Process/Sub-process Potential Risks Audit Procedures

Stock Verification:

Physical Stock Count: In SAP, Yarn is built on two  Stock may pertain in SAP report but not 1- Email to store and data entry concerns to post
locations, and 100% stock of both locations will be exist physically on floor. pending entries in SAP.
counted in a specific cut-off date.  Risk of misappropriation of inventory. 2- Generate SAP stock report at specific cut-off date
 Stock may not be recorded in SAP, and it once all posting is done.
UF2-CC Rewinding (1002 Plant & 1011 S. Locations) could be the cause of inventory 3- Plan the physical audit with store concern.
UF2-CC Rewinding (9002 Plant & 9217 S. Locations) understatement. 4- 100% verification of physical stock VS SAP stock
 Stock may be in poor condition due to to be done on floor to sheet.
mismanagement 5- To ensure the proper placement, capacity,
 Rewind department may not measure the stacking, segregation, handling and inventory
received quantity, due to which SAP- management.
transferred quantity and physical stock 6- Recent received warping stock quantities will be
could differ. verified (Physical vs SAP).
 The same count /quality may be placed on 7- To ensure that, one bag of each lot should have all
multiple places. the details written on it. Set #, Yarn count,
Production date and etc.
8- Observe the old stock, its physical condition &
prepare an ageing report of complete stock
through SAP.
9- After competition of 100% physical stock
verification, differences will be reconciled and
then discussed with the responsible person.
10- If the differences are due to pending SAP
issuances entries, then appropriate justification
should be sought and manual register entries will
be checked.     
11- Prepare the final reconciliation sheet after
completion of above procedure.
12- All the stock variances will be discussed with the
concern; once all differences are agreed, Auditor
will sign the stock sheet and obtain the initials
from responsible concern.
13- Create copy of stock reconciliation signed sheet
and submit the original stock reconciliation sheet
to initiate the adjustment process as per Stock
Adjustment SOP.

Cut cones Receiving:

Cut cones are received from Warping, and knitting  Physical issuance could be differ from SAP 1- “MB51” T-Code will be executed in SAP.
location; the net weight of the cut cones are transferred quantity. 2- “1002 & 9002” Plant and “1011 & 9217”
transferred (303 & 313 Mvt Type) on rewind location  There could be a difference in the SAP location will be inserted on the relevant field.
after deducting the empty paper cone weight from transferred quantity and receiving quantity. 3- After inserting the above parameters, report
the gross weight.  Supporting document may not exist for will execute.
stock receiving. 4- Pivot will apply on the transactional sheet, the
Rewind department confirms net weight of cut cones, complete Receiving and production will
and then he will receive (305 & 315 Mvt Type) on reconcile on behalf of the production order
their (1011) SAP location. number.
5- One month receiving documents will obtain
from rewind department then it will be verify
with the SAP transferred quantity to ensure,
either the provided document quantity is
complete or not.

Issuance of Stock:

After completion of set wise rewind production,  There could be a count difference in 1- “MB51” T-Code will execute in SAP.
rewind yarn will be transferred to the warehouse document and actual received quantity. 2- “1002 & 9002” Plant & 1011 & 9217 Storage
Storage locations in SAP.  Physical issuance quantity could be differ Location will select as Yarn is pertaining on these
from SAP transfer quantity. mentioned locations in SAP.
 Transfer entry may not performed in SAP 3- Last six months date range will insert in “Posting
or physical yarn may not move to their date” field.
precise location after transfer or wise versa. 4- SAP report will execute.
 In-transit stock may be occur. 5- Analyze the transactions in SAP to ensure the
 Lack of documentation. timely recording and data entry accuracy.
6- To analyze the transactions accuracy in SAP.
7- Once again “MB51” T-Code will execute in SAP.
8- “303, 305 & 313, 315” Mvt type will be inserted in
“Movement type field”.
9- The comparison of “303 / 305” and “313 / 315”
Mvt type will be done to analysis the In-Transit
stock.
10- To compare the last 10 issuance from manual
record with SAP to ensure the manual record
maintenance and their accuracy.

