Report-Sadiq Textile Mills Limited FINAL 25.05.21

2021
EVALUATION OF
INTERNAL CONTROLS &
SADIQ RECOMMENDATIONS
WEAVING ART
(WEAVING UNIT)
Fazal Mahmood & Company
Chartered Accountants
Contents
INTRODUCTION & SCOPE ............................................................................................. 2

STEPS INVOLVED IN WEAVING FABRICS ................................................................ 3
FABRIC FORMATION PROCESS OF ENTITY ............................................................. 4
A. YARN FROM SPINNING UNIT ........................................................................ 4
B. DYING ................................................................................................................. 6
C. WARPING. ........................................................................................................ 12
D. OUTSOURCE FOR PRODUCTION OF GREY FABRICS ............................. 18
E. PRODUCTION DEPARTMENT ...................................................................... 20
F. DESIGNING, DRAWING, DRAFTING AND DENTING .............................. 21
G. WEFT YARN WINDING .................................................................................. 21
H. LOOMING PROCESS----------------------------------------------------------------- 25
I. WEAVING------------------------------------------------------------------------------- 28
J. INSPECTION OF GREY FABRIC/SHAWLS.................................................. 30
K. HAND KNOTTING, HAND TRACING & CUTTING ................................... 33
L. FOLDING AND PACKING .............................................................................. 36
M. EMBROIDERY AND LAUNDRY ................................................................... 41
GENERAL OBSERVATIONS ............................................................................................. 43
WASTAGE & SCRAP OBSERVATIONS ............................................................................ 45
SALE RECEIPTS ............................................................................................................. 51
HIERARCHY ................................................................................................................... 55
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147-SHADMAN 1, LAHORE-54000 (PAKISTAN) TEL: +92-42-37426771-3 FAX: +92-42-37426774
E-mail: info@fmc.com.pk, fazalm@live.com, fazalm@brain.net.pk Web: www.fmc.com.pk
Offices: KARACHI, ISLAMABAD& USA
Introduction:
Sadiq Weaving Art (Weaving Unit) is an unregistered entity and principally engaged in the
manufacturing and sale of shawls.
The unit had started its operation in June 2019. In weaving unit raw material (yarn) from
spinning unit undergoes through various processes where it’s converted into finished goods
in the form of shawls. After completion of shawls, these are dispatched to respective
customers / Lahore office containing various categories of shawls according to the sales
order. They produce various categories of shawls containing various colours and designs.
Its geographical location and address of the entity’s business unit including mill is as under:
The office of the company is situated at Shan chowk Shah, Rukn-e-Alam, Multan.
The entity’s mill is located at Power Looms Near Dera Amir Saeed Ansari, Kachi Abadi,
Multan.
Scope:
The engagement letter signed between the Sadiq Textile Group and Fazal Mahmood &
Company Chartered Accountants covers the following scope:
There are two elements of the engagement:

❖ Evaluation of Internal Controls &
❖ Recommendations for proper Implementation of Controls
The critical evaluation of the Internal Controls included:

❖ Identifying weaknesses
❖ Highlighting the problems if left unresolved,
❖ Suggesting suitable recommendation &
❖ Providing an implementation Plan with probable costs and alternatives
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Following steps are involved in weaving process.
1. Yarn from
Spinning
unit
2. Dying
2.i. Weft Yarn 2.i. Warp Yarn
3. Creeling and 3. Warping

7. Winding of
Recycling
weft yarn
3. Warp Beam
7. Pirn winding 4. Out source for 5. Production

(bobbin preparing Grey department
winding) fabrics
6. Designing,
Drawing, drafting
& denting
9. Weaving 8. Looming
Process
11. Hand knotting,

