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EXPENDITURE CYCLE CONTROL OBJECTIVES

Note: This document has to be completed by internal audit.

Control Objectives Control Activities Addressedin Internal

AuditProgram

Reference to RobertsonsControl Procedure Manuals

EX1015 Purchaseorders are placed onlyfor approvedrequisitions.

EX112 Management must approveall purchase orders, with higher level management authorityrequired for unusual purchases(such as capital outlays or standing orders) and all purchasesthat exceed established limits.Board approval is required for specified types of purchases andthis approval is appropriatelydocumented.

Expenditure Cycle: Standard No.302.01-3

EX1025 Purchaseorders are enteredaccurately.

EX213 Purchase order entry datais compared to source documentsby individuals who are

independent of the purchase order entry process.


EX1035 All purchaseorders issued are inputand processed.

EX115 Purchase orders aresequentially prenumbered. Thesequence of purchase ordersprocessed is accounted for.

Expenditure Cycle: Standard No.302.01-2Expenditure Cycle: Standard No.302.04-1

EX2005 Amountsposted to accountspayable representgoods received.

EX141 Goods received arematched on-line or manually withpurchase order details and/or invoices; long outstanding goodsreceipt notes, purchase ordersand/or invoices are investigatedtimely and accrued as appropriate;documents are canceled oncematched or on payment of theinvoice to prevent reuse.


EX2010 Amountsposted to accountspayable representservices received.

EX261 Invoices for servicesreceived are authorized andaccompanied by appropriatesupporting documentation.


EX2015 Accountspayable amounts areaccurately calculatedand recorded.

EX2020 All amountsfor goods received areinput and processed toaccounts payable.

EX2025 All amountsfor services receivedare input andprocessed to accounts

payable.EX2030 Amounts for goods or servicesreceived are recordedin the appropriateperiod.

EX145 Statements received fromsuppliers are reconciled to thesupplier accounts in the accountspayable subledger regularly anddifferences are investigated.

Expenditure Cycle: Standard No.302.10-1Expenditure Cycle: Standard No.302.10-2

Comment: Replace with manual

version completed by internal audit and

ensure all objectives have been covered.



EX2035 Accountspayable are onlyadjusted for validreasons.

EX2040 Credit notesand other adjustmentsare accuratelycalculated andrecorded.

EX2045 All valid creditnotes and other adjustments related toaccounts payable areinput and processed.

EX2050 Credit notesand other adjustmentsare recorded in theappropriate period.

EX3020Disbursements areaccurately calculatedand recorded.

EX3005

Disbursements areonly made for goodsand services received.

EX3015Disbursements aredistributed to theappropriate suppliers.

EX130 Management reviews

supporting documentation beforeapproving payments. Supportingdocumentation is canceled oncepayment is made.

Expenditure Cycle: Standard No.

305.02-1Expenditure Cycle: Standard No.305.01-3

EX3015Disbursements aredistributed to theappropriate suppliers.

EX189# Management reviews alisting of supplier payments prior torelease.


EX3030 Alldisbursements arerecorded.

EX3040Disbursements are

recorded in the periodin which they areissued.

RE900 Bank statements arereconciled to the general ledger regularly.

Bank reconciliations areprepared monthly for every bankaccount.

EX4005 Only validchanges are made tothe supplier master file.

EX4010 All validchanges to the supplier master file are inputand processed.

EX4015 Changes tothe supplier master fileare accurate.

EX4020 Changes tothe supplier master fileare processed timely.

EX4025 Supplier master file dataremains pertinent.

EX222 Supplier master file data isperiodically reviewed bymanagement for accuracy andongoing pertinence.

Expenditure Cycle: Standard No.302.01.10



FIXED ASSETS CYCLE

Control Objectives Control Activites Addressedin Internal

AuditProgram


FA0505 Recorded

fixed asset acquisitionsrepresent fixed assetsacquired by theorganization.

FA0515 Fixed assetacquisitions areaccurately recorded.

FA0525 All fixed assetacquisitions arerecorded.

FA1510 Recordedfixed asset disposalsrepresent actualdisposals.

