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PVO/STR/VI/002/2010 DATED 30-12-2010





An Internal Audit was performed in store division, which involved procedure of receiving,
issuing, ordering, stock to hold at the most appropriate level for store materials and
delegation of authority. In our audit, we have considered and reviewed transactions for the
month of November 2010. A random physical stock count was carried out to check on the
accuracies of the stock between the physical and store ledger balances. Objective of this
audit is to gain an understanding of the processes and determine the effectiveness of
internal control system. Audit appreciates the cooperation and courtesies extended during
this review.

1.1 Findings
It was found that there is no written standard operating procedure (SOP) and departmental
organization chart available in the store division.

1.2 Recommendation

A duly approved organization chart and written standard operating procedure (SOP) to be
made available immediately, clearly indicate the flow of store procedures

1.3 Management Response

1.3 Findings
Store division unable to achieve their target to reduce store holding by 20% by 01/01/2010
has per mention in the ISO documents. Stock balances show RM7,726,561.02 as at
01/01/2008 and RM7,387,992.01and able to reduce by 4.38%

1.4 Recommendation

A duly approved organization chart and written standard operating procedure (SOP) to be
made available immediately, clearly indicate the flow of store procedures

1.3 Management Response

PVO/STR/VI/002/2010 DATED 30-12-2010

2.1 Finding

A random physical stock take was carried out and the audit found that there are stock
discrepancies between the physical and book balance in 4 out of 10 items. Below are the
details: -


1 PLSBRG22216 E Bearing SKF22216 E 9 9 0
2 PLSBRGNU308 Bearing SKFNU308 3 3 0
3 PLSCOUPLG02D Coupling Rubber Insert 49 9 40
4 P&FLANGE 511A Flange MS2 1 1/2" (pn16) 4 0 4
5 P&FLANGE 511 Flange MS2 1 1/2" (10k) 8 6 2
6 P&F KOMBINATOR 49 Kombinator O-Ring Seal 10 10 0
7 PISSEALER 02 THSP-H43main Spring Part 10 10 0
8 PISPMILL 518 P Mill Switch SLD 33 2 2 0
9 P& F COLLAR 413 SS Collar 2" 2 2 0
10 PLSCCLIPA100 Circlip A62 4 0 4

2.2 Recommendation

Audit reiterates its earlier recommendation of implementing a perpetual inventory system,

which could be carried on together with the regular monthly stock checks.

2.3 Management Response

3.1 Below are the pending matters, which has been highlighted in our previous audit report but
pending for improvement.

2 Major lapses in The concerned All returnable gate pass Expected date of
controlling the divisions who are will be monitored by receiving back the
returnable items issuing gate stores dept. material still not up-
send to the passes should dated in the returnable
supplier by mention the Monthly reports will be gate pass.
various expected date of forwarded to concerned
departments by receiving back the department to update on Records are yet to be
using Returnable material on the pending returnable gate checked and
gate pass. As per gate pass itself. passes. reconciled.
available records,
there are items The records with After obtaining response The report was send
PVO/STR/VI/002/2010 DATED 30-12-2010

not returned to us security should be from the departments a only in the months of
since 2005 and checked and copy will be forwarded to January, February, and
records were not reconciled with the Sr.Vice.President. March’09. The
updated properly. concerned division response has not been
at least once in received from most of
fortnight the divisions

Follow-up Audit
NO Findings Recommendation Management Response
This matter has All outstanding However, during the
been highlighted returnable gate follow-up audit an
in our previous passes for more email on the
audit report no than one month outstanding returnable
SEC/RGP/001/2007 should be gate pass has been
dated 07/04/07 forwarded to the forwarded to the
and Sr. Vice President concerned division and
PVO/STRVI/004/08 on the monthly copy to Sr.Vice
dated 18/12/08 basis. President. An
and still pending immediate action has
for In the event of any Expected date of been taken, which
implementation material sent receiving back the outstanding returnable
under returnable material not required gate pass listing needs
gate pass is not due to an immediate to reconcile on weekly
possible to be action has been taken, basis.
brought back, the which outstanding
concerned H.O.D. returnable gate pass
has to get specific will be reconcile on
approval from Sr. weekly basis.
Vice President and
forward a copy to
the security for
squaring up their

