7. Areas of Audit of Manufacturing Companies. Purchases Sales Creditors Debtors Sub Contracting Inventory – Scrap Export Incentives Price Escalation Cash Management Payroll Labour Contractors Review of MIS and Internal Controls
8. 1. Purchases To check whether quotations are received from various suppliers. To check whether Comparative Statements are prepared for each Purchase Order. Match the Purchase Orders with the Purchase Requisitions in respect of quantities. Receipt of materials is recorded through Material Receipt Note (MRN) against all Purchase Orders. To check whether bills are passed after adequate inspection. Quantity and Rates match with the PO Check of bills are properly accounted in the books
9. 2. Sales Scrutiny of contract with the client and ensure that design, supply and erection phases are properly billed. Provision of Guarantees/advances Review Project Status Check the Billing Break Up as per Contract & Ensure the same is followed Collection/ Receivables/ Retention Taxes & Duties reimbursement from the client Taxes & Duties in case of Direct Dispatches All Materials dispatched is billed Sales Returns Compare budgeted profit with actual profit.
10. 3.Creditors Review Scrutinize debit balances in creditor's ledger, to determine the following: Excess payment Bill not booked Advance made but material not received Whether new advance given to the same party from which earlier supplies are pending since a long time.
11. 4. Debtors Review Check age wise listing of the debtors Filter out debtors aging more than the credit period Investigate into the reasons of delay in payments Ensure the adequacy of the debt recovery measures and recommend ways to eliminate the inefficiency Reconcile the debtors as per the branch/site and as per the Head Office. Accentuate on frequent visits by HO officials/auditors to site/branch in order to sort out the differences in the amount of debtors and keep a track on the debt recovery controls.
12. 5. Sub Contracting Matching bills to Work Order and receipt of material. Check whether Excise/CENVAT implications Quotations are invited for new jobs / new contracts. Material Accounting Report / PO wise Material Accounting Report is checked with issue and receipt details for reasonableness. Perform material reconciliation to ensure whether correct credit has been given for expensive material for e.g. Stainless Steel. Perform material reconciliation to ensure that input/output ratio's exist and are reasonable.