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Confidential

For Internal Use Only

TAMER

Internal Audit Report


Leased Vehicles Process
(Admin Department)

IAR 28-
Report No.
12/11

Tamer Co.
Internal Audit of Leased Vehicles Process
Confidential- Tamer Co.
TAMER
Page 1 of 15
24 Dec
Date of issue
2011

Contents

Executive Summary.......................................................................................3

Audit Objective & Scope.................................................................................4

Our Audit Methodology..................................................................................5

Action Plan.................................................................................................... 7

1. Un-Documented Practice & Procedures.............................................................8

2. No Comprehensive Record Maintained for Leased Vehicles & Rent-a-Car Vehicles.......11

3. Deficiencies in Leased Vehicles’ Record...........................................................13

Annexure A..................................................................................................16

Tamer Co.
Internal Audit of Leased Vehicles Process
Confidential- Tamer Co.
TAMER
Page 2 of 15
Executive Summary

Background
We have performed an Internal Audit of Leased Vehicles’ Process of Admin Department at Head Office. This
report focuses on assessing the specific risks identified within process, evaluating the associated mitigating
controls, and commenting on the results of our audit procedures. The risk/control, observation/process
enhancement and recommendation on the following pages are intended to improve existing controls over
these risks and to improve the efficiency of current operating procedures.

The following is a summary of the significant findings and observations noted during our review of
Termination & Resignation process at Head Office. Detailed findings are discussed in the report excluding
management’s response and action plan related to each finding.

Risk Description
Rating
HIGH 1. Un-Documented Practice & Procedures

During the review, we found that current policies and procedures for leased and rent-a-car
vehicles is not documented due to which the admin department is conducting activities without
documented policies and procedures
HIGH 2. No Comprehensive Record Maintained for Leased Vehicle

Deficiencies were noted in admin record for leased vehicles being used by employees. Further
no record is kept for vehicles returned to suppliers.
MEDIUM 3. Deficiencies in Leased Vehicles’ Record

We found the following deficiencies in admin records:


 Employees’ names and number not mentioned
 Employee undertakings not obtained at the time of delivery of vehicles to employees.
 Monthly leased payments wrongly entered in admin records.

Tamer Co.
Internal Audit of Leased Vehicles Process
Confidential- Tamer Co.
TAMER
Page 3 of 15
Audit Objective & Scope
Objective

Our objective was to gain an understanding of the process as well as identify risks associated with the
process and determine whether internal controls exist and were operating as intended.

Scope

The scope included the following aspects of the Leased vehicles’ process:

 To ensure our leased car contracts cover major risks

 To ensure correct payments being made to suppliers

 To ensure proper record being maintained for leased cars

The review focused on the overall design and implementation of efficient and effective control procedures
covering the Leased vehicles’ process. The review was for the year 2011.

Tamer Co.
Internal Audit of Leased Vehicles Process
Confidential- Tamer Co.
TAMER
Page 4 of 15
Our Audit Methodology

 Initial understanding for audit purposes.

 This may involve:

 Interactions / explanations
 Testing of samples
 Observations
 Analytical Procedures
 Corroborative confirmations
 Examination / Review of documents / correspondence
 Review of underlying transactions.
 Tracing from source to result and vice versa.
 Considering appropriateness of presentation.

 Documentation of work carried out and exception noted.

 Attributing a level of event significance and event likelihood as seen by an independent team.

 Review of audit work carried out with follow-up visits to fill the gaps in observations.

 Preparation of the observations in presentable formats.

 Reporting

 Request for action with timeline.

 Follow-up visits to ensure compliance.

Tamer Co.
Internal Audit of Leased Vehicles Process
Confidential- Tamer Co.
TAMER
Page 5 of 15
Risk Ratings
An overall category of risk has been assigned to each observation based on both the likelihood and impact
of risks:

 Likelihood is determined by considering the probability that a risk will occur; and
 Impact of a risk occurring is determined by taking into account financial, operational and reputation
factors relevant to the operations.

For each observation, the likelihood and impact assessments are combined to provide an overall
assessment using the following matrix:

Heat Map
Almost
Certain
Medium High Critical Critical Critical

Likely Low Medium High Critical Critical


Likelihood

Possible Low Low Medium High Critical

Unlikely Low Low Low Medium High

Rare Low Low Low Low High

Insignifican Catastroph
Minor Moderate Major
t ic

Impact

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Internal Audit of Leased Vehicles Process
Confidential- Tamer Co.
TAMER
Page 6 of 15
Action Plan

ACTION ON
ACTION BY
(Points of Report)
OD Manager
1 1,2,3

Legends

OD Manager – Organizational & Development Manager

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Internal Audit of Leased Vehicles Process
Confidential- Tamer Co.
TAMER
Page 7 of 15
Detailed Findings
1. Un-Documented Practice & Procedures High

Observation

During the audit, we found that admin department does not have written operating policies and procedures
for leased vehicles. Due to which the admin department is conducting activities for leased vehicles without
documented policies and procedures. In the absence of documented policies for leased vehicles, it was hard
to assess that the following are being complied with in a standardized manner:

 Employee eligibility requirements for leased vehicles;


 Request and approval procedures for acquiring the leased vehicle;
 Delivery process of leased vehicle to employee;
 Employee undertaking for using leased vehicles (covering all the risks related to Tamer as
mentioned in the contract with supplier);
 Vehicles’ return procedures;
 Record retention policies.

