and record

any long outstanding items.
d) Enquire into and verify all price adjustments. Enquire into

reasons for any extraneous charges raised.

e) Reconcile Ledger Balance of Oil Stock Account at the end
of the previous review period with the Memorandum Oil
Records.
f) Examine records relating to wagon standage and other

extraneous charges. Enquire into reasons for excessive
expenditure/charges.
D. STOCKS:
a) Examine records relating to stock verification. Ensure that
all stocks have been surveyed.
b) Ascertain the method of determining stock density and

confirm that the method and figures have been arrived at
as per the guidelines issued by Corporate Centre.
c) Check conversion of volume and density to weight and

relate the same to book stock figure.
d) Check that physical verification results have been sent to

officials concerned at Corporate Centre.
e) Confirm that appropriate adjustments are being made

where the stock as verified differs significantly from the
book stock, after approval of the Competent Authority.

INTERNAL CONTROL QUESTIONNAIRE: LIQUID FUELS
1. GENERAL:
(1.1) Obtain details of grades of oil stocked and the purpose for
which each grade is purchased.
(1.2) Obtain details of storage tank capacity, flow diagrams,

measuring devices and relevant working instructions.
2. DELIVERIES:
(2.1) Is oil received by :
(a) Road
(b) Rail
(c) Pipeline
(d) Water.
(2.2) Is more than one grade of oil

received?
(2.3) Is each delivery checked as to the

commodity to be discharged?
(2.3.1) Does this agree with that entered on

the delivery advice?
(2.4) Are all inlet points clearly marked as

to the grade of oil to be off-loaded?
(2.5) Are all inlet points kept locked when

not in use?
(2.6) Are deliveries made into an isolated

storage tank?
(2.6.1) Are storage tank levels taken both

before and after delivery?
(2.7) Control checks:

Are deliveries checked with
capacities of delivery vehicles?
(2.8) Are dipstick readings for all

compartments checked from the top
of the delivery vehicle/tanker?

(2.8.1) Are records of such readings
maintained?
(2.9) Are delivered quantities metered?
(2.10) Are vehicles check-weighed, gross

[before] and tare [after] delivery?
(2.11) Are suppliers delivery advices

checked for conversion of
weights/volume determined above?
(2.11.1) Have the correct conversion factors

been used in making the above
checks?
(2.12) Are differences in quantities

recorded, compared with invoices
and claims made for shortages?
(2.12.1) Are all such claims pursued to a

proper conclusion?
(2.13) Are notifications of price chargeable

received from the appropriate
departments?
(2.13.1) Are these used for checking prices

charged?
(2.14) Are samples collected in accordance

with the procedures laid for
evaluation against specification?
(2.15) Are the results of sampling

evaluations recorded and checked
against the specification?
(2.15.1) Are any differences advised promptly

to the supplier?
(2.15.2) Are all such differences pursued to a

proper conclusion?

CHECKS APPLICABLE TO ROAD BORNE VEHICLES :
(2.16) Are vehicle discharge valves left

open after delivery?
CHECKS APPLICABLE TO RAIL DELIVERIES:

(2.17) Is it ensured that each tank car is
appropriately documented on arrival
of train?
(2.18) Is train documentation collected for
comparison with consignment advice
notes?
CHECKS APPLICABLE TO PIPELINE DELIVERY:
(2.19) Are appropriate meters maintained

to an approved standard?
(2.20) Are meter readings checked before

and after delivery and are reconciled
with advised quantities?
3. CONSUMPTION:
Sl.No Particulars Yes No Comm en ts

(3.1) Is consumption determined by:
a) Meter readings.
b) Changes in tank level.
(3.2) Is all metering equipment regularly

maintained, checked and the results
of such checks recorded?
(3.3) Are any adjustments made to

consumption records properly
authorised?
(3.4) Are there adequate methods for

determining quantities consumed
other than by generation?

4. RECORDS:
Sl.No Particulars Yes No Comm en ts
(4.1) Is information from prime documents
i.e. invoice/delivery/ advices, posted
promptly in the memorandum oil
records?
(4.2) Are records maintained which
differentiate between oil used for
generation and oil consumed for other
purposes?
(4.3) Are records maintained which show

the quantity of oil in transit?
(4.4) Are memorandum oil stock records

reconciled with oil stock account in the
Financial Ledger at the end of each
Financial Review Period?
(4.5) Are physical stocks reconciled with

memorandum oil stocks at stated
intervals [indicate frequency]?
(4.5.1) Are all differences explained and

Recorded?
(4.6) Is supplier responsible for all costs of

operating/maintaining the pipeline?
[Refer to appropriate contract]?

OPERATIONS – FUEL – GAS
a) Check whether the purchase of gas has been accounted

and paid for on the basis of properly authenticated meter
readings and records.
b) Compare the standard heat rate level of gas indicated by

suppliers modified to local site conditions with actual heat
rate achieved. Analyse and comment on variances.
Comment on the follow-up with suppliers.
c) Ascertain the number of instances of payment of Minimum

Guaranteed Off-take (MGO) charges paid to GAIL due to
short consumption of gas and examine the corrective
action taken to reduce such cases.
d) Compare the standard norms of generation based on

standard consumption of gas with actual generation
achieved at actual consumption of gas. Highlight cases of
systems losses/ deficiencies.
e) Examine and comment on the standby arrangement made

by the project to stock substitute fuels like NAPTHA / HSD.
f) Ascertain instances of loss in generation due to grid

restrictions and non-availability of gas. Examine and
comment on corrective action initiated.
g) Gas supply agreements provide for measurement of gas

supply as well as computation of calorific value and
provide for certain rebates. In case calorific value of gas
supply is lower, examine whether the provisions are
actually being implemented.
h) Verify the method of computation of the Net Calorific

Value (NCV) of gas used for the purpose of billing.
i) Test check the payments for pipeline maintenance and

operation in accordance with the relevant contract.

j) Examine meter records maintenance for frequency of checks
and ascertain that corrective action has been taken where
necessary.

