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Transfer of RMs from Lakshmi Godown (Cuddalore - TN) to Rohit (I) foods

division (Pondy), Form for stock transfer as required under Central Sales Tax
act is not being issued for such transfer. (Para 1 (e))
Observed stock out of certain materials during the period from 26th June to 4th
October the (Para 4(b)) Refer annexure 2
Production plan for3rd & 4th week of JC for 50 paise tomato garlic was not
executed as there was stock out of 50 paise tomato garlic laminates from
11th July 2008 to 16th July 08 . For bin card details refer the Exhibit .(para 4(c))
Loss or Destruction of Asset:

No restricted access controls inside the work floor. (Para 2(c))


Specimen authorisation list for both NRGP & RGP from the chief
department heads of the unit were not available in the material gate. (Para

2(d))
No controls over the returnable containers (carbuoys for storing pickles &
brines) (Para 2(e))
Returnable items wrongly captured in non returnable register & Non returnable
items wrongly captured in returnable & observed instances of returnable items
pending for more than 3 months. (Para 2(f))
Insurance cover & details were not available for any of the fixed assets in the
unit
Stacking norms not being followed in the godown & stores in stacking of raw
materials such as bottles & carbuoys. (Para 5 I(a))
As per the stacking norms of the SOP, every carton shall be palletized but it was
not found to be in practice in the unit. (Para 5 I(b))
No dedicated place (bins/ bays) for storing expired, damaged and rejected
materials in the FG godown (Para 5 I(d))
There is no BIN system in place for any material movements & all the carbuoys
containing pickles & brines were mixed with other carbuoys containing rice
brand oil, salt etc. (Para 5 I(d & e))
Majority of the carbuoys containing brines and pickles were not coded with the
GRN number .The carbuoys were not stacked variant wise and were scattered all

around the Godown. Besides, found dented carbuoys stacked underneath good
carbuoys. (Lakshmi Godown) (Para 5 II(a))
No fire extinguisher was found anywhere in the godown & pest controls were
not in place. (Para 5 I(b))
Conflict of Interest:
All the fixed asset invoices (except for factory shed & other infrastructure
expenses) are in the name of Rohit India instead of CKPL whereas; the
insurance coverage of the same is taken care by CKPL. (Para 3(c))
No clear memorandum of understanding between the two entities on the
ownership & usage of fixed assets. (Para 3(c))

Erroneous Record and/or incomplete Information:

Production department is not signing the conversion details in the daily


conversion note (to vet the data) before raising conversion orders in S-A-P
(Para 1 a).

The stores in charge (who is being physically placed in Rohit (I) foods division,
Pondy) vouches for the receipt of raw materials in GRNs pertaining to Lakshmi
Godown, Cuddalore.(Para 1b)
GRN is being raised for the net quantity of goods (gross quantity received less
rejections) rather than for the gross quantity of goods received. (Para 1(c))
Stock transfers from one TPU to another TPU were not accompanied by stock
transfer note in several cases. (Para 3(c))
No provision for differentiating packing materials (unused inputs - which are in
stores) with that of its WIP issued for production. (Para 4(d))
No practice of returning the PMs to stores by production and whatever that
is being posted in SAP as return is only a PAPER RETURN. As a result, there will
always be a mismatch in book stock between S-A-P & in the books of Rohit (I)
pickles division. (Para 4(d))
Variances were observed while correlating the book stock maintained by Rohit
(I) with the S-A-P closing stock of CKPL. (Para 5I(c))
Variances were observed during physical verification of raw materials (brines &
pickles) stored in the Lakshmi godown (Sampling: 18%).(Para 5II(d))
Unrealized or Lost Revenue:

Expired laminates were RECODED with revised month & year through hired
machinery inside the premises from DP Bharat Products & Shree
Enterprises Erode. The hire charges paid by Rohit (I) foods from April 08 to
October 08 (subsequently reimbursed by CKPL) amounts to 2.25 Lakhs. (Para

4(a))

Unacceptable Accounting Principles:


