Date: Mon, 31 Dec., 2007
To: “Darlene Wardlaw”
From: "Team C"
Subject: Apollo Shoes Inventory Observation
During the observation of inventory, Manager Andrew Jacobs provided the Apollo inventory count teams
...
Date: Mon, 31 Dec., 2007
To: “Darlene Wardlaw”
From: "Team C"
Subject: Apollo Shoes Inventory Observation
During the observation of inventory, Manager Andrew Jacobs provided the Apollo inventory count teams with written instructions regarding the inventory count process. The inventory count instructions covered each stage of the verification process. However, said instructions did not include consideration for inventory items held by Apollo but not owned by Apollo, inventory items in transit, or inventory items that have become obsolete. The observed count team followed all instructions on the inventory count instructions. The inventory count instructions are included as an attachment to this memo.
Several cases of slow-moving goods were observed in the warehouse during the observation process. Apollo has no policies or procedures for slow-moving goods. While many of these slow-moving goods are stocked in the warehouse in large quantities, the items are unnecessarily ordered. Apollo also has no policies or procedures regarding obsolete items. During the observation, I discovered several pallets of shoes located in the back of the warehouse covered in dust. I made inquiries to the foreman about the dusty pallets and was told these were the reason Apollo’s reserve for inventory obesity is so high. I am providing an attachment to this memo showing the slow-moving inventory items and purchases of unnecessary items.
While the employees involved in the Apollo count teams followed the instructions provided, these employees were regular warehouse workers. None of the count team members was independent.
Apollo’s count sheets totaled 98. Of the 98 total count sheets, seven were rechecked. The seven count sheets that were recounted were selected randomly and the client was not informed which sheets would be recounted. The seven recounted count sheets are provided as attachments to this memo. No differences were observed between the client’s inventory count and the auditor’s recount. Several boxes selected at random were opened to verify the contents. Each box opened contained the appropriate inventory.
As previously stated, the inventory count teams followed the instructions provided by management. However, one item on the instructions was not within the count teams’ control. The instructions specifically stated that NO inventory should be moved or sold during the counting process. Apollo received a shipment of inventory on December 31, 2007, during the count. The shipment was included in the inventory count with a value of $8,434,889.
Each pallet in the warehouse was tagged as counted to avoid missing a pallet or counting twice. However, the tags were attached by one count team and not subjected to review by a second team.
Apollo Shoes
Inventory Count Instructions
1. Counts will be performed in teams of two, consisting of a counter and a writer.
2. For each bin, identify the item located in it and the count of that item. If more than one item is in the bin, write in the bin number, the additional item description, and the count in the open space at the bottom of your count sheet.
3. After counting a bin, place an inventory count tag on the bin to mark it as having been counted.
4. After a team finishes its counts, each count team member should write his/her name in the "Count Team" line on each count sheet and the team should then turn in the sheets to the inventory manager.
5. After receiving the count sheets(s), the inventory manager will review and sign them, and then submit them to the inventory clerk for processing.
6. The inventory clerk will enter the counts into the computer system, run a variance report, and submit the variance report to the inventory manager.
7. The inventory manager will assign recounts for variances to the count teams. Each team will then recount the assigned bins and initial beside the recount on the count sheet.
8. The recounts will be resubmitted to the inventory manager, who will review and sign them, and then submit them to the inventory clerk for final entry.
9. There will be NO sales and NO movement of inventory during the count.
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