INVENTORY MANAGEMENT
Sub-process Risk Description Control
Storing Inventory is not Goods are delivered only to
adequately designated, physically secure
safeguarded. locations within a warehouse or
storage building and are accepted
only by authorized personnel.
Security personnel monitor all
incoming and outgoing vehicles and
ensure all goods leaving the premises
are accompanied by duly completed
documentation (e.g., delivery note or
goods returned note).
Inventory is stored in properly
secured and environmentally
conditioned warehouse locations
where access is restricted to
authorized personnel.
Inventory is non The salability of finished goods and
saleable or non usable. usability of raw materials are
assessed regularly including a review
during physical inventory counts.
Inventory aging reports are prepared
and analyzed regularly.
Con Control Test Performed Attributes Sample Data analytics Process Metrics
Ref. Owner tested size performed
Visit to the Inventory Warehouse/Store. Authorization 30 GRNs
Check GRN to verify that goods are received and on GRN.
accounted to by only authorized personnel.
- Goods inward/outward register should be
reviewed for accuracy and completeness
- This register should be checked for
synchronization with a stock statement,
- Credentials of the security guard to be verified. It
should be seen whether the guard is rotated,
carries ID card issued by the security agency.
- Duty register should be checked to verify whether
or not a guard is present at all times.
- Visit to the warehouse premises
- Verify that goods are correctly stacked as
according to the batch number, entry date, stacking
norms etc.
- Expired goods should be kept in a separate bay.
- Procedures for entry in the warehouse should be
reviewed. Example: Are entrants searched before
and after entry, Is there a log for visitors, Is there a
guard on duty at all times, Is there rotation of the
security guard, Is the agency periodically changed.
- Check for users having access rights to
warehouse.
- Check whether there is a separate bay for
salable/usable and non salable/usable goods.
- Check for quality control certificates issued for
goods/raw material.
- Verify the physical verification reports to see
whether any goods have been declared non
salable and the treatment thereof.
- Check if any goods past expiry are lying with
salable goods.
- Check the inventory ageing reports for details and
periodicity and management action taken thereof.
Sub-process Risk Description Control Con
Ref.
Inventory is stored in properly
secured and environmentally
conditioned warehouse locations
where access is restricted to
authorized personnel.
Rejected raw materials are
adequately segregated from other raw
materials and regularly monitored to
ensure timely return to suppliers.
Management monitors the adequacy
and appropriateness of inventory
levels.
Rejected finished goods are
adequately segregated from other
finished goods and are monitored to
ensure timely disposition.
System functionality monitors and
maintains inventory levels in
accordance with organization policies.
Control Test Performed Attributes Sample Data analytics Process Metrics
Owner tested size performed
- Visit to the warehouse premises
- Verify that goods are correctly stacked as
according to the batch number, entry date, stacking
norms etc.
- Expired goods should be kept in a separate bay.
- Procedures for entry in the warehouse should be
reviewed. Example: Are entrants searched before
and after entry, Is there a log for visitors, Is there a
guard on duty at all times, Is there rotation of the
security guard, Is the agency periodically changed.
- Check for users having access rights to
warehouse.
- Review procedure to track rejected goods.
Example: preparation of an MIS, visual
identification of goods etc.
- Check whether the rejected material is identified
and kept in a separate area.
- Verify adherence to SLA's for return of goods.
- In case of hazardous material verify if dumping is
done as per Statutory regulations
- Check for the debit notes raised for return to
supplier.
- See production logs (if applicable) for stoppages 30 items
due to non availability of inventory.
- Are Minimum , reorder and maximum levels
defined.
- Are there any instances of stock out's
- Obtain a copy of the current stock levels to check
whether the levels are adhered to.
- Review procedure to track rejected goods.
Example: preparation of an MIS, visual
identification of goods etc.
- Check whether the rejected material is identified
and kept in a separate area.
- In case of hazardous material verify if dumping is
done as per Statutory regulations
- Check whether the inventory levels are defined.
- Obtain a copy of the current stock levels to check
whether the levels are adhered to.
- Verify if the system is programmed to raise an
alarm when goods fall below the Minimum levels.
Sub-process Risk Description Control Con Control Test Performed Attributes Sample Data analytics Process Metrics
Ref. Owner tested size performed