FA1515 All fixed assetdisposals are

recorded.FA2505 Only validchanges are made tothe fixed asset register and/or master file.

FA134 Periodic counts of fixed

assets are performed andreconciled to the fixed assetregister and/or master file.

Production Cycle Standard No.

403.04-6

FA0520 Fixed assetacquisitions arerecorded in theappropriate period.

FA1525 Fixed assetdisposals are recordedin the appropriateperiod.

FA110 Asset-related transactionsat, before, or after the end of anaccounting period are scrutinizedand/or reconciled to ensurecomplete and consistent recordingin the appropriate accountingperiod.

Not performed - all changes tothe FAR are not reviewed after they have been entered. A mitigating control is that theFAR is sent to each of thelocations and the respectivemanagement reviews is toensure that the applicablechanges have been put throughfor the month.

FA1010 Depreciation

charges are accuratelycalculated andrecorded.

FA145 Standard programmed

algorithms perform depreciationcalculations.

SAP automatically calculates

depreciation in accordance withstandard programmedalgorithms.

FA1005 Depreciationcharges are valid.

FA1020 Alldepreciation chargesare recorded in theappropriate period.

FA118 Depreciation charges arereviewed by managementincluding consideration of therecording of such charges in theappropriate accounting period.

Production Cycle Standard No.402.04-2

FA1520 Fixed assetdisposals areaccurately calculatedand recorded.

FA154 Standard programmedalgorithms perform the calculationof the profit or loss upon disposalof an asset.

SAP automatically calculatesprofit & loss on disposal inaccordance with standardprogrammed algorithms.

FA2010 Fixed assetsare adequatelysafeguarded.

FA122 Fixed assets are located inan appropriately secured area,where access is restricted to

authorized personnel.


FA2505 Only validchanges are made tothe fixed asset register and/or master file.

FA115# All changes made to thefixed asset register and/or master file are approved by management.

Production Cycle Standard No.402.04-1Production Cycle Standard No.402.04-2Production Cycle Standard No.402.04-3Production Cycle Standard No.



402.04-4

FA2510 All validchanges to the fixedasset register and/or master file are inputand processed.

FA117 All authorized sourcedocuments supporting fixed assetacquisitions, disposals, and other changes to the fixed asset register and/or master file data arecompared to the fixed assetregister and/or master file toensure they were input.

The FAR is sent to each of thelocations and the respectivemanagement reviews is toensure that the applicablechanges have been put throughfor the month.

FA2515 Changes tothe fixed asset register and/or master file areaccurate.

FA2525 Fixed assetregister and/or master file data remainspertinent.

FA147 Fixed asset register and/or master file data is periodicallyreviewed by management for accuracy and ongoing pertinence.

The FAR is sent to each of thelocations and the respectivemanagement reviews is toensure that the applicablechanges have been put throughfor the month.

FA2520 Changes tothe fixed asset register and/or master file areprocessed timely.

FA142 Requests to change thefixed asset register and/or master file data are submitted onprenumbered forms; the numericalsequence of such forms isaccounted for to ensure that allrequested changes are processedtimely.

The changes to the FAR are onprenumbered forms, however these are not sequence checkedas each location has it's ownsequence. A mitigating control isthat the FAR is sent to each of the locations and the respectivemanagement reviews is toensure that the applicablechanges have been put throughfor the month.



INVENTORY CYCLE


AuditProgram


IM0005 Inventory is

salable or usable.

IM100 The salability of finished

goods and usability of rawmaterials are assessed regularlyincluding a review during physicalinventory counts.

Production Cycle Standard No.

402.03-1

IM0010 Inventory isadequatelysafeguarded.

IM111 Inventory is stored inproperly secured andenvironmentally conditionedwarehouse locations where accessis restricted to authorizedpersonnel.

Production Cycle Standard No.404.01-1Production Cycle Standard No.404.01-2Production Cycle Standard No.404.01-3Production Cycle Standard No.404.01-4

IM0015 Adjustments toinventory prices or quantities relate tovalid price changes

and physical inventorydifferences.

IM0020 Alladjustments toinventory prices or quantities arerecorded.

IM130 Management reviews andapproves all recorded adjustmentsto inventory prices or quantities.


