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Production and Inventory AO2 - Coggle Diagram
Production and Inventory AO2
i.)
Compromises in Internal Controls in
:star:Production Planning and Design
3.) Inadequate documentation
Proper documentation is
crucial for maintaining internal controls
. Generating
customer job cards
(CJC) or
inventory job cards
(IJC)
to capture all costs involved in production
, such as raw materials, direct hours worked, and machine hours, helps ensure accurate tracking and accountability.
2.) Absence of segregation of duties
It is
important to ensure appropriate segregation of duties
by having different individuals responsible for
authorizing
and
accepting production orders
. This helps prevent unauthorized or fraudulent activities.
4.) Lack of sign-offs
Each
person responsible
for a specific part of the
production process
should
sign off on the document evidencing the transfer of goods to the next stage
. Failure to obtain these sign-offs can compromise internal controls and
increase the risk of errors or fraud
.
1.) Lack of proper authorization
Internal controls can be compromised when production orders, such as
customer production orders
(CPO) or
inventory production orders
(IPO), are
not duly authorized
by the
production planning department
before being accepted by the
production processing department
or
factory manager
.
5.) Inadequate monitoring and review
Regular
monitoring and review
of
production processes
are essential
for detecting any unusual charges or discrepancies.
Daily production reports
should be generated,
distributed to relevant departments
, and
reviewed by management to identify
and
rectify any anomalies promptly
.
6.) Failure to query and rectify discrepancies:
Management should
be proactive
in
addressing any unusual charges or discrepancies identified in the daily production report.
Promptly querying and rectifying these issues
helps maintain the integrity of internal controls
and
prevents potential compromises
.
ii.)
Compromised in the :star:Production Process
3.) Timekeeping fraud:
If
production employees
Or machines
falsely record the time spent on each stage of production on the Job Card
, there is a
Risk of Inflated hours
and
Production Costs
.
4.) Lack of inspection:
If the shift foreman
or production manager
fails to inspect each stage of the production process before goods pass to the next stage
and authorize via signature, there is a risk of incomplete or defective products.
2.) Failure to compare records:
If the
Raw Materials issued to Production
are
not listed on the Daily Production Report
and
compared
with the
Raw Material Inventory Master File
records for that day, there is a
risk of unrecorded or stolen materials
.
5.) Unauthorized variances:
If the production manager
does not duly authorize any differences or variances from standard costs and unexpected items
such as labour overruns, there is a
risk of incorrect production charges
and
financial misstatements
.
1.) Lack of segregation of duties:
If the
same person
or department
prepares the Pre-Numbered Raw Materials Issues Slip
(RMI) AND
allocates them to work in progress customer job card
(CJC) or
Inventory Job Card
(IJC), there is a
risk of errors
or intentional misallocation.
6.) Lack of accountability:
If the
transfer of manufactured goods
to
finished inventory
is
not authorized by the factory
or
production manager
and acknowledged by the
finished goods inventory stores staff
, there is a
risk of stolen
or
misplaced products
.
Internal Controls that can Be Compromised in
:star:Inventory Management
Inadequate review of production reports:
Poor storage and dispatch procedures:
Lack of agreement with production reports:
Inadequate physical protection of inventory:
Absence of supporting documents:
Lack of periodic inventory counts:
Inaccurate recording of costs:
Insufficient maintenance of inventory master files:
Lack of updating ledger accounts:
Weak physical and monitoring controls: