Contributed 2/7/2002 by Ed Tutlys
etutlys@courier.com
FIBER SALES AND PROCUREMENT: SALES
Audit Scope 1. A detailed walkthrough of the sales and invoicing. 2. Review and test the pricing methodology. Determine reasonableness versus third party and/or market conditions. Document how pricing decisions are made and determine reasonableness. 3. Perform detailed testing of sales transactions. Verify the following: Items shipped match items ordered. Items and quantities billed match the items and quantities shipped. Prices charged match the approved pricing arrangements. Therefore prices billed to customers were proper. Do we have inflated to brokers/agents in which ultimately the difference between the inflated price and the contractual price is distributed to the customer in the form of a subsequent “rebate”? This will be verified when looking at rebates. The right inventory was relieved in the proper period. Ensure shipment date was in time to meet the customer’s requested shipment date. Ensure the customer was billed in a timely manner. If sales commissions are paid, agree the commission rate to the approved supporting documentation and recompute the commission. Ensure the product was quality controlled when produced. Sale booked in the proper accounting period. If it was a credit sale, was proper credit approval obtained Test conversion factors for accuracy/correctness. Trace components of each transaction into the GL making sure each piece got into the right bucket.
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4. Verify/test the weighing and measuring techniques used in determining quantity of pulp sold. 5. Perform an analytical review of Pulp G/L accounts and reconciliation’s, if any. Look for any dormant accounts or unusual activity. 6. Look at Department of Transportation (DOT) compliance audits that have been performed. Follow up on material or significant items. 7. Look at a sample of credits issued to ensure we do not have significant customer returns.
FIBER PROCUREMENT
Audit Scope 1. A detailed walkthrough of the purchasing/receiving/payable function which will focus on: Control over requisitions and purchase orders Segregation of duties Vendor selection, bidding procedures and performance monitoring Controls over receipts and verification of what was received
2. Perform detailed testing of purchasing transactions. Verify the following: Requisitions were properly approved. Correct data was input in a timely manner. Purchases were made only from approved vendors. Receiving reports are signed and dated. Documents were properly matched and canceled when paid. Review cycle time from the purchase order to the payment date. Test conversion factors for accuracy/correctness. Accounts charged were reasonable.
3. Verify/test the weighing and measuring techniques used in determining quantity of pulp purchased. 4. Document performance evaluation criteria for suppliers. What are the procedures for reject shipments for quality or other reasons. How often does this happen?
INVENTORY
Audit Scope 1. Perform test counts, both book to floor and floor to book. Consider performing test counts at outside warehouses. Cycle count test results will also be reviewed and evaluated. Ensure the differences are being investigated and any problems corrected. Investigate inventory and production adjustments to ensure there are no major discrepancies or red flags.
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