High Costs and Probable Loss of Asset:
It is recommended to ascertain the RM stock holding levels (maximum,
minimum, reorder, safety & danger level) for the conversion unit to avoid
piling-up of stocks. (Para 1(d))
Both returnable (RGPs) & non-returnable gate passes (NRGPs) were raised in the
same GP format & Gate passes have manually numbered rather than pre-printed
numbering system &No separate fields for return date & tentative date of
return available in the returnable gate pass register. (Para 2(b))
There is no dedicated place for storing expired, damaged and rejected materials
& there is no BIN system in place for material movements. (Para 5II(c))

Inappropriate Management Policy and/or Decision Making / Business


Divergence:
Failure of Support Services:
CCTVs were not installed anywhere in the premises. (Para 2(a))
Visitors log sheet rather than visitors register is being maintained & n o
practice of issuing visitor passes to the visitors / outsiders (Para 2(a)).
OBSERVATIONS
1. TCU OPERATIONS
(a) While verifying the daily conversion note maintained in the unit, it was
observed that the production department does not sign the conversion details (to
vet the data) before raising conversion orders in S-A-P.
Risk Analysis:
Risk Factor

Risk Assessment

Authenticity of the
conversion note raised to
production department
cannot be verified.

Frequenc
y of Lapse

Probability
of Risk

Severity of
Impact

High

Moderate

Moderate

Likelihood of
Prior
Detection
High

Action Required-:

Type of Action

Preventive
Ensure that the
conversion order
written in the note is
signed by a authorised
person from
production
department

Responsibility

Detective

Corrective

Operations CKPL

Unit Response
Action Plan
Action Plan Date

(b) While verifying the process of raising GRNs for goods receipt, it was observed that
the stores in charge (who is being physically placed in Rohit (I) foods division,
Pondy) vouches for the receipt of raw materials in GRNs pertaining to Lakshmi
Godown, Cuddalore.
Risk Analysis:
Risk Assessment
Risk Factor

Frequenc
y of Lapse

Probability
of Risk

Severity of
Impact

Likelihood of
Prior
Detection

Authenticity of the GRN


raised cannot be ensured as
it is being vouched by a
person who is not present in
the Godown
Control Lapse as the GRN
for both Rohit India &
Lakshmi Godown is
authorised by same person.

High

Moderate

Moderate

High

High

Moderate

Moderate

High

Action Required-:

Type of Action

Preventive
Ensure that GRN for
Lakshmi Godown is
authorised by a person
other than the one
who is the stores in
charge of the Rohit
India

Responsibility

Detective

Corrective

Operations CKPL

Unit Response
Action Plan
Action Plan Date

(c) During the course of audit it was observed that GRN is being raised for the net
quantity of goods, gross quantity received less rejections, rather than for the
gross quantity of goods received. It results in open items in GR account, which
cannot be cleared because the PO quantity and the GRN quantity wont match and
shows goods pending to be received
For further details refer Annexure1
Risk Analysis:
Risk Assessment
Risk Factor
GR account shows a wrong
picture as goods pending to
be received from vendor

Frequenc
y of Lapse

Probability
of Risk

Severity of
Impact

High

Moderate

Moderate

Likelihood of
Prior
Detection
High

Vendor parameter analysis


cannot be done as the
quantity of goods rejected
cannot be ascertained.

High

Moderate

Moderate

High

Action Required-:
Preventive
Ensure that the GRN is
being raised for the
gross quantity rather
than for net quantity.

Type of Action

Responsibility

Detective

Corrective

Operations CKPL

Unit Response
Action Plan
Action Plan Date

(d) During our audit visit, it was observed that the daily production execution of the
TCU is 20 tons (altogether for all the variants) whereas the existing minimum &
maximum RM stock level ranges from 300 to 350 tons (Lead time: 15 18 days).
By enquiry, we found that the stocks that are being sent from Abhiruchi, Mallipudi
will be converted in to finished product within 7 to 8 days. Therefore, the ideal
production lead-time (after considering all uncertainties) works out to maximum
of 10 days & the ideal stock holding level would be 200 tons.
It is recommended to ascertain the RM stock holding levels (maximum, minimum,
reorder, safety & danger level) for the conversion unit so that this will have the
following advantages:

Piling-up of stocks can be avoided.


Thereby, godown space can be managed efficiently.
Expiry & damage of RM stocks can be prevented.
Thus, working capital blockage can be curbed.

