auditing final arslan2

8/8/2019 Auditing Final Arslan2

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A U D I T I N G

P R O J E C T

P H A S E O N E

COMPANY: PACKAGES

AREA ALLOCATED: INVENTORY

PRESENTED TO: SIR ABRAR JAMIL

BY: ARSLAN AHMAD ZIA

11-10660


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PACKAGES

DEPARTMENT: SUPPLY CHAIN MANAGEMENT- STORES & INVENTORY

Approximate quantity on inventory: 20 billion

Number of stores: 20 large stores

System used: SAP

Achievement: were certified with ISO 9001-14001 in year 2009

DEPARTMENT STRUCTURE


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Flowcharts


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NARRATION

First of all the Production and Planning department receives a job order, which is checked bythe manager plant whether the order has come into the right plant or not and then it is filed job

number wise. Based on that job order the Planning division prepares the Bill of Material(BOM).

In the BOM there is a recipe made in which the method of production and the material needed is

stated. The BOM is also checked by the Planning manager. From the BOM the department

makes a Issue Requisite (IR) which is sent to the stores. In the IR the user department

demands for the required quantity of material needed. The store keeper of the stores first of all

checks the document, whether the document is authorized by the right person or not. Then one

copy is saved in the store after the manager of that store approves the release of the material.After the material is released the store officer updates the Material Master. In the material

master there are all the updates made for the material moving in and out of the stores, there is

proper check on the level of inventory. As the material master is an application of SAP and all

the concerned departments have access to it, the accounts department updates the cost

centers.


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NARRATION

The procedure is very similar in case of any department needing miscellaneous items, spare

parts and stationary. In this case the first step would be taken by the user department. First of

all the user department will make a IR of whatever goods they need. That ir will be approved by

the head of that department before reaching the store. In the store, the store keeper will first of

all check the signature of the authorized person, then he would go to the junior executive for

approval of good and then if approved the demanded goods will be issued. There would be two

copies of that IR, one kept in the user department and one kept in the store. Then the store

officer will update the material master which will be communicated to the accounts where the

cost center of the user department will be updated.

Attached: copy of GOODS ISSUE BOOK

IMPORTANT

The above two flow charts are for the Issue Requisites made by hand and are physically

delivered to the stores. In most cases there are Good issuance Notes generated on the system

(SAP) and communicated to the store and the other departments.

Attached: copy of computer generated GOOD ISSUE SLIP


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SAP

Goods Issue

Goods Issue (GI) is a document used by the Store to issue the material on the basis of the IR

(Issue Requisition) from the concerned user department.

Goods will only be issued against the Goods Issue Slip (Issue Requisition). Once the Goods

Issue is entered in the system the stock quantity as well as value will be updated automatically

and relevant accounting entry will be posted in the system.

The Goods Issue Slip can be created either automatically through system against job or

maintenance orders or manually on ad hoc basis.

In case additional material is required for an order, the concerned department will fill another

material issue slip manually duly approved by the department head and forward it to the Stores

Department for issue of materials.

Goods Issue Slip will contain the following basic information:

Material No.

Material Description

Issued Quantity

Unit of Measure

Issue Date

Cost Center / Order No.

Goods can be issued on the following basis:

i. Job / Production Orders

ii. Cost Centers (Department)

iii. Maintenance Orders


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Against Job Orders

The respective user department will process an Issue Requisition in the system against the

production order and a printout will be forwarded to the Stores Department. The Store

Department will issue the materials and record the Goods Issue in the system.

In case the goods cannot be issued in the exact quantity as mentioned in the Bill of Material

because of the standardized quantities, the Store Keeper will over-write the amount mentioned

in the Goods Issue Slip and issue the revised standard quantity.

Cost Centers

The goods that cannot be allocated to a job will be issued against cost centers. The respective

department will fill out the Issue Requisition Slip, assign the cost center and send it to the

department head for approval. The approved IR will be forwarded to the Costing Department for

verification of cost center and the Stores Department will then enter the Goods Issue in the

system.

Maintenance Orders

The respective user department will process an Issue Requisition in the system against the

maintenance order and a printout will be forwarded to the Stores Department for issuance of

stock. The Store Keeper will record the maintenance order number on the goods issue

document and post it in the system.


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Stock Transfer

Transfer posting or Stock Transfer is a process used by the Stores Department to transfer

material from one location to another location, usually from one plant to another.

The Stock Transfer document will be created in the system which will contain the following basic

information:

Material number

Description


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INTERNAL CONTROLS

Security- all the inventory is insured (with IGI), there are cameras installed everywhere,

armed guards.

Physical check- the supply chain department itself does the physical count of the

inventory on a regular basis and the internal audit department does surprise visits t the

store for the physical count.

There is authority given to lower management as well, for example the store keeper in

the stores has the authority to issue goods.

Proper accounting methods are used. FIFO is used for the evaluation of inventory.

All the transactions done in a day are matched against the hard copies so that the any

errors made can be omitted.

Safe working conditions- all the workers in the plants are suppose to wear the protective

measures.

Goods issue document number will be generated by the system automatically.

The system will automatically update the quantity as well as value at the time of Goods

Issue.

The system will not allow posting of the document, if the stock quantity is less than the

quantity required to be issued.

Only the Stores Department will be authorized to enter Goods Issue in the system.

Only the Store Incharge will be authorized to cancel a Goods Issue document in the

system.


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Goods will be issued to the user department against an approved auto-generated or

manual issue requisition.

Goods Issue is a single step process, therefore, there is a risk that the Store personnel

entering the Goods Issue may charge off an issue to expense and misappropriate the

item. In order to minimize this risk, the Stores Incharge in the Stores Department and the

Inventory Section Incharge in the Accounts Department will review the Goods Issue

Listing on a regular basis and identify and investigate large and unusual items.

The Store Department may charge the incorrect account or cost center with the value of

the goods issued. The Accounts Department will need to review the Goods Issue listing

daily to identify errors.


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QUESTIONNAIRE

Is too much money tied up in your inventory?

Do frequent shortages in inventory occur?

Does an excessive inventory discrepancy occur?

Is there are a lot of obsolete and/or non-moving items on stock?

Does the company have realistic safety stock levels?

Does the company have realistic reorder point levels?

Does the company have realistic inventory lead times?

Are inventory control policies and procedures documented?

Are inventory records kept up- to-date for all materials?

Are inventory records regularly verified by actual count?

Are incoming and outgoing goods properly checked?

Are surplus and scrap items properly recorded and controlled?


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auditing final arslan2

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