Audit Function: Production

Audit Objectives Control Control Weakness Testing

Production Planning  Standard documentation should be used to  Lack of monitoring on the  Perform walkthrough of processes
To ascertain the production communicate sales orders and production planning may lead to and systems relating to the
planning process to ensure production/modification requirements to delayed in actual production. production planning to ensure the
the schedule planning to production personnel.  Possibility the material order may process are in place.
meet the customer  Production schedules should be compared to not meet the planned quantity due  Perform sample to test check
requirement. sales orders to ensure that production timing to defect/wrong calculation/wrong whether the company has met the
and quantities are appropriate. item ordered. customer expected delivery date
 Production schedules should be reviewed and and ordered quantity. Any delayed
approved by appropriate personnel delivery shall inform the
 Standard documentation should be used to customer.
communicate material requirement plans
(including quantities and dates) to the
purchasing department.
 Material requirement plans (MRPs) should be
compared to production schedules weekly to
ensure that quantities and timing (including
the effect of lead times) are appropriate.
 Instances of insufficient or excessive raw
material inventory should be monitored
weekly/monthly.
 Any late delivery shall inform the customer to
keep them up to date.
 Ensure that the log book in respect of all the
plant machinery and equipment are kept
properly and up to date. Verify the machine
log books and comment on the discrepancies
observed
.
Audit Objectives Control Control Weakness Testing
Monitoring of material  Ensure that the quantities of inputs, expected  Unauthorized of material usage may  Understand and document the distinct
usage and output outputs and actual outputs are clearly arise due to lack of processes involved in the
To ascertain the documented and accounted for before and after monitoring/documentation evidence manufacture of the finished good.
appropriateness of the the production process. for the requisition of material.  Check the budgeted production of all
issuance of material  Actual production (Actual Material Usage) is  Risk that actual output may have the products with the actual result on
and the actual output compared against schedule (Budgeted variances in accordance to the a monthly/annual basis. Ascertain the
Material) and variances are highlighted with planned output against to material reason for a shortfall in the
prompt action taken. input. production if any and comment upon
 Production Report prepared is comprehensive,  Possibility the actual output has been it.
correct and approved by Production Manager. recorded wrongly into the account.  Perform testing on the actual output
 Employees should be trained in the use of the  Lack of training may lead to whether is it recorded correctly into
equipment. employee is not familiar with the the account (if any, test check with
equipment/machinery. manual record against the system).
 Verify the production records such as
production slips/memos to ensure that
the records are properly maintained.
 Perform walkthrough on the system /
procedure / method of recording the
input and output.
 Check the details in respect of yield -
Budgeted yield v/s actual yield in
respect of all the products and enquire
in to the reason for lower yield and
comment upon it
Audit Objectives Control Control Weakness Testing
Scrap Management  Ensure that scheduled waste are segregated,  Risk of missing scheduled waste  Perform walkthrough on the scrap
To ascertain the stored and safeguarded until disposal. The due to unauthorized personnel management process and
appropriateness of scheduled waste is clearly marked, labelled and have the access to the place. determine the waste is properly
management of the packed.  Incomplete of documentation for stored in a designated place.
scheduled scrap.  The Company does not keep the scheduled the disposal of scrap which cause  The total scrap as per the Scrap
waste for more than 6 months unable to rectify the actual record Stock Register should be tallied
 Scrap material and rejected finished goods are of the waste. with the quantity of scrap
reasonable in quantity and completely recorded  Scheduled waste may sell to generation of various types as
for reference. unauthorized personnel or is not shown by the costing data.
 Ensure that a proper record is kept of receipts, approved by the management. Comment if any difference /
issues, opening and the closing balances  Lack of monitoring of the disposal discrepancy is observed.
quantity of each item of scrap in the scrap yard. of scrap to other party.
 Ensure there is proper documentation for the
transportation of waste material (e.g. noting the
vehicle registration number, authorized driver,
etc.).
 For sale of scrap ensure that a comparative
chart of offers / quotations is prepared and the
Sales order is made in the name of the best
quoted party. All the offers / quotations should
be properly evaluated.
 Sales proceeds from disposal are adequately
recorded, supported, banked in timely and
accounted for
 Scrapping process should be witnessed by
independent company personnel.