A STUDY ON

CORPORATE GOVERNANCE WITH

SPECIAL REFERENCE TO INTERNAL
AUDIT
AT URANIUM CORPORATION OF INDIA
LIMITED

A project report
Submitted by

MANOJ KUMAR PATRO

In partial fulfillment of the degree of

Post Graduate Diploma in Business

Management

Under the guidance of Prof. G.V.K. KASTURI

Integral Institute of Advanced Management

1
 ACKNOWLEDGEMENT

The exclusivity of this project can’t be claimed as singular efforts for

several persons have contributed shared accomplishment of this
project report .I offer my profound gratitude as without their
generous assistance this work would never have recorded completion.
As it is impossible to include all the names are recognized at
appropriate places.

I wish to express my deep sense of gratitude to my Honorable Prof.

K. Kasthuri of INTEGRAL INSTIUTE OF ADVANCE
MANAGEMENT, VISAKHAPATNAM for her guidance and
consultancy.

I am very much thankful to UCIL management especially to Mr.

[Link] Manager (Accounts) for his kind co-operation and keen
interest shown by him for the preparation of this report.

Collection of data and information was one of the most difficult tasks
in the preparation of this study. I owe my gratitude to the staff of
UCIL library for providing me every information I demanded thanks
them all for their kind assistance.

Last but not the least; I wouldn’t be able to complete my report

without the blessings of my parent’s and the co-operation of all those
persons who have directly or indirectly helped me for preparation of
this report.

MANOJ KUMAR PATRO

2
 DECLARATION

I, the undersigned hereby solemnly declare that this project, titled “A

Study on Corporate Governance With Special Reference to Internal
Audit” is a genuine profound work done by me under the auspicious
project guide and concerned executives. All the information collected
is authentic and to the best of my knowledge. The journal, annual
report and books and relevant information handout bears the
testimony to the genuineness of the work done.

MANOJ KUMAR PATRO

3
CONTENTS
Chapter 1: INTRODUCTION Page No.

Needs

Objectives

Research methodology

CHAPTER 2:INDUSTRY AND COMPANY PROFILE

Industry profile

Company profile

CHAPTER 3:CONCEPTUAL FRAMEWORK

CHAPTER4:FINDINGS SUGGESTIONS AND CONCLUSION

SUMMARY

BIBILIOGRAPHY

4
CHAPTER 1
INTRODUCTION

INTRODUCTION

5
CORPORATE GOVERNANCE: Corporate Governance implies that the
company should manage its affairs with diligence, transparency,
responsibility, accountability and would maximize shareholder wealth.
Hence it is required to design system, processes, procedures, structures
and take decision to augment its financial performance and stakeholder
value in the long run.

INTERNAL AUDIT: Internal audit is the independent appraisal of activity

within an organization for the review of accounting, financial and other
business practices as a protective and constructive arm of the
management.

6
 INDUSTRY PROFILE
Mining has provided the answer to the manufacturing and energy needs of the humanity in
the past century. Mining community around the world has contributed to the enrichment of
the world through industrial development. Minerals are valuable natural resources being
finite and non-renewable. They constitute the vital raw materials for many basic industries
and are a major resource for development.

Demand for minerals is expected to grow very fast, due to increasing levels of consumption,
infrastructure development, and growth of the economy. Management of mineral resources
has, therefore, to be closely integrated with the overall strategy of development and
exploitation of minerals is to be guided by long-term national goals and perspectives.

In India, 80% of mining is in coal and the balance 20% is in various metals and other raw
materials such as gold, copper, iron, lead, bauxite, zinc and uranium. India with diverse and
significant mineral resources is the leading producer of some of the minerals. India is not
endowed with all the requisite mineral resources. Of the 89 minerals produced in India, 4
are fuel minerals, 11 metallic, 52 non-metallic and 22 minor minerals.

India is the largest producer of mica blocks and mica splittings; ranks third in the production
of coal & lignite, barytes and chromite; 4th in iron ore, 6th in bauxite and manganese ore,
10th in aluminium and 11th in crude steel. Iron-ore, copper-ore, chromite and or zinc
concentrates, gold, manganese ore, bauxite, lead concentrates, and silver account for the
entire metallic production. Limestone, magnesite, dolomite, barytes, kaolin, gypsum, apatite
& phosphorite, steatite and fluorite account for 92 percent of non-metallic minerals. The
index of mineral production, excluding fuel and atomic minerals, (base year 1993-94=100)
for the year 2005-06 is expected to be 154.23 as compared to 153.48 in 2004-05.

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Life Indices: Important non-fuel Minerals

Recoverable reserves Life Index (years)

Mineral/ Ore/ Metal estimated as on 1.4.2000 ([Link])
(Based on exploration/
prospecting) Figure in
million tonnes unless
otherwise specified
Bauxite 2462* 211
Copper metal (tonnes) 5297,000 80
Lead metal (tonnes)) 2381,000 45
Zinc metal (tonnes) 9707,000 45
Gold metal (tonnex) 68* Not Estimated
Iron ore 13460* 131
Chromite Ore 97 46
Magnesite 245* 542
Manganese Ore 167* 47
Limestone 75679* 254
Phosphorite (Rock 142 79
Phosphate)
Sillimanite 516* Very large
Garnet 52* 90
Kyanite ( tonnes) 2817000* 265
Dolomite 4387* 438
Diamond ( Thousand 982* 19
carats)
  * Recoverable reserves  
estimated as on 1.4.1995.
Regulation of Minerals

Management of mineral resources in India is the responsibility of the Central Government

and the State Governments in terms of Entry 54 of the Union List (List I) and Entry 23 of the
State List (List II) of the Seventh Schedule of the Constitution of India. The Central
Government in consultation with the State Governments, formulates the legal measures for
the regulation of mines and the development of mineral resources to ensure basic uniformity
in mineral administration and to ensure that the development of mineral resources keeps
pace, and is in consonance with the national policy goals. The regulation of mines and
development of mineral resources in accordance with the national goals and priorities is the
responsibility of the Central and State Governments.

The role to be played by the Central and State Governments in regard to mineral
development has been extensively dealt in the Mines and Minerals (Regulation and
Development) Act, 1957 and rules made under the Act by the Central Government and the
State Governments in their respective domains. The provisions of the Act and the Rules are
reviewed from time to time and harmonised with the policies governing industrial and socio-
economic developments in India.

The Mines and Minerals (Regulation and Development) Act, 1957 lays down the legal
frame-work for the regulation of mines and development of all minerals other than petroleum
and natural gas. The Central Government has framed the Mineral Concession Rules 1960
for regulating grant of prospecting licences and mining leases in respect of all minerals other

8
than atomic minerals and minor minerals. The State Governments have framed the rules in
regard to minor minerals. The Central Government has also framed the Mineral
Conservation and Development Rules, 1988 for conservation and systematic development
of minerals. These are applicable to all minerals except coal, atomic minerals and minor
minerals.

National Mineral Policy

A national mineral policy has evolved over the years in India. The policy emphasizes the
need for conservation and judicious exploitation of finite mineral resources through scientific
methods of mining, beneficiation and economic utilisation. Simultaneously, it keeps in view
the present & future needs of defence and development of India and strives to ensure
indigenous availability of basic and strategic minerals to avoid disruption of core industrial
production in times of international strife.

The basic objectives of the mineral policy in respect of minerals are:

(a) to explore for identification of mineral wealth in the land and in off-shore areas;

(b) to develop mineral resources taking into account the national and strategic
considerations and to ensure their adequate supply and best use keeping in view the
present needs and future requirements;

(c) to promote necessary linkages for smooth and uninterrupted development of the mineral
industry to meet the needs of India;

(d) to promote research and development in minerals;

(e) to ensure establishment of appropriate educational and training facilities for human
resources development to meet the manpower requirements of the mineral industry;

(f) to minimise adverse effects of mineral development on the forest, environment and
ecology through appropriate protective measures; and

(g) to ensure conduct of mining operations with due regard to safety and health of all
concerned.

According to the policy, induction of foreign technology and foreign participation in

exploration and mining for high value and scarce minerals shall be pursued. Foreign equity
investment in joint ventures in mining promoted by Indian companies would be encouraged.
While foreign investment in equity would normally be limited to 50%, this limitation would not
apply to captive mines of any mineral processing industry. Enhanced equity holding can
also be considered on a case to case basis. In respect of joint venture mining projects of
minerals & metals in which India is deficient or does not have exportable surplus, a
stipulated share of production would have to be made available to meet the needs of the
domestic market before exports from such projects are allowed. In case of ores whose
known reserves are not abundant, preference will be given to those who propose to take up
their mining for captive use.

The policy also addresses certain aspects and elements like mineral exploration in the sea-
bed, development of proper inventory, proper linkage between exploitation of minerals and
development of mineral industry, protection of forest, preference to members of the
scheduled tribes for development of small deposits in scheduled areas, environment and
ecology from the adverse effects of mining, enforcement of mining plan for adoption of
proper mining methods and optimum utilisation of minerals, export of minerals in value
added form and recycling of metallic scrap & mineral waste.

9
10
 COMPANY PROFILE

URANIUM CORPORATION OF INDIA LTD.

LOCATION:
Uranium Corporation of India Ltd. a public sector undertaking under
administrative control of the department of atomic energy with its
headquarter at Jaduguda is located at30 km. away from Tatanagar
Railway Station and 5 km. from Rakhamines Railway Station of South
Eastern Railway in the East Singhbhum district of Jharkhand. Jaduguda is
a mode habitat with all civic amenities like well laid houses, bank with
ATM facility, Post Office, Tele – communication system with cellular

11
networking, community center, large play ground, School, Hospital,
Shopping center, co-operative stores uninterrupted power supply, rail and
road communication systems and perennial supply of treated water etc.

HISTORICAL GROWTH:

Occurrence of Uranium minerals in the famous Singhbhum copper belt

was known since1937. In 1950, a team of Geologist was assigned specific
task of closely examining the 160km. Long Singhbhum copper belt to
locate the presence of Uranium mineralization and other radioactive
minerals. The team after conducting extensive exploration work located
several Uranium occurrences. One of these occurrences was at Jaduguda.
It was discovered in 1951. The Uranium deposit at Jaduguda eventually
turned out to be a major one. It is located almost in the center of
Singhbhum copper belt. After the discovery of the deposit, detail
prospecting and exploratory mining was done by Atomic Minerals
division of the Department of Atomic Energy. Prospecting and
Investigation works were going on simultaneously and to speed up the
mining work, Jaduguda mines project was separated from the Atomic
Mineral Division of the country on 8th December 1961. Subsequently in
order to process the Uranium Ore extracted from Jaduguda, the Atomic
Energy commission of the government of India decided to set up a
processing plant at Jaduguda. The work for installation of the processing
plant was entrusted to M/s Indian Rare Earths Limited. A detailed project
report was prepared in September 1962 and the construction of process
plant (Mill) was undertaken by Jaduguda Uranium Mill Project in
February [Link] flow sheet and design of Uranium Processing Plant
was prepared by engineers and scientists of Bhabha Atomic Research
Center, Bombay which was commissioned in May1968. It was capable of
processing a thousand tones of Uranium Ore per day. Subsequently a
public sector in the name of UCIL was formed on 4th October 1967 after
amalgamation of Jaduguda mines project and Jaduguda Uranium mill
project. The Uranium processing mill commenced commercial production
in May 1968. After Uranium Corporation of India Limited came to stay
and on the basis of experience gained and researches made a decision was
taken to set up Uranium recovery plant to develop and establish the
technology in recovering low Uranium values from the copper tailing of
12
the copper concentrating plant of M/s Indian Copper Complex /
Hindustan Copper Limited on the southern bank Subarnarekha river.
Earlier, the waste known as tailings was disposed in the river by M/s ICC.
The Surda Uranium recovery plant was set up and minerals concentrate
was deposited to Jaduguda Uranium mill for further processing. But with
the closure of various units of Hindustan Copper Ltd. and inadequate
recovery of copper tailing from its plant the above recovery plant had to
be abandoned. Uranium Ore of Jaduguda contains small amount of
copper, nickel, molybdenum, magnetite, Ilmenite, Mortile,Vraninite,
tutile,Chalcopyrite, Pyrrhotile, Marcasite, Pyrite, Machinawite ,
Pentlandite , Viotarite ,Tellurbuismuth , Tetradymite , Cubanite , and
Molybdenite . Studies made by UCIL and Bhabha Atomic Research
Center (BARC) explored the possibilities of recovering This Material as
by-product without affecting Uranium recovery. The recovered by-
product having marketability are disposed off in the open market. In
addition to the Mines and Mills division the corporation also runs various
other technical and non-technical Department viz. Control Research and
Development Department, Stores and Purchase Department, Personnel
and Administration Department. There are no separate sales departments
in the organization as because the ultimate product of the company is
Magnesium Di-Urinate (U3O8) is totally acquired by government of
India and cannot be sold in open market as per the stipulation led down in
the Atomic Energy Act. Thus, the Uranium Corporation of India Ltd.
Jaduguda is strategically an important at the forefront of nuclear energy
programme of the government. In other words, It can be said that UCIL is
a sub agency undertaking commercial scale exploitation of country’s
Uranium resources.
REQUIREMENT OF NUCLEAR ENERGY IN INDIA’S
CONTEXT:
Electricity is the most predictable requirement for development in today’s
industrial world, particularly in India, which is the largest democracy
with nearly one-sixth of world Population with low per capita income.
Our per capita consumption of electricity is a mere 487 units compared to
compounding figure of about 10,000 units in OECD countries. The
central electric authority of India, which undertakes periodic projections
of energy requirement, has estimated that energy needs of the country
will record a steep increase from 529,014 millions units in 2001-02 to

