S Ox Inventory Management Risks and Controls

Unit:
Subject: Sarbanes-Oxley Act Review - Inventory Management

Title: Risk & Control Identification
Year end:
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POTENTIAL RISK
SUGGESTED CONTROLS TO MITIGATE THE POTENTIAL RISK
(Internal Audit)
MANAGEMENT CONTROL or COMMENTS (if Risk is
excluded from the Scope)
CONTROL OWNER
(Name)
MILL RAW MATERIALS
Receiving of Raw Materials
Raw materials are received and accepted only if
they have valid Purchase Orders. (validity)
O,F INV101 Raw materials are received and accepted on invalid
Purchase Orders or without Purchase Orders. The
following may be received and ultimately paid for,
rather than returned or refused: unordered raw
materials, excessive quantities, incorrect items,
cancelled or duplicated deliveries. Raw materials that
arrive too early or too late may be accepted. Company
policy is not followed regarding the handling of receipts
for which no Purchase Order can be located on SAP.
The requirement exists that a goods receipt must reference a
Purchase or Production Order so there is certainty the goods
received were ordered. All goods received are based on a valid
Purchase Order (PO) number. Purchase Order is stated on delivery
documents and is verified for validity.
Raw materials are checked for quantity and quality
before being accepted.
O,F,
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INV102 Raw materials received are not subject to an inspection
for quality / quantity. Criteria are not clearly established
for inspecting received goods and services. No policy
is established for inspecting receipts in proportion to
their importance and value. Only the vendor's delivery
note (and not the physical goods) is matched to the
Purchase Order. Inspection results are not recorded to
be available for the vendor evaluation process.
Vendors do not deliver the expected quantity or
materials. Goods receipt discrepancies are not
addressed. Company policy regarding the handling of
under/over deliveries is not followed. Tolerances for
under/over deliveries are set to inappropriate values.
Raw materials are accepted without authorised
documentation (e.g. COAs - Certificate Of Analysis).
Goods counted and inspected before acceptance: overshipments
and unacceptable items are returned to the vendor. Materials are
checked for quantity and quality: Quantities of material received are
verified by actual count, weight, or measurement by the receiving
department. Quality inspection evidenced by inspection reports,
notations, receiving reports, or other acceptable records. Variances
in quantity ordered versus quantity shipped are reported. Quantities
less than those indicated on the Purchase Order may be accepted;
however, quantities more than those indicated on the Purchase
Order should be approved by the requisitioning department and the
buyer.
Returns of raw materials to suppliers are properly
handled.
O, F INV103 Damaged or low quality goods received are not
properly identified and handled. Defective raw
materials are not returned to the supplier and are
accepted into stock. Accounts payable is not notified of
goods returned to vendor, and the invoice is paid.
Return deliveries are not entered promptly into the
system in order to reverse the goods receipt updates.
No process is established to ensure the vendor issues
credit memos when appropriate.
Defective raw materials received from suppliers are logged. The log
is monitored to ensure that the defective goods are returned promptly
and that the credit (AP) is received timely. Rejected raw materials
are adequately segregated from other raw materials and are not
used. Rejected raw materials are regularly monitored to ensure
timely return to suppliers. A security check to either an authorised
return form or a delivery note is performed on all goods leaving the
premises.
Only raw materials received are recorded.
(validity)
O, F INV104 Fictitious receipts of raw materials may be recorded.
Invalid materials may be recorded. Payments may be
made for fictitious goods.
SAP edits and validates input GRN data on-line. The values that are
allowed, for example, for a material master, are known to the system.
Upon entry in the field SAP automatically checks the value entered
against the values available in the configuration tables. Most goods
receipts are created with reference to a Purchase Order.
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POTENTIAL RISK
(Internal Audit)
CONTROL OWNER
(Name)
Raw materials received are recorded accurately.
(accuracy)
O, F INV105 Raw materials receipts are not recorded accurately.
Incorrect goods receipt information is entered.
Capturing of receipts directly into SAP: Mandatory fields, Tolerance
levels, Visual checks by operator, e.g. key in material number and
description appears on the screen, Limit/reasonableness checks on
quantities (e.g. no negative amounts). SAP edits and validates input
Goods received note (GRN) data on-line. Most goods receipts are
created with reference to a Purchase Order. SAP then copies
information from Purchase Order into GRNs per configuration. The
SAP material movement automatically creates both a material (for
quantity) and accounting (for value) document. The transactions
update these items: Purchase Order history, stock overview, Material
Requirements Planning (MRP) (planning file), general ledger
accounts.
Raw materials received are allocated correctly.
(classification)
O, F INV106 Goods receipts do not have the correct account
assignments.
Account assignment is determined at the time of purchase
authorisation (PR / PO).
All raw materials received are recorded.
(completeness)
O, F INV107 All raw materials are not recorded when received.
Inventory received is not recorded at all. Goods
movements are not captured on SAP (i.e. receipt of
raw materials).
All deliveries must be directed through Stores Receiving. Appropriate
stores procedures should be implemented to ensure all raw materials
receipts are recorded. Vendor statement reconciliation including
follow-up of invoices without GRNs.
Receipts of raw materials are recorded timeously
and in the correct period. (proper period)
O, F INV108 All raw materials received are not recorded in the
period in which they have been received. Goods
receipts are not entered immediately into the system,
particularly on period-end dates.
Documentation in respect of goods received at, before, or after the
end of an accounting period is scrutinised and/or reconciled to
ensure complete and consistent recording in the appropriate period.
Received raw materials are safeguarded. O, F INV109 Raw materials are received by unauthorised personnel.
Received goods are not physically secured to protect
them from theft. Personnel are not required to
acknowledge receipt of goods.
Goods are delivered only to designated, physically secure locations
within a warehouse or storage building and are accepted only by
authorised personnel (stores personnel).
Raw materials are delivered to the correct
location.
O, F INV110 Raw materials are delivered to the incorrect location. Purchase Order forms are pre-printed with the receiving location and
that instruct vendors only to deliver to that location. Security
accompanies vendors which deliver toxic, chemicals and other
environmentally sensitive material to the correct location.
Expected and overdue orders for raw materials
are monitored.
O, F INV111 No monitoring of expected or overdue goods receipts.
Vendors do not deliver on time. No action is taken for
late deliveries.
Expedition of Purchase Orders is covered under the Expenditure
cycle.
See weighbridge for relevant controls and risks over
incoming product.
Transfers (issues) of Raw Materials to Production
Issues from raw materials inventory are made only
on the basis of authorised documents.
(authorisation)
O, F INV201 Goods movements in SAP (inventory transfers,
transfer postings) are not authorised. Unauthorised
issues may be recorded. Incorrect quantities of raw
materials may be transferred to production. Raw
materials not requested transferred to production.
Appropriate documentation is completed when goods are issued:
Written stores requisition is required for all raw materials issues.
Materials are only transferred on the basis of a properly approved
source document. Transfer documentation should accompany all
transfers, stores or other activities and personnel should verify
material and quantity received. Requesting department should sign
approval on stores requisitions as acknowledgement of receipt.
All issues of raw materials to production are
accounted for. (completeness)
O, F INV202 Issues from raw materials inventory may not be
recorded. Transfer documents may be lost. Goods
movements are not captured in SAP.
Prenumber transfer documents (e.g. stores requisitions) should exist.
The sequence of these documents is independently checked.
Missing documents should be investigated.
All material is issued in a timely manner. O INV203 Late raw materials issues may resulting in loss of
production time.
A procedure should be established that the material is issued to an
order (transfer, work, etc.) within an established time period after the
inventory has been picked. By issuing the material to the order
immediately after the pick has been completed, the inventory levels
are kept current and the possibility of the wrong material being issued
to an order is minimized.
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POTENTIAL RISK
(Internal Audit)
CONTROL OWNER
(Name)
Issues from raw materials inventory are correctly
recorded as to quantity and amount. (accuracy).
Issues from raw materials inventory are processed
in the correct accounting period to the correct
account. (classification and proper period)
O, F INV204 Transfers (issues) of raw materials to production may
not be accurately recorded. Raw materials issues may
be processed in the incorrect period or to the incorrect
account. Raw materials may be allocated to the
incorrect cost centre. Transfer procedures do not
require preparation of supporting documentation.
Transfers of raw materials are documented. Transfers (issues) from
raw materials to production are only done on the basis of a source
document. A procedure should be established whereby the source
documents are captured in SAP within an established time period
after the inventory has been issued. By recording the issue in SAP
immediately after the issue has been completed, the inventory levels
in SAP are kept current and the possibility errors are reduced.
Physical inventory is counted periodically. Inventory counts are
reconciled to inventory records and a theoretical usage is derived.
Monthly consumption figures are reviewed by Management.
Variances against standard are identified and investigated.
All materials requisitioned represent valid items
and quantities used in the production of pulp or
paper at the mill. (validity)
O INV205 Raw materials could be used for unauthorised
purposes. Incorrect raw materials are used.
Validations prevent the entry of incorrect information (e.g.
nonexistent storage locations or materials). SAP has standard
reports for goods issued and goods received, these report are
reviewed regularly.
Transfers between units/mills are recorded
accurately and timeously.
O, F INV206 Transfers between units/mills are not recorded. Require appropriate documentation of materials transferred from
Raw Materials Stores to other business activities.
See weighbridge for risks relevant to other mass
measurement devices for issues to production.
Storage of Raw Materials
Company personnel store materials in accordance
with established Company Policy.
O, C INV301 Raw materials inventory is unusable. Chemicals are
not stored in a dry, safe place and separate from other
raw materials. Other raw materials are not usable due
to bad storage.