Existing Stock Level (Tons)


Existing Lead time (Days)

300 to 350 tons


15 to 18 days

Ideal Stock Level (Tons)


Ideal Lead time (Days)

160 to 200 tons


8 to 10 days

Risk Analysis:
Risk Assessment
Risk Factor
Chances of expiry of stocks
exist.
Chances of space constraint
in godown and stores exist
Chances of blockage of
funds in form of piled up
stock exist.

Likelihood of
Prior
Detection

Frequenc
y of Lapse

Probability
of Risk

Severity of
Impact

Low

Moderate

Moderate

High

Low

Moderate

Moderate

High

Low

Moderate

Moderate

High

Action Required-:
Preventive

Detective

Type of Action

Responsibility

Corrective
RM stock holding
levels (maximum,
minimum, reorder,
safety & danger
level) for the
conversion unit
should be
ascertained.

Purchases & Operations CKPL

Unit Response
Action Plan
Action Plan Date

(e) There are two inter state stock movements observed:

First, the RM stock is being despatched from Abhiruchi (Mallipudi, AP) to


Lakshmi Godown (Cuddalore, TN). For this, the stock transfer
declaration forms (as required by CST Act) are being duly issued for all the
consignments.

Whereas, for transfer of RMs from Lakshmi Godown (Cuddalore - TN) to


Rohit (I) foods division (Pondy), no such form is being issued. This is a
contravention of the relevant section in the CST Act.

Risk Analysis:
Risk Assessment
Risk Factor
Contravention of CST act
will attract penalty

Frequenc
y of Lapse

Probability
of Risk

Severity of
Impact

High

Moderate

Moderate

Likelihood of
Prior
Detection
High

Action Required-:

Type of Action

Responsibility

Preventive
Detective
Corrective
Ensure that FORM as
required by CST act is
issued for stock
transfer.
Logistics & Operations CKPL

Unit Response
Action Plan
Action Plan Date

2. SECURITY CONTROLS
(a) During our audit visit, a survey of the existing security controls in the unit was
made & observed the following:
CCTVs were not installed anywhere in the premises.
Visitors log sheet has been maintained & updated by the security staff in the
unit rather than visitors register. Moreover, there is no practice of issuing
visitor passes to the visitors / outsiders.

Risk Analysis:
Risk Assessment
Risk Factor
Chances of pilferage/
burglary going untraced due
to Non installation of CCTV
In case of visitors log sheet
information like address,
phone number, purpose of
visit is not captured so risk
of not knowing about the
visitors exist.
In case of non issue of
visitors gate pass chances
of visitors not being
distinguished from
employee exist. Like wise
the authenticity of the
purpose of visit also cannot
be ensured.

Likelihood of
Prior
Detection

Frequenc
y of Lapse

Probability
of Risk

Severity of
Impact

Low

Moderate

Moderate

NA

High

Moderate

Moderate

NA

High

Moderate

Moderate

NA

Action Required-:
Preventive

Detective

Type of Action

Corrective
Installing CCTVs can
create moral
responsibility among
the loading
supervisors and
associates as they
are being watched,
and it will provide
better control and
prevents any
pilferage.
Ensure Gate pass is
issued to the visitors

Responsibility

Unit Response
Action Plan

Operations

Action Plan Date

(b) We observed that the gate pass slip contains an option to mark the gate pass as
returnable (RGPs) or non-returnable gate passes (NRGPs), so there exist a
possibility of marking gate pass wrongly. It is suggested to have a separate gate
pass for returnable / non returnable items. Furthermore gate pass have manual
numbering system rather than pre-printed numbering system.
The exhibit of the same is available in exhibit .Gate pass.JPG
Moreover, no separate fields for return date & tentative date of return were
made available in the returnable gate pass register.
Risk Analysis:
Risk Assessment
Risk Factor

Frequenc
y of Lapse

Probability
of Risk

Severity of
Impact

Likelihood of
Prior
Detection

Chances of returnable item


wrongly marked as non
returnable cannot be
avoided.

High

Moderate

Moderate

High

Loss of capital asset

High

Moderate

Moderate

High

High

Moderate

Moderate

High

High

Moderate

Moderate

High

Missing out the numbering


sequence can result in
losing track of items that
was sent out.
Non mentioning of tentative
date of return can result in
loosing track of items that
were sent out.
Action Required-:
Preventive

Type of Action

Responsibility

Detective

The above lapses


shall be rectified &
streamlined
hereafter by the
concerned
departments

Corrective

Operations

Unit Response
Action Plan
Action Plan Date
(c) We also observed that there was no restricted access controls inside the work
floor. There were no one to watch over the movement of strangers & outsiders
inside the work floor.

