3. The Company
Name: 3EMS Delivery Services
Type: Sole Proprietorship
Owner: Ernesto Macale Santos
Nature: Distribution Company
Products: Home, food, and hygiene
Offices: Pampanga, Nueva Ecija, Tarlac
4. Vision:
To be recognized as the
Leading and Largest
distributor in Central and
North Luzon by 2030
through our guiding
principles of providing
consistent service quality,
affordable prices, and
effective commitment to
our customers
Mission:
Deliver quality and
essential home, food, and
hygiene products in the
most effective, offer the
most reasonable price and
ensure stock availability
whenever the customer
desire.
Company Overview
10. OPERATIONAL AUDIT
Sales Process (Booking)
Sales Process (Ex-truck)
Ex-truck Inventory Reimbursement Process
Accounts Receivable Collection Process
Sales Return Process
Purchase Process
Reimbursement Process
Payroll Process
11. Places order by filling out
the Pricelist-PMS Form
Encodes orders in
Google Sales Form
Collects & processes all
orders per salesman
Approval/Denial of
Sales Order (SO) &
Delivery
Prepares Pick Lists (PL)
Informs Salesman
re the disapproval
immediately
Prepares orders
based on PL
Pick ups the orders based
on SI and PL and delivers
the same to the
customers
Prepares Sales
Invoices (SI)
CUSTOMER SALESMAN SALES & FINANCE
OFFICER
GENERAL
MANAGER
WAREHOUSE
STAFF
Sales Process (Booking)
Approved
Denied
Informs customers re the
disapproval immediately
Receives orders
and signs the SI
Receives the
signed SI
Receives the signed SI
and record as Sales
Forwards PL to
SFO
Prepares Summary of
Delivery
DELIVERY
Prepare Sales Liquidation
Summary
Send Pictures of Sales
liquidation report,
Summary of Delivery and
Sales summary
12. Sales Process - Booking
No
.
Audit Observations Audit Recommendations Management Response Audit Procedures
1
We noticed that Pick Lists
are not being signed by the
Sales and Finance Officer
(SFO) and the Warehouse
Staff.
We recommend that Pick Lists
must be signed by the SFO as
preparer of the document, the
Warehouse Staff as preparer of
the orders, and the Delivery Team
who shall pick up the orders.
We will inspect Pick Lists whether
the same are signed by the
appropriate signatories.
2
In Nueva Ecija office, we
noticed that Pick Lists are
also being issued to the
delivery team together with
the Sales Invoice.
We recommend that the Pick Lists
be kept by the SFO and must not
be released to the Delivery Team.
We will inspect the completeness
of the Pick Lists and compare
them with the customer-signed
Sales Invoices.
3
We noticed that the Pick
Lists have the following
information printed on
them: price, amount,
discount, and amount due.
We recommend that the
information regarding the price,
amount, discount, and amount
due be withheld from the Pick
Lists to avoid unnecessary
information being divulged to
those employees who no longer
need to know the same.
We will check if the said
information were already withheld
from the Pick Lists.
4
We noticed that Sales
Invoices are not being
signed by the SFO,
Warehouse Staff, and the
Delivery Team.
We recommend that the Company
issue a memorandum requiring
the SFO, Warehouse Staff, and
the Delivery Team to sign on the
Sales Invoices. This memo should
also inform them about their
accountabilities in signing the
same.
GM recommend that Sales Invoices
should be clean and no erasures and
update the sales orders immediately
after checking the items
We will inspect the Sales Invoices
whether the same are signed by
the appropriate signatories.
13. Sales Process - Booking
No. Audit Observations Audit Recommendations
Management Response
Audit Procedures
5
In Nueva Ecija office,
Salesmen accompany
delivery team during the
delivery of orders. In
Tarlac office, Salesmen no
longer accompany the
delivery team.
We recommend that the Salesmen
no longer accompany the delivery
team during delivery of orders.
They may use the time to book
more orders and collect
receivables from customers.
N/A
6
We noticed that there is
no process of counter
checking whether the
reported out-of-stock
inventory in the sales
liquidation report are
really out-of-stock or just
missing inventories.
We recommend that the
Warehouse Staff prepare an out-
of-stocks report per batch of
delivery. This should be compared
by the SFO with the sales report
of the Salesman every day, if
applicable. If not tallied, this
should be resolved by the SFO,
Warehouse Staff, and the Delivery
Team.
We will compare the out-of-stocks
report with the sales liquidation
report.