Develop strategy/policy for storing materials to include (1) the number
and type of storage locations to be used, (2) Warehouse placement
of materials (3) OSHAct requirements for the proper labelling/storage
of hazardous materials (4) Storage capacity levels (5) Physical
inventory requirements. A shelf life strategy is developed and
authorised to include any materials that would have specified
timeframe for usage. Physical storage methods regularly reviewed for
sources of inventory deterioration.
Raw materials inventory is adequately
safeguarded. There are special safeguards for
expensive material and material susceptible to
personal use or sale.
O, C INV302 Unauthorised access to raw materials inventory -
misappropriation of raw materials inventory.
Storage areas secured against unauthorised admission. Periodic
stock counts should be regularly performed. Storage areas secured
against unauthorised admission.
All warehouse and inventory locations comply with
appropriate government, regulatory, and company
policies.
O, C INV303 Non-compliance with statute and / or company policy
e.g. with regard to safety, notices. Fines / Loss of
ratings (e.g. NOSA).
Management reviews all physical inventory storage locations for
compliance with government, regulatory, and company policies.
Hazardous materials are stored and handled in an
appropriate manner in accordance with applicable
government regulations.
O, C INV304 Hazardous materials are not stored, handled and
transported in compliance with applicable laws and
regulations. Fines / Loss of ratings (e.g. NOSA).
The item master record should contain a field to identify the material
as hazardous. Appropriate procedures for handling and storing
hazardous materials should be maintained. There should be proper
follow up on reported safety concerns. Relevant policies should be
maintained which are consistent with Occupational Safety and
Health Administration and other pertinent laws and regulations
approved at technical and legal personnel. Compliance should be
monitored.
Receiving and despatch of raw materials are
separate.
O INV305 Receiving and despatch of raw materials take place
out of the same entrance. Lack of segregation of
duties.
Physical storage areas for goods issued and goods received should
be segregated. Different personal are responsible for receiving
and/or issuing raw materials.
Raw materials inventory adjustments (including
scrapping) are valid. (validity)
O, F INV306 Adjustments to raw materials inventory prices or
quantities do not relate to valid price changes and
physical inventory differences. Recorded scrapped
raw materials are not valid.
Detailed records maintained for any adjustments processed. The
officials are authorised to make raw materials adjustments only on
the basis of an authorised source document.
All raw materials inventory adjustments (including
scrapping) are recorded when identified and are
subsequently accounted for as having been
processed. (completeness)
O, F INV307 All adjustments to raw materials inventory are not
recorded.
Inventory adjustments data is edited and validated; identified errors
are corrected promptly. Maintain procedures for promptly updating
inventory records.
Raw materials adjustments (including scrapping)
are processed to the correct account within the
correct accounting period. (classification and
proper period)
O, F INV308 Raw materials adjustments may be processed in the
incorrect period or to the incorrect account. Raw
materials scrapped items are not processed timeously.
Goods received at, before, or after the end of an accounting period
are scrutinised and/or reconciled to ensure complete and consistent
recording in the appropriate period.
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POTENTIAL RISK
(Internal Audit)
CONTROL OWNER
(Name)
are accurately processed. (accuracy)
O, F INV309 Adjustments to raw materials may be inaccurately
recorded or incorrectly processed. Raw materials
scrapped items are not processed accurately. Costs of
scrapped items are not written off.
Raw material adjustments are compared to authorised source
documents to ensure that they were input accurately.
are reviewed and approved by a responsible
official. (authorisation)
O, F INV310 All adjustments to raw materials inventory have not
been authorised in accordance with the appropriate
limit of authority. The scrapping of raw materials is not
authorised.
The officials are authorised to make raw materials adjustments only
on the basis of an authorised source document. Management
reviews and approves all recorded adjustments to inventory prices or
quantities.
Inventory valuation policy is adhered to when
valuing raw materials stock. Inventory reserves
are reviewed and adjusted to ensure that
balances do not exceed net realisable values.
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INV311 Raw materials inventory does not reflect the existing
business circumstances and economic conditions in
accordance with the accounting policies being used.
(lower of cost or Net Realisable value (NRV))
Raw Materials are valued automatically in SAP according to moving
average price. At the end of each accounting period management
should assess whether there is any indication that inventory may be
impaired. The recoverable amount should be estimated. Application
of stock valuation policy by controlling when valuing stock on a
monthly basis.
Raw materials are issued on a first in first out
basis.
O,F INV312 Raw materials inventory may expire - exceed the shelf
life - or become obsolete.
Materials are issued to production on a FIFO basis, expiry dates are
monitored and there is regular turnover of the main raw materials,
limiting the risk of obsolescence.
Inventory levels are maintained in accordance with
established Company Policy. Limits are placed on
quantities to be maintained in inventory. The
adequacy and appropriateness of inventory levels
is monitored.
O INV313 Inadequate or inappropriate inventory levels are
maintained. Unanticipated or excess inventory carrying
costs may be incurred.
Management monitors the adequacy and appropriateness of
inventory levels. Stock level policies are established to include
replenishment cycles, safety stock levels, slow moving inventory, etc.
and this plan is communicated to appropriate personnel. Stock
replenishment policies are periodically reviewed, at least annually, to
ensure policies meet changing company needs. The value of items in
stock is maintained at the lowest practical levels in order to
economise the use of working capital and to minimise the costs of
storage.
Individual inventory balances per SAP are
periodically compared to the physical inventory of
raw materials. (completeness, accuracy and
validity)
O,F INV314 Inventory balances may be incorrectly recorded.
Correct raw materials stock count procedures are not
followed (e.g. as regards cut-off.) Stock counts of raw
materials are not properly recorded.
Physical inventory is counted 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.
Adjustments resulting from the comparison of
physical to recorded inventory of raw materials are
approved by a responsible official. (authorisation)
O,F INV315 Raw materials stock count adjustments are not
authorised, or are inaccurate or incomplete. Raw
materials stock count differences are not investigated
and corrected.
Raw material stock count adjustment data is edited and validated;
identified errors are corrected promptly. Raw material stock count
adjustments are compared to authorised source documents to
ensure that they were input accurately.
Raw materials inventory is usable. Inventory is
periodically reviewed for excess and
obsolescence issues.
O INV316 Obsolete and slow moving raw materials items have
not been identified.
The usability of raw materials is assessed regularly including a review
during physical inventory counts. Inventory ageing reports are
prepared and analysed regularly.
Replacement items have been ordered (if
required) for raw materials scrapped.
O INV317 Replacement items have not been ordered (if required)
for raw materials scrapped.
System functionality monitors and maintains inventory levels in
accordance with organisation policies.
Scrapped raw materials are kept separate from
other inventory.
O INV318 Scrapped raw materials are not kept separate from
other inventory.
Obsolete, excess, and damaged inventories are adequately
segregated from other finished goods inventories and are monitored
to ensure appropriate and timely disposition.
Sufficient inventory of raw materials is kept on
hand. Stock balances are adequate to support the
current rate of consumption, with regard to
economy.
O INV319 Insufficient raw materials inventory levels resulting in
loss of production time or excess inventory or
inaccurate or untimely material requirement forecast.
Management monitors the adequacy and appropriateness of
inventory levels or SAP functionality monitors and maintains
inventory levels in accordance with organisation policies.
Raw Materials Master Data
Only valid changes are made to the raw materials
master data file. (validity)
O INV401 Changes to raw materials master data are not valid. A procedure is established that changes to the raw materials material
master record are documented on a valid source document and
approved by owner of the material master information. All information
entered during raw materials master creation and/or change is
automatically validated by SAP. For example, the values that are
allowed for base unit of measure, pricing group, purchase
organisation and account group are known to SAP. Upon entry in the
field, the system automatically checks the value entered against the
values available in the configuration tables. An error message is
generated if the value entered is not available.
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POTENTIAL RISK
(Internal Audit)
CONTROL OWNER
(Name)
Duplicate raw materials master records are
avoided.
O INV402 Duplicate raw materials master data may be created.
The same material is defined more than once in the
masterfile but with different names. This may result in
incomplete materials management reporting due to
more than one material number and/or confusion when
selecting material when processing Purchase Orders.
All raw material master entries must be reviewed against the existing
material master before entry into SAP to ensure there are no
unnecessary duplication of materials in the material master. Standard
naming conventions are used to reduce the possibility of duplicate
material names. The Material List (RMMVRZ00) report is generated
and reviewed at least quarterly or as needed for duplicate materials.
This lists materials by number, type, group, and user who created the
material. Duplicate materials will be investigated and deleted from the
material master record if they are not held in inventory, used in a
BOM, or purchase requisition or Purchase Order.
Raw material master data changes are approved
by a responsible official. (authorisation)
O INV403 Changes to raw materials master data are not
authorised.
The officials are authorised to enter, modify or delete raw material
master data only on the basis of an authorised source document.
Significant changes to the raw material master file are approved by
management.
Changes to raw materials master data are
accurate. (accuracy)
O INV404 Inaccurate raw materials data may be entered.
Changes to raw materials master data may be
incorrect. For example, a material may be
characterised as an inappropriate material type.
The officials (responsible for maintenance of raw material master
data) shall authorise all requests for modification of the material
master data after having checked the contents and the accuracy of
the data supplied. SAP edits and validates material master records
online. Recorded changes to the material master file data are
compared to authorised source documents to ensure that they were
input accurately.
All valid and authorised changes to raw materials
master data are processed. (completeness)
O INV405 Not all valid changes to the raw materials master data
are input and processed. Not all materials are included
in the material master.
Requests to change raw material master file data are submitted on
prenumbered forms, the numerical sequence of such forms is
accounted for to ensure that all request changes are processed.
