Process / Sub-process Potential Risks Audit Procedures

Physical Count:

Processing store contained the following categories of items  Excess / Shortages of Inventory. 1- Communicate to store in-charge for the
inventories at 1001 Storage location and 1004 plant in SAP.  Misappropriation of inventory. Physical Count audit and inform that all
 Items category wise physical space not pending data entries to be post in SAP.
Category wise allocated. 2- Generate SAP stock report at specific cut-off
Row Labels Stock Quantity
valuation %  Stock may be in poor condition due to date once all posting is done.
Dyes and Chemical 280 0.14% mismanagement. 3- 100% verification of physical stock (All stock
Electrical 21,914 43.59%  SAP and Physical Item brand or quality Category) with SAP stock.
General Items 194,803 8.21% not being matched. 4- Floor to Sheet & Sheet to floor stock
Information Technology 600 0.08%  Different Brands of items are recorded verification will be performed.
Mechanical 57,812 40.06% on same material code. 5- To ensure the proper placement, handling
Oil and Lubricants 4,507 1.18% and inventory management.
6- Observe the old & damages parts during
Packing 2,210 0.30%
stock count.
Pipe and Fittings 5,594 2.04%
7- After physical count, obtain the store in-
Screens 480 3.64%
charge signature on the stock sheet.
Tools and Instruments 178 0.08%
8- Reconcile SAP stock quantity with physical
Grand Total 288,377 100% quantity & if any difference is found then
discussed with store in-charge.
9- If the stock differences are due to valid reason
of pending receiving entries, then DC /
Invoice copy will be obtained, or if the
differences are due to pending SAP issuances
entries, then appropriate justification should
be sought and reservation will be checked.     
10- After finalize the quantity differences, it will
be discussed with the store in-charge and
comments will be obtained on each difference.
11- After concern comments all difference will be
highlighted to Management.

Receiving & Issuance of Stock:

- After physical receiving of the physical goods the quality of  There could be a difference in challan 1- To compare the last one month challans with
the goods will be inspected. and physical receiving quantity and the the GRN quantity, quality, brand and etc.
- Till the quality inspection is in process, the goods are not GRN quantity is not as per actual
received in SAP, but it is on hold to a transit, whose receiving quantity. 2- Analyze Reservation record to ensure these
movement type is 103.  Late recording in SAP.
- After inspection the store will execute 105 movement type  Receiving items not being inspected. have been proper record and issued by the
against that stock and the stock will be moved from transit to  SAP consumption quantity could be store, analyze reason for difference if any.
Stock location. more than reservation quantity. 3- To analyze the suspicious transactions i.e.
- Inspection of items will be done within 2 days max from  Reservation is created from store ID of reversal, back dated, In-Transit or etc.
receiving. other department cost center and make 4- Ensure that Quality inspection is done within
- Other than chemical’s all the items will be issued on the basis bogus consumption to adjust their reasonable time. And analyze the time taken
of reservation, for chemical store will create reservation on shortages of store inventory. for quality inspection.
behalf of manual issuance slip.  Bogus reversal transactions (202 Mvt 5- Analyze the Goods receive note (GRN) where
- Consumption is recorded on the cost center with 201 Mvt Type) may perform to adjust their excess abnormal time is taken for Quality Inspection.
type in SAP. stock inventory. 6- Ensure authenticity of data recorded in the
- Consumption is recorded on the basis of reservation quantity,  Valuated items issued on the approval of Goods Receive Note in relation to item code,
and if the issuance quantity will change from the reservation Unauthorized persons name, Quantity received / rejected, Cost,
quantity than the reservation quantity will manually change Statutory duties and freight.
and the consumption will record as per the issuance quantity.

Items Replacement:

Items replacement must be obtained at the time of issuance, in  Misappropriation of store inventory. 1- “T-Code MB51” Transactional report will
order to control misappropriate issuance / consumption, but in  Risk of valuable items being stolen. execute.
case of Chemical issuance & Machine erection the replacement 2- “1001” Storage location and “1004” Plant”
will not be obtained. and (Consumption) 201 M-Type will insert in
relevant fields and then select last 3 months
date range.
3- After execution, valuated items will evaluate
with their rates.
4- Some valuated items will be selected
randomly.
5- Selected items replacements will be verified
physically from store.