7
We observed that the
Company does not
maintain profile records of
its credit customers i.e.,
Customer Investigation
Form, DTI/SEC Permit,
LGU Business Permit, BIR
Certificate of Registration,
Proprietor’s Identification
Cards, and Pictures of
Establishments.
We recommend that the Company
maintain such profile records to
establish the identity, credit
worthiness, and credit limits of
each credit customer.
All Clients with Accounts
Receivable must have a hard copy
of the customer profile records of
its credit customers
We will accompany the
salesman/delivery team in their
store visitations to verify the
details in the Credit Investigation
(CI) Form, and customer profile
records.
14. Offers products to various
stores Places order
Prepares Billing Invoice
(BI) and prepares the
orders
Receives the payment and
the signed BI
CUSTOMER
SALESMAN
Sales Process (Ex-truck)
SALES & FINANCE OFFICER
Receives orders, signs the
BI, and pays in cash
Receives the cash remittances
and the signed BI
Prepare Sales Liquidation
Summary
Send Pictures of Sales
Liquidation Summary and
Sales Summary
15. SALESMAN
Ex-truck Inventory Replenishment Process
Lists inventory items which
needs to be replenished
SALES & FINANCE OFFICER
Reviews the Inventory
Requests
WAREHOUSE STAFF
Load the inventories to
Delivery Vehicle (witness by
salesman)
Signs STI and retains the
original copy
Forwards the Inventory
Request to the Warehouse
Prepares Stock transfer
Invoice (STI) and forwards
to the Salesman
Update Inventory Records
Prepares the requested
inventories
Checks the prepared
inventory based on the
approved request
Receives the requested
inventories
16. Sales Process – Ex-truck
N
o.
Audit Observations Audit Recommendations Management Response Audit Procedures
1
We noticed that the
Company has no ex-truck
inventory request form.
The salesman only
prepares his request for
inventory replenishment
by listing his requests on
any piece of paper.
We recommend that the
company create an Ex-truck
Inventory Request form to
formalize the request. This must
be signed by the Salesman and
Received by the SFO.
We will inspect Ex-truck
Inventory Request Form
whether the same are signed by
the appropriate signatories.
2
We noticed that the
Company only issues
Billing Invoices which is
not BIR registered in Ex-
truck sales in lieu of BIR-
registered Sales Invoice
which is required by the
Tax Code.
We recommend that the
Company coordinate with its
external accountant/bookkeeper
to assist them in securing and
registering Sales Invoices.
We will check whether the
salesman issue BIR-registered
Sales Invoices.
3
We noticed that the
Company only performs
ex-truck inventory count
every two weeks.
We recommend that the
Company performs ex-truck
inventory count every week.
This should be attended by the
SFO, Warehouse Staff, and the
Ex-truck Team.
We will inspect Pick Lists
whether the same are signed by
the appropriate signatories
17. Sales Process – Ex-truck
N
o.
Audit Observations Audit Recommendations Management Response Audit Procedures
4
We observed that the
stock transfer invoice are
not being signed by the
Stock Transfer Invoice
(STI) by the SFO,
Warehouse Staff, and the
Ex-truck Team.
We recommend that the
Company issue a memo
requiring the SFO, Warehouse
Staff, and the Ex-truck Team to
sign the STI.
We will inspect the Stock
Transfer Invoices whether the
same are signed by the
appropriate signatories.
5
The Company has no clear
written policy regarding
ex-truck sales payment
terms e.g., COD, PDC, or
no PDC.
We recommend that the
Company issue a memo
regarding ex-truck sales
payment terms. All ex-truck
sales must be paid in cash as
general rule. Upon approval
however of the General
Manager, Post Dated Checks
(PDC) may be accepted. For
credit sales with no PDC, the
same must also be approved by
the General Manager.
Nonetheless, the salesman may
still proceed with the sales
orders with no PDC, however,
the resulting bad debts shall be
on his account.
GM recommend that the
approval of Credit sales with no
PDC should submit a required
documents.
We will check whether
necessary approvals for credit
sales were secured before
proceeding with the sales order.