Raw material master information is recorded in a
consistent and complete fashion to expedite
production and procurement functions. Material
master data information is complete.
O INV406 Incomplete raw material master data may be entered.
Critical fields that must be entered are not specified as
mandatory. Not all materials components (general,
plant, storage location, batch valuation, forecast) are
established.
The field status group defines for a particular material type which
fields are mandatory.
Changes to the raw materials master file are
processed timeously. (proper period)
processed timeously.
Requests to change raw material master file data are logged. The log
is reviewed to ensure that all request changes are processed
timeously.
Raw materials master data remains pertinent. O INV408 Raw material master file data does not remain
pertinent. Material master data no longer needed is
not deleted/archived from the system.
Raw material master file data is periodically reviewed by
management for accuracy and ongoing pertinence. Materials that
have not been used for a significant period of time are reviewed to
ensure that the material master file remains up-to-date.
All changes to, and deletion, of raw materials
master data records must be properly logged,
documented and retained. The accuracy and
timeliness of changes to the material master
record is reviewed.
supported by valid documentation. Required
documentation is not retained for mandatory retention
periods. Changes to raw materials master data are not
reviewed by a senior member of staff. No responsibility
is assigned for regularly reviewing audit trails of change
information.
Recorded changes to raw materials master file data are compared to
authorised source documents by a senior member of staff to ensure
that the correct changes were made. A list of changes can be
generated using SAP (MM04). A list is prepared with date and time of
change, old and new values for fields and also the user that entered
the change.
MILL ENGINEERING (STORES ITEMS)
Receiving of Engineering Stores items
Engineering stores items are received and
accepted only if they have valid Purchase Orders.
(validity)
O,F INV501 Engineering stores items are received and accepted
on invalid Purchase Orders or without Purchase
Orders. Company policy is not followed regarding the
handling of receipts for which no Purchase Order can
be located on SAP.
The requirement exists that a goods receipt must reference a
Purchase or Production Order so there is certainty the goods
received were ordered. All goods received are based on a valid
Purchase Order (PO) number. Purchase Order is stated on delivery
documents and is verified for validity.
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POTENTIAL RISK
(Internal Audit)
CONTROL OWNER
(Name)
Engineering stores items are inspected before
acceptance.
O,F INV502 Engineering stores items received are not subject to an
inspection for quality / quantity. Criteria are not clearly
established for inspecting received goods. No policy is
established for inspecting receipts in proportion to their
importance and value. Only the vendor's delivery note
(and not the physical goods) is matched to the
Purchase Order. Inspection results are not recorded to
be available for the vendor evaluation process.
Vendors do not deliver the expected quantity or
materials. Goods receipt discrepancies are not
addressed. Company policy regarding the handling of
under/over deliveries is not followed. Tolerances for
under/over deliveries are set to inappropriate values.
Goods counted and inspected before acceptance: overshipments
and unacceptable items are returned to the vendor. Materials are
checked for quantity and quality: Quantities of material received are
verified by actual count, weight, or measurement by the receiving
department. Quality inspection evidenced by inspection reports,
notations, receiving reports, or other acceptable records. Variances
in quantity ordered versus quantity shipped are reported. Quantities
less than those indicated on the Purchase Order may be accepted;
however, quantities more than those indicated on the Purchase
Order should be approved by the requisitioning department and the
buyer.
Returns of engineering stores items to suppliers
are properly handled.
O,F INV503 Damaged or low quality goods received are not
properly identified and handled. Defective engineering
stores items are not returned to the supplier and are
accepted into stock. Accounts payable is not notified of
goods returned to vendor, and the invoice is paid.
Return deliveries are not entered promptly into the
system in order to reverse the goods receipt updates.
No process is established to ensure the vendor issues
credit memos when appropriate.
Defective engineering stores items received from suppliers are
logged. The log is monitored to ensure that the defective goods are
returned promptly and that the credit (AP) is received timely.
Rejected engineering stores items are adequately segregated from
other engineering stores items and regularly monitored to ensure
timely return to suppliers. A security check to either an authorised
return form or a delivery note is performed on all goods leaving the
premises.
Only engineering stores items received are
recorded. (validity)
O,F INV504 Invalid receipts of engineering stores items are
recorded.
SAP edits and validates input GRN data on-line. The values that are
allowed, for example, for a material master, are known to the system.
Upon entry in the field SAP automatically checks the value entered
against the values available in the configuration tables. Most goods
receipts are created with reference to a Purchase Order.
Engineering stores items received are recorded
accurately. (accuracy)
O,F INV505 Engineering stores receipts are not recorded
accurately. Incorrect goods receipt information is
entered.
Capturing of receipts directly into SAP: Mandatory fields, Tolerance
levels, Visual checks by operator e.g. key in material number and
description appears on the screen, Limit/reasonableness checks on
quantities (e.g. no negative amounts). SAP edits and validates input
GRN data on-line. Most goods receipts are created with reference to
a Purchase Order. SAP then copies information from Purchase
Order into GRNs per configuration. The SAP material movement
automatically creates both a material (for quantity) and accounting
(for value) document. The transactions update these items: Purchase
Order history, stock overview, MRP (planning file), general ledger
accounts.
Engineering stores items received are allocated
correctly. (classification)
O,F INV506 Receipts of engineering stores items do not have the
correct account assignments.
Account assignment is determined at the time of purchase
authorisation (PR / PO).
All engineering stores items received are
recorded. (completeness)
O INV507 All engineering stores items are not recorded.
Inventory received is not recorded at all.
All deliveries must be directed through Stores Receiving. Appropriate
stores procedures should be implemented to ensure all raw materials
receipts are recorded. Vendor statement reconciliation including
follow-up of invoices without GRNs.
Receipts of engineering stores items are recorded
timeously and in the correct period. (proper
period) Perpetual inventory records are updated
as of the date the goods are received.
O,F INV508 All engineering stores items received are not recorded
in the period in which they have been received.
Goods movements are not captured on SAP (i.e.
receipt of engineering stores items).
Documentation in respect of goods received at, before, or after the
end of an accounting period is scrutinised and/or reconciled to
ensure complete and consistent recording in the appropriate period.
Received engineering stores items are
safeguarded. Engineering stores items are
delivered to the correct location.
O,F INV509 Raw materials are received by unauthorised personnel.
Received goods are not physically secured to protect
them from theft. Personnel are not required to
acknowledge receipt of goods. Engineering stores
items are delivered to the incorrect location.
Goods are delivered only to designated, physically secure locations
within a warehouse or storage building and are accepted only by
authorised personnel. Purchase Order forms are pre-printed with the
receiving location and instruct vendors only to deliver to that location.
Expected and overdue orders for engineering
stores items are monitored.
O,F INV510 No monitoring of expected or overdue goods receipts.
Vendors do not deliver on time. No action is taken for
late deliveries.
Expedition of purchase orders is covered under the Expenditure
cycle.
Engineering Stores items sent for repairs
OBJECTIVE
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CONTROL OWNER
(Name)
The costs relating to items sent out for repairs are
allocated accurately. (classification)
O,F INV601 Costs are not allocated to the correct department or
not allocated accurately. Incorrect costs are allocated
to the works order. Repairs are not allocated to the
correct sub-order or allocated to the incorrect sub-
order.
All costs of repairs allocated should be reviewed by management for
accuracy.
Items sent out for repair are repaired timeously. O INV602 Repairs are not done or not done timeously. A maintenance register should be kept detailing all repairs history of
each engineering stores item. The maintenance register should be
regularly reviewed to identify engineering stores due for repairs.
The correct repairs are performed on items sent
out for repairs. (accuracy)
O INV603 Incorrect repairs are performed. Scope of repairs are
not received from vendors or are incorrect. Repair
history does not accompany item to be repaired and
repairs are not done in terms of valid documentation.
All repairs should be supported by authorised documentation. The
documentation should state what repairs need to be performed and
repair history.
Items to be sent out for repair are approved by a
responsible official, to ensure inter alia, that
repairs are correctly allocated internally or
externally. (authorisation)
O,F INV604 Workshop foreman does not inspect repairable item
before repairs are undertaken. Items that could be
repaired internally are sent out for repair at higher
costs to the company. Repairs are commissioned /
undertaken without appropriate authorisation.
Only repairs which have been authorised by management can be
allocated to the works order. Repairs should be sent to an internal
specialist to determine whether the repairs should be done externally.
All repairs should be authorised in terms of the Limits of Authority.
Items sent out for repair are accounted for and
controlled.
O INV605 Items sent for repair are swapped with inferior items
before they are sent back to the mill. Long outstanding
items are not followed up. Vendors do not return
scrapped items to the mill and items are not sent to the
salvage yard at the mill. Items sent for repair are not
returned.
A repairs register should exist. The register should be regularly
examined to identify long outstanding repairs not yet returned. Long
outstanding repairs should be investigated. The documentation
supporting the item to be repaired should include details of the items
make, model and serial number. These details should be agreed to
the item on return. All outstanding items sent for repairs should be
followed up. All scrapped items should be returned by the vendor
and sent to the salvage yard.
Transfers (issues) of Engineering Stores items to the Plant
Issues from engineering stores inventory are
made only on the basis of authorised documents.
(authorisation)
O,F INV701 Unauthorised issues may be recorded. Incorrect
quantities of engineering stores are transferred to the
plants. Engineering stores not requested may be
transferred to production.
Written stores requisition is required for all engineering stores issues.
Materials are only transferred on the basis of a properly approved
source document. Transfer documentation should accompany all
transfers, stores or other activities and personnel should verify
material and quantity received. Requesting department should sign
approval on stores requisitions as acknowledgement of receipt.