Rewind Production:

Multiple cut cones are converted into the complete  Increased rejection / Wastages results in 1- Comparison of rejection %age from Jan – Jun 2021
yarn cone, this process is known as rewind process, increased cost. with that Jul – Dec-2021 rejections.
 Higher defects rate at incoming inspection 2- Assess the frequency of rejections of incoming
The rewinding process is started by applying cut of parts leads to difficulty during the parts.
cones on the machine. After applying the cut cones production. 3- Inquire about the frequency of maintenance.
on the rewind, the produce cone length will  Physical weight and production recording 4- Evaluate the effectiveness of safety measures.
configure on rewind, when the mounted cut cones weight may vary. 5- Recent production yarn bags will measure on the
finish, then it will replace with another cut cone and  Financials results are impacted with weight scale to ensure either the production
it will adjacent with the previous thread. inaccurate BOMs.  Standard Gross margins recording is satisfactory or not.
are not accurately stated. 
 Material Valuation To analyze the actual and BOM quantities following
Stock Valuation may not correct in SAP, due to procedures will be perform,
Rewind valuation is based on the following following reason,
components.  “T-Code COOIS” will execute.
1- Salaries and overhead are not absorbed on  “2001 In-House” will select in order type field.
1. Salary (AT01) actual hours  After selecting the order type the T-Code will
2. Utility (AT02) 2- Utility (department wise) breakup may not execute.
3. Repair & Maintenance (AT03) receive on monthly basis; result the utility  Production order number will copy from the
4. Factory Over Head (AT04) details may incur on average basis. report.
5. Depreciation (AT05) 3- Repair and Maintenance expenses may not  “T-Code ZFICOSUPTIONS” will execute and the
6. Rewind Yarn absorbed on production. copied order number will insert in the
4- Machine depreciation may not be absorbed “Production order No” field.
in production cost.  The BOM and actual quantity variation could be
analyzed from this data.
Rewind material cost may exceed from the fresh
yarn material. Following procedures needs to perform, to ensure
whether the stock valuation reflect in SAP, is correct
or not.

1- To observe the valuation of existing stock in SAP,

and find out abnormal values of existing stock,
and same Construction but Major value
difference). Both issues will be highlighted if any
case will found.
2- Actual and standard valuation difference will
analyze through “T-Code ZMP” (For Multiple
Materials)

For Individual material standard and actual valuation

will analyze through “T-Code CK13N” in SAP.

Warping Process:
The audit procedure will start from the productions
On the basis of program, yarn cones are mount on The warping program is not being made order details,
warp creels and program length will configure on effective, due to which the warping production
warping panel. In direct warping equal length of not done effectively and yarn cones are not 1- T-Code “COOIS” will be executed.
yarn will wound on all beams. When the desired utilized maximum .i.e. Yarn Issuance quantity is 2- ”1001 for Sized Beam In-house” will be selected in
length of beam has been wound onto the beam, it is excessive than the program requirement due to “Order type” field.
cut and taken out, and a new beam set and it will which more cut cones quantities will proceed 3- After the selection of “Order type”, report will be
adjacent to the previous section and it will wound for for the rewind process, which could a cause of executed of last 3 Months (Oct, Nov & Dec –
the same length. In this way set all beams will extra cost. 2021), sizing production orders will be copied.
be wound continuously of fixed length. 4- T-Code “ZRES_MB51” will be executed.
In the same way, If the planning of the knitting 5- Copied production orders will be inserted into the
After completion of the production process, the net is not effective, then the yarn consumptions will “Production order” field.
weight of remaining cut cones will be done after not be proper, and the more cut cones quantities 6- After execution of report “303 Mvt” Transferred
deducting the tare weight of the yarn from the gross will proceed for the rewind process, that could a quantity & “Receiving Plant 1001” will be filtered.
weight. The weight of cut cones, Number of beams, cause of extra cost. 7- Now the production order-wise yarn bags,
Total ends, Beams Length will mention on the transferred quantity can be seen.
warping program. 8- We will analyze that, how many Yarn Bags have
been transferred against the production order and
how many LBS should have been used. Secondly,
we will also analyze the production order
quantity wise cut cones %.
9- If a cut cones quantities are found anomalous,
then it will be highlighted, and the justification
will be sought from the concerns.

1- “MB51” T-Code will be executed in SAP.

Transactions Analysis: 2- “1002 & 9002” Plant & 1011 & 9217 Storage
Location will be selected as Rewind Yarn is
To ensure and analyze the transactions accuracy from  Misappropriation of Yarn consumption. pertaining on provided locations in SAP.
each perspectives. 3- After inserting the above parameters, report will
 Transaction reversed to adjust the stock
be executed.
variances.
4- Pivot will be applied on the transactional sheet,
 Yarn is not being consumed on their time.
the complete Receiving and production will be
 Production done before cut cones
reconciled on behalf of the production order
consumption.
number.
 The Same Count may be opened on 5- Transactional accuracy, wastage analysis, In -
multiple SAP materials, than its cost vary or transit and additional analytical procedures will
it may be taken on average cost in SAP perform from the above data.
6- Material description and its Material coding will
be analyzed.