INTERNAL AUDIT DEPARTMENT
AUDIT PROGRAM GUIDE FOR AUDIT OF SERVICE CENTER
LOCATION VISITED:_____________________________
AUDIT DATE:__________________________
Overview:
Generally, locations maintain a service center for warranty and out-of-warranty repairs. Customers are
required to pay for the cost of services on out-of-warranty repairs. Inventories at the Service Center are either
company inventory or customer inventory.
In certain cases, there are also franchisee located at strategic cities and towns. Normally, they a paid on a piece
rate basis based on repair reports and billing statements submitted.
Audit Objectives:
1.
2.
3.
4.
To assess adequacy of controls over products for repair and evaluate effectives of procedures in the
Service Center.
To evaluate internal control of service centers over inventory for repair, cash funds and collections, and
replacement parts.
To identify products with high repair rate, the causes of defects, and alternative solutions to defect
problems.
To identify other operational problems related to Service Center operations.
No.
1.
2.
Procedures
General
Obtain an understanding of the Service Center Operation:
a) Identify locations of Service Centers
b) Obtain list and locations of SFA attached to it
c) Obtain or prepare organization chart
d) Review latest reports of internal audit department and
evaluate problems identified.
e) Warranty periods per product.
Physical Layout
Select service center location to be visited.
Obtain the service centre layout if any, if not available
draw a sketch of the service centre and study the
bottlenecks, inefficiencies due to layout.
Observe the physical control deployed to protect the
company’s assets and customer’s products.
Discuss your findings with Manager process development
to see the opportunities for redesign the layout
3.
Cash and Receivable
Identify cash funds kept by the location (normally petty
cash fund and collections from customers). Conduct
regular cash counts and reconcile counts against cash
accountabilities.
Review if collections are deposited or remitted on time.
Wps. Ref.
Done By
Date Done
Match collections and deposits for the last two weeks.
Vouch petty cash expences to esure their accuaracy and
compliancy to procedure
Analyse expenses against prior year and identify unusual
variances
Obtain list of debtors and their aging and investigate
reasons for long outstanding debtors
Obtained list of completed repairs which were not
invoiced. Calculate the aging and discuss with manger
reason for not raising invoices.
4.
Inventory
Prepare flowcharts (or narrative) on:
a) Control over parts inventory.
b) Control of accountability over inventory for repair
(both for company and customer inventory)
d) Management reporting
5.
Evaluate whether existing procedures provide adequate
internal controls. Check if records are updated and kept in
order.
6.
Obtain monthly analysis of the following (by product line
and by product):
a) Inventory received for repair.
b) Inventory repaired during the month.
c) Inventory pending repair (with aging).
Review available management reports. Generally, these
will provide the required information and more.
7.
Perform test count of service parts (10 to 15 items).
Reconcile against inventory records.
8.
Conduct count of selected items pending repair, repaired
but not collected items and reconcile against
accountability records.
9.
Note down long-outstanding items not repaired and obtain
reasons why they remain unrepaired (refer to aging).
Determine time needed to repair damaged inventory and
review whether repair turnover rate is acceptable? What
should be done to expedite repair?
Select items repaired during the year. Calculate the
number of days from the time that the unit is received until
it is repaired. Also determine date when the customer
picked up the unit.
2
Are there items already repaired but not yet picked up by
the customer? How long have they been in the service
center?
10.
Assess condition of the repair area. Is it clean, organized,
and orderly? Are items for repair properly tagged so that
defects are readily identified?
Check whether repaired items segregated from unrepaired
items.
Also review whether company inventory
segregated from customer inventory.
3
No.
11.
Procedures
Identify products with high quality problems. Relate the
units of products sent for repair during the year against
unit sales. Evaluate seriousness of recall percentages and
determine need for additional procedures.
Prepare a pareto list of quality problems. What did the
location do to solve the problems?
12.
Review procedures over repairs done by subcontractors.
How are subcontractors paid? Review billings and
payments and perform required tests at head office.
13.
Determine the total warranty repairs during the previous
year and current year. Obtain an analysis by product line.
14.
Obtain P&L of service center. If none is available,
identify all income and expense related to the Service
Center operations.
Are there areas where costs can be saved?
1.
2
.
3
4
5
6
7
8
9
SFA Work
Discuss the nature of the SFA operation with
Obtain list of SFAs attached to the Service centre and
check the SFA agreements to identify expired agreements.
Ensure that adequate SD is maintained for each SFA
Look at the coverage of the SFA and service centers and
assess the adequacy of the resources to cover the area.
Check SFAs are available for all kind of product
categories and if not; check whether servce center has
resources to cover the gap.
Analyse SFA jobs and payments for last 6 months
Investigate repeated repairs and investigate the reason for
repeat repairs and parts consumed to ensure no
misappropriation exist.
Select 7 SFAs covering following criteria;
a)
High voulume
b)
Lowers volume
c)
High volume of labour only jobs
d)
High % of jobs with spareparts
e)
Pending jobs and other criteria you may
think appropriate
Visit the above slected SFAs and do a physical
observation of the location to determin cleanliness, due
care for the products and resources to carry out jobs with
the expectation of the company. Also check Nameboard
and uniform for staff were provided
Assess the technical background of the staff working
under SFA
4
Wps. Ref.
Done By
Date Done
Carryout physical verification of finished products and
agree with pending jobs and undelivered jobs.
Check whether inventories are insured adequately.
Analyse the pending jobs and investigate any aging items
Analysie locally purchased items and check if SFA is
purchaseing items available in service centers.
Analyse payable to and receivable from SFA and
investigate any aging items
Check sample of labour only jobs and contact the
customers to ensure a job was done for them.
Check whether Service Center Management had vsited
SFA and SFA had called for the regular meetings with SC.
Review minutes of meetings if available and ensure they
were properly followed up.
Discuss with SFA about improvement opprtunities
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