10. Inspection of hand tracing &
Grey fabrics cutting
13. Embroidery 12. Lahore Office 12. Folding and

and Laundry Packing
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Fabric Formation Process:
1. Yarn from Spinning Industry / Unit:
When Yarn is delivered from the spinning unit or an external supplier then we need
to allocate the counts and packages related to their weft and warp. Basically, two
separate set of yarns (e.g. acrylic and tilla yarn) are interlaced at right angles to form
suitable count and packages through the process.
Acrylic Yarn
Tilla yarn
Weaknesses:
• Yarn purchased from spinning unit is directly transferred for dying whereas
sometimes it is delivered in the premises and is then sent for dying. There is
no single practice being followed by the entity. This shows the management
is not planning for the production and can save cost for the management.
• The supplier does not provide the purchase invoice and the accountant
manually prepared it. No proper invoice is being prepared therefore the
record requires further clarity.
• No inspection is done with purchase order at the time of inward of yarn. It
was observed that the management is carrying stock which has not been used
in production for the last 6 Months.
• No Gate Inward Pass is maintained by gate keeper against yarn received in
the premises only the Gate Outward Pass is maintained. GRN is manually
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maintained in the register by acting storekeeper and no separate daily or
monthly report is being prepared.
Suggestions:
• There should be proper recording (Bin Cards) of yarn when issuance from
the store department to the mill, with a daily and monthly record of the
issuance & any returns.
• There should be supplier invoice for the purpose of recording yarn, or the
management can make an internal system for example yarn count, colours,
quality and rate.
• There should be a proper check and balance with a daily report of production
of spinning unit which has been directly transferred to dying and
communicated via email to Weaving Unit which can be reconciled when
once the dyed yarn is received by the Weaving Unit. This will save the
management cost and increase profitability.
• There should be proper inspection of yarn and reconcile the yarn bags with
the purchase order including specification of goods, quality, and quantity.
• There should be proper Gate Inward Pass maintained by Gate Keeper who
will be responsible for goods received in the premises.
• Storekeeper should have proper record stock of yarn on daily basis
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2. Dying:
Yarn purchased from spinning unit is transferred for dying in various colours. These
colours are specified according to the order of the parties. These yarn after dying
return to the premises of entity and dried up under the sun because of moisture in
the yarn. The whole process of drying up the yarn takes 3 to 4 days. The wastage of
yarn in dying process is 1 % to 2%.
Each bag contained 40 cones and having weight of 45.360 kgs and each cone has
an average weight of 1.125 kg. After these processes dried yarn is sent to weft and
warp department according to the production plan.
Payment of dyed yarn:
Payment of dyed yarn made through using cash and bank consideration and also in-
kind consideration (Yarn directly transferred to dying owner if payment is not
made).
i. Weft and warp department:
The weft and warp yarn separated according to their count i-e Single count
yarn and double count yarn. The single count yarn is transferred to weft
department and double count yarn is transferred to warp department. There
are different categories of yarn. This is the case 95% of the time.
For example
• 72/1 & 72/2

• 64/1 & 64/2
• 48/1 & 48/2
• 40/2
• 80/2
At this point in Audit the entity is using 72/2 and 40/2 in warp department
including dying & non-dying yarn.
Weaknesses:
• There is no concept of maintaining bin cards.
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• No system of recording of weft yarn in the store as it directly transfers for
pirn winding.
• There is no stacking of yarn in the store department.
• Most of the bags of yarn are openly placed in the other room which may lead
to pilferage.
• There is no record of yarn in and out as yarn kept in the store is easily used
by anyone without any restriction.
• Only the weight is being measured of yarn bag in the store while quantity of
bags and yarn is not being accounted for.
• No gate inward pass maintained by gate keeper regarding dying. Moreover,
gate number is manually written in the register and they used dyer gate pass
as an evidence.
Detail of yarn sent Dyer gate

for Dying outward pass –
by Third Party
Recording
of Yarn
Sent for
Dying in
detail
Register
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Dyer’s own outward

gate pass while entity
has not prepared
inward gate pass
Suggestions:
• The entity should maintain bin card for recording in and out of yarn either
weft yarn or warp yarn.
• There should be verification of yarn transfer from dying to the mill in the
form of Purchase & Issuance register, which should include weighing and
quantifying the yarn.
• There should be proper stacking of yarn in the store so that we can easily find
and update their bin card accordingly.
• There should be a proper security system in the store room. For example,
window should be properly covered as there is an open window which was
observed in the premises which may lead to pilferages as proper record is not
being maintained.
• There should be proper SOP’s regarding payment of dyed yarn.
• The voucher of yarn transfer from store to another department should be
checked, approved and verified by General Manager of the Mill.
• There should be a proper acknowledgement receipt for dispatching the yarn
for dying by the dyer.
• A proper gate inward pass should be prepared which can be compared to the
dyer gate pass. Any difference should be investigated.
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3. Warping:
Warping is intended to prepare the warping beam of the weaver to be installed on

the weaving machine. Warping perform the following operations:
Create, out of a limited number of warp threads (creel load), a warp composed of
any number of threads with the desired length. Many layers of warping beam into
single weaver beam.
arrangement of the above-mentioned threads according to the desired sequence.

The industrial warping process can be accomplished by:
• Sectional warping
In the premises of entity Sectional warping is used. Sectional warping is also

