Sales Order Cycle Review Report
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T EPOR R W E EVI R E CYCL R E RD S O E L SA
Table of Contents
Executive Summary
Executive Summary
3
Objective, Scope & Procedures Performed
4
Background
Background Statistics
5-6
Action Matrix
Action Matrix Summary
Action Matrix Detail
7 8-15
Appendices
A: Best Practice Scorecard
16
B: Internal Control Assessment
23
C: Process Maps
30
D: Testing Matrix
36
E: Acknowledgments
37
mpany X Confidential: Do not distribute
2
Executive Summary
Internal audit conducted a review of the sales order processing process with the objective of evaluating the overall function for adequate controls and operational effectiveness. Specific areas of focus included quote-to-invoice process, contract operations/maintenance, accuracy and integrity of data captured in the order management system, and the quote-to-invoice cycle time. This review was completed in (insert date). The current sales order processing process is inefficient and results in increased quote to invoice cycle time. Also, the company’s information system is currently not collecting valuable sales discount information. This lack of information hampers management’s ability to make informed decisions relating to pricing. Other key observations noted during our review include: ➲ Discounts are currently not being tracked on an overall basis. This lack of discount information hinders management’s ability to create and maintain effective pricing strategies. In an analysis performed by Internal Audit, it was noted that XX% discount ($XXM) was given on orders of $XXXM during the period (insert dates). ➲ Discount authorization documentation is incomplete or missing. Potential unauthorized discounts may be given to customers which results in lost revenue and undermines the company’s overall pricing strategy. ➲ Contracts and agreements are not consistently submitted to contract operations for review. ➲ Tool configuration information is not readily available to regional marketing and sales personnel. As such the overall quotation/order process cycle time is increased because quotes and purchase orders do not contain complete information. ➲ Sales quotes do not consistently have complete tool configuration information, resulting in incomplete purchase orders from customers. Incomplete tool configuration information on purchase orders creates process inefficiencies in the configuration process and ultimately increase the overall order cycle time. ➲ A global clean book checklist (CBC) to address the overall sales order process do not exist. As CBC requirements are not consistent between departments, quotes and purchase orders are sometimes passed on to the next process step without complete information. ➲ The master price list in the (system) is not maintained. Pricing information provided to customers may be incorrect and could potentially result in lost revenue. Maintaining a manual system is costly and time consuming. ➲ The shipping log is not consistently filled out to reflect all appropriate shipping information. Failure to record shipping information in the shipping log could potentially hinder the company’s ability to trace shipments and respond to customer inquiries regarding shipments in a timely manner.
mpany X Confidential: Do not distribute
3
Objective, Scope, & Procedures Performed
Objectives • Evaluate the internal control environment and the effectiveness and efficiency of the sales order cycle from quote to invoicing. • Review and evaluate the adequacy of existing policies and procedures in the sales order process. • Benchmark Company X’s sales order process with “Best Internal Control Policies” and “Best Practices” information. • Identify opportunities for internal control and process improvements. Scope • The scope of the work included a review of the sales order cycle at (company). • Our work did not include other Company X locations Procedures Performed During This Review • Reviewed existing policies and procedures in the processing of sales orders from quote to invoicing. • Interviewed key personnel in regional marketing, order management, and systems engineering to obtain an understanding of the sales order process. • Performed transaction testing of sales orders to evaluate cycle time, proper authorizations and support for entries. • Perform CAAT (Computer Assisted Auditing Testing) analysis on sales order records. • Evaluated the efficiency and effectiveness of the sales order process and related internal controls and compared to “Best Practices,” noting opportunities for improvement.
mpany X Confidential: Do not distribute
4
Background Statistics
Key Discount Statistics: Sales order statistics from (dates): Total Orders Received $xxx.xM Less: Total Discounts xx.xM (xx%) Net Bookings Value xxx.xM
Top 10 Customer Discounts CUSTOMER NAME
LIST PRICE BOOKING VALUE DISCOUNT GIVEN DISCOUNT %
The table at right shows the top 10 customers by discount given. This represents approximately $xx.xM (xx%) of the total discounts over the period from (dates). The table below shows the top 10 discounted parts over the same period. Discounts relating to the xxxMM Indexer accounted for approximately $xx.xM (xx%) TOTALS of total discounts ($xx.xM) given. Note: Data for both tables taken from sales order data from (dates). PART #
PART DESCRIPTION
Top 10 Part Discounts LIST PRICE BOOKING VALUE DISCOUNT GIVEN DISCOUNT %
TOTALS
mpany X Confidential: Do not distribute
5
Background Statistics
Stratification of Order Values The total order value of $ is comprised of x,xxx orders and is broken out below: Stratified Value
# of Orders % of Orders
Total Value
% of Value
*The data above was obtained from the system and includes all orders received from (dates).
Top Ten Customers as Percentage of Total Order Value
The top ten customers below accounted for $ (xx%) of the total booking value and x,xxx (xx%) of total orders from (dates). The detailed breakdown is outlined below: Customer Name
Booking Value
Percent Of Total
mpany X Confidential: Do not distribute
6
Action Matrix Summary
Issues / Observations
Page
1. Discount information is not tracked on a global basis and is therefore not available for management’s analysis.
8
2. Discount authorization documentation is incomplete or missing.
9
3. Contracts and agreements are not consistently submitted to contract operations for review.
10
4. Tool configuration information is not readily available to regional marketing and sales personnel which increases the overall order process.
11
5. Sales quotes do not consistently have complete tool configuration information, resulting in incomplete purchase orders from customers.
12
6. A global clean book checklist (CBC) to address the overall sales order process do not exist.
13
7. The master price list in the system is not maintained.
14
8. Repeat Item: The shipping log is not consistently filled out to reflect all appropriate shipping information.
15
Priority Rating
High
Medium
mpany X Confidential: Do not distribute
Priority
Low
7
Action Matrix Detail
Issues / Observations
1. Discount information is not tracked on the system and is therefore not available for management’s analysis. Internal audit conducted analysis of sales orders received from (dates). We compared the booking value of orders received to the master price list in the system. It was noted that approximately XX% discount was given ($XX.XM) on total orders of $XXXM. This information is not readily available to management (i.e., no reports from which detail this information, is currently available). When customer orders are entered into the system, the total price on the orders is input into a field called “booking value.” Orders are currently entered in at the net sales amount and not at the gross price with the associated discount (if applicable). Per discussion with the Project Specialist, the system has this capability (tracking both the gross price and the discount) but it is currently not being utilized. As such, the company is not tracking discounts through its order management system.
Action Required
Owner
Date
A. The gross value of the product and the discounts offered should be entered and tracked in the system. B. Perform periodic margin and profitability analysis of the sales order in the system to ensure that overall discounts given to customers are in accordance with management’s strategies.
As the company currently does not have good visibility of total discounts given to customers on a global basis, management is not informed on how much discount is actually given away. Additionally, margin & profitability information on the various product lines is difficult to ascertain because of the lack of detailed discount information. Business Impact: • Lack of discount information affects management’s ability to create and maintain effective pricing strategies. • Margin & profitability information on the various product lines is difficult to ascertain because of the lack of detailed discount information.
mpany X Confidential: Do not distribute
8
Action Matrix Detail
Issues / Observations
2. Discount authorization documentation is incomplete or missing. According to the company’s sales authorization matrix (on the company’s intranet), all discounts greater than XX% must be signed by either the CEO or the COO. At the request of the Operations Controller, we reviewed X purchase orders (with the purpose of verifying proper discount authorization) for the following customers; (companies). Our findings are as follows: (insert findings)
Business Impact: • Unauthorized discounts given to customers.
mpany X Confidential: Do not distribute
Action Required
Owner
Date
A. Train applicable sales personnel to ensure that discount authorization is obtained prior to providing discounts to customers. Additionally, make sure approved discounts are supported by the appropriate documentation. B. Evaluate the current discount authorization matrix/policy for relevancy and make changes as appropriate.
9
Action Matrix Detail
Issues / Observations
3. Contracts and agreements are not consistently submitted to contract operations for review. According to the Director of Contracts/Intellectual Property, the company does not currently have a formal contract and agreement review process. There are currently no formal guidelines or policies governing sales individuals when they are negotiating contracts/agreements with customers. As such, sales individuals have at times entered into agreements with customers without first consulting the company’s in-house legal counsel. Per discussion with the Director of Contracts/Intellectual Property, any non-standard agreement (i.e., any modification or deviation from Company X’s standard Terms & Conditions) should be reviewed by contract operations. However, this is a verbal policy only at this time and no formal documentation exists.
Action Required
Owner
Date
A. Establish a systematic process to review nonstandard contracts. Additionally, create a matrix of potential sales opportunities with corresponding action items to help sales individuals know when they should obtain assistance from the in-house legal counsel.
Establishing a formal documented review process will help mitigate potential legal risks the company may be exposed to during contract negotiations. Business Impact: • Although we did not encounter any significant issues, the company may have potential exposure by entering into agreements without first obtaining the necessary legal advice.
mpany X Confidential: Do not distribute
10
Action Matrix Detail
Issues / Observations
4. Tool configuration information is not readily available to regional marketing and sales personnel which increases the cycle time in the sales order process. Sales personnel request pricing and availability information from regional marketing when preparing a quote for a customer. This is done for both tool (configurable) and non-tool (not configurable) products. If the quote involves a tool then it will require configuration information. Per discussion with the Senior Regional Marketing Representative, tool configuration information is not consistently available to regional marketing and sales personnel. Systems engineering maintains a database of known configurations with tool names; however, regional marketing and sales personnel do not have access to this information. If quotes do not contain accurate tool configuration information then the whole order process is slowed down because systems engineering can not configure tools without complete information from the customer. As both regional marketing and sales personnel are heavily involved in the quoting process, they need to have easy access to this information to be able to provide customers with accurate tool information.