Spares Part Purchasing:

- User / Department make a reservation in SAP, after creation  Un-necessary purchased. 1- “MB51” T-Code will be executed in SAP.
department authorized person will approved that  Purchased but un-utilized, could be the 2- “1004” Plant & 1001 Storage location along
reservation. cause of cash flow issue. with 103, 104, 105, 106, 201 & 202 mvt type
- Store upon receiving the approved reservation copy, store in-  Slow moving stock frequent purchasing will insert on their relevant fields.
charge will check, either the required quantity is too excessive could be the cause of opportunity cost 3- Last six months date range will be given into
(Loss associated with not being able to the “Posting Date” field.
 or reasonable. bring in new, faster moving inventory). 4- After inserting the parameters, SAP report
- If the required quantity is excessive, store in-charge will will be executed.
manually change reservation quantity, and issue the quantity. 5- To compare the “105 Mvt Type” GRN
- If the required items not in store inventory, then store quantity with the PO quantity.
department will create the PR with reference of reservation. 6- To compare the “105 Mvt Type” GRN
- The purchase department in this regard confirm the PR and quantity with its Consumption “201 Mvt
select the supplier from the approved list and makes a PO Type”
against that PR. 7- To check the (105 Mvt Type) receiving of
stock date and compare with (261 Mvt Type)
- The PO is then communicated to supplier regarding the
consumption, to analyze either the purchased
goods required.
items quantity was completely utilized,
- The supplier receives PO details of required goods and partial utilized or still un-utilized.
arranges the desired goods to be sent to store.
- After bringing the goods on the respected unit, an inward
stamp will be embossed on Dc from the gate office after verify
the goods with DC.
- Time office personnel will entered the received items details
in SAP Inward Register.
- The store upon receive the goods, will intimate to concern
department for inspection, meanwhile stock will record as
blockage stock, with mvt type “103” in SAP.
- After inspection “GRN” will be created, and the blockage
stock will be transferred from blockage to store inventory
with Mvt type of “105”.

Spare Parts Loan (Borrowing and Lending)

We gives Spare parts on loan & take Spare on loan as needed,  There is no any policy for Loan item. 1- “ME2L T-Code” will be executed in SAP.
 No check and balance for Loan given 2- “ZMLG & ZMLR document type will be
Following POs will be created for Spare parts lending and and Loan receivable. selected and execute.
borrowing.  Lend items returns quality may be lower 3- PO Numbers will be inserted in Order field.
than sent quality. 4- Following workings will be prepared after
Yarn Lending (PO Creation):  Borrowed items returns quality could be getting report.
higher than received yarn.  To perform the comparison of “161 Mvt
1- For lending Yarn “54 Series” PO will be created, if lending  No time frame defined for loan Type & 162 Mvt Type” for outstanding
from “Union Fabrics”. settlement. receivable, PO number will become the
2- For Lending Yarn “87 series” PO will be created, if lending  No follow-up for outstanding borrowed key element to perform this procedure.
from “Union Apparel”. items.  To perform the comparison of “101 Mvt
 Cash flow issues may face due to long Type & 102 Mvt Type” for outstanding
Yarn Borrowing (PO Creation): outstanding loans. Payable.
1- For Borrowing Yarn “53 Series” PO will be created, if
borrowing from Union fabrics.
2- For Borrowing Yarn “88 Series” PO will be created, if
borrowing from “Union Apparel”.

Transaction Analysis:

To ensure and analyze the transactions accuracy from each  Wrong Unit of Measurement in SAP. 1- “MB51” T-Code will be executed in SAP.
perspectives.  Same item is being recorded on different 2- “1004” Plant & 1001” Storage Location
material code with different rates. will be selected in SAP and give last 3
 Transaction reversed to adjust their months date range.
excess stock. 3- After inserting the parameters, report will be
 Bogus consumption to adjust stock executed.
shortages. 4- Item wise unit of measurement will be
analyzed.
5- Item wise rate will be analyzed.
6- Consumption reversal will be analyzed.