known as conical drum or indirect warping. In sectional warping, we
performed several checks and numerous patterns in sectional warping
machine. It is dividing the warp beam into much smaller, even sections, and
warping one at a time, like lots of tiny warps. These tiny warps then passed
through the holes in the warping machine for reducing tension and resistance
in the thread.
The yarn packages are mounted on the cone holders. Yarn guide and a
tensioner are provided in the creel for each warp end. The yarn coming from
package first of all passes through the ceramic yarn guide then it passes
through yarn tensioner. The main function of tensioner is to impart sufficient
amount of tension to the yarn. Normally inverted cup and dead weight washer
type of tensioner is used in the warping machine. The number of washers and
their weight depends upon the yarn count to be used in the warping process.
As the yarn count becomes finer from coarser, the number of washers is
reduced its weight is also reduced if necessary.
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Now the warp end passes through many ceramic guides which are arranged
at equal distance to each other. The distance depends upon the length of the
creel. The main objective of these guides is to keep separate each end and to
prevent end to end entanglement during warping. Second objective of these
guide is to provide enough support each end. The yarn sagging problem
creates due to insufficient support to the yarn during warping because a long
length of yarn tries to sag due to its own weight. Thus, enough support needs
throughout the passage of warp end. Now the next passage of warp end is
drop wire. Its objective is to stop the machine immediately when end
breakage occurs and knot the thread and run the machine again. When the
warping beam is prepared it extracted from the warping machine and
continue the process vice versa. Warping beam thread measured by weighing
it and its length measured in approximately 50 meter – 1000 meter depend
upon order. The size ranging from 2,150 - 4,250 ends.
Sectional
warping
Types of warping machine:
There are two types of machine depending upon their speed and efficiency (i-e slow
and fast warping machine)
Slow Warping Machine:
The slow warping machine consist of maximum 300 cones of yarn to prepare a
warping beam. Slow warping machine contains belt used to run the conical wheel
that reduce the speed of the machine. The average production of warping beam is
relatively slower than the fast machine. It produces approximately 3 warp beams in
the 08 hours shift. Normal wastage is 1% to 2 % of yarn.
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Belt of slow
Warping machine
(Slow Warping Machine)
Fast warping Machine:
It consists of electric motor operating the conical drum which enhance its efficiency
to prepare 5 to 6 warping beams in 08 hours shift. Each warping beam having
different length of yarn ranging from 400 meters to 900 meters. Normal wastage is
3% to 5% which is further recycled in the creeling process where multiple
smaller cones are converted into some larger cones to be used in the warping
process on the basis of identical colors.
(Fast Warping Machine)
Creeling and recycling:
Creel is a frame of round or square section pipes and iron channels. During
preparation of warping machine, the yarn packages that are left on creel holder are
sent to cone winding machine for recycling where multiple small cones of yarn
produces some larger cones of yarn to be reused in warping process. Creeling of
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small yarn is done by the machine which is known as cone winder. There are 09
cone winder machines working in the premises. Each cone winder consists of 01
creel yarn holder at one time during creeling if creeling cone is completely used into
one large cone then second creeling cone is used and so on.
The cone holders are arranged in vertical columns on both side of creel 01 columns
of cone holders in each side of creel are there in the creel of direct warping machine.
The number of rows of cone holders vary according to capacity of creel. Number of
rows in the creel increased when the requirement is to double the yarn or according
to the requirement. The creel is when thread breaks then the operator immediately
knots it with the cone winder and run the cone winding machine.
After the preparation of large single cone, it again used for preparation of warping
beam in warping machine.
Moreover, when the warping beam is prepared it transferred it to production

department or outsource for production of grey fiber. While outsourcing, beam is
dispatched by weighing it.
Yarn Cone after recycling
Cone Winding Machine
Creel holder
Creel before recycling
Weaknesses:
• There is no concept of maintaining bin cards for creel yarn.

• There is no stacking of yarn in the warp department.
• There is no record of wastage after creeling process but management has an
estimate of wastage is 1 kg per bag. (weight of a single bag is 45.360 kg).
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• There is no signatory authorization from production department for
receiving warper beam in the premises.
No signatory
authorization
Suggestions:
• There should be verification of yarn transfer from store for warping.

• There should be proper stacking of yarn in the store so that we can easily find
and update their bin card accordingly.
• There should be a proper security system in the store room.
• There should be proper record of wastage of yarn during creeling of yarn as
there is active market of wastage of yarn. for example, Rs 30/kg and 40/kg
as per the quality of count.
• There should be calculation of overheads like labour, depreciation8 of
machinery, electricity consumption during creeling and repair and
maintenance expenses of machinery if any.
• There should be receipt and issuance register in the warping department.
• There should be signature of receiving regarding warper beam in the
production department in the voucher.
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4. Outsourcing for Production of Grey Fabrics:
The entity provides warper beam and weft yarn in the form of pirn/bobbin winding
to the external parties for the purpose of preparing grey fabrics. When the grey
fabrics / shawls are returned to the entity; they are received by weighing the grey
fabrics / shawls. The entity inspects the quality and length of received shawl from
party. The entity provide consideration regarding their services on the basis of
weight of shawl and per piece as per the agreement with the entity. The
consideration is paid through only cash which is 90% and remaining amount is paid
at the end of season when the wastage is calculated.
As per the management the wastage of outsourcing warper beam is calculated at the
end of the season. If the wastage is greater than 1kg per bag, then the entity deducted
amount accordingly.
The criterion of calculating is “the difference between warper beam and weft yarn
given (in weight) for outsourcing party minus the weight of shawl received”.
Weaknesses:
• Outsourced Local Parties do not provide any invoice