18. Accounts Receivable Collection Process
SALES & FINANCE OFFICER
Receive the signed Sales Invoice (SI)
and Record the same as Accounts
Receivable (AR)
Prepares AR Summary per Salesman
SALESMAN
Collects the amount due and/overdue to
Customer
CUSTOMER
Pays the amount due in cash or in
check and returns the duplicate
copy of SI
Receives Original Copy of SI and
CR if KA. If PMS, Original Copy of
SI only
Records collection and updates
Accounts Receivable Report
Receives the Original Copy of SI from SFO
-Prepares & Issues two copies of Collection
Receipt (CR) & SI if Key Accounts(KA). If
PMS booking(PMS), Original Copy of SI only
to customer
Forwards Duplicate Copy of SI to SFO
Prepare Sales Liquidation Summary
Send Pictures of Sales liquidation
summary, cheques and CI
19. SALES & FINANCE OFFICER
Receive the signed Sales Invoice
(SI) and Record the same as
Accounts Receivable (AR)
Prepare Summary of AR per
Salesman
SALESMAN
Collect the Amount due
and/overdue to Customer
CUSTOMER
Pays the amount due in cash
or in check and returns the
duplicate copy of SI
Receives Original Copy of SI
and CR if KA. If PMS,
Original Copy of SI only
Prepare Sales Liquidation Report
Prepares & Issues two copies of
Collection Receipt (CR) & SI if
Key Accounts(KA). If PMS
booking(PMS), Original Copy of
SI only to customer
Forwards Duplicate Copy of SI
to SFO
GENERAL MANAGER
Sign the Sales Liquidation Report
Forward the Sales Liquidation
Report
Received Sales
Liquidation Report
Receives the Original Copy of SI
from SFO
Accounts Receivable Collection Process
20. Accounts Receivable Collection Process
No. Audit Observations Audit Recommendations Management Response Audit Procedures
1
We noticed that the
Company maintains
list of receivables, it
does not maintain
however an Accounts
Receivable Aging
Report which may
help the management
to push its salesmen
to collect receivables.
We recommend that the
company create an Accounts
Receivable Aging Report per
salesman which must be
maintained by the SFO. This
should be reported to the
Operations Manager and the
General Manager at least on
a weekly basis.
We will assist in analyzing
the collectability of accounts
receivables based on its
aging.
2
The Company does
not maintain a
database of customers
with credit limits and
credit terms.
We recommend that the
Company maintain a
database of customers with
credit limits and credit
terms.
We will check whether the
said customer credit limits
and terms are followed by
checking the sales invoices.
3
By inquiry, we are
made aware that
some of the PDCs are
dated beyond its due
date.
We recommend that the
salesman should require the
credit customers to date the
PDCs in accordance with the
approved credit terms which
must be reckoned from the
date of delivery and not from
the date of collection. This
should be monitored by the
OM and the SFO.
We will look at the summary
of accounts receivables
whether there are PDCs
dated beyond its normal
credit terms.
21. Sales Return Process
CUSTOMER
Informs Salesman about
the products to be
returned
SALESMAN
Receives the SP/BO
Form and forwards the
same to the Customer
Checks the filled out
SP/BO Form and the
quantity of the
returned goods
Fills out the SP/BO Form
and surrender the goods
to the salesman
SALES & FINANCE OFFICER
Informs SFO about the
sales return and its
nature (i.e., good or
defective items)
Receives the SP/BO
Form and check
quantity of the
returned goods
Update Sales and AR
Summary
Issues a Stock Pull-out
/ Bad Order Form
(SP/BO Form)*
WAREHOUSE STAFF
Receives the SP/BO
Form and check
quantity of the
returned goods
*If defective products, supplier approval
must be secured first.
22. Sales Return Process
No. Audit Observations Audit Recommendations Management Response Audit Procedures
1
We observed that some
Stock Pull-out / Bad
Order Forms are not
signed by the
Customer,
Salesman/Delivery
Team, Warehouse Staff,
and the SFO.
We recommend that the
Company issue a memo
regarding the processing of
Stock Pull-out / Bad Order
Forms. The said form must be
signed by Customer,
Salesman/Delivery Team,
Warehouse Staff, and the SFO.
We will inspect Stock Pull-out /
Bad Order Forms whether the
same are signed by the
appropriate signatories.
23. Purchase Process
SALES & FINANCE OFFICER
If for Simply G, Well made, Fiber
world, Sinta, forwards the report
to the Operations Manager
GENERAL MANAGER
Reviews and approves
PO Form
SUPPLIER
WAREHOUSE STAFF
Checks and receives
orders based on SI
Signs SI and
returns a copy to
the Supplier
Issues Sales
Invoice (SI)
Lists inventory
items which needs
to be replenished
Processes the PO
and deliver the
orders
Issues PO to supplier
Receives the SI
OPERATIONS MANAGER
Prepares
Purchase Order
(PO) Form*
Other than Simply G, Well made,
Fiber world, Sinta, forwards the
report to the General Manager
Issues PO to
supplier
Pays the Sales
Invoice in Cash /
Check
Receives Cash /
Check
24. Purchase Process
N
o.
