CHAPTER 1

INTRODUCTION
Audit Report
Definition: An audit report is a written opinion of an auditor regarding an entity's financial
statements. The report is written in a standard format, as mandated by generally accepted
auditing standards (GAAS). GAAS requires or allows certain variations in the report,
depending upon the circumstances of the audit work that the auditor engaged in. The
following report variations may be used:

A clean opinion, if the financial statements are a fair representation of an entity's

financial position.

A qualified opinion, if there were any scope limitations that were imposed upon the
auditor's work.

An adverse opinion, if the financial statements were materially misstated.

A disclaimer of opinion, which can be triggered by several situations. For example, the
auditor may not be independent, or there is a going concern issue with the auditee.

The typical audit report contains three paragraphs, which cover the following topics:
1. The responsibilities of the auditor and the management of the entity.
2. The scope of the audit.
3. The auditor's opinion of the entity's financial statements.
An audit report is issued to a user of an entity's financial statements. The user may rely upon
the report as evidence that a knowledgeable third party has investigated and rendered an
opinion on the financial statements. An audit report that contains a clean opinion is required
by many lenders before they will loan funds to a business. It is also necessary for a publiclyheld entity to attach the relevant audit report to its financial statements before filing them with
the Securities and Exchange Commission.

TYPES OF AUDIT:
1. Statutory Audit: any audit carried on as per the requirement of law is called as a statutory
audit. eg: all companies have to get their accounts audited as per the provision of the
companys Act of 1956.
2. Periodical/ Annual Audit: it is a kind of audit where the auditor verifies the account at
the end of the financial year. He starts the audit work after the closure of financial year.
This is a common audit and is mostly used by small organizations.
3. Interium audit: its an audit conducted in the middle of the accounting year before the
accounts are closed. In other words any audit conducted between two financial audit is
known s interium audit. The objective is to get periodical results, to declare interium
dividend.
4. Partial Audit: when an auditor is asked to audit only a part of the account system. Its
called partial audit. Eg: he may be asked to audit only the payment side of cash book.
5. Balance sheet audit: its a kind of partial audit and is concerned with the verification of
only those items appearing in the Balance Sheet. It is more popular in the USA. Infact
while verifying BS items the auditor verifies/ checks all related items/accounts.
6. Cost audit: cost audit is defined as the verification of cost accounting records. Data and
techniques for its accuracy and authenticity. It gets as effective managerial tool for the
detection of errors and frauds in cost accounting records. The companies act implies the
central government to order cost audit incase of specifies companies.
7. Management audit: Management audit may be defined as a comprehensive examination
of an organizational structure of a company, institution/government and its plans and
objectives it means of operations and use of human and physical facilities. The main
objective of mgt audit is to see how far the objectives of mgt are fulfilled. It aims to
ascertain whether sound mgt prevails throughout the organisation and evaluates its
efficiency in the system of its operation.
8. Continuous audit: a continuous audit is one in which the auditor visits his clients office
at regular intervals through out the year to verify the account. The objective of CA may
bea. To get final account audited immediately after the closure of accounting year.
b. When the business is very large.
c. When interval control system is into effective.
d. When regular final accounts are required.

ADVANTAGES:
1. Errors and frauds are discovered and rectified quickly.
2. The chances of fraud are reduced.
3. The workers will be careful in their work.
4. Continuous audit acts as a valuable morale check on the staff.
5. Final audit becomes easier and faster.
6. If the company wants to declare interim dividend it is easier to prepare interium
account.
7. It increases the efficiency and accuracy in the accounts.
DISADVANTAGES:
1. After the auditors visit is over, alternative may be made.
2. It affects the regular work.
3. Its not suitable for small organizations.
4. The auditor may loose the line of work if he does not complete his work in a visit.

Scope of Study:
This study deals with the auditing procedure and conduct of audit in NEW INDIA
ASSURANCE COMPANY LTD. The Study in this Paper is confined to the information
collected from secondary sources.

Limitation of Study:
All the information in this study is limited to the auditing of Insurance sector and the
respective information for the same is limited to the information collected from the secondary
sources.

Research & Methodology:

All the information in this study is collected from the secondary sources. The respective
information is collected from internet and some auditing books of ICAI

Chapterisation:
The study of the auditing in New India Assurance Company is arranged in the following
Sequences:
Chapter I : It focus on the introduction of the overall study in this project paper
Chapter II : It concentrate on the brief explanation of the company profile of New India
Assurance.
Chapter III : It explains the various auditing procedure followed by the auditor in the New
India Assurance
Chapter IV : This Chapter deals with the Finding, Suggestion & Conclusion of the project
study.

CHAPTER 2
PROFILE OF NEW INDIA ASSURANCE
The New India Assurance Co. Ltd., based in Mumbai, is one of the five Wholly
Government of India owned assurance companies of India. It is the "largest
general insurance company of India on the basis of gross premium collection
inclusive of foreign operations". . It was founded by Sir Dorabji Tata in 1919, and
was nationalised in 1973.

Previously it was a subsidiary of the General Insurance Corporation of India(GIC).

But when GIC became an re-insurance company as per the IRDA Act 1999, its
four primary insurance subsidiaries New India Assurance, United India Insurance,
Oriental Insurance and National Insurance got autonomy.
New India Assurance operates both in India and foreign countries. In the recent
past it has collaborated with some of the leading public sector banks of India such
as State Bank of India, Central Bank of India, Corporation Bank and United
Western Bank to increase its distribution network.
Offices
The company with its corporate office in Mumbai has about 31 regional offices, 5
Large Corporate Offices, 412 Divisional Offices, 583 Branches, 27 Direct Agent
Branches and 1041 Micro Offices. Centralised claim processing offices called
claims hubs are operated from 29 locations.
The company operates in 27 Countries as of 2014-15, with 19 Branch Offices in 9
Countries, 7 Agency Offices in 6 countries, and 3 Subsidiary Companies in 7.
Business Performance
The only direct insurer in India rated A-(Excellent Stable outlook) by AM Best.
"CRISIL has reaffirmed its ' AAA/STABLE ' rating on The New India Assurance
Company Limited indicating that the company has the Highest degree of Financial
strength to honor its Policyholders obligations".
Gross premium ( in India) of Rs.13209 Cr.in the year 2014-15 as against Rs. 11540
Cr. in the year 2013-14. Assets Rs.61720 Cr. as on 31 March 2014. First Indian
non-life company to reach Rs. 16050 Cr. gross premium.
The domestic gross premium procured for the period from April 2013 to March
2014 was Rs.11,540 crore with a growth of 15.00%, when compared to the same
corresponding period pertaining to previous financial year and the global gross
premium stood at Rs.14,304 crores with a growth of 14.40% over previous year.
The company posted PAT (Profit After Tax) of Rs.1089 crores. The company paid