• There is no Gate Inward Pass for shawls returned from the outsourced parties.
There is only an office copy i.e. Inward Gate Pass where the weight and
quantity of shawl is written.
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Warp Beam
outsourcing gate
outward pass
Shawls invoice
manually
prepared by
management.
Suggestions:
• The invoice from outsourced local parties should be obtained so that we can
calculate the actual price of shawl and compare the rate if different from other
parties.
• The gate inward pass should be maintained for the purpose of recording
actual goods received in the form of grey fabrics.
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5. Production Department:
After preparation of warper beam, it transferred to looming where production of

grey fabrics performed. The warper beam is transferred according to the
requirement of shawls. Simple grey fabrics are transferred dobby machine whereas
fancy grey fabric are transferred to jacquard machine.
Production department
Weaknesses:
• There is no record maintained of warper beam received in production which

is transferred after warping.
• There is no record of wastage of yarn during tying-in-process.
• There is no acknowledgement from the production department against
receipt of warper beam.
Suggestions:
• There should be proper control of movement of warper beam transferred

from warping department to production department.
• There should be receipt register in the production department so that the we
can record the length of warper beam along with weight.
• There should be an acknowledgement of receiving warper beam on a voucher
and verified accordingly.
• The benefit of maintaining the record of transferring warper beam from
warping to production department is to calculate the wastage during the
process.
The formula will be
Wastage = total weight of warper beam + total weight of weft shuttle minus
total weight of shawl manufactured.
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6. Designing, Drawing, Drafting and Denting:
The entity in its labour force has 03 designing masters who can create the design
according to the demand and send it to looming department to produce grey fabric
on relevant machinery.
Drawing is done to pull the thread of the warp through the drop wires & heddles.
Denting signifies drawing the warp thread through dent as reed plan requires and
this more reliably signifies the fabrics width and ends per inches.
7. Weft Yarn Winding:
The transfer of weft yarn from one package to another large package (cone, pirn
etc.) is known as winding. Winding requires for preparing suitable yarn package. It
consists in winding the yarn on a tube.
The weaving cones are prepared for the weft (horizontal threads) in a cylindrical
form, all of the exact same length to avoid waste. For the weft to be produced conical
bobbins are made so that the yarn can slide on the frame without problems.
Sometimes the bobbins are wound before dying in the form of a ball to allow that
the dye colorant can penetrate evenly throughout the yarn. We know that in the
weaving process two set of yarn is used. Warp and Weft yarn. Warp yarn wind into
a cone package while weft yarn wind into pirn package for conventional loom. There
are two side of winding machine. Each side of the winding machine consist of 20
bobbins and a bowl type swinging machine called spindle that allow bobbins to
rotate and thread wind into bobbin, there is supporter in the machine which help in
winding by moving up and down. In case if thread breaks down the operator knot it
and continue the procedures. The wastage of winding does not recycle if the thread
in the bobbins are less.
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Working Principle of Pirn Winding Machine:
The principle of pirn winding machine is as follow:
• In weft winding machine, the Pirn is driven by a spindle.

• In weft winding process a parallel winding packages result.
• Also, instead of winding them back and forth, the weaver winds them a half
inch at a time.
• The pirn is mounted on the spindle driven by a mechanism which consists of
gears and cam.
• The pirn rotates at very high and constant speed.
• When the diameter of Pirn increases. The yarn winding tension increases up-
to some extent and reduces the speed of rotation.
• When it rotates, it rolls the yarn and winds on it.
• In pirn winding process a parallel winding packages result. This package
comprises one or more threads which are laid very nearly parallel to the
layers already existing on the package.
• This yarn guide performs traversing motion of yarn. Yarn traverse guide
which makes nearly parallel coils of yarn on the Pirn. Almost half inch of
pirn (chasing length) gets wound at a time.
• At a time, the yarn moves to and fro between half inch’s distance of Pirn.
• When this half inches distance is filled, the winding of next half inches
begins, thus winding of complete Pirn is performed.
• The chasing length get shifted gradually during winding.
• The weft bobbin or Pirn contains very less amount of yarn length on it
because it is very difficult to throw a shuttle with Pirn containing high
amount of yarn on it.
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Wastage of
weft yarn
(Pirn Machine)
Weaknesses:
• There is no record of yarn taken from store of weft department.

• After shuttle winding the further wastage of yarn cannot be measured reliably
and management consider it negligible, and it is duly agreed.
• There is no record of weft shuttle transferred for looming.
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Suggestion:
• There should be an acknowledgement on voucher regarding receipt of weft

yarn.
• There should be proper documentation of Wastage & Scrap.
• There should be an acknowledgement of receipt of weft shuttle from looming
department.
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8. Looming process:
There are a total of 34 employees who work in this department in two shifts of 12
hours each. Each shift of 12 hours consists of 17 workers. Each shift starts at 7 am
in the morning and 7pm at the night. In the looming all knots are pulling through
the drop wires, heddles and reeds after tying-in process. The process in which each
end of the new beam is attached to its consequent end on the old beam is known as
tying in process. The process required for completion is 1.5 hours to 2 hours. The
weft yarn put in the form of shuttle. Now, the loom is ready for use.
Tying-in-Process
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Weaknesses:
• The wastage during tying-in-process is not being measured and the

management keeps an estimated wastage criterion i.e. 2%.
• No record of receipt regarding weft shuttle received after pirn winding

department.
Suggestions:
• There should be separate calculation of wastage on each type of machine

