Internal Audit Checklist of Stores & Spares

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C Published: 31 August 2013
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Store may be categorized into the following categories

1. Raw Material Store.

· Categorise the Total Store Inventory into the following classification.

· Slow moving inventory à items that have moved slowly during the period
of audit ( A criteria may be set in this regard )
· Non moving inventory à item that have not moved during the period of
audit ( A criteria may be set in this regard )

The classification into Slow Moving / Non Moving inventory should be

· The Slow / Non moving inventory should be further classified into the following
categories – The value and quantity of -

(a) Item that will be consumed in the next few months.

(b) Items that can be sold off being not required.

(c) Insurance spares - in case of Engineering stores.

(d) Items that have to be scrapped – useful life being over.

· Check the Goods Received Notes (GRN) to ensure that the GRN are properly filled
in. Ensure that all the columns of the GRN have been completely filled in.

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· Ensure that inspection by the proper person has been made and his remark has been
entered on GRN. Locate the cases where unreasonable delay has taken place in
carrying out the inspection of the material. Check that the date of inspection is put on
the GRN by the person who has carried out the inspection.

· The GRN should have a serial control and the GRN should be authorised by a
responsible official.

· Ensure that an action plan has been drawn to dispose off / sell the Non-moving
inventory.

· Check the Material Requisition Notes / Material Issue Note (MRN / MIN) in respect of
the issue of material to production. Ensure that the Material Requisition Notes / Material
Issue Notes are properly and completely filled in.

· Further check that details of – quantity of stock in hand are filled in all the Material
Requisition Notes before the MRN are sent to the Purchase Department for effecting
further purchases. All the columns in the NMRN / MIN should be filled in.

· Ensure that the MRN / MIN are authorized by a responsible official.

· Ensure that the stores stock ledgers are kept uptodate and entries in respect of receipts
/ issues are made on a daily basis.

· Carry out a physical verification of say 10% items in the stores inventory (All ‘A’ items
should be verified 100%)and check whether the physical balances agree with the book
balances appearing in the stores ledger. Comment upon the discrepancies, if any.

· Enquire whether there is a system of Perpetual Inventory in force where at any point of
time the book balances agree with the physical balances. The system of continuous
stock taking - perpetual inventory should be such that every single item is covered at the
physical stock take at least once in a year.
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· Check that Norms (No of days consumption) have been determined in respect of
inventory level of Raw Material. The inventory level should be maintained at that level.
Comment if the inventory levels are at a higher level as compared to the Norms.

· Ensure that the stores - warehouse inventory is kept properly segregated with clear
identification marks. Further, the imported material and the material bought under
Advance licence should be stored separately and with prominent identification tags.

· Check that entries in the records of the gate have been made for all the inward
material. Check the entries in the gate register with the GRR / Invoices of the supplier.
The gate entry should be made on the face / back of the suppliers’ invoice.

· Ensure that the Rejected Material is kept separately and the material is returned back
to the supplier only after adjustment of outstanding balance in Accounts.

· Ensure that the Material Requisition Note - INDENT - format has separate columns
for showing - stockin hand and - Item consumption pattern for the last 6 months.

· Ensure that the shortages in the receipt of material are duly taken care of by
recovering the amount from the transporters / supplier/insurance companies. Check
that there is a proper control over the claims pertaining to shortage of material.

· In case of Engineering Stores ensure that proper identification tags / codes are put
on the bins for identification of material.

· Check that the return of material from shop floor - production to the stores is effected
through Material Return Note (MRN) only. Ensure that the MRN are duly authorized
by a responsible person and all the columns of the MRN are properly and completely
filled in.

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· Check whether an ABC analysis of the stores inventory is carried out both by value
and consumption. Comment upon the need for an ABC classification of inventory for
ensuring a proper control.

· Ensure that a proper control is kept by Stores over items sent outside for job
work/repair etc (Material sent under a Returnable Gate Pass)Check that the list of
pending items (RGP) is prepared on a regular basis and the materials sent are
received back within a reasonable period.

· Ensure that various items forming part of the Stores inventory are stored properly and
safely. For example in case of chemicals, ensure that the containers are kept safely
and not exposed to rain / heat /sunlight etc. Carry out a review of all the items Stores-
Raw material/General/Engg/Packing material and the finished goods warehouse.

· Check the procedure adopted in the Stores for carrying out the inspection of material.
Ensure that a place is earmarked for inspection in stores.

· Ascertain the status of Pending GRR in the stores - (a) Items where the material has
been received but the GRR have not been made and (b) cases where the GRR is
made but pending to be sent to the Accounts for further processing on account of
want of information. Check that the material received/ GRR preparation and
authorisation / sent to accounts cycle is completed within the shortest possible time.

· Issues after General Working hours

· Enquire into the procedure of making Issues in the night/after general office hours. If
the Stores also works in shifts then it may not pose any problem but at such plants
where the stores operates only during the normal working hours then enquire whether
any Night Issues Register is maintained and entries in the night register duly
regularized / authorized next morning by a responsible and authorized person.

· Ensure that all key items in the Stores (above or certain value, to be decided by Unit
Management) are insured against fire, theft etc.

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· Check whether there are adequate fire fighting arrangements in the Stores e.g.
required no of fire extinguishers etc, required in the event of fire etc and as part of
industrial regulations.