Internal audit also noted that admin department does not have any written policy for rent-a-car vehicles
making it hard to consider:

 Whether request and approval for acquiring the vehicle from rent-a-car company was proper;
 Criteria for charging of the rent to employee personal account or company.

Implication

As the current procedure for leased vehicles is not documented due to which there is a risk that:

 A single invoice may be accepted by admin department for leased vehicles of all legal entities
instead of separate invoices for each legal entity;

 Absence of reconciling supplier invoices with admin record for leased vehicles to ensure that Tamer
is not being charged for the vehicles not used or excessively charged for current leased vehicles;

 No confirmations obtained from regional sales managers for leased vehicles being used in their
respective regions.

 Finance may process the supplier invoices without proper review of supporting documents;
Tamer Co.
Internal Audit of Leased Vehicles Process
Confidential- Tamer Co.
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 Absence of documented accounting policies and procedures increases the risk of adoption of
policies and procedures not in conformity with best industry practices.

 Adoption of policies and policies on temporary basis in the function.

Recommendation(s)

Internal audit recommends that the Admin function consider the preparation and maintenance of the written
standard operating policies for leased and rent-a-car vehicles and, as a minimum, the following procedure
are recommended for leased vehicles and rent-a-car;
Leased Vehicles
 Admin department should make an arrangement with suppliers for issuing separate leased vehicles’
invoices for each legal entity. This will help in tracking the legal entity wise invoices.

 Admin department should then reconcile the records of leased vehicles with supplier invoices in
order to ensure that relevant invoices are received from suppliers and forward to respective finance
department of each legal entity.

 After receiving supplier invoices, admin department should circulate the list of leased vehicles to
regional sales managers (or any of the leased car users’ managers) in order to ensure that invoices
are received only for vehicles which have been used during the month.

 Finance should process the invoices for payments after verifying the approval of relevant manager
and reviewing the supporting documents and relevant admin record (list of leased vehicles record).

 In case of any variation, a new amended invoice should be obtained from supplier.

 It is recommended that balance confirmation be obtained from the supplier prior to payment.

Rent-A-Car
In case of rent-a-car, atleast the following should be covered in the written policies and procedures and
adhered to:

 Purpose for acquiring the vehicle;

 Expected date of return of the vehicle;

 Proper request and approval for acquiring the vehicle from rent-a-car company;

Tamer Co.
Internal Audit of Leased Vehicles Process
Confidential- Tamer Co.
TAMER
Page 9 of 15
 Criteria for charging of the rent to employee personal account or company. (E.g. In case of
Manager’s car maintenance, the user (manager) should provide the support of maintenance
company in order to justify the period of usage of rent-a-car. In all other cases if the rent-a-car is
being used for excessive period without manager approval should be charged to personal account of
employee).

Management Response

Comments and/ or Details of Actions Due Date and


Responsibility

Tamer Co.
Internal Audit of Leased Vehicles Process
Confidential- Tamer Co.
TAMER
Page 10 of 15
2. No Comprehensive Record Maintained for Leased
Vehicles & Rent-a-Car Vehicles
High

Observation

During the review, we found that no comprehensive record is being maintained for vehicles currently in use
by employees. We found the following deficiencies in the record;

 Employee grade not mentioned for quick reference;


 Principal leased amount
 Vehicle receiving date by employee;
 Contract expiry date;
 Approval authority;

We found that there is no separate record kept for returned vehicles due to which we could not identify the
vehicles which have been returned to the supplier.

Implication

 Risk of overpayment to suppliers in absence of incomplete record for vehicles;

 Risk of paying the lease rentals for vehicles which have been returned back to suppliers;

 Difficult to reconcile supplier invoices with our incomplete record;

 Submission of inaccurate leased vehicles’ reports to management; and

 Time consuming in providing current status of leased vehicles.

Recommendation(s)

We recommend that a proper and complete record for current and returned vehicles should be maintained
by Admin department in HRMS showing all details of vehicles. Further separate record for vehicles returned
to suppliers should also be maintained by admin department. A sample for the record to be maintained for
vehicles returned to suppliers is attached in Annexure A.

Tamer Co.
Internal Audit of Leased Vehicles Process
Confidential- Tamer Co.
TAMER
Page 11 of 15
Management Response

Comments and/ or Details of Actions Due Date and


Responsibility

Tamer Co.
Internal Audit of Leased Vehicles Process
Confidential- Tamer Co.
TAMER
Page 12 of 15
3. Deficiencies in Leased Vehicles’ Record Medium
Observation

We found the following deficiencies in the record being maintained by admin department:

 Employees’ names and number not mentioned

 Employee undertakings not obtained at the time of delivery of vehicles to employees.

 Monthly leased rentals wrongly entered in admin records.

Above mentioned deficiencies in admin record are shown in the following table:

Employee Name Employee Division Branch Car plate Employee Approval Employee Monthly Monthly Rentals
No No. Request undertaking Rentals as per as per Admin
Agreement record
Tareq Al Rabei 102887 Common Riyadh 2532 XEB Ok Ok X 1,690 1,690
‫عبدالعزيز نواف الحربي‬ 101942 Common Riyadh 2533 XEB Ok Ok X 1,690 1,690
Abdulrahman
103832 Consumer Jeddah 8581 VGA Ok Ok X 2,850 2,850
Alhimyari
HAITHAM
MOHAMMED 104587 Consumer Jeddah 8582 VGA Ok Ok X 2,850 2,850
HAJJI
ABDELWADOUD
New Consumer Jeddah 8583 VGA Ok Ok X 2,850 2,850
ABDELAAL
Amer Naeem
104626 Consumer Jeddah 8584 VGA Ok Ok X 2,850 2,850
Ibrahiam M.Alshibli
X X Consumer Riyadh 8577 VGA Ok Ok X 2,850 2,850
X X Consumer Riyadh 8578 VGA Ok Ok X 2,850 2,850
Sameer Abdullah 100222 Common H.O 3599 NEB Ok Ok X 1,690 1,690
Saber Al Dasouqi 101446 Consumer Madina 5412 HSB Ok X Ok 1,465 1,240
Mobarak
Mohammed 101123 Pharma Jeddah 3893 SGB Ok Ok 1,870 1,870
Mukhdhir Al Thalabi X

Raid Abu Alhija 103770 Common Jeddah 3937 SGB Ok Ok X 1,870 1,870

Abdulbasett
Mahmood 104105 3PL Jeddah 3929 SGB X Ok X 1,870 1,870
M.Qurishi
Abdulrahman Saleh
101313 Common H.O 3943 SGB Ok Ok X 1,960 1,870
Abdullah Bawazir
Ibrahem
Mohammed Al 102957 Pharma Abha 3701 DGB Ok Ok X 1,870 1,870
Shahrani
Abu Al Qasim
102661 Pharma Abha 3927 SGB Ok Ok X 1,870 1,870
Abdulati Ahmed

Ali Ahmed Abdullah 1,465


103191 Consumer Jeddah 3195 DGB Ok Ok X 1,465
Bamaas

WAEL ABO 102470 Consumer Khobar 7426 Ok Ok X 2,330 2,330


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Internal Audit of Leased Vehicles Process
Confidential- Tamer Co.
TAMER
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Employee Name Employee Division Branch Car plate Employee Approval Employee Monthly Monthly Rentals
No No. Request undertaking Rentals as per as per Admin
Agreement record
SOLOA
Hane nsem yaqup 102108 Consumer Riyadh 3196 DGB Ok Ok X 1,240 1,465
Idrees Mir
103167 Consumer Jeddah 5113 LGB Ok Ok X 1,465 1,465
Mohd.Jamali
Mohd.Hussain j Al
101237 Common Jeddah 2405 DKB Ok Ok X 1,600 1,600
Najrani

Samer Mohammed 1,960


New Consumer Jeddah 4537 JKB X X X 1,600
Fareed Hamdan

Noushad A.Jabbar 101567 Consumer Jeddah 3197 DGB Ok Ok X 1,240 1,465


Hesahm Ahmed
104507 Consumer Jeddah 1404 VKA Ok Ok X 1,865 249
Saleh Al Qhsai
Sajjad Ahmed Shah
104506 X Jeddah 1406 VKA Ok Ok X 1,865 249
Pir Ghulam Shah
Mobarak Arbab 104665 X Khobar 1402 VKA Ok Ok Ok 1,865 1,624
Motaz Khalid
104538 X Riyadh 1405 VKA Ok Ok X 1,865 1,685
Sobyea

Implication

 Difficult to reconcile between admin record and supplier invoices (as employee names & numbers
not mentioned, wrongly entered monthly rentals).

 Misplacing or losing employee requests, approvals and other documents.

 Employee unaware of their responsibilities for using vehicles in absence of employee undertaking.

 Submission of wrong reports to top management in absence of complete record.

Recommendation(s)

We recommend that

 Leased vehicles should be handed over to employees after obtaining undertakings from them;

 Information should be correctly entered by the admin officer and a review by a supervisor of the
record and files occasionally;

 Check list of the standard documents for filing should be made;

Management Response

Comments and/ or Details of Actions Due Date and


Responsibility

Tamer Co.
Internal Audit of Leased Vehicles Process
Confidential- Tamer Co.
TAMER
Page 14 of 15
Annexure A

Employe Employe Branc Departme Divisio Contra Car Car Issu Returne Total
e Name e h nt n ct Type Plate e d Date Amount
Number Numbe Numbe Date Paid
r r

Tamer Co.
Internal Audit of Leased Vehicles Process
Confidential- Tamer Co.
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