Obsolete, excess, and damaged
inventories are adequately
segregated from other finished goods
inventories and are monitored to
ensure appropriate and timely
disposition.
-Check the inventory records to get details of
obsolete/excess/damaged inventory.
'-Check by visual identification whether the same is
identified and placed in a separate bay.
'-Check whether the inventory is disposed off after
obtaining necessary approvals.
- In case of hazardous material verify if dumping is
done as per Statutory regulations

SAP R/3 “Management reviews -Review Ageing report. Analyze reasons for slow Check the inventory
reports of slow-turnover inventory to moving inventory such as mismatch between levels to ascertain
ensure that it is still saleable or production and sales forecast, quality issue/ not as slow moving and
usable.” per specifications, obsolescence etc. non moving items
and ascertain the
reasons for same
and action taken to
dispose off the
same.

FG Storage FG lying with warehouse When GRN for completed production -Check for system configuration.
is not updated in the order is raised by the Plant planner,
ERP System. the FG stocks are automatically
updated in the system.

Any FG lying in the warehouse and
not updated in the ERP system is
identified and reported during the
physical verification process done
periodically
Movement of Inventory to be issued As per the Organization policy the
Materials from the ERP system is same is the responsibility of the
not identified, and Warehouse officers and they ensure
issued on a FIFO basis. that material is issued on FIFO basis
- Review of discrepancy report for the reasons
thereof. Ensure that the reasons are adequately
documented and approved by an appropriate
authority.
- This can be tested as part of the physical
verification, wherein batch numbers from the
records can be matched against the dates when
entered into the warehouse.

In case of known deviations, a - Verify if all deviations are by authorized personnel

deviation report is raised by the user as defined in the authority matrix.
dept. and approved by Dy Mgr QA