STATEMENT OF FUEL PARTICULARS
COAL/LIQUID FUEL /GAS/NAPHTHA
S.no Description Unit Q u ant i t y Value

A. STOCK POSITION AS ON:
1. Opening Balance MT/KL

2. Receipts - do-
3. Consumption - do-
4. Closing Balance - do-
5. Handling Loss - do-
B. ANALYSIS OF GCV
1. GCV on Receipt Basis KC AL/Kg

2. GCV on Fired Basis KC AL/Kg
3. Variation KC AL/Kg
C. COMPARISON WITH TARIFF
1. Heat Input from Coal/Gas/ KCAL/Kg

Naphtha KCAL/ML
2. Cost per MT/KL/SCM Rs.
3. Heat Rate from Coal /Oil/ Kg. /Kwh

Gas/Naphtha ML/Kwh
4. Tariff Norms for Coal/Oil/ Kg. /Kwh

Gas/ Naphtha ML/Kwh
5. Variation -- do --
D. COAL/OIL/ COST
1. Recovery through Tariff R s. / L ak h

2. Actual Cost [consumption] - - d o --
3. Over/under recoveries - - d o --
- --- --- --- -- --- --- --- -- --- --- --- -- --- --- --- -- --- --- --- -- --- --- --- -- --- -
Note: The Statement may be prepared separately for coal, oil
(including naphtha) and gas.

NOTES
1. Ensure that all Weightometers are kept under working

condition and defective Weightometers are rectified or
replaced.
2. Calibrate the Weightometer readings for each Mill at least

once in a month.
3. Determine the correction factor and apply 50% of

Correction factor for coal consumption recorded between
two consecutive calibrations for computing the correct coal
consumption through that Mill.
4. Compute pro-rata coal consumption for the Weightometer

going out of order with the readings of adjacent
Weightometers of the same boiler as base.

ACCOUNTS
A. VERIFICATION OF VOUCHERS
a) Verify all the vouchers are signed by two persons, one of

whom shall be an executive authorised to approve the
voucher.
b) Verify whether adequate genuine supporting documents

are enclosed with the payment vouchers. A sample list of
supporting documents which can be enclosed is as below :
i) Invoice copy and copy of P.O in case of purchase

orders.
ii) Approval of Competent Authority and relevant bills in
case of miscellaneous payments.
iii) Copy of payment order recorded in the measurement
book in case of works payments.
iv) Sanction Order or advance application duly approved in
case of employee advances
c) Verify whether the word “authorised for payment” is being

included in the place of “approved by” in the format of
Cash & Bank Payment Voucher.
d) Verify whether name of the party in whose favour DD is to be

drawn or the number of LSC are mentioned on the cheques drawn for
obtaining DD or LSC
for e.g. “Yourselves” LSC No.1234

“Yourselves” DD in favour of BHEL
e) In case of miscellaneous payments in foreign currency, the

instruction letters to the Bank shall be entered in a
control register after being control serially and on receipt
of DD or debit advice from the bank the same should be
crossed checked with the control register. Verify whether
the same procedure is being followed.

f) Verify whether adjustment vouchers for other direct debits
than commission/ bank charges, interest, conveyance
charges and LC payments are approved by HOD(Finance).
g) Verify whether the Indian agent’s commission under
foreign LCs are paid against the claims submitted by the
party and bill submitted by the Materials Deptt./Contracts
Deptt.
h) Verify whether the payer’s name mentioned in the bank

receipt voucher prepared by the concerned department is
as per the receipt scroll.
i) Verify whether the payment of any liability unpaid for more

than three years has the approval of the Head of Project.
j) Examine whether all the Cash / Bank Payment Vouchers

are serially numbered.
k) Examine whether the Bank Adjustment Vouchers are also

supported by genuine documentary evidence in addition to
advices from Banks. Verify the accuracy of the amounts
directly debited to the bank account. (Example: whether
proper exchange rates/ commission have been applied,
name of the beneficiary being mentioned etc.)
B. CASH / BANK
(a) Examine whether the Cash Tally Sheets are being made
daily before closing of the cash book to ensure that the
physical cash balance tallies with the balance as per cash
book. Verify whether the cash tally sheets are being
approved by Competent Authority.
(b) Verify whether the system of surprise cash verification is

being followed or not. The internal auditor should also
conduct surprise cash verification on one day during each
phase of internal audit.
(c) Examine and comment whether cheques Inward and

Outward Register has been maintained properly.
(d) Review the insurance cover of cash for adequacy and

currency of coverage.
(e) Examine whether Cash Payment Vouchers and Bank Payment

Vouchers have been approved by competent authorities and

they contain the signatures of two executives as provided in
the Financial Accounting System Manual.
(f) Examine whether the cash and bank balances being

maintained by the unit are in excess of normal requirements
of the unit.
(g) Examine whether the unit is maintaining LC margins with

banks in violation of instructions issued by Corporate
Centre.
(h) Verify that the unit is conforming to Corporate Finance

Circular with regard to the custody and issue of unused
cheques conforming to the following:
i) All cheque books drawn from the banks should be

entered in the register maintained for this purpose.
ii) All cheque books should be kept in the cash chest and
handled by the cashier/accountant and the officer in
charge of the cash and bank section.
iii) Section in-charge of the cash and bank section shall
conduct checks from time to time of the safe keeping
and record of unused cheque books.
iv) The cheques must be kept in a place of security under
lock and key. It is advised that it is periodically
verified whether all unused forms are intact and
promptly intimated to the bank the loss, if any, of the
unused cheque forms / cheque requisition slips.
v) The cheques contained in the cheque book shall be
counted before using any of them.
vi) At the time of closure or transfer of bank account, all
unused cheques and cheque book requisition forms
should always be returned to the bank after cancelling
them.
vii) Indelible ink/ reverse carbon / cheque protectograph /
pinpoint typewriter should be used wherever possible
to prevent unauthorised alterations.
viii) Blank cheques should not be given to anyone.
ix) All alterations on the cheques must be confirmed by
the full signature of the drawer.
(i) Examine whether the payments by Demand Drafts have

been approved by competent authority.
(j) With regard to Bank Reconciliation, verify the following:
i) That Bank reconciliation is being done during the first

week of the following month.

