Checklist for Inventory Management

CHECKLIST FOR INVENTORY MANAGEMENT

S. PRIORITY QUESTIONNAIRE Risk Associated Methodology INPUT REQUIREMENTS
No.
1. A Whether stock levels such as Non fixation of these levels Check the actual and Actual and projected
ROL, Maximum & Minimum may result in maintenance projected consumption of consumption of stock
levels have been set up by of excess or short inventory stock over a period of time over a period of time
the Units? levels, resulting in blocking and fix the levels on that
2. B Examine the basis of such of working capital or basis. The changes in
levels i.e. whether they are delays / discontinuation of consumption pattern needs to
linked to usage & whether projects. be captured taking into
these are frequently revised account the on going project
in line with the change in work and requirement of the
usage pattern? item in near future.
3. B Whether Units establish the The units may end up The EOQ should be fixed The rate slabs as
quantum of purchases on paying higher rates. depending upon the usage, provided by the
the basis of EOQ & whether rate slabs offered by the vendors and the
it is applied in practice? vendor for materials, and cost usage pattern.
of capital blocked.
4. A Whether MRN is prepared In case the controls over The MRN should be prepared The MRN book and the
for every receipt of material MRN are not proper, it may on receipt of every lot into the stores register.
in the Stores? Who result in payment for stores. It should be signed by
authorizes MRN? material, which is not stores incharge and approved
received. by Head – Materials.
5. A Whether MRN is prepared on As the packing list may The MRN should be prepared
the basis of packing list differ with the actual on the basis of actual receipt
given by the supplier or quantity and quality of materials.
on the basis of actual received, the unit may end
receipt of materials? up paying for material not
received or inferior quality
received while paying for
more or superior material.
6. B Whether material received is Low quality material The quality inspection report The quality inspection
subjected to Quality received from vendors may alongwith the MRN should be report and MRN book.
Inspection at the Unit? get approved and paid for. attached before the bill is
Are there any instances The business as a whole forwarded to accounts for
where full payment to may suffer for using low payment / credit.
supplier is released quality material.
despite negative report

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 CHECKLIST FOR INVENTORY MANAGEMENT
S. PRIORITY QUESTIONNAIRE Risk Associated Methodology INPUT REQUIREMENTS
No.
from Quality
Inspection?
7. B How are materials received The rejected material may The rejected material to be Quality inspection
but rejected by Quality get entered in the stores immediately dispatched back report, MRN book and
Inspection treated? Are and may be used for the to the vendor in case the QC material return advice.
these returned to project while excess credit rejects the same. The same
suppliers? may appear in vendors’ should not be taken into
account. stores.
8. A Review system of issuing the May result in unauthorised All material to be issued on Material issue slips
material, check on its issue. The valuation of authorisation as per DOA. and issue price
authorisation and user, its project may vary Method of valuation should be calculations.
accounting in correct group, considerably and cannot be consistent and should be
code and method of issue monitored, in case the cross-checked for calculation
i.e. LIFO, FIFO, check on method of valuation other of valuation.
physical movement and than the one, which is in
updation of stock ledger. continuous use, is adopted.
9. A What is our control over the May result in disputes over The material issued to Contractor account
inventory issued to the quantity and value of contractors and the usage by reconciliation,
contractor? Whether inventory with contractors them as per approved daily material issue advices
reconciliation with the and wrong valuation in work sheet in the stores and contractors bills.
contractor is regularly financials. records should be done
done? Whether promptly. Periodic
accounting for material reconciliation of material with
issued to contractor vendors should be done as a
has been properly process.
done?
10. A What is the procedure for Lack of controls over RPG The process of issue of RGP & NRGP with
issue of inventory from the and NRGP may result in material on RGP and NRGP relevant supporting
Stores against RGP/NRGP? pilferage of material. should be strictly followed. documents.
Who authorizes RGP/NRGP? Material sent on RGP should
How many copies of Gate be properly authorized and be
Pass are generated? received back in the
Whether a copy is available stipulated time frame.
with Security and Accounts?
What is the procedure if
material is not lifted from
the Stores within maximum

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 CHECKLIST FOR INVENTORY MANAGEMENT
S. PRIORITY QUESTIONNAIRE Risk Associated Methodology INPUT REQUIREMENTS
No.
time specified say 24hours?
What is the follow-up action
in case of non-receipt of
material within stipulated
time, which was issued
against RGP?
11. B Whether any instances Excess or short inventory Check the actual and Stores register
noted where piling up of levels result in blocking of projected consumption of
inventory or shortage been working capital or delays / stock over a period of time
observed. If yes, how has discontinuation of projects. and fix the levels on that
the issue been addressed? basis.
12. B Whether stores are Non-classification may Stores should classified as Stores register
classified as critical, result in shortage of critical critical, preventive
preventive maintenance, material or piling up of non- maintenance, regular,
regular, slow- moving, non- moving stores. slow- moving, non-moving
moving items? items.
13. B Whether maintenance of Loss because of Continuous monitoring of all
stores is done properly? obsolescence stores material to keep all
material in usable condition.
14. A What is the control over Lack of controls may lead to 1. There should be a Material issue advices
inventory of telephone pilferage. documented process for and stores register.
instruments, relevant in issue of instruments.
case of Basic Circles? How is 2. All issues need to be
consumption booked in the properly authorized.
account books? Who 3. The entry in stores as well
authorizes the issue of as financial records should
telephone instruments? How be made timely.
is replacement made in case 4. All replacements should
telephone instruments are be supported by specific
out of order? complaints and physical
availability of faulty
instruments, which have
been replaced.
15. A Inspect the Stores premises 1. Difficulty in 1. All material should be The stores register,
to determine whether: counting and arranged in such a way List of all obsolete/
possibility of that counting or scrap items and
1. The arrangement of
measuring can be done records of material

