CONTENTS

Pages

CHAPTER 1

INVENTORY ITEMS KEY PROCESSES

CHAPTER 2

INVENTORY ITEMS
CHECKLIST OF RECOMMENDED PRACTICES

2.1

Setting up an Inventory Management System

2.2
2.3

Security of Stores Facilities

Receipt of Inventory Items

2.4

Issue of Inventory Items

2.5

Disposal of Inventory Items

2.6

Inventory Check

CHAPTER 3

FIXED ASSET ITEMS KEY PROCESSES

CHAPTER 4

FIXED ASSET ITEMS

CHECKLIST OF RECOMMENDED PRACTICES

4.1

Setting up a Fixed Asset Management System

10

4.2
4.3

Receipt, Storage, Issue, and Disposal of Items

Inspection and Monitoring

11
12

CHAPTER

INVENTORY ITEMS KEY PROCESSES

Key Processes
Listed below are the key processes in the management of inventory items. The
recommended control measures for each process are provided in Chapter 2 (the
relevant paragraphs are quoted below).

Setting up an Inventory Management

System and Security of Stores Facilities
(2.1 & 2.2)

Receipt of Inventory Items (2.3)

Issue of Inventory Items (2.4)

Disposal of Inventory items (2.5)

Inventory Check (2.6)

INVENTORY ITEMS CHECKLIST OF

RECOMMENDED PRACTICES

CHAPTER

2.1

Setting up an Inventory Management System

Responsible
Parties

Recommended Control Measures

Management

Lay down in guidelines the policies and procedures for inventory

management, including:

y receipt, secure storage, replenishment, and disposal of inventory items;

y conduct of inventory checks, handling of discrepancies, amendment of
inventory records, and handing over of stores, etc.

Clearly specify:

y the authorities for inventory management activities (e.g. issue of stock,

disposal of inventory items, writing off and amendment of inventory
records); and

y the roles and duties of the staff responsible for various inventory
management activities (e.g. storekeeper, store supervisor, procurement
and accounting staff).

Store
Managerial
Staff

Put in place a computerised inventory management system, if resources

allow, to maintain accurate inventory records and to facilitate control and
supervision, such as:

y search keys for identifying an item or a batch of items, including the

item code and batch number, and data such as description of the item
and its location in the store;

y stock movement transactions, including dates, quantities of incoming

or outgoing items, voucher references, the names of issuing or
receiving staff, etc.; and

y stock information such as the expiry or validity date, and stock balance
of items in store.

Install a bar-coding system or radio frequency identifier technology to

further enhance control of inventory items, if resources permit.

INVENTORY ITEMS CHECKLIST OF RECOMMENDED PRACTICES

Store
Supervisor

CHAPTER 2

Segregate the following duties as far as practicable:

y purchasing duties from inventory control duties;

y storekeeping duties (duties involving physical access to inventory)
from inventory record-keeping duties;

y storekeeping duties from inventory disposal approving duties.

Accounting
Staff

2.2
2.2

Maintain independent accounting records on inventory.

Security of Stores Facilities

Responsible
Parties

Recommended Control Measures

Store
Managerial
Staff / Store
Supervisor

Ensure there is adequate physical security to safeguard items in stock,

having regard to their value. For example:

y keep inventory in an adequately secure store room equipped with

electronic access control or a lock with the key kept by only the
storekeeper (the duplicate key should be kept in the accounts or
administrative section in a sealed envelope signed by two persons to
prevent unauthorized use);

y if an electronic system is used, ensure access is controlled by

personalized security passes so that the identity of the staff accessing
the store is logged for future checking if necessary;

y if necessary, install a CCTV system with recording function to monitor

movements at the store entrance and inside the store; and

y if cupboards or cabinets are used for storage, ensure the keys are under
the control of a designated staff member to enhance accountability and
the duplicate keys are secured in the same way as for the store room.

INVENTORY ITEMS CHECKLIST OF RECOMMENDED PRACTICES

CHAPTER 2

Lay down in guidelines the store security procedures as necessary. For

example:

y restrict access to the storeroom to designated staff members only;

y give personal access codes or passes to the staff strictly on a need basis
and instruct them to safeguard their own codes/passes;

y record the names of persons given permission to enter the store room
on an ad hoc basis and the reasons;

y change the access codes whenever there are staff changes;

y require the store room to be locked at all times except when in use or
under guard; and

y make spot checks to ensure compliance as appropriate.

