Investigative

Stock Audit Report of

FMS RAGS (U) LIMITED
st
From 1 November 2016 to
st
31 August 2017
CONTENTS PAGE

1 Covering letter 1

2 Summary of issues 2

3 Details of issues arising during the stock audit 3-9

5 Conclusion 10

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THE BOARD OF FMS RAGS (U) LIMITED
P.O.BOX 35183 KAMPALA
19TH SEPTEMBER, 2017

Dear Sir,

REPORT ON THE ALLEDGED MISSING STOCK OF USED CLOTHES IN BALES.

The purpose of this letter is to bring to your attention the findings from the recent
stock audit carried out on FMS RAGS from 1st November, 2016 to 31st August 2017.
Because of previous discussions, we appreciate that you will already be aware of the
majority of the matters contained in this letter; however, we are required by
Auditing Standards to formally communicate certain matters to you.

Our audit has been conducted on a computation basis and is mainly focused on stock
thus we are unable to provide a comprehensive statement of all weaknesses which
may exist in the accounting and internal control systems or of all the improvements
which may be made. We can only address those matters which have come to our
attention as a result of this stock audit procedures that we have performed and this
report is free of material misstatements and it’s not for the purpose of expressing an
opinion on the effectiveness of the entity’s internal control.

Per our engagement letter dated 18th September, 2017, Blend Business Solutions
has performed the Stock audit and found the alleged missing Stock of used clothes in
the company’s stock books between 1st November 2016 and 31st August 2017.

Our services were performed and this Report is developed in accordance with our
engagement letter dated 18th September 2017 and subject to the terms and
conditions included herein.
Our Scope of work included the following:

1. A review of the company’s stock books.

2. A review of detailed import documents.
3. Review of Stock takings minutes
5. Review of Compliance to Statutory requirements

The procedures we performed constituted an examination or a review in accordance

with generally acceptable auditing standards or attestation standards.

Our submitted report is limited to the specific procedures and analysis described
herein and is based only on the information made available to us by 18th Sept 2017.

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This Report and all Blend Business Solutions deliverables are intended solely for the
board of FMS RAGS (U) LTD, for their internal use and benefit and is not intended to
nor may they be relied upon by any other party (“Third Party”). Neither this
deliverable nor its contents may be distributed to, discussed with, or otherwise
disclosed to any Third Party without the prior written consent to Blend Business
Solutions.

Blend Business Solutions accepts no liability or responsibility to any Third Party who
gains access to this deliverable.

We appreciate the opportunity to assist you with this matter.

Yours faithfully
For: Blend Business Solutions

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SUMMARY OF ISSUES
Section I - Issues arising from the Stock Audit

Ref Summary of the issues

1. Missing Stock / Sales
2. Daily Sales Register & Cash book
3. Wrong Opening Balance Carried Forward

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Section 1-Details of issues arising from the stock audit
1 Missing Stock / Sales
Issue/observation
During the audit, we noted
that some stock received
from the supplier is either
received less, counted
wrongly or lost during the
offloading process.
In July, A stock of a full
container was not entered
in the register.
This fraud could also be
concealed by hiding certain
sales and claiming to have
received less stock, since
there was no actual CASH
SALE book to verify from all
the sales made.
Risk/implication Recommendation Management Individual
Comments Responsible/
Implementation
Date:
Stock is a vital Asset in Debtors should strictly be
business and the stock monitored and reviewed by
records should be management.
handled in a more
professional manner Staff should always ensure
where columns of loss/ that carbon papers are
damages, adjustments properly inserted in the
and remarks are inserted invoice books.
for future reference.
Sales made on a daily
basis should be recorded
in a carbonated CASH
SALE book, since one may
easily forget how many
bales were sold at the
end of the day.
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2. Daily Sales Register & Cash book
Issue/observation
There is no daily sales
Register book to record the
detailed daily sales of the
company.
The Cash book would help
in analysing whether the
stock sold was entered in
value and forgotten to be
entered in quantity.
Risk/implication Recommendation Management Individual
Comments Responsible/
Implementation
Date:
Trucking sold stock may Management should prepare
be complex when and maintain a daily Sales
depending on only the register and a cash book on a
stock register. day today basis.
When dealing with a
single record, there is no
room for reconciliation
which could easily be
created if we had two
entries for comparison.
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3. Wrong closing and opening balances of stock
Issue/observation
The opening balances
carried forward in a single
month was wrong. This
could be as either a result
of goods already sold and
forgotten to record out or
wrong calculations.
Risk/implication Recommendation Management Individual
Comments Responsible/
Implementation
Date:
This can lead to a huge If balances carried forward
loss of stock as other can NOT be recorded well,
staffs may take advantage Then management should
since the known stock is think of employing a third
different from the actual party who strictly comes to
stock. This is most likely confirm and verify the stock
to happen in times of before new balances are
loading bulky customers carried forward.
you may connive with the
staff and swindle stock.
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Opinion:
Based on our terms of reference stated above, our audit work was limited due to incomplete records since we didn’t have where to verify the
sold stock except on the stock register. Also since there is no cash book that would help verify whether the values entered were correct and
the quantities entered were less than actually what is supposed to be.

Since our scope of audit was only stock, we therefore conducted a computation test and reviewed using the company’s importations and
found out that 2643 Bales of used clothes were not accounted for appropriately as reflected in the Computation schedule.

OTHER MATTERS:

a) Missing funds/ Stock

The missing funds should be accounted for by the General Manager who was negligent on his job. He did not take action using his
powers to mitigate the Stock register as a result of weaknesses in the internal control system. Additionally, the stores manager should
also be held liable for the loss of stock.

Hopefully management can provide appropriate explanation for the amounts under question.

We take this opportunity to express our gratitude to you and your staff for the co-operation and assistance, which we received
during the course of our audit.

Yours faithfully,

Blend Business Solutions

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