EVALUATION OF INTERNAL CONTROL OVER INVENTORY AT PT DINAR PUTRA MANDIRI LAMPUNG

Abstract

Inventory represents one of the primary sources of revenue generation and subsequent earnings for the company's shareholders/owners that consist of raw materials, work-in-process, and finished goods inventory. Therefore, to manage inventory in a proper way, A company needs an appropriate internal control system on inventory management. The purpose of the research is to assess whether internal control over inventory has been applied adequately. The scope of the research is focused on the control activities and control environment.The research method used in this evaluation is qualitative method using types of audit evidence approach. Data gathering and processing are done through literature review and field research such as inquiry of client, observation and documentation. During the research process, researcher founds some strengths indicating that company had applied good procedures such as company conduct quality and quantity inspections of goods when the goods are received and when the goods are sent. Warehouse area is always locked except during normal working hour. The company has segregated the operating function (inventory management) from recording (accounting). Apart from that, the company also has several weaknesses of internal control.First,the company does not have written job description. Second, the company does not have written standard operating procedure on inventory. Third, the warehouse is not a closed area. Fourth, Logistic Department and Accounting Department do not get the copy of purchase order from Marketing Department. Last but not least, the company does not have inventory stock card. For the better improvement in the internal control system, there are several actions that should be considered. First, the company should have written job description authorized by Director. Second, the company should establish written standard operation procedure on inventory decided by Director. Third, the company should define the warehouse as a closed area that only can be accessed by the authorized person. Fourth, the company should create two copies of the purchase order from Marketing Department that are distributed to Logistic and Accounting Department. Last but not least, the company should create inventory stock card to monitor the accurate information regarding the availability of inventory stock.