3 A 100% physical Obsolete, Planning to do physical Audit was informed

stock check has damaged and stock count, to complete that 100% physical
been carried out used items must by end March 2009. count still under
to confirm the be accounted and progress and expected
actual physical removed from the Discussed with Mr Raja & to complete by end of
stock as at stock. Ms Sagthi and have this year.
31/07/2007 and planned as per
encountered Shortage/excess recommended. No action taken for the
shortage of items should be used and excess
RM1, 332,216.64 properly items.
between the accounted for in
physical and store the store ledger. Perpetual inventory
ledger balances system still not
PVO/STR/VI/002/2010 DATED 30-12-2010

which mainly due A perpetual Perpetual inventory will implemented.

to unexplained inventory system be carried out once the
shortages to be introduced new System takes
/excesses which could be effect. Expected trial in
obsolete and carried on together October’09 and full
used items with the regular implementation by
available in the monthly stock January 2010.
stores as stock. checks.

Follow-up Audit
NO Findings Recommendation Management Response

4 Transport, duty, This expense to be Have discussed with As at 31/07/2009 this

clearing accounts directly allocated Accounts/EDP to look on account shows
shows balance of to specific cost how to merge these balance of
RM144,117.96 as units. charges into materials. RM214,507.23.
at 19/12/2008 EDP to look into this
matter. Action will be taken
when the new system
Will be adjusted once is implemented
the new System takes

5 GRN is being GRN to be raised To carry on with the GRN is still being
raised for only for goods same method and further raised for all other
services as well received by stores discussions with audit. items such as Works
as for work orders and for all other Order, Natural Gas.
items the bill Diesel.
methodology is to Will be look into this
be modified and to matter when the new
be done without System takes effect.

6 Paper bags for To clear area near Still pending

packing to be electrical room/solvent.
- stored in covered Planning to make shed
and safe area to area.
prevent from
absorbing Pending due to cost
moisture. factor.

7 To fix a minimum Need time to Under progress and
level of stock and update/store books to be expected to complete
the store indent for adjusted. Still under by end of this year.
purchase planning
PVO/STR/VI/002/2010 DATED 30-12-2010

immediately after
the reorder level is Under progress and
reached. expected to complete
by end of this year.

Follow-up Audit
NO Findings Recommendation Management Response

8 All SRN should be Agreed to follow. Have Found, there is a

properly discussed with all HOD. number of SRN issued
authorized before particularly on
issue of any items Saturdays were not
by the stores. authorized.
- Below are the
Decided that Saturday’s samples:
issuance only for the SRN NO Date
urgent items. 93968 11/07/09
94478 11/07/09
94198 25/07/09
94101 25/07/09

9 The receiving Requester is the receiver Store division still

person’s signature claiming the requester
should be obtained Will introduce new will be the receiver.
on the SRN. format of SRN after
clear the old SRN book.

10 All SRN for which Implemented and to be Implemented except

materials have followed strictly for Saturdays issues
been issued which will be entered
should be entered into the system on the
in the store system following Monday.
on real time basis.
Will be adjusted once Also found a number of
- the new System takes SRN for the excess
effect. stock was not taken
into the system. Below
are the samples:
99109 27/07/09
94250 06/08/09
99660 05/08/09
96046 04/08/09
PVO/STR/VI/002/2010 DATED 30-12-2010

Management Follow-up Audit

NO Finding Recommendation
Response Comment

11 To have a better This recommendation Bin Card preparation is

control of was disagreed. in progress. However
the store still disagree to
physical Bin card system will the recommendation
inventory be continuing only and would like to
at floor for fast moving items maintain in the system
level it is until the new system on real time basis.
advised takes effect.
that bin After implementation Audit reiterate its
card is to of the new system recommendation to
be bin card will be implement the Bin card
maintain discontinued and this with immediate effect
ed and will be monitored for better control
all directly from the new
receipts store system.
on the

12 As per the current This lapse of To be discussed with Store manager still
store system, internal accounts and carried out amendment
store manager is control Mr. Raja. after the closing
given authority to system period.
amend the to be
records in the rectified
system after immedi
closing is done for ately. In
any case of
period. any
ment to
PVO/STR/VI/002/2010 DATED 30-12-2010

after the
it is
to get
l from
Sr. Vice
nt and
copy of
ment to
ed to
r/ Head

Management Follow-up Audit

NO Finding Recommendation
Response Comment

13 Matching, Recommendation has Audit recommends that

checking on the been accepted and there is breach in
accuracy of implemented but internal control system
Purchase order, discontinued and and accuracy should
Delivery order and currently this activity is be checked by an
invoice and back to store division independent
recording in to the Found Better control in department .
System to be store
carried out by
PVO/STR/VI/002/2010 DATED 30-12-2010

accounts division. .

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