Faculty of Management

(Bachelor of Accounting)

ASSIGNMENT

AUDITING 1
(BC 200)

Prepared for,
Lecture: MR HARI RAMULU A\L
MUNUSAMY
Prepared by,
GROUP MEMBERS

REFILWE NCHE TLHAPISO 1061110257

LIM SUE ERN 1061111641
KHOO WEI MUN 1061111717
FUJITSU SDN BHD

CORPORATE PROFILE

Fujitsu Component (Malaysia) Sdn Bhd (FCM) is a Malaysian based subsidiary of

Fujitsu Component Limited, Japan.Established in October 1980; FCM began commercial
production of electromagnetic relay coils thereafter assembled by Fujitsu (Singapore) Pte.
Ltd., the parent company of FCM. In lieu of Fujitsu's globalisation policy and the
recognition of FCM as a major overseas electromechanical devices manufacturing base, the
ownership of FCM was transferred to Fujitsu Limited, Japan in June 1986. In July 1995,
Fujitsu Takamisawa Component Limited was formed to strengthen the collaboration of
technical expertise between Fujitsu Limited Japan and Takamisawa Electric Company
Limited. FCM thus became a subsidiary of this newly formed company. Fujitsu Takamisawa
Component Limited had since become Fujitsu Component Limited and Nagano Fujitsu
Component Limited, with FCM now being a subsidiary of Nagano Fujitsu Component
Limited under Fujitsu Component Limited. Now FCM is a subsidiary of Fujitsu Component
Limited, Japan.
Today, FCM's product focuses on two key areas of electromechanical components -
Relays, Keyboards/Mouse/Pointing Devices, and their parts thereof. For support purposes
we also manufacture dies and assembly machines for the electronic products. Our products
are sold through the worldwide network of Fujitsu Component sales offices, whilst technical
and administrative support is provided by both Fujitsu Component Limited and Nagano
Fujitsu Component Limited.

PHILOSOPHY
Fujitsu pledges to always strive to provide innovative, superior goods and services to its
customers throughout the world. In doing so, it will establish and maintain harmonious
relations both locally and internationally.it seeks to make a positive contribution to world
society.

VISION
To be a global leader in Electro-Mechanical component parts manufacturing fully pleasing
our customers.

MISSION
Fujitsu specialises in the manufacturing and installation of specific products for the
customers.

CUSTOMER SATISFACTION
By establishing a quality management system to achieve customer satisfaction and prevent
non-conformity from development to servicing, FMS was amongst the first IT organisations
in Malaysia to be awarded the ISO 9001 certification in 1994.
ORGANISATIONAL CHART
SYSTEM OF INTERNAL CONTROL

Effective internal control is a foundation for the safe and sound operation of any institution.
It is a process affected by an entity’s board of directors, management, and other personnel. It
is designed to provide reasonable assurance about the achievement of the institution’s
objectives with regard to the reliability of financial reporting, the effectiveness and
efficiency of operations, and compliance with applicable laws and regulations. The design
and formality of an entity’s internal control will vary depending on its size, the industry in
which it operates, its culture, and management’s philosophy. Examiners perform an overall
assessment of an institution’s system of internal control during each examination.

An external auditor brings an independent and objective view to an institution’s financial

reporting process. This, in turn, contributes directly to the achievement of the institution’s
objectives for this process by performing a financial statement audit and, in some cases, an
internal control audit or examination. Indirectly, this process provides information useful to
management, the board of directors, and its audit committee in carrying out their
responsibilities. The objective of an audit of an institution’s financial statements is for the
external auditor to express an opinion on the fairness with which the financial statements
present, in all material respects, the institution’s financial position, results of operations, and
cash flows in conformity with generally accepted accounting principles. The auditor’s
opinion is communicated to the institution’s board of directors, audit committee, and
management through the auditor’s report. When conducting a financial statement audit, the
auditor must obtain a sufficient understanding of the institution’s internal control to plan the
audit and determine the nature, timing, and extent of tests to be performed during the audit.
Although the auditor may become aware of control deficiencies during the course of a
financial statement audit, the auditor is not required to perform procedures for the specific
purpose of identifying deficiencies in internal control.
Nevertheless, among the responsibilities of the external auditor in connection with a
financial statement audit is to communicate to management and the audit committee (or
board of directors) matters related to the institution’s internal control over financial
reporting that were identified during the audit. An external auditor may also be engaged to
audit or examine the effectiveness of an institution’s internal control over financial reporting
and express an opinion on it at the end of the fiscal year. In connection with such an
engagement, the auditor also has a responsibility to communicate certain information
concerning internal control matters to management and the audit committee
BASIC STANCE ON INTERNAL CONTROL FRAMEWORK AND
STATUS IMPLEMENTATION OF FUJITSU SDN BHD