All issues of engineering stores to the plants are
accounted for. (completeness)
O,F INV702 Issues from engineering stores inventory may not be
recorded. Goods movements are not captured in SAP.
Prenumbered transfer documents (e.g. stores requisitions) should
exist. The sequence of these documents is independently checked.
Missing documents should be investigated.
Issues from engineering stores inventory are
correctly recorded as to quantity and amount.
(accuracy) Issues from engineering stores
inventory are processed in the correct accounting
period to the correct account. (classification and
proper period)
O,F INV703 Transfers of engineering stores to the plant may not be
accurately recorded. Engineering stores issues may be
processed in the incorrect period or to the incorrect
account. Engineering stores may be allocated to the
incorrect cost centre.
Transfers of raw materials are documented. Transfers (issues) from
raw materials to production are only done on the basis of a source
document. A procedure should be established whereby the source
documents are captured in SAP within an established time period
after the inventory has been issued. By recording the issue in SAP
immediately after the issue has been completed, the inventory levels
in SAP are kept current and the possibility errors are reduced.
Physical inventory is counted periodically. Inventory counts are
reconciled to inventory records and a theoretical usage is derived.
Monthly consumption figures are reviewed by Management.
Variances against standard are identified and investigated.
All engineering stores items requisitioned
represent valid items and quantities used in the
production of pulp or paper at the mill. (validity)
O INV704 Engineering stores items could be used for
unauthorised purposes or personal gain.
Security perform random checks on personnel / vehicles leaving the
mill.
Storage of Engineering Stores Items
OBJECTIVE
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CONTROL OWNER
(Name)
Company personnel store engineering stores
items in accordance with established Company
Policy.
O,C INV801 Engineering stores items are unusable due to bad
storage.
Develop strategy/policy for storing materials to include (1) the number
and type of storage locations to be used, (2) Warehouse placement
of materials (3) OSHAct requirements for the proper labelling/storage
of dangerous equipment (4) Storage capacity levels (5) Physical
inventory requirements. Physical storage methods regularly reviewed
for sources of inventory deterioration.
All warehouse and inventory locations comply with
appropriate government, regulatory, and company
policies.
O,C INV802 Non-compliance with statute and / or company policy
e.g. with regard to safety, notices.
Management reviews all physical inventory storage locations for
compliance with government, regulatory, and company policies.
Engineering stores items are adequately
safeguarded. There are special safeguards for
expensive material and material susceptible to
personal use or sale.
O,C INV803 Unauthorised access to engineering stores items.
Engineering stores items may be stolen, lost,
damaged, or temporarily diverted. Fines / Loss of
ratings (e.g. NOSA).
Access should be restricted to authorised personnel only. Physical
security arrangements (fencing and gate security) should exist and
periodic stock counts should be regularly performed.
Dangerous equipment is stored handled and
handled in an appropriate manner in accordance
with applicable government regulations.
O,C INV804 Dangerous equipment is not stored handled and
transported in compliance with applicable laws and
regulations. Fines / Loss of ratings (e.g. NOSA).
Appropriate procedures for handling and storing dangerous
equipment should be maintained. There should be proper follow up
on reported safety concerns. Relevant policies should be maintained
which are consistent with Occupational Safety and Health
Administration and other pertinent laws and regulations approved at
technical and legal personnel. Compliance should be monitored.
Engineering stores inventory adjustments
(including scrapping) are valid. (validity)
O,F INV805 Adjustments to engineering stores inventory prices or
physical inventory differences. Recorded scrapped
engineering stores items are not valid.
Detailed records maintained for any adjustments processed. Officials
are authorised to make engineering stores inventory adjustments
only on the basis of an authorised source document.
All engineering stores inventory adjustments
(including scrapping) are recorded when identified
and are subsequently accounted for as having
been processed. (completeness)
O,F INV806 All adjustments to engineering stores inventory are not
recorded.
are corrected promptly. Maintain procedures for promptly updating
inventory records.
(including scrapping) are processed to the correct
account within the correct accounting period.
(classification and proper period)
O,F INV807 Engineering stores inventory adjustments may be
account. Engineering stores scrapped items are not
(including scrapping) are accurately processed.
(accuracy)
O,F INV808 Adjustments to engineering stores inventory may be
inaccurately recorded or incorrectly processed.
Engineering stores scrapped items are not processed
accurately. Costs of scrapped items are not written off.
Engineering stores adjustments are compared to authorised source
(including scrapping) are reviewed and approved
by a responsible official. (authorisation)
O,F INV809 All adjustments to engineering stores inventory have
not been authorised in accordance with the appropriate
limit of authority. The scrapping of raw materials is not
authorised.
Inventory adjustments are compared to authorised source
documents. Management reviews and approves all recorded
adjustments to inventory prices or quantities.
valuing stock of engineering stores items.
Inventory reserves are reviewed and adjusted to
ensure that balances do not exceed net realisable
values.
O,F,
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INV810 Engineering stores inventory does not reflect the
existing business circumstances and economic
conditions in accordance with the accounting policies
being used.
Engineering stores items are valued automatically in SAP. At the end
of each accounting period management should assess whether there
is any indication that inventory may be impaired. The recoverable
amount should be estimated.
Engineering stores items. (completeness,
accuracy and validity)
O,F INV811 Inventory balances may be incorrectly recorded.
Correct engineering stores stock count procedures are
not followed (e.g. as regards cut-off). Stock counts of
engineering stores items are not properly recorded.
physical to recorded inventory of engineering
stores items are approved by a responsible
O,F INV812 Engineering stores stock count adjustments are not
authorised, or are inaccurate or incomplete.
Engineering stores stock count differences are not
investigated and corrected.
Stock count adjustment data is edited and validated; identified errors
are corrected promptly.
Engineering stores inventory is usable. Inventory
is periodically reviewed for excess and
obsolescence issues.
O INV813 Obsolete and slow moving engineering stores items
have not been identified.
The usability of raw materials is assessed regularly including a review
during physical inventory counts. Inventory ageing reports are
prepared and analysed regularly.
Scrapped engineering stores items are kept
separate from other inventory.
O,F INV814 Scrapped inventory stores items are not kept separate
from other inventory.
segregated from other stores inventories and are monitored to
ensure appropriate and timely disposition.
OBJECTIVE
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CONTROL OWNER
(Name)
Sufficient inventory of engineering stores is kept
on hand.
O,F INV815 Insufficient inventory levels of engineering stores
resulting in loss of production time or excess inventory
or inaccurate or untimely material requirement forecast.
segregated from other stores inventories and are monitored to
ensure appropriate and timely disposition.
Engineering Stores Master Data
Only valid changes are made to the engineering
stores master data file. (validity)
O INV901 Changes to engineering stores master data are not
valid.
A procedure is established that changes to the engineering stores
master record are documented on a valid source document and
approved by owner of the material master information. All information
entered during engineering stores material master creation and/or
change is automatically validated by SAP. For example, the values
that are allowed for base unit of measure, pricing group, purchase
organisation and account group are known to SAP. Upon entry in the
field, the system automatically checks the value entered against the
values available in the configuration tables. An error message is
generated if the value entered is not available.
Duplicate engineering stores material master
records are avoided.
O INV902 Duplicate engineering stores master data may be
created. The same material is defined more than once
in the masterfile but with different names. This may
result in incomplete materials management reporting
due to more than one material number and/or
confusion when selecting material when processing
Purchase Orders.
All engineering stores master entries must be reviewed against the
existing material master before entry into SAP to ensure there are no
material names.
Engineering stores master data changes are
authorised.
The officials are authorised to enter, modify or delete engineering
stores material master data only on the basis of an authorised source
document. Significant changes to the material master file are
approved by management.
Changes to engineering stores raw materials
master data are accurate. (accuracy)
O INV904 Inaccurate engineering stores master data may be
entered. For example, a material may be characterised
as an inappropriate material type.
The officials (responsible for maintenance of engineering stores
master data) shall authorise all requests for modification of the
material master data after having checked the contents and the
accuracy of the data supplied. SAP edits and validates material
master records online. Recorded changes to the material master file
data are compared to authorised source documents to ensure that
they were input accurately.
All valid and authorised changes to engineering
stores master data are processed. (completeness)
O INV905 Not all valid changes to engineering stores master data
are input and processed. Not all engineering stores
are included in the material master.
Requests to change engineering stores master file data are
submitted on prenumbered forms, the numerical sequence of such
forms is accounted for to ensure that all request changes are
processed.
Engineering stores master information is recorded
in a consistent and complete fashion to expedite
sales, production and procurement functions.
Material master data information is complete.
O INV906 Incomplete material master data may be entered.
mandatory. Not all material components (general,
established.
Changes to the engineering stores master file are
Material master file data is periodically reviewed by management for
accuracy and ongoing pertinence. Materials that have not been used
for a significant period of time are reviewed to ensure that the
material master file remains up-to-date.
Engineering stores master file remains pertinent. O INV908 Engineering stores master file data does not remain
pertinent. Engineering stores material master data no
longer needed is not deleted/archived from the system.
Engineering stores management master file data is periodically
reviewed by management for accuracy and ongoing pertinence.
All changes to, and deletion of, engineering stores
record is reviewed.
periods. Changes to engineering stores master data
are not reviewed by a senior member of staff. No
responsibility is assigned for regularly reviewing audit
trails of change information.
Recorded changes to engineering stores master file data are
compared to authorised source documents by a senior member of
staff to ensure that the correct changes were made.
PRODUCTION
OBJECTIVE
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(Internal Audit)
CONTROL OWNER
(Name)
Production Planning and Control
All production orders are accounted for as having
been fulfilled. (completeness) Production orders
are created and released on a timely basis to
allow for timely meeting of commitments to
customers.