Action Required
Owner
Date
A. A periodic report of known tool configuration should be provided to by Systems engineering should provide regional marketing and sales personnel. B. Management should consider creating an online database of known tool configuration that regional marketing and sales personnel can access. Such database should be updated with accurate tool configuration information. On-site field engineers and selected customers should be provided access to such tooling information.
Providing regional marketing and sales personnel with a report of known tool configurations will help them to better communicate with the customer on the front end and expedite the quoting process. Business Impact: • The overall quotation/order process cycle time is increased because quotes and purchase orders do not contain complete information. This in turn increases the overall cycle time from quote to shipment.
mpany X Confidential: Do not distribute
11
Action Matrix Detail
Issues / Observations
5. Sales quotes do not consistently have complete tool configuration information, resulting in incomplete purchase orders from customers. Per discussion with the Senior Regional Marketing Representative, sales personnel do not consistently provide regional marketing with all the necessary information to ensure that quotes (which customers use to issue purchase orders) are accurate and complete. Additionally, sales personnel are required to complete a clean book checklist (CBC) for the quote before they issue it to the customer; however, this is not consistently done. A standardized quote request form has been developed for sales personnel but is not consistently used. As such, customer purchase orders do not always have complete information. According to the Systems Engineer, purchase orders need to be more specific to allow the systems engineering team to accurately configure tools. According to the Systems Engineering Manager, approximately XX% of purchase orders received from order management have incomplete or incorrect tool configuration information. When this happens, systems engineering is required to communicate with regional marketing or directly with the customer to obtain the necessary information to complete the tool configuration process. Internal audit tested XX purchase orders received by systems engineering over a one week period and noted that X purchase orders contained incomplete (X) or incorrect (X) tool configuration information. These types of issues prevent systems engineering from completing tool configurations in a timely manner and thereby increases the cycle time to process customer orders. Business Impact: • Incomplete tool configuration information on purchase orders creates process inefficiencies in the configuration process and ultimately increase the overall order cycle time. • Incorrect configuration information could potentially cause the company to incur additional costs associated with rework.
mpany X Confidential: Do not distribute
Action Required
Owner
Date
A. Establish a systematic process to ensure that complete configuration information is provided by the customer before the purchase order is submitted to systems engineering. B. Systems engineering should be involved in the quote process to ensure that customers are provided with accurate configuration information up-front. C. The standardized quote request form should be used to ensure complete and accurate quote information is captured from customers. Sales personnel should review completed quotes for accuracy and completeness before submitting to regional marketing and systems engineering.
12
Action Matrix Detail
Issues / Observations
6. A global clean book checklist (CBC) to address the overall sales order process do not exist. Regional marketing and order management are required to complete a clean book checklists (CBCs) which are unique to their respective area. Additionally, systems engineering completes an engineering design analysis (EDA) when configuring tools. However, there is no global document that addresses the overall sales order process. As such, customer purchase orders are processed without regard to the overall sales order process. This has resulted in inefficiencies in the sales order process.
Action Required
Owner
Date
A. Regional marketing, order management, and systems engineering should evaluate consolidating the existing CBCs and EDA into one global document that contains all necessary information (i.e., billing information, tool configuration information, etc.)
For example, the order management CBC does not contain all the information needed by systems engineering. Items such as the customer contact name, tool name and model name are not addressed by the current order management CBC. As a result, purchase orders “pass” the order management CBC which do not meet systems engineering information requirements. These purchase orders require additional follow-up work (i.e., locating the customer contact name, tool name, etc.). We tested XX purchase orders that passed the order management CBC and were faxed to systems engineering and noted that X of the purchase orders required follow-up work. In order to expedite the sales order process, management should consider aligning the CBCs and the EDA among the various departments involved in the sales order process. This will help streamline the overall process as all the necessary information is captured from the customer at one point in time. Business Impact: • As CBC requirements are not consistent between departments, quotes and purchase orders are sometimes passed on to the next process step without complete information. This inefficiency increases the overall cycle time from quote to shipment.
mpany X Confidential: Do not distribute
13
Action Matrix Detail
Issues / Observations
7. The master price list in the system is not up to date. Per discussion with the Information Technology specialist, the master price list in is not complete and is not kept up to date. Internal audit reviewed the list price for XX part numbers in the price book used by regional marketing for quote purposes and traced and agreed the price to the master price list contained within and noting one discrepancy. Additionally, we performed CAAT testing on the master price list within and found that XXX part numbers were missing from the master price list.
Action Required
Owner
Date
A. Update and maintain the master price list on the system. B. Establish a formal process to ensure that pricing information is consistently obtained and updated.
The master price list within should be kept current with all existing tools and their associated prices. Maintaining pricing information on system X will increase the accuracy and integrity of the pricing information and decrease the cost of maintaining and updating the manual system which is currently being employed. Business Impact: • Pricing information provided to customers may be incorrect and could potentially result in lost revenue. • Maintaining a manual system is costly and time consuming.
mpany X Confidential: Do not distribute
14
Action Matrix Detail
Issues / Observations
8. Repeat Item: The shipping log is not consistently filled out to reflect the carrier and routing number. The shipping department is required to keep a shipping log to capture daily shipping information and activity. Each log entry is supposed to capture key information on the shipment, which includes the carrier and the applicable routing number. Per review of the shipping log, it was noted that key shipping information is not consistently being recorded in the shipping log. It was noted that XX% of the log entries did not contain carrier and routing number information. Additionally, we were unable to locate the supporting shipping documentation in XX% of the transactions reviewed.
Action Required
Owner
Date
A. Implement policy that requires shipping log to be completely filled out the same day product is shipped. B. Create an X database database to maintain the shipping log. The invoicing department should have access to the database so they can verify items have been shipped before invoicing occurs.
Shipping employees should record all applicable shipping information in the shipping log on the same day that shipment occurs. This practice will ensure that all supporting information is properly recorded and documented. Business Impact: • Failure to record shipping information in the shipping log could potentially hinder the company’s ability to quickly respond to customer questions regarding shipments. • Potential loss of traceability for products in transit.
mpany X Confidential: Do not distribute
15
Appendix A: Best Practices Scorecard
The matrix The “Best Practices” Summary on the following pages is based on Company Y’s Global Best Practices. As part of this review, Company X’s practices were benchmarked against the “Best Practices.” An evaluation of Company X’s processes is noted in each instance. Best Practices were evaluated as follows:
Good/World Class - “Best Practice” currently in use.
✔ Moderate Use - Improvement possible in order to achieve “Best Practice” status. ✖ Limited/Some Use - Improvement recommended to improve process efficiency/effectiveness.
Where possible improvement can be made in the company’s best practice structure, a reference has been made to the Action Matrix, where management’s change implementation is described along with the responsible party and estimated implementation timing.
mpany X Confidential: Do not distribute
16
Best Practices
Key Internal Control Objective
Page
1. Provide one primary contact point for each type of customer.
18
2. Create a simple, easy-to-use order-taking process.
19
3. Create an integrated system that is informative and flexible and used throughout the company.
20
4. Make decisions at the time of customer contact.
21
5. Establish and periodically reevaluate long-term agreements between customers and the company.
22
mpany X Confidential: Do not distribute
Priority
17
Best Practices
Key Internal Control Objective
1. Provide one primary contact point for each type of customer. • The company has records that indicate customer characteristics such as order frequency, volume, and complexity. • Customer technological and personnel capabilities are a major consideration in deciding how a company's orders are placed. • Employee responsibilities relating to taking customer orders is well defined, and questions about products are referred to a trained customer service representative. • The company has mechanisms in place to measure how well employees taking orders respond to customers. Benefits: • Reduced customer frustration in searching for answers to questions. • Improves order cycle time. • Reduces company costs and customer complaints. • Improves the company’s responsiveness and ability to track orders.
mpany X Confidential: Do not distribute
Company X Practice
Company X customers currently interact primarily with the sales person servicing their account.
Rating
Reference
Action Item #4,5
When the customer needs technical information then someone from the systems engineering department will interact with the customer to exchange the relevant technical data. Systems engineering does not currently have a formal process for communicating this information to the customer. The company should evaluate the feasibility of dedicating a systems engineer (or another employee with a sufficient technical background) to working exclusively with customers to determine technical specifications.
18
Best Practices
Key Internal Control Objective
2. Create a simple, easy-to-use order-taking process. • Computer systems are always accessible while employees are taking orders. • The company considers the complex or specialized needs of certain customer groups in designing its order-taking process. • The company always confirms a customer's order before completing the order-taking process. • The company uses the order date as the primary means of ranking orders by priority. Benefits: • Order process time is reduced. • Reduces customer inquiries/complaints and internal follow-up on orders.
mpany X Confidential: Do not distribute
Company X Practice
Sales personnel do not consistently provide regional marketing with all the necessary information to ensure that quotes (which customers use to issue purchase orders) are accurate and complete.
Rating
Reference
Action Item #4,5
According to the Systems Engineering Manager, approximately XX% of purchase orders received from order management have incomplete information. When purchase orders have incomplete information systems engineering is required to communicate with regional marketing or with the customer to obtain the necessary information to complete the tool configuration process.
19
Best Practices
Key Internal Control Objective
3. Create an integrated system that is informative and flexible and used throughout the company. • Customers are transferred from the primary contact when order status must be checked. • All departments involved in the order cycle share a common database. • If the company sells to distributors, its system is linked with individual distributor's sales data. • Customers who place orders on a credit basis must have each order approved by the credit department.
Company X Practice
The company currently uses the system, which is an enterprisewide system. The order entry system resides in system x; however, only regional marketing and order management use the system to locate pricing information and to input configuration information. Sales and systems engineering do not use the system to perform their specific functions.
