The following is an excerpt from the internal audit report of Berjaya Hypermarket Berhad (BHB) pertaining to the inventory purchase procedures.
OBSERVATION
Criteria
The details of the goods received are documented in Form RP01 (Receiving Report) and supported with Form RP08 (Purchase Order). These documents are attached together and send to the Accounts Executive (Accounts Payable) for the receiving information to establish the validity of the invoices receive from the vendors.
Condition
The details of receiving are not completely written on Form RP01, in particular on the reason for the return and this has resulted delay in acknowledging the liability in the accounts payable. As a result, the vendors receive late settlements.
Cause
Every day, the receiving department handles many deliveries.
Effect
This issue did not result in a loss of revenue. However, late in paying the invoices do negatively affect the company reputation with the vendors.
Recommendation
It is recommended by the internal auditors that two staff should be responsible in managing the receiving process.
Action Plan
Failure to note the damage can relieve the transport operator of liability. That means Berjaya Hypermarket Berhad (BHB) could become responsible for bearing the costs of the damage.
Required:
a. Discuss three (3) deficiencies in any of the above report sections.
b. Explain four (4) steps to promote effective communication of internal audit report.
c. Advise three (3) matters that need to be observed before disclosing the internal audit report to parties outside the organization.