Bharat Petroleum

Presentation By Group 8
Bharat Petroleum: Redesigning

the internal audit organization
Operational Issues Facing Internal Audit at Bharat Petroleum
• By October 2013, 67 of 178 planned audits had not commenced, indicating a

Audit Completion backlog and inefficient execution. This delay affected the department's ability to
Delays provide timely assessments of operational risks.
• There were 4,434 pending audit recommendations, with some open for over
Recommendation three years, including 59 for over five years, indicating a lack of follow-through
Compliance and compliance issues within the organization.
• Audits were perceived as mere compliance checks or box-ticking exercises rather

Perception of Audits than value-adding activities. This perception hindered the effectiveness of the
internal audit function
• There were inefficiencies in scheduling audits due to uncertainty about auditor

Inefficiencies in availability. The lack of a clear process for determining when auditors would be
Scheduling available to start new audits contributed to delays
Changes that should be made to IA to achieve sustainable improvements in audit
completion & compliance with respect to changes in
Operational Processes Staffing Plans

• Implementation of AMS : Streamlines audits, • Staff Assessment : Assess the staffing needs of the IA dept. to
determine if additional personnel are required to manage the
enhances documentation, and centralizes
audit workload effectively.
tracking for recommendations and
• Performance-Linked Incentives : Linking appraisals to audit
compliance. completion and compliance motivates the team to meet targets
• Risk-Based Prioritization: Categorizing and enhance performance.
recommendations by risk (high, medium,
Organizational Structure
low) prioritizes critical issues for prompt
• Simplified Reporting Structure : Clarifying the reporting structure
attention.
for auditors can reduce administrative complexities and
• Standardization of Audit Processes: streamline communication.
Standardizing processes enhances efficiency, • Cultivate a Culture of Continuous Improvement: Encouraging a
consistency, and audit quality. culture of continuous improvement within the internal audit
department can help adapt to evolving needs and challenges.
Strategies of control used by Dinaker in his efforts to bring change in
internal audit's performance
Implementation of Technology (AMS): By mandating the use of an Audit Management Software (AMS), Dinaker
aimed to establish real-time monitoring and control over the audit process, enabling better oversight and
management of recommendations and compliance.
Narrowing Focus on Only Significant Items: A lot of audit recommendations were starting to appear as insignificant
and that used to increase the number of compliances. Dinaker believed that narrowing the focus on significant items
would lead to SBUs finding greater value in internal audits and be more likely to implement the recommendations.
Performance Appraisal Linkage: Linking performance appraisals to audit completion and recommendation
compliance served as a control mechanism to incentivize the audit team to meet targets and enhance performance.
Inviting Top Leadership: Dinaker invited top leadership to involve everyone in the changes that were being made.
Connection of Internal Audit to Governance in BPCL
Is this important for organizations like BPCL or for every organization? Why?
Internal Audit as per the Section 138 of the Companies Act 2013, with Rule 13 and 14
Examine Review of the

Objectives Monitor Compliance
Financial and Operations an
of Internal and
Operational d Risk
Internal Audit Controls Governance
Information Management
• Governance is the system and structure of decision-making, accountability, and control within an organization.
• Internal audit plays a pivotal role in governance by evaluating and ensuring that the organization operates in line
with its established governance framework.
YES!
• Internal audit's is essential due to its role in ensuring compliance, risk management, and effective operations for
all organizations, regardless of their industry, as it contributes to transparency, accountability, and overall success in a
complex and regulated business environment.
• Because these organizations do not have continuous auditing and solely depend on the internal audits along
with the statutory audits.
Linkage of Audit Functions to Corporate Governance Mechanisms
Checks and Balances:
•Audit functions serve as a critical component of the checks and balances within an organization. They provide an
independent and objective assessment of the organization's operations, ensuring that no single entity has unchecked
authority or control.
Risk Management:
• Audits help identify and manage operational risks. By conducting assessments of internal controls and processes, audit
functions contribute to risk mitigation, which is essential for effective corporate governance.
Legal and Regulatory Compliance:

•Audits ensure compliance with laws and regulations. In regulated industries like the petroleum sector, adherence to legal
requirements is crucial. Audit functions play a key role in verifying that the organization complies with relevant laws.
Transparency and Accountability:

• Audits provide assurance that internal controls are in place and functioning effectively. This transparency fosters
accountability among employees and management, as they know their actions will be subject to scrutiny, promoting
ethical behaviour within the organization.
Unbiased Evaluation:
• Corporate governance mechanisms rely on audit functions to provide an unbiased and objective evaluation of the
organization's operations. This impartial assessment helps in detecting irregularities and preventing fraud.
Risk Mitigation:
• Audits also serve as a mechanism for risk mitigation, helping the organization avoid financial and reputational risks that
can result from non-compliance, fraud, or mismanagement.
Thank You

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Presentation By Group 8

Bharat Petroleum: Redesigning

• By October 2013, 67 of 178 planned audits had not commenced, indicating a

• Audits were perceived as mere compliance checks or box-ticking exercises rather

• There were inefficiencies in scheduling audits due to uncertainty about auditor

Operational Processes Staffing Plans

Examine Review of the

Legal and Regulatory Compliance:

Transparency and Accountability:

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