Rating
Reference
Action Item #4
Benefits: • • • •
Improves order cycle time. Reduces internal follow-up on orders. Improves the accuracy of the order process. Improves the efficiency of tracking and monitoring the order status.
mpany X Confidential: Do not distribute
20
Best Practices
Key Internal Control Objective
4. Make decisions at the time of customer contact. • The customer contact representative is empowered to make most decisions regarding customers during the course of taking an order. • The company has a system mechanism by which it can monitor representatives to ensure they adhere to preset credit/discount authorizations. • In most cases, calls from customers with questions about order status must be referred to someone other than the customer contact representative. Benefits: • Reduces the number of times customers have to call. • Reduces the time spent on answering questions and taking orders. • Eliminates frustration with not getting an answer. • Speeds up the customer's decision process.
mpany X Confidential: Do not distribute
Company X Practice
The company does not currently have a systematic process to ensure that complete configuration information is provided by the customer prior to the purchase order being submitted to systems engineering.
Rating
Reference
Action Item #5
Systems engineering should be involved in the quoting process to ensure that customers are provided with adequate configuration information before the purchase order is submitted to Company X.
21
Best Practices
Key Internal Control Objective
5. Establish and periodically reevaluate long-term agreements between customers and the company. • The company makes an effort to identify customers with whom to establish long-term contracts. • The company jointly decides with the customer on the terms and conditions of the sale that should be expected of both the company and the customer. • Terms and conditions of sale in general and for specific customers are reflected in the company's order processing system.
Company X Practice
Contract operations is currently attempting to institute a formal contract and agreement review process to ensure that terms and conditions of contracts and agreements are clear and understood by both parties.
Rating
Reference
Action Item #3
Benefits: • Improves customer relations. • Allows the company to cooperate with their customers on price, service, and quality. • Enables the company to estimate product demand. • Increases customer satisfaction by providing reliable sources and predictable lead times. • Eliminates expectation gaps. • Reduces customer claims for non-conformance.
mpany X Confidential: Do not distribute
22
Appendix B: Internal Control Assessment
The matrix on the following pages lists process controls which should be present within the warranty/field services environment. We evaluated the adequacy of each control in Company X’s warranty/field services process. Controls were evaluated as follows:
Strong Controls - Controls are present to mitigate process/business risk and are operating effectively and efficiently.
✔Moderate Controls - Controls are present to mitigate most process/business risk, but management should evaluate opportunities to enhance existing controls.
✖Limited Controls - Existing controls may not mitigate process/business risk, and management should consider implementing a stronger control structure.
Where possible improvement can be made in the control structure, a reference has been made to the Action Matrix, where management’s change implementation plan is described along with the responsible party and estimated implementation timing.
mpany X Confidential: Do not distribute
23
Internal Control Assessment
Key Internal Control Objective
Page
1. Discounts should approved by appropriate personnel.
25
2. Use a comprehensive control documentation to ensure that all relevant sales order information is captured on quotes and purchase orders prior to processing.
26
3. Standard quote request forms should be used when obtaining quotes.
27
4. Sales order information on quotes should be reviewed by the appropriate personnel prior to final distribution to the customer.
28
5. Shipping logs should be filled out completely and maintained on a daily basis.
29
mpany X Confidential: Do not distribute
Priority
24
Internal Control Assessment
Key Internal Control Objective
1. Discounts should approved by appropriate personnel. • Discount authorization forms should be signed and dated by the appropriate personnel. • Discount authorization forms should be filed with the applicable purchase order or contract.
Business Impact: • Discount authorization policies and procedures protect the company’s pricing strategy and provide management with visibility over the discounts given to customers.
mpany X Confidential: Do not distribute
Company X Practice
It was noted during our review that standard authorization documentation for discounts was missing or incomplete. The sales authorization matrix on the company’s intranet states that all discounts greater than XX% must be signed by either the CEO or the COO.
Rating
Reference
Action Item #2
Train applicable sales personnel to ensure that discount authorization is obtained prior to providing discounts to customers. Additionally, make sure approved discounts are supported by the appropriate documentation. Management should also evaluate and update the current discount authorization matrix/policy for relevancy.
25
Internal Control Assessment
Key Internal Control Objective
2. Use a comprehensive control document to ensure that all relevant sales order information is captured on quotes and purchase orders prior to processing. • Ensures all the necessary information is obtained on the purchase order for entry into the system • Provides accountability and allows management to track breakdowns in the process. • Ensures all the correct information is on the quote before it is distributed to the customer. Business Impact: • Improves cycle time from quote to entry into the order backlog. • Improves process efficiency. • Provides control points to ensure all information is complete and accurate.
mpany X Confidential: Do not distribute
Company X Practice
Order Management currently uses a Clean Book Checklist (CBC). The CBC ensures that the PO contains all the necessary information for entry into the system. However, the CBC does not require that all necessary configuration information be on the purchase order before entry is made into the system.
Rating
Reference
Action Item #5,6
According to the Quote Completion process map (date ), sales personnel should complete a CBC for the quote before they distribute it to the customer. However, this is not done consistently.
26
Internal Control Assessment
Key Internal Control Objective
3. Standard quote request forms should be used when obtaining quotes. • Ensures that all the information needed by regional marketing, order management, and systems engineering is provided by the sales personnel on the front end of the sales order process. • Reduces the overall time spent obtaining the necessary quote information (i.e., pricing, tool configuration) from regional marketing. Business Impact: • Improves overall sales order cycle time. • Pricing and tool configuration information is more accurate and timely.
mpany X Confidential: Do not distribute
Company X Practice
Per discussion with the Senior Regional Marketing Representative, a standardized quote request form has been developed for sales personnel but is not used consistently.
Rating
Reference
Action Item #5
This form should be used to ensure complete and accurate quote information is captured from customers. Have sales personnel review completed quotes for accuracy and completeness.
27
Internal Control Assessment
Key Internal Control Objective
4. Sales order information on quotes should be reviewed by the appropriate personnel prior to final distribution to the customer. • Quotes are reviewed by the engineers to ensure the product configuration is technically correct. • Systems engineering should interact with the customer (if necessary) early on in the quoting process to ensure the integrity of the quote process is maintained.
Company X Practice
Quotes generated by regional marketing for sales personnel are not consistently reviewed by systems engineering.
Rating
Reference
Action Item #4,5
Systems engineering should be involved early on in the quoting process to ensure that customers are provided with adequate tool configuration information.
Business Impact: • Improved process efficiency in the quotation process. • Reduce the number of purchase orders that need to be reconfigured. • Provide accurate quotes to the customers.
mpany X Confidential: Do not distribute
28
Internal Control Assessment
Key Internal Control Objective
5. Shipping logs should be filled out completely and maintained on a daily basis. • All information in the shipping log should be filled out daily at the time of shipment. • Shipping information allows the company to verify shipments for invoicing purposes and to track shipments once they have been sent. Business Impact: • Improve traceability on products shipped to customers. • Provide complete and accurate shipping documentation.
mpany X Confidential: Do not distribute
Company X Practice
The shipping department does not consistently record the carrier and routing number in the shipping log on the same day of shipment. Currently, this information is recorded the day after the product actually ships.
Rating
Reference
Action Item #8
Detailed testing revealed that this information is often not recorded in the shipping log. Also, we were unable to locate much of the source documentation providing the applicable information. It should be noted that the company is in the process of determining the feasibility of using an electronic shipping log. Additionally, the company is evaluating using bar code technology for all shipments. As such, all the shipping information will be electronically recorded and input into the company’s information system.
29
Appendix C: Sales Order Process Map
Sales Representative request a quote from Regional Marketing
Customers Sends Purchase Order to Company X
Order Management specialist reviews PO and enters it into the system
System Engineering determines configuration
• Regional Marketing obtains Standard product and pricing information from product marketing.
• The PO comes into Company X and is distributed to the appropriate Order Management Specialist.
The PO is logged into the X database that tracks the sales order process.
• When PO passes the CBC, it is entered into as “System Engineering.”
✔ The Order Management (OM) Specialist utilizes the clean book checklist (CBC) to review the PO.
• The Order Management Specialist faxes the PO to Person X in System Engineering.
If the PO fails the CBC, then the OM Specialist will note in Access, the reason why the item failed and who the PO is sent to in Regional Marketing.
✔ System Engineering configures the toll and emails the configuration to the appropriate Order Management Specialist. ✔ Order Management Specialist enters the information into backlog.
✖ Sales Representatives do not use a standardized quote request form. Quote is sent to the sales representative for review. This review is not consistently performed. ✔ Non standard orders that are not in the visibility system or in the price book are sent to system engineering for configuration, even if the tool has been created before.
• A folder is created to maintain copies of the PO, CBC check list, X database log sheet, order entry check list, any change order check list, copy of fax set to system engineering (for non standard products), and any product configurations.
✖ Known tool name report is not distributed monthly to RM. Quote is not consistently generated by product marketing with System Engineering input. Quote is emailed to the Sales Representative before receiving system engineering input. • Sales Representative sends quote to the customer.
mpany X Confidential: Do not distribute
✖ A standard form is not used to communicate problems to Regional Marketing. ✔ One copy is placed in the PO folder and one copy is sent to appropriate Regional Marketing personnel.
PO is entered into the System
• When PO passes the CBC, it is entered into .
Company X Control Points In Place:
• ✔
Process Step Internal control point (manual) Internal control point (system based)
Company X Control Weaknesses:
✖
Internal control weakness Process inefficiency
30
Appendix C: Shipping/Invoicing Process Map
The Shipping Request Form (SRF) is created.
Product is pulled from the inventory warehouse.
Product is inspected by Quality Assurance (QA).
Packing slips are generated.
