1. PROCUREMENT • Review and understand the flow of activities in the Procurement department to get an overall understanding of the various stages and procedures involved in the purchase of goods and services. • Review the structure / organisation of the Procurement department. Inquire whether duties and vendors are rotated periodically among purchasing staff. • Enquire if standard purchase orders are used to order all goods from vendors. • Review the procedure for issuance of Purchase Orders (P.O.). Inquire if in addition to a P.O., there is also a written agreement with the vendors. If so, review the same for salient terms and conditions. • Is authorisation to issue or amend Purchase Orders given in writing, or electronically with password restrictions. • Ensure whether system user profiles and access rights are used to ensure that only authorised individuals have access to purchase orders. • Review the process of negotiation for contracts. Check whether tenders are invited, evaluated and that the most competitive tender was accepted. In cases where the most competitive has not been accepted, inquire into the reasons. Ensure the reasons are documented and have been duly approved by the Site Procurement Head. • Select a sample of atleast 50 Purchase Orders (P.O.’s) covering the purchase of: Major Raw Materials sourced by the site. Major Packing Materials Capital Assets Services (e.g. Transportation, AMC’s, etc.)

• For the sample selected, review the P.O.’s to ensure completeness in all respects such as date, serial number, amendment no., if any, terms and conditions, due dates for receipt of materials, insurance, penalty clause, signature, etc.
• Ensure that all P.O.’s are system generated and are serially controlled. Also, review the controls within the System that prevent unauthorized access to and generation of P.O.’s.
• Review the P.O.'s with the delivery schedules and the actual receipt of stock at the site. Check whether any penalty has been levied on defaulting vendors. If so, verify the realisation of the same. Trace the receipt / adjustment of debit note into the ledger.
• Check if there is any system for vendor evaluation. What are the various parameters on which the evaluation is done and the periodicity for such evaluation?
• Check whether an annual review of all approved vendors is carried out and documented.
• Check whether category managers' review reports, which show the value of purchases from major vendors with comparative figures for the prior year, to identify large increases.
• Check if any annual non-inventory expenditure review is carried out to identify items, which are bought regularly so that blanket purchase order can be issued to cover these items.
• Review the system of intimation to the Procurement department for receipt of materials.

2. HUMAN RESOURCES :RECRUITMENT , PAYROLL & BENEFITS • Review and understand the activities in the Human Resources department to get an overall view. Also, review the oraganisational structure of the department. • Check whether all new positions require assessment of job scope before approval to hire is given? • Check whether all references have been checked and documented? • Review the procedure for hiring "temps", project trainees? Is approval for the same taken from H.O.-HR? Review the basis for fixing the remuneration / stipend being paid. • Is access to the payroll master file restricted? • Check whether intimation is sent to the Finance department for all new recruits? • Review the procedure followed when employees leave the organisation. Ensure emphasis on the following: ➢ Check whether a written authorised notice is sent to the payroll dept? ➢ Ensure leave encashment has been calculated and paid in compliance with company policy. • Ensure all deductions for provident fund etc. have been authorised by employees and filed? • Check whether provident fund and superannuation deductions are reconciled with the contributions paid to the funds by the company? • Ensure whether duties of payroll calculation / processing are separate from payment of payroll? • Check whether loans and salary advances have been made to employees only with senior management's (Site HR head and Site GM / Manager) authorisation? • Check whether all loans / advances have been accurately documented and reclaimed in accordance with the company policy? • Review how changes to the payroll, including basic salary, benefits etc are made? Check whether there is a standard format and whether the same is documented and filed? Is this form authorised by the line manager and approved by HR? • Review the updated list of all employees at the location from HR. Check whether a reconciliation of this list with the leave registers maintained by HR is done to ensure that leave records of all employees exist. • Check whether the leave records maintained by HR are reconciled with the attendance record maintained by the attendance record at the gate.

