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The Production and Inventory Business Cycle - Coggle Diagram
The Production and Inventory Business
Cycle
Three functions
Production Planning and Design, the initial step in the production process,
involving order authorization, cost tracking, and monitoring progress
Production Processing in the Production and Inventory cycle. It covers
raw material issuance, time tracking, inspection, and inventory transfer
processes.
Inventory Management, the final function in the Production and Inventory cycle. It
includes ledger updates, controls, and inventory counts
General Controls
Supervision and review
• Segregation of duties
• Rotation of duties
• Personnel take leave regularly
• Management control
• Internal audit
• Sufficient stationery control
Scrutinise all records and documents for
extraordinary items
Test castings and calculations on all selected
items, documents and ledger accounts
Internal Controls and Control objectives:
Safeguarding:
Completeness, Existence
Inventory should be safeguarded against theft and damage
Issue of raw materials to production:
Completeness, Validity
Inventory only leaves the storeroom based on properly authorised
documentation
Recording:
Completeness, Accuracy
All inventory is accurately recorded at the correct quantity and prices
Documents In Cycle
Customer Production Order
Inventory Production Order
Raw material issues slip
Customer Job card (“CJC”)/ Inventory Job card (“IJC”)
Job transfer/ inventory movement sheet (Goods received note)
Inventory master files – Raw mat., WIP & Finished Goods
Daily production report
Completed production report
Transfer to finished goods note
Picking slip and delivery notes
Inventory Count Sheet
Inventory adjustment form
SUBSTANTIVE PROCEDURES
Raw Materials: Completeness: Inspect sequence tests & exception reports of unmatched pre-numbered raw material requisitions & pre-numbered raw material issue slips.
Work in progress (WIP): Completeness: Inspect whether total cost of materials issued per the requisition notes is matched by charge to WIP. Inspect a sample of completed job records for specific customers for invoice numbers and allocation to finished goods. Inspect transfers from WIP to finished goods ensuring that accumulated costs have been transferred completely
Accuracy/Validity: Recalculate the overhead allocations and enquire about the basis of allocation and it being consistent with that of the PY