At the end of 2016, internal auditors and safety officers of the holding identified many indicators of financial abuse on the part of management and main departments responsible for the collection, transportation and storage of agricultural products. Having been informed of the above-mentioned indicators, the owner, based on results of a restricted tender, chose our company for carrying out an internal investigation into the reasons of such abuse.
Owner’s representatives and we understood that it was important for us not only to find those who committed particular acts of such misconduct, but also analyse weaknesses of the existing internal control system in respect of property safety and propose measures for increasing the efficiency of the internal control system in the future.
In order to solve the task, we created a joint working group consisting of business analysts and financial and industry experts.
Business analysts were responsible for the expert analysis of basic (Soil Preparation,Planting, Harvesting, Delivery From Fields to the Elevator, Storage in the Elevator, Shipment to Clients (Railway and Car)) and auxiliary (Staff Management, Quality Control, Machinery Control, Planning and Budgeting) business processes of the company to identify their efficiency, and the real onsite check to find out how these processes actually worked.
Financial experts compared the onsite check data obtained from business analysts with financial information disclosed in accounting documents, source documents, warehouse ledgers and management reports in order to check their mutual consistency.
Local experienced agriculturists were engaged as industry experts; they helped our financial expert sand business analysts with matters of the sowing plan, work of the laboratory at the elevator, distribution of petroleum, oil and lubricants, spare parts expenditure control, rates of natural loss, humidity and impurity, and other specific industry information. Professor, Chair of IT Department of the local Economics and Management University, acted as a project manager.
During the work, we analysed internal regulations of the enterprise, detected areas of inadequate control and found multiple violations of the adopted in-house regulations. For example, we detected the following: clear violations of the automatic control in the course of product acceptance at the weighing station; laboratory employees understated grain grade and impurity; evidence that unrecorded excess of grains was removed from the elevator as dirt; rail cars were unsealed when products were shipped to customers; violations concerning the accounting for petroleum, oil and lubricants, and spare parts; failure to observe tender procedures related to the selection of suppliers (purchases from bad-faith suppliers at overinflated prices) and other violations.
All our findings and recommendations on each violation detected were described in our report and the presentation submitted to owner’s representatives; as a result, relevant personnel decisions were made, and a plan of the improvement of holding’s internal control system was developed.
We express our special gratitude to our lead auditors Elena Nazarenko and Tamara Belenova for their mental flexibility and dedication to that unusual audit assignment.