a dividend of Rs.220 crores to the Government of India for the fiscal 13-14.
Dividend paid to Government of India.
The state owned company's achievements include;
1) Procurement of highest Global Gross Premium of Rs.16,050 crores for the year
2014-2015. Maintaining the 'largest general Insurer in India' tag.
2) Market leadership position for four consecutive decades
3) The ratio of available solvency margin to required solvency margin standing at
250%
4) Highest net profit of Rs.1431 crores
5) Highest net worth of Rs.8,621 crores
6) Highest assets - crossed Rs.61720 crores
7) Only Indian General Insurance Company to have presence in 27 countries
8) Financial Strength rating of A-Excellent (Stable) by A.M Best -Europe.
IT Solution
The company has teamed up with TCS BaNCS to provide a core insurance
platform. The project is known as CWISS or Centralised Web based Insurance
System Solution.
For re-insurance, company uses RAMS software. RAMS stands for Re-insurance
accounting and management system. This software is also developed by TCS
BaNCS.
Awards
New India Assurance was selected as the General Insurance Company of the year
in the 6th Fintelekt India Insurance Awards at a ceremony held at Lalit Sahar, at
Mumbai on 26 June 2015. "THE BEST GENERAL INSURANCE COMPANY "
consecutively for the third time in 6th Dalal Street Investment Journal PSU Award
at Delhi.Director & General Manager, Mr. K. Sanath Kumar received the award
from Shri. K. D. Tripathi, Secretary, Ministry of Public Enterprises, Government
of India on 23 March 2015 along with Mr. Narinder Kumar, DGM, Mr. S. Bharija,
CRM & Mr. J. Mehndiratta, CRM. New India Assurance has emerged as Indias
6

Best General insurance Company for MSMEs, from a Nationwide Survey &
Analysis of Small & Medium Enterprises, in 2013-14 conducted by India SME
Forum. New India Assurance Co Ltd has received three awards at the 4th Indian
Insurance Awards organized by Fintelekt at a grand function held at Mumbai on 25
June 2014. 1)Personal Lines Growth Leader 2)Underserved Market Penetration
3)Technology Maturity New India has received the Platinum Award for Excellence
in General Insurance at the 36th SKOCH Summit on 21 June 2014 at Delhi NIA
has been selected for Prestigious Indira Gandhi RajBhasha Puraskar for
outstanding performance in implementation of our Official language.Hindi. J.D
Power Asia Pacific part of McGraw Hill Companies has ranked New India
Assurance Company Ltd, the highest in satisfying auto insurance customers. The
award relates to 2011 India Auto Insurance Customer Satisfaction Index Study
wherein out of a 1000-point scale, the company scored 804

CHAPTER 3
AUDIT OF THE NEW INDIA ASSURANCE

Internal Audit is an independent appraisal function within the organisation for review of
systems and the quality of performance as a service to the organization. It objectively
examines, evaluates and reports on the adequacy of internal control as a contribution to the
proper, economic, effective and efficient use of resources and guards against leakage of
revenue.
OBJECTIVES AND SCOPE :
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The main features of internal audit set up in The New India Assurance Company Ltd, would
be as under :a). Objective :
Internal audit-cum-inspection is not to be regarded as an extraneous activity, concerned with
criticism and fault-finding. It is an integral part of the Companys function and its objective is
to help the management by providing feedback on all the areas of the Companys operations,
so that action can be taken if any thing goes wrong and changes in procedure and methods can
be introduced, if found necessary, in order to tone up administration and improve efficiency.
b). Functions :
The main functions of the Internal Audit-cum-Inspection Department may be summarized as
follows :

Review whether the accounting, financial, budgetary and operating control are

adequate and have been efficiently applied.

Examine whether receipts of the Company on account of premium or otherwise have
been correctly assessed and realized as per prescribed tariffs, rules, regulations and
orders; whether they have been correctly accounted and promptly deposited in Banks;
whether all sums of money paid into the banks in cash or by cheques / drafts have
been credited to the Companys accounts; and whether there is effective follow-up for

recovery of arrears.
Examine whether payments by way of claims, commission and other expenses have
been made with due regularity and propriety after proper sanction accorded by a
competent authority and have been duly vouched, correctly classified and recorded in

accounts;
Ensure that the Companys assets are properly accounted and safeguarded from the
losses of all kinds, and that there is a periodical physical verification to check the

accuracy of the quantity balances in the books;

Examine whether instructions and procedures given in the Companys manuals and
Head Office Circulars ( including rules, regulations, guidelines etc., issued by the

Company ) are strictly followed;

Examine whether financial and administrative powers exercised by officials are
strictly in accordance with the delegations or guidelines laid down from time to time.
8

Examine whether returns / statements / reports required to be furnished by each

office /department to different authorities are correctly complied and sent within the
stipulated time.
NB : All Offices are required to maintain a calendar of returns showing the returns
required to be submitted to different authorities, the due dates and the actual dates of
their submission.

The Calendar should be submitted every month for inspection by the Head of the

office /department. These apply to the departments in Head Office as well.

Test the accuracy of accounting and other data developed in the Office / Department

inspected.
Examine the delay in issue of documents and settlement of claims.
Spot out missing links, if any in the chain of operations which may give room for

financial irregularities, misappropriations, frauds etc.

Review the register of complaints to see that all complaints have been disposed off
within a reasonable time and the machinery set up for the purpose is adequate and
efficient.
Since a complete check of all transactions, records and documents is physically
impossible, the Internal Audit-cum-Inspection Department may exercise a test check
of the relevant transactions, records & documents to the extent prescribed for the
purpose of a reasonably efficient discharge of above functions.
In addition to routine inspection and audit, the Internal Audit-cum-Inspection
Department may also carry out in depth review of particular aspects of the working of
any office where any serious case of defalcation or breakdown in procedures has been
noticed, needing special investigation from the audit angle. Such special reviews may
not be undertaken as substitute for vigilance investigations and may be undertaken
only under specific orders issued by the Financial Advisor in consultation with the
Chairman-cum-Managing Director or vice versa. It should not be open to any lower
authorities to divert the Audit Inspection teams for other items of work.
The Audit may also respond to any reference made by the operating office /
department on any specific file or query by way of considered opinions / clarification.
c). Methods :