2.3
2.3

Receipt of Inventory Items

Responsible
Parties

Recommended Control Measures

Procurement
Staff

Copy purchase orders to the storekeeper for him to keep in view delivery
to the warehouse.

Witness the receiving process and counter-sign the receipt in case of goods
ordered in large quantity or of high-value.

Inspect the goods received against the specification and quantity shown in
the purchase orders and certify receipt on the invoices or delivery notes if
in order.

Report any goods in excess, short delivery or defective goods to the

procurement unit or user as soon as possible.

Update the inventory movement records according to the certified receipts,

with copies sent to the accounting section.

Storekeeper

INVENTORY ITEMS CHECKLIST OF RECOMMENDED PRACTICES

Accounting
Staff

2.4
2.4

CHAPTER 2

Update the master inventory accounting records according to the certified

receipts.

Issue of Inventory Items

Responsible
Parties

Recommended Control Measures

Store
Supervisor

Design a standard form for requests for issue of inventory items.

User

Raise requests for issue of inventory items using the standard request
form.

Supervisor

Ensure that requests for issue are justified (e.g. supported by production
job orders) before endorsement as appropriate.

Storekeeper

Verify the issue request before issuing the items and require the receiving
staff to acknowledge receipt on the form with a copy sent to the accounts
section.

Issue stocks on a first-in first-out basis, particularly for items with an

expiry date or a limited shelf life.

Update the inventory movement records without delay.

Update the accounting records according to the request forms duly signed
by parties concerned.

Accounting
Staff

INVENTORY ITEMS CHECKLIST OF RECOMMENDED PRACTICES

2.5
2.5

CHAPTER 2

Disposal of Inventory Items

Responsible
Parties

Recommended Control Measures

Management

Lay down the policy and approval authority for disposal of inventory
items (e.g. defective or obsolete items).

Specify the disposal methods, such as donation or sale of usable items, or

disposal as waste and the considerations to ensure consistency in approval
of disposals.

Lay down the procedures for checking of inventory items before approval
of disposal and the witnessing process.

Store
Supervisor

Design a standard form for requests and approval for disposal of inventory
items.

User /
Storekeeper

Raise requests for approval of disposal using the standard disposal form.

Supervisor

Approve the request for disposal and inspect the conditions of items before
authorization.

Conduct spot-checks while the disposal is in progress (e.g. on the items

and quantity).

Verify the approval given before releasing the items for disposal and
require the receiving staff to acknowledge receipt.

Update the inventory movement records without delay and send copies to
the accounts section.

Storekeeper

INVENTORY ITEMS CHECKLIST OF RECOMMENDED PRACTICES

Procurement
Staff

Accounting
Staff

2.6
2.6

CHAPTER 2

If the items are to be disposed of by sale, seek price quotations from

buyers through competitive means.

Document the offers properly.

Update the accounting records according to disposal records.

Inventory Check

Responsible
Parties

Recommended Control Measures

Management

Lay down in guidelines the stock-taking and store inspection

requirements, such as levels of staff responsible and frequency of checks.

Require the staff responsible to report observations made during the

inspection.

Conduct regular stock taking against the inventory records and report
irregularities or stock depletion to the store supervisor.

Produce periodic inventory reports for management review (such as stock

in-take, issue, wastage, disposal, etc.).

Verify before the incoming storekeeper the physical stock against the
inventory records/ledgers whenever there are staff changes.

Require the incoming storekeeper to sign the handover records showing

the stock in store.

Storekeeper

INVENTORY ITEMS CHECKLIST OF RECOMMENDED PRACTICES

Store
Supervisor

Managerial
Staff

Accounting
Staff

CHAPTER 2

Conduct surprise inventory checks, in particular on the valuable items.

Ensure there is strong justification (e.g. normal wastage) before

authorizing adjustment of the inventory records if necessary and document
the justification.

Investigate and report to the management any abnormal stock depletion or

other irregularities.

Review the inventory reports against any related data (e.g. normal wastage
and sales data) and initiate enquiry if there is any anomaly (e.g. stock
depletion).

Conduct ad hoc surprise physical stock checks as necessary.