✔ Order management enters ✔ The LPT line manager ✔ QA inspects the product and ✔ Once SRF information has sales order information into provides a daily shipping verifies that the information on been verified it is entered sheet which the finished the system. the SRF matches to the actual into the system and a goods coordinator reviews packing slip is generated. items on the shipping floor ✔ Regional Marketing creates and matches up to the SRF (i.e., part number, description, ✔ The packing slip is used to a Shipping Request Form details. quantity, serial number) create the invoice. (SRF) based on the sales Packing slips are not being QA is using the SRF, rather order information within the ✔ The finished goods coordinator then examines reviewed/checked against system. The SRF triggers than the packing slip, to verify the serial numbers on the the SRF. the shipping process. the serial numbers instead of goods to be shipped and the packing slip. ✔ A copy of the SRF is sent to writes the serial numbers on the finished goods the SRF. Tools requiring coordinator. serial numbers include: SmartComm, SmartTag, ✖ Some SRFs are created LPTs, Indexer, & 300MM manually because of Pods efficiency limitations within . ✔ The items on the SRF are ✔ The serial number is allocated (transferred from assigned to product on the finished goods) to the sales manufacturing floor. order. Serial numbers are ✔ Finished goods not already duplicated or are incorrectly on the shipping floor are assigned. pulled from the inventory warehouse. ✔ The SRF is then passed on to Quality Assurance for review. Serial number information is still manually transferred on some of the shipping docs, and is therefore subject to human error.
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Invoice is generated.
The product is invoiced and shipped.
✔ The packing slip is sent to ✔ A copy of the invoice is invoicing and an invoice is mailed to the customer. generated by system. Product loaded onto freight ✔ A copy of the invoice is sent carriers is not being to the shipping floor (for sufficiently monitored as international shipments) and its being loaded. is attached to the product The daily invoice log is not being shipped (along with all being matched up to the of the other shipping shipping log. documentation).
Company X Control Points In Place:
• ✔
Process Step Internal control point (manual) Internal control point (system based)
Company X Control Weaknesses:
✖
Internal control weakness Process inefficiency
31
Appendix C: Proposed Sales Order Non-Tool Processing Process Map
Sales Representative request a quote from Order Management
✔ Sales Representative requests a quote for tool and non-tool products from Regional Marketing utilizing the standard quote request template. ✔ Standard products, pricing information is obtained from product marketing system. ✔ Quote is sent to Order Management for technical review. ✔ Quote then forwarded to the sales representative for order completeness review. • Sales Representative sends quote to the customer.
Customers Sends Purchase Order to Company X
• The PO comes into Company X and is distributed to the appropriate Order Management Specialist. • If the PO is new, a folder is created to maintain copies of the PO, CBC check list, X database log sheet, order entry check list, any change order check list, copy of fax set to systems engineering (for non standard products), and any product configurations. ✖ There are no policies or procedures in place that indicate the proper way to receive/process PO, to maintain a folder, what to put in the folder, and what to enter into Access.
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Order Management specialist scrub PO and enters it into the system
The PO is logged into the X database.
PO is entered into the system
• When PO passes the CBC, it is entered into system.
✔ The Order Management Specialist utilizes the clean book checklist (CBC) to review the PO. If the PO fails the CBC, then the OM Specialist will log under the PO number in Access, the reason why the item failed and who the PO is sent to in Regional Marketing. ✔ One copy is placed in the PO folder and one copy is sent to appropriate Regional Marketing personnel. • The Order Management Specialist fills out the standard CBC fail sheet and sends the PO to Regional Marketing . • This process is completed util the PO passes the CBC
Company X Control Points In Place:
• ✔
Process Step Internal control point (manual) Internal control point (system based)
Company X Control Weaknesses:
✖
Internal control weakness Process inefficiency
32
Appendix C: Proposed Sales Order Tool Based Processing Process Map
Sales Representative request a quote from Order Management (known)
Sales Representative request a quote from Sales Order Management Representative (Unknown) request a quote from Order Management
Customers Sends Purchase Order to Company X
Order Management specialist scrub PO and enters it into the system
✔ Sales Representative requests a quote for tool and non-tool products from Regional Marketing utilizing the standard quote request template. ✔ Check in the visibility system, the price book, and the known tool name report (provided by SE) for the requested tool. ✔ If tool is not found, send to systems engineering for configuration. • Quote is generated.
• The PO comes into Company X and is distributed to the appropriate Order Management Specialist.
The PO is logged into the X database.
✔ Quote is sent to Order Management for technical review.
✔ Quote is sent to Order Management for technical review.
✔ Quote then forwarded to the sales representative for order completeness review.
✔ Quote then forwarded to the sales representative for order completeness review.
✖ There are no policies or procedures in place that indicate the proper way to receive/process PO, to maintain a folder, what to put in the folder, and what to enter into Access.
• Sales Representative sends quote to the customer.
• Sales Representative sends quote to the customer.
✔ Sales Representative requests a quote for tool and non-tool products from Regional Marketing utilizing the standard quote request template. ✔ Check in the visibility system, the price book, and the known tool name report (provided by SE) for the requested tool. ✔ Standard products, pricing information is obtained from product marketing system.
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• If the PO is new, a folder is created to maintain copies of the PO, CBC check list, X database log sheet, order entry check list, any change order check list, copy of fax set to systems engineering (for non standard products), and any product configurations.
✔ The Order Management Specialist utilizes the clean book checklist (CBC) to review the PO. If the PO fails the CBC, then the OM Specialist will log under the PO number in Access, the reason why the item failed and who the PO is sent to in Regional Marketing. ✔ One copy is placed in the PO folder and one copy is sent to appropriate Regional Marketing personnel. • The Order Management Specialist fills out the standard CBC fail sheet and sends the PO to Regional Marketing. • This process is completed util the PO passes the CBC.
Systems Engineering determines configuration
• When PO passes the CBC, it is entered into as “Systems Engineering.” • The Order Management Specialist faxes the PO to (name) in Systems Engineering. ✔ Systems Engineering configures the toll and emails the configuration to the appropriate Order Management Specialist. ✔ Order Management Specialist enters the information into backlog.
Company X Control Points In Place:
• ✔
Process Step Internal control point (manual) Internal control point (system based)
Company X Control Weaknesses:
✖
Internal control weakness Process inefficiency
33
Appendix C: Proposed Shipping/Invoicing Process Map
Product is moved from manufacturing to the finished goods area and inspected by QA. ✔ Each manufacturing line provides regional marketing with an accurate lead time report indicating product availability. The serial number is input into the system at the front end of the shipping/invoicing process (at the end of the manufacturing process). ✔ QA examines the product to ensure it matches the pick/pack slip (part #, serial #, etc.) and goes through the remaining QA checklist.
Regional marketing coordinates orders with available goods.
✔ Regional marketing coordinate orders from customers with the finished goods availability and manufacturing backlog. ✔ Regional marketing assigns finished goods with orders and established what is available for shipment on a daily basis. ✔ Orders are allocated to Finished Goods by Regional marketing. The Finished Goods Coordinator prints out a list of goods to be shipped each day and generates the pick/pack list for these goods.
Company X Control Points In Place:
• ✔
Process Step
Product is pulled from the finished goods inventory.
✔ The pick/pack slips are used to pull the products from inventory.
Product is packed and prepared for shipment.
✔ QA performs final quality and documentation checks. ✔ Pick list goes to the Traffic Coordinator to print the Packing slip. ✔ The goods are packed, boxed and prepared for shipment. ✔ The necessary shipping documents are attached to the shipment (i.e., packing slip, invoice) ✔ For international shipments, a shipping employee can generate a copy of the invoice at the shipping dock location using software package.
The product is invoiced and shipped.
✔ The product is loaded onto the freight forwarders and shipped. ✔ Invoicing receives copies of the shipping documentation so that any remaining invoices can be generated and sent to the respective customer. For shipments via Power Freight, invoicing sets up an intermediate invoicing location in and invoices the intermediate location in system. Once a copy of the signed freight document is returned to invoicing (indicating final shipment), the invoice is transferred out of the intermediate location and is closed to the regular revenue account.
Internal control point (manual) Internal control point (system based)
Company X Control Weaknesses:
✖
Internal control weakness Process inefficiency
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Appendix D: Testing Matrix The following matrix documents the audit tests performed, relating to the sales order process review, and the results of these tests. Overall, opportunities exist to improve the process. These improvements will ensure that internal controls are operating effectively and efficiently in order to mitigate risks associated with the process. Test
Attribute
Tested
Noncompliance
%
Comments/Detail
Customer File to PO
Verified that the customer file contained a copy of the PO and a signed X database entry form
Of the XX customer files tested, XX contained a copy of the PO
Customer File to Order Entry List
Verified that the customer file contained a completed and signed CBC and order entry list
Of the XX files tested, X did not contain an order entry check list
Customer File to CBC
Verified that the CBC was signed and completed
Of the XX files tested, XX CBC’s were not signed and one was not fully completed
System to Customer PO
Verified that the information on the PO was accurately reflected in the system
Of the XX sales orders selected from , all XX contained the proper information form the PO
Shipping Log & Supporting Doc.
Verified that shipments had proper weigh bill documentation
Of the XX log entries checked X did not have supporting weigh bill documentation
Shipping Log & Supporting Doc.