Unauthorized issue of Issue of RM can be made only - Verify if all issues are against properly authorized Check whether
RM inventory against a Production Order in the production order. system allows
ERP system made by the User - Check whether a production order gets closed issue of
post issue of material. material more
than the
reproduction
order or issue
of alternate
material.
Sub-process Risk Description Control Con
Ref.
Material Requisition (MR) slip is
authorized by the user department
HOD before material is issued.
Material issue is recorded in the ERP
system and the Material
Requisition(MR) slip is printed from it.
This MR slip is signed by the Issue
Clerk and the user confirming the
receipt. These copies are filed in the
stores records.
RM inventory is issued RM can be issued (accounted)
against wrong against the PO only if the PO has
Production Order (PO) provision for that material & Qty. It will
not accept if more qty is issued or
some other material is issued.
RM - (Liquids like The shift in charge signs the issues
Solvents etc) Issues are made during the night confirming the
not/incorrectly updated quantity issued in the register used to
in the ERP ( specifically update pumping at night.
for issues during nights)
Daily stock register is maintained by
the Plant to get an assurance of the
issues made at night.
Quarterly physical verification throws
up any discrepancies in quantities.
Unauthorized issue of Material Requisition (MR) slip is
Engg. Stores authorized by the user department
HOD before material is issued.
Material issue is recorded in the ERP
system and the Material
Requisition(MR) slip is printed from it.
This MR slip is signed by the Issue
Clerk and the user confirming the
receipt. These copies are filed in the
stores records.
Control Test Performed Attributes Sample Data analytics Process Metrics
Owner tested size performed
-Check for user departments approval on MR slip.
'-Check the MR slips to ensure that the same are
signed (for hard copy)/ closed (soft copy) post
issue of material to avoid issue of material more
than once.
- Verify the system check to ensure that the system
issues material against the PO only. Issue of
material should be as per BOM defined in the
system.
'-Check whether BOM is defined for all production
items.
'- Review of instances wherein special requisition
notes(outside BOM) have been issued and root
cause analysis for the requirement and frequency
for issuance of the same.
-Check for the register maintained for issues in the
night shift. Check whether the same is updated and
signed by the shift in charge.
Check whether the issues made during the night Check the 30 entries
shift are updated in the system in the morning. date of register
entry and date
of entry in the
system
-'Check whether any physical verification is
conducted and the frequency
'- Review of discrepancy report for the reasons
thereof. Ensure that the reasons are adequately
documented and approved by an appropriate
authority.
- Physical verification report should have Sign off's
of all the team members present during the PV.
- PV should be performed by a cross functional
team.
Check for user departments approval on MR slip.
Check the MR slips to ensure that the same are
signed (hard copy)/closed(soft copy) post issue of
material to avoid issue of material more than once.
Sub-process Risk Description Control Con
Ref.
There is a process of periodic cyclic
counts of engg stores, which throws
up any incorrect / unauthorized issue
Engg Stores issues are reviewed
every fortnight by Asst. Manager
Finance and Asst Mgr Warehouse
RM/ES issued but stock Material Requisition (MR) slip is
is not authorized by the user department
updated/Incorrectly HOD before material is issued.
updated Material issue is recorded in the ERP
system and the Material
Requisition(MR) slip is printed from it.
This MR slip is signed by the Issue
Clerk and the user confirming the
receipt. These copies are filed in the
stores records.
Any variance due to incorrect/non
updation of issues will be identified
during physical verification and
reported in Physical verification report
Wrong materials are Details of the material issued are
issued for production recorded on the Material Requisition
slip, printed from the ERP system and
the document is signed by the user
after checking the specifications of
the material issued.
Production Chemist / User in the
Production Department physically
verifies the material after receipt from
the stores and highlights any
discrepancy noted.
Stock outs resulting in Inventory stock levels are defined for
production stoppages / all critical inventory. Plant planner is
Stock outs are not timely responsible for continuously
monitored/reviewed monitoring the actual stocks. Actual
levels are also mentioned in the daily
production reports, which is monitored
by various HODs as per the
circulation list.
Control Test Performed Attributes Sample Data analytics Process Metrics
Owner tested size performed
Check for physical verification reports.
Review of discrepancy report for the reasons
thereof. Ensure that the reasons are adequately
documented and approved by an appropriate
authority.
Check for user departments approval on MR slip.
Check the MR slips to ensure that the same are
signed (hard copy)/closed(soft copy) post issue of
material to avoid issue of material more than once.
Check for physical verification reports.
Review of discrepancy report for the reasons
thereof. Ensure that the reasons are adequately
documented and approved by an appropriate
authority.
- Review of material requisition slips and material
issue notes for discrepancy between the quantity
and nature of material issued.
- Root cause analysis for unutilized raw material
lying on the shop floor.
- Check for records maintained by the production
department for receipt of material from stores.
Match the same against the issue of material from
