—Guide
Common Internal Audit Findings in Indian SMEs and How to Fix Them
The control gaps internal audits most often find in growing Indian businesses — from purchases to payroll — and practical fixes for each.
Internal audits of small and mid-sized Indian businesses tend to find the same kinds of issues again and again. They're rarely dramatic frauds — more often gaps that let money leak quietly as the business grows. Here are the most common findings, and how to fix them.
Purchases Without Proper Approval
Orders placed by phone or message, with the invoice approved after the fact. Fix: a simple purchase order process with approval limits, even if it's in a spreadsheet or basic software.
Vendor Master Changes Without Checks
Vendor bank details changed on the strength of an email — one of the most common fraud routes. Fix: any change to vendor bank details needs independent verification and a second approval.
Discounts Outside Policy
Sales staff offering discounts or credit terms beyond what's authorised. Fix: written discount limits by role, with system checks where possible.
Unbilled Work or Deliveries
Goods delivered or services performed without an invoice being raised. Fix: reconcile deliveries or timesheets with invoices every month.
Stock Differences
Book stock that doesn't match what's in the warehouse, and expired or damaged stock still at full value. Fix: periodic counts, expiry tracking and prompt write-offs.
Duplicate Payments
The same invoice paid twice, often through different channels. Fix: payment only against a recorded invoice, with duplicate checks.
Delayed Statutory Payments
TDS, GST, PF, ESI or Professional Tax paid late, attracting interest, penalties and tax disallowances. Fix: a compliance calendar with owners and reminders.
Payroll Irregularities
Salary changes without approval, employees who've left still on the payroll, or overtime without authorisation. Fix: HR approval for every change, and a monthly reconciliation of headcount to payroll.
Too Much Access in the Accounting System
Everyone logs in as administrator, or one person can create, approve and pay. Fix: user roles and segregation of duties, with the audit trail enabled.
Petty Cash
Large, unsupported cash spending. Fix: a fixed float, vouchers for every payment, and periodic surprise counts.
Making Fixes Stick
- Assign each finding to a named owner with a deadline.
- Fix the process, not just the transaction.
- Check fixes in the next audit.
Getting Help
Think Filing's internal audits focus on practical fixes for growing businesses, and follow up to make sure they stick.