1.

Purchasing procedure issue

Issue 1
The issuance of monthly material requirement (mmr) is not authorize by the general manager.
Instead, it was being send directly to Encik Razi, the assistance purchasing manager for the Monthly
Raw Material summary preparation

Recommendation
Authorization by General manager must be obtained for MMR and endorsed by the planning section.
This is to avoid fraud to happen from the planning section or En Razi itself.

Issue 2
The procedures for calling vendor to submit the quotation is not precise instead, the vendor are called
by En Razi through facsimile, e-mail or by telephone without proper authorization by general manager
or on the submitted quotation. This will lead to fraud made by En Razi

Recommendation
The procedures on calling the available vendors should be made available and have a proper
authorization to avoid fraud done by the assistant manager

2. Segregation of duties

Issue 1
Calling for quotation, evaluating the quotation and purchase order segregation are solely done by the
assistant purchase manager, En Razi. There is too much task given to En Razi which can cause
depression and fraud.

Recommendation
The task should be done by different people at the different level of staff. For example, calling for
quotation should be done by other qualified staff and being authorize by En Razi, the evaluating for
the quotation can be done by EN Razi and purchase order generation can be done by other staffs
under general manager supervision, Encik Sam.

Issue 2
The received on material required and raw material store are solely done by storekeeper, En Min
under the same department.

Recommendation:
The receiving department should be established and separated from the raw material store and also
appoint another staff in the new receiving department. This is to avoid from confusion and error on
the material received since the En Min take the responsibility on the material required as well as the
store.
 receiving raw material
department store

Chart 2.2 Relationship of segregation of duties.

Issue 3:
The cheque and voucher preparation done by the same account clerk, Encik Faris. This problem can
bring to fraud on the company’s money especially when it did not been supervised by the manager.

Recommendation:
Cheque and voucher should be done or prepared by the different account clerk and be check first by
the supervisor before it being sent to the general manager and assistant finance will approved on the
amount in the cheque and voucher.

account clerk finance general

1 assistance manager

Chart 2.3 Relationship of segregation of duties.

Issue 4:
There is no committee being setup for the approval on the purchase of materials in the purchasing
department.

Recommendation:
Committee of quotation approval should be set up by the company so that, the approval not only
solely made by the manager of his interest

Issue 5:
Material stored at the store does not have any proper inventory reconciliation that should be made by
material department.
Recommendation:
The reconciliation should be made at the end of each month before issuing the MMR by the planning
department in order to avoid material theft and also to make sure only necessary purchase be made
by the department.

3. Asset and record Safety Issue

Issue 1:
The Store Received Note (SRN), Monthly Material Requirement (MMR) and Voucher Certificate Action
Request (VCAR) are not pre-numbered as for safety and archive purpose. Instead, it just been
submitted to the person or department that need the document and if it necessary.

Recommendation:
Document such as SRN, Raw Material Received Report(RMRR), and VCAR should be pre-numbered
correctly for the safety of the documents and avoid from any error.

4. Completed recording and documentation Issue

Issue 1:
The purchasing clerk, Cik Anne did not attach the purchase order together with the set of invoice,
SRN, delivery order sent to the financing department meant for payment preparation to the vendor.

Recommendation:
The purchase order should be attached and sent to the finance department with the set of invoice
before arrangement for payment being made to the vendor or supplier. This is done to make sure on
the actual total of the delivery material and the actual payment that should be made so that, there is
no fraud happened if it been checked with the invoices.

Issue 2:
The carbon copies for cheque sent to vendor was not being filed by the finance clerk, En Faris. This
could cause the problem to the company if the vendors claimed for any unpaid materials and the
finance department could not find any evidence such as the copy of cheque to show they have already
paid the materials ordered.

Recommendation:
The carbon copy should be kept and filed by serial number or pre-numbered by the finance
department as for reference for the company if needed.

5. Verification by independent department

Issue 1:
There is no verification made by the independent person or internal auditor being made by the
company upon the balance of raw material request being prepared and authorized by the General
Manager of Material Resources Planning, Cik Lim.
Recommendation:
The verification by independent person or internal auditor should be done on the balance of raw
material for each of ending month before the MMR being authorized by the General Manager.
Therefore, theft of the material can be avoided as well as can increase the efficiency in the company’s
management.