(Dobby (48 Machines) and Jacquard machine (16 Machines)). Furthermore,
by doing this process we can easily calculate wastage per machine type.
• There should be estimated benchmark for production on each type of

machine so that we can calculate efficiency of machine.
• The wastage during tying-in-process should be accumulated on daily basis.
• There should be an acknowledgement of receiving weft shuttle from

winding.
• There should be proper documentation of weft shuttle receipt in the looming

department.
• There should be proper documentation of weft shuttle consumed in the

looming department.
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9. Weaving:
There are two types of weaving machine that are being used by the company:
1. Dobby machine
2. Jacquard machine
Dobby machine:
Dobby machine is used for manufacturing simple shawl containing maximum

design on 12 threads. This machine is relatively faster than jacquard machine
because of simple designing. This machine is operating manually by the workers.
After inserting warp and weft shuttle. The wastage of this machine warp and weft
yarn is aggregated weight to 700 grams to 1 kg.
Dobby Machine
Weaknesses:
• In the tying-in-process the wastage of yarn cannot be measured reliably and

the estimated wastage is 2%.
Suggestions:
• The wastage in tying-in-process should be placed in separate carton and

weighing it at the end of the day. By doing this, we can calculate the actual
weight of wastage in tying-in-process and compared it on daily basis. If the
variation arises on day to day basis then it should be investigated.
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Jacquard Machine:
The jacquard machine is computerized machine where fancy shawls are prepared.
The designer prepared the design according to the requirement of the order. In
jacquard machine after tying in process operate through computer where design
which was prepared by the design master and approved by the GM.
The sample of design is inserted through USB in the computer system that is
attached in the upper portion of the jacquard machine.
After this, the threads of warp beam pass through the Harness Machine. Harness
take command from the computer and designed on the grey fabrics where weaving
is performed.
This machine contains maximum of 2,400 hooks which are used for preparing
several designs on grey fabrics like flowers on the shawls and preparing jacquard
shawls etc.
Computer for the

designing
Harness
Jacquard Machine
Weaknesses:
• In the tying-in-process of dobby machine and jacquard machine, the wastage

of yarn cannot be measured reliably and the estimated wastage is 2%
calculated overall wastage per bag by management.
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Suggestions:
• There should be separate calculation of wastage on each type of machine

(Dobby and Jacquard machine). Furthermore, by doing this process, we can
calculate wastage per machine.
• There should be estimated benchmark for production on each type of

machine so that we can calculate efficiency of machine.
10. Inspection of Grey Fabric / Shawls:
The essential process of maintaining the quality of raw materials used during
making the finished product is called inspection. For garments, need to check the
quality of fabric, sewing thread, trims etc. The process is done following specific
SOPs to check the specific items.
Fabric Inspection Criteria:
When the shawls are manufactured, the inspection depend upon size, length and
weaving quality. The entity doesn’t compromise with the size, length and weaving
quality. If the grey fabric is not in the shape of proper size, length and the quality of
weaving cloth is not of the desired quality then the shawls are rejected. Furthermore,
these shawls are then either sold at break even or are given as Zakat.
Sheering department:
In sheering department, there are 04 workers who sheered the fabrics threads from
designing on grey fabrics. The worker sheered the fabrics either from sheering
machine or by hands. After sheering the grey fabrics are sent to either for
embroidery to Lahore office (If the shawls are necessary for embroidery) or packing.
The entity also outsources shawls for sheering by quantifying per piece and paid
them accordingly.
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Weaknesses:
• There is no record maintained by inspection department of shawls transferred

to sheering.
• If the shawl size, length and quality is not according to the specified criteria
of the management they considered as wastage and these are taken under the
head of Zakat.
• The workers take the shawls from one room to other room and forget to take
it back from where they have taken. Moreover, at the end of the week the
inspection manager reconciles it and inquired for missing items from
workers.
Suggestions:
• There should be proper documentation / acknowledgment regarding

movement of grey fabrics within the premises.
• The wastage of shawls should be recorded as scrap sale which will ultimately
reduce the production cost.
• There should be proper control on movement of finished goods from one

department to another department.
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11. Hand Knotting, Hand Tracing and Cutting.
After the completion of inspection stage, the grey fabrics will be dispatched for
either hand tracing, hand knotting (household women for preparing design and
finishing the shawls) and cutting. The management recorded it in the form of
quantity when it is dispatched and received.
Recording of shawls when

returned after hand
knotting.
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Weaknesses:
• No gate inward prepared for returning of shawls from hand knotting.

• No weighing of shawls by segregation of variety.
• No segregation of heads recorded when dispatched to household women.
Suggestions:
• There should be proper inward prepared by the management for the record
of receiving shawls from hand knotting and cutting.
• There should be variety wise segregation while weighing of shawls so that

cost of shawls by variety can be measured reliably.
• There should be segregation of heads recorded in the register so that we can

calculate the shawls dispatched and shawls received.
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12. Folding and packing:
There are two persons who are hired outside the premises for folding and packing
of order. They paid on weekly basis.
Now, the shawls are ready for dispatch to either Lahore Office or directly to the
parties.
Following are the type of shawls and their average weights and bar codes as
agreed with the management:
Serial Product Name Quantity Total Avg Weight Multan Lahore