IM0030 Adjustments toinventory prices or quantities are recordedaccurately.

IM0025 Adjustments toinventory prices or quantities are recordedtimely and in theappropriate period.

IM1015 Raw materialsreceived are recordedaccurately.

IM1020 All rawmaterials received arerecorded.

IM1025 Receipts of raw materials arerecorded timely and inthe appropriate period.

IM2010 All transfers of raw materials toproduction arerecorded accuratelyand in the appropriateperiod.

IM4005 Finishedgoods returned bycustomers arerecorded completelyand accurately in theappropriate period.

IM5005 All shipmentsare recorded.

IM101 Physical inventory iscounted periodically by personsindependent of day-to-day custodyor recording of inventory.Inventory counts are reconciled to

inventory records and theinventory records are reconciled togeneral ledger.

YES Production Cycle Standard No.403.02-1Production Cycle Standard No.403.01-2



IM5010 Shipments arerecorded accurately.

IM5015 Shipments arerecorded timely and inthe appropriate period.

IM1005 Raw materialsare received andaccepted only if theyhave valid purchaseorders.

EX141 Goods received arematched on-line or manually withpurchase order details and/or invoices; long outstanding goodsreceipt notes, purchase orders,and/or invoices are investigatedtimely and accrued as appropriate;documents are canceled oncematched or on payment of theinvoice to prevent reuse.


IM1030 Defective rawmaterials are returnedtimely to suppliers.

IM113 Rejected raw materials areadequately segregated from other raw materials and regularlymonitored to ensure timely returnto suppliers.


IM3005 All recordedproduction costs areconsistent with actualdirect and indirectexpenses associatedwith production.

IM3010 All direct andindirect expensesassociated withproduction arerecorded as productioncosts.

IM3020 All direct andindirect expensesassociated withproduction arerecorded accuratelyand in the appropriateperiod.

IM265 When standard costing isused, management approves thestandard costs and reviewsvariances between actual andstandard costs. Significantvariances are investigated andadjustments to inventory and costof sales are approved bymanagement.


IM3045 All transfers of completed units of production to finishedgoods inventory arerecorded completelyand accurately in theappropriate period.

IM270 Finished goods sent to thewarehouse are logged; the log isused to ensure that all finishedgoods are recorded in theinventory records.


IM3050 All defectiveproducts and scrapresulting from theproduction process arevalid and recordedcompletely andaccurately in theappropriate period.

Quantities of finished goodsproduced are regularly reconciledto quantities of raw materials andsupplies put into production,approved recipes and bills of material, and approved scrap or yield rates. Explanations must bepromptly obtained anddocumentation for significant

variances.


IM4010 Finishedgoods received fromproduction arerecorded completelyand accurately in theappropriate period.

IM209 Inventories received,including transfers, are countedand compared to receipt or transfer documentation (that isused to record movements of inventory in the financial records),by personnel in the area assuming

Production Cycle Standard No.403.01-6Production Cycle Standard No.402.02-3



responsibility for the inventory(e.g., production, finished goodsstorage), and are recorded in theappropriate period.

IM4015 Goodsreceived fromproduction or returnedby customers are onlyaccepted inaccordance with theorganization’s policies.

IM152 Quality control inspectionsare performed for finished goodsreturned by customers and/or received from production to assesswhether such goods should bereturned to inventory, reworked, or scrapped.

Quality control inspections areperformed on all goods receivedfrom suppliers, finished goodsand returns at all the factories.

IM5020 Inventory isrelieved only whengoods are shipped withapproved customer orders.

RE101 Before goods are shipped,the details of the approved order are compared to actual goodsprepared for shipment by anindividual independent of the order picking process.

Revenue Cycle Standard No. 1.4

IM5030 Costs of shipped inventory arerecorded accurately.

IM5035 Amountsposted to cost of salesrepresent thoseassociated withshipped inventory.

IM5040 Costs of shipped inventory aretransferred frominventory to cost of sales timely and in theappropriate period.

RE826 Management reviewsrelevant sales, accountsreceivable, cost of sales andinventory reports related to order entry, shipping, invoicing, andaccounts receivable; significantunusual relationships aremonitored and acted upon.


