Inventory is one of the important area for any business where chances of fraud are more as it’s a department where thefts and damages occur. Having strong controls, proper processes, checklist and regular stock audit is essential for this function.
In this article we would learn the basic check points which needs to be checked at the Gate to implement effective control over Inward Material Movement.
We would illustrate the steps keeping in view that the manufacturing unit has an effective SAP installed to have proper control over inventory movements.
In any manufacturing concern where we have SAP installed, encompasses the following basic steps.
- The user department as per the requirement will raise Material Requisition (MR)/Purchase Requisition (PR) as per their requirement.
- Now what is MR and PR.? So let’s elaborate. When the user department views the Stock Report he may get the required material in stock or maybe it will not be in stock. Now if the required material in available in the stock the user department will raise Material Requisition and the Stores Department will issue material against such MR. Now suppose the required stock is not available or is less available. Then in that case user department will raise Purchase Requisition for such material. Based on such PR, Stores Department will raise Purchase Order.
- On arrival of inventory at the Security Gate first the concern person records the materials in Gate Register in SAP.
- Now either that material would require inspection by the user department or not. If such material doesn’t require inspection, the Goods Receipt Note (GRN) would be directly made through movement type 101 (Movement types varies from company to company basis). Once it is done it would directly reflect in Inventory Report.
- If such material requires inspection, it will entered in SAP through movement type 103 (Movement types varies from company to company basis). Now on entry of material detail it would not appear in inventory. Once the material is inspected the same is entered to inventory my making GRN through movement type 105 (Movement types varies from company to company basis)
Audit Check Points:
- First obtain a brief understanding of the procedure adopted by the unit and modify the check points accordingly.
- Review whether Gate entry is done for all incoming materials
- Review whether there is delay in creation of Gate entry of incoming material
- Review the delay between movement type 103 to 105
- Review the pattern and check whether materials for which inspection is required GRN of which is done directly through movement type 101.
- Review the procedure adopted for materials rejected by inspecting user. Whether any penal clause is there in PO for the same and check whether any deduction is made. Check the timeliness of replacement of rejected materials.
- Review whether segregation of duties is in place with respect to gate entry, inspection and creation of GRN.
We would share the remaining audit check points with regard to Inventory Management based on review of this article.
Qualification: CA in Job / Business
Location: Kolkata, West Bengal, IN
: 13 Jan 2018 | Total Posts
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