No. Weight per piece Barcode Barcode
(kgs) (kgs)
1 Mona liza 10 1.750 0.175 MJ600- LJ600-
Patti-Jacquard 001 001
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2 Mixture Shawl- 10 2.510 0.251 MD- LD-002
Dobby 002
3 Rashmina Pati 10 2.470 0.247 MD- LD-003
Shawl-Dobby 003
4 Chandni 10 2.850 0.285 MJ600- LJ600-
Shawl-Jacquard 004 004
5 64/2 Black - - - MD- LD-005

shawl-Dobby 005
6 Fancy Sizing 10 2.250 0.225 MD- LD-006
Shawl-Dobby 006
7 Mareena - - - MJ2400 LJ2400-

Shawl-Jacquard -007 007
8 Shatranj 10 2.480 0.248 MDB- LDB-

Shawl-Dobby 008 008
9 Diamond Pati 10 2.990 0.299 MJ600- LJ600-

10 Moon Light / 10 2.950 0.295 MJ2400 LJ2400-

Nagina shawl- -010 010
Jacquard
11 Taj shawl- 10 2.540 0.254 MJ2400 LJ2400-
Jacquard -011 011
12 Rangoli shawl- 10 2.620 0.262 MD- LD-012

Dobby 012
13 Lining Shawl- 10 2.630 0.263 MJ600- LJ600-
Jacquard 013 013
14 3-Tilla Shawl- 10 2.490 0.249 MD- LD-014

Dobby 014
15 Draw Box 10 2.460 0.246 MDB- LDB-
Shawl-Dobby 015 015
16 Self-Shawl- 10 2.730 0.273 MJ2400 LJ2400-

Jacquard -016 016
17 Anmol Shawl- 10 4.620 0.462 MJ600- LJ600-

Jacquard 017 017
Page 37 of 56
18 Kiran Shawl- 10 3.820 0.382 MJ600- LJ600-
Jacquard 018 018
19 Fancy Shawl- 10 2.430 0.243 MD- LD-019

Dobby 019
20 Chamki Pata 10 2.730 0.273 MJ2400 LJ2400-
Shawl-Jacquard -020 020
21 Stripe Shawl- 10 2.510 0.251 MD- LD-021

Dobby 021
22 BF Shawl- 10 2.620 0.262 MD- LD-022
Dobby 022
23 Tilla Shawl- 10 2.430 0.243 MD- LD-023
Dobby 023
24 Sample- - - - MD- LD-024
Dobby/Jacquar 024
d
25 Check Shawl- 10 2.440 0.244 MDB- LDB-
Dobby 025 025
26 Plain Shawl 10 2.490 0.249 MD- LD-026

72/2 Coloured- 026
Dobby
27 Boarder Tilla 10 2.860 0.286 MD- LD-027
Shawl-Dobby 027
28 Ches Shawl- 10 2.990 0.299 MJ600- LJ600-
Jacquard 028 028
29 Diamond 10 3.890 0.389 MJ600- LJ600-

Shawl A- 029 029
Jacquard
30 Diamond 10 3.250 0.325 MJ600- LJ600-
Shawl F- 030 030
Jacquard
31 4-Side Tilla 10 2.470 0.247 MD- LD-031
Shawl-Dobby 031
32 Chokor Tilla 10 2.740 0.274 MDB- LDB-
Shawl-Dobby 032 032
33 Fancy Scarf- 10 1.430 0.143 MD- LD-033

Dobby 033
Page 38 of 56
34 Sat Rangi 10 2.540 0.254 MDB- LDB-
Shawl-Dobby 034 034
35 Tilla Lining 10 2.620 0.262 MDB- LDB-

Shawl-Dobby 035 035
36 Banarsi Shawl- 10 2.610 0.261 MJ2400 LJ2400-

Jacquard -036 036
37 Brosha Shawl- 10 4.180 0.418 MJ2400 LJ2400-

Jacquard -037 037
38 Indian Boarder 10 2.620 0.262 MJ600- LJ600-

39 Kareena Shawl- 10 2.440 0.244 MJ600- LJ600-

Jacquard 039 039
40 Mareena 10 3.040 0.304 MD- LD-040

Shawl-Dobby 040
Each shawl having length 92 – 94 inches and width is 45 inches. Mona Liza Patti,
mixture shawl, Rashmina Patti shawl, 64/2 Black shawl, Stripe shawl, Ches shawl,
fancy scarf and Kareena shawl has been closed for manufacturing by the
management. There is also variation in the weight of each type of shawl according
to quality adjustment on demand.
Weaknesses:
• No parameter has defined related to measurement of shawls. Some shawls

measured in meter and others are measured per piece.
• Some inventory shows negative closing stock like in stock report Anmol
shawl, BF shawl, sample shawl, check shawl and plain shawl 72/2 coloured.
Page 39 of 56
Page 40 of 56
Suggestions:
• There should be a proper parameter defined related to measurement of

shawls.
• Stock should be recorded on daily basis so that the chances of

misappropriation is reduced.
• Stock count should be calculated on monthly basis.
13. Embroidery and Laundry:
After the manufacturing of grey fabric, the shawls are dispatched for embroidery to
Lahore office. After receiving in office, they dispatch the shawls for embroidery.
On completion of embroidery, they undergo laundry and are returned to Lahore
Office and afterward invoices are maintained in Lahore along with the shawls.
Weaknesses:
• No invoice of laundry & embroidery available in Multan to calculate cost of