O INV
1001
Work-in-progress may not be completed timeously,
and as a result commitments to customers may not be
met, or finished goods may be unsaleable.
Production plans and their associated demand requirements are
entered timely in the system which helps ensure required production
lead times are met. There is an established review and approval
procedure that includes the timeliness of the various cycles.
Production orders are accurately prepared.
(accuracy)
O INV
1002
Incorrect product may be manufactured resulting in
unsaleable finished goods.
Production orders are approved by a responsible
O,F INV
1003
The company may produce unacceptable products or
quantities of products in excess of acceptable levels;
this could result in obsolete, excess, or otherwise
unsaleable inventory; it could also result in abnormal
sales returns because of unacceptable product quality.
Only authorised personnel may enter demand requirements and
release production plans to help ensure the validity of system
production data. Only authorised personnel have the authority to
process planned production orders to help ensure validity of
production records.
Production operates consistent with management
intent and the approved production plans. The
various measurements/criteria reporting are
enabled and are properly approved.
O INV
1004
Production may not be planned in an orderly manner.
Incorrect manufacturing processes may be used
resulting in unsaleable finished goods.
Various reports are available from SAP and PTS. These reports are
reviewed periodically by Production Management and supervisors to
ensure the proper production control. There are operating
procedures that define the process by which the criteria,
measurements and reporting is determined, and who is responsible.
Processing and Recording of Production Costs
The use of labour, materials and plant in
production is recorded. All labour, materials, and
overhead recovery bases are accounted for as
having been processed to cost of production.
(completeness)
O,F INV
1101
Production costs may not be accounted for. All direct
and indirect expenses associated with production may
not be recorded as production costs.
Costs associated with raw materials, labour and overhead are
independently reconciled to appropriate supporting records.
Labour, materials, overhead recovered and other
production measurements are accurately
recorded. (accuracy) To properly account for
productions costs, collected machine costs (run-
times, set-up costs, changeover costs,
maintenance costs), labour costs (standard costs,
actual costs, overtime costs) collected/entered are
accurate.
O,F INV
1102
Production costs may be inaccurately recorded. Reconciliations of quantities set forth in BOMs to quantities actually
used in production. Costs associated with raw materials, labor and
overhead are independently reconciled to appropriate supporting
records. When standard costing is used, management approves the
standard costs and reviews variances between actual and standard
costs. Significant variances are investigated. When actual costing is
used, management reviews actual costs based on their knowledge of
day-to-day activities.
Production costs are recorded against the
appropriate production units in the correct
accounting period. (classification and proper
period)
O,F INV
1103
Production costs may be recorded against incorrect
production units or the incorrect period.
SAP account assignment configuration ensures that amounts for raw
materials are posted to the appropriate general ledger account.
Management should review the recording of production costs to
production units to ensure that they have been recorded correctly
and in the correct period.
Labour, materials, and plant are used in
production only if authorised. (authorisation)
O,F INV
1104
Unauthorised factors of production may be used and
result in irrecoverable costs. The production
processes and inventory holdings may be sub-optimal
and result in irrecoverable costs.
Only authorised costs should be allocated to production.
Defective Products and Scrap
All defective products, by products and scrap
resulting from the production process are
authorised. (authorisation)
O INV
1201
Scrapped items (broke) are not authorised. Materials
are transferred to scrap without proper authorisation.
All products are inspected before being transferred to finished goods
inventory: products not meeting specified quality standards will be
reworked or scrapped. Separate personnel to investigate the need
for write-offs. Items identified as scrapped (broke) should be
authorised prior to being written down or reworked.
All defective products and scrap resulting from the
production process are valid and recorded
completely and accurately in the appropriate
period. (completeness, accuracy, and validity)
O,F INV
1202
Scrapped items (broke) are not valid. Inventory is
intentionally scrapped to facilitate misappropriation.
All scrap items (broke) should be written down/ off. WIP written off as
broke is reviewed by the Production Department and the
management team. Abnormal wastage's and variances between
actual production versus budget are investigated.
OBJECTIVE
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CONTROL OWNER
(Name)
The reporting of defective products and scrap is
recorded completely and accurately in the
appropriate period. (completeness, accuracy, and
proper period)
O,F INV
1203
Broke not monitored, not properly reported (production
inefficiencies result in excess waste). Sale of broke not
reported properly. Broke or proceeds from sale of
broke misappropriated.
Management, based on their knowledge of day-to-day activities
review records of scrapped and reworked items and check whether
such items have been correctly identified and properly recorded in
the appropriate accounting period.
Orders are fulfilled if make is broked. O INV
1204
Due to broking of original make, customer or
replenishment order is not fulfilled.
The customer should be notified of any delays in receiving their
order.
Scrapped (broke) and by-product items are kept
separate from other inventory.
O INV
1205
Scrapped (broke) items not kept separate from other
inventory. Scrapped (broke) items may be
despatched.
Rejected work in process is adequately segregated from other work
in progress and is monitored to ensure it is scrapped or reworked on
a timely basis.
Production Master Data (BOMs - Bill of Material)
Only valid changes are made to the BOMs.
(validity) Only valid BOMs are created and saved.
O,F INV
1301
Changes to BOMs are not valid. Incorrect product
costing.
A procedure is established that changes to the BOMs are
documented on a valid source document and approved by
management. All information entered during material master creation
and/or change is automatically validated by SAP.
Changes to the BOMs are approved by a
responsible official. (authorisation)
O,F INV
1302
Changes to BOMs are not authorised. SAP may be configured to process all BOM changes through the
engineering change (with history) process, which provides traceability
and proper approvals.
Changes to the BOMs are accurate. (accuracy)
BOMs and their associated data are created and
saved accurately which helps ensure accurate
inventory valuation and cost of goods sold.
O,F INV
1303
Changes to the BOMs may be incorrect. Bill of
Materials changes are entered incorrectly.
The officials (responsible for maintenance of the BOMs) shall
authorise all requests for changes to the BOMs after having checked
the contents and the accuracy of the data supplied. SAP edits and
validates material master records online. Recorded changes to the
BOMs are compared to authorised source documents to ensure that
they were input accurately.
Material master information is recorded in a
consistent and complete fashion. All BOM master
data is complete (including all relevant views for
manufacturing planning and execution) to ensure
material master data integrity.
O,F INV
1304
Incomplete BOMs data may be entered. Critical fields
that must be entered are not specified as mandatory.
SAP is configured with mandatory fields to help ensure complete data
entry of this information.
All valid and authorised changes to BOMs are
O,F INV
1305
Not all valid changes to the BOMs are input and
processed.
Requests to change BOM master file data are submitted on
Changes to the BOMs are processed timeously
(proper period) to help ensure the existence of
pertinent master records.
O,F INV
1306
Changes to BOMs are not processed timeously. Requests to change BOM master file data are logged. The log is
reviewed to ensure that all request changes are processed timeously.
All changes to and deletion of BOMs must be
properly logged, documented and retained.
O,F INV
1307
Changes to BOMs are not supported by valid
documentation. Changes to BOMs are not reviewed by
a senior member of staff.
Recorded changes to BOM master file data are compared to
authorised source documents by a senior member of staff to ensure
that the correct changes were made.
Paper Converters
Inventory transfers to / from paper converters
("subcontractors") are complete, accurate and
valid to ensure material transaction integrity and
that stock is properly tracked and safeguarded.
O,F INV
1401
Loss of stock sent to converters. Inaccurate reporting
of costs relating to stock sent to converters.
SAP standard functionality requires that all material movements are
recorded through a material document. SAP is configured with
specific movement types, reason for movement and/or storage
locations for material transfers to subcontractors. SAP is configured
with edit checks, mandatory fields, and validity checks to help ensure
accurate data entry of material movement information. Procedures
are established for the regular review of a Material Movements by
Material Report for inappropriate material movement types and
storage locations.
MILL FINISHED GOODS
Receipt of Finished Goods from Production
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CONTROL OWNER
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Finished goods transferred from production to
inventory are recorded accurately and in the
period transferred.
O,F INV
1501
Not all transfers of complete units of production to
finished goods are recorded completely and accurately
in the appropriate period and to the correct account.
Management should periodically review the status of production jobs
and ensure that finished goods have moved out of WIP to Finished
Goods Inventory. Inventories received, including transfers, are
counted and compared to receipt or transfer documentation (that is
used to record movements of inventory in the financial records), by
personnel in the area assuming responsibility for the inventory (e.g.,
production, finished goods storage), and are recorded in the
appropriate period.
All finished goods produced should be accounted
for as having being recorded in finished goods
inventory. (completeness)
O,F INV
1502
Finished goods inventory receipts from production may
not be recorded: Not all transfers of complete units of
production to finished goods are recorded. Goods
movements are not captured in SAP (i.e. movements
to and from production).
Finished goods sent to the warehouse are logged; the log is used to
ensure that all finished goods are recorded in the inventory records.
Inventory receipts from production should be
accurately recorded as to quality, quantity, and
amount - mass. (accuracy)
O,F INV
1503
Finished goods inventory receipts from production may
be inaccurately processed.
Goods received input data is edited and validated; identified errors
are corrected promptly.
Completed production should be promptly
recorded.
O,F INV
1504
Production may be completed but not reported as
available for sale (finished goods inventory); this could
result in lost sales or requesting additional production
(inefficient use of resources) to fill a customer's order.
It could also result in an undervaluation of finished
goods inventory.
Proper reports should exist for all transfers; from raw materials to
production, production to work in progress, work in progress to
finished goods and finished goods to stores. These reports should be
reconciled to actual goods transferred.