The Successful performance of the functions enlisted in sub para (b) call for
experience, sound knowledge of procedures, a flair for details and probing nature. The
Inspectors and Internal Auditors will, however, be greatly assisted in their tasks if the
Company has procedural manuals covering all its departments and all aspects of work.
For, in that case, the Audit-cum-Inspection department can prepare a detailed checklist
or questionnaire with the help of which the Inspection and Audit teams can cover the
whole range of operations in a systematic manner, within the shortest possible time.
As a first step, the company should therefore prepare a complete set of procedure
manuals. Existing manuals should be revised and brought upto-date and new manuals
prepared where non-existent.
However, as Internal Audit-cum-Inspection cannot wait till all the manuals are
completed, the Inspectors and Auditors in the mean time will have to carry on with
their work on the basis of improvised questionnaire drawn up on the basis of their own
experience. Nevertheless, the Internal Audit-cum-Inspection Department should
prepare a set of questionnaire or check lists for the use of their Audit and Inspection
teams, so that the work may be carried out in a thorough and systematic manner.
At the same time, Auditors and Inspectors should be properly briefed. Their task is not
merely to complete the questionnaires or check lists. They should probe into the
answers given for each questions, find out the reasons for recurring irregularities,
omissions, mistakes and delays and wherever possible give their own suggestions for
remedial action.
d). Staffing :The number and composition of the Audit and Inspection teams required may be
assessed on the basis of the functions indicated. The teams may be located at Regional
Offices, so that the traveling time may be saved to some extent.
The Personnel for audit teams may be drawn from personnel with accounts
experience.
Inspection teams may consist of personnel with Administrative and technical
background and experience in underwriting and claims departments.
e). Frequency of Inspection :-

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Each Office ( including all the departments at the Head Office and Regional Offices )
should be inspected once during the year. The audit and inspection work pertaining to
the HO maybe entrusted to team located at Regional Offices where the HO is situated.
f). Administrative Procedure :Two copies of each Inspection / Internal Audit report should be prepared and sent by
the Audit team to the Competent Authority through proper channel. The HO
scrutinizes the report and thereafter forwards one copy of the report to the Officer-incharge of the office inspected and take followup action. Compliance with the
requirements of the Internal Audit and Inspection report should be insisted upon
within a reasonable time. Serious irregularities, pointed out in the report should not be
followed up in a routine
manner. These should be taken up separately through demi-official letter addressed to
the Officer-in-charge of the offices concerned.
g). Verification by Sampling :i). Audit :
As it will not be practicable to verify each and every entry, resort will have to be made
to sampling in selecting the items for scrutiny. Either of the following methods may be
followed :
Select for scrutiny every 3rd payment in a category. If a smaller sample is
required, every 4th or 5th payment can be selected. The period can also be
selected on a regular basis. E.g. All transaction of the first 10 days in a month

can be covered.
Select all cases of transactions above, say Rs. 1000/-. A variation of this will be
to select systematically a certain number of cases in each layer ( eg. case in the
layer Rs. 500/- to Rs. 1,000/-; 10 cases in the layer Rs. 1,000/- to Rs. 2,000/and so on. )

ii). Inspection team should similarly select sample case of files relating to
Underwriting,Claims, Reinsurance etc., and thoroughly scrutinize those files. They
should then list out the irregularities, omissions, mistakes, delays etc., and report
on these. The above methods of sampling are only mentioned by way of an
illustration. Teams may use their own ingenuity in selecting the samples.

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h). Scope of Audit :Since internal audit is an integral part of the organization, management would like
to know as to whether business is conducted as per laid down rules, procedures,
systems
instructions etc. Internal Audit Department is a link between higher management
and field formations at various operative levels by its review of the extent to which
objectives and plans have been achieved. The scope of internal audit should,
therefore, be unrestricted in the coverage of organisations operations.
It is also the objective of Management to see that irregularities, frauds,
misappropriations or non-compliance of its instructions are minimised and
corrective measures are undertaken to ensure that adequate control machinery
exists. Besides getting individual irregularities rectified, Internal Audit should also
suggest remedial measures to prevent recurrence of such irregularities. The basic
purpose of Internal Audit is not just to collect instances of irregularities, but to
suggest improvements in systems and procedures with a view to minimize, if not
altogether eliminate chances of repetition of irregularities, and to present a
balanced feed-back report on the working of the office inspected for appropriate
corrective action by the management.
Thus the efficiency of Internal Audit Department would not be measured only
from the number of irregularities it has detected or volume of reports submitted but
by increase in operational effectiveness and the efficiency and economy achieved
by the management due to the application of various remedial measures suggested
by the Internal Audit department.
i). Audit sub committee of the Board of Directors :Board of Directors of the Company have appointed a sub-committee to review
major audit objections and their compliance on quarterly basis and therefore audit
offices must ensure that the audit objections are given due priority for compliance.

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FINANCIAL AUDIT
In this, all the financial transactions of a Divisional / Branch Office are scrutinised.
Financial transactions normally include :a) Premium Collection, depositing and accounting
b) Refund of premium
c) Commission Payment and accounting
d) Claims Payment and accounting
e) Expenses of Management
a). Premium
1. Collection and depositing of premium by Collective Cashier :The Collective Cashier receives premium and issues a receipt after allotting a
collection number. He prepares Cash Income Book ( form No. RA-16 ) which is
used for depositing the collections. The points to be checked are as under :1. All the documents should be underwritten in system and no premium should be
deposited in the bank without booking of document.
2. Collection receipts should be issued for all the documents underwritten.
3. The cancelled receipts should be kept separately duly certified by Class 1
officer.
4. The days collections are deposited in the Collection Account with the Bank on
the same day / next working day.
5. The cheques of Development Officers, agents and third parties ( not having
insurable interest ) are not accepted.
6. A register showing acknowledgement of the Sub-Staff for cash / cheques / DDs
handed over to him for depositing & subsequently to be checked by the person
responsible for positing.
7. Whether there is delay in remitting the premium to the Collective Cashier by the
Development Officers.
2. Bank Guarantee Accounts :-

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1. To verify that this facility is extended only to Fire Schedule Policies where
premium is not ascertainable in advance and Marine Hull Policies.
2. To verify the Bank Guarantee to ascertain its adequacy and validity and that it is
on a requisite stamp paper in the approved form.
3. To check whether the BG dues are collected in time debits raised in a month
should be collected before the close of succeeding month.
4. The debits to BG a/c should be checked with the Premium register and the
credits
with the Collective Cashier Cash Income Book.
5. To verify whether the total of debits to BG a/c do not exceed the Bank
Guarantee limit.
6. Whether BG has been invoked where client fails to pay the balance in time.
3. Cash Deposit Account :1. All the points enumerated under Bank Guarantee Account are applicable here
also except point nos. (2) & (6).
2. For all other classes of business ( e.g. Marine Transits ) Advance Premium
a/c. is to be maintained. This is to be operated as per the guidelines contained in
HO Circular TECHAGM:10:91, date 03.09.1991.
3. To ensure that not more than one APD A/c is opened in the name of the same
insured.
4. Non-operative APD A/c must be closed before expiry of next financial year with
duly discharged vouchers from account holders.
4. Co-insurance :A). Inward ( where we are not leaders ) ( A/c codes 5111, 5113 & 5114 ) :Premium / refunds are booked on the basis of statements of account / policy copies
/ letter advices received from leader company. Each office is required to maintain a
coinsurance register with various details.
This should be checked to see :1. Whether sharing of business is as per insureds instructions.