laundry & embroidery per shawl. These invoices are available at Lahore
office. It would mean that financial statements are misstated with reference
to non-booking of the expense.
Page 41 of 56
• No acknowledgement of receipt regarding laundry & embroidery available

in the Mill.
Suggestions:
• There should be a copy of laundry & embroidery expenses in mill premises

for the calculation of cost per unit, with the accountant.
• There should be acknowledgement of receipt for receiving of shawls in mill

premises.
Gate Pass of Shawls

dispatched for
embroidery
Party copy of
shawls dispatched
as a record for mill.
Page 42 of 56
General Observations:
• There is one person responsible for supervising the weaving unit (Mr. Shahzad). For
example, staff hiring, design to be produced, wages to be approved, supervising of
looming department, ordering of the Yarn, sample to be produced, how much
quantity of sample to be produced etc.
• Mr. Shahid Raza is responsible for multiple tasks. Such as Mr. Shahid is responsible
for petty cash, receipts of yarn from dying department, household works of owners,
voucher preparation of dying on basis of gate pass, purchase and recording of acrylic
etc.
• Mr. Iftikhar is also responsible for multiple tasks i.e. Inspection of yarn, purchase
of yarn supplied to production departments, sale of waste, supervision of sheering
of shawls, shawls sent for embroidery, recording of warper beam outsourced to
different local clients, folding and packing of shawls according to the order, delivery
of sales orders etc.
• Management response towards implementation of control is not positive.
• There is no acknowledgment of receipt and delivery of goods to different

departments within the entity’s premises.
• There is no single place for sheering and cutting of Shawls as a result of which some
of the shawls are misplaced which causes interference in the operations of the
department.
• After cutting and sheering shawls are placed outside rather than being taken to a
separate store which causes confusion in handling of the stocks and the management
forgets where the stock is being kept.
• There is no proper supervision for evening shift as some of the warp beam produced
by warping department is used in production without any recording at the spot.
• There is no supervision of the mill in the evening shift except for machinery
supervisors.
Page 43 of 56
• There is no proper place for storage of the wastage carried out from different
departments within the premises.
• There is no proper check in and check out time of weaving supervisor (Mr.
Shahzad).
• There is no independent record keeper in the looming department to make sure

Shawls made by each individual is accurately recorded. They only recorded the
shawls manufactured on the machine when they extract it from machinery.
• There is no proper security system in the store department (as open window is
observed).
• There is no repair and maintenance of machines carried out by the management.
• There is no NRV testing of inventory carried out by the management.
• There is no updated trail balance provided by the management.
• There is negative closing balance in stock sheet for the year.
• The trial has not been fully updated.
• There is no method of inventory valuation such as First in First Out (FIFO),

Weighted Average (AVCO).
• There is no deduction of EOBI or Provident Fund deductions from salaries of

workers.
• There is no procedure of paying bonus and gratuity to their employees/workers.
• There is no proper gate pass (inward & outward) of repairing of machine.
Page 44 of 56
Wastage & Scrap Observation:
In the premises of entity, the wastage & Scrap is bifurcated as follows:

1.) The wastage of yarn occurs during warping of beam,
2.) Wastage in the form of creel,
3.) Wastage during winding,
4.) Wastage of paper cone,
5.) Wastage during tying-in process,
6.) Spare parts Scrap and
7.) wastage of power loom.
The management estimated wastage per bag (45.340 kg) is 1 kg. There is no proper
segregation of wastage per department nor on daily basis.
Wastage of yarn during warping:
Wastage of yarn during warping occurs when the thread broke and then the yarn is knotted
again.
Wastage of yarn is collected in the plastic carton on each warping machine. When the
carton is filled with wastage then it is placed outside where all the wastage is being
collected for all the departments mentioned above.
There is no wastage quantification on daily basis. No weighing of wastage at the time of
placement outside. The yarn is weighed when the management decides to sell it.
Wastage of Yarn in
fast warping
machine
Page 45 of 56
Wastage of Yarn
in Slow Warping
machine
Wastage Collected
outside (wastage
placement area)
Wastage in the form of Creeling:

While preparing warper beam, at the time when the operator of warper beam decided to
stop the warping based on his experience and estimation that further yarn cannot be warped
then the remaining yarn is treated as creeling yarn.
The creeling yarn is neither quantified nor weighed by management. They just pack it in
the carton and placed it where all wastage is being placed. Furthermore, when they intend
to recycle it, they transfer it to the winding department for creeling process.
No record is being maintained of transferring the yarn from one department to another
department.
No record maintained of transferring yarn after creeling process from winding to warp
store.
Page 46 of 56
Yarn before Creeling

Process & further
recycling when necessary
Yarn after Creeling

process
Page 47 of 56
Waste of Yarn after

recycling
Wastage of Winding and Wastage of paper cone:

In the winding department recycling of warp creel and weft winding on bobbin has been
done. The waste of winding placed in the carton and paper cone is separately placed.
According to the management only paper cone and Empty bag has sale value while yarn
wasted in the department has no sale value. The sale price is Rs 1.5 per paper cone at the
time of making this report.
Paper cone
Waste of winding
department
Page 48 of 56
Wastage during Tying-in Process:

The wastage during tying-in process occurs when there is a change in the colors, variety
etc. The waste in this process is placed at the end of production department and it is not
being quantified on daily and weekly basis. There is no time specified for sale of wastage
as it is sold in the market when the bag is filled with wastage.
Wastage during tying- in

process
Scrap of Machine Spare parts:

The scrap of machinery spares parts in the looming department is gathered till it is sold as
scrap in the market when it is necessary. It should be kept separately and accounted for in
relation to actual purchase of new spare part.
Page 49 of 56
machinery spare parts
Waste of Power Loom:

The waste under the power loom is mixed with mud and oil on machine i.e. is categorized
as invisible waste and has zero value. This wastage occurs when the machine is running
for producing grey fabrics. The yarn knotting in each layer warp and weft thereby resulting
in small quantity of cotton extract from the yarn and drops under the machinery on floor.
This wastage is not quantified on daily basis. According to the management, this waste
has no sale value.
Wastage from
loom including
mud and
invisible waste
Scrap of Spare
Part
Page 50 of 56
Sale Receipts of wastage:

Following are the Sale Receipt of wastages as a sample:
Sale of
Wasted cones
receipt
Sale of wasted
cones and
wasted yarn
Page 51 of 56
Sale of Scrap receipt
Page 52 of 56
Page 53 of 56
Page 54 of 56
Hierarchy:
Board of Directors
(Qamar Saeed
Ansari)
Chief Executive
Officer
General Manager
Manager
Store Warping Bobbin Production Inspection ERP

Accountant
Keeper Master Winder
Cutting Hand Hand Sheering

Knotting Tracing
Folding & Packaging and

Dispatched to Lahore Office
Page 55 of 56
Weaknesses:
• There is no proper reporting hierarchy within the entity.
• The is no job description for employees working within the premises of the entity,
for example, one employee is responsible for multiple tasks while others are
responsible for single task.
Suggestions:
• There should be proper reporting line to make employees accountable for their
work. For example, it can help to establish clear lines of authority and reporting
within the entity, clearer understanding of employee roles and responsibilities.
• There should be proper job description for each employee working within the
premises to achieve efficiency and effectiveness of the operations.
Page 56 of 56

Report-Sadiq Textile Mills Limited FINAL 25.05.21

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Report-Sadiq Textile Mills Limited FINAL 25.05.21

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2021

INTRODUCTION & SCOPE ............................................................................................. 2

There are two elements of the engagement:

The critical evaluation of the Internal Controls included:

2.i. Weft Yarn 2.i. Warp Yarn

3. Creeling and 3. Warping

7. Pirn winding 4. Out source for 5. Production

11. Hand knotting,

13. Embroidery 12. Lahore Office 12. Folding and

Fabric Formation Process:

1. Yarn from Spinning Industry / Unit:

Payment of dyed yarn:

i. Weft and warp department:

• 72/1 & 72/2

• There is no concept of maintaining bin cards.

Detail of yarn sent Dyer gate

Dyer’s own outward

Warping is intended to prepare the warping beam of the weaver to be installed on

arrangement of the above-mentioned threads according to the desired sequence.

In the premises of entity Sectional warping is used. Sectional warping is also

Types of warping machine:

Slow Warping Machine:

(Slow Warping Machine)

Fast warping Machine:

(Fast Warping Machine)

Creeling and recycling:

Moreover, when the warping beam is prepared it transferred it to production

Yarn Cone after recycling

Cone Winding Machine

Creel before recycling

• There is no concept of maintaining bin cards for creel yarn.

• There should be verification of yarn transfer from store for warping.

4. Outsourcing for Production of Grey Fabrics:

• Outsourced Local Parties do not provide any invoice

After preparation of warper beam, it transferred to looming where production of

• There is no record maintained of warper beam received in production which

• There should be proper control of movement of warper beam transferred

7. Weft Yarn Winding:

Working Principle of Pirn Winding Machine:

The principle of pirn winding machine is as follow:

• In weft winding machine, the Pirn is driven by a spindle.

• There is no record of yarn taken from store of weft department.

• There should be an acknowledgement on voucher regarding receipt of weft

• The wastage during tying-in-process is not being measured and the

• No record of receipt regarding weft shuttle received after pirn winding

• There should be separate calculation of wastage on each type of machine

• There should be estimated benchmark for production on each type of

• The wastage during tying-in-process should be accumulated on daily basis.

• There should be an acknowledgement of receiving weft shuttle from

• There should be proper documentation of weft shuttle receipt in the looming

• There should be proper documentation of weft shuttle consumed in the

Dobby machine is used for manufacturing simple shawl containing maximum

• In the tying-in-process the wastage of yarn cannot be measured reliably and

• The wastage in tying-in-process should be placed in separate carton and

Computer for the

• In the tying-in-process of dobby machine and jacquard machine, the wastage

• There should be separate calculation of wastage on each type of machine

• There should be estimated benchmark for production on each type of

10. Inspection of Grey Fabric / Shawls:

Fabric Inspection Criteria:

• There is no record maintained by inspection department of shawls transferred

• There should be proper documentation / acknowledgment regarding