Finished goods transferred from production to
inventory should be inspected for quality.
O INV
1505
Inventory may be unsaleable. Unsaleable goods are
sent to the customer.
Quality control inspections are performed for finished goods received
from production to assess whether such goods should be forward to
finished goods inventory, reworked, or scrapped. The saleability and
usability of finished goods are assessed regularly including a review
during physical inventory counts.
Finished Goods Returned for Credit ("Return Orders")
Return orders are processed accurately. Finished
goods returned by customers are recorded
accurately. (accuracy)
O,F INV
1601
Customer returns may be incorrectly processed.
Returns are processed more than once.
SAP is configured to automatically validate the return order on
quantity and material. SAP will issue a warning message if the
quantity entered on a return order exceeds the quantity purchased on
the original sales order. In addition, SAP will issue a warning
message if there is an existing return for this material against the
original sales order.
Return orders are processed only for valid
materials.
O,F INV
1602
Return orders are processed for invalid materials. SAP standard functionality validates materials included on sales
order and return order line items. A return order will not be accepted
by SAP if the material line items do not exist in the SAP material
master.
Finished goods returned for credit are quality
inspected and the quantities verified.
O INV
1603
Return documents and return deliveries do not
accurately reflect the returned materials. Returned
goods are not inspected for quality and quantity.
Received inventory has not been quality inspected.
Returned goods that are damaged are posted back
into inventory.
Receiving personnel check the returned goods against the Stock
Transport Order, and record details in a Customer Return book.
Quality control inspections are performed for product returned by
customers to assess whether such goods should be returned to
inventory, reworked, or scrapped. These results are written into the
Customer Return book and signed by the QA inspector.
Approved returns are processed in a timely
manner. Customer returns are recorded
timeously and in the appropriate period. (proper
period)
O,F INV
1604
Returned goods are not recorded in the period they are
received back.
On a daily basis, the Sales Accountants create return orders using
appropriate data for approved returns (per CSRs).
Customer returns are approved by a responsible
official (authorisation). Finished goods returned
by customers are only accepted in accordance
with company policy.
O INV
1605
Inventory is accepted without authorised
documentation.
Product upliftments from customers should only be made once an
authorised Upliftment form has been completed (DC). No product
returns should be made to / accepted by the Mill without a Stock
Transport Order having been raised (Mill). The approved Limits Of
Authority is used for the authorisation.
Recorded customer returns are valid. (validity) O,F INV
1606
Product for which a credit note is processed is not
returned to the Mill timeously. Returned goods are not
posted back into inventory.
A copy from the Customer Returns book (detailing product returned)
should be attached to the CSR before Credit Notes are processed.
All return information is recorded for audit trail
purposes.
O,F INV
1607
Critical information for returns or return deliveries is not
specified as mandatory. Audit trail is lost. Returned
goods are not tracked adequately, leading to a loss of
control over the goods.
SAP standard functionality automatically creates an audit trail of all
return order creation (Credit memo request) and maintenance.
Appropriate validations are defined for critical fields
OBJECTIVE
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CONTROL OWNER
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See weighbridge for additional risks and controls
relevant to incoming product.
Despatch of Finished Goods and By-Products
All orders scheduled for delivery are shipped to
the customer. Picking is performed promptly.
O,F INV
1701
Delivery is not made for those sales orders due to be
despatched. Orders authorised for shipment are not
shipped. Product is shipped early or late, causing
disruptions of customers operations (poor customer
relations). Product is not picked promptly.
The delivery due list is printed and reviewed on a daily basis. SAP
reports of open sales documents are prepared and monitored to
ensure timely shipment. Deliveries not able to be fulfilled are
communicated to the relevant Sales Office.
All orders scheduled for delivery are shipped only
once to the customer.
O,F INV
1702
Deliveries for the same sales order are duplicated. SAP matches goods shipped to open line items on an open sales
order and closes each line item as the goods are shipped, thereby
preventing further shipments for those line items.
Finished goods (and by-products) are assembled
for delivery only on the instruction of authorised
documents e.g. an approved sales order raises a
picking list and a delivery note. (authorisation)
O,F INV
1703
Unauthorised deliveries may be made. Unordered
product may be delivered to customers.
SAP standard functionality validates picking lists for requested
product against the quantities in the sales order.
Picking is performed accurately (correct quantities
and materials).
O,F INV
1704
Incorrect picked quantities are entered into the system.
Picking lists may not match the delivery documents.
Incorrect goods may be despatched.
Finished goods are drawn for delivery against appropriate source
documents - picking slip. Bar code scanners are used to input
actual inventory picking and storage locations and quantities;
differences from picking and storage instructions are investigated.
Verification of completed picking lists to physical
goods picked is performed.
O,F INV
1705
Verification of completed picking lists to physical goods
picked is not performed.
Before goods are shipped, the details of the picking list are compared
to actual goods prepared for shipment by an individual independent
of the order picking process.
Deleted and cancelled deliveries are logged and
reviewed.
O,F INV
1706
Deleted and cancelled deliveries are neither logged
nor reviewed. A delivery may be prepared even
though the sales order was cancelled by the customer.
Despatch personnel use real-time picking lists / delivery due lists
when preparing product for deliveries. SAP will not generate a
delivery note (needed as authority to leave warehouse) if sales order
is cancelled by order flow personnel.
Shipping information is correct (for delivery
purposes).
O,F INV
1707
The shipment is made to the incorrect customer or to
an invalid customer. The shipment is made to the
incorrect customer location. Partial deliveries are sent
to customers who specify only full deliveries. Multiple
shipping points are specified for the items in an order
although the customer requested a single shipment.
Delivery notes details (including customer delivery address) are
uploaded into SAP at time of order placement.
Shipment problems are promptly resolved. O,F INV
1708
Shipments are lost, misplaced or misappropriated.
Misappropriated shipments are not identified. A
backorder is not created when goods are not available
for shipment.
Despatch department / outsourced contractors match PODs to
despatch records. Discrepancies are timeously resolved and
validated.
Deliveries reference sales orders. O,F INV
1709
A delivery does not reference a sales order. SAP delivery notes automatically include the sales order number.
Deliveries are approved by a responsible official.
(authorisation)
O,F INV
1710
Improper shipment. Unordered or non-authorised
products may be included in customer shipment.
Customer orders shipped may be incomplete,
damaged, or of poor quality.
A physical inspection of shipments is made prior to delivery for quality
and agreement to SAP delivery note.
All deliveries / shipments are recorded. Finished
goods and by-products may leave the premises
only if authorised in writing. (completeness)
O,F INV
1711
Finished goods and by-products may leave the
premises/security area without being monitored and
recorded. Goods movements are not captured in SAP
(transfer of finished goods).
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).
Deliveries / Shipments are recorded accurately. O,F INV
1712
Shipments may be recorded incorrectly. 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.
OBJECTIVE
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CONTROL OWNER
(Name)
Deliveries / shipments are recorded timeously and
in the correct period. Appropriate cut-off
procedures are used to ensure deliveries are
invoiced in the correct period. (proper period)
O,F INV
1713
Goods issue transactions are not created promptly
after the goods are shipped. Goods issue
transactions are posted in the incorrect period.
Shipments may not be recorded in the period they are
shipped. Deliveries may be invoiced in the incorrect
period. No review is performed to ensure that goods
issue has occurred for all shipments.
Goods shipped at, before, or after the end of an accounting period
recording in the appropriate accounting period including the raising
and recording of the related invoice.
Recorded shipping transactions are valid. (validity) O,F INV
1714
Shipping transactions may be purposefully or
erroneously altered, resulting in incorrect invoicing and
misstated revenues and receivables.
Sales order entry, shipping, and invoice processing are performed by
an integrated application system. The general ledger is automatically
updated for all valid deliveries.
Controls over manual delivery documents are
adequate (in particular to ensure that all
shipments are recorded).
O,F INV
1715
Manual delivery documents not actioned and recorded
in SAP.
Manual documents should be processed as soon as the system is up
and running. Manual documents should be compared / agreed to
information processed on SAP. Policies and procedures are in place
for using manual delivery notes.
Appropriate procedures are in place to control
situations when SAP is off-line.
O,F INV
1716
Goods not despatched due to system being offline or
down.
Manual documents are in use, and are appropriately controlled.
Policies and procedures are in place for off-line situations.
Shipments are delivered in a cost-effective
manner. Routes and vehicles are appropriate for
the movement of goods and materials.
O,F INV
1717
Inappropriate vehicles and/or routes may be used
resulting in unnecessary costs to the Company.
Contracts with haulage contractors specify rates per destination
(regardless of vehicle / route).
Finished Goods - Cost of Sales
Costs of shipped inventory are transferred from
inventory to cost of sales. (completeness)
F INV
1801
Recorded Cost of Sales may be incomplete.
(understated)
Maintain procedures for promptly updating cost of sales records.
Costs of shipped inventory are recorded
accurately (accuracy) and posted correctly
(classification).
F INV
1802
Recorded Cost of Sales may be inaccurately
calculated.
SAP account assignment configuration ensures that amounts for
shipped goods are posted to the appropriate Cost of Goods Sold
account
Amounts posted to Cost of Sales represent those
associated with shipped inventory. (validity)
F INV
1803
Cost of Sales transactions may be invalid. Cost of sales is periodically reviewed by management for accuracy
and ongoing pertinence.
Costs of shipped inventory are transferred from
inventory to Cost of Sales timeously and in the
appropriate period. (proper period)
F INV
1804
Cost of sales transactions may be recorded in the
incorrect period. Incorrect costing methods may be
used.
Management reviews relevant costs of sales, and inventory reports
related to order entry, shipping, invoicing, and accounts receivable;
significant unusual relationships are monitored and acted upon.
