PREMIUM VEGETABLE OILS SDN. BHD.
INTERNAL AUDIT REPORT
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RE: STORE AUDIT BACKGROUND
An Internal Audit was performed in store division, which involved procedure of receiving, issuing, ordering, stock to hold at the most appropriate level for store materials and delegation of authority. In our audit, we have considered and reviewed transactions for the month of November 2010. A random physical stock count was carried out to check on the accuracies of the stock between the physical and store ledger balances. Objective of this audit is to gain an understanding of the processes and determine the effectiveness of internal control system. Audit appreciates the cooperation and courtesies extended during this review.
1.1 Findings
It was found that there is no written standard operating procedure (SOP) and departmental organization chart available in the store division.
1.2 Recommendation
A duly approved organization chart and written standard operating procedure (SOP) to be made available immediately, clearly indicate the flow of store procedures
1.3 Management Response
1.3 Findings
Store division unable to achieve their target to reduce store holding by 20% by 01/01/2010 has per mention in the ISO documents. Stock balances show RM7,726,561.02 as at 01/01/2008 and RM7,387,992.01and able to reduce by 4.38%
1.4 Recommendation
A duly approved organization chart and written standard operating procedure (SOP) to be made available immediately, clearly indicate the flow of store procedures
2.1 Finding
A random physical stock take was carried out and the audit found that there are stock discrepancies between the physical and book balance in 4 out of 10 items. Below are the details:
-NO ITEM CODE DESCRIPTION STOCK QTY PHYSICAL QTY DIFF
1 PLSBRG22216 E Bearing SKF22216 E 9 9 0 2 PLSBRGNU308 Bearing SKFNU308 3 3 0 3 PLSCOUPLG02D Coupling Rubber Insert 49 9 40 4 P&FLANGE 511A Flange MS2 1 1/2" (pn16) 4 0 4 5 P&FLANGE 511 Flange MS2 1 1/2" (10k) 8 6 2 6 P&F KOMBINATOR 49 Kombinator O-Ring Seal 10 10 0 7 PISSEALER 02 THSP-H43main Spring Part 10 10 0 8 PISPMILL 518 P Mill Switch SLD 33 2 2 0 9 P& F COLLAR 413 SS Collar 2" 2 2 0 10 PLSCCLIPA100 Circlip A62 4 0 4
2.2Recommendation
Audit reiterates its earlier recommendation of implementing a perpetual inventory system, which could be carried on together with the regular monthly stock checks.
2.3 Management Response
3.1 Below are the pending matters, which has been highlighted in our previous audit report but pending for improvement.
2 Major lapses in controlling the returnable items send to the supplier by various departments by using Returnable gate pass. As per available records, there are items
The concerned divisions who are issuing gate passes should mention the expected date of receiving back the material on the gate pass itself. The records with
All returnable gate pass will be monitored by stores dept.
Monthly reports will be forwarded to concerned department to update on pending returnable gate passes.
After obtaining response
Expected date of receiving back the material still not up-dated in the returnable gate pass.
Records are yet to be checked and
reconciled.
not returned to us since 2005 and records were not updated properly.
security should be checked and reconciled with the concerned division at least once in fortnight
from the departments a copy will be forwarded to Sr.Vice.President.
only in the months of January, February, and March’09. The
response has not been received from most of the divisions
NO Findings Recommendation Management Response Follow-up Audit Comments
This matter has been highlighted in our previous audit report no SEC/RGP/001/2007 dated 07/04/07 and PVO/STRVI/004/08 dated 18/12/08 and still pending for
implementation
All outstanding returnable gate passes for more than one month should be
forwarded to the Sr. Vice President on the monthly basis.
In the event of any material sent under returnable gate pass is not possible to be brought back, the concerned H.O.D. has to get specific approval from Sr. Vice President and forward a copy to the security for squaring up their records.
Expected date of receiving back the material not required due to an immediate action has been taken, which outstanding returnable gate pass will be reconcile on weekly basis.
However, during the follow-up audit an email on the
outstanding returnable gate pass has been forwarded to the
concerned division and copy to Sr.Vice
President. An
immediate action has been taken, which outstanding returnable gate pass listing needs to reconcile on weekly basis.
3 A 100% physical
stock check has been carried out to confirm the actual physical stock as at 31/07/2007 and encountered shortage of RM1, 332,216.64 between the physical and store ledger balances
Obsolete, damaged and used items must be accounted and removed from the stock.