IM6005 Only validchanges are made tothe inventorymanagement master file.

IM6010 All validchanges to theinventory management

master file are inputand processed.

IM6015 Changes tothe inventorymanagement master file are accurate.

IM6020 Changes tothe inventorymanagement master file are processedtimely.

IM6025 Inventorymanagement master file remains pertinent.

IM250 Inventory master file data isperiodically reviewed bymanagement for accuracy and on-going pertinence.




PAYROLL AND PERSONNEL CYCLE


AuditProgram


PR1010 Additions to

the payroll master filesrepresent validemployees.

PR1015 All newemployees are addedto the payroll master files.

PR1020 Terminatedemployees areremoved from thepayroll master files.

PR1030 Deletions fromthe payroll master filesrepresent validterminations.

PR5005 Only valid

changes are made tothe payroll master files.

PR5010 All validchanges to the payrollmaster files are inputand processed.

PR5015 Changes tothe payroll master filesare accurate.

PR5020 Changes tothe payroll master filesare processed timely.

PR5025 Payroll master files data remainspertinent.

PR115 Payroll master file data is

periodically reviewed for accuracyand ongoing pertinence.

Expenditure Cycle Standard No.

303.01-6

PR1025 Employees

are only terminatedwithin statutory andunion requirements.

PR135 Compliance with employee

termination policies andprocedures, including compliancewith statutory regulation and unionrequirements, is monitored bymanagement.

Expenditure Cycle Standard No.

303.04-1

PR2005 Time andattendance datarecorded reflectsactual time worked andis authorized.

PR4005 Payrolldisbursements andrecorded payrollexpenses relate toactual time worked.

PR128 Salary and hourly payrollreports (including compensationand withholding information) arereviewed and approved bymanagement.

Expenditure Cycle Standard No.303.04-2Expenditure Cycle Standard No.303.04-4Wage control is established byusing the clockcard hours toprepare the wage payrolls at thefactories. The clockcards arecompared to the hours on theaccess control reports (gateaccess) to ensure

reasonableness.PR2015 All timeworked is input.

PR2020 Time workedis accurately input andprocessed.

PR141 Time reported byemployees is reconciled regularlybetween clock cards/timesheetsand payroll reports.

Expenditure Cycle Standard No.303.02-3Expenditure Cycle Standard No.303.02-4



PR2025 Time workedis processed timely.

PR3010 Payroll isrecorded in theappropriate period.

PR144 Payroll transactions at,before, or after the end of anaccounting period are scrutinizedand/or reconciled to ensurecomplete and consistent recordingin the appropriate accountingperiod.


PR3020 Payroll(includingcompensation andwithholdings) isaccurately calculatedand recorded.

PR146 Standard programmedalgorithms perform significantpayroll calculations.

The payroll system calculates thepayroll.

PR4010 Payroll isdisbursed toappropriateemployees.

PR104# Access to the payroll banktransfer tape is restricted toauthorized personnel.

Expenditure Cycle Standard No.305.03-2Expenditure Cycle Standard No.303.09

PR4010 Payroll isdisbursed toappropriateemployees.

PR155# Employees sign for cashreceived; compliance is monitoredby management.


PR5030 Only validchanges are made tothe payroll withholdingtables.

PR116 The payroll withholdingtable data is periodically reviewedby management for accuracy andongoing pertinence.

Expenditure Cycle Standard No.303.05

PR5035 All validchanges to the payrollwithholding tables areinput and processed.

PR5040 Changes tothe payroll withholdingtables are accurate.

PR5045 Changes tothe payroll withholdingtables are processedtimely.

PR5050 Payrollwithholding table dataremains pertinent.

PR5055 Statutorywithholding tables areconsistent withstatutory requirements.

PR168 Payroll withholding tabledata is periodically reviewed for compliance with statutoryrequirements.

Expenditure Cycle Standard No.303.05



REVENUE CYCLE


AuditProgram


RE3010 Orders areonly processed withinapproved customer credit limits.

RE800 Orders are not processed if the customer’s credit limit will beexceeded.