The Company, through a resolution by the Board of Directors, has adopted the following
basic stance on the framework for internal control (resolved on May 25, 2006, and
revised on April 28, 2008).

1. OBJECTIVE
The Fujitsu Way, which embodies the philosophy, values, principles and code of conduct for
the Fujitsu Group, describes the vision of the Fujitsu Group as follows: “Through our
constant pursuit of innovation, the Fujitsu Group aims to contribute to the creation of
a networked society that is rewarding and secure, bringing about a prosperous future that
fulfills the dreams of people throughout the world.” The compabanye believes that by
conducting our activities in accordance with the Fujitsu Way, they maximize the value of the
Fujitsu Group and enhance their contribution to the communities in which they operate and
to society as a whole. In addition, in order to continuously enhance the corporate value of
the Fujitsu Group, it is necessary to pursue management efficiency and control risk arising
from our business activities. Recognizing that it is essential to strengthen our corporate
governance in order to accomplish this, we will continuously strive to implement the
policies described below.
(1) SYSTEM TO ENSURE EFFICIENT BUSINESS EXECUTION BY
DIRECTORS
At Fujitsu, there is a separation of the oversight and operational execution functions of
management. The Board of Directors oversee the execution functions of the Management
Council and other management bodies, and makes decisions on important matters. Among
executive organs, the Management Council discusses and decides upon basic management
policies and strategies and also decides upon important matters regarding management
execution. Matters taken up by the Management Council, including discussion items, are
reported to the Board of Directors, and the Board of Directors decides upon any important
issues.

b. To strengthen the management oversight function, Fujitsu proactively employs outside

directors and auditors.
c. The Board of Directors clarifies the scope of authority for board directors, corporate vice
presidents and managing directors (hereafter collectively referred to as “senior
management”) as well as other business execution organs, and ensures that business is
conducted in accordance with the division of business duties.
d. In performing their duties, senior management follows appropriate decision-making
procedures, such as the Board of Directors Rules, Management Council Regulations, and
Regulations on Corporate Decision-Making.
e. In addition to making employees thoroughly aware of management policies, senior
management sets and achieves concrete goals in order to accomplish overall management
goals.
f. To pursue operational efficiency, senior management promotes continuous improvement
of internal control systems and reform of business processes.
g. By having senior management and other business execution organs provide monthly
financial reports and business operation reports, the Board of Directors observes and
oversees the status of achievement of management goals.
 ( 2) SYSTEM TO ENSURE THAT BUSINESS EXECUTION OF DIRECTORS AND 
EMPLOYEES COMPLIES WITH LAWS AND ARTICLES OF INCORPORATION