14

2. Whether refunds / claims pertaining to other policies are adjusted at the time of
settlement of our account. If so, verify JE as well as booking of refunds / claims.
3. Enquire into cases where premium is outstanding.
4. Whether provision is made in the final accounts of Branch / DO for the share of
claims payable to the leader on both paid and outstanding claims.
B). Outward ( where we are leaders ) ( A/c. Codes 5101, 5103 & 5104 )
1. Arrangements for sharing is to be checked. It is to be seen whether adjustments
are correctly made on account of refunds / claims while settling accounts and that
the control codes for accounting coinsurance business are correctly used.
2. To check whether only our share is booked under Premium / Refund / claims
and share of other companies is accounted in Co-insurance control account codes
in Premium Register / Refund Premium Register / Disbursement Vouchers.
3. Enquire into cases where claims / refunds are outstanding.
4. Co-sharing arrangements within the offices of New India should not be
accounted as co-insurance arrangement. 100% premium is to be accounted by the
Policy issuing office only.
C). Refund of Premium :1. To verify whether refunds have been properly allowed and sanctioned as per
Financial authority.
2. To verify the commission recoveries on refunds and to comment on the
unrecovered commission.
3. In respect of Declaration policies to check whether all the declarations are
received when the premium is refunded.
4. To check whether large refunds are intentionally kept pending in the last quarter
and passed in he month of April to inflate premium figures as well to give benefit
to Development Officers for the purpose of Incentives.
5. To check whether the refund voucher is discharged by all the parties.
6. To check premium refund account schedule as if large refunds are appearing as
unpaid for more than 6 months the reasons for the same may be recorded.
15

D). Commission :1. To check whether agency license / brokers license is in force and if the license
has expired whether commission / brokerage has been released. If so to ask for
written explanation from the Office Incharge.
2. Whether Payment of commission is sanctioned by competent authority that is
Office Incharge.
3. Whether TDS has been deducted and deposited in Bank within 7 days of
payment.
4. Whether there is proper follow-up in cases where commission recoverable is
outstanding for more than 3 months.
5. Whether Commission / Brokerage expiry register has been generated.
E). Claims Disbursement :The various aspects to be seen are as under :1. The signature of insured has been obtained on discharge voucher bearing
revenue
stamps as per the law.
2. In case of policies where banks / financiers interest is involved, whether
signature of both insured / bankers of financiers were obtained on the discharge
voucher and claim cheque prepared in the name of bank or financier unless letter
from bank / financier is obtained slowing payment directly to the insured.
3. Claims settling limits prescribed for various cadres of officers are strictly
adhered
to.
4. Whether disbursement vouchers give all required details and vouchers are in
serial order.
5. That claim cheques are dispatched by ECS to the address of the insured given in
policy.
6. Whether payment of claims are made by Account payee cheques only.

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7. In case of co-insurance claims, where we are leaders and full amount is paid to
the insured, only our share of claim is debited to claims code and share of the
coinsurance is debited to co-insurers account code.
8. Where fresh cheques are issued by canceling previous cheques, whether correct
account codes are used.
9. Legal fees relating to claims and any other specific expenses incurred have been
debited to claims account.
10. In the case of claims settled on behalf of other offices as well as claims settled
by other offices on behalf of the auditee office, control account codes 5553 & 5554
are to be used.
11. Receipts pertaining to salvage disposal should be credited to claims account.
12. In case of TPA the amount stated in the TPA float Account of trial balance
tallies with the Bank Guarantee submitted by TPA.
13. In MACT cases where interest payment to individual beneficiary exceeds
Rs.50,000/- than TDS @ 20% in the absence of PAN and 10% where PAN is
available is deducted or not.
F). Expenses of Management :GENERAL :All items other than claims and commission fall under this head which normally
include salaries and other allowances to staff, imprest accounts, traveling
expenses, motor vehicle expenses, telephone expenses, conveyance, printing &
stationery, rent, electricity, office upkeep and maintenance, repairs and renewals,
capital expenditure like purchase of furniture, office equipment and real estate and
all other miscellaneous expenses.
Disbursement vouchers are prepared at the time of effecting payments. Scrutiny of
these vouchers constitutes important part in financial audit. While scrutinizing, it
should be ensured that financial powers are exercised as per the provisions and

17

limits laid down in the standing order on Financial Authority, Powers & Limits. All
deviations should be reported.
All the supporting bills, vouchers, cash memos, receipts, invoices, etc. should be
affixed with PAID stamp giving date and disbursement number at the time of
making payment.
BUDGET & BUDGETORY CONTROL :1) Whether budget proposals have been prepared on a realistic basis and sent by
DO in time to RO.
2) The approved budget should be compared with the actual expenses incurred. If
there are variances, reasons for the same should be obtained and commented upon.
3) Financial powers delegated to various authorities are subject to availability of
budget. Therefore, it is to be seen that Budget availability position certificate is
indicated on each disbursement voucher to ensure availability of budget be for
incurring expenditure. For this purpose, rules stipulate maintenance of register.
IMPREST ACCOUNTS :Imprests are of following types :1. Petty Cash
2. Postage
3. Revenue Stamp
4. Policy Stamp &
5. Agency Stamp.
The general points to be seen in their audit are :I. Imprest balance is within sanctioned limit.
II. Payment vouchers in case of petty cash are attached.
III. Conduct a surprise check of physical balance and tally with book balance.
Difference, if any, is to be enquired into.
IV. In case of policy stamps it should be seen that :18

a. The stamps immediately on purchase are defaced.

b. Separate policy stamp register is maintained.
c. Stamps have not been requisitioned when there was sufficient balance with the
departments.
d. Check up from original policies ready for dispatch that stamps are correctly
affixed.
e. Whether stamps are affixed as per the law, the provisions of which are as
prevailing.
SALARIES & OTHER ALLOWANCES TO EMPLOYEES :Points for verification are as under :1. Whether salary is paid as per salary sheet.
2. Whether payments other than normal salary viz. overtime, personal allowance,
functional allowance, leave encashment etc, are properly authorized and paid.
3. Whether advances to staff are made as per rules and whether proper control
records are maintained for various advances given to employees and postings for
deductions made.
4. Whether deductions i.e. income-tax, PF, professional tax, CTD, deductions
under court order etc. have been correctly made and deposited with the concerned
authorities within the specified time limit.
5. In case of transferred employees, whether details have been fully received from
previous offices and whether advances / loans, income-tax deductions etc. are
accounted for.
6. Whether confirmations pertaining to declarations of investments by employees
for obtaining IT relief are verified.
7. Verify JEs passed by Salary Section / Accounts department.
TRAVELLING EXPENSES :1. Whether tour has been sanctioned in advance by the competent authority.