Shortage/excess items should be properly
accounted for in the store ledger.
Planning to do physical stock count, to complete by end March 2009.
Discussed with Mr Raja & Ms Sagthi and have planned as per recommended.
Audit was informed that 100% physical count still under
progress and expected to complete by end of this year.
No action taken for the used and excess items.
Perpetual inventory system still not
which mainly due to unexplained shortages /excesses obsolete and used items available in the stores as stock. A perpetual inventory system to be introduced which could be carried on together with the regular monthly stock checks.
Perpetual inventory will be carried out once the new System takes effect. Expected trial in October’09 and full implementation by January 2010.
implemented.
NO Findings Recommendation Management Response Follow-up Audit Comments
4 Transport, duty, clearing accounts shows balance of RM144,117.96 as at 19/12/2008 This expense to be directly allocated to specific cost units.
Have discussed with Accounts/EDP to look on how to merge these charges into materials. EDP to look into this matter.
Will be adjusted once the new System takes effect.
As at 31/07/2009 this account shows balance of RM214,507.23. Action will be taken when the new system is implemented
5 GRN is being
raised for
services as well as for work orders
GRN to be raised only for goods received by stores and for all other items the bill passing
methodology is to be modified and to be done without GRN.
To carry on with the same method and further discussions with audit.
Will be look into this matter when the new System takes effect.
GRN is still being raised for all other items such as Works Order, Natural Gas. Diesel.
6
-Paper bags for packing to be stored in covered and safe area to prevent from absorbing
moisture.
To clear area near electrical room/solvent. Planning to make shed area.
Pending due to cost factor.
Still pending
7
-To fix a minimum level of stock and the store indent for purchase
Need time to
update/store books to be adjusted. Still under planning
Under progress and expected to complete by end of this year.
immediately after the reorder level is
reached. Under progress and expected to complete by end of this year.
NO Findings Recommendation Management Response Follow-up Audit
Comments 8 -All SRN should be properly authorized before issue of any items by the stores.
Agreed to follow. Have discussed with all HOD.
Decided that Saturday’s issuance only for the urgent items.
Found, there is a number of SRN issued particularly on
Saturdays were not authorized.
Below are the samples: SRN NO Date 93968 11/07/09 94478 11/07/09 94198 25/07/09 94101 25/07/09 9 -The receiving person’s signature should be obtained on the SRN.
Requester is the receiver
Will introduce new format of SRN after clear the old SRN book.
Store division still claiming the requester will be the receiver.
10
-All SRN for which materials have
been issued
should be entered in the store system on real time basis.
Implemented and to be followed strictly
Will be adjusted once the new System takes effect.
Implemented except for Saturdays issues which will be entered into the system on the following Monday. Also found a number of SRN for the excess stock was not taken into the system. Below are the samples:
SRN NO DATE 99109 27/07/09 94250 06/08/09 99660 05/08/09 96046 04/08/09
NO Finding Recommendation Management Response Follow-up Audit Comment 11 To have a better control of the physical inventory at floor level it is advised that bin card is to be maintain ed and all receipts and issues should be recorded on the spot. This recommendation was disagreed.
Bin card system will be continuing only for fast moving items until the new system takes effect.
After implementation of the new system bin card will be
discontinued and this will be monitored directly from the new store system.
Bin Card preparation is in progress. However store still disagree to the recommendation and would like to maintain in the system on real time basis. Audit reiterate its recommendation to implement the Bin card with immediate effect for better control
12 As per the current store system, store manager is given authority to amend the records in the system after closing is done for
any period. This lapse of internal control system to be rectified immedi ately. In case of any amend ment to be made To be discussed with accounts and Mr. Raja.
Store manager still carried out amendment after the closing
after the closing period, it is recomm ended to get prior approva l from Sr. Vice Preside nt and HOD. A copy of the amend ment to be forward ed to finance manage r/ Head of finance in factory.
NO Finding Recommendation Management Response Follow-up Audit Comment
13 Matching,
checking on the accuracy of Purchase order, Delivery order and invoice and
recording in to the System to be carried out by
Recommendation has been accepted and implemented but discontinued and currently this activity is back to store division Found Better control in store
Audit recommends that there is breach in internal control system and accuracy should be checked by an independent department .
