Checklist for Internal Audit of Purchases and Inventory Management

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Purchase and inventory department is very sensetive department of any organization. Approval, Vendor validation, Quality assessment , communication are important part of Purchase process
 Inventory audit is based on inventory information and policies, inventory levels, and inventory monitoring.

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Purchase & Inventory Management
ParticularsConcerned PersonChecked ByRemarks
AMaterial Control
Check proper records for-
1Availability of materials
2Control over the investment in material
3Reasonable Prices
4Wastage Control
5Control over the spoilage and obsolescence
BPurchase
1There should be at least two personnel for the purchase department with rights and duties as per the Purchase Policy
2All the purchases are properly authorised as per the policy
Upto Rs 5000/- Purchase Manager
Revenue purchase > Rs 5000/- Unit Head
Capital purchase > Rs 25000/- BOD
CRequirements
1Requirement of the Stores Department is in accordance with the production schedule and on the basis of need of the particular item whether it is capital or revenue item is forwarded through Purchase Indent in 2 copies
DVendor Registration
1The Purchase department registers the potential suppliers according to the required items in the prescribed format.
2Check proper maintenance by Purchase manager of master list of the suppliers
ESelection / Assessment of the suppliers
1Check for following aspects while selection of suppliers-
Quality
Price
Terms / Conditions (availability etc.)
Transportation Cost
Discount
Credit Facilities
2Final selection is vetted by a Team consisting of Purchase Manager, respective departmental head, finance / accounts person and if required the technical person of the company.
3Tender is raised in the specified format for specific purchases along with terms & conditions of the company
If any other method is followed, mention it-
4Proper analysis of the quotations invited in the prescribed format
5Proper explanatory note is prepared to state the reason for selection of particular supplier by the selection committee
6Documentation of the analysis summary sheet with the PO
FExecution of Emergency Purchase
1Check for following points-
Reasons / Conditions
Time Basis
Price
Dealers
Others – Credit Terms, Transportation, Taxation etc.
2Finalised by a Committee comprising of-
Purchase Officer
Finance / Accounts Officer
Respective Department Head
GPurchase Order
1PO is prepared in 2 copies in the prescribed manner and is duly authorised
2Regular follow up of PO for timely receipt of materials
HMaster List for Purchase
Check proper maintenance by Purchase manager of following master list of the suppliers
IReceiving and Inspection of the Material :
1All supplies at receiving department.
2Check against Purchase Orders.
3Inspection of material
4Proper delivery of goods to the concerned department / store.
5Proper authorization by the receiving authority.
6All returns, shortage, rejection must be informed to the purchase as well as to the accounts department so that the payment to / debit notes on the suppliers should be made / raised accordingly.
7Goods Receipts Notes (GRN) should be endorsed to accounts and sent to purchase department.
8Purchase orders file should be maintained properly.
9Receiving, unloading and unpacking the material delivered by the suppliers under delivery challans/ Invoices.
10Checking quality of the material received by the Quality control department.
JStores/Inventory Management
1Proper counting of the material received and recording and classification of the same.
2After receiving of the required material the invoice should be supported with the Material Inspection Report and sent to the accounts department.
3Proper authorization and verification of the MIR by the purchase manager as well as the higher authority.
4Control measures i.e. stock taking & supervision of the material received should be done on periodic basis (Monthly / fortnightly / weekly).
5Separate authority for purchase and stock taking.
6Continuous stock verification.
7Shortage/excess of the material is reported to the purchase as well as the production department.
8Any discrepancies / damages must be recorded and reported to the concerned authority.
9There should be a proper control over the Scrap / Wastages / Damages/ Defectives etc.
KClassification & Coding of Material
1Proper classification as construction material, consumable stores, spare parts, tools etc.
2Authentic code no. is allotted for proper distinction / description
LMaterial Control System :
Analysis of Material / inventory according to their value, movement, quantity i.e.
·        ABC ( High : Medium : Low value )
·        FSN ( Fast : Slow : Non moving )
MInventory Records:
1Daily Updation of Stores Ledger
2Check Stores Ledger for proper stock keeping, recording material receipts, issues and balances
3Issue of material from stores in proper format
4In case of material transfer from one job to another job, the material transfer note will be prepared in 2 copies
5Scrap / wastage should be recorded and reported in a proper format

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