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 CHECKLIST FOR INVENTORY MANAGEMENT
S. PRIORITY QUESTIONNAIRE Risk Associated Methodology INPUT REQUIREMENTS
No.
inventory is such that an mistakes. conveniently. owned by third
accurate count is 2. The damaged / scrap 2. All scrap and obsolete parties.
possible material may get mixed items should be kept
2. The inventory is in good with good quality separately from the good
condition with material leading to quality material
adequate storage space, wrong valuation of 3. The material should not
and whether items are inventory. be accessible for
properly packed or 3. The material owned by unauthorised use.
binned in a convenient other parties may get 4. Inventory owned by
manner for counting mixed leading to third parties should be
3. Scrap, obsolete, and overvaluation of adequately identified
damaged goods are inventory. and segregated
adequately identified and
segregated.
4. Inventories appear to be
adequately
safeguarded against
access by unauthorized
persons and protected
against deterioration.
5. inventory owned by third
parties is adequately
identified and segregated
16. A Determine whether slow- The working capital stands The usage should be analysed
moving, obsolete, scrapped or blocked because of pile up for all stores items by the
damaged items have been of slow moving or scrap consumption pattern. The
adequately identified by: items. This results in loss minimum level, maximum
on account of obsolescence level and reorder level should
1. Obtaining and reviewing a also. be fixed accordingly. The
schedule of items that scrap or unusable material
have shown little or no should be segregated and
recent movement; placed separately. This should
be done on a periodic basis.
2. Tracing information
obtained during the
observation of the
physical inventory to

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 CHECKLIST FOR INVENTORY MANAGEMENT
S. PRIORITY QUESTIONNAIRE Risk Associated Methodology INPUT REQUIREMENTS
No.
management reports of
slow-moving, obsolete,
scrapped or damaged
items;
3. reviewing detailed
inventory records, bin
cards, etc.;
4. Discussing with
management quantities
held in the light of current
requirements, future
marketing forecasts;
examine documentation,
including where
appropriate, aged listings
of inventory balances,
substantiating the
information obtained;
5. Discussing with
management whether any
substantial inventory'
amounts may not be
realizable because of
major delays or disputes,
defective work, marketing
difficulties, etc.

17. A When was the physical 1. Pilferage of material. 1. The records should be The reports of physical
verification of stocks done 2. Incorrect stores records upgraded with every verification done in
last time? leading to wrong receipt or issue. the past and
18. A Whether any reconciliation inventory valuation. 2. All receipts should be reconciliation if any
statement prepared signed by stores incharge prepared for
between physical v/s the and countersigned by discrepancies.
book records? Head – Materials.

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 CHECKLIST FOR INVENTORY MANAGEMENT
S. PRIORITY QUESTIONNAIRE Risk Associated Methodology INPUT REQUIREMENTS
No.
19. B Whether any material 3. All issues should be duly
discrepancy observed? How authorized as per DOA.
was it dealt with in the 4. Physical verification
accounting records? should be done on a
20. A Whether such physical periodic basis
verification is done 5. The outcome of physical
frequently? verification should be
21. B Whether coding of all the documented and placed
store items done? before the management
22. B Is there any possibility of to take corrective action
same item being allotted on discrepancies, if any.
multiple codes?
23. A Is the receipt of material
properly recorded in
Stock Register?
24. A Whether Stock register is
properly maintained?
Whether it is updated on
daily basis?
25. A Obtain and document an Wrong inventory valuation. The prescribed Methodology The stores register
understanding of methods and for valuation of inventory and costing sheets.
procedures for costing should be consistently
inventory; followed. The rates should be
taken from stock register and
1. Perform audit procedures calculations should be
to ensure that the correctly done.
inventory costs are
appropriate, e.g., trace
unit costs of inventory
items to suppliers'
invoices;
2. Determine whether the
method of inventory
pricing is consistent with
the prior year

26. A Ensure adequate insurance Loss due to theft, fire, The average quantity Insurance policies and

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 CHECKLIST FOR INVENTORY MANAGEMENT
S. PRIORITY QUESTIONNAIRE Risk Associated Methodology INPUT REQUIREMENTS
No.
cover has been obtained on the pilferage etc. maintained and the latest valuation sheets.
inventory lying at the Stores. rates should be used to arrive
at the value of inventory for
taking up the insurance.

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