stores.
- Review of adequacy and basis ( lead time,
required production level ) of the defined inventory
levels such as minimum level and reorder level.
- Review of instances for inventory falling below the
minimum level / stock outs.
- Check the periodicity and need for revision of
minimum levels of inventory (owing to anticipated
increase in production levels etc)
Sub-process Risk Description Control Con
Ref.
Surplus stock resulting The indent is reviewed and approved
in incremental inventory by the authorized personnel (as per
holding costs the limits set out in approved
Authority Matrix), signifying the need
to procure material. The Authority
Matrix is inputted in the ERP system
in Access Control List (ACL)
A Monthly Budget Vs Actual review is
conducted encapsulating department
budgets and major expenditures
incurred are identified. Any
unauthorized expenditure or double
processing of significant expenditure
would be identified in the review
meeting.
Management monitors the adequacy
and appropriateness of inventory
levels.
Expired / Rejected stock Materials that are expired are
is issued to production automatically posted to blocked stock
in SAP. The same cannot be issued
Materials that are rejected by Quality
are posted to blocked stock by QC
once GRN for quality is updated.
Such stock cannot be issued.
Stocks once rejected or expired are
moved physically away from the rest
of the stocks are kept under lock and
key / defined area to ensure that it is
not used.
Issues are not recorded Issues are automatically accounted at
at the correct cost the weighted average cost in the ERP
system
Control Test Performed Attributes Sample Data analytics Process Metrics
Owner tested size performed
- Identification of slow moving / non moving
inventory.
- Review the reasons for excess procurement such
as incorrect sales forecasting, mismatch between
production planning and procurement Non
updation of BOM( Bills of material ) etc.
- Check the adequacy of authorization on indent.
Check the periodicity of monitoring mechanism.
;-Check whether the expired material is moved out
of the inventory records and the same has been
blocked in the system for issue.
'- Conduct physical verification of the expired stock
and match it with the expired stock in the system.
'- Check if any issues have been made from the
expired stock.
- Check for material rejected note (for quality) and
verify in the system whether the same has been
moved to rejected stock and is blocked for issue.
'- Check whether the rejected material is identified
and kept in a separate bay.
- Physical verification of the stock room/
warehouse to ensure physical segregation
between the defective and saleable stock and
incorrect stacking/ classification of saleable
material as rejected.
'- Review of log/ register to ensure, no
unauthorized access to defective /rejected stock
has happened.
- Understand the basis on which inventory is being
recorded in the books .
'- Check for system configuration for inventory
valuation (whether it includes overheads, taxes
etc).
Sub-process Risk Description Control Con
Ref.
Unauthorized stock Transfers RM/PM/Intermediates are
transfer of made only against Stock Transfer
RM/Intermediates Orders(STO) raised in in the ERP
system by the Executive SCM
NRGP/Excise invoice is made for
removing material from the factory
which is checked by the security.
Entry is made by security officer in
outward NRGP Register
All open STOs are reviewed on a
monthly basis by Asst. Mgr
Warehouse and by Sr. Mgr Finance at
the Corporate.
RM/PM transfers is GRN is raised for actual quantity
updated in stock records received against the open STO raised
with incorrect quantities by transferor plant in the ERP system.
The receipts cannot be for a different
quantity as against that entered in
STO
FG Unauthorized transfer of Transfers of FG can be made only
Movements FG against STOs raised in the ERP by
the Executive Marketing
Transfers of FG are made only
against Goods Transfer Note issued
by the Plant Planner
NRGP/Excise invoice is made for
removing all materials from the
factory which is checked by the
security. Entry is made by security
officer in outward NRGP Register
FG received by the CFA GRN is raised for actual quantity
is updated in stock received against the STO. The
records with incorrect receipts cannot exceed the quantity
quantities entered in STO
CFA mails the daily stock statements
at the end of each day to the
Marketing Manager.
Stock balance confirmations are
received from the CFA at the end of
every month.
Control Test Performed Attributes Sample Data analytics Process Metrics
Owner tested size performed
- Review of date as per STO and date of issuance Stock issued
of stock as per dispatch register. before the
receipt of STO.
'- Review of transfers made on the basis of Manual
(Email) STO's and reason analysis for the same.
- Check the invoices to ensure that excise duty has 30
been correctly levied on all dispatches from the Invoices.
factory.
'- Check whether NRGP register for entry of all
excise invoices.
'- Check whether all dispatches in the dispatch
register have a corresponding excise invoice.
- Review of all open STO's and analyze the
reasons for the same.
- Check whether the system allows raising a GRN 30 STNs
for a different quantity than STO
'- Check a sample of GRNs against the STOs
raised.
'- Check if one STN has been linked to more than
one GRN.
- Check whether the system automatically transfers
stock post recording of STOs.
- Check the invoices to ensure that excise duty has
been correctly levied on all dispatches from the
factory.
'- Check whether NRGP register for entry of all
excise invoices.
- Check whether all dispatches in the dispatch
register have a corresponding excise invoice.
- Check whether the system allows raising a GRN
for quantity exceeding STO quantity.
'- Check a sample of GRNs against the STOs
raised.