ii) Whether all debits and credits made by the bank have
been duly identified and accounted.
iii) Examine the amounts debited by Banks towards L/C
charges etc. are in line with the applicable rates.
iv) Examine whether there is undue delay in realization of
cheques deposited in the Bank.
v) Comment on old outstanding items along with reasons.
C. W OR KS A C COU NTS
While conducting the audit internal auditors should verify the

following:
(a) Whether release of initial advance, mobilisation advance,

secured advance, advance against materials brought to the
site by the contractor, have been released with reference to
the terms and conditions of the contract and with the
approval of the competent authority after it has been duly
signed by the Engineer In-charge.
(b) Test check of the running accounts bills with reference to

the Measurement Book. Test check the computation of the
quantities mentioned in the Measurement Book.
(c) Test check the amount due with reference to the rates
provided for the LOA/billing break-up and quantities
mentioned in the Measurement Book.
(d) Whether the payments are released after obtaining time

extension where needed.
(e) Recovery of various advances like initial advance,

mobilisation advance, interim advance, materials brought to
the site etc.
(f) Reasonableness of the insurance coverage as per the terms

of LOA and indemnity bonds by the contractor, to cover the
value of material issued to them.
(g) Review the bank guarantee (B.G) register and identify cases
of expired B.Gs.
(h) Report on the lapses of action taken for the revalidation of

the expired B.Gs. or lodging and realisation of the claim
before expiry of the BG.

(i) Highlight the details of the cases where recoveries could not
be effected due to inability to invoke BG.
(j) Payment of account of escalation and extra claims due to -
(i) Changes in items rates/duties/Taxes

(ii) Changes in quantities executed.
(iii) Changes in scope of work
(iv) Changes in payment terms
(k) That final payments have been made after Performance

Guarantee (P.G) test and payment of erection price/civil
works in line with letter of award, general conditions of the
contract and have been made after obtaining necessary
approvals. Also verify that material reconciliation statement
has been prepared and necessary recoveries have been
effected before releasing the final payments.
(l) Posting of materials issued on loan account, free issue

material from the Issue Journal.
(m) Whether sub ledgers (contractors’ advances, materials

issued on loan and free issue material) are tallied with
general ledger. Old outstandings should be reported.
(n) Whether adjustments are being made from the running bills
on account of materials issued on loan.
(o) Whether monthly statement recovery on account of hiring of

construction equipment, rental and electricity charges
towards accommodation given to the contractors on
chargeable basis and hospital charges are being received
from the respective department and the same are being
recovered from the contractor. List out old outstanding and
comments on the same.
(p) Wherever Liquidated Damages (L.D) leviable on the

contractor on account of delay in completion of the
works/deviation from the prescribed performance meters
has been waived, whether the reasons recorded for waiver
are justifiable.
(q) Whether income tax/works tax is deducted at source as per

the prescribed rates and the same is being deposited in
time. Whether TDS certificates are being issued as per the
provision of the Income Tax Act.

(r) Whether all provisions for expenses and capital liabilities
have been duly made on the basis of proper documentation.
Comment on cases of over or under provisions.
(s) whether all deposits like EMD, security deposits etc. have
been maintained properly and reconciled with the General
ledger (highlight old cases outstanding).
(t) Whether the security deposits have been released as per

the terms and conditions of LOA and necessary approvals
have been obtained from the Competent Authority.
(u) Review the Work-in-Progress (WIP) register and point out

old cases where the work was abandoned long ago. Further,
review whether O&M works are included in capital works.
D. SUPPLIERS’ BILLS ACCOUNTS
While conducting audit, internal auditors should verify the

following:
a) Whether release of advance against Purchase Orders (P.Os) is

as per terms of the P.O.
b) Wherever payments are being made against documents

through bank, whether advance documents have been cleared
by the Materials Management Deptt. and they are in
conformity with the P.O.
c) Final / Balance payments are released on the basis of the

invoice of the party supported by the SRV to the extent of
accepted quantity .
d) Whether suppliers ledger is tallying with general ledger.
e) Test verification of the posting into suppliers ledger.
f) Whether material under inspection (MUI) and Material in

Transit (MIT) matches with general ledger. Report old cases.
g) Whether ‘C’ form/LST register is being maintained. Any

abnormal cases are to be reported .
h) Include the list of the cases where higher rate of sales tax has
been paid due to non-issuance of ‘C’ form, in the report.

i) Whether the claims for material rejection are being followed
up. Old cases are to be reported.
j) Wherever shortages are noticed, whether marine insurance

claims are being lodged promptly and followed up for
settlement. List of non-settled claims should be reported.
k) Test check the entries in security deposit account, EMD

account and Retention Money account and review the sub-
ledger and report old outstandings.
l) Whether waiver of liquidated damages is on justifiable

reasons.
m) Where guarantee clause is provided in the P,O in respect of

certain spares/equipment like grinding rings, etc., whether
claims are being lodged on the suppliers and the same are
being followed up for realisation.
n) Adjustment of the advance against supplies and report on the

old advances.
E. STORES P.S.L

following:
a) Test check whether Stores Receipt Vouchers (SRVs) and

Stores Issue Vouchers (SIVs) are being controlled properly
with reference to stores records.
b) Test check the SRV valuation. Verify whether final

adjustments have been carried out wherever SRVs are
valued provisionally.
c) Report on odd balances – quantity without values, value

without quantity and negative balances.
d) Report on the instances of purchases made in spite of

having inventory.
e) Report on the variations in rates of a particular item

purchased on different dates in the period under review.
f) Whether physical verification has been conducted covering