13
1,317,644 millions units in 2016-17. The installed capacity on 31 st March
2001 is a mere101,150 Mwe. Energy is the engine for empowerment and
growth. Availability of energy leads to enhance livelihood and better
amenities. With the issue of sustainability in mind, is possible only if the
energy supply becomes abundant and within the reach of all. It is
appropriate to quote Dr. Bhabha’s Famous expression “No power is
expensive than no power.”
This calls for a close examination of fuel resource positions for energy in
our country. India has a reasonable coal reserve, which is concentrated
north central of the country, whereas load centers are spread all over.
Considering the major role to be played by coal fired thermal stations in
coming year to meet the established need of the electricity for the
projected growth of the population, the coal reserves is expected to last
about 75 years. Besides the problem of transportation of large amount of
coal to different parts of the country, environmental problems related to
disposal of ash, emission of greenhouse gases and acid rain complicate
the scenario. Similarly, the inadequate reserves of oil and gas in our
country have very limited scope to meet the long-term energy
requirement. Importing oil on a sustainable basis to generate electricity is
also not very encouraging because of complex geo-political regions.
Tapping the potential of hydropower is limited to geographically suitable
sites and entirely depends on good rainfall of year after year. The social
problems related to the replacement of vast population to construct a
large catchments area of the water reservoirs are not very encouraging
too. Non- conventional sources like solar, biomass and wind do play
useful role as distributed source to meet the demand at small load points.
But these, at the present level of technological development cannot be
conceived as noteworthy source of energy especially there is a significant
demographic shift continual growth of urban population. The importance
of Uranium as a source of energy can be realized on the fact that the
single gram of U235 or complete fission releases energy of One
megawatt per day is equivalent to about 1,40,000 tons of coal. Therefore,
to ensure long-term availability of energy, India has to look for other
sources. It is worth to consider the power of the atom. The enormous
potential of generating electricity from the atomic minerals like Uranium
and Thorium holds the promise for the future of our country. India has a
modest reserve for Uranium and abundant reserve of Thorium. In order to

14
tap this vast potential of Thorium to generate electricity on a sustainable
basis, nuclear power programme of our country is very strategically
formulated. In its noble mission to serve the country, the Department of
Atomic Energy has gone far ahead in demonstrating scientific and
technological superiority over many advance countries. The department
now enters into its glorious 50th year and its service to the nation in
different fronts like Power, healthcare, water management, Food
preservation, `Environmental protection, National security, Technology
Development, Industry etc. has made every Indian proud in all corners of
the world.

UCIL’S OPERATION:

JADUGUDA MINES:
It has the destination of being the first Uranium Mine of the country
where mining operation began in 1967 and was established with
commissioning of a shift with tower mounded friction winder a technical
mile stove for the mining industry in India. The mine is accessed by a 5m
diameter vertical shaft with a total depth of 640m. The shift is through set
concrete lined and has a cage and a skip with their counterweights. The
cage accommodates 50 people and the skip has a capacity of hosting 5
tones of ore at a time. This shaft also is the main ventilation intake
besides it provide service lines such as compared air and water pipe lines,
communication and power cables etc. Mine is well ventilated by
boundary ventilation layout. Horizontal cut and fill method is followed
for stopping. The ore is transferred to the adjacent process plant by
conveyor and the mill tailing is used conveyor and the mill tailing is used
as fill. The main shaft caters up to a depth of 555M and an auxiliary shaft
up to 950M depths was sunk to mines ore from deeper level. This mine
was the first in terms of Technology development and absorption from
across the globe. It has created a large skill base for mining industry in
general and Uranium mining in particular. There were total 1148
manpower employed in this time.

15
BHATIN MINES:
It is located at a distance of 5 km. From Jaduguda and shares much of
infrastructure of Jaduguda. Mining of this small deposit illustrates
UCIL’s commitment to optimally utilize country’s source minimum
resources. Bhatin mine was commissioned during the year 1987 and has
been plant up to a dept of 250m. The total manpower in this mine is 239.

NARWAPAHAR MINES:
It is another addition to UCIL’s operating mines and was commissioned
in April 1995. This is the most modern mine in the country with a decline
access to underground and ramp access to the stripes. This permits use of
large diesel power underground equipment to be used giving high
productivity eliminating fatigue workers and providing a good working
environment unparallel in Indian mining industry. Total manpower
employed in this mine is 1184.

TURAMDIH MINE:
It is about 23 km. West to Jaduguda and one body is lenticular in shape
occurring as several discrete lenses. The mine was commissioned in 30th
September 2003. The total manpower employed is 283.

BAGJATA MINE:
It is located about 7 km. West of Musabani and it is the latest UCIL’s
Uranium mine. The work is under construction. The mine has depth
30metres decline at present. Uranium is not yield from mine. At present
there are 74 workers in this mine.
BANDHU HURANG MINE:

16
It is located around 7 km. south to Tatanagar Railway Station. It is one of
the latest Uranium mine of UCIL. It is an open cast mine. The work is
under construction and there are 39 workers at present

MANPOWER STRENGTH FOR THE MONTH OF MARCH 2008

[Link]. Name of the department. No. of workers

01 Jaduguda Mines 1058

02 Jaduguda Mill 786
03 C.R.&D. 63
04 Jaduguda Administration 226
05 Jaduguda Accounts 52
06 Jaduguda Store 40
07 Jaduguda Purchase 19
08 Others 14
09 Narwapahar Mines 1169
10 Turamdih Mines 426
11 Bagjata Mines 74
12 Bhatin Mines 233
13 Bandhu Hurang 39
TOTAL 4209

PROCESSING PLANT (MILL):

The Ore mined from Narwapahar , Jaduguda, Bhatin and Turamdih mines
is presently processed in the centralized processing plant (mill) located
close to Jaduguda mines. Uranium is extracted from ore in the Jaduguda
mill by hydro-metallurgical process. This mill has been expended twice
since its commissioning in 1968 to process additional ore from Bhatin

17
and Narwapahar mines. The original installed capacity of this mill was
1000 ton/day and was subsequently enhanced to 1300 ton/day. This mill
was further expanded during the year 1996 to process 2090 ton/day. The
total workforce developed for this purpose is 827.
TAILINGS TREATMENT & DISPOSAL:
Two types of wastes are generated in Uranium ore processing. Liquor
depleted in Uranium from ion exchange unit after uranium recovery
&filtered solids depleted in Uranium from filtration of leached slurry.
Both are neutralized with lime stone and lime slurry to precipitate
remaining radionuclide along with heavy metals like Manganese Ore,
Copper etc. The neutralized slurry is classified & course fractions are
pumped back to the mines for back filling the voids. The fine particles are
pimped to telling pond, where slime settles and clear liquor is sent to
effluent treatment plant for further re-treatment.
EFFLUENT RE-TREATMENT &TECLAMATION:
UCIL has implemented a composite scheme for reclamation of water &
effluent re-treatment to make the final discharged effluent
environmentally begin.
CONTROL RESEARCH AND DEVELOPMENT LABORATORTY
A full fledged control, research and development laboratory with sound
infrastructure monitors the process parameters for the recovery of
Uranium and by-products from Uranium ore. Efforts continue to improve
further process efficiency. It caters the testing requirement of raw
material maintaining of loco exhaust in the mine air.
PILOT PLANT:
A technology demonstration pilot plant has been commissioned in
Nov.2002 at Jaduguda Mill premises. This plant has the comprehensive
facility for uranium ore processing, mechanized crusher house grinding
classification circuit, acid/ alkali leaching tanks, ion-exchange/solvent
extraction activities, tailings neutralization & disposal system with the
provision to study the recovery of by-products, with the commissioning
of this pilot plant, it is now possible to optimize various process
paramete4rs & establish the techno-economic feasibility.
BY PRODUCT PLANTS:

18
The company has always kept mineral conservation as its prime
consideration. It has put in lot of research & development efforts to
recover the small quantities of Cu, Ni, Mo, Sulphides present in the
Jaduguda Ore. To recover the magnetite
contained in the ore, a Magnetite plant was commissioned in the yr. 1974.
The magnetite recovered is supplied to coal washeries for benefaction of
coal.
RADIOLOGICAL & ENVIRONMENTAL SAFETY:
Health Physics Unit-Cum-Environmental surveillance laboratory of
environmental Assessment Division Bhabha Atomic Research Centre
carries out-in-plant &environmental surveillance of all the UCIL units to
evaluate & ensure overall safety in accordance with the standards
prescribed by the national & international regulatory bodies.
NEW PROJECTS:
In order to meet the increased demand of nuclear energy of the country
UCIL being the sole producer of U3O8 , has undertaken following plans
to expand its activities in Singhbhum East District of Jharkhand.
1. Opening an open cast Uranium Mine at Bandhu Hurang in
Singhbhum East District of Jharkhand.

2. Contraction of a processing plant at Turamdih in Singhbhum East

District of Jharkhand.

3. Opening an underground mine at Bagjata in Singhbhum East

District of Jharkhand.

4. Opening an underground Mine at Mohuldih in the Saraikela-

kharsawan district of Jharkhand.

In addition to the above projects, the corporation has also taken up

following few sites in other parts of the country for construction of
Uranium Mines &processing plants.

19
 1. Underground Uranium Mine and Ore processing plant at Lambapur
Peddagatter in Nalgonda district of Andhra Pradesh.
2. Open cast Uranium mine and Ore processing plant at Domiasiat in
Klest Khasi hill district of Meghalaya.
3. Underground Uranium mine at Gogi in Gulberga district of
Karnataka.
4. Underground Uranium mine at Rohi Ghateshwar in Rajasthan.

With the UCIL in expansion made it is evident that UCIL is poised for a
massive growth with technological scientific excellence aspiring to
progressively achieve the capability of meeting the entire fuel
requirement of the rearrested generation of nuclear power.