'- Check if one STN has been linked to more than
one GRN.
- Check whether any reporting is done for daily
stock statements.
- Check for balance confirmations by CFA.
'- Check whether the same are received from all
CFA.
'- Check for reconciliation and approvals incase of
discrepancy.
Sub-process Risk Description Control Con
Ref.
Physical verification of stocks
performed by external agencies
covering all CFA locations. A
standard checklist is filled by the
external agencies that has been
issued by the Internal audit dept.
Finished goods received Physical inventory is counted
from production are not periodically by persons independent
recorded completely and of day-to-day custody or recording of
accurately in the inventory. Inventory counts are
appropriate period. reconciled to inventory records and
inventory records are reconciled to
the general ledger.
Goods received are logged; the log is
reconciled to receipts input to the
inventory management system that is
used to record movements of
inventory in the financial records.
Finished goods returned Physical inventory is counted
by customers are not periodically by persons independent
recorded completely and of day-to-day custody or recording of
accurately in the inventory. Inventory counts are
appropriate period. reconciled to inventory records and
inventory records are reconciled to
the general ledger.
Goods received are logged; the log is
reconciled to receipts input to the
inventory management system that is
used to record movements of
inventory in the financial records.
Goods received from Quality control inspections are
production or returned performed for finished goods returned
by customers are not by customers and/or received from
accepted in accordance production to assess whether such
with the organization’s goods should be returned to
policies. inventory, reworked, or scrapped.
Control Test Performed Attributes Sample Data analytics Process Metrics
Owner tested size performed
- Check for physical verification reports.
'- Check whether PV has been conducted by an
external agency.
'- Check if internal audit has issued any
checklist/guidelines for PV.
'- Review of discrepancy report for the reasons
thereof. Ensure that the reasons are adequately
documented and approved by an appropriate
authority.
- Check for physical verification reports.
'- Check whether PV has been conducted by an
external agency/persons independent of stores.
'- Check if any checklist/guidelines exist for
conducting PV.
'- Review of discrepancy report for the reasons
thereof. Ensure that the reasons are adequately
documented and approved by an appropriate
authority.
- Check for physical verification reports.
'- Check whether PV has been conducted by an
external agency/persons independent of stores.
'- Check if any checklist/guidelines exist for
conducting PV.
'- Review of discrepancy report for the reasons
thereof. Ensure that the reasons are adequately
documented and approved by an appropriate
authority.
- Check for sales return and ascertain the reasons
for the same.
'- Check whether the same are accepted and
treated as per company's policy for sales return.
Sub-process Risk Description Control Con
Ref.
All shipments are not Physical inventory is counted
recorded. periodically by persons independent
of day-to-day custody or recording of
inventory. Inventory counts are
reconciled to inventory records and
inventory records are reconciled to
the general ledger.
Security personnel monitor all
incoming and outgoing vehicles and
ensure all goods leaving the premises
are accompanied by duly completed
documentation (e.g., delivery note or
goods returned note).
Sales order entry, shipping, and
invoice processing are performed by
an integrated application system. The
general ledger is automatically
updated for shipping and invoicing
transactions.
Orders are sequentially numbered.
The sequence of orders processed is
accounted for.
Inventory quantities per the inventory
management system are regularly
reconciled to quantities per the
nonintegrated warehouse system.
Management reviews relevant sales,
accounts receivable, costs of sales,
and inventory reports related to order
entry, shipping, invoicing, and
accounts receivable; significant
unusual relationships are monitored
and acted upon.
Shipments of goods to customers are
logged. The log is used to ensure
that all shipments are invoiced and
that all invoices are recorded.
Control Test Performed Attributes Sample Data analytics Process Metrics
Owner tested size performed
- Check for physical verification reports.
'- Check whether PV has been conducted by an
external agency/persons independent of stores.
'- Check if any checklist/guidelines exist for
conducting PV.
'- Review of discrepancy report for the reasons
thereof. Ensure that the reasons are adequately
documented and approved by an appropriate
authority.
- Goods inward/outward register should be
reviewed for accuracy and completeness
- This register may be checked for synchronization
with a stock statement, and/or BIN cards
- Credentials of the security guard to be verified. It
should be seen whether the guard is rotated,
carries ID card issued by the security agency.
- Duty register should be checked to verify whether
or not a guard is present at all times.
- Check for system configuration.
- Check whether the sequence order is generated
from the system.
'- Check whether the users have right to modify the
sequence numbers.
'- Check for any missing order numbers (for orders
cancelled/deleted from the system)
Check for MIS circulated for sales, AR, cost of
sales, inventory etc and the periodicity.
- Check whether the a dispatch order can be raised
without an invoice/STO.
'- Check the dispatch register with the
corresponding invoices/STOs raised in the system.
Sub-process Risk Description Control Con Control Test Performed Attributes Sample Data analytics Process Metrics
Ref. Owner tested size performed