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2. The traveling advances have been properly authorized and earlier advances have
been cleared. The advance drawn should be reasonable considering the number of
days of tour and cost of tickets.
3. The traveling bills are supported by hotel bills / receipts, boarding pass, in case
of air travel and are sanctioned by the competent authority.
4. The mode of journey, halting allowance, hotel room charges, conveyance
charges, incidental charges etc. have been claimed as per T.E. Rules.
5. The TE bills have been submitted within one month of completion of tour and
the bills submitted thereafter are approved by Regional Manager. Balance of
advance is refunded to the company immediately.
6. The traveling advances and traveling expenses have been properly accounted
through adjustment columns of Disbursement voucher or Income Receipts, as the
case may be.
7. In case of transfer TE bills, the benefits are allowed as per the rules.
8. Halting allowance in case of training or attending conference is allowed as per
TE rules / circulars and that traveling expenses incurred for traveling for attending
conferences are not debited to conference expense.
9. Advances pending for more that 3 months have to be reported as CMD level
query.
MOTOR VEHCILE EXPENSES :1. In case of leave proper deductions should be done from monthly entitlement as
per rules.
2. Insurance, taxes, petrol / diesel, tyres and tubes and batteries are debited to
Motor Vehicle Expenses Account.
3. Reimbursement of petrol / diesel, tyres and tubes, batteries is made only to
entitle category.
4. Disbursement vouchers are supported by bills and cash receipts.
5. When new car is sanctioned it should be ensured that the sanction is as per rules
and in no case higher valued vehicle is purchased and if the old car is sanctioned
under Conveyance Scheme 2002 which comes in effect from 01.01.2003 the
20

written down value of the old car along with proportionate one time tax recovery
and proportionate Insurance premium is recovered as per Conveyance Scheme
2011.
6. If the old car is sanctioned as per 80:20 scheme then the depreciation allowance
should be stopped as soon as the loan gets exhausted.
TELEPHONE / TELEX / FAX EXPENSES :Points for verification are as under :1. For entitled officers quarterly reimbursement is to be checked for landline and
mobile telephones.
2. For officers who have been allotted telephone at residence in Discretionary
quota the reimbursement /payment of telephone bills is within prescribed limit of
Rent plus local calls allowed.
3. In case Company owned Telephone is provided to the Officer whether the same
is surrendered back to the company on retirement, death, resignation.

RENT ( BOTH OFFICE & RESIDENTIAL ACCOMMODATION )

Points for verification are as under :1. Whether hiring of premises is approved by HO, authority in terms of Area, Rate,
Period, Advance etc. Whether renewal terms are approved by HO. In the case of
leasing of office premises, the tender procedure followed may be checked.
2. Whether payments are made as per agreement and are accounted.
3. Whether adjustment of advance / recovery of interest is made before payment.
4. Whether there is any litigation. If so, enquire into details.
5. Whether Rent register is maintained.
6. Whether the premises rented is not excessive in area and is properly utilized.
7. Whether premises are occupied within reasonable time of taking possession and
paying Advance / Deposit.
8. Whether Income tax is deducted from rent paid where the annual payment is
Rs. 1,20,000/- or more per landlord.
21

Additional points in case of residential accommodation :A) Owned premises :- Verify the following.
1. Whether register is maintained showing the occupancy and recoveries of
License fee and that they are not idle for long periods.
2. Whether municipal taxes and other statutory payments are regularly made.
3. Whether inventory of assets is maintained.
4. Leave & License Agreement is entered into.
5. If leased to outsiders, reasons thereof may be reviewed.
6. Whether register for repairs to premises is maintained.
7. Electricity and water charges are to be borne by the occupants.
B) Leased premises :- Verify the following.
1. Register of leased premises showing occupancy and recoveries of license fees is
maintained.
2. Where the leased premises are in the name of individual employee,
reimbursement is made on production of rent receipt as per norms.
3.Whether leased premises are taken although company owned premises are
available.If so, enquire into reasons for the same.
4. No furniture should be provided. Fixtures like fans, geyser are provided as per
norms.
5. Water & Electricity charges are to be borne by the employees.
6. In case of leased accommodation provided to the officer it should be checked
whether HRA has been stopped and license fee is recovered from the Officer.
7. Whether TDS has been deducted from the rent and deposited in the Bank within
prescribed time limit.
8. Where the monthly rent is more than officers entitlement and company is paying
full rent, then whether the deduction of difference is made from salary of
concerned officer or not.
PRINTING & STATIONERY :
22

The following points should be covered :1. The DO / BO should not incur expenses for printing of letter heads, envelopes,
continuation sheets and all numbered stationery which are to be printed at RO
only.
2. Whether there are any obsolete stocks. If so, reasons must be enquired into.
3. Sample checking of stocks should be done.
4. Whether the printing is done as per norms laid down and they are within the
budget.
5. Whether the payments are sanctioned as per financial authority. In some cases
the bills of the same order are split into lower amounts and sanctioned by junior
officers. Such cases should be immediately brought to the notice of higher
management.
REPAIRS & MAINTENANCE :Verify :1. All recurring expenses on a particular item / asset.
2. Is there annual maintenance contract entered into after inviting quotations / rates
etc. In the case of annual maintenance contracts for computers, whether the terms
are as per requirements and guidelines.
3. Whether expenses are debited to correct account code and are economical
keeping in view the life of the asset.
4. In case of major repairs whether approval from competent authority is obtained.
5. Whether income-tax is deducted from payments to contractors as per provision
under Income Tax Act.
CONVEYANCE :1. Local conveyance register should be scrutinized.
2. Conveyance and out of pocket expenses for attending Lok Adalats etc. are paid
as per the HO guidelines.

23

BOOKS & PERIODICALS :

Expenditure on these should be verified with reference to :1. Approval for newspapers and magazines purchased.
2. Register maintained for purchase of books.
3. Whether old newspapers / magazines are properly disposed off and sales
proceeds are accounted.
4. A physical check of the books in the library may be conducted. Whether the
Librarian has conducted physical check periodically and whether cost of books
that are found missing have been recovered / written off may be checked.
RURAL INSURANCE EXPENSES :Verify that :1. Tags are purchased from approved suppliers and supplies received are entered in
the stock register.
2. Whether the stock register gives particulars of tags issued such as quantity and
serial number and to whom it is issued. Seriality of tags is maintained.
3. Fees paid to veterinary doctors are as per the rates prescribed from time to time
and are verified with the policy documents.
4. Expenses incurred in connection with the participation in exhibition etc are as
per the sanction of competent authority and expenses are accounted properly.
5. Physical checking of stock in hand.
MISCELLANEOUS EXPENSES :Verify whether the expenses debited to this account do not pertain to any other
account head.
CAPITAL EXPENSES :Verify :1. Whether the assets are purchased after approval by competent authority.
2. Whether expenses are within approved budget.

