Multi-Branch Logistics Company — ₹11.3 Lakh Unauthorised Procurement Uncovered
A four-branch road logistics operator with escalating diesel costs and no procurement controls. A risk-based internal audit uncovered a vendor-manager nexus, ₹11.3 lakh in unmatched procurement, and a phantom payroll entry — then rebuilt the controls.
Unexplained costs and no controls to find the source.
Diesel and consumables costs had risen for three consecutive quarters with no satisfactory explanation from branch managers. The company had no formal internal audit function, no procurement policy, and no documented vendor approval process. Purchase orders were not systematically generated, goods receipt was not formally recorded, and vendor selection was entirely at the discretion of individual branch managers. Petty cash floats at each branch ranged from ₹35,000 to ₹65,000 and were replenished on the basis of self-certified expense claims — no secondary approval, no receipt-level verification. This combination of decentralised authority and undocumented processes created the conditions for both error and deliberate misappropriation. The board needed to know which it was facing.
How we executed the engagement.
Risk Mapping
Scored each operational area — procurement, fuel, petty cash, payroll, vendor payments, fixed assets — against likelihood and impact of misstatement or misappropriation. Produced a heat map that confirmed procurement and fuel as highest-risk and provided a defensible basis for audit effort allocation.
Surprise Physical Stock Counts
Unannounced physical counts at Pune and Nashik facilities. Counted diesel tank levels, tyre inventory, and warehouse consumables without advance notice to branch staff. Combined variance of ₹2.4 lakh found — no adjusting entries or shortage reports on record.
Vendor Nexus Analysis
Pulled all purchase transactions for the audit period and identified three vendors accounting for 67% of procurement spend across two branches. Cross-referenced vendor mobile numbers, bank accounts, and addresses against company employee records. All three vendors linked to the Pune branch manager.
3-Way PO-GRN-Invoice Matching
Performed 3-way matching across all 840 purchase transactions in the period. Of these, 47 had no matching purchase order — goods or services recorded as received and paid for without prior management authorisation. These 47 entries totalled ₹11.3 lakh. Several vendor invoices were dated on weekends or public holidays.
Petty Cash & Payroll Review
Branch-level petty cash claims examined for secondary approval and receipt-level support. Floats found running at 2–3x recommended limits. Headcount verification at each branch against payroll records identified one phantom employee entry at the Aurangabad location.
The capabilities we brought to bear.
Risk-Based Audit Design
Heat map scoring across six operational areas to direct effort and provide a board-ready rationale for scope decisions.
Physical Stock Verification
Surprise counts at branch level — diesel, tyres, consumables — without advance notice to local management.
Vendor Intelligence Analysis
Cross-referencing vendor registration details, bank accounts, and contact history against employee records to surface undisclosed relationships.
PO-GRN-Invoice Matching
3-way matching across 840 transactions — identifying every instance of payment without prior authorisation.
Control Reconstruction
Internal Control Matrix prepared covering all high-risk areas; vendor registration policy, float limits, and 3-way matching processes designed and documented.
The numbers that matter.
The results we delivered.
The vendor nexus didn’t show up in the accounts — it showed up when we cross-referenced mobile numbers and addresses. That’s the kind of work that only happens when you look at the whole picture, not just the ledgers.