a. Senior management adheres to the Fujitsu Way as a basic vision for compliance issues,
including compliance to laws and the articles of incorporation, and proactively promotes the
Group’s overall compliance on an ethical basis.
b. By continuously administering training, senior management instills adherence to the
Fujitsu Way in employees and promotes the overall Group’s compliance.
c. Senior management clarifies the legal and other regulations that relate to the Fujitsu
Group’s business activities and implements internal rules, training and oversight systems
necessary to adhere to them, thereby promoting the compliance of the Group as a whole.
d. If senior management or employees become aware of the possibility of a major
compliance violation in connection with the execution of business activities, they
immediately inform the Board of Directors and the Board of Auditors via normal reporting
channels.
e. In order to use independent information sources outside of normal reporting channels to
discover and deal appropriately with compliance problems on a prompt basis, senior
management establishes and operates an internal reporting system that protects whistle-
blowers.
f. The Board of Directors receives periodic reports on the status of business execution from
executive officers and verifies that there are no compliance violations in relation to the
execution of work.
3) SYSTEM TO ENSURE APPROPRIATENESS OF AUDITS BY STATUTORY
AUDITORS
Ensuring independence of auditors:
a. Fujitsu has set up a Statutory Auditors’ Office with employees assigned to assist the
statutory auditors in carrying out their duties. Appropriate employees with the ability and
expertise required by the statutory auditors are assigned to the office.
b. In order to ensure the independence of the staff in the Statutory Auditors’ Office, matters
relating to their appointment, transfer and compensation are decided on the basis of prior
consultation with the auditors.
c. In principle, senior management does not assign office staff to other divisions or duties.
In instances, however, where a need arises to give dual assignments to staff with
specializedknowledge in response to requests from statutory auditors, care is given to ensure
their independence.
REPORTING SYSTEM
a. Senior management of Fujitsu and Group companies provides the statutory auditors with
the opportunity to attend important meetings.
b. In cases where risks arise that could affect management or financial results, or where
there is an awareness of major compliance violations in connection with the execution of
business activities, senior management as well as employees of Fujitsu and Group
companies immediately reports on them to the statutory auditors.
c. Senior management as well as employees of Fujitsu and Group companies periodically
reports to the statutory auditors on the status of business execution.

ENSURING EFFECTIVENESS OF STATUTORY AUDITORS

a. Senior management of Fujitsu and Group companies periodically exchange information
with the statutory auditors.
b. The internal audit organization periodically reports to the statutory auditors on audit
results.
c. The auditors have the independent accounting auditor explain and report on accounting
audits as required and periodically exchange information with the independent accounting
auditors.
REVENUE CYCLE PROCEDURES
The cycle concept presents a framework for viewing the interrelationship between accounts
affected by the same transaction or business activity. Audit evidence verifying the
existence and proper valuation of accounts receivable also provides evidence of the
existence and valuation of recorded revenue,and vice versa.When examining sales
transactions, the auditor also gathers evidence on proper credit authorization and the proper
valuation of the recorded transactions.Further,a review of sales contracts provides evidence
to analyze the adequacy of the client’s warranty expenses and related liability.
Sales transactions often serve as a basis for computing commissions for sales staff.Sales
information is used for strategic long-term decision making and marketing analysis.Thus,
the accuracy of accounting in the revenue cycle is important for management decisions as
well as for the preparation of financial statements.

1. FUNCTIONS OF THE REVENUE CYCLE

Revenue cycle includes following functions:

• Concluding services contracts with customers, client acceptance procedures,
• Credit control
• Activation and disactivation of subscribers
• Providing cellular communications services and products
• Customer master file maintenance
• Customer billing
• Sales analysis
• Customer returns and allowances
• Collection of accounts receivable
• Provisioning for doubtful accounts
• Receipt of cash from trade customers (initial deposit, prepayments, under/over payment,
regular receipts.
2. CRITICAL FORMS AND DOCUMENTS ASSOCIATED WITH THE
CYCLE:

• Service agreements with clients;

• Billing system output (minutes used by clients);
• Invoices
• Credit memos;
• Bank statements evidencing payments for services received

3. COMMON RISKS ASSOCIATED WITH THE REVENUE CYCLE

AUTHORIZATION AND ACCURACY OF CONTRACTS WITH CLIENTS

• Unauthorized rates or prices are quoted.

