Inventory Management Audit Program by fB7N0g

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									This is the AuditNet Standard Risk Control Audit Matix which incorporates formats
used by many audit organizations in their documentation working papers. There are
format templates for risk control, audit procedures, questionnaires and checklists.
There is a blank workpaper and a report summary that can in used by audit
organizations. AuditNet has prepared a monograph for guidance on preparing and
developing audit work programs, checklists, questionnaires and matrices. The
monograph is available to AuditNet subscribers. For more information go to
Audit Program Area: Inventory Management

                                         AUDIT PROCEDURES                                    WP Ref
          Inventory receipting

          1) Document and review the process in place for communicating to the warehouse
          the expected delivery of stock including the delivery dates and stock items.

          2)  Identify 10 deliveries that are recorded to be delivered on a specific date.
          Ensure that these deliveries are delivered on the stated date.

          3) Document the process by which the warehouse prepare for the delivery of the
          goods. Consider any goods inward time allocation logs, allocation of unloading
          personnel and physical area booking in logs. Agree these for the 10 deliveries
          identified for testing.

          4)   Document and review the process for recording the goods that have been
          received. Consider the following:

          Checks performed to ensure the quality of the goods being receipted

          How these checks are recorded

          What is the process if sub-standard goods are received

          How are sub-standard goods segregated and returned

          How are sub - standard goods recorded in SAP

          Process of agreeing quantities and type of goods received to the delivery note

          Agreement of the delivery note to the purchase order

          Recording and verification of input of goods received into SAP

          5) Consider persons who have SAP access rights to receive and record stock.
          Also consider user accounts, generic accounts, input reviews and management

          Inventory storage & security

          1) Review and document the process for storing delivered goods. Consider the

          How deliveries are palleted, labelled and recorded
Arrangement of racking and how items on racks are recorded

Processes for moving items to the racks

Qualifications of the fork lift drivers

Process if stock items are damaged during racking.

Stock rotation policy e.g. FIFO, sell by date etc.

2) Assess the physical security of the site. Consider the following as part of this

Is the warehouse locked and guarded

Is there access controls in place

Is there CCTV in place

Are random checks carried out when warehouse workers leave the building

Are there fire detection and fire control mechanisms in place

Is there risk of flooding/ flood management processes in place

3) Are background checks carried out/ references taken for warehouse workers.

4) How are slow moving stock items identified, recorded and updated in SAP

Stock takes

1) Verify that there are documented stock take policies, procedures and a stock
take calendar in place.

2)   Review and assess the PI process

3)   Select 5 stock items and agree the quantities from the perpetual inventory
system to the physical quantities.

4) Select 5 stock items from the racks and agree the quantities to the perpetual
inventory system.

5)   Review the stock take procedures and consider the following:

     Counting procedures including number of counters

     Re-count procedures

     Cut-off process
    Input of count and verification process

    Adjustment authorisations

Damaged goods management

1)    Review the processes in place for identification of damaged goods

2)    Assess how damaged goods are recorded and reported within SAP

3)     Assess the process of destroying damaged goods. Include the following points
in the assessment:

    How and who authorises destruction of damaged goods

    Destruction certificates obtained

    Authorisation of disposal suppliers

    Updating of SAP inventory records

4)     Assess the appropriateness of persons who have access in SAP to write/off

5)    Establish the process for reviewing and managing damaged stock.

Packing & loading of goods

1)   Review and document the process for identifying sales orders

2)   Review and document the process for generating picking/ packing lists

3)   Review and observe the picking and packing process. Consider the following:

    Verification of accuracy of what has been picked

    Updating SAP for items picked

    Process for out of stock items

    Storage and security of picked items

    Labelling of picked items

    Process for ensuring all picked items are packed

    Labelling of packed items

4)   Review and assess the loading process. Consider the following:
       What controls are in place to ensure all packed items are loaded

       Are loaded items agreed with the sales order and picking list

       Is the loading area clear of damaged goods and other non-inventory items

       Is the loading area secure

       Are delivery notes generated and agreed to the picking list

       Are delivery notes sent with every delivery.

       How is SAP updated for loaded items

Delivery to the customer

1)   Are delivery times of goods booked in with the customer?

2)   Verify that only authorised haulers are used for delivering stock to customers.

3)   Are there tracking mechanisms in place for goods in transit

4)   Review the process of obtaining proof of delivery from the customer.

5)   How is this POD communicated to RLB for invoicing?

6)   How is SAP updated for deliveries to customers

Customer returns

1) Review and assess the process for managing customer returns. The following
should be considered as part of this review:

              How are returns recorded on SAP

              Are reasons for the returns analysed and appropriate remedial action

              Are returned goods inspected to verify reason of return

              Is evidence of inspections retained and authorised

              If the goods are damaged are they disposed off appropriately

           Where appropriate are returned goods re-stocked and SAP stock levels
adjusted accordingly.

Stock insurance
1) Verify that stock insurance cover is in place for the stock. Assess the adequacy
of the insurance.

2)   Verify the existence of insurance for goods damaged/ lost in transit.


1)    How are stock - outs avoided and are there minimum stock quantities.

2)    How are Xxxxxxxx Limited notified of stock level and the need to re-order
Auditor    Time      Date     Date           Checked
Initials   Spent   Expected Finished Remarks   By:
                              Client Name
                      Internal Control Framework

          Date Completed:
          Completed By:
          Reviewed By:

          Question                                                  Yes No* Comments /Description

              To the best of my knowledge, the answers and comments noted above are accu

          Name and Title of Person Completing Form (please print)                            Name and Title of Department Dire

* For a “No” answer, cross-reference to either a compensating control or to audit work which has been performed
or is to be performed.                            Questionnaire
                   Signature of Person Completing Form                                                Signature of Department

                          Date Form Completed                                                     Date of Department Directo

* For a “No” answer, cross-reference to either a compensating control or to audit work which has been performed
or is to be performed.                            Questionnaire
                           Employee Responsible for Task

s noted above are accurate and reflect the current

Name and Title of Department Director (please print)

            * For a “No” answer, cross-reference to either a compensating control or to audit work which has been performed
            or is to be performed.                            Questionnaire
   Signature of Department Director

Date of Department Director's Signature

      * For a “No” answer, cross-reference to either a compensating control or to audit work which has been performed
      or is to be performed.                            Questionnaire
Finding Ref #   Control Testing   Finding
Management Response & Treatment

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