This audit report reviews the major financial and administrative processes at a company facility. The review covers internal controls and processes in the following areas: (1) expenditure cycle (purchasing, accounts payable and payroll); (2) revenue cycle (billing, accounts receivable and credit and collections); and (3) inventory (inventory management, inventory accounting and physical security).
The following items were noted during this review:
- Physical security is adequate, including security guards 24-hours per day.
- Cycle counts are regularly performed.
- A full physical is performed annually.
- Orders are promptly processed.
- Billings are generated based only on shipments made on a one day lag.
- Days-sales-outstanding is below the industry average.
- Credit file evaluations could be performed on a consistent basis rather than ad-hoc
- Cash is properly applied on a timely basis.
An opportunity exists to strengthen the excess and obsolete inventory review process and to standardize purchase orders processed, as orders come in various forms.