• Extension of credit terms to customers who represent unacceptable credit risks to the
company.
• Orders may be accepted/contracts concluded from/with related parties without
management’s knowledge.
• Orders may be accepted at prices or on terms that violate governmental laws and
regulations.
 OVERVIEW OF FUJITSU’S REVENUE PROCESS

The revenue cycle of Fujitsu is trigeered by a salesorder from customers.fujitsu has a sales
line so that custmers may speak to one of the knowleagable sales represaanttative who can
help the customers with their production selection. Sales staff can exploit the information
accumulated in the system to make proposals to customers that best suit customers’
individual needs. In addition, sharing a variety of sales information makes possible
systematic sales activities. If the customers have more technical pre sales questions their
questions they are advised to email them and hence they will be forwarded to the
appropriate pre sales staff. Evaluation and post sales must go through Fujitsu’s web support
tool.
When oreders are reeceived from new customers, the credit department performs a credi
check on the credit standing of the customer. The customer is requestd to fill a credit
approvla form to make certain that credit is extended to desirable customers in order to
preventexcessive mount of uncloolectible debt as well bad debts. The amount of the credit
lilmit is stipulated in the credit approval form.

BASIS ACCOUNTS RECEIVABLE PROCESS OF FUJITUSU

CASH RECEIPTS (CASH SALES)

SALES ORDER

CONFIRM SHIPMENT

ACCOUNTS
BILLING RECEIVABLE

FORWAD TO BILLING BILL SALES CASH

DEPARTMENT ORDER RECEIPTS
 APPLY CASH
CASH RECEIPTS (CASH SALES)

The customer sends a sales order to Fujistu by way of telephone and email. This document
contains the details of the type of goods and the quantity ordered by the customer. This sales
order is then sent to shipping department to authorise them to deliver the gooods to the
customer. Goods are not shipped without proper authorisation as the sales oreder is matched
with the order of the customer. Thes shipping depattment packs the goods and sends them to
the adress of the customer. After the delivery of the goods, the shipping department
furnishes the billling department with the sales order. The billing department ensures that the
goods billed are authorised price to avoid quoutes of prices that are unlauful or misleading.
The billing department also ensures that credit notes are only issued for goods that have
beeen returned after the receivig department has issued the acknowledegemt of receipt of
goods from customers.
The cash colected is properly identified and promptly deposited intact at the bank. The
cheques are deposited daily as a plocy by the company.

STEPS TAKEN BY THE COMPANY TO ENSURE CONTROL

OVER RECORDS

One of the most important controls in any accounting system is proper segreagation of
duties. This is particualarly important in the revenue process because of potential theft and
fraud.therefore individuals in the order ebtry, credit, shipping or billing should not have
acceses to the accounts reeivable records, the general ledger or any cash receipt activities.
The company has ensured segregation of duties. Only authorised people are in cahrge of
certain primary activities. The individual who grants credit is not the individua who bills the
customer to avoid the issue of sales oreder to ficticious people. The shipping function also
performs a function that is sepaarte from the billing function. The billing department
scrutinises the sales order and the delivery note for any mismatches and irregularities. The
accouts receivable is also segreagated from the accounting department to aoid situations
where sales are not recorded and as a measure for preventing theft of goods.