Storage of Finished Goods
Receiving and despatch of finished goods are
separate.
O INV
1901
Receiving and despatch take place out of same
entrance.
The warehouse layout will be established to segregate receiving and
shipping locations. A separate entrance and exit should exist.
Security should ensure deliveries and despatch only take place at the
correct location.
Finished goods inventory adjustments (including
write-offs) are valid. (validity)
O,F INV
1902
Adjustments to finished goods inventory prices or
physical inventory differences. Adjustments may be
processed that are not acceptable to management e.g.
saleable inventory may be improperly written off and
scrapped.
Finished goods adjustments are compared to authorised source
documents to ensure that they were input accurately. Management
reviews and approves all recorded adjustments to inventory prices or
quantities.
All finished goods inventory adjustments (including
write-offs) are recorded when identified and are
subsequently accounted for as having been
O,F INV
1903
All adjustments to finished goods inventory are not
recorded.
are corrected promptly. Inventory adjustment forms are numbered;
the sequence of such forms is accounted for.
write-offs) are processed to the correct account
within the correct accounting period. (classification
and proper period)
O,F INV
1904
Finished goods inventory adjustments may be
account. Scrapped (written-off to broke) items may not
be processed timeously.
write-offs) are accurately processed. (accuracy)
O,F INV
1905
Adjustments to finished goods inventory may be
inaccurately recorded or incorrectly processed. Write-
offs of finished goods items may not be processed
accurately. Costs of items broked are not written off
correctly.
Finished goods adjustments are compared to authorised source
OBJECTIVE
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CONTROL OWNER
(Name)
write-offs) are reviewed and approved by a
responsible official. (authorisation).
O,F INV
1906
All adjustments to finished goods inventory have not
been authorised in accordance with the appropriate
limit of authority. The write-off of finished goods items
to broke may not be authorised. Possible irregularity:
unwarranted reduction of inventory value to facilitate
"bargain" purchases by employees or third parties.
Inventory adjustments are compared to authorised source
documents. Management reviews and approves all recorded
adjustments to inventory prices or quantities.
valuing finished goods stock. Inventory reserves
are reviewed and adjusted to ensure that
balances do not exceed net realisable values.
Inventory is carried at the lower of cost or market
value.
O,F,
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INV
1907
Finished goods inventory does not reflect the existing
business circumstances and economic conditions in
accordance with the accounting policies being used.
(Loss not provided for: inventory valued at above
market price). Continued production of items being
sold at a loss.
At the end of each accounting period management should assess
whether there is any indication that inventory may be impaired. The
recoverable amount should be estimated. Application of stock
valuation policy by controlling when valuing stock on a monthly basis.
finished goods stock. (completeness, accuracy
and validity). Physical verification of inventory is
conducted regularly and accurately.
O,F INV
1908
Inventory balances may be incorrectly recorded. SAP
inventory records may have overstated quantities on
hand. Book inventory quantities are inaccurate causing
stock outs or excess inventories and misstated
financial statements.
Correct finished goods stock count procedures
are followed in order to detect any physical loss of
finished goods inventory. (validity) Physical
verification of inventory is appropriately planned.
O INV
1909
Undetected physical loss or deterioration of inventory.
The physical inventory process and timing is not in
accordance with company policy. Instructions for
performing the physical verification are inadequate. No
preliminary warehouse clean-up is performed (reducing
damaged, failed inspection and in-transit inventory).
Goods receipts and issues are not processed prior to
physical verification. Materials are inadvertently
excluded from the verification process. Inventory
documents are mislaid so the count is incomplete.
Appropriate cut-off procedures are not documented,
planned, followed and communicated. Inventory
balances are not "frozen" at the time of the account to
ensure proper cut off and to prevent artificial
discrepancies or incorrect adjustments being made.
Company owned materials at all locations(e.g.
materials at customers or third party warehouses) are
not physically verified. Non-Company owned material is
counted in the company's own inventory. Possible
irregularity: non-existent items are included in periodic
physical inventory count.
Stock counts should be performed in accordance with the company
policy. Employees who perform the counts should be given written
guidelines. Procedures should ensure that consignment materials are
not inadvertently counted in Company's own inventory. All stock
count documents are retained after the count is completed (as an
audit trail).
physical to recorded inventory of finished goods
stock are completely and accurately recorded, and
are approved by a responsible official.
(authorisation)
O,F INV
1910
Finished goods stock count differences are not
investigated and corrected. Adjustments may be
recorded to conceal physical shortages. Incorrect
inventory differences are recorded. No report of
differences is produced or reviewed by management.
Inventory differences are posted to the incorrect GL
account. Posting of inventory differences is not
appropriately authorised.
Finished goods stock count adjustment data is edited and validated;
identified errors are corrected promptly. Finished goods stock count
adjustments are compared to authorised source documents to
ensure that they were input accurately.
Inventory is managed to prevent obsolescence
and excessive write-offs. Obsolete, slow-moving
and/or overstocked inventory is prevented or
promptly detected and provided for.
O INV
1911
Obsolete and slow moving finished goods stock items
have not been identified and are maintained in
inventory. Inventory known to be obsolete or slow-
moving not written-off. Continued production of
finished goods stock that cannot be sold.
Inventory ageing reports are prepared and analysed regularly and
necessary follow-up action is completed. Quality control inspections
are performed to assess whether such goods should be returned to
inventory, reworked, or scrapped.
Sufficient inventory of finished goods is kept on
hand.
O,F INV
1912
Insufficient finished goods inventory levels resulting in
loss of sales.
System functionality monitors and maintains inventory levels in
accordance with organisation policies.
Finished goods inventory is protected from
damage.
O INV
1913
Handling and storage procedures are inappropriate for
the nature of the products. Finished goods are not
stored in an appropriate environment. (safe and dry)
Physical storage methods are regularly reviewed for sources of
inventory deterioration.
OBJECTIVE
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CONTROL OWNER
(Name)
Physical loss of finished goods inventory is
prevented.
O INV
1914
Unauthorised access to inventory. Finished goods
may be stolen, lost, damaged, or temporarily diverted.
Access should be restricted to authorised personnel only. Physical
security arrangements (fencing and gate security) should exist.
Periodic stock counts should be regularly performed. Bar codes: The
shipping label and bar code contain all relevant information. There is
a coding structure in place which ensures identification and
traceability of finished product.
Finished Goods Master Data
Only valid changes are made to finished goods
master data. (validity)
O INV
2001
Changes to finished goods master data are not valid. A procedure is established that changes to the material master
record are documented on a valid source document and approved by
owner of the material master information. All information entered
during material master creation and/or change is automatically
validated by SAP. For example, the values that are allowed for base
unit of measure, pricing group, purchase organisation and account
group are known to SAP. Upon entry in the field, the system
automatically checks the value entered against the values available
in the configuration tables. An error message is generated if the
value entered is not available.
Duplicate finished goods material master records
are avoided.
INV
2002
The same material is defined more than once in the
masterfile but with different names. This may result in
incomplete materials management reporting due to
more than one material number and/or confusion when
selecting material when processing Sales Orders.
All material master entries must be reviewed against the existing
material master before entry into SAP to ensure there are no
material names.
Changes to finished goods master data are
O INV
2003
Changes to finished goods master data are not
authorised.
The officials are authorised to enter, modify or delete material master
data only on the basis of an authorised source document. Significant
changes to the material master file are approved by management.
accurate. (accuracy)
O INV
2004
Changes to finished goods master data may be
incorrect. For example, a material may be
characterised as an inappropriate material type.
The officials (responsible for maintenance of material master data)
shall authorise all requests for modification of the material master
data after having checked the contents and the accuracy of the data
supplied. SAP edits and validates material master records online.
Recorded changes to the material master file data are compared to
authorised source documents to ensure that they were input
accurately.
All valid and authorised changes to finished goods
master data are processed. (completeness)
O INV
2005
Not all valid changes to the finished goods master data
are input and processed. Not all materials are included
in the material master.
Requests to change finished goods master file data are submitted on
Material master information is recorded in a
consistent and complete fashion to expedite sales,
production and procurement functions. Material
master data information is complete.
INV
2006
Incomplete material master data may be entered.
mandatory. Not all materials components (general,
established.
O INV
2007
processed timeously. Obsolete materials are not
deactivated immediately to prevent sales orders from
referring to them.
Requests to change finished goods master file data are logged. The
log is reviewed to ensure that all request changes are processed
timeously.
Material master data remains pertinent. INV
2008
Material master file data does not remain pertinent.
Material master data no longer needed is not
deleted/archived from the system.
Material master file data is periodically reviewed by management for
accuracy and ongoing pertinence. Materials that have not been used
for a significant period of time are reviewed to ensure that the
material master file remains up-to-date.
All changes to, and deletion of, finished goods
record is reviewed.
O INV
2009
periods. Changes to finished goods master data are
not reviewed by a senior member of staff. No
responsibility is assigned for regularly reviewing audit
trails of change information.
Recorded changes to finished goods master file data are compared
to authorised source documents by a senior member of staff to
ensure that the correct changes were made. A list of changes can be
generated using SAP (MM04).A list is prepared with date and time of
change, old and new values for fields and also the user that entered
the change.
OBJECTIVE
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CONTROL OWNER
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ROAD AND RAIL WEIGHBRIDGES
Details of all commercial vehicles & train "wagons"
are entered into the weighbridge system on when
entering and exiting the mill.
O INV
2101
Details of commercial vehicles & wagons are not
entered into the weighbridge system on entering and
exiting the mill.