Delivery notes are sequentially
numbered; the sequence of delivery
notes processed is accounted for.
Shipments are not Physical inventory is counted
recorded accurately. periodically by persons independent
of day-to-day custody or recording of
inventory. Inventory counts are
reconciled to inventory records and
inventory records are reconciled to
the general ledger.
- Check whether the delivery note is generated
from the system.
'- Check whether the users have right to modify the
sequence numbers.
'- Check for any missing delivery note numbers (for
orders cancelled/deleted from the system)
- Check for physical verification reports.
'- Check whether PV has been conducted by an
external agency/persons independent of stores.
'- Check if any checklist/guidelines exist for
conducting PV.
'- Review of discrepancy report for the reasons
thereof. Ensure that the reasons are adequately
documented and approved by an appropriate
authority.

Inventory quantities per the inventory

management system are regularly
reconciled to quantities per the
nonintegrated warehouse system.

Bar code scanners are used to input

actual inventory picking and storage
locations and quantities; differences
from picking and storage instructions
are investigated.(mostly international
clients)

Sales order entry, shipping, and Check for system configuration.

invoice processing are performed by
an integrated application system. The
general ledger is automatically
updated for shipping and invoicing
transactions.
Data input to the invoicing subsystem
is compared to priced order and
shipment data per the separate,
nonintegrated order entry and/or
shipping applications; differences
require management approval before
invoices can be processed.

Shipping transaction input data is

edited and validated; identified errors
are corrected promptly.
Data transferred from the order entry
subsystem to the shipping and
invoicing subsystems is balanced;
identified errors are corrected
promptly.
Sub-process Risk Description Control Con Control Test Performed Attributes Sample Data analytics Process Metrics
Ref. Owner tested size performed

Management reviews relevant sales, Check for MIS circulated for sales, AR, cost of
accounts receivable, costs of sales, sales, inventory etc and the periodicity.
and inventory reports related to order
entry, shipping, invoicing, and
accounts receivable; significant
unusual relationships are monitored
and acted upon.

Shipment data and/or backorders are

input in batches. Batches are
balanced and out-of-balance batches
are corrected timely.
Shipments are not Physical inventory is counted
recorded timely and in periodically by persons independent
the appropriate period. of day-to-day custody or recording of
inventory. Inventory counts are
reconciled to inventory records and
inventory records are reconciled to
the general ledger.
- Check for physical verification reports.
'- Check whether PV has been conducted by an
external agency/persons independent of stores.
'- Check if any checklist/guidelines exist for
conducting PV.
'- Review of discrepancy report for the reasons
thereof. Ensure that the reasons are adequately
documented and approved by an appropriate
authority.

Inventory quantities per the inventory

management system are regularly
reconciled to quantities per the
nonintegrated warehouse system.

Goods shipped at, before, or after the - Check for goods dispatched on the last day of the
end of an accounting period are accounting period/first day of the next accounting
scrutinized and/or reconciled to period to ensure that the booking is done correctly.
ensure complete and consistent
recording in the appropriate
accounting period, including the
raising and recording of the related
invoices.

Sales order entry, shipping, and Check for system configuration.

invoice processing are performed by
an integrated application system. The
general ledger is automatically
updated for shipping and invoicing
transactions.
Inventory is relieved and Physical inventory is counted
goods are shipped periodically by persons independent
without approved of day-to-day custody or recording of
customer orders. inventory. Inventory counts are
reconciled to inventory records and
inventory records are reconciled to
the general ledger.
- Check for physical verification reports.
'- Check whether PV has been conducted by an
external agency/persons independent of stores.
'- Check if any checklist/guidelines exist for
conducting PV.
'- Review of discrepancy report for the reasons
thereof. Ensure that the reasons are adequately
documented and approved by an appropriate
authority.
Sub-process Risk Description Control Con Control Test Performed Attributes Sample Data analytics Process Metrics
Ref. Owner tested size performed

Security personnel monitor all - Goods inward/outward register should be

incoming and outgoing vehicles and
ensure all goods leaving the premises
are accompanied by duly completed
documentation (e.g., delivery note or
goods returned note).
reviewed for accuracy and completeness
- This register may be checked for synchronization
with a stock statement, and/or BIN cards
- Credentials of the security guard to be verified. It
should be seen whether the guard is rotated,
carries ID card issued by the security agency.
- Duty register should be checked to verify whether
or not a guard is present at all times.

Before goods are shipped, the details
of the approved order are compared
to actual goods prepared for shipment
by an individual independent of the
order picking process.
- Check if any independent checking is conducted
before shipment of goods to match the physical
stock with the approved order.

ERP restricts to authorized personnel - Check for access rights for creation., deletion,
the ability to create, change, or delete modification of sales orders.
sales orders, contracts, and delivery
schedules.
Costs of shipped Management reviews relevant sales, - Check for MIS circulated for sales, AR, cost of
inventory are not accounts receivable, costs of sales, sales, inventory etc and the periodicity.
transferred from and inventory reports related to order
inventory to cost of sales entry, shipping, invoicing, and
or recorded inaccurately accounts receivable; significant
unusual relationships are monitored
and acted upon.