CUSTOMER MANAGEMENT

CUSTOMER WORKBENCH

CUSTOMER
MAINTENANCE

CUSTOMER BILL TO
LOCATION

CUSTOMER SHIP TO
LOCATION

CUSTOMER BUYING
LOCATION
CREDIT SALES FLOWCHART
CUSTOMER SALES WAREHOUSE CUSTOMER SERVICE

PLACE
ORDER

NO

ORDER
COMPLETE

YES

SEND ORDER
TO COMMUNICATE
ITEM IN WITH THE
WAREHOUSE STOCK
TO FULFIL CUSTOMER

YES

RECEIVE
ITEM

PURCHASES CYCLE
As code in the definition, internal controls are to be an integral part of any organization's
financial and business policies and procedures. Internal controls consists of all the measures
taken by the organization for the purpose of; (1) protecting its resources against waste,
fraud, and inefficiency; (2) ensuring accuracy and reliability in accounting and operating
data; (3) securing compliance with the policies of the organization; and (4) evaluating the
level of performance in all organizational units of the organization. Internal controls are
simply good business practices.
Internal control is highly related in each and every department in a company. To integral
purchase control with the organization’s financial and business company policies
procedures, Fujitsu has adopted various ways to ensure the business runs smoothly. Fujitsu
Way is a guideline of all controls in the business as it leads the core value of the company.
Fujitsu Way comprise of four core elements, which include corporate vision, corporate
value, principles and code of conduct. Besides, Fujitsu business policy is a strategies
pursued in accordance with the Fujitsu Way. Base on the Fujitsu Way, stakeholders are able
to understand Fujitsu Corporation better where the existence of the corporation, value,
principles as well as rules are clearly stated in the Fujitsu Way. The main goal of having
Fujitsu Way is to cultivate the good practice in their company stakeholders. The tradition
and atmosphere occur in the corporation has also been lead the employees to follow the
discipline set and gradually lead to a better internal control in the corporation as the mind set
of the employers and employees are at the right and true path. At the mean while, the Fujitsu
Way which respect employees diversity and support individual growth allow a space to the
employees to have self improve and opportunity to carry out own unique way in dealing
business transaction also lead the corporation to have a better internal control. As different
individual are able to create unique controls to suit different individual, the Fujitsu Way has
bring out many innovation people thought and dynamic corporation value, which can then
lead to a better control in the corporation. In addition the fair evaluation and rewards to the
employees have also decrease the risk in internal controls as well as provide a safe and
comfortable working environment to the corporation.
With the Fujitsu Way, employees are strongly motivated and have ample opportunities for
advancement and feel pride, confident and joy working with Fujitsu Corporation.
Furthermore, Fujitsu Corporation build a mutually benefits relationship with their business
partners. As we dealing with purchase controls, business partners are part of the business
transaction. A good relationship with business partner will aid the company purchase
controls system as both parties can hand in hand cope with the errors that will possibly
occur. For example, Fujitsu and their suppliers can corporate and come out with supervision
team to overview the corporation day to day transaction. Besides that, Fujitsu emphasis on
fair trade, regulatory compliance, information security to fulfill the corporation social,
ethical and legal obligations have been practice from the start of Fujitsu and highly
influence the corporation’s culture and stakeholders.

At the mean while, senior management of Fujitsu strives to maintain the Fujitsu business
continuity that they assign certain department to deal with each type of risk and put in place
into the appropriate risk management system. As long as there is any potential risk arising in
the business, the senior management will carry out risk mitigation initiatives and try to
minimize the losses from risk occurred. In addition, a risk management committee is created
to carry out necessary countermeasures. A periodically analysis risks will be engages to
prevent recurrence risks. With accordance, an internal reporting system has been also set up
to ensure the protection of whistle blowers.

Follow with the rules set in Fujitsu, senior management established an appropriate system
appointing a few documentation managers to have segregation of duties and to ensure strong
internal controls. There is also a system enable the directors and auditors to verify the status
of execution of business duties as the documentation kept by the documentation manager are
accessible in the system. Furthermore, special internal control department in Fujitsu who
responsible in pursuing initiatives to implement operational execution structure by
reviewing and revising corporation regulations and business operation make up a strong
system in internal controls. Fujitsu Way that have been established is a one of the conductive
guideline for all created by this special department and will be revise from time to time to
suit the nature of business.
As human are not perfect, careless mistake will occur in every business, the same situation
occurs in Fujitsu. Human error, misunderstandings, fatigue and stress will lead to the error
in running a business transaction. Due to this matter, Fujitsu try their best to provide a
peaceful and good environment for their employees to reduce any unforeseen constrain in
carrying our their duties. Moreover, there is no such thing as a perfect control system. The
number of employees will obstruct efforts to properly segregate duties, yet the
implementation of compensating controls can ensure that objective is achieved.

Sometimes, the cost of implementing a specific system control will exceed the expected
benefit of the control. An adequate control may not suit all type of corporation, so Fujitsu
has chosen the best suit control system to ensure it fits to the organization needs and
requirements.