Risk Analysis:
Risk Assessment
Risk Factor

Frequenc
y of Lapse

Probability
of Risk

Severity of
Impact

Likelihood of
Prior
Detection

Pilferage of goods/tools
cannot be avoided.

High

Moderate

Moderate

High

Security threat

High

Moderate

Moderate

High

Action Required-:

Type of Action

Responsibility

Unit Response
Action Plan
Action Plan Date

Preventive
Ensure that a security
is posted at the
entrance of the work
floor to monitor the
movements

Detective

Corrective

Operations

(d) During the course of audit, it was observed that the specimen authorisation
list for both NRGP & RGP from the chief department heads of the unit were
not available in the material gate. This system will make aware the security
guards (on duty) about the authorised signatories who can pass RGPs & NRGPs in
the unit, which will strengthen the material outward movement controls of the
unit.
Risk Analysis:
Risk Assessment
Risk Factor

Frequenc
y of Lapse

Probability
of Risk

Severity of
Impact

Likelihood of
Prior
Detection

Chance of unauthorized
outward material movement
cannot be avoided.

High

Moderate

Moderate

High

Loss of capital asset

High

Moderate

Moderate

High

Action Required-:

Type of Action

Responsibility

Preventive
Ensure that
specimen
authorisation list is
made available to the
security at the gate.

Detective

Corrective

Operations

Unit Response
Action Plan
Action Plan Date

(e) It was observed that the unit does not have controls over the returnable
containers (carbuoys for storing pickles & brines) in the unit. The unit utilizes

carbuoys ranging from 50kg to 60kg capacity both in Pondy & Cuddalore (Lakshmi
godown), but no controls were put into practice for the same.
Risk Analysis:
Risk Assessment
Risk Factor
Chance of carbuoys being
stolen cannot be avoided.
Revenue loss as each
carbuoys cost more than Rs
400

Likelihood of
Prior
Detection

Frequenc
y of Lapse

Probability
of Risk

Severity of
Impact

Moderate

Moderate

Moderate

High

Moderate

Moderate

Moderate

High

Action Required-:

Type of Action

Responsibility

Preventive
Ensure a tracking
mechanism is put in
place to track the
inward & outward
movement of carbuoys

Detective

Corrective

Operations

Unit Response
Action Plan
Action Plan Date

(f) During our audit visit, we verified the gate passes & the registers maintained at
the factory gate & observed the following:
Some of the non-returnable items have been wrongly captured in returnable
register by the security guard(s). The following are the instances:

S No

Date

Particulars of Description

Reason / Purpose

14-05-08

Oil gel 45x65x10(Damaged) & bearing


(damaged)

Sample to Ravindran,
CKPL Chennai

23-05-08

Lime sachet strip 10 GM x 9 NOS

CKPL Chennai

27-08-08

SS table

Rohit India, Cuddalore

01-09-08

3 HP motor Make CG

Transfer to Chikki division

Same as above, some of the returnable items were wrongly captured in non
-returnable register which are tabulated below:
S.No

Date

Description

Purpose

17-04-08

Godrej Lock & Key

17-04-08

Laminate mango & tomato garlic 50ps


total 11 packs

For EB Kaatukupam
give to Malayan
PIPL Pondy

The following are some of the materials that are pending to be returned for more
than 3 months.
SI
No

Date

Description

Purpose

12-04-08

Motor HP 220v 1 No ,GC power


system, Cuddalore

Not mentioned

20-06-08

Ruchi Empty 300 GMs bottles 1 box

To CFC sample
purpose

Risk Analysis:
Risk Assessment
Risk Factor
Loss of capital asset as
returnable is captured in
non returnable.

Frequenc
y of Lapse

Probability
of Risk

Severity of
Impact

Moderate

Moderate

Moderate

Likelihood of
Prior
Detection
High

Misleading information as
non returnable is captured
in returnable register.

Moderate

Moderate

Moderate

High

Action Required-:

Type of Action

Preventive
Ensure the asset
movement is rightly
captured in the right
register.