24

SATUTORY PAYMENTS :Verify :1. Whether income tax deducted at source from salaries, commission, rent and
payments to contractors, surveyors, Advocates is remitted to the Authorities within
the stipulated time limits.
2. Whether Sales Tax collected on the disposal of salvage is remitted in time and
return is filed with the Sales Tax Authorities.
3. Any penalty / fine imposed by any authority for violation of any statute should
be invariably reported.
4. Whether Quarterly/Annual returns are filed with the tax authorities in time.
There may be cases of inordinate delay in filing e-TDS returns which can attract
heavy penalties.
SERVICE TAX :1. Whether service tax is collected properly. Whether total amount collected is
intimated to RO in time as per the instructions of Central Accounts Department,
HO after deducting service tax on refunds made.
2. In case of co-insurance, the leader should alone collect the full amount of
service tax.
3. Whether the office is taking Input Credit of Service Tax correctly and intimating
the same to higher office properly.
CHEQUE DISHONOURED BOOK :Verify to ensure that :1. All cheque dishonoured to be booked through system immediately on receipt
from bank.
2. In the case of cancellation of Motor Policy arising out of dishonour of cheque,
whether the RTO is informed promptly by Registered Post AD. Also Bank /
financer is to be informed.
3. Whether cancellation endorsements are sent to the insured promptly.
4. Commission paid is recovered where policy is cancelled.
25

5. Where there are frequent instances of dishonour of cheques under any

Development Officer code, reasons for the same should be looked into by the audit
party. Suitable observations should be made in the audit report.
6. Cases where there are repeated cases of cheque dishonour pertaining to one
insured or where third party cheques / Agents cheques / development Officers
cheques are dishonoured, a Xerox copy of such cheque may be taken as a
supporting evidence to audit query / investigation.
7. Whether there are instances of dishonour of cheques not reported to the DO /
Branch, but revealed at the time of bank reconciliation. In all such cases, reasons
for the same should be looked into and also the aspect of who collected the
dishonoured cheque advice from the bank should be seen.
8. Whether there are any claims registered on policies in respect of which premium
cheques have been dishonoured. This could be done on a test check basis.
9. All Audit Incharges should review the cheque dishonoured statements received
and take prompt action wherever warranted.
10. Bank charges on cheque dishonour to be recovered from concerned Agent /
Development Officer.
BANKING :Points for verification are as under :1. Presently only two accounts viz. Collection account and Disbursement account
are to be operated by a DO / Branch.
2. Due to introduction of new banking system- Zero balance accounts, the idle
funds lying in old collection/disbursement accounts are transferred or not. Whether
initiative for closer of old accounts is taken or not.
3. Whether bank statements are received regularly.
4. Whether bank reconciliation is done regularly on monthly basis.
6. Whether funds are transferred as per the standing instructions viz. on every
Saturday from the Branch collection a/c. to the DO Collection a/c. and on every
Saturday from the DO Collection a/c. to Head Office.
BANK RECONCILIATION :26

Bank Reconciliation is to be done on monthly basis and if the same is not done
reasons for the same may be recorded.
While checking Bank Reconciliation following codes should be checked in
details :1. Code 1 Cheques issued but not debited by the Bank :Many times claims cheques are prepared but the same are not sent to the client,
which
results in cheque appearing as outstanding. Such cases should be examined in
detail and the reasons for the same should be ascertained.
2. Code - 2 Cheque deposited but not credited :If items are outstanding for more than 6 months the cheques become stale and the
amount will never be credited. If any claim is registered and paid on such policy
Section 64 VB confirmation should be checked in order to find the officer who has
signed the same. Such matters should be brought to the notice of higher
management immediately.
3. Code 6 Cheques dishonoured but not accounted in our books :If such cases are found the same should be immediately reported because in case
of TP claim there will be no defence available with the company and the claim will
have to be paid even though the cheque has been dishonoured.
4. Code 8 Cheques debited by Bank but not accounted in our Books :This is also a very serious matter because in some cases there may be cases of
forgery where our account will be debited even though we might have issued a
cheque for smaller amount. Further in some cases TP awards, which become exparty, may be debited to our Account.
JOURNAL VOUCHERS :Introduction :JEs are prepared for rectification of errors viz. errors of omission or commission or
principle.

27

Closing JEs are passed to account depreciation, outstanding claims, outstanding

expenses, accrued income, prepaid expenses, money-in-transit, etc. All the JEs are
to be authorized by the Accountant and the Officer Incharge.
The following types of JEs need full attention :1) JEs passed for booking of premium, claims, cheque dishonoured and refunds
are to be checked and their impact ( due to inflating / suppression of premium /
claims etc ) on performance appraisal of the office or a Development Officer are to
be studied and to be reported.
When business is shared by two or more offices of New India, 100% premium is
to be accounted by the policy issuing offices only. If any JE is passed by offices
other than policy issuing office, the same should be commented upon.
2) All expenses booked through JEs are to be supported by proper bills / vouchers
in which case all rules for verifying a disbursement voucher are applicable here
also.
3) Any unauthorised writing off any advance / debit balance is to be reported.
4) In the case of transfer of employees, whether suitable JEs are passed in respect
of various loans and advances to staff.
FINAL ACCOUNTS GENERAL LEDGER, TRIAL BALANCE WITH
SCHEDULES :1) Postings from various income / outgo books, journals may be traced for the
months selected.
2) Verification of brought forward / carried forward of closing / opening balances
is to be done on a test check basis.
3) Scrutiny of schedules are to be undertaken, items pending for a long time
appearing under various advances codes / Suspense a/c. and control codes are to be
examined and commented upon.
4) Items which are basically revenue in nature but appearing in the Schedule ( e.g.
incentives paid / leave encashment not adjusted appearing as Advance Salary ) are
to be looked into.