sufficient number of items as per the MAOCARO Order,

1975. Whether provisions have been made for the
discrepancies observed on physical verification. Also verify
whether the provisions have been finally adjusted on
completion of investigations, with the approval of the
Competent Authority. Abnormal cases should be pointed
out.
g) On test check of Issue Journal, whether capital items are

being included in the repairs and maintenance expenses.
h) Whether inter-unit debits for materials transferred to other

projects have been raised immediately.
i) On test check basis, whether all the issues not pertaining to

any specific cost centre are finally accounted for.
F. ESTABLISHMENT ACCOUNTS
Internal audit should ensure in all cases that the sub-ledger

balances match the general ledger figures in all cases. All cases
where such balances do not match should be reported. While
conducting audit, internal auditors should verify the following
with regard to the respective heads:
a) SALARY
i) Test check of salary with attendance records.
ii) Checking of reconciliation with HR records for additions/
deletions.
iii) Test check of pay fixation.
iv) Test check of certificate for expenditure incurred on
conveyance/lease maintenance etc.
v) Test check of deduction of HR lease.
vi) List out the salary advances outstanding for more than
six months.
vii) Test check of LPC in the salary records.
viii) Test check of salary with the personal file.
ix) Examine whether all the leave encashment paid have
been approved by the Competent Authority.
x) Examine whether all Overtime / incentive payments
have been approved by the Competent Authority.
xi) Test checking of salary bill and verify whether correct
TDS has been deducted as per Income Tax Act and has
been deposited in time. Whenever an employee is
relieved on transfer, it is to be ensured that the unit
has issued the LPC immediately. It is also to be checked
that whenever an employee is relieved on transfer, the

advances outstanding against his name should be sent
through Inter-Unit immediately.
xii) Examine whether PF deductions have been deposited
with Corporate Centre regularly and the same has been
reconciled at regular intervals.
b) T.A. ADVANCE
i) Verify the advance is released with the approval of

competent authority.
ii) Test check of T.A. bills.
iii) Where an earlier advance is still outstanding, Verify
whether a subsequent advance has been released with
the specific approval of Competent Authority.
iv) List out the advances outstanding for more than six
months.
c) LEAVE TRAVEL CONCESSION
i) Test check of LTC bills. Test checking the cases of

medical and LTC payments made to the dependents of
the employee to verify whether they have been paid as
per the new definition of ‘family’.
ii) List out the advances outstanding for more than one
year.
d) MEDICAL
i) Test check of medical bills.

ii) Test check of medical bills with reference to the
dependants.
iii) Test check of direct payment to hospitals.
iv) Test check of TDS deducted and deposited in time from
hospital bills.
v) Test check of TDS deducted and deposited in time on
payment in excess amounts specified in the Income Tax
Act.
vi) List out the advances outstanding for more than six
months.
e) TRANSFER T.A.
i) Test check of Transfer T.A. bills.

ii) List out the cases of outstanding for more than three
months.

f) STAFF ADVANCE
i) Test check of advances released with the approval of

Competent Authority.
ii) List out the cases outstanding for more than six months.
iii) List out the cases where more than one advance is
outstanding.
g) NEGATIVE SALARY
i) List out the cases of negative salary and interest

thereon if applicable.
ii) List out the cases where negative salary is repetitive
every month.
h) ADHOC SALARY ( ACCOUNT CODE –752129 )
i) List out the advances outstanding for more than one

month.
j) HBA VEHICLE ADVANCE/ COMPUTER ADVANCE
i) Test check the release of advances with proper

documentation and approvals.
ii) Test check the timely recoveries.
iii) List out the cases where recoveries are not been
effected from the due date.
k) MULTIPURPOSE ADVANCE/ FURNITURE ADVANCE/ CYCLE ADVANCE
i) Test check the release of advances with proper

approvals.
ii) Test check the timely recoveries.
iii) List out the cases where recoveries are not been
effected from the due date.
l) INTEREST ON ADVANCES
i) Test check the monthly calculation of interest on all the

interest bearing advances.

m) MISCELLANEOUS BILLS
i) Test checking of bills.

ii) Test checking of bills and verifying that proper TDS has
been deducted and deposited in time.
G. COMMERCIAL ACCOUNTS

following with regard to the respective items:
I) COAL
a) Payments are being released for the supply of the coal on the
basis of SRV duly supported by weighment records.
b) Payments are being released with reference to terms and

conditions of the coal supply agreement.
c) Whether stones are being segregated and claims are being

lodged on the coal supply companies for receipt of coal of size
more than 200 mm and adjustment of the same while releasing
the payments.
d) Claims for variation in moisture content are being lodged on

the coal supply companies.
e) Regular joint sampling is being done for assessment of the

grade of coal and joint analysis report is being exchanged
with the coal companies.
f) Wherever the grade varies from the declared grade based on

which the payments have been released against invoices,
whether suitable adjustment have been made for such
variations.
g) Proper claims are lodged on the railways for missing wagons

and they are being settled regularly with railways. Review the
sub ledger and point out old cases if any. Further if the claims
are not settled within the time stipulated in the relevant rules,
whether claims are being lodged with Railway Claims Tribunal.
h) Review the reconciliation of accounts with coal suppliers and

verify whether provisions have been made for the claims of
coal suppliers.

II) COAL PSL
a) whether SRVs are being valued on the basis of payments

released, adjusted for the credits received for excess
moisture content and oversized stones etc. Further, verify
whether the quantity of stones and excess moisture content
are being adjusted against receipt quantity.
b) While valuing SRV the cost of stone picking, handling

charges, cost of diesel issued for MGR locos, loco drivers’
salary and other direct costs incurred upto the stage of coal
firing are being included in the SRV cost.
c) Shortages/excesses on physical verification are being

adjusted in the PSL with the approval of competent
authority.
d) Whether stocks are being held as per tariff norms.
III) LIQUID FUELS
a) Payments are being released on the basis of invoices , PO

and SRV.
b) Proper claims are lodged for missing wagons and are being
claimed and pursued for settlement like in the case of coal.
c) Test check the SRV valuation.
d) Whether stocks are being held as per tariff norms.
e) Review the reconciliation of accounts with liquid fuel

suppliers and verify whether provisions have been made for
the claims of suppliers.
f) Shortages/excesses on physical verification are being

adjusted in the PSL with the approval of competent
authority.