ISO CERTIFICATION:
With the introduction of the international standard of working practices
and their strict Compliance, UCIL has now been awarded with the
prestigious ISO – 9001:2000 & ISO – KI001 certificates for its quality
management system & environmental management system respectively.
Company is also reported to have initiated steps for obtaining ISO –
18001 certification for its occupational.

UNIONS OF UCIL:

SL NAME AFFILIA REGISTRA PRESIDEN GENERAL

20
 . OF THE TED TO TIO-N NO. T SECRETA
N UNION RY
O.

01. URANIU BHARTI 2621 SHRI SHRI RAM

M YA OMPRAK NARESH
MAZDOO MAZDOO ASH AGI KUMAR
R SANGH R SANGH
02. JADUGU INDIAN 923 SHRI. P.K. SHRI B. N.
DA NATION BALMUC CHAUDH
LABOUR AL HU ARY
UNION TRADE
UNION
03. SINGHBH 3430 SHRI SHRI P.K.
UM CHAMPAI BHAGAT
URANIU SOREN
M
MAZDOO
R UNION
04. URANIU IFTU 2315 SHRI H.M. SHRI
M UPADHY RAMRAT
KAMGAR AY AN SINGH
UNION

MINES DIVISION

INTRODUCTION:

21
Mining is the process of obtaining mineral from the earth crust and
include both underground excavations and surface working. Prospecting
work of Uranium ore at Jaduguda was started on 4 th November 1957 by
the Atomic energy. Prospective work gave a good result and feasibility of
the mineral was ascertained. The work of mining in the prospecting stage
included the deep drilling of bore hole from the surface and the deep of
the presence of mineral was also determined. Consequent to the decision
of exploiting the Uranium loads on a commercial scale. It was then
decided to sink a circular shaft 635 meters deep after preliminary survey
for local size. Winding capacities and other technical planning first stage
of shaft sinking now the depth of the mine in 605 meters and finished
diameter of the shaft is 5 meter and is completely lined. Mines division of
the corporation is headed by the superintendent (Mines) and assisted by
mines manager and a team of technically qualified Personnel/Scientists
like mines surveyor, geologist, physicists, mining mechanical and
electrical engineers. Superintendent (mine) is directly reporting to the
Chairman and Managing Director and other to the Superintendent
(mines). Mining work comprises the under-mentioned processes.

1. Survey, Planning and Development.

2. Drilling.
3. Blasting.
4. Timbering.
5. Track Laying.

6. Pipe Fitting.

7. Mucking.

22
 ORGANISATION CHART (UPTO SUPERVISOR RANK)

MINES DIVISION

MILL DIVISION
23
INTRODUCTION :

The Atomic Energy Commission decided in March 1960 to set up a mill

at Jaduguda to concentrate the Uranium [Link] design and floor sheet of
mill was prepared by the Engineers and Scientists of Bhabha Atomic
Research center (B.A.R.C.) , Bombay. The work of setting up the mill
was entrusted to the Indian Rare Earth Limited after construction, the mill
was handed over to the Uranium Corporation of India ltd. The capacity of
the mill is to treat 1000 metric tons per day and was commissioned for
commercial production in May 1968. Mill Division is headed by the
Superintendent (Mill) and assisted by Assistant Superintendent (Mill).
Mill Division follows Mechanical, Electrical and team of technically
qualified persons. The following processes are followed by Mill
Department. They are :-

A. PROCESSING

1. Crushing of ore.

2. Milling Process.
3. Leaching Process.
4. Filtration.
i. Drum Filter Side.
ii. Pre-coat Filter Side.
iii. Ion enchance.
iv. Precipitation.
v. Press Filter.
vi. Driving Plant.

vii. Tailing Disposal

B. MAGNETITE RECOVERY PLANT.

C. SULPHURIC ACID PLANT.
D. WATER TREATMENT PLANT.
E. SEAWAGE TREATMENT PLANT.
F. OUTSIDE CAMPUS PLANT.
G. MAINTENANCE AND CIVIL.

24
DEPARTMENT OF FINANCE AND ACCOUNTS:

INTRODUCTION:

All business organization owns their liabilities to the propreitor or the

share holder . It is the basic duty of finance department to safeguards the
facility of the shareholders by whose contribution exist. Every business
unit must earn a fair rate of return on investment, which is essential not
only from shareholders point of view but also for the benefits of the
society as a whole. If it is unable to achieve this then it will become an
other adverse affect will follow. So primarily the accounts department is
concerned with the recording of all the transactions as and when they take
place. This traditional accounting practices and is known as Financial
Accounting.

In addition to this it assists the management in decision making by

furnishing them with the required data. This accounting system is known
as Management Accounting. Frequently reports are furnished to the
management to draw its attention to important aspects. The same original
data is used for both financial accounting and management accounting on
their representation differs. The staffs working in the financial accounts
department are well conversant with the rules, order and instruction
issued by the company, for smooth function of the department and
account manual has been drawn up and outmost care is taken to ensure
that :-

1. The dues of the company are correctly assessed and promptly

realised.
2. The appropriate authorities sanction the expenditure of the
company for various activities.
3. The classification of receipts and expenditura are correctly made
and,
4. All the accounts records are maintained properly.

25
FUNCTIONS OF ACCOUNTS DEPARTMENT:

Besides compilation of accounts of all receipts and expenditure of the

company and maintenance of account record of the finance and accounts
department exercise the following check.

1. To check with reference to rules or orders of all transactions

affecting the receipts and expenditure of the company.
2. To check prompt settlement of proper claim against the company.
3. To see that there are no financial irregularities in the transaction.
4. To ensure timely and correct preparation of financial reports
statistical data etc.

MAIN DIVISION OF WORKS

The work in the accounts department are distributed to and carried out in
folowing sections :-

1. SALARY AND ESTABLISHMENT SECTION.

2. PURCHASE ACCOUNT SECTION.
3. WORKS ACCOUNT SECTION.
4. PRICED STORES LEDGER SECTION.
5. BUDGET AND COST SECTION.
6. CASH SECTION.
7. DATA PROCESSING SECTION.
8. GENERAL ACCOUNT SECTION.
9. CONTRIBUTORY PROVIDENT FUND AND GRATUITY
SECTION.
[Link] AUDIT SECTION.
26
SALARY AND ESTABLISHMENT SECTION

The Salary and Establishment section deals with all matters connected
with pay and allowances of all employees various recoverable advances
other related matter connected with the payment of these deal to the
employees and recovery of dues to the company.
The monthly pay bill and supplementary pay bill are prepared in data
processing center to which all inputs are furnished by the Salary &
Establishment section wherever necessary by obtaining same time from
other department section concerned. For all these purpose of preparation
of Wages/Salary bill the attendence of each employee is furnished by
Time section base on actual attendence from 1st to 20th of the every month
for assumed attendence for remaining days. Attendence sheet is used in
Data Processing Center. Salary and Establishment section obtain every
month from Data Processing Center a printed attendence sheet showing
Serial No. , Department Code No. , Name , Designation and Basic pay
and send these to the Time office , Mill , Mines for furnishing attendence
of each employee. Time office return the attendence sheet indicating the
information under “Attendence” leave and total column to the Account
Department (salary and establishment section).

PURCHASE ACCOUNT SECTION:

This section primarily deals with payment of suppliers bill as per

purchase order issued by the purchase department and accounting of the
related expenditure through material receipt voucher. All purchase issued
by Purchase department are kept in this section in chronological series.
After receipt of material receipt voucher from the Store Department
suppliers bill are processed and note of Receipt Voucher (RV) No. and
bill reference etc. is kept to avoid double payment. Bill are passed after
the proper scrutiny with reference to the terms of Purchase Order and sent
to the cash section for issue of cheques to the suppliers.

The various phases of work dealt within this section are as under :-

27
 1. Audit and Payment of suppliers bill for Stores etc. purchased by
the corporation.

2. Payment of advance along with Purchase Order where specifically

stipulated.
3. Payment for imported materials including allied works such as
Opening of letter of credit, correspondence with Clearing agent ,
Customs and Banks etc.
4. Adjustment of debit advice sent by company’s banker on account
of value of stores being imported.
5. Adjustment of expenses incurred on account of Custom duty, Port-
handling charges paid to the Custom Authorities and Port
Authorities against the deposit account opened with them by the
corporation.
6. Maintenance of Ledgers and Registers.
7. Reconciliation of advances and sundry creditor account.
8. Issue of Bihar sales tax declaration for payment of Sales Tax at
concessional rate.

WORK ACCOUNT SECTION:

This section is entrusted with checking the estimates tender, documents.

Bills and other allied record pertaining to work / job done departmentally
or by outside agencies. The works pertaining to the following are also
done in this section.
Bills of Transport Contract.
1. Telephone / Telex bill.
2. Bills for advertisement issued by the company.
3. Miscellaneous Bill.
4. Advance to private agencies and other against collection of
material and job orders and consignment note for clearance of
material from outstation.
5. Temporary advance to the other department, Offices for emergent
purchase and job.

28
 6. Reimbursement of imprest accounts held by different departments
of the company.
7. Payment of Road Tax Premium on Vehicles etc.
8. Director sitting fees.

BUDGET AND COST SECTION:

BUDGET SECTION

This section is headed by Deputy Manager (cost) and assisted by

Assistant Account Officer and other Staffs. A Performance Budget is
prepared by the company to indicate in advance the Income and
Expenditure anticipated in ensuing year based on the level of Production
and other activities planned during the financial year. The Budget
documents are prepared separately for Revenue Receipt and Expenditure
and that for Capital Expenditure. Approved programmed of Production
and related information are obtained from the head of Mines, Mill and
Other Departments to prepare revised estimates for the current year and
budget estimates for the following year. Revised and Estimate Budget are
submitted to Board of Directors for approval together with Explanatory
notes of variation etc. Relevant Budget estimates are approved by the
board and sent to the head of the Department for guidance and executive.

COST SECTION

Monthly Cost Sheet of Ore raised in Mines Division, U3O8 produced in

Mill division, by-products, Uranium recovery from Copper tailings etc.
This section is entrusted with the works of preparation of monthly cost
sheet for main product and Sulphuric acid produced by the company
master chart of the account head are integrated. The activities of the
company are divided into eleven functions and each function is again
subdivided into a number of cost centers. The cost center is represented
by the last four digit of ten-digit account code. The first digit represents
the financial code and the next two digits represent the function code.
Each cost center is consisting of one or more cost code. This section is
also entrusted with the following task: -

29
 1.
2. Cost of Production of Sulphuric acid and maintenance of cost audit
records.
3. Maintenance of subsidiary Ledger of cost accounts.
4. Compilation of physical and financial production data for cost
control and statistical purpose.
5. Fixation of rate of services etc. rendered on chargeable basis.
6. Valuation of Stock at the end of each quarter.
7. Annual Cost Sheet for closing of accounts.
8. Checking of cost code in the issue voucher.

CASH SECTION
All receipt of dues to the company and disbursement on behalf of the
company except payment through authorized imprest holder handled in
cash section. This section is headed by Assistant Manager (Accounts) and
assisted by Cashier and as Assistant Cashier. All

transactions are recorded in the respective cashbook duly supported by

Receipt and Disbursement Vouchers, which are kept in safe custody of
cash section for proper accounts and audit purpose. Cash section receives
Voucher with supporting bills etc. from different section of Finance and
Accounts Department and pay to the payees as mentioned in the
respective voucher. All Vouchers for receipt and payment are numbered
in the cashbook and filed kept chronologically. Bank cashbook is
maintained by the Cashier and imprest payment voucher are sent daily to
E.D.P. center for the preparation of imprest cashbook. Monthly
reconciliation of bank cashbook with bank statement is done and
reconciled. The duties performed by cash section are: -

1. Safe custody of records, documents and valuables.

2. Operation of safes in cash section and safe custody of Keys.
3. Maintenance of primary account of receipts and disbursements.
4. Custody of Chequebook.
5. Writing of Cheques and dispatch.