Verified that shipper documents were properly authorized or signed
Of the XX shipper documents checked X did not have shipped by signed
Shipping Log
Verified shipping log contained carrier name and weigh bill number
Of the XXX log entries checked XX did not have information for carrier or weigh bill invoice number
Clean PO to Systems Engineering
Verified with system engineering that “clean” POs sent to them were actually “clean”
Of the XX clean PO’s tested, only X contained the proper information for systems engineering to configure the product immediately
Master Price List
Traced and agreed the list price from the price book to the master price list in the system
Of the XX prices tested, X price discrepancy was noted
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Appendix E: Acknowledgements
We would like to thank all Company X employees who assisted us in our work during this project. We received input and assistance from the following persons:
Operations Controller Global Spares and Logistics Manager Regional Marketing Contracts/Intellectual Property Systems Engineer Systems Engineering Manager Project Specialist Regional Marketing Information Technology Order Management
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T EPOR R W E EVI R E CYCL R E RD S O E L SA
Table of Contents
Executive Summary
Executive Summary
3
Objective, Scope & Procedures Performed
4
Background
Background Statistics
5-6
Action Matrix
Action Matrix Summary
Action Matrix Detail
7 8-15
Appendices
A: Best Practice Scorecard
16
B: Internal Control Assessment
23
C: Process Maps
30
D: Testing Matrix
36
E: Acknowledgments
37
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2
Executive Summary
Internal audit conducted a review of the sales order processing process with the objective of evaluating the overall function for adequate controls and operational effectiveness. Specific areas of focus included quote-to-invoice process, contract operations/maintenance, accuracy and integrity of data captured in the order management system, and the quote-to-invoice cycle time. This review was completed in (insert date). The current sales order processing process is inefficient and results in increased quote to invoice cycle time. Also, the company’s information system is currently not collecting valuable sales discount information. This lack of information hampers management’s ability to make informed decisions relating to pricing. Other key observations noted during our review include: ➲ Discounts are currently not being tracked on an overall basis. This lack of discount information hinders management’s ability to create and maintain effective pricing strategies. In an analysis performed by Internal Audit, it was noted that XX% discount ($XXM) was given on orders of $XXXM during the period (insert dates). ➲ Discount authorization documentation is incomplete or missing. Potential unauthorized discounts may be given to customers which results in lost revenue and undermines the company’s overall pricing strategy. ➲ Contracts and agreements are not consistently submitted to contract operations for review. ➲ Tool configuration information is not readily available to regional marketing and sales personnel. As such the overall quotation/order process cycle time is increased because quotes and purchase orders do not contain complete information. ➲ Sales quotes do not consistently have complete tool configuration information, resulting in incomplete purchase orders from customers. Incomplete tool configuration information on purchase orders creates process inefficiencies in the configuration process and ultimately increase the overall order cycle time. ➲ A global clean book checklist (CBC) to address the overall sales order process do not exist. As CBC requirements are not consistent between departments, quotes and purchase orders are sometimes passed on to the next process step without complete information. ➲ The master price list in the (system) is not maintained. Pricing information provided to customers may be incorrect and could potentially result in lost revenue. Maintaining a manual system is costly and time consuming. ➲ The shipping log is not consistently filled out to reflect all appropriate shipping information. Failure to record shipping information in the shipping log could potentially hinder the company’s ability to trace shipments and respond to customer inquiries regarding shipments in a timely manner.
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3
Objective, Scope, & Procedures Performed
Objectives • Evaluate the internal control environment and the effectiveness and efficiency of the sales order cycle from quote to invoicing. • Review and evaluate the adequacy of existing policies and procedures in the sales order process. • Benchmark Company X’s sales order process with “Best Internal Control Policies” and “Best Practices” information. • Identify opportunities for internal control and process improvements. Scope • The scope of the work included a review of the sales order cycle at (company). • Our work did not include other Company X locations Procedures Performed During This Review • Reviewed existing policies and procedures in the processing of sales orders from quote to invoicing. • Interviewed key personnel in regional marketing, order management, and systems engineering to obtain an understanding of the sales order process. • Performed transaction testing of sales orders to evaluate cycle time, proper authorizations and support for entries. • Perform CAAT (Computer Assisted Auditing Testing) analysis on sales order records. • Evaluated the efficiency and effectiveness of the sales order process and related internal controls and compared to “Best Practices,” noting opportunities for improvement.
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4
Background Statistics
Key Discount Statistics: Sales order statistics from (dates): Total Orders Received $xxx.xM Less: Total Discounts xx.xM (xx%) Net Bookings Value xxx.xM
Top 10 Customer Discounts CUSTOMER NAME
LIST PRICE BOOKING VALUE DISCOUNT GIVEN DISCOUNT %
The table at right shows the top 10 customers by discount given. This represents approximately $xx.xM (xx%) of the total discounts over the period from (dates). The table below shows the top 10 discounted parts over the same period. Discounts relating to the xxxMM Indexer accounted for approximately $xx.xM (xx%) TOTALS of total discounts ($xx.xM) given. Note: Data for both tables taken from sales order data from (dates). PART #
PART DESCRIPTION
Top 10 Part Discounts LIST PRICE BOOKING VALUE DISCOUNT GIVEN DISCOUNT %
TOTALS
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5
Background Statistics
Stratification of Order Values The total order value of $ is comprised of x,xxx orders and is broken out below: Stratified Value
# of Orders % of Orders
Total Value
% of Value
*The data above was obtained from the system and includes all orders received from (dates).
Top Ten Customers as Percentage of Total Order Value
The top ten customers below accounted for $ (xx%) of the total booking value and x,xxx (xx%) of total orders from (dates). The detailed breakdown is outlined below: Customer Name
Booking Value
Percent Of Total
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6
Action Matrix Summary
Issues / Observations
Page
1. Discount information is not tracked on a global basis and is therefore not available for management’s analysis.
8
2. Discount authorization documentation is incomplete or missing.
9
3. Contracts and agreements are not consistently submitted to contract operations for review.
10
4. Tool configuration information is not readily available to regional marketing and sales personnel which increases the overall order process.
11
5. Sales quotes do not consistently have complete tool configuration information, resulting in incomplete purchase orders from customers.
12
6. A global clean book checklist (CBC) to address the overall sales order process do not exist.
13
7. The master price list in the system is not maintained.
14
8. Repeat Item: The shipping log is not consistently filled out to reflect all appropriate shipping information.
15
Priority Rating
High
Medium
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Priority
Low
7
Action Matrix Detail
Issues / Observations
1. Discount information is not tracked on the system and is therefore not available for management’s analysis. Internal audit conducted analysis of sales orders received from (dates). We compared the booking value of orders received to the master price list in the system. It was noted that approximately XX% discount was given ($XX.XM) on total orders of $XXXM. This information is not readily available to management (i.e., no reports from which detail this information, is currently available). When customer orders are entered into the system, the total price on the orders is input into a field called “booking value.” Orders are currently entered in at the net sales amount and not at the gross price with the associated discount (if applicable). Per discussion with the Project Specialist, the system has this capability (tracking both the gross price and the discount) but it is currently not being utilized. As such, the company is not tracking discounts through its order management system.
Action Required
Owner
Date
A. The gross value of the product and the discounts offered should be entered and tracked in the system. B. Perform periodic margin and profitability analysis of the sales order in the system to ensure that overall discounts given to customers are in accordance with management’s strategies.
As the company currently does not have good visibility of total discounts given to customers on a global basis, management is not informed on how much discount is actually given away. Additionally, margin & profitability information on the various product lines is difficult to ascertain because of the lack of detailed discount information. Business Impact: • Lack of discount information affects management’s ability to create and maintain effective pricing strategies. • Margin & profitability information on the various product lines is difficult to ascertain because of the lack of detailed discount information.
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8
Action Matrix Detail
Issues / Observations
2. Discount authorization documentation is incomplete or missing. According to the company’s sales authorization matrix (on the company’s intranet), all discounts greater than XX% must be signed by either the CEO or the COO. At the request of the Operations Controller, we reviewed X purchase orders (with the purpose of verifying proper discount authorization) for the following customers; (companies). Our findings are as follows: (insert findings)
Business Impact: • Unauthorized discounts given to customers.
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Action Required
Owner
Date
A. Train applicable sales personnel to ensure that discount authorization is obtained prior to providing discounts to customers. Additionally, make sure approved discounts are supported by the appropriate documentation. B. Evaluate the current discount authorization matrix/policy for relevancy and make changes as appropriate.
9
Action Matrix Detail
Issues / Observations
3. Contracts and agreements are not consistently submitted to contract operations for review. According to the Director of Contracts/Intellectual Property, the company does not currently have a formal contract and agreement review process. There are currently no formal guidelines or policies governing sales individuals when they are negotiating contracts/agreements with customers. As such, sales individuals have at times entered into agreements with customers without first consulting the company’s in-house legal counsel. Per discussion with the Director of Contracts/Intellectual Property, any non-standard agreement (i.e., any modification or deviation from Company X’s standard Terms & Conditions) should be reviewed by contract operations. However, this is a verbal policy only at this time and no formal documentation exists.
Action Required
Owner
Date
A. Establish a systematic process to review nonstandard contracts. Additionally, create a matrix of potential sales opportunities with corresponding action items to help sales individuals know when they should obtain assistance from the in-house legal counsel.
Establishing a formal documented review process will help mitigate potential legal risks the company may be exposed to during contract negotiations. Business Impact: • Although we did not encounter any significant issues, the company may have potential exposure by entering into agreements without first obtaining the necessary legal advice.
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10
Action Matrix Detail
Issues / Observations
4. Tool configuration information is not readily available to regional marketing and sales personnel which increases the cycle time in the sales order process. Sales personnel request pricing and availability information from regional marketing when preparing a quote for a customer. This is done for both tool (configurable) and non-tool (not configurable) products. If the quote involves a tool then it will require configuration information. Per discussion with the Senior Regional Marketing Representative, tool configuration information is not consistently available to regional marketing and sales personnel. Systems engineering maintains a database of known configurations with tool names; however, regional marketing and sales personnel do not have access to this information. If quotes do not contain accurate tool configuration information then the whole order process is slowed down because systems engineering can not configure tools without complete information from the customer. As both regional marketing and sales personnel are heavily involved in the quoting process, they need to have easy access to this information to be able to provide customers with accurate tool information.