IV) GAS
a) Payments are being released as per the invoice of gas

companies duly supported by the records of joint meter
readings as per the provisions of the gas supply agreement.
b) Whether the premiums/rebates in the basic price and

transportation charges of gas supplies, due to variation in
the Net Calorific Value (NCV) of gas, are as per the gas
supply agreement.
c) Report whether any Minimum Guaranteed Off-take (MGO)

charges are being paid and if so, how the same are being
treated in the PSL and recovered from the beneficiaries
through tariff.
d) Necessary TDS is being deducted as per the Act and is being

deposited in time.
V) FUEL PRICE ADJUSTMENT IN RESPECT OF ALL FUELS
a) Test to verify the conclusion of fuel price adjustment.
b) If the site is paying any taxes and duties like water cess
etc. which are reimbursable by beneficiaries separately in
terms of Power Purchase Agreement/Tariff notification, the
relevant information is being sent to regional headquarters
/billing centres for raising necessary bills. Report also
whether such bills are being raised and realised.
VI) OPERATING RESULTS
a) Review of financial results for the period under audit.

Compare
the actual profits with the budgeted profits and analyse the
profits as shown below:
(i) Profit variance due to variance in tariff: (budgeted

tariff per kWh – actual tariff per kWh) * actual
generation
(ii) Profit variance due to variance in generation:

(budgeted generation - actual generation) * budgeted
contribution per kWh.

(iii) Profit variation due to variance in heat rate from
each source of fuel (i.e., coal, oil or gas):
(budgeted heat rate - actual heat rate) * budgeted
cost per KCal from that source.
(iv) Profit variation due to variance in auxiliary

consumption: {(budgeted percentage of auxiliary
power consumption * actual generation) - actual
percentage of auxiliary power consumption * actual
generation ) } * budgeted variable charges recovery
per kWh. In the case of gas projects, the variance may
be reviewed separately for open and combined cycle
operation.
(v) Expenditure variance: To be reported in the

following format:
Rs/Lakh
Head of Exp Budget Actual Variance Main
Reasons
Employee Cost
Repairs &
Maintenance
Station and other

Overheads
Interest & Finance

Charges
Depreciation
Total
Fixed Charges in tariff
(vi) Variation due to non-operating income: (actuals –

budget)

H. REVIEW OF GENERAL LEDGER AND SUB-LEDGER
a) Examine whether the balances in the control accounts in

the General ledger have been duly reconciled with the sub-
ledger balances.
b) Review and comment on old balances appearing in the

General Ledger.
c) Examine whether the accounting treatment followed by the

unit for accounting of mandatory spares, furniture, fixture
and scrap is proper, reasonable and in line with the
accounting policy.
d) Units have to obtain confirmation and prepare

statements of reconciliation of balances as on 31st
December of the financial year under advances,
debtors (including those due from State Electricity
Boards), creditors and materials in transit / under
inspection and with contractors/ fabricators. Further
they have to carry out adjustments in the Books of
Account upon such confirmation/ reconciliation of
balances under the above heads.
In this context, accounting units shall analyse the

advances, claims, materials under inspection,
materials in transit, materials with contractors /
suppliers / fabricators etc. into (1) good and fully
recoverable, (2) requiring adjustment entries to be
passed, (3) doubtful of recovery to be provided for
and (4) bad and to be written off with supporting
documents / explanations and reasons as for each
and every account. The analysis will be of the
accounts as per the ledgers and schedules to the
accounts as at 31.3.2001. Internal auditors are
required to vet the analysis statements prepared by
the units and submit their re port on the same to the
Corporate Internal Audit Department along with the
Phase I Internal Audit Report.
e) Test check the entries in the General Ledgers and Sub-

Ledgers with basic vouchers for at least one month.
f) Status of contingent liabilities mentioned in the latest

balance sheet should be reviewed and reported on.

g) Whether supports are available for all inter unit debits and
credits along with confirmation of balances.
h) Whether all debits and credits from Corporate Centre and

other projects on account of initial advance, customs duty
payments, advances on account of transferred employees
and transfer of materials are raised in time, with full
supports.
i) In respect of fire insurance, whether all the claims have

been lodged with reference to primary records. Valuation
of the claims should be verified. Comment on short-
settlement of the claims and old outstandings.
j) Ascertain whether all relevant accounting standards are

being followed by the unit and comment on the same.
k) With regard to the Fixed Assets Register, internal audit

should verify the following:
i) Examine whether segregation of assets leading to the

main classification has been properly done.
ii) Whether all columns in fixed assets register have been

duly filled up separately for each asset.
iii) Verify whether physical verification of fixed assets has

been done in accordance with the system laid down in
this regard.
iv) Whether adjustments on account of discrepancies

observed on physical verification and sales/adjustments
have been properly reflected in conformity with
MAOCARO (1988)
v) Whether fixed asset register has been reconciled with

General Ledger.
vi) Whether procurement and other related costs have

been properly identified with the respective assets.