Security should ensure that all commercial vehicles, trucks & wagons
entering and exiting the mill go via the weighbridge, generating an In /
Out transaction in the weighbridge system file. The weighbridge
should be situated at the entrance/exit to the Mill. There should be no
by-pass lane into/out of the mill. If there is a by-pass lane, security
should monitor the use of the by-pass lane at the weighbridge.
All relevant details of commercial vehicles and
wagons entering /exiting the Mill are recorded.
INV
2102
Relevant details of commercial vehicles and wagons
entering /exiting the Mill are not recorded.
There should be a standard system-generated pre-numbered
weighbridge ticket on which all details of the truck and wagon e.g.
registration number, tonnage, time of entrance/exit, company name,
truck drivers name, train drivers name, number of trailers and
wagons should be recorded.
The incoming and outgoing masses of vehicles
and wagons entering the mill are recorded.
O INV
2103
On entering and exiting the Mill, the mass of the vehicle
& wagons are not checked against the mass of the
invoiced / returned goods. Prescribed weighbridge
tolerance levels are not adhered to.
The mass of the product (Vehicle Out mass less Vehicle In mass) is
automatically compared against the mass on the document
accompanying the product leaving the Mill. No vehicle outside a pre-
set tolerance will be permitted to exit the Mill. Any variance outside
the tolerance should be reported to a Security Superintendent and
followed up by Security. Reasons therefore should be written onto the
weighbridge ticket / OB (Occurrence Book) entry system (also signed
by the investigating parties). Policies and procedures should exist
stipulating the prescribed tolerance levels and investigating
procedures.
The nature of the product being removed per the
accompanying documentation is verified.
O INV
2104
Type of product on vehicle & wagon has not been
verified to the invoiced product.
Security should verify the nature of product being removed against
the description on the accompanying documentation (delivery note,
etc), and should sign the documentation as verification thereof.
Unauthorised removal of product or other goods. O INV
2105
Documentation authorising the removal of product
(Delivery notes, route rosters, etc) are used more than
once.
All documentation supporting / authorising the removal of product
(delivery notes, weighbridge tickets, etc) should be stamped and
signed to prevent re-submission.
No unauthorised goods leave or enter the mill
without the necessary authorisation and
documentation.
O INV
2106
Undeclared and unauthorised goods may be hidden in
vehicles and not detected.
Security should search trucks & trains (both the horse, trailer &
wagon) and all other vehicles on entry and exit for unauthorised
goods, fire arms, cameras etc. Goods leaving the premises should
be supported by the authorised relevant documentation.
Weighbridge system data is valid. O INV
2107
Weighbridge masses and other data can be
overwritten.
The weighbridge system should be set up in such a way that it can
not be overridden by unauthorised staff. There must be a register or
log book to record any "overrides" that should be reconciled (by a
senior person) to the changes made.
Reliance can be placed on the accuracy of the
mass-measurement devices.
O INV
2108
Weighbridge scale tests are not performed internally
resulting in incorrect mass readings.
Policies and procedures should exist stipulating the weighbridge
scale testing (including the way they should be performed). Any
unacceptable variances should be reported, investigated, and
corrected.
Mass-measurement calibrations are done in
conformance with statutory regulations.
O,C INV
2109
Weighbridge not calibrated by independent contractor
on a regular basis resulting in inter alia contravention of
government regulations.
Policies and procedures should exist stipulating the weighbridge
calibration intervals and the regulatory requirements (i.e. calibrations
to be done every two years).
Adequate controls are in place when the
weighbridge system fails.
O INV
2110
Inadequate control when weighbridge fails. i.e. when
the computer system or weighbridge scale equipment
is down (manual tickets).
During a weighbridge failure, only urgent deliveries should be made.
There should be adequate manual documentation completed when
the computer or weighbridge system is down. The mass that is
calculated manually should be checked by a senior person for
correctness before entry or exit. A register should be established
and maintained to record all "off-line" transactions.
Weighbridge movements during system failures
are recorded.
INV
2111
Weighbridge movements during system failures are
not recorded.
All manual transactions should be captured into the weighbridge
system as soon as the system is "up & running". A senior official
should agree the information captured to the manual transactions to
ensure accuracy and completeness of captured information.
Security are performing their duties diligently. O INV
2112
Security not performing duties diligently. Senior security officials should monitor junior security to ensure that
they are performing their duties diligently. Rotation of security
personnel should be done as a matter of course.
OBJECTIVE
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CONTROL OWNER
(Name)
SEGREGATION OF DUTIES
There is adequate segregation of duties relating to
the receiving of raw materials.
O INV
2201
Ordering, receiving and issue of raw materials are not
segregated.
Persons responsible for purchasing, accounts payable, receiving and
issue of raw materials should have responsibility for only one such
function and have no system access to functions other than their
assigned function.
the receiving of engineering stores items.
O INV
2202
Ordering, receiving and issue functions for stores
engineering are not segregated.
Persons responsible for purchasing, receiving and issue for function
stores engineering should have responsibility for only one such
function and have no system access to functions other than their
assigned function.
finished goods stock.
O INV
2203
Finished goods receiving and despatch functions are
not segregated.
Personnel responsible for sales, order entry, shipping, invoicing,
accounting receivable, and cash receipts have responsibility for only
one such function and have no system access to functions other than
their assigned function. Despatch function should be adequately
segregated from receiving of other finished goods and monitored to
ensure and timely disposition.
Physical stock counts are performed by persons
independent of inventory custodians.
O INV
2204
The same employees receiving, despatching and
controlling the store perform the stock counts without
independent review.
reconciled to inventory records and the inventory records are
reconciled to general ledger.
Access to production, cost accounting and
inventory records, critical forms, processing areas,
and computer systems should be permitted only in
accordance with management's criteria (which
should provide for segregation of duties).
O INV
2301
Records may be destroyed or lost; this could result in
an inability to prepare reliable and/or timeous financial
and operating reports. Records may be misused or
altered, to the detriment of the entity or other parties
(vendors, customers, employees).
Prenumbered documents should exist and missing documents
should be investigated, documents should be retained in accordance
with the company policy. Documents should be safeguarded and
access thereto have to be restricted to authorised personnel only.
Access to material master data amendments is
restricted to authorised employees only. (raw
materials, engineering stores items, finished
goods, BOMs).
O INV
2302
Inappropriate authority to add, change or delete
materials master data is granted.
Through the use of SAP security authorisations, access is restricted.
Transaction codes MM01 Create Material Master, MM02 Change
Material Master, MM06, Delete material master). SAP R/3 restricts to
authorised personnel the ability to create, change, or delete bills of
material.
Access to maintain process production orders is
restricted to authorised employees only.
O INV
2303
Access to maintain process production orders is
inappropriately assigned.
Access to process goods movement transactions
is restricted to authorised employees only.
O INV
2304
Goods movements transactions and data are
accessible to inappropriate staff. Material movement
data is altered to conceal theft or loss of materials.
Transaction codes MB02 (Change material document), MB1A
(Goods issue), MB1B, Transfer posting.
Access to post goods receipts is restricted to
authorised employees only.
O INV
2305
Unauthorised users have the ability to post the receipt
of goods into the system.
Transaction codes MB01, MB04, MB31, MB1C - Goods Receipts
transactions.
Authority is appropriately assigned / restricted for
shipping functions.
O,F INV
2306
Authority is inappropriately assigned for the steps and
functions in the shipping process (e.g. create
deliveries, produce picking list, confirm deliveries, enter
picking information, post goods issue transactions).
SAP restricts to authorised personnel the ability to create, change, or
delete picking lists, delivery notes, and goods issues.
GENERAL
Policies and procedures are complete. O INV
2401
Lack of procedures. Departments have reviewed internal process and documented
procedures. Process and procedures methods are updated regularly.
Policies and procedures are clearly communicated
to all parties.
O INV
2402
Procedures not communicated to employees. All inventory policies and procedures should be fully documented and
communicated to personnel.
Policies and procedures remain pertinent and up-
to-date.
O INV
2403
Policies and procedures may be outdated. Policies and procedures should be kept up to date.
ACCESS TO INVENTORY RECORDS AND RESOURCES
OBJECTIVE
O
B
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C
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G
O
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R
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S
K
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F
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POTENTIAL RISK
(Internal Audit)
CONTROL OWNER
(Name)
Policies and procedures are valid and authorised. O INV
2404
Policies and procedures are not authorised. Management should authorise all policies and procedures.
Investment in system design is safeguarded by
adequate documentation of procedures.
O INV
2405
Investment in system design is not safeguarded when
there is a high employee turnover.
Policies and procedures should be clearly stated in writing,
systematically organised into handbooks, manuals, or other
publications (including electronic formats).
Controls mandated by policies and procedures are
established.
O INV
2406
Controls mandated by policies and procedures are not
established as desired.
Formal and documented policies and procedures should be tested,
updated, authorised and reviewed on a regular basis.
Employees have a clear understanding of their
responsibilities and the detailed procedures they
are to perform
O INV
2407
Employees may not have a clear understanding of their
responsibilities and the detailed procedures they are to
perform.
The employees job description should clearly document their
responsibility and should be agreed between the line manager and
employee.
Minimisation of risk of fraud occurring with regard
to employees.
O INV
2408
Employees are in a position to perpetuate irregularities
without detection (leave not taken / no rotation of
duties).
Employees should be encouraged to take leave regularly and rotate
duties to prevent over reliance on key personnel.
O INV
2409
Low morale / Lack of recognition. A suggestion box and mentorship programmes should be in place to
encourage employees. Regular promotions as well as greater
incentives should be in place. Career paths and continuous
education.

S Ox Inventory Management Risks and Controls

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Subject: Sarbanes-Oxley Act Review - Inventory Management

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