Introduction to warehouse auditing
Warehousing operations needs to be handled differently, so to critically supervise the operations is called warehouse audit supervising and taking record of all the operations in the warehouse is auditing. Warehouse audit includes: Checking if the goods are placed according to mentioned custody and checking the uniformity in warehouse operations. Tallying the physical stock with the system stock, checking the documents of stock available in the warehouse.
Why is warehouse audit required?
Warehouse audit manages the business by keeping proper record of the inventory. Warehouse audit helps in: Understanding the accuracy and adequacy of financial statements, maintaining the accountability if goods stored as well as goods out for delivery, maintains the record of goods in custody.
Warehouse audit from business objective
When we look warehouse audit from a perspective of business objective, it includes accreditation of warehouse, registration of warehouse, quality of services, roles and responsibilities, adherence to the business objective.
Accreditation of warehouse
When a warehouse is audited on the basis of its accreditation the following documents are checked. Certificate of accreditation from an authorized accreditation agency to get registered, certificate of a Chartered Accountant or creditworthiness from a scheduled bank, Proof of ownership or registered leased deed/rent receipt that gives the right of warehousing, No objection certificate/warehouse license from Municipal Corporation or local body, The list of goods for which accreditation is being sought, Statement including all documents, records and information about the storage worthiness of the warehouse, Insurance policies of the warehouse for fire/floods/theft/burglary/riots.
Registration of warehouse
When a warehouse is audited on the basis of its registration the following documents are checked: List of accredited goods allowed for storage, checking the list of accredited documents, checking of renewal receipt.
Warehouse should maintain the quality of its storage. Auditing on the basis of quality has the following checks:
Check on the security measures, Check on the fire fighting system, Check on the water storage tank along with jet pump, Maintenance of the warehouse laboratory (in case of material preservation).
Roles and Responsibilities
There are certain roles and responsibilities that the warehouse operators should adhere to, so the audit is done on this basis: Check on the usage of material handling equipments, Check on the behavior of the operators within the warehouse. There are certain roles and responsibilities that the warehouse operators should adhere to, so the audit is done on this basis: Check on the inventory management system, Check on the documentation process flow, Check on the usage of bay area.
Adherences to the business objective
The warehouse management is also supposed to follow certain rules to adhere to the business objective. Auditing is done on the basis of the following:
Tallying the list of items stored and the list of items accredited, tallying the proof of documents available with the documents given at the time of registration.
Inspecting and updating production details
Inspecting and updating production details includes warehouse management system and core processes.
Warehouse Management System
In the warehouse management process the auditing is done on the following basis: Accreditation of warehouse with accreditation agency, Warehouse registration with the WDRA, Control of documents and records by warehouse. In the warehouse management process the auditing is done on the following basis: Corrective action process, internal audit and inspection system, Performance review.
While auditing the core process the following requirements are of need: Registration of depositor sampling, inspection and grading of goods, Process of receiving and dispatch of goods. While auditing the core process the following requirements are of need: Storage of goods, Periodic inspection of goods and physical stock counting process, Insurance and insurance policy management.
Offences and penalties
The accreditation rules and the registration rules of are set norms for the warehouse owners. Adhering to those rules is a compulsion; if it’s not followed there are penalties. Let’s check it out some offences and its corresponding penalties.
The offence was Issuing a duplicate warehouse negotiable receipt; the penalty will be Imprisonment for terms of 1 year which may be extend to 3 years or a fine of 1 lakh. For taking possession and engaging in fraudulent activities such as producing fake documents, the penalty served will be Imprisonment for a term of 1 year which may be extend to 3 years or a fine of 1 lakh. And for Receiving of goods without quality check, the penalty will be Imprisonment for terms of 1 year which may be extend to 3 years or a fine of 1 lakh.
PPEs required for warehouse audit
At the time of warehouse audit, wearing and using personal Protective Equipment are required. They are hard hat, protective shoes, safety glass & gloves, hearing protection and chemical protection.