30
6. Monthly reconciliation of bank statement.

PRICED STORE LEDGER SECTION:

An Assistant Accounts officer manages this section “Priced Store Ledger

Section” (PSL) is mainly responsible for pricing of receipt and vouchers
as per bill passed by the PAS, giving correct financial account code on
each issue voucher before it is passed to the cost section for checking of
correctness of cost code center. Primary work of this section is to
maintain the ledger for receipt and consumption of store and equipment
and balance their receipt and issue voucher are sent to E.D.P. center for
preparation of priced store ledger. Summary of material issue, cost wise
allocation of consumption of material as well as detailed statement of all
issues for capital work.

E.D.P. CENTER:
This section is entrusted with the work of preparation of salary Statement
of the employees, monthly statement and salary summary. Financial code
wise and cost center wise. Sundry creditor, Registers and Ledgers
monthly material abstract register. Monthly consumption of store and
spares, financial and cost code wise, annual inventory of the company,
maintenance of Provident Fund account ledger, Imprest cashbook,
Monthly

Imprest cash summary (Cost / Financial Code Wise). Calculations of Ex-

Gratia leave. Ex-Gratia payment and control of festival advance cycle and
Motorcycle allowances, Food and Draught advance of the corporation.
All the above work is done on the basis of master information supplied by
the section concerned.

GENERAL ACCOUNT SECTION:

This section is entrusted with the compilation of the company and

preparation of annual accounts at the close of the financial year, which is
31
from 1st April to 31st March of every year. In addition to the above
realization of compensation due on the main product. Sale proceeds of the
products and other charges from Non-UCIL employees. Payment of
Electricity Bill, Sales Tax, Excise duty, Royalty, Investment of Surplus
Fund of the company maintenance of register for loan receive from
government payment of interest there on etc. are also dealt in this section.
For Compilation of Trading Profit and Loss account and Balance Sheet
Main and Subsidiary book are maintained in this section. For the
Compilation of Trading Profit and Loss account and Balance Sheet, two
Ledgers Main and Subsidiary are maintained in this section. Proper
positioning to each accounts head are recoded on the basis of Analysis
book for cash transaction and from material abstract register for material
Consumption as well as for other Income and Expenditure from Journal
voucher after making entries in the ledger account are reconcile and
quarter as well as annual Profit and Loss account and Balance Sheet are
prepare, audited and placed to the Board of Director for approval.
The duties performed by General Account section are:-
1. Realization of Compensation due on the main product of the company
and sales proceed by the company etc.
2. Realization of Rental charges from Non-UCIL employee.
3. Realization of other receipt (Guest House, Hospital, and School etc.)
4. Payment of Electricity bills, Sales Tax, Excise duty, Royalty, Sales,
Duty on Electricity and submission on returns therefore to appropriate
authorities.
5. Payment of C.I.S.F. bills, Insurance Premium and Reimbursement of
Post Expenses.
6. All other works allied and related to compilation of account and their
work mentioned above.
7. Investment of Surplus fund of the corporation.
8. Maintenance of Registers for Loans received from government,
Payment of Interest and Repayment of Principal.
9. Preparation of monthly Cash analysis statement.
[Link] estimates of working results for each quarter and quarterly
financial report.

INTERNAL AUDIT:-

32
This section primarily deals with the review of accounting and financial
matter and also deal with the matter related to operation and
performances. The main objective of the internal audit is to verify the
accuracy and integrity of the financial record and ascertain that the
policies, plan and accounting procedure laid down by the organization is
faithfully implemented. Also that there have been proper section for
acquisition, retirement and disposal of assets of the company to prevent
and detect fraud and verify that the expenditure are sanctioned and
financial decisions are taken according to the power to the various
authorizes in the organization.

FUND SECTION:

This section is under the charge of an account officer an assisted by an

Assistance Account Officer. The contributory provident fund of the
employees and gratuity fund of the corporation are managed and
administrated by truest in accordance with the rules framed and truest
deed executed. The fund section renders all services to the trust and
maintains relevant records as per provision and respective rules. Both
they are-

1. UCIL employee’s contributory provident fund truest.

2. Gratuity fund

DEPARTMENT OF PERSONNEL AND ADMINISTRATION

INTRODUTION:

Deputy General Manager heads the departmental of personnel and chief

personnel manager heads the industrial relation. He is directly responsible
to the director technical. He is not looking after the work of personnel
and administration, but also entrusted with the welfare amenities of the
worker to run the organization efficiently a good labor manager
relationship is require. In these circumstances. Personnel management
plays a vital role. This department is responsible for making relationship

33
between labour and management. The main area of work of personnel can
be studied as under:-

1. MANPOWER:-

Man power is very important for each an every company. Manpower may
be in the from of worker, executives, officer and manager. Without
manpower company cannot run each and every from of manpower play a
important role in the company.

2. RECRUITMENT:-

Personnel department is responsible for initiating the process of

recruitment in regard to the vacancies occurred as per policy of the
corporation. All the vacancies are advertised in the newspaper. Selection
is basically responsibility of the department head under whom the
candidate has to work. The screening of application receive against open
advertisement is done by the concerned head of the department selected
candidate are called for the personnel department.

3. MEDICAL DEPARTMENT:-

Before accepting the joining report of the selected candidate, he has to

go for medical examination by the medical officer of the company. No

person is employed until fitness is obtained from the company’s medical
officer or such medical officer as may be appointed by the company for
the purpose.

4. TRAINING:-

After requirement internal training facilities are provided to the new

candidate selected for the job in the company. After requirement officer
are also given training in the workshop of the different willing and
suitable workers specially in the mines are also given training in other
trades and after getting satisfactory training report they are considered for
higher post.

5. PROMOTION POLICY AND REQUIREMENT:-

34
When a permanent worker retire resign or death the vacancy is filled up
from the junior grade workman consequent or resignation promotion
creation of post and separation the vacancy occurs which is directly dealt
in the central personnel department of the corporation.

6. LEAVE PROCEDURE:-

All the employees of the company is entitled for annual leave are allowed
to the employees -

 Eared leave
 Sick leave
 Casual leave

7. COMPENSATION:-

Compensation is also paid to the employees as per the Compensation Act

1923.

8. GENERAL:

The function of the personnel and department is also to maintain service

book and family record of the employee, leave, increment and
establishment matter like disciplinary action and handling of grievances
of the employee of the company.

9. INDUSTRIAL RELATIONSHIP:-

Regarding industrial relation the company seen to have manage well.

There four union for employees.

10. SECURITY ARRANGEMENT:-

For the protection of the company property of as well as colony, Central

Industrial Security Force (C.S.I.F.) of the ministry is inducted in the
company. Along with company has its own security officer, who is
responsible to the manager (personnel and administration) with sufficient
number of security guards. Now the company has private security guard
who looks after the company colony.
35
11. WELFARE ACTIVITIES:-

The company is providing both obligatory as well as non-obligatory

facilities to its employees. The company is sending adequately on welfare
amenities of the employees. The major welfare facilities provided by the
company to its employees are -

 Schooling
 Hospital
 Housing
 Canteen
 Guesthouse etc.

DEPARTMENT OF PURCHASE AND STORE

INTRODUTION

Purchase and store department of the company is headed by Controller of

Stores and Purchase and assisted by deputy controller of store and
Purchase. The main objective of purchases department is to provide right
quality of good and equipment at right price. It is difficult to locate right
supplier who can supply the material with:-

i. Of right quality as ordered

ii. In right quantity as ordered
iii. At the right time at which the purchase department has asked for the
supply
iv. At an agreed price and
v. Should be able to honor the commitment without much follow up

After ensuring the business reputation financial stability, credit

worthiness, value of business and service, facilities, their name are
registered in the company permanent record of the per purchase
department which is consulted off on for procurement of requirement
.Store section is functioning under the supervision of deputy controller of
store. The major function of the store department is to receive the
material supply by the supplier for the use in the organization. Keep them
in safe custody, issue them to the user section, keep a close watch on
36
inventory, forward back the rejected material to the concerned supplier
and release the claim for losses of goods in transit and arrange dispatch
of main and by-product of the company.

CHAPTER 3

CONCEPTUAL FRAMEWORK

CORPORATE GOVERNANCE:

Corporate governance is the set of processes, customs, policies, laws and

institutions affecting the way a corporation is directed, administered or
controlled. Corporate governance also includes the relationships among
the many stakeholders involved and the goals for which the corporation is
governed. The principal stakeholders are the shareholders, management
and the board of directors. Other stakeholders include employees,

37
 suppliers, customers, banks and other lenders, regulators, the environment
 and the community at large.

Corporate governance is a multi-faceted subject. An important theme of

corporate governance is to ensure the accountability of certain individuals
in an organization through mechanisms that try to reduce or eliminate the
principal-agent problem. A related but separate thread of discussions
focus on the impact of a corporate governance system in economic
efficiency, with a strong emphasis on shareholders welfare. There are yet
other aspects to the corporate governance subject, such as the stakeholder
view and the corporate governance models around the world (see section
9 below).

There has been renewed interest in the corporate governance practices of

modern corporations since 2001, particularly due to the high-profile
collapses of a number of large U.S. firms such as Enron Corporation and
WorldCom. In 2002, the US federal government passed the Sarbanes-
Oxley Act, intending to restore public confidence in corporate
governance.

DEFINITION

In A Board Culture of Corporate Governance business author Gabrielle

O'Donovan defines corporate governance as 'an internal system
encompassing policies, processes and people, which serves the needs of
shareholders and other stakeholders, by directing and controlling
management activities with good business savvy, objectivity and
integrity. Sound corporate governance is reliant on external marketplace

commitment and legislation, plus a healthy board culture which

safeguards policies and processes'.

O'Donovan goes on to say that 'the perceived quality of a company's

corporate governance can influence its share price as well as the cost of
raising capital. Quality is determined by the financial markets, legislation
and other external market forces plus the international organizational
environment; how policies and processes are implemented and how
people are led. External forces are, to a large extent, outside the circle of
control of any board. The internal environment is quite a different matter,
and offers companies the opportunity to differentiate from competitors
through their board culture. To date, too much of corporate governance
debate has centered on legislative policy, to deter fraudulent activities and
38
transparency policy which misleads executives to treat the symptoms and
not the cause.

It is a system of structuring, operating and controlling a company with a

view to achieve long term strategic goals to satisfy shareholders,
creditors, employees, customers and suppliers, and complying with the
legal and regulatory requirements, apart from meeting environmental and
local community needs.

Report of SEBI committee (India) on Corporate Governance defines

corporate governance as the acceptance by management of the inalienable
rights of shareholders as the true owners of the corporation and of their
own role as trustees on behalf of the shareholders. It is about commitment
to values, about ethical business conduct and about making a distinction
between personal & corporate funds in the management of a company.”
The definition is drawn from the Gandhian principle of trusteeship and
the Directive Principles of the Indian Constitution. Corporate Governance
is viewed as ethics and a moral duty.

HISTORY

In the 19th century, State Corporation lawless enhanced the rights of

corporate boards to govern without unanimous consent of shareholders in
exchange for statutory benefits like appraisal rights, to make corporate
governance more efficient. Since that time, and because most large
publicly traded corporations in the US are incorporated under corporate
administration friendly Delaware law, and because the US's wealth has
been increasingly securitized into various corporate entities and
institutions, the rights of individual owners and shareholders have
become increasingly derivative and dissipated. The concerns of
shareholders over administration pay and stock losses periodically has led
to more frequent calls for corporate governance reforms.

In the 20th century in the immediate aftermath of the Wall Street Crash of
1929 legal scholars such as Adolf Augustus Berle, Edwin Dodd, and
Gardiner C. Means pondered on the changing role of the modern
corporation in society. Berle and Means' monograph "The Modern
Corporation and Private Property" (1932, Macmillan) continues to have a
profound influence on the conception of corporate governance in
scholarly debates today.