3. STORES & SUPLLY CHAIN MANAGEMENT • Review the set up and various activities of the department. • Review the systems in place to manage obsolete and slow moving inventory (OSMI). • Understand how inventory is reviewed at month end. Check whether there is a monthly report showing no. of weeks on hand for each item, based on current and forecasted plan for production. Also, check if excess inventory is valued, monitored and used as a KPI for production planning. • Check whether the site management reviews any MIS of inventory, that is due to expire within 6 months and also explore opportunities to use this inventory. • Check whether there is a monthly review of items with more than 3 months cover. • Review the procedures in place to differentiate between goods that are waiting for approval from QA, approved by QA and goods that have been rejected by QA. • Check whether the responsibility for stock counts and access to physical inventory is segregated from the duty & authority to record updates and make changes in the stock/ inventory records. • Review the procedure for receiving goods. Check whether there is a policy that requires raw materials to be segregated & tested by QA for compliance with specifications as per the P.O? • Check whether the receiving employees complete Goods Inward Receipt (GIRs) / Goods Received Note records and notify Procurement and Finance within 24 hours of receipt.Also, check whether these GIRs are serially numbered / system generated. • Inquire if there is a system for investigating all open orders on a daily basis using a report, which lists all items that have not been delivered on the due date. • Check whether duties have been segregated among the purchasing, purchase approval, and personnel receiving the materials? Review whether the stores / receiving staff validates the material received with the purchase order for all material received. • Inquire how raw materials rejected by Quality Control are dealt with? Review whether Finance, Production and Procurement departments are notified in a timely manner. • Review how material received in damaged condition is dealt with? Are all damaged goods received stored separately and sent back to the vendor with a claim form immediately? • Check whether the General Ledger (G/L) and the perpetual subledger for inventory is periodically reconciled. • Review the security of all receiving and storage locations with emphasis on accessibility and safeguard? • Review the system of physical verification of inventory. Also, check whether inventory is reconciled with the production department. • Review the system for approval of inventory movements. Are System user profiles and access rights used to ensure that only authorised individuals have update access to inventory masterfiles.

4. PRODUCTION • Review the activities of the department and understand the process of manufacture of Horlicks with the Production Manager and visit the plant to gain a better understanding of the processes involved. • Check whether standards recommended by H.O. TQM (Approved Bill of Materials (BOM) regarding the standard inputs of raw materials to be added for a given output is being adhered to. • Review the procedure for assigning unique batch numbers and the system to ensure that raw materials can be traced through to finished goods. • Review the various records maintained by the production department wrt the standards. Check the records maintained to keep control over Fat & SNF, Material requisition, Daily Production of Horlicks and Ghee. • Review the procedure in place to ensure that BOM being used is accurate. Inquire if there is a system which helps identify material usage variances. • Inquire if there is a system to monitor under/ over utilisation of raw materials on monthly basis.Review the analysis for three consecutive months. • Check whether there is a system to identify and review the differences between scheduled production and actual production. Also, check whether the reasons for the variation are documented and filed? • Inquire into the system of physical verification of production before transfer of the same to the Bonded Store Room (BSR).

5. MILK PROCUREMENT • Review the Milk Accounting System. Check whether access to Milk Accounting Package is restricted to authorised users.Also, check the user's access rights to make changes in the master file data. • Does the milk received at Milk Collection Center reconcile with the receipt at Dairy Dock. • Is the recording of milk receipt carried out with the help of electronic weighing machines or with the help of some other alternative method to ensure the correctness. • At Milk Collection Center is the weight of the empty milk cans used for weighing the milk. Is all milk first unloaded into these cans and then weighed. • Is report generated and reviewed for the updation (additions / deletions) made in the master file data. • Is the Daily Milk Receipt statement prenumbered to ensure better internal control for booking of milk purchased. • Is a proper contract made in the name of the contractor operating chilling plant to ensure elimination of statutory compliance. • Is the tare weight of the tankers noted thereon the same as the standard weight of the tanker. • Is milk quantity, Fat & SNF percentage as per Dairy Dock Receipt and Daily Milk Purchase statement same. • Are the variations in the milk receipt per trip per Milk Collection Center anaysed. • Are surprise visits made to the Milk Collection Center to observe the procedure followed and actual milk collection? • Are the lactometers regularly calibrated. • Is periodic physical verification carried out for Cattlefeed, Medicines and are proper records maintained at the Milk Collection Center. • Are the supplies made for Cattlefeed and Medicine in consonance with the Purchase order / suppliers bills.

6. INTERNAL REPORTING • Review whether written roles and responsibilities have been defined for those recording transactions and preparing periodic reports? – JOB DESCRIPTION • Check whether a timetable for monthly reporting including cutoff dates for all key information streams has been communicated to all concerned? • Review whether all General Ledger accounts allocated to staff members have been reviewed each month? • Check whether General Ledger accounts are reviewed periodically and dormant accounts closed? • Check whether all journal entries have been authorised and reviewed before entry? • Review whether JDE integrity reports are run periodically? • Check whether written month end procedures have been established to clarify roles and responsibilities to ensure segregation of duties ? • Review whether there is a Standard Operating Procedure (SOP) available to ensure procedures are documented to assure consistency in account preparation?

