3) Several IDRs contained comments regarding damaged goods. For example, a very large recent IDR was for a shortage of vanilla toffee coffee, one of the special coffee flavors highlighted in September. An audit of the inventory records found the following: - The audit team vouched the inventory adjustments back to the IDR to determine if the reasons for the discrepancies could be ascertained. - The staff auditor also interviewed the warehouse employee that completed the IDR. - The auditor reviewed the area where the coffee is stored. It was determined that a bottom box on a large pallet of coffee had collapsed and 3/4 of the boxes had fallen and had been damaged beyond use. Another pallet had been placed on top of the coffee pallet in question. The damaged boxes were moved to a damaged goods area, but had not been adjusted in the current inventory. 4) The auditors decided to review the damaged goods procedures. This investigation revealed: - There are no written procedures for damaged goods - Damaged product is taken to a rework area. - If usable/saleable product can be salvaged it is placed back into the warehouse supply. - A list of unusable damaged product removed from inventory is made by a warehouse employee. It is signed off by a warehouse supervisor. This list is provided to the quality control clerk. - The quality control clerk investigates damages in an attempt to reduce further losses. The list is kept and a quarterly report is made to the warehouse manager regarding warehouse damages. - The report from quality control is used to prepare financial reports and performance reports that are sent to the corporate offices. Product damaged that cannot be sold (e.g. dented cans) may be used in the DC (coffee and supplies may be used in the office or break area) once it is approved by the quality control clerk and the inventory manager. Audit report guidelines: All reports are addressed to - the auditee, Chick Corea, Distribution Center Manager - the auditees immediate manager, Roy Hargrove, VP of Materials Management - the president of the company, Charles McPherson - the chairperson of the audit committee, Coleman Hawkins - the external audit engagement manager, Diana Krall Requirements - Follow examples in On-Course Resources A575 Help: 1. Write a report in good form 2. Create a findings worksheet for each finding (should be 4) 3. Include your audit program 4. Include your Risk Assessment and Control evaluation Note: The discussion of the findings should include the five elements of an audit finding