I. LOAN ACCOUNTS
Internal auditors should verify the following with respect to all loans
taken by the company:
1. TERMS OF LOANS: To verify the following from loan agreements:
i) Loan amount.
ii) Drawl Schedule & Terms & conditions of drawl.
iii) Project and specific packages to be funded out of loan.
iv) Instructions for filing of claims (time period).
v) Dates of Payment of Agency Fee/ Management Fee/ Upfront Fee.
vi) Dates of payment of Commitment Fee.
vii) Interest payment dates.
viii) Repayment schedule and repayment dates.
2. LOAN DRAWALS: After verifying the above from the loan

agreements, check the following in respect of each loan:
i) Drawals have been made as per schedule.

ii) Drawals have been made as per the terms & conditions and
for the packages mentioned in the loan agreement.
iii) Loan Register has been updated after each drawal
iv) Accounting entries have been passed for each drawal.
v) Quarterly reconciliation of the account has been done with the lender.
3. PAYMENT OF AGENCY FEE/MANAGEMENT FEE/UPFRONT FEE: Terms of

the loans may involve any or all of the above mentioned fees. Internal
auditors should verify that:
i) Payment is made as per Loan agreement.

ii) Payment has been made on time.
iii) Verification of exchange rate debited as per Bank advice
with bid rate.
iv) Adjustment entry has been passed.
v) Loan ledger has been updated.
vi) Adjustment entry has been passed for accrual.
4. DEBT SERVICING: INTEREST PAYMENTS: Verify that:
i) Interest is calculated as per loan agreement.

iii) Verification of bid rates with exchange rate charged in the
bank advice.
vi) Adjustment entry has been passed for accrual.

5. DEBT SERVICING: REPAYMENT OF LOANS: Verify that:
i) Repayment amount is calculated as per loan agreement.

iii) Verification of bid rates with exchange rate charged in the
bank advice.
6. EXTENSION OF LOAN AGREEMENT: Verify that:
i) Loan drawl is a per schedule.

ii) Extension is taken with the approval of competent
authority.
iii) If extension is taken due to the delay on the part of the
supplier then charges are paid by the supplier.

STORES DEPARTMENT
A. DOCUMENTATION / PROCEDURES:
a) Examine whether materials inward slip (MIS), materials

inward register (MIR), discrepancies register and SRV
control register are being prepared and maintained as
provided in the Inventory and Stores Manual. Comment on
old outstanding items.
b) Examine whether a proper serial control exists over all

SRVs and SIVs.
c) Examine and comment on cases of old SRVs pending along

with reasons.
d) Examine the follow up maintained in regard to receipt and

recording of material in transit of earlier years.
e) Review and comment on the reasonableness of number of

old cases of materials rejected upon inspection where
100% advances have been released.
f) Examine and comment on the follow-up maintained with

suppliers in these cases.
g) Examine the status of stock verification in line with the

Corporate Circular on the subject and for conformity to
MAOCARO (1988).
h) Examine whether the discrepancies observed on physical

verification have been investigated and adjusted with due
approval of competent authority.
i) Comment on investigation pending along with the reasons.
j) Examine and comment on the system of identification and

disposal of surplus, non-moving, obsolete and scrap items
at periodical intervals.
k) Examine and comment on adequacy of the steps taken for

collection of sweep cement.

l) Reconciliation of PSL balances with Bin Card Balances.
B. CLAIMS
a) Examine whether all claims on railways, marine and other

insurance, including the insurance suppliers that ought to
have been lodged with reference to primary records of
receipt of materials at site have been lodged in time.
b) Comment on cases of delays.
c) Examine the realisation of the above-mentioned claims.
d) Examine whether detailed claim-wise registers have been

maintained, with adequate follow up of all claims.
e) Examine the basis adopted for valuation of all claims and

ensure that the same is in order, vetted by finance and
incorporated in time in the books of accounts.
f) Examine whether all doubtful claims have been identified

and written off with the requisite approval.
g) Tally the claims reflected in finance books with the claims

as indicated in the Materials records.
h) Review the adjustment of short realised claims in the

books of accounts.
i) Review the old outstanding claims and comment on the

outstandings on this account.

HUMAN RESOURCES DEPARTMENT
While conducting the audit internal auditors should verify the
following:
a) Earned Leave account and Half-pay Leave account
b) Sanctions of leave encashment
c) Sanctions of Leave Travel Concession
d) To verify original documents such as mortgage deeds,

hypothecation deeds etc. RC books, in connection with
sanction and release of House Building Advance,
Conveyance Advance, Furniture Advance, Computer Advance
etc. Internal audit should cover at least 50% of all cases.
e) Procedure for booking of tickets and claims on cancellation

of the tickets
f) Cases of pay fixation

TOWNSHIP
a) Examine the applications for allotment of houses and ensure

that employees particulars have been verified by personnel
department.
b) Verify the allotment made with reference to rules and for

approval by competent authority in case of allotment to both
outsiders and employees.
c) Verify the entry for recoveries due from the date of allotment
and ensure that recoveries have been made from the date of
occupation by the allottees, comment on the recoverability
aspect of the amounts outstanding from employees not on the
rolls as well as outsiders.
d) (i) Test check computation of electricity and water charges

for recovery from employees and others and ensure that
recoveries have been made from employees and others in
time.
(ii) Comment on outstandings on this account.
e) (i) Verify the cases of vacation of houses and premises by

employees and outsiders with the vacation slips and ensure
that fittings etc. have been duly verified by the
Administration Department.
(ii) Verify the recoveries in case of shortage/breakage etc.

(iii) Verify the recoveries due on account of electricity and
water and ensure that in all cases of vacation, recoveries
have been effected before issuing vacation slips.
f) (i) Trace the cash/bank receipt on this account into the daily
collection statement.
(ii) Highlight the cases of delays in the accounting of

cash/bank receipts.
(iii) Trace the entries in the daily collection statement into
the township recovery statement and the General Ledger.
g) IMPREST ACCOUNTS:

(i) Examine whether statements of account have been
rendered in time by the imprest holder/s and that the
same has been approved by competent authority.
(ii) Whether proper vouchers have been attached to the

imprest account statements.
(iii) Whether recoupment has been done in line with

expenditure incurred.
(iv) Whether the amount of imprest held is reasonable as

compared to the general quantum of expenditure
incurred.
h) SUB - STORES
(i) Examine whether receipts and issues of materials
have been properly documented and carry the
approval of competent authority.
(ii) Test check the quantities received in the sub

stores from the main sores on the basis of SIVs of
main stores.
(iii) Examine and comment on the control over issue

of materials from the sub stores and whether items
in stock have been physically verified at regular
intervals.
i) MISCELLANEOUS SALES
Verify the disposal of miscellaneous items for approval by
competent authority along with the basis for determination
of rates for disposal and ensure that the proceeds have
been handed over to Finance Deptt. on a timely basis for
accounting.
j) Highlight the facilities in township lying unutilised

indicating the cost of the facilities along with the period
from which they have been lying unutilised.