Internal controls is mean to reduce the risks associated with undetected errors or
irregularities, but designing and establishing effective internal controls is not a simple task
as thought and cannot always be accomplished through a short set of quick fixes in a short
period. Fujitsu believe that there is a always space of improvement, so the corporation is
willing to take any necessary cost to maintain their high creditability in internal control and
to increase the value of Fujitsu Corporation.
 Steps in the Purchasing Cycle

Recognize, describe, define the need

Classification Of Needs Specification Of Need

1. Type Of Need
2. Strategic Or Operational?
3. Repetitive Or Non-Repetitive
4. Size (quantity; dollars)
5. Speed/Timing

Transmit the need (requisitions)

A. standard requisitions
B. traveling requisitions

Determine sources, investigate, and select supplier/analyze bids

Prepare and issue the PO

Follow-up the order (including expediting and de-expediting)

Receive and inspect the material (use of receiving report: purchasing, accounting,
user, receiving)

Clearance of the invoice and payment to supplier

Close the order/records

 INVENTORY CYCLE

Purchasing process Inventory management

Revenue process
process

• Purchase of raw materials

Sales of goods
• Payment of manufacturing costs

Human Resource
management process

Assignment of direct and indirect

labour costs

As a leading manufacturing firm, inventory is a major component of the balance

sheet of Fujitsu. However, it also represents one of the most complex parts of the audit since
the company manufactures more than one product in its manufacturing process. Sales,
purchasing, production, transfers and adjustments all have an impact on inventory, which
itself is often maintained at different locations. Therefore, it is important for Fujitsu to
implement an effective inventory control that is designed to support the requisition
processing, inventory management, purchasing, and physical inventory reconciliation
functions of inventory management through a set of highly interactive capabilities. The
inventory management process of Fujitsu is affected by the control procedures for the
revenue, purchasing, and human resource management process, each of these processes
interacts closely with the inventory management process.
At Fujitsu, inventory control system uses the following documents for entering and
maintaining information:
• Production Schedule
• Receiving Report
• Material Requisition (MR)
• Stock Issue Confirmation(CI)
• Stock Return(SN) –Revised accounting at issue
• Inventory Adjustment (IA)
• Inventory Master File
• Production Data Information
• Inventory Status Report
• Shipping Order (SO)

At Fujitsu, the inventory control process can be divided into the following general
categories: Demand management which covers the processes for sales and operations
planning, sales forecasting and finished goods inventory deployment planning. Once the
marketing department forecasts consume and predicts that there is expected demand will
exist for a particular product, the design department will responsible to prepare
production schedule periodically based on the expected demand predicted. The
production schedules contain information on the planned level of operating activity such
as the inventory planning and ordering which is often accompanied by material
requirement planning (MRP). Once the goods are received from the suppliers, they are
transferred from the receiving department to the warehouse department and the data
must be recorded into the Receiving Report to update the entity’ perpetual inventory
records. After that, when the goods have arrived in the warehouse, the warehouse
department is responsible to safeguard the goods against pilferage or unauthorised use.
The employees are also given the proper instructions for counting, weighing, measuring
and checking the goods in the warehouse on a daily basis. Besides that, the employee
that responsible for the inventory records is different from individual who responsible
 for controlling the inventory to prevent unauthorized shipments of goods occur at
Fujitsu.
The inventory records must be approved by respective manager before they could be
reflected in the system and also updated in the Inventory Master File. This demonstrates that
the inventory stores function is segragated from the cost-accounting function.