Responsibility

Detective
Reconciliation of
information
captured in the
registers should be
done on periodic
basis.
Operations

Corrective

Unit Response
Action Plan
Action Plan Date
3. CONTROL ON FIXED ASSETS
(a) The following are the latest stock insurance details available in the unit & copy of
the policy renewal was not available with the unit.
S.No

Insurance
Company

IFFCO
TOKYO

IFFCO
TOKYO

Type of
Insurance
Cover
Burglary

Standard
Fire &
Special
Perils

Covered
for

Period

Food
products at
dehydration
factory
Food
products at
dehydration
factory

07.02.07 to
06.02.08
07.02.07 to
06.07.08

Sum
Insured
(Rs)
12500000

Break up
NA

Status
Expired

Expired

Action Required-:

Type of Action

Preventive
Make available to the
unit a copy of the
latest insurance policy

Detective

Corrective

Responsibility

Operations

Unit Response
Action Plan
Action Plan Date

(b) Besides above, it was observed that insurance cover & details were not
available for any of the fixed assets in the unit (by enquiry, it was informed to us
that CKPL - HO had conducted physical verification of fixed assets in the unit
on 02.09.08 for the purpose of insurance cover but insurance copy was not
available in the unit at the time of audit).
Risk Analysis:
Risk Assessment
Risk Factor
Financial loss due
destruction or impairment
of asset cannot be
mitigated

Frequenc
y of Lapse

Probability
of Risk

Severity of
Impact

Low

Moderate

Moderate

Likelihood of
Prior
Detection
High

Action Required-:
Preventive

Detective

To ensure that the


Insurance cover is
taken at the earliest
for TPU held assets.

Type of Action

Responsibility

Unit Response
Action Plan
Action Plan Date

Corrective

Operations

(c) Furthermore, all the fixed asset invoices (except for factory shed & other
infrastructure expenses) are in the name of Rohit India instead of CKPL
whereas, the insurance coverage of the same is taken care by CKPL. It was
observed that there were no clear memorandum of understanding between the
two entities on the ownership & usage of fixed assets.
Documentation on asset transfer: Stock transfers from one TPU to another TPU
were not been accompanied by stock transfer note in several cases.
Risk Analysis:
Risk Assessment
Risk Factor
Chance of legal
complication in insurance
claim in case of any
untoward happening.

Frequenc
y of Lapse

Probability
of Risk

Severity of
Impact

Moderate

Moderate

Moderate

Likelihood of
Prior
Detection
High

Action Required-:
Preventive

Detective

Type of Action

Responsibility

Corrective
Agreement to the
above effect can be
entered into at the
earliest.

Operations

Unit Response
Action Plan
Action Plan Date
4. CONTROL ON RAW MATERIALS / PACKING MATERIALS
(a) During the course of audit, it was observed that the material planning of
laminates (PM) was not been properly done.

Due to this, the expired laminates were RECODED with revised month & year
through hired machinery inside the premises from DP Bharat Products &
Shree Enterprises Erode. The hire charges paid by Rohit (I) foods from April
08 to October 08 (subsequently reimbursed by CKPL) amounts to 2.25 Lakhs.
Refer Exhibit2, Exhibit3
Risk Analysis:
Risk Assessment
Risk Factor
Future financial loss due to
expiry of laminates cannot
be prevented if proper
material planning is not
done.

Frequenc
y of Lapse

Probability
of Risk

Severity of
Impact

Moderate

Moderate

Moderate

Likelihood of
Prior
Detection
High

Action Required-:

Type of Action

Preventive
Recoding cost can be
avoided if proper
material planning is
done.

Responsibility

Detective

Corrective

Operations

Unit Response
Action Plan
Action Plan Date
(b) During the audit it was observed that certain materials had stock-out status
during the period from 26th June to 4th October the details of which are provided
in the annexure2.
Risk Analysis:
Risk Factor

Risk Assessment

Financial loss as the


production plan was not
executed to meet the
demand for the product.