Since the late 1970’s, corporate governance has been the subject of
significant debate in the U.S. and around the globe. Bold, broad efforts to
reform corporate governance have been driven, in part, by the needs and
39
desires of shareowners to exercise their rights of corporate ownership and
to increase the value of their shares and, therefore, wealth. Over the past
three decades, corporate directors’ duties have expanded greatly beyond
their traditional legal responsibility of duty of loyalty to the corporation
and its shareowners.

In the first half of the 1990s, the issue of corporate governance in the U.S.
received considerable press attention due to the wave of CEO dismissals
(e.g.: IBM, Kodak, Honeywell) by their boards. CALPERS led a wave of
institutional shareholder activism (something only very rarely seen
before), as a way of ensuring that corporate value would not be destroyed
by the now traditionally cozy relationships between the CEO and the
board of directors (e.g., by the unrestrained issuance of stock options, not
infrequently back dated).

IMPACT OF CORPORATE GOVERNANCE

The positive effect of good corporate governance on different

stakeholders ultimately is a strengthened economy, and hence good
corporate governance is a tool for socio-economic development. After
East Asian economies collapsed in the late 20th century, the World
Bank's president warned those countries, that for sustainable
development, corporate governance has to be good. Economic health of a
nation depends substantially on how sound and ethical businesses are.

PARTIES TO CORPORATE GOVERNANCE

Parties involved in corporate governance include the regulatory body

(e.g. the Chief Executive Officer, the board of directors, management and
shareholders). Other stakeholders who take part include suppliers,
employees, creditors, customers and the community at large.

In corporations, the shareholder delegates decision rights to the manager

to act in the principal's best interests. This separation of ownership from
control implies a loss of effective control by shareholders over
managerial decisions. Partly as a result of this separation between the two
parties, a system of corporate governance controls is implemented to
assist in aligning the incentives of managers with those of shareholders.
With the significant increase in equity holdings of investors, there has
been an opportunity for a reversal of the separation of ownership and
control problems because ownership is not so diffuse.

A board of directors often plays a key role in corporate governance. It is

their responsibility to endorse the organization’s strategy, develop
40
directional policy, appoint, supervise and remunerate senior executives
and to ensure accountability of the organization to its owners and
authorities.

The Company Secretary, known as a Corporate Secretary in the US and

often referred to as a Chartered Secretary if qualified by the Institute of
Chartered Secretaries and Administrators (ICSA), is a high ranking
professional who is trained to uphold the highest standards of corporate
governance, effective operations, compliance and administration.

All parties to corporate governance have an interest, whether direct or

indirect, in the effective performance of the organization. Directors,
workers and management receive salaries, benefits and reputation, while
shareholders receive capital return. Customers receive goods and
services; suppliers receive compensation for their goods or services. In
return these individuals provide value in the form of natural, human,
social and other forms of capital.

A key factor in an individual's decision to participate in an organization

e.g. through providing financial capital and trust that they will receive a
fair share of the organizational returns. If some parties are receiving more
than their fair return then participants may choose to not continue
participating leading to organizational collapse.

PRINCIPLES:

Key elements of good corporate governance principles include honesty,

trust and integrity, openness, performance orientation, responsibility and
accountability, mutual respect, and commitment to the organization.

Of importance is how directors and management develop a model of

governance that aligns the values of the corporate participants and then
evaluate this model periodically for its effectiveness. In particular, senior
executives should conduct themselves honestly and ethically, especially
concerning actual or apparent conflicts of interest, and disclosure in
financial reports.

Commonly accepted principles of corporate governance include:

Rights and equitable treatment of shareholders: Organizations should

respect the rights of shareholders and help shareholders to exercise those
rights. They can help shareholders exercise their rights by effectively

41
communicating information that is understandable and accessible and
encouraging shareholders to participate in general meetings.

Interests of other stakeholders: Organizations should recognize that

they have legal and other obligations to all legitimate stakeholders.

Role and responsibilities of the board : The board needs a range of skills
and understanding to be able to deal with various business issues and
have the ability to review and challenge management performance. It
needs to be of sufficient size and have an appropriate level of
commitment to fulfill its responsibilities and duties. There are issues
about the appropriate mix of executive and non-executive directors. The
key roles of chairperson and CEO should not be held by the same
person.

Integrity and ethical behaviour : Ethical and responsible decision

making is not only important for public relations, but it is also a
necessary element in risk management and avoiding lawsuits.
Organizations should develop a code of conduct for their directors and
executives that promotes ethical and responsible decision making. It is
important to understand, though, that reliance by a company on the
integrity and ethics of individuals is bound to eventual failure. Because
of this, many organizations establish Compliance and Ethics Programs to
minimize the risk that the firm steps outside of ethical and legal
boundaries.

Disclosure and transparency: Organizations should clarify and make

publicly known the roles and responsibilities of board and management
to provide shareholders with a level of accountability. They should also
implement procedures to independently verify and safeguard the
integrity of the company's financial reporting. Disclosure of material
matters concerning the organization should be timely and balanced to
ensure that all investors have access to clear, factual information.

Issues involving corporate governance principles include:

 Oversight of the preparation of the entity's financial statements.

 Internal controls and the independence of the entity's auditors.
 Review of the compensation arrangements for the chief executive
officer and other senior executives .

42
 The way in which individuals are nominated for positions on the
board.
 The resources made available to directors in carrying out their
duties.
 Oversight and management of risk.
 Dividend policy.

INTERNAL CORPORATE GOVERNANCE CONTROL

Internal corporate governance controls monitor activities and then take

corrective action to accomplish organizational goals. Examples include:

1. Monitoring by the board of directors: The board of directors,

with its legal authority to hire, fire and compensate top
management, safeguards invested capital. Regular board
meetings allow potential problems to be identified, discussed
and avoided. Whilst non-executive directors are thought to be
more independent, they may not always result in more
effective corporate governance and may not increase
performance. Different board structures are optimal for
different firms. Moreover, the ability of the board to monitor
the firm's executives is a function of its access to information.
Executive directors possess superior knowledge of the
decision-making process and therefore evaluate top
management on the basis of the quality of its decisions that
lead to financial performance outcomes, ex ante. It could be
argued, therefore, that executive directors look beyond the
financial criteria.
2. Remuneration: Performance-based remuneration is designed
to relate some proportion of salary to individual performance.
It may be in the form of cash or non-cash payments such as
shares and share options, superannuation or other benefits.
Such incentive schemes, however, are reactive in the sense
that they provide no mechanism for preventing mistakes or
opportunistic behaviour, and can elicit myopic behaviour.

EXTERNAL CORPORATE GOVERNANCE CONTROL

43
External corporate governance controls encompass the controls external
stakeholders exercise over the organization. Examples include:

1. Demand for and assessment of performance information

(especially financial statements)
2. Debt covenants
3. Government regulations
4. Media pressure
5. Takeovers
6. Competition
7. Managerial labour market
8. Telephone tapping

SYSTEMATICPROBLEMSOFCORPORATE GOVERNANCE:-

Supply of accounting information: Financial accounts form a crucial link

in enabling providers of finance to monitor directors. Imperfections in
the financial reporting process will cause imperfections in the
effectiveness of corporate governance. This should, ideally, be corrected
by the working of the external auditing process.

Demand for information: A barrier to shareholders using good

information is the cost of processing it, especially to a small shareholder.
The traditional answer to this problem is the efficient market hypothesis
(in finance, the efficient market hypothesis (EMH) asserts that financial
markets are efficient), which suggests that the shareholder will free ride
on the judgments of larger professional investors.

Monitoring costs: In order to influence the directors, the shareholders

must combine with others to form a significant voting group which can
pose a real threat of carrying resolutions or appointing directors at a
general meetings

44
 AUDITING

ORIGIN OF AUDITING
The origin of audit may be traced to middle ages, but the audit in the
present sense can be traced after the introduction of large scale
production, in consequence of Industrial Revolution, during the 18 th
century. Before this era, goods were produced by individuals, on small
scale. There was not much capital. The individual, who invested the
capital, usually himself maintained the account and, therefore, there
was no necessity of checking them.

But stabilized governments, expansion of banking facilities and new means of

communication, have widened the scope of investment and business. The
investor would naturally like to see that his investment is safe. For this
purpose, the accounts must be checked and audited, especially in the case of
joint stock companies, where the shareholders are drawn from far off places,
and who have no hand in the actual running of the business. In such a case,
therefore, it is essential to get the accounts audited, in order to assure them
that their investment is safe and that the Directors and the Managing
Directors, etc. who handle the capital and accounts, have presented true and
correct accounts. As it is not possible for the shareholders to check the
accounts of the company, they appoint a person who would audit the accounts
on their behalf. Formerly, such a person used to be one of the shareholders,
who might not have technical knowledge of accountancy. To have an effective
check, the custom to appoint professional accountants began to develop.

DEFINITION OF AUDITING
The word “audit” is derived from the Latin word “Audire” whish means “to
hear”.In olden times, whenever the owner of a business suspected fraud,

45
they appointed certain persons to check the accounts. Such person sent for
the accountants and“heard” whatever they had to say in connection with the
accounts. It was an Italian, who first published his treatise on double entry
system of book-keeping for the first time in 1494. He mentioned and
described the duties and responsibilities of an auditor. Since then, there have
been lot of changes in the scope and definition of an audit and the duties and
responsibilities of an auditor.

The original object of an audit was principally to see whether the accounting
party has properly accounted for the receipts and payment of cash. In other
words, the object of audit was to find out whether cash has been embezzled
and, if so, who embezzled it and what amount was involved. The principal
object of an audit is to see whether the Balance sheet exhibits a true and fair
view of the state of affairs of a company and whether it is drawn up
according to the Companies Act, in the case of the audit of the company.

SPICER AND PEGLER, have defined Audit as “such as examination of the

books, accounts and vouchers of a business, as will enable the auditor to
satisfy himself that the balance sheet is properly drawn up, so as to give a
true and fair view of the state of the affairs of the business, and whether the
Profit and Loss account gives a true and fair view of profit and loss for the
financial period, according to the best of his information and the
explanations given to him and as shown by the books, and if not, in what
respect he is not satisfied.”

F.R.M. DE PAULA, an English authority on auditing literature, describe

auditing as “ the examination of a balance sheet and Profit and Loss account
prepared by others, together with the books, accounts, and vouchers relating
thereto in such a manner that the auditor may be able to satisfy himself and

46
honestly report that, in his opinion, such Balance sheet is properly drawn up
so as to exhibit a true and correct view of the state of affairs of the particular
concern, according to the information and explanations given to him, and as
shown by the books”.

J. R. BATLIBOI, a renowned authority on accounting an auditing defines

auditing as “an intelligent and a critical scrutiny of the books of accounts of a
business with the documents and vouchers from which they are written up,
for the purpose of ascertaining whether the working results for a particular
period, as shown by the Profit and Loss

account, as also the exact financial condition of that business, as reflected in

the balance sheet are truly determined and presented by those responsible
for their compilation”.

ADVANTAGES OF AN AUDIT:

On account of the following advantages people get their accounts audited

especially in case where audit is not compulsory.

1. Errors and Frauds are located at an early date and in future no attempt
is made to commit such frauds or one is rather careful not to commit an
error or a fraud as the accounts are subject to regular audit.

2. The auditing of accounts keeps the accounts clerks regular and vigilant
as they know that the auditors would complain against them if the
accounts are not prepared up-to-date or if there is any irregularity.

3. In case of fire, the insurance company may settle the claim on the basis
of the audited accounts of the previous years.

47
 4. Money can be borrowed easily on the basis of previous audited balance
sheet.

