Hi Mike, we have found that the numbers of our count do not match with the system recording, so we need to test the control of one of your warehouse randomly selected. Can we meet tomorrow?
Mike: Sure, no problem, i will arrange the warehouse manager to meet you tomorrow.
Would you please show me your inventory management process? We need to assess the effectiveness of your process.
Yes, please follow me.We use the perpetual FIFO inventory recording system and we take stock of our inventory three times a week manually. We use CCTV to monitor our warehouse, and each shelf is equipped with a camera. Each day, the warehouse workers work with three shifts for 24 hours. We require warehouse personnel to count the goods received when they are transferred to the warehouse and acknowledge receipt of the specified quantity by signing the receiving report.
Would you please show me the staff shift schedule ?
I notice that you are understaffed. What happened?
Oh, because of COVID-19, we have to lay off some employees.
Sure. Here you are.
OK. Now I want to talk to the employees.
Employee A: yes. Our job becomes more stressful because we need to cover more areas than before.Employee B: I need to take both recording and counting jobs now.Employee C: there are more stocks to organise. So tired.
Hello. I notice that there are not many of employees recently. Does that influence your working condition?
Tony:Good job. So the conclusion is, there is no material problems in the internal control, but more employees are needed. Now that our job is almost completed, we need to report back to the management of ABC Co. jack, please contact Helen(the CFO). We need to arrange a final meeting.
Sarah: Tony, I have gone to the warehouse and finished the control test of inventory count. I find that due to COVID-19, the warehouse is understaffed and most staff are exhausted. They lack segregation of duties and this may allow the employee to steal from the warehouse. What’s more, since there are not enough employees, many expired products are not written-off in time, leading to overstated inventory and maybe food safety issues. We need to take these into consideration.
Jack: Sure. I will inform them.
Thank you for your advice. We will adjust according to your suggestions.
We suggest that you implement the PDA system to improve your efficiency in inventory management and release the pressure of the staffs. More staff training should be provided to new staff. You can establish a more sound IT system. After your adjustment, please send us your new data of inventory count. We will then prepare the final report. Thank you.
Thanks for attending. We have already prepared the management letter and sent them to your email address.
Now, we’d like to point out some weaknesses inthedesign or implementation of your internal control.The staff are not well trained. Employees in the warehouse are not enough. Manual inventory count is not effective. In conclusion, the internal control system is working properly, but you can make some improvements.