28

5) To check whether the schedules are drawn wherever required showing opening
balance, additions, deductions and closing balance instead of just showing closing
balance only. e.g. vehicle loan schedule.
6) Whether action has been taken on previous years report of statutory auditors
and items appearing in schedules and notes forming part of audited trail balance.
( indicate corrective measures taken to avoid repetition ).
7) Whether the accounted figures as appearing in the audited trial balance agree
with the statistics appearing in various statistical returns. If the differences are
material, reasons are to be looked into and are to be reported if there are no valid
reasons.
PERSONNEL DEPARTMENT :General :1) Whether attendance is properly marked.
2) Whether half day CL is debited for each and every occasion of late arrival /
early going occurring after three late comings / early goings in a calendar month.
3) Whether accrued leave is calculated properly and entered in the leave records.
No privilege leave accrues for the period when the employee is on PL, SL, LWP,
unauthorised absence and under suspension.
4) Whether leave applications are received from employees for the leave availed as
per the Attendance register and are posted to leave records properly.
5) In the case of Leave Without Pay ( LWP ), the aspects to be seen are :Whether competent authority has sanctioned it, whether timely and correct advices
are sent to Salary section, whether recovery is actually made by the Salary section,
whether increment is postponed in cases where LWP exceeds 30 days in a year,
whether GIC has been advised where the LWP exceeds 180 days and whether
suitable disciplinary action under CDA rules is taken wherever warranted.
In case of LWP, to ensure that salary is not generated for unauthorized absence and
all statutory deductions are also withheld in case of unauthorisedly absent
employee.
6) In the case of promotions, whether fixation is done properly.
29

7) In the case of transfers, whether personnel record ( including leave record ) is

also transferred giving details of eligibility regarding LTS, leave encashment, brief
case, mediclaim and domiciliary treatment.
8) In case of transfer of vehicle in the name of officer under the New Conveyance
Scheme the WDV to be checked whether calculated according to given norms
applicable only for vehicles under Conveyance Scheme 2002. In case of vehicles
transferred to Conveyance Scheme 2011, the WDV to be added to income and
tax to be deducted.
9) In case of recommendations for settlement of terminal dues, the basic pay, pay
recoverable in case of exit taking place during the month, leave encashment
components, various benefits available as per options.
10) Whether various staff benefits such as Leave encashment, LTS / Foreign LTS,
brief case etc. are allowed as per rules.
11) Overtime, if any, should be approved by the Competent authority at HO.
12) In cases where disciplinary action is in the form of stoppage / deferment of
increments, whether it is implemented correctly. In the case of Development
Officers, the fact of such disciplinary action is to be recorded in the Performance
Appraisal sheet for control purposes.
13) Ceilings as per the applicable scales of pay for each cadre are to be kept in
mind at the time of checking of stagnation increments. Rules governing stagnation
increments are to be strictly observed.
14) Proper enrolment forms are obtained for coverage under staff mediclaim.
Premium recovery is to be checked. Test check of a few claims paid is to be made
to ascertain whether the same are settled as per rules.
15) In the case of employees kept under suspension, whether the subsistence
allowance was paid correctly and on revocation of suspension, whether relevant
rules regarding pay and allowances, deductions and leave are observed.
HOUSING LOAN :-

30

1) Whether there are any cases where housing loan was given and the employee
continues occupation of Companys Quarters even after completion of construction
of his own premises.
2) Whether loan is sanctioned by competent authority.
3) Whether agreement is executed as per approved terms.
4) Whether the loan is secured as per the provisions of Housing Loan Scheme.
5) Whether the property is adequately insured and kept renewed.
6) Whether loan & interest recoveries are regularly effected as per rules and the
advices are acted upon by the salary section.
7) Whether documents are preserved in safe custody.
8) Whether recovery has started immediately for supplementary loan.
9) Whether the quantum of supplementary loan is sanctioned as per rules.
VEHICLE LOAN :1). Approved make :The vehicle purchased should be of approved make. Even if the employee is
willing to bear the difference in cost between the approved make and any higher
model, it cannot be allowed.
2). Hypothecation agreement is submitted and the endorsement is made in the RC
book.
3). In the case of non-entitled employees, interest is recovered and shown under
separate code in the salary sheet.
3) INCENTIVE AUDIT :The aspects to be seen are :a. To check the arithmetical accuracy of incentive calculation sheet as well as the
working sheet for arriving at the data on premium, claims, commission and cost of
individual Development Officer.
b. Agreement of accounted premium of the branch with the Development Officer
wise premium.

31

c. Transfer of business from direct code / Development Officers code to another

are to be examined from the point of view of GIC circular dated 14.11.1992.
d. Whether relevant items appearing under Inter Office codes ( 5553 / 5554 ) are
considered.
e. Whether various JEs passed for accounting refunds, claims, coinsurance
arrangements, premium booking etc are considered.
f. In the case of policies with co-sharing arrangements or where the business is
shared
between different codes within the same office or master policy credits, whether
the
respective share of claims also is considered.
4. Arising out of audit, if any Development Officer becomes ineligible for a car
loan, then interest @12% p.a. is chargeable on the loan amount till he becomes
eligible. In addition, conveyance allowance is payable on no car basis till he
becomes eligible.
GRIEVANCE CELL :Grievance cases register is to be checked. Correctness of number of cases pending
and new cases reported, cases settled during the period under audit may be test
checked. The reasons for pending cases, especially cases which are pending for
more than six months may also be test checked to see how far the action taken on
the grievance was prompt. Bad cases of delay before the case was taken up by the
cell may be highlighted after ascertaining the systems failure and remedial action
taken in such cases. Comments to be given on the lapses which had resulted in
grievances.
CUSTOMER SERVICE :Points for verification are as under :1. Instances of abnormal overcharging of premium along with reasons such as nonreceipt of circulars / instructions, lack of knowledge of tariff.

32

2. Commission allowed in lieu of special discount is to be recovered from the

agents and refunded to the insured.
3. In certain claims, penalty is levied for non-observance of warranties, some of
which could have been avoided by timely risk inspection and proper risk
management advices.
4. Inordinate delay in submission of survey reports, in issuance of documents,
settlement of claims and in granting of genuine refunds.
5. Review of grievance cell cases ascertaining the lapse which had resulted in
grievances and the remedial action taken.

33

AUDITORS' REPORT
To The Members'
The New India Assurance Company Limited Report on the Financial Statements:
We have audited the accompanying financial statements of The New India
Assurance Company Limited (the st Company), which comprise the Balance Sheet
as at 31 March, 2014 and the annexed the revenue accounts of Fire, Marine and
34