Frequenc
y of Lapse

Probability
of Risk

Severity of
Impact

Low

Moderate

Moderate

Likelihood of
Prior
Detection
High

Action Required-:
Preventive

Detective

Corrective

Type of Action
Responsibility

Operations

Unit Response
Action Plan
Action Plan Date
(c) Furthermore, it was observed that the production plan for3rd & 4th week of JC for
50 paise tomato garlic was not executed as there was stock out of 50 paise
tomato garlic laminates from 11th July 2008 to 16th July 08 . For bin card details
refer the Exhibit
Risk Analysis:
Risk Assessment
Risk Factor
Financial loss as the
production plan was not
executed to meet the
demand for the product.

Frequenc
y of Lapse

Probability
of Risk

Severity of
Impact

Low

Moderate

Moderate

Likelihood of
Prior
Detection
High

Action Required-:
Preventive

Detective

Corrective

Type of Action
Responsibility

Operations

Unit Response
Action Plan
Action Plan Date
(d) During the course of audit, it was observed that there is no provision for
differentiating packing materials (unused inputs - which are in stores) with that
of its WIP issued for production.
We enquired on this and observed further that at the end of each day, the
information pertaining to issues and return of unused packing materials is passed
on by stores to accounts for posting the same in S-A-P. We found that there
was no practice of returning the PMs to stores by production and whatever
that is being posted in SAP as return is only a PAPER RETURN. As a result, there
will always be a mismatch in book stock between S-A-P & in the books of Rohit (I)
pickles division.
Risk Analysis:
Risk Assessment
Risk Factor
Generation of incorrect MIS
cannot be avoided.
Accurate quantity of
physical stock in stores
cannot be known.

Frequenc
y of Lapse

Likelihood of
Prior
Detection

Probability
of Risk

Severity of
Impact

High

Moderate

Moderate

High

High

Moderate

Moderate

High

Action Required-:

Type of Action

Preventive
Explore the possibility
of generating a report
in SAP that captures
work in Progress.

Responsibility

Unit Response
Action Plan
Action Plan Date
5. GODOWN OPERATIONS

Detective

Corrective

Operations

I. Rohit (I) FG Stores, Pondy


(a) No stacking norms being followed for the raw materials like bottles & carbuoys in
both the godowns (Exhibits 4)
(b) As per the stacking norms of the SOP, even cartons shall be palletized but it was
not in practice at the unit (Exhibit 5)
(c) No variances were observed while verifying physical stock with the book stock as
maintained by Rohit India. However, discrepancies were observed while
correlating the book stock maintained by Rohit (I) with the S-A-P closing stock
of CKPL. The details of the same are available in Annexure -3

Risk Analysis:
Risk Assessment
Risk Factor
Possibility of damaging of
stock exits.
Stock out cannot be avoided
as the SAP stock is not
matching with that of the
actual stock.

Likelihood of
Prior
Detection

Frequenc
y of Lapse

Probability
of Risk

Severity of
Impact

Moderate

Moderate

Moderate

High

Moderate

Moderate

Moderate

High

Action Required-:

Type of Action

Responsibility

Preventive
The reason as to why
there is a difference
between SAP stock
level and the actual
stock level exist
should be looked into
and rectified.

Detective

Corrective

Operations

Unit Response
Action Plan
Action Plan Date
(d) We further observed that there is no dedicated place (bins/ bays) for storing
expired, damaged and rejected materials in the FG godown. There is no BIN
system in place for any material movements.

Risk Analysis:
Risk Assessment
Risk Factor
Chance of damaged goods
dispatched/issued for
production cannot be
avoided.
Mixing up of variants cannot
be avoided as there is no
BIN system in place

Frequenc
y of Lapse

Likelihood of
Prior
Detection

Probability
of Risk

Severity of
Impact

High

Moderate

Moderate

High

High

Moderate

Moderate

High

Action Required-:

Type of Action

Preventive
Ensure that a
dedicated place is
made available for
storing damaged
goods.
BIN system can be
introduced for
effective inventory
management

Responsibility

Detective

Corrective

Operations

Unit Response
Action Plan
Action Plan Date
(e) While visiting RM stores, we observed that all the carbuoys containing pickles &
brines were mixed with other carbuoys containing rice bran oil, salt etc.
Risk Analysis:
Risk Assessment
Risk Factor
Identification & issue of
variants becomes difficult.

Frequenc
y of Lapse

Probability
of Risk

Severity of
Impact

Moderate

Moderate

Moderate

Likelihood of
Prior
Detection
High

Action Required-:

Type of Action

Preventive
Ensure that the raw
materials are stacked
variant wise.