[Link] the business is to be sold as going concern , there will not be much
difficulty regarding valuation of the assets and goodwill as the accounts
have already been subject to audit by an independent person
[Link] tax authority generally accepts the profit and loss account
which have been prepared by a qualified auditor and they do not go into
the details of the accounts [Link]
management may consult the auditor and seek his advice on certain
technical points although it is not the duty of an auditor to give advice .

[Link] the accounts have been prepared on a uniform basis , accounts of one
year can be compared with other years and if there is any discrepancy, the
cause may be enquired into .

9. Audited accounts are considered more or less correct by the sales tax
authorities.

10. It would facilitate the settlement of accounts of the deceased partner.

INTERNAL CONTROL – MEANING & IMPORTANCE:

SPICR AND PEGLAR, a famous authorities on auditing literature, defines the

system of Internal control as “Internal control is best regarded as the whole
system of controls, financial and otherwise, established by the management in

48
the conduct of a business including Internal check, Internal audit and other
forms of control”.

This definition implies the following:-

(A) The Internal control is a system of controls.

(B) Controls are established over financial and non-financial areas.

(C) The mechanism of controls may manifest itself in the forms of Internal
check or Internal audit or other forms.

The statement on Auditing practices (SAP-6) of the Institute of Chartered

Accountants of India describes Internal control as “ the plan of organization and
all the methods and procedures adopted by the management of an entity to
assist in achieving management’s objective of ensuring, as far s possible, the
orderly and efficient conduct of its business, including adherence to
management policies, the safeguarding of its assets, prevention and detection
of fraud and error, the accuracy and completeness of the accounting records
and timely preparation of reliable financial information. The system of Internal
control extends beyond those matters which relate to the functions of
accounting system”.

The Internal control, according to this definition, implies the following:

Internal control is a prescription and practice of a system by management. The

system encompasses plan, methods and procedures prescribed for and
practiced by the internal constituents of an entity.

INTERNAL CONTROL – ACCOUNTING, ADMINISTRATIVE CONTROLS:

49
The Internal control areas spread over accounting and non-accounting spheres.
Internal control, as it applied to accounting system, implies control over
accounting system with the aim of achieving the following objectives:

(A) Efficient and Orderly conduct of accounting transactions.

(B) Safeguarding the assets in adherence to management policy.

(C) Prevention of error, Detection of error.

(D) Prevention of fraud, Detection of fraud.

On the other hand administrative controls seek to achieve the aims of

management in efficient and orderly conduct of transaction, in non accounting
areas. It seeks to ensure the adherence to management policy in various areas
of business operations.

An auditor is mainly concerned with good accounting control of internal control

system. If good Internal controls system exists in accounting system, an auditor
can put greater reliance on the financial data generated in the system with test
checking of selected items. If the Internal control is not strong, the auditor may
have to resort to detailed checking of transaction, events, and practices in the
accounting system.

INTERNAL CHECK:

Internal check is one of the modes of executing internal control. As applied to

accounting system Internal check is a method of organizing the accounts
system of a business concern or a factory where the duties of different clerks
are arranged in such a way that the work of one person is automatically
checked by another and thus the possibility of fraud or error or irregularity is
minimized unless there is a collision between the clerks, e.g., the receipt of

50
cash is entered by the cashier on the debit side of the cash book; this entry is
carried to the ledger by another clerk; the statement of account relating to this
transaction is sent to the customer by the third clerk and so on. Thus, we see
that the same transaction has passed through three different hands, and the
work of one is checked automatically by the other. It is a kind of division of
labour. This minimizes the possibilities of frauds and errors unless all the three
join hands in defrauding their employer. Again if an error or fraud has been

committed, it will be detected very soon by another clerk while the

transaction is being automatically checked.

Under this system, no one is allowed to deal with one book throughout
the year. Therefore the work of the members of the staff should be
changed from time to time.

The application of some of the automatic devices, e.g., cash registers, time
recording clocks, book keeping and calculating machines etc., prevents the
commission error and fraud. The clerks should be transferred from one
department or job to another department or job from time to time
without any prior notice.

The work is sub-divided amongst many person and hence the Internal
check system can be usefully employed by big concerns.

The aim of application of Internal check is the prevention and alternatively

the early detection of fraud, errors, and misappropriation.

The advantage of the existence of good and efficient Internal check is that
in that case the auditor can rely upon the accuracy of the accounts. Even
though he finds a very efficient Internal check system in operation, he
should not be negligent but must be alert. He should apply test checks to

51
a few items selected at random. If he finds that the Internal check system
in the business is not satisfactorily he should be very careful and test
checks should be extensive and thorough and he should mention that fats
in his report.

EVALUATIVE CRITERIA FOR GOOD INTERNAL CHECK:

A good Internal check system must provide in-built checks and balances
while the operations are being performed. To achieve this end, the
following control mechanism may be introduced:

(A) DIVISION OF LABOUR: No one should be allowed to have right to

perform the work from origin to end. For example, a transaction of sale
may have to be split into display of article by a staff, the performance of
invoice by another, the receipt of cash against the invoice by a third clerk,
the delivery of article against the proof of receipted invoice by another
clerk, checking of outward movement of article against delivery order by a
clerk and so on.

(B) JOB ROTATION: No individual clerk should be allowed to occupy a

particular area of operation for long. Familiarity with and exclusiveness in
a position offers a person greater flexibility to attempt manipulation with
the system.

(C) AUTHORITY LEVELS: There must be clear cut authority levels for
according sanctions to various transactions. Commensurate to the
authority vested, responsibility must be extracted. Existence of authority
levels results in review of operations of subordinates.

52
(D) SEPARATION OF CUSTODY AND RECORDING: There needs to be
effective control by way of separation that the person handling an asset
cannot make entries for the transaction without any counter check.

(E) ACCOUNTING CONTROLS: In order to ensure internal check with

regards to recording of transaction in accounting records various cross
checks must be introduced to ensure that the accounting records reflect
reliable information.

INTERNAL AUDIT:

As discussed in definition of Internal control, the control is exercised in the

form of Internal check and Internal audit. Internal check is concerned with
so devising the form and flow of operations of an entity that automatic
checks are carried out as the transactions occur. On the other hand,
internal audit is a critical appraisal of functioning of various operations of
an enterprise including the functioning of the system of internal check.
Exceptions from normal functioning of internal check system are exposed
in internal audit. Accuracy, completeness, reliability, and timeliness of
accounting information are tested and reported for remedial actions.
Non-accounting areas viz. operational side of enterprise are critically
studied, analyzed and weakness of the system or practice – viz.,
inefficiency, wastages, frauds etc.- are brought to the notice of the
management. That part of an internal audit dealing with operational side

of the entity to improve efficiency is termed as operational audit. That

part of Internal audit aiming at improving the effectiveness of accounting
and administrative and other operational systems are called system audit.

53
Internal audit is the independent appraisal of activity within an
organization for the review of accounting, financial and other business
practices as a protective and constructive arm of management. It is a type
of control which functions by measuring and evaluating the effectiveness
of other types of control.

Prof. Walter B. Meigs of America says Internal auditing consist of a

continuous, critical review of financial and operating activities by a staff of
auditors functioning as full type salaried employee. Internal audit is an
independent appraisal activity within an organization for the review of
accounting, financial and other operations as a basis for service to the
management. Internal audit implies an audit of the accounts by the
employees of the business. The work is done by a separate set of staff
who may or may not have professional audit qualifications. The function
of internal auditor is practically the same as that of an auditor. In addition
of that an internal auditor has to see that there is no wastages and the
business is carried on efficiently. He ahs to report to the management
whether the policies and plans of activities prescribed by them have been
implemented; whether the internal controls and checks established were
adequate; whether the actual results obtained were varying from the
estimates etc., to enable the management to achieve the objective of the
company in the planned manner. It is a kind of continuous audit but
conducted by the staff of the concern.

DISTINCTION BETWEEN INTERNAL AUDIT AND STATUTORY AUDIT:

1. APPOINTMENTS: Internal auditor is appointed by the management

while the statutory auditor is appointed by the shareholder except in

54
certain cases when he is appointed by the directors of the company or the
government.

Appointment of Internal auditor is optional while that of the statutory

auditor is obligatory.

2. QUALIFICATIONS: Internal auditor need not posses the qualification as

are laid down under section 226 of the companies Act while a statutory
auditor must have those qualification.

3. STATUS: Internal auditor is an employee of the company while the

statutory auditor is an independent person.

4. CONDUCT OF AUDIT: An internal audit is a kind of continuous audit

while a statutory audit is generally conducted after the preparation of the
final accounts.

5. SCOPE OF WORK: The scope of the work by the internal auditor is

determined by the management while the scope of the work by and the
responsibilities of the statutory auditor are determined by law.

6. OBJECTIVE: An internal auditor has the primary duty to find out

whether any error or fraud has been committed while the statutory
auditor has to report whether the balance sheet and the profit and loss
account of a company have been drawn up in conformity with

Law and whether they show true and fair view of the state of affairs of the
company. Detection of errors and frauds are incidental duties of a
statutory auditor.

7. DETERMINATION OF DUTY: The scope and duties of an internal auditor

can be reduced while it is not so in the case of a statutory auditor.

55
8. Internal auditor has to make suggestions to the management as to how
to run the business efficiently and to avoid wastages but a statutory
auditor need not do so unless he specifically asked.

9. Internal auditor has to check all the transactions while the statutory
auditor may apply test checks.

10. REPORT: Internal auditor has not to submit any report to the
shareholders while the statutory auditor has to do so.

11. APPLICATION OF CHARTERD ACCOUNTANTS ACT: Internal auditor

cannot be prosecuted for professional misconduct unless he is a chartered
accountant while a statutory auditor can be prosecuted.

12. REMOVAL: Internal auditor can be removed by the management or

the directors while a statutory auditor can be removed only by the
shareholders and not by the management or the directors.

13. The Internal auditor acts as a watch-dog for the directors while the
statutory auditor has to act as a watch-dog for the shareholders.

14. REMUNERATION: Remuneration of the internal auditor are fixed by

the management while for the statutory auditor they are fixed by the
shareholders.

15. ATTENDANCE AT MEETINGS: Internal auditor has no right to attend

the meeting of the shareholders while the statutory auditors has such a
right.

USING THE WORK OF INTERNAL AUDIT BY EXTERNAL AUDITOR: The

auditor can effectively make use of the work performed by internal

56
auditor by planned co-ordination of his work. The auditor must judiciously
use his work to his advantage. As regards to accounting system of the
enterprise, the internal audit covers almost all areas of checking covered
under external audit. However, the external auditor expresses his opinion
on the truth and fairness of financial statements. Therefore the auditor
has to evaluate the internal audit and decide whether its coverage of
checking can lessen the extent of checking. The auditor has to evaluate
the efficiency of internal audit system by assessing the professional
competence of internal auditor, their independence in the organization,
audit coverage, actual work performed by them as evidenced by their
working files, reports etc. Depending upon the degree of reliance that he
could place on it, the auditor can devise his nature , extent and timing of
audit work

INTERNAL AUDITING

Internal auditing is a profession and activity involved in advising

organizations regarding how to better achieve their objectives. Internal
auditing involves the utilization of a systematic methodology for
analyzing business processes or organizational problems and
recommending solutions. Professionals called internal auditors are
employed by organizations to perform the internal auditing activity. The
scope of internal auditing within an organization is broad and may
involve internal control topics such as the efficacy of operations, the
reliability of financial reporting, deterring and investigating fraud,
safeguarding assets, and compliance with laws and regulations. Internal
auditing frequently involves measuring compliance with the entity's
policies and procedures. However, internal auditors are not responsible
for the execution of company activities; they advise management and
the Board of Directors (or similar oversight body) regarding how to
better execute their responsibilities. As a result of their broad scope of
involvement, internal auditors may have a variety of higher educational
and professional backgrounds. Publicly-traded United States
corporations typically have an internal auditing department, led by a

57
Chief Audit Executive ("CAE") who generally reports to the Audit
Committee of the Board of Directors, with administrative reporting to
the Chief Executive Officer. The profession is unregulated, though there
are a number of international standard setting bodies, an example of
which is the Institute of Internal Auditors ("IIA"). The IIA has established
Standards for the Professional Practice of Internal Auditing and has over
150,000 members representing 165 countries, including approximately
65,000 Certified Internal Auditors.