Miscellaneous Insurance Business (collectively known as 'Revenue Accounts'),

Profit and Loss Account and Receipts and Payments Account of the Company for
the year then ended and a summary of significant accounting policies and other
explanatory information. Incorporated in these financial statements are: (a)
Returns from Thirty Two Regional Offices(including 4 LCO's), Four Hundred and
Twelve Divisional Offices audited by the other firms of Auditors appointed by the
Central Government ; (b) Returns from Nine Foreign Branches audited by local
Auditors appointed by the Company ; (c) Returns from Seven Foreign Agencies
audited by local Auditors appointed by the Company; and (d) Returns of Eight
Unaudited and One Audited run-off Foreign Agencies (In all covering total
premium of 13727.61 crores and Incurred Claims of 10428.25 crores)
Management's Responsibility for the Financial Statements: Management is
responsible for the preparation of these financial statements that give a true and
fair view of the financial position, financial performance and cash flows of the
Company in accordance with the Insurance Act 1938, the Accounting Principles as
prescribed in the Insurance Regulatory and Development Authority ('IRDA')
(Preparation of financial Statements and Auditors' Report of Insurance Companies)
Regulations, 2002 and orders or direction issued by the Insurance Regulatory and
Development Authority and accounting principles generally accepted in India,
including the Accounting Standards ` ` notified under the Companies Act, 1956
read with General Circular 15/2013 dated 13 September 2013, issued by the
Ministry of Corporate Affairs, in respect of Section 133 of the Companies Act,
2013. This responsibility includes the design, implementation and maintenance of
internal control relevant to the preparation and presentation of the financial
statements that give a true and fair view and are free from material misstatement,
whether due to fraud or error.
Auditor's Responsibility :
Our responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit in accordance with the Standards on Auditing
issued by the Institute of Chartered Accountants of India. Those standards require
35

that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The procedures
selected depend on the auditor's judgments, including the assessment of the risks
of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to
the Company's preparation and fair presentation of the financial statements in
order to design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the entity's internal
control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of the accounting estimates made by
management, as well as evaluating the overall presentation of the financial
statements. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our qualified audit opinion. Emphasis of Matter:
Without qualifying our opinion, attention is invited to Notes to Accounts: a. Note
number 8(a), 8(b) (ii) and 8(c) in Schedule 16 B regarding non-compliance of
Insurance Regulatory and Development Authority (IRDA) Regulations during the
year. b. Note number 12 in Schedule 16 B, which describe deferment of gratuity
liability of the company to the extent of Rs. 3431.20 lakhs, pursuant to the circular
dated 18-04-2011 of IRDA to Public sector insurance companies. c. Note number 8
(b) (i) in Schedule 16 B, non-disclosure of segment reporting in respect of Public
and Product Liability of Foreign Business.

36

CHAPTER 4
SUGGESTIONS AND CONCLUSIONS
FINDINGS:
1. The Balance Sheet, Profit and Loss Account, Revenue Accounts and Receipts
and Payment Account are prepared in accordance with the requirements of the
Insurance Act, 1938, the Insurance Regulatory and Development Authority
Act, 1999 and the Companies Act, 1956, to the extent applicable and in the
manner so required.
2. Auditors have obtained all the information and explanations, which, to the
best of their knowledge and belief were necessary for the purposes of our
3.

audit and found them satisfactory'

In their opinion, proper books of accounts, as required by law, have been kept

by the Company so far as appears from our examination of those books.

4. The reports of the regional auditors consolidating divisional auditors' reports,
reports of the foreign branches and foreign agencies auditors audited under
section 228 by a person other than the company's auditor has been forwarded
to us as required by clause (c) of sub section (3) of section 228 and have been
dealt with in preparing our report in the manner considered necessary by us;
5. The Balance Sheet, Revenue Accounts, Profit and Loss Account and Receipts
and Payments Account are in agreement with the books of accounts.
6. The actuarial valuations of liability in respect of claims Incurred But Not
Reported (IBNR) and those Incurred But Not Enough Reported (IBNER) as at
31st March, 2014, have been duly certified by the Company's Appointed
Actuary and relied upon by us. The Appointed Actuary has also certified that
the assumptions considered by him for such valuations are in accordance with
guidelines and norms prescribed by the Insurance Regulatory and
Development Authority (IRDA) and the Actuarial Society of India in
concurrence with the IRDA.

37

7. The investments have been valued in accordance with the provisions of the
Insurance Act, 1938, the regulations and orders/ directions issued by IRDA in
this regard.
8. The Balance Sheet, Profit and Loss Account, Revenue Accounts and Receipts
and Payment Account comply with the accounting standards referred to in
Section 211 (3C) of the Companies Act, 1956 read with General Circular
15/2013 dated 13 September 2013, issued by the Ministry of Corporate Affairs,
in respect of Section 133 of the Companies Act, 2013 to the extent applicable
to the Company and are also in conformity with the accounting principles as
prescribed in the IRDA Regulations, except preparation of Receipts and
Payments Account has been drawn by "Indirect Method" instead of "Direct
Method" as required by Part I of Schedule B.
9. As per Circular Number 8/2002 dated 22.03.2002 of the Department of
Company Affairs, the directors of the Government Companies are exempted
from applicability of the provisions of section 274 (1) (g) of the Companies
Act, 1956. i) Auditors have reviewed the management report attached to the
financial statements for the year ended 31st March, 2014 and there is no
apparent mistake or material inconsistency with the financial statements; and
ii) Based on management representation by officer of the Company charged
with the compliance, nothing has come to our attention which causes to believe
that the Company has not complied with the terms and conditions of
registration as stipulated by the IRDA.

SUGGESTIONS:

In the areas of access control and business continuity plan, the Companies should

evolve suitable security policies with clearly defined procedures and responsibilities.
Its implementation by the operating offices should be closely monitored by Head

Office.
Directions, instruction and guidelines issued by IRDA, TAC and the Head Offices of
the Companies should be incorporated into the system.

38

 Necessary modifications to the software may be made in respect of the deficiencies

relating to input controls, application controls and process controls pointed out in
Audit.

CONCLUSION
The project concludes that, given the complexity and development of Company, the overall
level of compliances with the standards and codes is of high order. This project gives the
correct ideas about how the major areas can be found by way of effective auditing system i.e.
errors, frauds, manipulations etc. form this auditor get the clear idea show to recommend on
the position. Project also contain that how to conduct of audit of the company, what are the
various procedure through which audit of company should be done. Form auditing point of
view, there is proper follow up of work done in every organization there no misconduct of
transactions is taken places for that purpose the auditing is very important aspect in todays
scenario form company and point of view.
New India Assurance Company Limited (NIA) is engaged in non-life insurance business
(Fire, Marine and Miscellaneous Insurance). Assessment, collection of premium, issue of
policies and settlement of claims were critical to their business. These operations were being
conducted through Genisys. Deficiencies in access control, input control and business
continuity planning made the system vulnerable to manipulations, errors and nonconforming
to the relevant provisions of rules and regulations. The design deficiencies led to incorrect
provisioning of claims and interest apart from contributing to non-integration of the data
among all operating offices leading to manual interventions in data entry. Genisys was being
used by the three insurance companies but continued with the deficiencies brought out above.

BIBLIOGRAPHY
BIBILORAPHY:39

Auditing By Manan Prakashan, Author Ainapure.

WEBILORAPHY:www.newindia.co.in/downloads/Complete_Final_Book_2014.pdf
www.accountingtools.com/definition-audit-report
en.wikipedia.org/wiki/New_India_Assurance

40