In order to track the raw materials needed for production purpose, the Material
Control Department is responsible to prepare the materials requisitions and issues the goods
to the appropriate manufacturing department. The cost accounting will be conducted
periodically for ensuring that there is adequate control over the physical flow of the goods
and proper accumulation of the costs attached to the inventory as goods are processed
through the manufacturing process. Managers will examine the costs of high value item, the
investigation and also adjustments for the inventory will be conducted if necessity. In the
mean time, the manager is responsible to ensure all the stock has been properly valued in
terms of lower-of-cost-or net realisable values, whichever is lower. Once the goods are
completed from the manufacturing process, they are transferred to the Finished Goods
Stores. Again, the manager will ensure there are adequate safeguards against pilferage or
unauthorized use. Logistic Department is responsible to supervising the physical inventory,
whereas Finished Goods Stores is responsible for the storage and control over the finished
products. Both of the duties are perform by different employees to prevent the existence of
possible errors and fraud or misstatement of inventory quantities or values. When the
Finished Goods Stores Department receives shipping order from the revenue process,
amount of goods ordered by the customer are then transferred to the shipping department for
shipment to the customer. Stock Issue Confirmation is then issued by warehouse to confirm
that the items have been issued to the customer and thus reduced the on hand quantity of the
inventory by the amount issued. Stock Return (SN) is issued to the Finished Goods Stores
when the return of stock items to inventory by the customers.
 Throughout the inventory management process, the Production Control Department
is responsible for the identification of defective, damaged, obsolete, and slow moving stock
and also conducts the appropriate investigation to find out the reasons for the occurrence of
such unfavourable outcomes as well as the solutions to overcome these deficiencies.
Manager of Production Control Department will also evaluates the usage of the slow
moving or non movement stock, and determine whether it should be continue to use as
inputs of further processing or scrap it as obsolesce items. An independent accountant is
assigned to carry out the general ledger function to ensure that all the inventory and costs of
production are properly accumulated, classified, and summarised in the general ledger
accounts. Periodically reconciliation of the inventory balances and physical counts is
conducted as to improve the financial control of the inventory. At Fujitsu, stock-taking
instructions are mandatory required to follow by the client’s staff, to ascertain it, all the
stock-takes are required to be observed carefully.

Effective inventory control is a vital function to help insure the success of a

manufacturing firm. Therefore, the effectiveness of Fujitsu’s inventory control is directly
measurable by how successful the company is in providing high levels of customer service,
low inventory investment, maximum throughput and low costs. In examining the inventory
management process of Fujitsu, several underlying inherent risk factors needed to be
considered as it will result in material misstatement. At Fujitsu, an independent and integrity
senior management is involved in the inventory management process to oversee the entire
process and to prevent certain inherent risks such as human errors or mistakes, management
override of internal control and collusion. In addition to making employees thoroughly
aware of management policies, senior management sets and achieves concrete goals in order
to accomplish overall management goals. To pursue operational efficiency, senior
management also promotes continuous improvement of internal control systems and reform
of business processes.
 Finally, by having senior management and other business execution organs provide
monthly financial reports and business operation reports, the Board of Directors observes
and oversees the status of achievement of management goals. Segragation of duties is a
particularly important control and concentration in Fujitsu through the entire inventory
management process in order to prevent the potential for theft and fraud or any manipulation
of inventory records and costs, which leads to an over- or understatement.

At Fujitsu, major control procedures for preventing fictitious records are carried out;
including a proper segregation of duties, in addition to the pre-numbered documents and
physical safeguards. Procedures for the transfer of inventory, material issuances and
requisitions are then reviewed. Therefore, occurrence assertion can be provided. Besides, the
most important assertion known as completeness assertion, which relates to the transcription
of all inventory transactions and events and they must be accurately computed as the
accuracy, this has been demonstrated by senior management and also the respective
personnel when they carry out their duties.

Overall, Fujitsu have got a very strong accounting and internal control as the stock-
taker’s independence and standing (integrity and competence), the bases of valuation used
and proper cut-off procedures employed are satisfied.
 REFERENCES
http://www.qpr.com/reversed-logistics-flowchart.html
http://www.glovia.com/pdf/datasheets/GloviaSalesOrders.pdf
http://www.glovia.com/pdf/datasheets/GloviaAccountsPayable.pdf
http://www.glovia.com/pdf/datasheets/GloviaSalesOrders.pdf
http://www.fujitsu.com/my/about/subsidiaries/fcm/
http://erp123.biz/wp-content/uploads/2008/09/inventory-management.jpg