NEEDS AND OBJECTIVES

ORGANISATION INDEPENDENCE:

To perform their role effectively, internal auditors require organizational

independence from management, to enable unrestricted evaluation of
management activities and personnel.

Although internal auditors are part of company management and paid

by the company, the primary customer of internal audit activity is the

58
entity charged with oversight of management's activities. This is typically
the Audit Committee of the Board of Directors in the United States. To
provide independence, most Chief Audit Executives report to the
Chairperson of the Audit Committee and can only be replaced with the
concurrence of that individual.

ROLE IN INTERNAL CONTROL:

Internal auditing activity is primarily directed at improving internal

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

 Effectiveness and efficiency of operations.

 Reliability of financial reporting.
 Compliance with laws and regulations.

Management is responsible for internal control. Managers establish

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

ROLE IN RISK MANAGEMENT:

Internal auditing professional standards require the function to monitor

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

Internal auditors may help companies establish and maintain Enterprise

Risk Management processes. Internal auditors also play an important
role in helping

companies execute a SOX 404 top-down risk assessment. In these latter

two areas, internal auditors typically are part of the project team in an
advisory role.

ROLE IN CORPORATE GOVERNANCE:

59
Internal auditing activity as it relates to corporate governance is
generally informal, accomplished primarily through participation in
meetings and discussions with members of the Board of Directors.
Corporate governance is a combination of processes and organizational
structures implemented by the Board of Directors to inform, direct,
manage, and monitor the organization's resources, strategies and
policies towards the achievement of the organizations objectives.
Internal auditing is often considered one of the "four pillars" of
corporate governance, the other pillars being the Board of Directors,
management, and the external auditor.

BEST PRACTICES IN INTERNAL AUDIT

A best practice in measurement of the internal audit function involves

a balanced scorecard approach. Internal audit functions are primarily
evaluated based on the quality of counsel and information provided to
the Audit Committee and top management. However, this is primarily
qualitative and therefore difficult to measure. “Customer surveys” sent
to key managers after each audit project or report can be used to
measure performance, with an annual survey to the Audit Committee.
Scoring on dimensions such as professionalism, quality of counsel,
timeliness of work product, utility of meetings, and quality of status
updates are typical with such surveys. Quantitative measures can also be
used to measure the function’s level of execution and qualifications of
its personnel. Key measures include:

Plan completion: This is a measure of the degree to which the annual

plan of engagements is completed, measured at a point in time. This
may be measured using the number of projects completed, weighted by
the planned size of each project, with estimates for projects in-progress.
Measured throughout the year, it is compared against the percentage of
the year elapsed.

Report issuance: This is a measure of the time elapsed from completion

of testing to issuance of the final audit report, including management’s
action plans. This can be measured in average days or percentage of
reports issued within a certain standard, such as 30 days. Establishing
expectations for the timing of management’s response to report
recommendations is critical. In addition, the scope and degree of change
involved in the report’s action plans are key variables. For example, a
report for a single retail store requiring only the store manager’s action

60
might take 3-5 days to issue. However, a report consolidating findings
from 20 retail stores, with action plans with national implications
determined by top management, may take 30-60 days in complex
organizations.

Issue closure: Reported audit findings are often called “issues” or

“deficiencies.” Professional standards require audit functions to track
reported findings to resolution, which effectively requires the
maintenance of an issues follow-up database. The number of days that
reported issues remains open, or open after their agreed-upon closure
date, are key measures. In addition, reporting database statistics such as
the number of issues open (unresolved), closed (resolved), and issues
opened/closed during a given period are useful statistics.

Staff qualifications: This can be measured through the percentage of

staff with professional certifications, graduate degrees, and overall years
of experience.

Staff utilization rate: This is measured as the percentage of time spent

on projects, as opposed to administrative time such as training or
vacation. Many internal audit departments track time by audit project.
This is typically captured in a database or spreadsheet.

Staffing level: The number of positions filled relative to the authorized

staffing level. Due to the challenge of finding qualified staff, departments
may have rotational programs to bring in management to complete
tours in the function or be "guest" auditors. Audit departments also "co-
source," meaning they obtain contract auditors from service providers.

HISTORY OF INTERNAL AUDIT:

The Internal Auditing profession evolved steadily with the progress of

management science after World War II. It is conceptually similar in
many ways to financial auditing by public accounting firms, quality
assurance and banking compliance activities. Much of the theory
underlying internal auditing is derived from management consulting and
public accounting professions. With the implementation in the United
States of the Sarbanes-Oxley Act of 2002, the profession's growth
accelerated, as many internal auditors possess the skills required to help
companies meet the requirements of the law.

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INTERNAL AUDIT OBJECTIVES AND RESPONSIBILITIES:

The Terms of Reference frame objectives for Internal Audit that take
account of the Council’s corporate aims and objectives

Consistent with this corporate aim, the key objectives of Internal Audit
relate to:

A. Internal Control Systems

B. Risk Management

C. Corporate Governance

D. Anti-Fraud and Corruption

E. Special reviews

A. INTERNAL CONTROL SYSTEM:

1. Regulation 4 of the Accounts & Audit Regulations 2003 require

that:

“(1) The relevant body shall be responsible for ensuring that

the financial management of the body is adequate and

effective and that the body has a sound system of internal

control which facilitates the effective exercise of that body's

functions and which includes arrangements for the

management of risk.

1
 (2) The relevant body shall conduct a review at least once in a

year of the effectiveness of its system of internal control and

shall include a statement on internal control, prepared in

accordance with proper practices, with –

(a) Any statement of accounts it is obliged to publish in

accordance with regulation 11, or

(b) Any income and expenditure account, statement of

balances or record of receipts and payments it is obliged to

publish or display in accordance with regulation 12.”

2. The objective of Internal Audit is to review, appraise and report

upon the adequacy of internal control systems operating

throughout the authority, and in this we will adopt a

predominantly systems-based approach to audit.

3. The internal control system comprises the whole network of

systems established within the authority to provide reasonable

assurance that corporate objectives will be achieved, with

particular reference to:

The effectiveness of operations:

 The economic and efficient use of resources

 Compliance with applicable policies, procedures, laws

and regulations

 The safeguarding of assets and interests from losses of

all kinds, including those arising from fraud, irregularity

and corruption

 The integrity and reliability of information, accounts and

data

 Accordingly, in the conduct of planned audits Internal

Audit may:

 Review the reliability and integrity of information and

the means used to identify, measure, classify and report

such information

 Review the means of safeguarding assets and, as

appropriate, verify the existence of such assets.

 Appraise the economy, efficiency and effectiveness with

which resources are employed, identify opportunities to

improve performance and recommend solutions to

problems
  Review the established systems to ensure compliance

with those policies, procedures, laws and regulations

which could have a significant impact on operations, and

determine whether the authority is in compliance

 Review operations and activities to ascertain whether

results are consistent with objectives and whether they

are being carried out as planned

 In accordance with the requirements of the “CIPFA Code

of Practice for Internal Audit in Local Government”, the

Head of Audit and Governance will make provision to

form an opinion where:

(a) Key systems are being operated, or key services provided, on

behalf of other organizations by the Council

(b) Key systems are being operated, or key services provided, by

other organizations on behalf of the Council

The Head of Audit and Governance will decide, in consultation with the
Corporate Director & Returning Officer, whether Internal Audit will
conduct the work to derive the required opinion itself or rely on the
opinions provided by other auditors.
B. RISK MANAGEMENT:

Internal Audit has a role in, and provides advice about, risk

management. Internal audits will be carried out on the risk

management process and the controls introduced by Business Units to

manage risks.

C. CORPORATE GOVERNANCE:

The Council has adopted a Local Code of Corporate Governance and has
designated the Head of Audit and Governance (as the council’s
Monitoring Officer), as the Officer responsible for overseeing,
monitoring and reviewing the operation of the Code in practice.

An annual audit will be carried out of the Corporate Governance

environment operating within the Council.

D. ANTI FRAUD AND CORRUPTION:

Internal Audit has a role in fraud prevention, detection and investigation

and assists the Section 151 Officer to develop and maintain an anti-fraud
and corruption policy, strategy and fraud response plan.

E. SPECIAL REVIEWS:

Internal Audit carries out special reviews and projects at the request of

the Audit, Governance & Accounts Committee, Strategic Management

Team and Business Unit Managers, subject to available budget and staff

resources.
 AUDIT COMMITTEE CHARTER

PURPOSE AND OBJECTIVES:

The Audit Committee will assist the Board in fulfilling the following
oversight responsibilities.  The Audit Committee will review the financial
reporting process, the system of internal control, management of financial
risks and the audit process.  In performing its duties, the Committee will
maintain effective working relationships with the Board of Directors,
Management and the internal and external auditors.  To perform his or her
role effectively, each committee member will obtain an understanding of the
detailed responsibilities of committee membership as well as the Company’s
business, operations and risks. 

In addition to compliance with the Section 201B of the Companies Act, Cap
50, the SingTel Audit Charter has also incorporated the guidance notes from
the Singapore Code of Corporate Governance and the Australian Stock
Exchange Corporate Governance Principles of Good Corporate Governance
and Best Practice Recommendations were applicable.

AUTHORITY:

The Board authorizes the Audit Committee to investigate any matter within
its terms of reference and the Audit Committee shall have:

1. Full access to and cooperation by Management.

2. Full discretion to invite any director or executive officer to attend its

meetings.

3. Direct access to the external auditors in the investigation of any matter

within its terms of reference

4. Reasonable resources to enable it to discharge its function properly,

including obtaining legal or other professional advice.
ORGANIZATION

(I) MEMBERSHIP

The Audit Committee shall comprise at least three members all of whom
shall be non-executive directors and non-Exco members.

The Chairman of the Audit Committee, who shall be a director other than
the Chairman of the Board of Directors of SingTel, will be nominated by the
members of the Committee from time to time.

The majority of the Audit Committee members, including the Chairman,

shall be independent.

At least two members of the Audit Committee shall have accounting or

related financial management expertise or experience.

(II) MEETING

The Chairman shall convene a meeting of the Audit Committee upon the
request of the external auditor. Special meetings may be convened as
required by the Committee.

The President/CEO, CFO and the Head of Internal Audit shall attend the
Committee Meetings.  As and when appropriate, the Chairman may invite
other staff or external parties to be present at the meetings.
Meetings shall be convened not less than three times a year. 

The proceedings of the meetings shall be minuted and kept by Internal Audit
and shall be produced for inspection upon request of any member of the
Committee or the Board.A quorum for any meeting shall comprise two
members.

ROLES AND RESPONSIBILITIES

INTERNAL CONTROL

1. To assist the Board in discharging its statutory and other

responsibilities on internal controls, financial and accounting
matters, compliance, business and financial risks management.

2. To appraise and report to the Board on the audit undertaken by the

external auditors and internal auditors, the adequacy of disclosure
of information and appropriateness / quality of the system of
management and internal control.

3. To approve changes or new policies related to its area of

responsibility.

FINANCIAL REPORTING

To review the quarterly financial statements (including the annual financial

statements), preliminary and interim announcements with management and
the external auditors.

INTERNAL AND EXTERNAL AUDIT

1. To review and approve the audit plans of the external and internal
auditors in ensuring that audit resources are allocated according to
 the key business and financial risk areas, focusing on optimum
coverage and efforts between the external and internal auditors.

