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PRODUCTION & INVENTORY CYCLE - Coggle Diagram

- - - - Outputs
        
        Finished Goods & Services
- - - - Based on established or future trends, re-order levels or out-of-stock items
        
        Segregation of duties
        
        Production processing department or factory manager accepts order by signature
        
        Then issues CJC or IJC
        
        Used to capture costs of raw materials used, direct hours worked and machine hours
        
        Responsible persons sign each stage as it moves through production
        
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  - - - Prepared by production planning department or production/factory manager
        
        Accounted for as allocated on CJC or IJC
        
        All materials issued - listed on daily production report
        
        Copies sent to raw materials store staff - compare with raw materials inventory master file records
        
        Direct labour & machine hours captured on CJC or IJC
        
        Jobs cards reconciled at end of day
        
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  - - - Evidence of date and authorization of transfer from one department to next should be kept
        
        Eventually transferred to finished goods inventory - Goods transferred note (GTN)
        
        Amounts in general ledger:
        
        Agreed to daily production reports (WIP)
        
        Completed production report (manufactured goods transferred to finished goods inventory)
        
        Management in various departments - review production reports regularly
        
        Inquire about out of line expenses
    - - Accounted for in raw materials or merchandise store
        
        Raw materials leaving - charged to production
        
        Cost of maunfactured goods transferred from WIP to finished goods - accounted for
        
        Once sold - charged to cost of sales and relevant customer invoice
        
        Resulting in charge to accounts receivable or recipt of cash
        
        Inventory movements maintained by records of physical quantities moving in and out.
        
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    - - Monitor finished goods inventory levels, existence & accuracy of measurement
        
        Ensure no stock-outs
        
        Monitor slow moving, obsolete or damaged items
        
        Monitor deliveries by suppliers - quality, prices and lead times
        
        Monitor existence of inventory - susceptible for theft
        
        regular / periodic inventory counts
    - - Perpetual inventory - continuous checking
        
        Issue of goods at selling price
        
        Gross profit analysis - monitor percentage of gross profit to sales
        
        Physical control - few, specific exist for movement of goods
        
        Monitoring of inventory levels - match sales demands
    - - Planning: Fixing the date
        
        Fixing responsibility
        
        Control over stationery
        
        Control over inventory movement
        
        Cut-off point established
        
        Cut-off maintained at date of count
        
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    - - Done under proper supervision
        
        Counts teams of 2 employees - 1 count 1 record
        
        All counters, recorderds & checkers should sign/initial count sheet
        
        Supervisor should scrutinze for such signatures + add own
        
        All count sheets/tags issued (used or unused) should be accounted for
        
        Auditor to obtain copy of planned procedures + written instructions to staff
        
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- - - - Segregation of duties
        
        Rotation of duties
        
        Personnel take leave regularly
        
        Management control
        
        Internal Audit
        
        Sufficient stationary control
        
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  - - - Inventory only leaves the storeroom based on properly authorised documentation
    - - Inventory should be safeguarded against theft and damage
    - - All inventory is accurately recorded at the correct quantity and prices
  - - - Regular inventory counts
        
        Follow up on differences
        
        Adjustments of inventory record
        
        After proper management authorization
      - Obsolete/slow-moving inventory ID'd timeously
        
        Systematically written off - company policy
      - Inventory records maintained
        
        Personnel independent from safeguarding function
        
        Written up from the GRN and delivery
        notes/or issue notes to production
    - - Inventory kept in locked storeroom
        
        Limited access
        
        Key control
        
        Security guards
        
        Camera's
      - Inventory safeguarded against elements
        
        Under shelter
        
        Fire extinguishers
      - Inventory sufficiently insured
    - - Issue notes made out to production
        
        After receipt of requisition
        
        Numerically accounted for
        
        Missing numbers followed up
        
        Signed for by storeman
        
        Production foreman signs as proof of receipt of goods
      - No changes allowed on issuing notes
  - - - Attend inventory counts
        
        Observe procedures
        
        Perform test counts - compare with client counts
        
        Observe inventory for obsolescence & damage
      - Inspect write-off of inventory
        
        Ensure inventory identified as obsolete & attendance properly provided for
      - Observe maintaining of inventory records
        
        Select GRN & DN - Follow to inventory records
        
        Agree details, quantity, amounts, description
        
        Select receipts & issues from inventory records
        
        Follow through to GRN and issuing docs
    - - Enquire & observe to confirm that inventory is kept in locked storeroom
      - Enquire & observe to confirm that inventory is safeguarded against elements
      - Inspect insurance contracts - invetory is sufficiently insured
    - - Enquire about issuing procedures
        
        Inspect supporting docs
        
        Confirm authorization signature
        
        Inspect issue notes - numerically numbered
        
        Signed for by foreman
        
        Inspect - production foreman signs as proof of receipt of goods
      - Inspect issue notes for changes
      - Observe procedures - issue of inventory
        
        Observe gate control
        
        Ensure no inventory leaves store without DN
- - - - Agree total og GL to TB & FS
        
        Inspect meeting minutes - authorization
        
        Test Pres & Discl - FS
        
        Test casstings & calcs of GL, docs & recons
        
        Overall review - exceptions - GL accounts
        
        Obtain management representation letter
        
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  - - - No unrecorded/disclosed items @ YE
    - - Recorded in correct period
    - - Valid title to inventry @ YE
    - - Determined through allocations of RM, labour & OHM expenses
    - - Physically exist @ YE
    - - Correctly classified & presented ito IFRS
    - - Stated at lower of cost or NRV
  - - - InspectTotal cost of materials issued per the requisition notes is matched by charge to WIP
      - Inspect sample of completed job records - specific customers for invoice numbers & allocation to finished goods.
      - Inspect transfers from WIP to finished goods ensuring accumulated costs - transferred completely.
    - - Recalculate overhead allocations - enquire about the basis of allocation - consistent of the PY.
        
        Scrutinize job records - direct labour hours allocated reconciled to underlying wage records.
        
        Inspect WIP account for jobs written off & related authorization
  - - - Agree GTN (in finished goods warehouse) to completed job records for goods transferred from manufacturing.
        
        Inspect suppliers’ invoices- receipt of merchandise in finished goods
        
        Inspect issue of finished goods to COS (GL) & sales inv.
  - - - Inspect sequence tests & exception reports
  - - - Select pre & pos YE
        
        GRN, DN, Completes production reports (WIP to FG)
        
        Follow trhough to inventory MF & GL - recorded in correct acc period
    - - Inspect FS to ensure amounts are classified & disclosed correctly in ito IFRS.
        
        Inspect FS notes reflect rights & obligations of entity wrt assets mortgaged, pledged or leased to secure the bank overdraft or liabilities of the entity, or others.