Contributed ( 14-Mar-2002)  by Abhay Kulkarni (abhay@godrej.com) 

Audit  Program : For Subcontracting / Job Processing Activity 

Primary Information 
  

Prepare a List of 'Processes' carried out on Job Work Basis 
Prepare a Process wise List of Subcontractors 
General understanding about plant capacity utilisation 
Total Subcontracting Cost and supplier wise cost 
Comparative statistics for 3 years 

Documentation 
  

List documents and statements of which hard copies are available 
Document flow chart of Subcontracting Activity 
List Sessions run in ERP accounting package 
ERP data flow chart 

Audit Check 
  

Check the basis for  considering a process for subcontracting 
Check  comparative cost statements for subcontracting and In house processing 
Check  procedure for selecting subcontractor 
Check Subcontracting Agreements on test check basis 
Check  records maintained for assets supplied to subcontractors 
Check  records maintained for spares supplied to subcontractors 
Check advances given to subcontractors 
Check records maintained for materials sent to and received back after processing 
Check Inventory valuation for materials laying with subcontractors 
Wasteages and Damages 
Transportation loss 
Process Loss 
Generation and disposal of scrap 
Check Freight expenses involved 
Check Octroi Duty costs and Octroi Deposits 
Check Excise Duty procedures 
Applicability of Works Contract Act 
Observe system set out for monitoring of subcontractors 
Visit one major subcontractor 
Check the possibility of getting bought out items instead of job processing 
Scrutinise Ledgers for subcontractors 
Sundry Creditors - Subcontractors 
Advances to subcontractors 
Job processing charge and Outstanding Liability 
Departments Involved 
  
Purchases / Vendor Development Cell 
Stores 
Excise 
Accounts, Finance and M. I. S 

(Note : Excise is a tax payable on Manufacture in India. Octroi is the entry tax payable to City authorities.)