2. To review the external and internal auditors’ evaluation of the

system of internal accounting controls.

3. To review the reports of the external auditors and internal auditors

and consider the effectiveness of responses/actions taken by
management on the audit recommendations and observations.

4. To review the assistance given by management to the external and

internal auditors

5. To review the cost effectiveness of the audit, the independence and

objectivity of the external auditors annually, and the nature and
extent of non-audit services supplied by the external auditors,
seeking to balance the maintenance of objectivity and value for
money.

6. To recommend to the Board the appointment or reappointment of

the external auditors for the ensuing year.

7. To review and approve the Internal Audit Charter and, at least

annually, the adequacy of the internal audit function.

8. To ensure that the internal audit function (which may be in-house,

outsourced to a reputable accounting/auditing firm or performed by
a major shareholder, holding or parent company or controlling
 enterprise with internal audit staff) is adequately resourced and has
appropriate standing in SingTel.

The Audit Committee shall meet with the External Auditor, and with the
Internal Auditor, respectively, without the presence of Management, at least
annually.

RESEARCH METHODOLOGY:

Methodology comprises of the following:

PRIMARY DATA: Primary data comprises of the information which is

collected by interviewing or discussion with the Chief Manager, Accounts
Officer and other staffs of the account section.

SECONDARY DATA: Secondary data comprises of the information which is

collected by internet, Accounts manual, secondary report and Annual
report provided by the company.
FINDINGS OF THE STUDY
IMPORTANCE OF THE FINAL AUDIT IN DIFFERRENT SECTIONS OF FINANCE
OF UCIL

SALARY AND ESTABLISHMENT SECTION

The salary and establishment section deals with all matters connected with
pay and allowances of all employees various recoverable advances other
related matter connected with the payment of these deal with the
employees and recovery of dues to the company. The monthly pay bill are
prepared in the data processing center to which all inputs are furnished by
the Salary and Establishment section wherever necessary by obtaining
same time from other department section concerned.
 1. The internal audit department of the company under this
department use to check the compensations given to the employees
to ensure that all the payments were made according to the rules
and regulations of the company and to check the malpractices in
order to prevent errors and frauds in the department of the
company.
2. Another function of internal audit under this department is to check
all the recoveries which are dues to the company and to check
whether they are made in correct time and correct way or not.

PURCHASE ACCOUNT SECTION:

This section primarily deals with payment of suppliers bill as per purchase
order issued by the purchase department and accounting of the related
expenditure through material receipt voucher. All purchase issued by
purchase department are kept in this section in chronological series. After
receipt of material receipt voucher from the Store Department suppliers bill
are processed and note of receipt voucher (RV) No. and bill reference etc. is
kept to avoid double payment. Bill are passed after proper scrutiny with
reference to the terms of purchase order and sent to the cash section for
issue of cheques to the suppliers.

1. The work of internal audit under this department is the checking of

bills of the suppliers whether it is made as per the purchase order
issued by the purchase department.
2. The work of internal audit is to verify the Notice Investing Tender and
acts as a representative of contractor’s and see whether the
contractor who had quoted the lowest price for tender had got the
permission execution of tender work or not.
3. Bills are passed after the proper scrutiny with reference to the terms
of purchase order and sent to the cash section for issue of cheques to
the suppliers.
 4. The other work of internal audit is to check receipt vouchers No. and
bill reference etc. to avoid double payment.
5. The Internal audit checks all payments were made by the company
which are as follows:-
6. Payment of suppliers bill for stores etc.
7. Payment of advances along with Purchase order.

WORK ACCOUNT SECTION:

This section is entrusted with checking the estimates tender, documents.

Bills and other allied record pertaining to work / job done departmentally
or by outside agencies. The works pertaining to the following are also done
in this section.

Bills of Transport Contract.

1. Telephone / Telex bill.

2. Bills for advertisement issued by the company.
3. Miscellaneous Bill.
4. Advance to private agencies and other against collection of material
and job orders and consignment note for clearance of material from
outstation.
5. Temporary advance to the other department, Offices for emergent
purchase and job.
A) Under this department, the internal audit use to check the bills of the
contractors which are already checked by the work account section.
The Internal audit department check whether the work for tender
i.e., civil or mechanical work is going as per the terms and condition
of the tender document or not.
B) The internal audit also checks whether the work is completed within
its validity period or not. If work is not completed within its validity
period, the internal audit checks whether the permission has been
taken from the company for the extension of the validity period or
not.
C) The main work of internal audit under this department is to check
the work of tender is carried as per the terms and conditions of the
company or not. It also performs checking of the R.A bills, after
proper scrutiny of the bills it checks the summarized final R.A bills
whether all the entries are made properly or not and to check the
authenticity of the function of the department.

CASH SECTION
All receipt of dues to the company and disbursement on behalf of the
company except payment through authorized imprest holder
handled in cash section. This section is headed by Assistant Manager
(Accounts) and assisted by Cashier and as Assistant Cashier. All
transactions are recorded in the respective cashbook duly supported
by Receipt and Disbursement Vouchers, which are kept in safe
custody of cash section for proper accounts and audit purpose. Cash
section receives Voucher with supporting bills etc. from different
section of Finance and Accounts Department and pay to the payees
as mentioned in the respective voucher.

1. The work of Internal audit is to check whether all transactions

were recorded in the respective cash book and duly supported by
Receipt and disbursement voucher.
2. The Internal audits also verify whether the payment made by the
cash section is in accordance with the receipt voucher or not. The
main work of internal audit under this department is the checking
of physical cash verification of the cash department once in a
month.

PRICED STORE LEDGER SECTION:

An Assistant Accounts officer manages this section “Priced Store

Ledger Section” (PLS) is mainly responsible for pricing of receipt and
vouchers as per bill passed by the PAS, giving correct financial
account code on each issue voucher before it is passed to the cost
section for checking of correctness of cost code center. Primary work
of this section is to maintain the ledger for receipt and consumption
of store and equipment and balance their receipt and issue voucher
are sent to E.D.P. center for preparation of priced store ledger.

1. The work of Internal audit is to check the Receipt vouchers which

are priced by the Priced Store Ledger section in accordance of bill
passed by the purchase Account Section or not. It also checks
Ledger maintained by the priced store ledger section department
and consumption of equipments.
2. The main work of Internal audit under this department is the
checking of physical stock verification of the store ledger
department of the company and to verify the accounts of the
department.

GENERAL ACCOUNT SECTION:

This section is entrusted with the compilation of the company and
preparation of annual accounts at the close of the financial year,
which is from 1st April to 31st March of every year. In addition to
above realization of compensation due on the main product. Sale
proceeds of the products and other charges from Non-UCIL
employees. Payment of Electricity Bill, Sales Tax, Excise duty,
Royalty, Investment of Surplus Fund of the company maintenance
of register for loan receive from government payment of interest
there on etc. also dealt in this section.

1. The internal audit under this department checks whether the

investment decision taken by the department are appropriate
or not.
 2. Apart from this, it checks the payment of electricity bills, sale
tax, excise duty, investment at surplus fund of the company.
Another function of internal audit under this department is to
check the trading and profit and loss account and the balance
sheet prepared by the general account department to verify
whether it gives a true and fair view of the accounts or not.

FUND SECTION:

This section is under the charge of an account officer an assisted by an

Assistance Account Officer. The contributory provident fund of the
employees and gratuity fund of the corporation are managed and
administrated by truest in accordance with the rules framed and truest
deed executed. The fund section renders all services to the trust and
maintains relevant records as per provision and respective rules. Both they
are –

1. UCIL employee’s contributory provident fund truest.

2. Gratuity fund

A) The work of internal audit department under provident

fund section is to check the final settlement of the
employees at the time of retirement.
B) In gratuity section, the internal audit department checks
whether the employees getting the amount of gratuity is in
accordance with the rules and regulations of the company
or not. The work of internal audit under both the
department is to check the final settlements of the
employees.
AUDITOR’S REPORT OF URANIUM CORPORATION OF INDIA LTD ON THE
ACCOUNT OF THE COMPANY FOR THE YER ENDING 31ST MARCH 2008

(I) (a) The Company has maintained proper records showing most of the
particulars including quantitative details and situation of fixed assets.
(b) The company has phased programme of physical verification of its
fixed assets over a period of three year, which in their opinion is
reasonable having regard to the size of the company and the nature of its
assets.

(c) In their opinion and according to the information and explanations

given to them, the company has not disposed off a substantial part of its
fixed assets.

(II) (a) As explained to them, inventory has been physically verified by the
management during the year at reasonable intervals.

(b) In their opinion and according to the information and explanation given
to them, the procedure of physical verification of inventories followed by
the management is reasonable and adequate in relations to the size of the
company and nature of its business.

(c)In their opinion and according to the information and explanation given
to them, the company is maintaining proper record of inventory. The
discrepancies noticed on physical verification were not material and the
same has been properly dealt with in the books of accounts.

(III) According to the information and explanation given to them, the

company has neither granted nor taken any loans , secured or unsecured
from the companies, firms or either parties covered in the register
maintained u/s 301 of the Companies Act, 1956.

(IV) In their opinion and according to the information and explanations

given to them, there is an adequate internal control system commensurate
with the size of the company and nature of its business, for the purchase of
inventory and fixed assets and for the sale of the goods. During the course
of their audit, they have not observed any major failures in the internal
control system.

(V) According to the information and explanations given to them, there is

no transaction during the year that needs to be entered into the register
maintained in pursuance of section 301 of the Act.

(VI) The company has not accepted any deposits from the public within the
meaning of Section 58A and 58AA of the Companies Act, 1956 and the
rules framed there under and the directives issued by the Reserve Bank of
India.

(VII)The company has an Internal Audit Department. Internal audit of the

company is carried out both by the Internal Audit Department as well as by
firms of Chartered Accountants. In their opinion, the Internal audit system
of the company is required to be strengthened with regards to
implementation by enlarging the scope and frequency of coverage in the
Audit plan.

(VIII) According to the information and explanations given to them, the

company has generally been regular in depositing undisputed statutory
dues including Provident Fund, Income-Tax, Sales-Tax, Service-Tax, Custom
Duty, Excise Duty, Cess and any other statutory dues with the appropriate
authorities.

(IX) The company does not have any accumulated losses at the end of the
financial year and has not incurred cash losses in the current financial year
and in the immediately preceding financial year.
(X) The company has not made any preferential allotment of shares to any
party/ company during the year.

(XI) The company has not issued any debentures.

(XII)The company has not raised any money by way of public issues.

(XIII) No fraud on or by the company has been noticed or reported

during the year.

COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA ON

THE ACCOUNTS OF URANIUM CORPORATION OF INDIA LTD. FOR THE YEAR
ENDING 31ST MARCH 2008.

The preparation of financial statement of Uranium Corporation of India

Limited for the year ended 31st March2007 in accordance with financial
reporting framework prescribed under the companies Act, 1956 is the
responsibility of the management of the company. The statutory auditor
appointed by the Comptroller and Auditor General of India under section
612(2) of the companies Act, 1956 is responsible for expressing opinion on
these financial statements under section 227 of the companies Act, 1956
based on independent audit in accordance with the auditing ad assurance
standards prescribed by their professional body the Institute of Chartered
Accountants of India. This is stated to have been done by them vide their
Audit Report dated 28.06.2007.

Comptroller and Auditor General of India have conducted a supplementary

audit under section 618(3) (b) of the companies Act, 1956 of the financial
statements of Uranium Corporation of India Limited for the year ended 31 st
March 2007. This supplementary audit has been carried out independently
without access to the working papers of the statutory auditors and is
limited primarily to inquiries of the statutory auditors and company
personnel and a selective examination of some of the accounting records.
On the basis of this audit nothing significant has come to the knowledge
which would give rise to any comment upon or supplement to Statutory
Auditor’s report under section 619(4) of the companies Act, 1956.