7. FIXED ASSETS / CAPITAL EXPENDITURE • Check that all capital expenditure has been incurred based on approved PIPs only. • Review whether capital expenditure post evaluation review has been carried out and documented? • Check whether asset identification tags have been attached to fixed assets, to allow for specific identification with the fixed assets register? • Check that once the asset has been received and installed, Asset Installation Form is prepared and sent to HOF. • Review the disposal process being followed for capital items. Check that disposal of capital equipment is authorised by the Regional / Site Head and later approved by Director – F&IT. • Review the fixed assets records being maintained at the site to ensure whether records maintained at the location are updated timely on the basis of addition/transfer/deletion and ensure physical verification is carried out atleast once a year to reconcile the status with book records. • Check that the PIP sent by the location should have serial number / location reference. • Check whether a periodic review is conducted to confirm that insurance on assets is adequate and not duplicated / under insured? • Check that insurance department at Head Office is informed of additions to ensure inclusion of asset for risk coverage. • Review the process of periodic reviews to identify assets, which are not in use. • Check whether standard forms have been used and documented for all assets installations, disposals and transfers. • Are management approval taken prior to sale of assets / transfer in accordance with financial delegation? • Are reconciliation performed regularly (minimum quarterly) of the fixed asset register to the G/L?

8. TREASURY & BANKING • Check whether bank reconciliation statement is prepared with in next 4 days from the close of the month. Review how issues arising out of reconciliation are taken up with the Bank and sorted out at the earliest. Unresolved issues are brought to the notice of HOF for taking up the bank suitably. • Check whether cheques drawn but not cleared through the bank account after six months are cancelled, the bank notified and the amounts transferred to Unclaimed cheques. • Check whether payment in cash, in excess of Rs Rs 20,000/- has not been made to any individual during a day. • Review the procedure for physical verification of at the site. Check that Cash in hand is physically verified and tallied with the cashbook maintained on JDE on daily basis. Further, check that the same is done by a person other than the cashier. • Check that keys to cash box and safe in which money is kept are maintained by the cashier and a senior member of the management team. • Check whether the cashier ensures that before release of payments, the same are approved / authorised by the competent authority. • Check whether the bank charges debited by the bank are thoroughly checked by the person responsible for the bank reconciliation. • Review the procedure for providing cash floats to the employees. Check whether expenses incurred against these floats are reimbursed on the basis of supporting which the competent authority duly approves. • Check whether any further advance has been allowed before the settlement of previous advance. • Check whether written balance confirmation have been obtained from the Bank and are available.

9. STATUTORY MATTERS • Review the site's compliance with all provisions concerning Indian Income Tax Act, State and Central Sales Tax Act, Factories Act and other Labour laws to ensure disputes, if any, have been reported to Head Office. • Check whether periodic reconciliation for Sales tax has been done and tax deposited on or before the due date. • Check whether the tax compliance report is being prepared on monthly basis and sent to H.O Taxation. • Check that all the returns required under various laws are being filed on time and acknowledgments kept properly. • Check that the copy of Sales tax registration is available at the Factory for verification. In case of expiry the same, renewal application is made on time and acknowledgement is kept properly.

COSTING
|Examine the YTD cost sheets for the latest month for different SKUs packed, and look for significant variances and adjustment entries. Ensure |
|that the SKU cost is getting charged with the appropriate conversion charges. |
|Analyse the monthly cost sheets of select SKUs to identify any abnormal variations in the month to month costs delivered. |
|Obtain the weighted average listing for packing materials. Review the monthly movement in the wieghted average against the averages of previous|
|months as well as against the standards. |
|Review the price stores ledger for these items to ascertain major entries giving rise to these differences. e.g. adjustment entries. |
|Check the costing entries passed at the site for a sample of packing materials, e.g. at receipt of packing materials. |
|Analyse the manual entries passed (e.g. document types P8 & PZ for entries in Accounts Payable , J6 & J7 for entries in General Ledger) |
|Check if the revaluation entry is passed & reversed correctly every month. |
|Examine the integrity report between BPCS and Costing and analyse the reasons for differences appearing if any (e.g. for creation of provision |
|for GIFs not downloaded). |
|Examine if the inventory value as per costing and JDE are tallying. |
|Check on a sample basis that the bill adjustments have been made basis a hard copy of the P.O. |
|Check on a sample basis that the provision for freight has been created for inter unit transfers of materials. |
|Check on a sample basis that all the expenses pertaining to purchase of RM / PM e.g. freight, octroi etc. have been provided for regularly. |
|Freight System : |
|Check the STAs in the freight system, with the STAs physically received at the site. The last STA physically available and the last STA entered|
|in the freight system should be the same. |
|Obtain the STA certification table, any entries appearing here indicate that the STAs are not updated in the freight system. |
|Obtain the report for STAs pending payment for which bills have not been received, and look into the reasons for the same. Ensure that |
|necessary action have been initiated by the site for long pending provisions. |
|Obtain a report for claims rejected at the site and approved at HO (Purchase), and examine the same. |
|Examine if there is any difference between provision for freight in JDE and outstanding STAs in the freight system. |
|Examine if the site is doing a manual reconciliation for the supplier's account on a monthly basis. |
|Obtain the report for bills approved at a higher amount than the provision created and look into the reasons for the same. |