ERP account assignment - Check for system configuration.

configuration ensures that amounts
for shipped goods are posted to the
appropriate Cost of Goods Sold
account
ERP restricts to authorized personnel - Check for access rights.
the ability to input, change, or cancel
goods received transactions.

Amounts posted to cost Management reviews relevant sales, - Check for MIS circulated for sales, AR, cost of
of sales do not represent accounts receivable, costs of sales, sales, inventory etc and the periodicity.
those associated with and inventory reports related to order
shipped inventory. entry, shipping, invoicing, and
accounts receivable; significant
unusual relationships are monitored
and acted upon.

ERP account assignment - Check for system configuration.

configuration ensures that amounts
for shipped goods are posted to the
appropriate Cost of Goods Sold
account
Standing Invalid changes being Inventory master file data is
data made to the inventory periodically reviewed by management
maintenance management master file. for accuracy and ongoing pertinence.
Sub-process Risk Description Control Con Control Test Performed Attributes Sample Data analytics Process Metrics
Ref. Owner tested size performed

Recorded changes to inventory Review log of changes made to the master file and
master file data are compared to check whether the same are authorized as per the
authorized source documents to authority matrix.
ensure that they were input
accurately.
Significant changes to the inventory Review log of changes made to the master file and
master file are approved by check whether the same are authorized as per the
management. authority matrix.
List prices of composed products are - Check for system configuration.
automatically calculated based on the
list prices of components of such
products.
Access to Inventory Management - Check for access rights.
master files are restricted to
authorized individuals only.
All valid changes to the Inventory master file data is
inventory management periodically reviewed by management
master file are not for accuracy and ongoing pertinence.
inputted and processed.
Requests to change inventory master - Review the dates for requests for change with the
file data are logged; the log is log maintained for actual changes made.
reviewed to ensure that all requested '- Check for any pending requests and ascertain
changes are processed timely. the reasons thereof.

Requests to change inventory master - Check if any forms are maintained and
file data are submitted on sequentially numbered.
prenumbered forms; the numerical
sequence of such forms is accounted
for to ensure that all requested
changes are processed timely.

List prices of composed products are - Check for system configuration.

automatically calculated based on the
list prices of components of such
products.
Changes to the Inventory master file data is
inventory management periodically reviewed by management
master file are not for accuracy and ongoing pertinence.
accurate.
Recorded changes to inventory Review log of changes made to the master file and
master file data are compared to check whether the same are authorized as per the
authorized source documents to authority matrix.
ensure that they were input
accurately.
List prices of composed products are Check for system configuration.
automatically calculated based on the
list prices of components of such
products.
Inventory master file input data is Inquire if there is a maker checker process for data
edited and validated; identified errors entry in master creation and verify if there is any
are corrected promptly. evidence. Also for a sample verify the effectiveness
of this control by checking for errors in the data
entry with the source documents.
Sub-process Risk Description Control Con Control Test Performed Attributes Sample Data analytics Process Metrics
Ref. Owner tested size performed

Stock Inventory count Communication is sent by the - Check if any checklist/guidelines exist for
Adjustments procedures are not Corporate Office to the SBUs/Units, conducting PV.
adequate to conduct a mentioning the detailed procedure '- Check whether the same is available with all
controlled inventory and accounting to be followed for warehouses.
count nor are they stock counts '- Check whether the same is followed during the
communicated to all stock counts.
personnel participating
in the count.
Inaccurate inventory Stock audits are carried out by - Check whether the stock audits are conducted by
counts, compilations & external agencies who furnish audit external agencies/persons independent of
descriptions. reports which are counter signed by inventory management.
the DGM Works (Plant Mgr), '- Check whether the report is signed by the
Production Manager, Asst. Mgr Finance and plant manager.
warehouse, Plant Manager & Asst. '- Review of discrepancy report for the reasons
Finance manager. Reason for each thereof. Ensure that the reasons are adequately
discrepancy is identified and documented and approved by an appropriate
mentioned on the physical verification authority.
statements