Detective

Corrective

Responsibility

Operations

Unit Response
Action Plan
Action Plan Date

II. Lakshmi Godown, Cuddalore


During our audit exercise, we visited the godown situated in Cuddalore (Lakshmi
Godown) and observed the following:
(a) Majority of the carbuoys containing brines and pickles were not coded with the
GRN number (See Exhibit3 )
The carbuoys were not stacked variant wise and were scattered all around the
Godown. Besides, we found some dented carbuoys being stacked underneath along
with good carbuoys.
Risk Analysis:
Risk Assessment
Risk Factor
Issue of Raw material on
FIFO method becomes
difficult as the carbuoys are
not coded with GRN
Identification & issue of
variants becomes difficult as
they are not stacked variant
wise.
Threat of carboys falling
down & getting damaged
exist as the good carbuoys
were stacked upon dented
ones

Likelihood of
Prior
Detection

Frequenc
y of Lapse

Probability
of Risk

Severity of
Impact

Moderate

Moderate

Moderate

High

Moderate

Moderate

Moderate

High

Moderate

Moderate

Moderate

High

Action Required-:

Type of Action

Preventive
Make sure that each
carbuoy batch is coded
with its respective
GRN.

Detective

Corrective

Ensure stacking norms


is followed
Responsibility

Operations

Unit Response
Action Plan
Action Plan Date
(b) Not even a single fire extinguisher was found anywhere in the godown & pest
controls were not in place.
Risk Analysis:
Risk Assessment
Risk Factor
Destruction of RM due to
fire cannot be prevented.
Contamination of RM cannot
be prevented as there is no
pest control measure.

Frequenc
y of Lapse

Likelihood of
Prior
Detection

Probability
of Risk

Severity of
Impact

High

Moderate

Moderate

High

High

Moderate

Moderate

High

Action Required-:

Type of Action

Preventive
Arrange for a Fire
extinguisher.

Detective

Put in place a pest


control measure.
Responsibility
Unit Response
Action Plan
Action Plan Date

Corrective

Operations

(c) There is no dedicated place for storing expired, damaged and rejected materials
& there is no BIN system in place for material movements.
Risk Analysis:
Risk Assessment
Risk Factor
Chance of damaged goods
dispatched/issued for
production cannot be
avoided.
Mixing up of variants cannot
be avoided as there is no
BIN system in place

Frequency
of Lapse

Likelihood of
Prior
Detection

Probability
of Risk

Severity of
Impact

High

Moderate

Moderate

High

High

Moderate

Moderate

High

Action Required-:

Type of Action

Preventive
Ensure that a
dedicated place is
made available for
storing damaged
goods.
BIN system can be
introduced for
effective inventory
management

Responsibility

Detective

Corrective

Operations

Unit Response
Action Plan
Action Plan Date

(d) We conducted physical verification of raw materials (brines & pickles) stored in
the Lakshmi godown & variances were observed which are as follows:
(Sampling: 18%). For details refer Annexure 4
Risk Analysis:
Risk Factor

Risk Assessment

Inadequate controls in stock


receipting & issues
Actual stock available at
godown
cannot
be
ascertained
immediately
unless physically verified.
Procurement of incorrect
quantity of RM is possible if
the availability of stock not
known correctly.

Likelihood of
Prior
Detection

Frequenc
y of Lapse

Probability
of Risk

Severity of
Impact

Low

Moderate

Moderate

High

Low

Moderate

Moderate

High

Low

Moderate

Moderate

High

Action Required-:
Preventive

Detective

Corrective

Type of Action
Responsibility

Operations

Unit Response
Action Plan
Action Plan Date

6.

ASSURANCES

(a) We verified the documents & register pertaining to calibration & AMC of
fixed assets (including spare parts) & observed to be satisfactory.
(b) During our visit, we verified the customer complaints register
maintained at the unit. It was observed that all the registered complaints
were duly attended by the operations team & no complaints were left
unattended.

(c) We also verified the documents / registers maintained by the quality


assurance department & it was observed to be satisfactory & kept current.
(d) The documents & appraisal process pertaining to scrap sales were also
been verified & observed that none of the scrap / waste were being sold at
uncompetitive rates.