Revenue Cycle Standard No.1.2.3Revenue Cycle Standard No.1.2.4

RE3020 Orders areapproved bymanagement as toprices and terms of sale.

RE824 Significant or unusual salesorders are specifically approved bymanagement as to prices andterms.

Revenue Cycle Standard No.1.1.2

RE3030 Orders andcancellations of ordersare input accurately.

RE3070 Only validorders are input andprocessed.

RE805 Recorded orders andcancellations are confirmed withcustomers.


RE3040 Order entry

data is transferredcompletely andaccurately to theshipping and invoicingactivities.

RE808 Data transferred from the

order entry subsystem to theshipping and invoicing subsystemsis balanced; identified errors arecorrected promptly.

The SAP system is integrated

and as soon as an authorisedorder is confirmed and becomesdue it creates a shippingdocument.

RE3060 All ordersreceived fromcustomers are inputand processed.

RE814 Orders are sequentiallynumbered. The sequence of orders processed is accounted for.


RE5010 Invoices aregenerated usingauthorized terms andprices.

RE5040 All goodsshipped are invoiced.

RE5060 Invoices relate

to valid shipments.

RE200 Data input to the invoicingsubsystem is compared to pricedorder and shipment data per theseparate, nonintegrated order entry and/or shipping applications;differences require managementapproval before invoices can be

processed.


RE5020 Invoices areaccurately calculatedand recorded.

RE999 Invoices and/or salesorders are automatically priced bythe application system, usingstandard programmed algorithms,including the calculation of discounts, if applicable.

The SAP system is linked to aprice masterfile which is keptupdated, refer to Revenue CycleStandard No. 1.3.1

RE5030 Credit notesand adjustments toaccounts receivableare accuratelycalculated andrecorded.

RE210 Management approvescredit notes, bad debt write-offsand other adjustments to accountsreceivable.


RE5050 Credit notesfor all goods returnedand adjustments to

accounts receivableare issued inaccordance withorganization policy.

RE203 A policy has beenestablished regarding criteria for issuing credit notes; compliance

with this policy is monitored.




RE5070 All creditnotes relate to a returnof goods or other validadjustments.

RE5080 All invoicesissued are recorded.

RE815 Invoices are sequentiallyprenumbered. The sequence of invoices processed is accountedfor.


RE5085 All creditnotes issued arerecorded.

RE50120 Credit notesissued are recorded inthe appropriate period.

RE204 Credit notes aresequentially prenumbered; thesequence of credit notes isaccounted for.


RE50110 Invoices arerecorded in theappropriate period.

RE115 Recorded sales, grossmargins, and miscellaneousreceipts are compared to budgetregularly; management reviewsand approves significantvariances.

Budget reviews are performedregularly by senior management.

RE6030 Cash receiptsdata is entered for processing accurately.

RE6040 All cashreceipts data isentered for processing.

RE522# Statements of customer accounts receivable are mailedperiodically to customers.


RE6020 Cash receiptsare recorded in theperiod in which theyare received.

RE6030 Cash receiptsdata is entered for processing accurately.

RE6040 All cashreceipts data isentered for processing.

RE6050 Cash receiptsdata is valid and isentered for processing

only once.

RE900 Bank statements arereconciled to the general ledger regularly.

Treasury Cycle Standard No.502.03

RE6060 Cashdiscounts areaccurately calculatedand recorded

RE916 Management reviews thelevel of recorded discounts grantedto customers.


RE6090 Timelycollection of accountsreceivable ismonitored.

RE111 Collection proceduresestablished by management for overdue accounts are performedas intended.


RE6090 Timelycollection of accountsreceivable ismonitored.

RE100# Accounts receivable agingreports are prepared regularly andanalyzed.


RE7010 Only validchanges are made tothe customer master

file.RE7020 All validchanges to thecustomer master fileare input andprocessed.

RE531 Customer master file datais periodically reviewed bymanagement for accuracy and on-

going pertinence.

The customer masterfile isreviewed regulary by authorisedmanagement for accuract and

ongoing pertinence.



RE7030 Changes tothe customer master file are accurate.

RE7040 Changes tothe customer master file are processedtimely.

RE7050 Customer master file dataremains pertinent.

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