GUEST HOUSE
a) Examine the entries in the register of guests and ensure
that all entries are complete.
b) Verify the charges recovered from guests and as entered in

the register with cash receipts, for employees and
outsiders for conformity of rates to rules.
c) Trace the receipts into the daily collection statement.
d) Verity the cases of company’s guests with written

communication to support the non-recovery of charges.
e) Examine the records maintained for food and beverages

indicating receipt of materials and their consumption.
f) Examine the imprest account maintained by Guest House

Incharge for recoupment along with supporting vouchers.
Ensure that the quantum of imprest held is reasonable as
compared to the level of expenditure in the guesthouse.
g) Compare the actual expenditure and income of the guest

house with the same for earlier years and identify and
comment on abnormal variations.
h) GUEST HOUSE ASSETS:
(i) Examine whether the assets at guest house have

been properly identified, recorded in a register,
physically verified at the end of the year, tallied with
the balance reflected in the register and corrective
action taken for the discrepancies noticed on such
verification.
(ii) Examine whether the guesthouse assets have also

been tallied with the fixed asset register maintained
in finance.
i) SUB-STORES: Examine and comment on the system of

receipt and issue of materials and whether the same has
been properly documented, recorded and authorised by the
competent authority.

j) Examine whether expenditure incurred on telephones and trunk-calls
has been monitored on the basis of a register and the same is
recovered from the guests. Comment on cases of non-recoveries.

HOSPITAL
a) Verify the updated list of employees and their dependents

with the hospital and trace the details in the register.
b) Verify the timely deposit of cash receipts by tracing the
cash receipts into the main cashbook.
c) Examine the recoveries from contractors and others in

accordance with corporate rules.
d) Examine the control over receipt and issue of medical

stores and also whether the issue of medicines to
employees has been approved by the competent authority.
e) Review the stock register of medicines to identify cases of

expired and expiring medicines and comment on the action
taken by the project in this regard.
f) Compare the expenditure incurred in hospital over the

total manpower of the project with the similar percentage
for earlier years. Comment on abnormal variances.
g) ASSETS: Examine whether the assets have been properly

documented and also a memorandum register maintained
to identify the location of these assets, ensure whether
these assets have been physically verified at least once a
year, whether the discrepancies observed between the
balances reflected in the register and the physical count
have been properly brought to the notice of the competent
authority before initiating action for adjustment, compare
the balances reflected in the memorandum register with
the fixed asset register maintained in finance and comment
on findings.
h) Examine whether proper records of expenditure have been

maintained to monitor recoveries due and made in the case
of hospitalisation of employees and comment on the
findings on this account.
i) SUB-STORES: Examine the system of receipt and issue of materials

for proper documentation and approval by competent authority.

j) MISCELLANEOUS SALES: Examine the records indicating the items
for disposal and the basis and rates for disposal. Ensure that the
same has been done with the approval of competent authority.

DEBTORS FOR THE SALE OF ENERGY
a) Examine and comment on the age wise analysis for all
debtors’ accounts.
b) Compare the balances in the sub ledger with the General

Ledger and ensure that the balances are in agreement.
c) Review the various debtors’ accounts and comment on

inordinate delays in recoveries and also examine and
comment on the steps taken to recover the outstandings.
d) Verify the certificate of confirmation of balances from SEBs

and comment on the status of receipt of such
confirmations.
e) Units have to obtain confirmation and prepare

statements of reconciliation of balances as on 31st
March 2001 under advances, debtors (including
those due from State Electricity Boards), creditors
and materials in transit / under inspection and with
contractors/ fabricators. Further they have to carry
out adjustments in the Books of Account upo n such
confirmation/ reconciliation of balances under the
above heads.
In this context, accounting units shall analyse the

advances, claims, materials under inspection,
materials in transit, materials with contractors /
suppliers / fabricators etc. into (1) good and fully
recoverable, (2) requiring adjustment entries to be
passed, (3) doubtful of recovery to be provided for
and (4) bad and to be written off with supporting
documents / explanations and reasons as for each
and every account. The analysis will be of the
accounts as per the ledgers and schedules to the
accounts as at 31.3.2001. Internal auditors are
required to vet the analysis statements prepared by
the units and submit their re port on the same to the
Corporate Internal Audit Department along with the
Phase I Internal Audit Report .

f) Review the LCs opened by various SEBs and comment on
their reasonableness with reference to the respective
agreement and average monthly billing.
g) Examine and comment on cases of delays in the opening of

LCs.
h) Examine the collection bank account statement and

comment on the delays in remitting the remitting the
receipts to Corporate Centre. Auditors should also enclose
a copy of the bank statement with their report.
i) Examine the bank charges debited by different banks in

respect of collection accounts and comment on the
uniformity of the same within the region.
j) Examine whether L/C charges being borne by NTPC are in

line with the provisions of the Power Purchase Agreements
or the incentive schemes of NTPC.
k) Verify that all credits to the Debtors’ accounts including

rebates are in line with Power Purchase Agreements/ Tariff
notifications/ schemes of NTPC.

INVOICING OF SALES
a) Verify the system of billing and ensure that the billing has
been done in time and energy accounting prepared by the
concerned REB.
b) Verify the agreements with State Electricity Boards and

ensure that the fuel price adjustment and other charges
are in accordance with the agreements/ tariff notifications.
Test verify the fuel price adjustment rates.
c) Verify the deposit of taxes collected on sales with

appropriate authorities and ensure that the same has been
done in time.
d) Verify that rebates etc. allowed to SEBs are in line with

Power Purchase Agreement/tariff notifications / special
schemes of NTPC and that approvals have been obtained
from competent authority.