Book-to-physical All write offs are approved as per - Review write offs during the year and check for
adjustment is GOA. The application for approval approvals.
unauthorized/miscalcula includes the value of material to be
ted/not recorded written off
In case of consumption adjustments - Review write offs during the year and check for
based on physical verification approvals.
statements, Sr. Mgr Finance's
approval is required.
For adjustments related to cyclic
counts, only Asst. Mgr Warehouse
has the access rights to pass the
adjustment entry for consumption
The value of adjustment is updated by
Asst. Mgr warehouse and is verified
by Asst. Mgr Finance for correctness
in the ERP system
Physical inventory Stock audits are carried out by - Check whether the stock audits are conducted by
differences are not external agencies who furnish audit external agencies/persons independent of
analyzed and resolved reports which are counter signed by inventory management.
on a timely basis. the DGM Works (Plant Mgr), '- Check whether the report is signed by the
Production Manager, Asst. Mgr Finance and plant manager.
warehouse, Plant Manager & Asst. '- Review of discrepancy report for the reasons
Finance manager. Reason for each thereof. Ensure that the reasons are adequately
discrepancy is identified and documented and approved by an appropriate
mentioned on the physical verification authority.
statements

Goods dispatched are DND (dispatched not delivered) report - Check whether any review is conducted for DND.
not delivered to is generated from the system and
customers/locations reviewed by the management
periodically.
Equipment delivered is DNI (delivered not installed) report is - Check whether any review is conducted for DNI.
not installed generated from the system and the
same will be reviewed by local
controller and service personnel at
each location on a daily basis.

Management also reviews it on a

daily basis.
Sub-process Risk Description Control Con Control Test Performed Attributes Sample Data analytics Process Metrics
Ref. Owner tested size performed

Accounting All recorded production When standard costing is used, - Check for management approval for standard
costs are not consistent management approves the standard costs.
with actual direct and costs and reviews variances between '- Check whether any variance analysis is carried
indirect expenses actual and standard costs. Significant our and reported to management.
associated with variances are investigated and '- Check if any revisions have been made to the
production. adjustments to inventory and cost of standard costs post variance analysis.
sales are approved by management.

When actual costing is used, costs

associated with raw materials, labor,
and overhead are independently
reconciled to appropriate supporting
records.
When actual costing is used,
management reviews the actual costs
based on their knowledge of day-to-
day activities.
Production reports input data is edited
and validated; identified errors are
corrected promptly
The ERP system restricts to - Check for access rights.
authorized personnel the ability to
create, change, or delete bills of
material.
The ERP system restricts to - Check for access rights.
authorized personnel the ability to
create, change, or delete work
centers.
All direct and indirect When standard costing is used, - Check for management approval for standard
expenses associated management approves the standard costs.
with production are not costs and reviews variances between '- Check whether any variance analysis is carried
recorded as production actual and standard costs. Significant our and reported to management.
costs. variances are investigated and '- Check if any revisions have been made to the
adjustments to inventory and cost of standard costs post variance analysis.
sales are approved by management.

When actual costing is used, costs

associated with raw materials, labor,
and overhead are independently
reconciled to appropriate supporting
records.
When actual costing is used,
management reviews the actual costs
based on their knowledge of day-to-
day activities.
Production reports input data is edited
and validated; identified errors are
corrected promptly
The ERP system restricts to - Check for access rights
authorized personnel the ability to
create, change, or delete bills of
material.
Sub-process Risk Description Control Con Control Test Performed Attributes Sample Data analytics Process Metrics
Ref. Owner tested size performed

All transfers of Finished goods sent to the warehouse Check for the records maintained by the plant
completed units of are logged; the log is used to ensure manager for transfer of finished goods and
production to finished that all finished goods are recorded in compare it with the records maintained at the
goods inventory are not the inventory records. finished goods warehouse.
recorded completely and
accurately in the
appropriate period.

SAP R/3 “Management reviews

reports of changes to inventory prices
and quantities on a regular basis.”

All defective products Management, based on their

and scrap resulting from knowledge of day-to-day activities,
the production process reviews records of scrapped and
are not valid and not reworked items and checks whether
recorded completely and such items have been correctly
accurately in the identified and properly recorded in the
appropriate period. appropriate accounting period.

Rejected work in progress is
adequately segregated from other
work in progress and is monitored to
ensure it is scrapped or reworked on
a timely basis.
- Check whether the rejected WIP is identified and
placed in a separate bay.
'- Check the inventory records to ascertain
whether the rejected WIP is scrapped/reused.
- In case of hazardous material verify if dumping is
done as per Statutory regulations
'- Check whether management approval is
obtained for disposal.