Terms of Reference; Stock count & reconciliation

Terms of Reference (TOR) for External Auditor Engagement

Background Information

Sun King designs, distributes, and finances Sun King solar home energy solutions to households and businesses
that lack reliable access to the electric grid. Since its founding in 2009, the company has become a leading global
provider of solar home energy products to over 80 million rural consumers, in collaboration with 300 distribution
partners, more than 15,000 rural retailers, and over 14,000 sales agents across the world.

Throughout the last decade, the company has grown steadily, building expertise in developing high quality solar
powered home energy solutions, product distribution in more than 40 countries in Asia, Sub-Saharan Africa, and
Central America, and consumer financing through its unique ‘pay-as-you-go’ (PAYG) technology.

Sun King is seeking qualified external auditors to facilitate a stock count and reconciliation audit at our
warehouses. Sun King is keen on regular review of the inventory management processes and procedures to
ascertain their effectiveness and efficiency with the goal of continuously improving the processes.

Objective of the Audit

● To conduct a comprehensive physical count of all inventory items in the warehouse.

● To reconcile physical count results with existing warehouse records and reports.
● To evaluate the current inventory control system and identify any discrepancies or weaknesses.
● To provide recommendations for improvements in stock management and internal controls.

Scope of Work

The external auditor shall be responsible for performing stock counts and reconciliation procedures for Sun King
for the financial year 2023. The scope of work shall include, but is not limited to:

3.1. Audit Standards: The audit will be carried out in accordance with the International Auditing Standards
and will include tests and verification procedures as the auditors deem necessary.
3.2. Physical Stock Counts: Conduct physical stock counts at Sun King's premises. This includes a
comprehensive examination of all inventory items, including but not limited to, all new, used, and
refurbished units. To confirm their existence, condition, and quantity.

Warehouse Name Location Appr. no. of SKUs Inventory Quantity

Central Warehouse Njewa 15 50,000

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Terms of Reference; Stock count & reconciliation

Central Warehouse 25 10,000

Kanengo

3.3. Reconciliation: Perform a thorough reconciliation process to match the physical counts with the stock
records. Document and analyse any discrepancies or variances.
3.4. Internal Controls: Assessment of the adequacy of internal controls related to inventory. Verify that stock
management procedures adhere to relevant regulatory requirements and internal policies.
3.5. Quality Assurance: Evaluate the quality and adequacy of the stock management system and recommend
improvements where necessary.
3.6. Communication: Maintain open and transparent communication with Sun King throughout the audit
process. Reporting on findings and providing detailed recommendations for improvements.

Deliverables

The auditor would be required to provide reports as follows: -

4.1. Pre-Audit Planning: Provide an initial audit plan outlining the approach and methodology.
Provide a budget proposal with a detailed fees structure.
4.2. Preliminary Stock Audit Report: Highlight initial findings and discrepancies discovered during
the audit. Share weekly progress status.
4.3. Final Stock Audit Report: Provide a comprehensive audit report highlighting the criteria used,
condition, cause, consequence, summarising the audit process, findings, and recommendations,
including but not limited to:

4.2.1. A summary of stock counts and reconciliation results.

4.2.2. Identification of any discrepancies.
4.2.3. Recommendations for process improvements and best practices.
4.2.4. A conclusion regarding the integrity of the stock management system.

Timelines

The Audit shall be conducted between 1st April to 15th April 2024, extendable depending on the conditions at the
time of audit.

Evaluation and selection criteria

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Terms of Reference; Stock count & reconciliation

Successful auditor would be selected based on the competitiveness of their proposal against their proven experience
and expertise on handling similar assignments, before then the service provider would required to provide details of
at least 2 contact people within the audit firm as well as submit mandatory documentation, the documents are listed
below:-

1. Copy of Certificate of Incorporation or Registration

2. Proof of the tenderer’s registration with the Institute of Certified Public Accountants as individual and/or
Firm
3. Proof of good standing from Public Accountants authority
4. A valid audit practising Certificate
5. Copy of valid Tax Compliance Certificate
6. Proof of similar assignments done, the provider should share a copy of a contract or service order.

Confidentiality and Non-Disclosure

All information that would be exchanged between Sun King and the external auditor would be considered
confidential. The auditor must maintain strict confidentiality, refrain from sharing or disclosing confidential
information to third parties, use confidential information solely for audit purposes, and return or destroy it upon
completion. The confidentiality obligations would extend beyond the engagement, with potential legal
consequences for breaches.