CUSTOMS DUTY AND PORT TRUST CHARGES
a) Check whether the provisional payments made towards

customs duty before the assessment of duty on the imports
are properly accounted and adjusted with the actual
assessments of the duty and balance amounts claimed
back from customs.
b) Check if adequate records in support of reconciliation of

the customs duty paid, adjusted and refunds claimed are
maintained.
c) Check the bills of entry for classification and rate of

assessment for payment of customs duty of cases involving
customs duty of and above Rs. 5 Lakh.
d) List out the cases of demurrage payment and indicate

whether approvals of competent authority have been
obtained as per the Delegation of Powers.
e) Check if the amount of demurrage identified for recovery

from the clearing agents or suppliers is realized.
Outstanding cases may be listed and brought out in the
report.
f) The continuity bonds furnished by NTPC before clearance

of the shipments are properly reflected in the bonds
register maintained for the purpose. See whether the
reconciliation of the bonds issued, adjusted and
outstanding is done periodically or not.
g) Verify whether the instructions given vide Finance System

Circular No. 6/99 dated 30.8.99 have been followed while
opening Foreign Letters of Credit (FLCs).

AUTOBASE AND CONSTRUCTION EQUIPMENT
a) Examine and comment on the serial control over requisition slips.
b) Examine the adequacy of the system of MIS and performance

reporting regarding the use of construction equipment.
c) (i) Examine the records being maintained with regard to history

of each of the vehicles and equipments.
(ii) Review the history records of each of the vehicles and

equipments and identify and comment on instances of
uneconomic operations, with reference to norms.
d) (i) Examine and comment on control over the return of

unserviceable spare parts returned after repairs.
(ii) Examine and comment whether they have been identified and
disposed off along with other scrap items of Autobase on a timely
basis.
e) Examine the status of various hired vehicles and also whether a

proper system has been in force to authorise hire.
f) Review the quantum of repairs got done from outside, vehicle-

wise and comment on its reasonableness.
g) (i) Review and comment on the percentage of utilisation of

construction equipments maintained by Autobase indicating
specifically cases of underutilisation, cases of equipments under
break-down, equipment lying idle etc. The status of
equipments/vehicle also lying under break down and idle may be
reviewed and commented upon.
(ii) Examine and comment on the action taken for transfer of idle
equipments and vehicles to other projects.
h) (i) Examine whether the Autobase has submitted the statement

of recovery of hire charges on construction equipments/ vehicles
let out to contractors and other users on a regular / timely basis
to Finance Deptt. for effecting timely recoveries.

(ii) Highlight the outstandings in cases where the subsequent
payments have been released to the Contractors without
effecting recoveries on account of hire charges.
i) (i) Examine whether hire charges fixed for recovery have been
regularly reviewed and revised as provided in the Corporate
Circular on the subject.
(ii) Comment on non-revision along with the period since when

the revision has been pending.

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NATIONAL THERMAL POWER CORPORATION LIMITED

MANUAL ON INTERNAL AUDIT

A.F. FERGUSON & CO.

Chapter Subject Page No.

7 System for ensuring compliance of 10

Audit Guidelines for

Manual on Internal Audit 2

(h) Review of General and Sub-Ledger 56

Manual on Internal Audit 3

This manual describes the system of internal audit to be followed

The internal audit system, as described in this manual shall be

Manual on Internal Audit 1

OBJECTIVES OF INTERNAL AUDIT

The broad objectives of Internal Audit shall be as under:

a) to ensure that the accounting and financial management

b) to review the efficacy, adequacy and application of accounting,

c) to verify that the system of Internal check is effective in

d) to identify areas of significant inefficiencies in existing

e) to confirm the existence of financial propriety in all decisions

f) to review the performance of various functions in the light of

g) to associate with Line Managers / HODs / Project Vigilance

Manual on Internal Audit 2

PERIOD TO BE COVERED BY INTERNAL

The following principles shall be followed:

1. Internal audit should cover the accounts of the various

2. All accounting units including Corporate Centre (SCOPE and

3. The internal audit shall be conducted in two phases. The

Manual on Internal Audit 3

SCOPE OF INTERNAL AUDIT

1. Works including O&M contracts (Pre-award and Execution)

While conducting the internal audit, emphasis should be laid on

Guidelines and checklists have been furnished for some of the

Apart from the areas covered above, special investigations as

Manual on Internal Audit 4

2 PROCUREMENT (Pre-award and execution)

(ii i) Vouching – Bank Payment Vouchers 50% of

(iv ) Vouching – Journal Vouchers 100%

Manual on Internal Audit 5

6 AUTOBASE AND CONSTRUCTION EQUIPMENT

7,8,9 TOWNSHIP, GUEST HOUSE AND HOSPITAL

11 INVOICING OF SALES 100%

12 DEBTORS FOR THE SALE OF ENERGY 100%

13 CUSTOMS DUTY & PORT CHARGES 100%

Manual on Internal Audit 6

CONDUCT OF INTERNAL AUDIT AND

The following principles shall be followed in the conduct of

1. The audit shall be conducted in accordance with the

2. The results of audit should be discussed with Head of Finance

3. The reports should be prepared after duly taking into account

4. Internal Audit Reports should be divided into three main

a) PART I: IMPORTANT OBSERVATIONS, OBJECTIONS

b) PART II: COMPLIANCE REPORT: A compliance report

Manual on Internal Audit 7

5. The report should be supplemented, in each phase, by a

(i) Particulars of records along with their volume and value

(ii) A summary report indicating the important observations

(iii) A statement indicating the audit personnel deployed,

6. Observations in the internal audit reports should not be

Manual on Internal Audit 8

FOLLOW-UP OF REPORTS AND SETTLEMENT

The following principles shall be followed in the follow-up of

2. Replies to internal audit observations shall be furnished by