Action Required
Owner
Date
A. A periodic report of known tool configuration should be provided to by Systems engineering should provide regional marketing and sales personnel. B. Management should consider creating an online database of known tool configuration that regional marketing and sales personnel can access. Such database should be updated with accurate tool configuration information. On-site field engineers and selected customers should be provided access to such tooling information.
Providing regional marketing and sales personnel with a report of known tool configurations will help them to better communicate with the customer on the front end and expedite the quoting process. Business Impact: • The overall quotation/order process cycle time is increased because quotes and purchase orders do not contain complete information. This in turn increases the overall cycle time from quote to shipment.
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11
Action Matrix Detail
Issues / Observations
5. Sales quotes do not consistently have complete tool configuration information, resulting in incomplete purchase orders from customers. Per discussion with the Senior Regional Marketing Representative, sales personnel do not consistently provide regional marketing with all the necessary information to ensure that quotes (which customers use to issue purchase orders) are accurate and complete. Additionally, sales personnel are required to complete a clean book checklist (CBC) for the quote before they issue it to the customer; however, this is not consistently done. A standardized quote request form has been developed for sales personnel but is not consistently used. As such, customer purchase orders do not always have complete information. According to the Systems Engineer, purchase orders need to be more specific to allow the systems engineering team to accurately configure tools. According to the Systems Engineering Manager, approximately XX% of purchase orders received from order management have incomplete or incorrect tool configuration information. When this happens, systems engineering is required to communicate with regional marketing or directly with the customer to obtain the necessary information to complete the tool configuration process. Internal audit tested XX purchase orders received by systems engineering over a one week period and noted that X purchase orders contained incomplete (X) or incorrect (X) tool configuration information. These types of issues prevent systems engineering from completing tool configurations in a timely manner and thereby increases the cycle time to process customer orders. Business Impact: • Incomplete tool configuration information on purchase orders creates process inefficiencies in the configuration process and ultimately increase the overall order cycle time. • Incorrect configuration information could potentially cause the company to incur additional costs associated with rework.
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Action Required
Owner
Date
A. Establish a systematic process to ensure that complete configuration information is provided by the customer before the purchase order is submitted to systems engineering. B. Systems engineering should be involved in the quote process to ensure that customers are provided with accurate configuration information up-front. C. The standardized quote request form should be used to ensure complete and accurate quote information is captured from customers. Sales personnel should review completed quotes for accuracy and completeness before submitting to regional marketing and systems engineering.
12
Action Matrix Detail
Issues / Observations
6. A global clean book checklist (CBC) to address the overall sales order process do not exist. Regional marketing and order management are required to complete a clean book checklists (CBCs) which are unique to their respective area. Additionally, systems engineering completes an engineering design analysis (EDA) when configuring tools. However, there is no global document that addresses the overall sales order process. As such, customer purchase orders are processed without regard to the overall sales order process. This has resulted in inefficiencies in the sales order process.
Action Required
Owner
Date
A. Regional marketing, order management, and systems engineering should evaluate consolidating the existing CBCs and EDA into one global document that contains all necessary information (i.e., billing information, tool configuration information, etc.)
For example, the order management CBC does not contain all the information needed by systems engineering. Items such as the customer contact name, tool name and model name are not addressed by the current order management CBC. As a result, purchase orders “pass” the order management CBC which do not meet systems engineering information requirements. These purchase orders require additional follow-up work (i.e., locating the customer contact name, tool name, etc.). We tested XX purchase orders that passed the order management CBC and were faxed to systems engineering and noted that X of the purchase orders required follow-up work. In order to expedite the sales order process, management should consider aligning the CBCs and the EDA among the various departments involved in the sales order process. This will help streamline the overall process as all the necessary information is captured from the customer at one point in time. Business Impact: • As CBC requirements are not consistent between departments, quotes and purchase orders are sometimes passed on to the next process step without complete information. This inefficiency increases the overall cycle time from quote to shipment.
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13
Action Matrix Detail
Issues / Observations
7. The master price list in the system is not up to date. Per discussion with the Information Technology specialist, the master price list in is not complete and is not kept up to date. Internal audit reviewed the list price for XX part numbers in the price book used by regional marketing for quote purposes and traced and agreed the price to the master price list contained within and noting one discrepancy. Additionally, we performed CAAT testing on the master price list within and found that XXX part numbers were missing from the master price list.
Action Required
Owner
Date
A. Update and maintain the master price list on the system. B. Establish a formal process to ensure that pricing information is consistently obtained and updated.
The master price list within should be kept current with all existing tools and their associated prices. Maintaining pricing information on system X will increase the accuracy and integrity of the pricing information and decrease the cost of maintaining and updating the manual system which is currently being employed. Business Impact: • Pricing information provided to customers may be incorrect and could potentially result in lost revenue. • Maintaining a manual system is costly and time consuming.
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14
Action Matrix Detail
Issues / Observations
8. Repeat Item: The shipping log is not consistently filled out to reflect the carrier and routing number. The shipping department is required to keep a shipping log to capture daily shipping information and activity. Each log entry is supposed to capture key information on the shipment, which includes the carrier and the applicable routing number. Per review of the shipping log, it was noted that key shipping information is not consistently being recorded in the shipping log. It was noted that XX% of the log entries did not contain carrier and routing number information. Additionally, we were unable to locate the supporting shipping documentation in XX% of the transactions reviewed.
Action Required
Owner
Date
A. Implement policy that requires shipping log to be completely filled out the same day product is shipped. B. Create an X database database to maintain the shipping log. The invoicing department should have access to the database so they can verify items have been shipped before invoicing occurs.
Shipping employees should record all applicable shipping information in the shipping log on the same day that shipment occurs. This practice will ensure that all supporting information is properly recorded and documented. Business Impact: • Failure to record shipping information in the shipping log could potentially hinder the company’s ability to quickly respond to customer questions regarding shipments. • Potential loss of traceability for products in transit.
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15
Appendix A: Best Practices Scorecard
The matrix The “Best Practices” Summary on the following pages is based on Company Y’s Global Best Practices. As part of this review, Company X’s practices were benchmarked against the “Best Practices.” An evaluation of Company X’s processes is noted in each instance. Best Practices were evaluated as follows:
Good/World Class - “Best Practice” currently in use.
✔ Moderate Use - Improvement possible in order to achieve “Best Practice” status. ✖ Limited/Some Use - Improvement recommended to improve process efficiency/effectiveness.
Where possible improvement can be made in the company’s best practice structure, a reference has been made to the Action Matrix, where management’s change implementation is described along with the responsible party and estimated implementation timing.
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16
Best Practices
Key Internal Control Objective
Page
1. Provide one primary contact point for each type of customer.
18
2. Create a simple, easy-to-use order-taking process.
19
3. Create an integrated system that is informative and flexible and used throughout the company.
20
4. Make decisions at the time of customer contact.
21
5. Establish and periodically reevaluate long-term agreements between customers and the company.
22
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Priority
17
Best Practices
Key Internal Control Objective
1. Provide one primary contact point for each type of customer. • The company has records that indicate customer characteristics such as order frequency, volume, and complexity. • Customer technological and personnel capabilities are a major consideration in deciding how a company's orders are placed. • Employee responsibilities relating to taking customer orders is well defined, and questions about products are referred to a trained customer service representative. • The company has mechanisms in place to measure how well employees taking orders respond to customers. Benefits: • Reduced customer frustration in searching for answers to questions. • Improves order cycle time. • Reduces company costs and customer complaints. • Improves the company’s responsiveness and ability to track orders.
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Company X Practice
Company X customers currently interact primarily with the sales person servicing their account.
Rating
Reference
Action Item #4,5
When the customer needs technical information then someone from the systems engineering department will interact with the customer to exchange the relevant technical data. Systems engineering does not currently have a formal process for communicating this information to the customer. The company should evaluate the feasibility of dedicating a systems engineer (or another employee with a sufficient technical background) to working exclusively with customers to determine technical specifications.
18
Best Practices
Key Internal Control Objective
2. Create a simple, easy-to-use order-taking process. • Computer systems are always accessible while employees are taking orders. • The company considers the complex or specialized needs of certain customer groups in designing its order-taking process. • The company always confirms a customer's order before completing the order-taking process. • The company uses the order date as the primary means of ranking orders by priority. Benefits: • Order process time is reduced. • Reduces customer inquiries/complaints and internal follow-up on orders.
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Company X Practice
Sales personnel do not consistently provide regional marketing with all the necessary information to ensure that quotes (which customers use to issue purchase orders) are accurate and complete.
Rating
Reference
Action Item #4,5
According to the Systems Engineering Manager, approximately XX% of purchase orders received from order management have incomplete information. When purchase orders have incomplete information systems engineering is required to communicate with regional marketing or with the customer to obtain the necessary information to complete the tool configuration process.
19
Best Practices
Key Internal Control Objective
3. Create an integrated system that is informative and flexible and used throughout the company. • Customers are transferred from the primary contact when order status must be checked. • All departments involved in the order cycle share a common database. • If the company sells to distributors, its system is linked with individual distributor's sales data. • Customers who place orders on a credit basis must have each order approved by the credit department.
Company X Practice
The company currently uses the system, which is an enterprisewide system. The order entry system resides in system x; however, only regional marketing and order management use the system to locate pricing information and to input configuration information. Sales and systems engineering do not use the system to perform their specific functions.
Rating
Reference
Action Item #4
Benefits: • • • •
Improves order cycle time. Reduces internal follow-up on orders. Improves the accuracy of the order process. Improves the efficiency of tracking and monitoring the order status.