Audit Observations Audit Recommendations Management Response Audit Procedures
1
The Company has no
standard process of
issuing Purchase Orders
to the Suppliers.
We recommend that the
Company assign one (1) officer
to issue POs to supplier. The PO
must be signed by the FSO,
Operations Manager, if
applicable, and the General
Manager.
We will inspect the POs whether
the same are signed by the
appropriate signatories.
2
We observed that the
Company has no records
or summary of Purchase
Orders.
We recommend that a record of
purchase orders be maintained.
This should be handled by the
person who will be assigned to
the issuance of POs.
We will check whether all the
purchases are recorded in the
summary of Purchase Orders
and if paid on time.
3
The Company does not
have any standard
procedure in processing
its payment to suppliers.
The Company must maintain
check vouchers and records of
payment to suppliers.
We will check whether all
payments to suppliers are
supported with duly signed
sales invoices and received by
the warehouse staff.
25. Reimbursement Process
SALES & FINANCE OFFICER
EMPLOYEE GENERAL MANAGER
Informs SFO about
goods which needs to be
purchased
Seeks approval from
General Manager
Approves Reimbursement
Informs Employee about the
approval
Employee purchases the
goods
Forwards the Official
Receipt (OR) for
reimbursement
Sends picture of OR through
Messenger
Transfers the amount of
reimbursement though Gcash
Transfers the amount of
reimbursement and record
the same as expense
Receives the amount
26. Reimbursement Process
No. Audit Observations Audit Recommendations Management Response Audit Procedures
1
Thru inquiry, we are
made aware that the
Company does not
maintain a revolving fund
from which immediate
but necessary expenses
may be disbursed. As a
result, sales remittances
were sometimes being
used to pay such
expenses.
We recommend that the
Company establish revolving
funds to solve this issue. To
mitigate the associated risks in
allowing the employees to handle
cash, we may initially set the
revolving fund at a low amount.
We will check whether
disbursements made from the
revolving fund were properly
approved.
2
There are some instances
where employees are
constrained to borrow
money from other
employees pending the
approval of their
reimbursements.
We recommend that the
Company establish revolving
funds to solve the issue of
employees borrowing money
from other employees.
We will check whether
disbursements made from the
revolving fund were properly
approved.
3
We noticed that the
Company has no
reimbursement form
from which the said
request must be written.
We recommend that the company
create a reimbursement form,
which must be signed by the
requesting employee, concerned
department head, SFO, and the
General Manager. We also
recommend that a memo
regarding the reimbursement
process be issued.
We will inspect Reimbursements
Forms whether the same are
signed by the appropriate
signatories.
27. Payroll Process
HR ADMIN OFFICER GENERAL MANAGER
Prepares Payroll Report on a
semi-monthly basis
SECRETARY
Reviews Payroll Report
Approved
Denied
Sends payroll report to the
General Manager
Updates or makes the
necessary revisions in the
payroll report
Reviews Payroll Report
Approved
Denied
Transfers total
amount of Payroll
through GCash
Updates or makes the
necessary revisions in the
payroll report
Sends pay slips to employees
and releases salary through
GCash
EMPLOYEE
Receives pay slip and
salary
Sends daily time in and
out using GPS Map
Camera Application;
Files leave form, if
taking leave
28. Payroll Process
No. Audit Observations Audit Recommendations Management Response Audit Procedures
1
Thru inquiry, we were
informed that by practice,
employees no longer fill
out and file leave form.
We recommend that leave forms
must be submitted by the
employees to the HR Department
before taking their leave/s.
Otherwise, the said employees shall
be tagged as Absence Without
Official Leave (AWOL) subject to the
disciplinary actions as provided by
the Company’s Code of Conduct. For
emergency leaves, the same must
be submitted immediately after the
said employees reported to work.
We will review the payroll report
on a semi-monthly basis. All
attachments for its preparation
must be submitted to the Internal
Audit team.
2
Thru informal inquiry, one
of the employees advised
Internal Auditor Ralph to
adjust the time in his
mobile phone before
taking picture using GPS
Map so that he can go
home early as scheduled.
On our mind, this raises
the doubt that some
employees are doing the
same.
We recommend that the HR
Department devise other ways of
checking their time in and time out
i.e., setting up biometrics.
We will compare the time in and
time outs in the biometrics
report/GPS Map report, with the
time report prepared by the HR
Staff.
