Production Cycle

Question 1

What are inherent risk of production cycle:

Answer 1

• Frauds built on inflated falsified inventory values

- Inventory mark-downs, has obsolete inventory been written down to correct value

Question 2

Who are key stakeholders?

Answer 2

• Production workers

- Raw material suppliers

Question 3

What are important forms?

Answer 3

• bill of materials (part number, quantity of each component)
• Master production schedule- plan for indicating how and when to produce
• Material requisition- Moving raw materials from storeroom to production
• Move tickets- identify parts to be transferred, their destination
• Operations list- sequence steps in making a product

Question 4

What are business risk/controls?

Answer 4

• Mange risk inventory levels to avoid stock outs and holding too much inventory
• Use forecasting systems, online, real-time inventory systems, periodic physical counts of inventory

Inventory theft or destruction- control include:

• Physically securing inventory and restricting assess
• Documenting inventory transfers
• Releasing inventory for shipping only with approved sales orders
• Accountability- employees handling inventory should sign the documents or enter their codes online to ensure accountability
• Use of wireless inventory increasing by RFID
• Have cameras in the warehouse
• Insurance (self-insurance or third party)

Question 5

What are risks and controls of fixed assets?

Answer 5

• Major asset acquisitions are APPROVED and supplier by Approved vendors
• Make sure you have appropriate capital budgeting techniques
• Detailed records document assets and accumulated depreciation
• Depreciation is properly calculated and posted
• Retirements approved by appropriate management
• Physical control and security over assets
• Periodic physical inspection of plan and equipment by individuals
• Written policies for cap versus expensing decisions exist
• Want to make sure you’re not over or under inventing in fixed assets