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20
Best Practices
Key Internal Control Objective
4. Make decisions at the time of customer contact. • The customer contact representative is empowered to make most decisions regarding customers during the course of taking an order. • The company has a system mechanism by which it can monitor representatives to ensure they adhere to preset credit/discount authorizations. • In most cases, calls from customers with questions about order status must be referred to someone other than the customer contact representative. Benefits: • Reduces the number of times customers have to call. • Reduces the time spent on answering questions and taking orders. • Eliminates frustration with not getting an answer. • Speeds up the customer's decision process.
mpany X Confidential: Do not distribute
Company X Practice
The company does not currently have a systematic process to ensure that complete configuration information is provided by the customer prior to the purchase order being submitted to systems engineering.
Rating
Reference
Action Item #5
Systems engineering should be involved in the quoting process to ensure that customers are provided with adequate configuration information before the purchase order is submitted to Company X.
21
Best Practices
Key Internal Control Objective
5. Establish and periodically reevaluate long-term agreements between customers and the company. • The company makes an effort to identify customers with whom to establish long-term contracts. • The company jointly decides with the customer on the terms and conditions of the sale that should be expected of both the company and the customer. • Terms and conditions of sale in general and for specific customers are reflected in the company's order processing system.
Company X Practice
Contract operations is currently attempting to institute a formal contract and agreement review process to ensure that terms and conditions of contracts and agreements are clear and understood by both parties.
Rating
Reference
Action Item #3
Benefits: • Improves customer relations. • Allows the company to cooperate with their customers on price, service, and quality. • Enables the company to estimate product demand. • Increases customer satisfaction by providing reliable sources and predictable lead times. • Eliminates expectation gaps. • Reduces customer claims for non-conformance.
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22
Appendix B: Internal Control Assessment
The matrix on the following pages lists process controls which should be present within the warranty/field services environment. We evaluated the adequacy of each control in Company X’s warranty/field services process. Controls were evaluated as follows:
Strong Controls - Controls are present to mitigate process/business risk and are operating effectively and efficiently.
✔Moderate Controls - Controls are present to mitigate most process/business risk, but management should evaluate opportunities to enhance existing controls.
✖Limited Controls - Existing controls may not mitigate process/business risk, and management should consider implementing a stronger control structure.
Where possible improvement can be made in the control structure, a reference has been made to the Action Matrix, where management’s change implementation plan is described along with the responsible party and estimated implementation timing.
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Internal Control Assessment
Key Internal Control Objective
Page
1. Discounts should approved by appropriate personnel.
25
2. Use a comprehensive control documentation to ensure that all relevant sales order information is captured on quotes and purchase orders prior to processing.
26
3. Standard quote request forms should be used when obtaining quotes.
27
4. Sales order information on quotes should be reviewed by the appropriate personnel prior to final distribution to the customer.
28
5. Shipping logs should be filled out completely and maintained on a daily basis.
29
mpany X Confidential: Do not distribute
Priority
24
Internal Control Assessment
Key Internal Control Objective
1. Discounts should approved by appropriate personnel. • Discount authorization forms should be signed and dated by the appropriate personnel. • Discount authorization forms should be filed with the applicable purchase order or contract.
Business Impact: • Discount authorization policies and procedures protect the company’s pricing strategy and provide management with visibility over the discounts given to customers.
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Company X Practice
It was noted during our review that standard authorization documentation for discounts was missing or incomplete. The sales authorization matrix on the company’s intranet states that all discounts greater than XX% must be signed by either the CEO or the COO.
Rating
Reference
Action Item #2
Train applicable sales personnel to ensure that discount authorization is obtained prior to providing discounts to customers. Additionally, make sure approved discounts are supported by the appropriate documentation. Management should also evaluate and update the current discount authorization matrix/policy for relevancy.
25
Internal Control Assessment
Key Internal Control Objective
2. Use a comprehensive control document to ensure that all relevant sales order information is captured on quotes and purchase orders prior to processing. • Ensures all the necessary information is obtained on the purchase order for entry into the system • Provides accountability and allows management to track breakdowns in the process. • Ensures all the correct information is on the quote before it is distributed to the customer. Business Impact: • Improves cycle time from quote to entry into the order backlog. • Improves process efficiency. • Provides control points to ensure all information is complete and accurate.
mpany X Confidential: Do not distribute
Company X Practice
Order Management currently uses a Clean Book Checklist (CBC). The CBC ensures that the PO contains all the necessary information for entry into the system. However, the CBC does not require that all necessary configuration information be on the purchase order before entry is made into the system.
Rating
Reference
Action Item #5,6
According to the Quote Completion process map (date ), sales personnel should complete a CBC for the quote before they distribute it to the customer. However, this is not done consistently.
26
Internal Control Assessment
Key Internal Control Objective
3. Standard quote request forms should be used when obtaining quotes. • Ensures that all the information needed by regional marketing, order management, and systems engineering is provided by the sales personnel on the front end of the sales order process. • Reduces the overall time spent obtaining the necessary quote information (i.e., pricing, tool configuration) from regional marketing. Business Impact: • Improves overall sales order cycle time. • Pricing and tool configuration information is more accurate and timely.
mpany X Confidential: Do not distribute
Company X Practice
Per discussion with the Senior Regional Marketing Representative, a standardized quote request form has been developed for sales personnel but is not used consistently.
Rating
Reference
Action Item #5
This form should be used to ensure complete and accurate quote information is captured from customers. Have sales personnel review completed quotes for accuracy and completeness.
27
Internal Control Assessment
Key Internal Control Objective
4. Sales order information on quotes should be reviewed by the appropriate personnel prior to final distribution to the customer. • Quotes are reviewed by the engineers to ensure the product configuration is technically correct. • Systems engineering should interact with the customer (if necessary) early on in the quoting process to ensure the integrity of the quote process is maintained.
Company X Practice
Quotes generated by regional marketing for sales personnel are not consistently reviewed by systems engineering.
Rating
Reference
Action Item #4,5
Systems engineering should be involved early on in the quoting process to ensure that customers are provided with adequate tool configuration information.
Business Impact: • Improved process efficiency in the quotation process. • Reduce the number of purchase orders that need to be reconfigured. • Provide accurate quotes to the customers.
mpany X Confidential: Do not distribute
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Internal Control Assessment
Key Internal Control Objective
5. Shipping logs should be filled out completely and maintained on a daily basis. • All information in the shipping log should be filled out daily at the time of shipment. • Shipping information allows the company to verify shipments for invoicing purposes and to track shipments once they have been sent. Business Impact: • Improve traceability on products shipped to customers. • Provide complete and accurate shipping documentation.
mpany X Confidential: Do not distribute
Company X Practice
The shipping department does not consistently record the carrier and routing number in the shipping log on the same day of shipment. Currently, this information is recorded the day after the product actually ships.
Rating
Reference
Action Item #8
Detailed testing revealed that this information is often not recorded in the shipping log. Also, we were unable to locate much of the source documentation providing the applicable information. It should be noted that the company is in the process of determining the feasibility of using an electronic shipping log. Additionally, the company is evaluating using bar code technology for all shipments. As such, all the shipping information will be electronically recorded and input into the company’s information system.
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Appendix C: Sales Order Process Map
Sales Representative request a quote from Regional Marketing
Customers Sends Purchase Order to Company X
Order Management specialist reviews PO and enters it into the system
System Engineering determines configuration
• Regional Marketing obtains Standard product and pricing information from product marketing.
• The PO comes into Company X and is distributed to the appropriate Order Management Specialist.
The PO is logged into the X database that tracks the sales order process.
• When PO passes the CBC, it is entered into as “System Engineering.”
✔ The Order Management (OM) Specialist utilizes the clean book checklist (CBC) to review the PO.
• The Order Management Specialist faxes the PO to Person X in System Engineering.
If the PO fails the CBC, then the OM Specialist will note in Access, the reason why the item failed and who the PO is sent to in Regional Marketing.
✔ System Engineering configures the toll and emails the configuration to the appropriate Order Management Specialist. ✔ Order Management Specialist enters the information into backlog.
✖ Sales Representatives do not use a standardized quote request form. Quote is sent to the sales representative for review. This review is not consistently performed. ✔ Non standard orders that are not in the visibility system or in the price book are sent to system engineering for configuration, even if the tool has been created before.
• A folder is created to maintain copies of the PO, CBC check list, X database log sheet, order entry check list, any change order check list, copy of fax set to system engineering (for non standard products), and any product configurations.
✖ Known tool name report is not distributed monthly to RM. Quote is not consistently generated by product marketing with System Engineering input. Quote is emailed to the Sales Representative before receiving system engineering input. • Sales Representative sends quote to the customer.
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✖ A standard form is not used to communicate problems to Regional Marketing. ✔ One copy is placed in the PO folder and one copy is sent to appropriate Regional Marketing personnel.
PO is entered into the System
• When PO passes the CBC, it is entered into .
Company X Control Points In Place:
• ✔
Process Step Internal control point (manual) Internal control point (system based)
Company X Control Weaknesses:
✖
Internal control weakness Process inefficiency
30
Appendix C: Shipping/Invoicing Process Map
The Shipping Request Form (SRF) is created.
Product is pulled from the inventory warehouse.
Product is inspected by Quality Assurance (QA).
Packing slips are generated.