3
Salaries of some
employees are not being
deducted with SSS, PHIC,
and HDMF contributions.
We recommend that the HR
Department withheld SSS, PHIC,
and HDMF contributions from all of
its employees, regardless of
employment status.
We will review the payroll report
on a semi-monthly basis.
29. Payroll Process
N
o.
Audit Observations Audit Recommendations Management Response Audit Procedures
4
Thru inquiry, we were
informed that there are
SSS outstanding
employee loans which
were not being deducted
from the salary of the
concerned employees.
We recommend that the HR
Department discuss the
amortization of the SSS
employee loans with the
concerned employees. This
should be deducted from their
salaries on a semi-monthly
basis to ensure collection.
We will review the payroll report
on a semi-monthly basis.
31. Financial Audit
No. Audit Observations Audit Recommendations Management Response Audit Procedures
1
The Company does not have an in-
house accountant/bookkeeper. Its
financial records are only limited to
sales records which are kept by
the SFO, and payroll records which
are kept by the HR Staff. Payment
records to suppliers (products) are
kept by the General Manager but
he does not maintain a summary
of purchases report. The Company
does not also maintain any journal,
ledgers, and trial balances.
We recommend that the
Company hire an inhouse
accountant/bookkeeper to
assist the company in
consolidating its financial
records.
We will discuss this in detail once the
company’s books become auditable.
2
Thru observations, we noticed that
Official Receipts/ Sales Invoices
pertaining to reimbursements and
other expenses incurred by the
Company are kept by the SFO,
however, she is not encoding
those expenses which led us to
believe that the Company is unable
to track its own expenses.
We recommend that the
Company hire an inhouse
accountant/bookkeeper to
assist the company in
recording its expenses.
We will check whether expenses are
recorded in the expense summary. We
will also check whether the expenses
recorded in the summary are
substantiated with official
receipts/sales invoices. We will also
check whether necessary approvals
are secured before its payment.
3
We noticed that cash collections
are only deposited to the bank
upon the instruction of the general
manager.
We recommend that all
cash collections must
always be deposited to the
bank the following day to
reduce the associated risks
in handling cash.
We will ask the SFO to present
validated deposit slips and tally the
same with the sales liquidation
summary.
32. Financial Audit
N
o.
Audit Observations Audit Recommendations Management Response Audit Procedures
4
We noticed that the SFO
does not maintain a
written record of cash
collections, cash
disbursements, and check
collections.
We recommend that the SFO
maintain such records for
internal audit purposes.
We will cross-check the cash
and check collections as per the
sales liquidation summary and
the records as per the cash
collections, cash disbursements,
and check collections.
34. COMPLIANCE AUDIT
No. Compliance Checklist Pampanga
Nueva
Ecija
Tarlac
1
Department of Trade and Industry
Business Name Certificate
/ / /
2
Local Government Unit
Mayor’s Permit
/ X X
3
Bureau of Internal Revenue
Certificate of Registration
/ X X
4
Department of Labor and Employment
Employer Registration
X N/A N/A
5
Social Security System
Employer Registration
X N/A N/A
6
Philippine Health Insurance Corporation
Employer Registration
X N/A N/A
7
Home Development Mutua Fund
Employer Registration
X N/A N/A
35. COMPLIANCE AUDIT
No. Audit Observations Audit Recommendations Audit Procedures
1
The warehouses in Nueva Ecija and
Tarlac are not yet registered with
their respective Local Government
Units and Bureau of Internal
Revenue District Offices.
We recommend that the warehouses in
Nueva Ecija and Tarlac be registered with
their respective Local Government Units
and Bureau of Internal Revenue District
Offices.
We will check whether the Company has
already secured
2
Despite having sales more than
P3,000,000, the Company’s tax
type registration is still Percentage
Tax as per its BIR Certificate of
Registration.
We recommend that their tax type be
updated from percentage tax to Value
Added Tax.
We will check whether the BIR Certificate of
Registration is already updated.
3
The Company is not yet registered
as employer under DOLE, SSS,
PHIC, and HDMF.
We recommend that the Company be
registered as employer under DOLE, SSS,
PHIC, and HDMF.
We will check whether the Company has
already secured the employer registration
certificates from DOLE, SSS, PHIC, and
HDMF.
4
We were informed that the tax
filings of the Company are
outsourced.
We recommend that we set a meeting with
the outsourced tax preparers to discuss the
submission of the filed tax returns to the
Company.
We will check whether the appropriate tax
returns were filed accurately and on a
timely manner.