✔ Order management enters ✔ The LPT line manager ✔ QA inspects the product and ✔ Once SRF information has sales order information into provides a daily shipping verifies that the information on been verified it is entered sheet which the finished the system. the SRF matches to the actual into the system and a goods coordinator reviews packing slip is generated. items on the shipping floor ✔ Regional Marketing creates and matches up to the SRF (i.e., part number, description, ✔ The packing slip is used to a Shipping Request Form details. quantity, serial number) create the invoice. (SRF) based on the sales Packing slips are not being QA is using the SRF, rather order information within the ✔ The finished goods coordinator then examines reviewed/checked against system. The SRF triggers than the packing slip, to verify the serial numbers on the the SRF. the shipping process. the serial numbers instead of goods to be shipped and the packing slip. ✔ A copy of the SRF is sent to writes the serial numbers on the finished goods the SRF. Tools requiring coordinator. serial numbers include: SmartComm, SmartTag, ✖ Some SRFs are created LPTs, Indexer, & 300MM manually because of Pods efficiency limitations within . ✔ The items on the SRF are ✔ The serial number is allocated (transferred from assigned to product on the finished goods) to the sales manufacturing floor. order. Serial numbers are ✔ Finished goods not already duplicated or are incorrectly on the shipping floor are assigned. pulled from the inventory warehouse. ✔ The SRF is then passed on to Quality Assurance for review. Serial number information is still manually transferred on some of the shipping docs, and is therefore subject to human error.
mpany X Confidential: Do not distribute
Invoice is generated.
The product is invoiced and shipped.
✔ The packing slip is sent to ✔ A copy of the invoice is invoicing and an invoice is mailed to the customer. generated by system. Product loaded onto freight ✔ A copy of the invoice is sent carriers is not being to the shipping floor (for sufficiently monitored as international shipments) and its being loaded. is attached to the product The daily invoice log is not being shipped (along with all being matched up to the of the other shipping shipping log. documentation).
Company X Control Points In Place:
• ✔
Process Step Internal control point (manual) Internal control point (system based)
Company X Control Weaknesses:
✖
Internal control weakness Process inefficiency
31
Appendix C: Proposed Sales Order Non-Tool Processing Process Map
Sales Representative request a quote from Order Management
✔ Sales Representative requests a quote for tool and non-tool products from Regional Marketing utilizing the standard quote request template. ✔ Standard products, pricing information is obtained from product marketing system. ✔ Quote is sent to Order Management for technical review. ✔ Quote then forwarded to the sales representative for order completeness review. • Sales Representative sends quote to the customer.
Customers Sends Purchase Order to Company X
• The PO comes into Company X and is distributed to the appropriate Order Management Specialist. • If the PO is new, a folder is created to maintain copies of the PO, CBC check list, X database log sheet, order entry check list, any change order check list, copy of fax set to systems engineering (for non standard products), and any product configurations. ✖ There are no policies or procedures in place that indicate the proper way to receive/process PO, to maintain a folder, what to put in the folder, and what to enter into Access.
mpany X Confidential: Do not distribute
Order Management specialist scrub PO and enters it into the system
The PO is logged into the X database.
PO is entered into the system
• When PO passes the CBC, it is entered into system.
✔ The Order Management Specialist utilizes the clean book checklist (CBC) to review the PO. If the PO fails the CBC, then the OM Specialist will log under the PO number in Access, the reason why the item failed and who the PO is sent to in Regional Marketing. ✔ One copy is placed in the PO folder and one copy is sent to appropriate Regional Marketing personnel. • The Order Management Specialist fills out the standard CBC fail sheet and sends the PO to Regional Marketing . • This process is completed util the PO passes the CBC
Company X Control Points In Place:
• ✔
Process Step Internal control point (manual) Internal control point (system based)
Company X Control Weaknesses:
✖
Internal control weakness Process inefficiency
32
Appendix C: Proposed Sales Order Tool Based Processing Process Map
Sales Representative request a quote from Order Management (known)
Sales Representative request a quote from Sales Order Management Representative (Unknown) request a quote from Order Management
Customers Sends Purchase Order to Company X
Order Management specialist scrub PO and enters it into the system
✔ Sales Representative requests a quote for tool and non-tool products from Regional Marketing utilizing the standard quote request template. ✔ Check in the visibility system, the price book, and the known tool name report (provided by SE) for the requested tool. ✔ If tool is not found, send to systems engineering for configuration. • Quote is generated.
• The PO comes into Company X and is distributed to the appropriate Order Management Specialist.
The PO is logged into the X database.
✔ Quote is sent to Order Management for technical review.
✔ Quote is sent to Order Management for technical review.
✔ Quote then forwarded to the sales representative for order completeness review.
✔ Quote then forwarded to the sales representative for order completeness review.
✖ There are no policies or procedures in place that indicate the proper way to receive/process PO, to maintain a folder, what to put in the folder, and what to enter into Access.
• Sales Representative sends quote to the customer.
• Sales Representative sends quote to the customer.
✔ Sales Representative requests a quote for tool and non-tool products from Regional Marketing utilizing the standard quote request template. ✔ Check in the visibility system, the price book, and the known tool name report (provided by SE) for the requested tool. ✔ Standard products, pricing information is obtained from product marketing system.
mpany X Confidential: Do not distribute
• If the PO is new, a folder is created to maintain copies of the PO, CBC check list, X database log sheet, order entry check list, any change order check list, copy of fax set to systems engineering (for non standard products), and any product configurations.
✔ The Order Management Specialist utilizes the clean book checklist (CBC) to review the PO. If the PO fails the CBC, then the OM Specialist will log under the PO number in Access, the reason why the item failed and who the PO is sent to in Regional Marketing. ✔ One copy is placed in the PO folder and one copy is sent to appropriate Regional Marketing personnel. • The Order Management Specialist fills out the standard CBC fail sheet and sends the PO to Regional Marketing. • This process is completed util the PO passes the CBC.
Systems Engineering determines configuration
• When PO passes the CBC, it is entered into as “Systems Engineering.” • The Order Management Specialist faxes the PO to (name) in Systems Engineering. ✔ Systems Engineering configures the toll and emails the configuration to the appropriate Order Management Specialist. ✔ Order Management Specialist enters the information into backlog.
Company X Control Points In Place:
• ✔
Process Step Internal control point (manual) Internal control point (system based)
Company X Control Weaknesses:
✖
Internal control weakness Process inefficiency
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Appendix C: Proposed Shipping/Invoicing Process Map
Product is moved from manufacturing to the finished goods area and inspected by QA. ✔ Each manufacturing line provides regional marketing with an accurate lead time report indicating product availability. The serial number is input into the system at the front end of the shipping/invoicing process (at the end of the manufacturing process). ✔ QA examines the product to ensure it matches the pick/pack slip (part #, serial #, etc.) and goes through the remaining QA checklist.
Regional marketing coordinates orders with available goods.
✔ Regional marketing coordinate orders from customers with the finished goods availability and manufacturing backlog. ✔ Regional marketing assigns finished goods with orders and established what is available for shipment on a daily basis. ✔ Orders are allocated to Finished Goods by Regional marketing. The Finished Goods Coordinator prints out a list of goods to be shipped each day and generates the pick/pack list for these goods.
Company X Control Points In Place:
• ✔
Process Step
Product is pulled from the finished goods inventory.
✔ The pick/pack slips are used to pull the products from inventory.
Product is packed and prepared for shipment.
✔ QA performs final quality and documentation checks. ✔ Pick list goes to the Traffic Coordinator to print the Packing slip. ✔ The goods are packed, boxed and prepared for shipment. ✔ The necessary shipping documents are attached to the shipment (i.e., packing slip, invoice) ✔ For international shipments, a shipping employee can generate a copy of the invoice at the shipping dock location using software package.
The product is invoiced and shipped.
✔ The product is loaded onto the freight forwarders and shipped. ✔ Invoicing receives copies of the shipping documentation so that any remaining invoices can be generated and sent to the respective customer. For shipments via Power Freight, invoicing sets up an intermediate invoicing location in and invoices the intermediate location in system. Once a copy of the signed freight document is returned to invoicing (indicating final shipment), the invoice is transferred out of the intermediate location and is closed to the regular revenue account.
Internal control point (manual) Internal control point (system based)
Company X Control Weaknesses:
✖
Internal control weakness Process inefficiency
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Appendix D: Testing Matrix The following matrix documents the audit tests performed, relating to the sales order process review, and the results of these tests. Overall, opportunities exist to improve the process. These improvements will ensure that internal controls are operating effectively and efficiently in order to mitigate risks associated with the process. Test
Attribute
Tested
Noncompliance
%
Comments/Detail
Customer File to PO
Verified that the customer file contained a copy of the PO and a signed X database entry form
Of the XX customer files tested, XX contained a copy of the PO
Customer File to Order Entry List
Verified that the customer file contained a completed and signed CBC and order entry list
Of the XX files tested, X did not contain an order entry check list
Customer File to CBC
Verified that the CBC was signed and completed
Of the XX files tested, XX CBC’s were not signed and one was not fully completed
System to Customer PO
Verified that the information on the PO was accurately reflected in the system
Of the XX sales orders selected from , all XX contained the proper information form the PO
Shipping Log & Supporting Doc.
Verified that shipments had proper weigh bill documentation
Of the XX log entries checked X did not have supporting weigh bill documentation
Shipping Log & Supporting Doc.
Verified that shipper documents were properly authorized or signed
Of the XX shipper documents checked X did not have shipped by signed
Shipping Log
Verified shipping log contained carrier name and weigh bill number
Of the XXX log entries checked XX did not have information for carrier or weigh bill invoice number
Clean PO to Systems Engineering
Verified with system engineering that “clean” POs sent to them were actually “clean”
Of the XX clean PO’s tested, only X contained the proper information for systems engineering to configure the product immediately
Master Price List
Traced and agreed the list price from the price book to the master price list in the system
Of the XX prices tested, X price discrepancy was noted
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Appendix E: Acknowledgements
We would like to thank all Company X employees who assisted us in our work during this project. We received input and assistance from the following persons:
Operations Controller Global Spares and Logistics Manager Regional Marketing Contracts/Intellectual Property Systems Engineer Systems Engineering Manager Project Specialist Regional Marketing Information Technology Order Management
mpany X Confidential: Do not distribute
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