Conduct periodic (e.g. monthly) reconciliation of the accounting and

inventory records.

Conduct periodic
stock-taking.

Make enquiry into and report to the management any unusual stock
depletion or irregularities.

(e.g.

annually)

physical

inventory

checks

or

CHAPTER

FIXED ASSET ITEMS KEY PROCESSES

Key Processes

Listed below are the key processes of management of fixed asset items. The
recommended control measures are provided in Chapter 4 (the relevant
paragraphs are quoted below).

Setting up a
Fixed Asset Management System
(4.1)

Receipt, Storage, Issue, and

Disposal of Items (4.2)

Inspection and Monitoring (4.3)

FIXED ASSET ITEMS

CHECKLIST OF RECOMMENDED PRACTICES

CHAPTER

4.1
4.1

Setting Up a Fixed Asset Management System

Responsible
Parties

Recommended Control Measures

Management

Classify property items that should be recorded as fixed assets (e.g. based
on their type and value).

Lay down in guidelines the ownership of property items, i.e. the owner
departments responsible for their safe keeping and require them to keep
proper inventory records showing the staff given the items and the items
movements (e.g. computer equipment and cameras).

Prohibit staff from swapping their assigned property items or move them
to different locations without the approval of the designated authority.

Require the owner departments to copy the fixed asset records to the
accounting department or head office (as appropriate) for central record.

Require the owner departments to conduct regular stock-taking and

inspection on the fixed asset items and specify the frequencies of such
checks.

Arrange an independent unit (e.g. the accounting department) to conduct

periodic inspections on the property items and report to the management
any irregularities, such as loss or damages).

Specify the approval authority for disposal of fixed asset items based on
their values, preferably at the management level and independent of the
owner departments.

Lay down the procedures and authorities for the issue of property items to
individual staff, and the requirements for recording the items movements
and disposal.

Assign to each fixed asset item a unique identification number.

Maintain a property register or database to keep up-to-date records of all

fixed asset items, e.g. the items unique number, description, brand name,
model number and serial number (if any), user, location, dates of
manufacture and issue, and purchase price or estimated value.

Owner
Department

10

FIXED ASSET ITEMS CHECKLIST OF RECOMMENDED PRACTICES

CHAPTER 4

Assign a staff member of the appropriate level to control and manage the
property items, including:

y issuing items to users;

y keeping the items movement records;
y notifying the management any unauthorized change in users or
locations of the items;

y amending the inventory records only with the endorsement of the

designated authority;

y arranging disposal of the items only with approval from the designated
authority.

Accounting
Staff

4.2
4.2
Responsible
Parties

Segregate the duties of asset management where practicable, e.g. separate

the record-keeping and disposal duties.

Keep independent accounting records on fixed asset items.

Receipt, Storage, Issue, and Disposal of Items

Recommended Control Measures

Receipt and Storage of Items

Designated
Staff

Adopt the procedures and control measures recommended in paragraph 2.3

as appropriate.

Label each valuable item showing a unique identification number.

Keep proper records of the items, with copies send to the accounting
section or head office for central record.

Adopt suitable safeguards as recommended in paragraph 2.2 to ensure the

items are in safekeeping while in store.

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FIXED ASSET ITEMS CHECKLIST OF RECOMMENDED PRACTICES

CHAPTER 4

Issue of Items
Owner
Department

Adopt the procedures and measures recommended in paragraph 2.4 as

appropriate for the issue of fixed asset items to staff.

Designated
Staff

Ensure all property items (e.g. computer equipment and mobile phones)
issued on a personal basis are returned upon the staff leaving the company
or upon transfer to another post.

Disposal of Items
Owner
Department

4.3
4.3

Adopt the procedures and control measures as recommended in

paragraph 2.5.

Submit to the management periodic reports on the disposed items

including the quantity and total value.

Inspection and Monitoring

Responsible
Parties

Recommended Control Measures

Owner
Department

Assign a responsible staff member to conduct periodic and annual

inspections as required on the property items in store or issued to users
against the fixed asset register or database.

Conduct enquiry into any missing items and take appropriate follow-up
action.

Produce periodic reports on fixed asset items for management information

(e.g. asset value, any asset lost, damaged or written off).

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FIXED ASSET ITEMS CHECKLIST OF RECOMMENDED PRACTICES

CHAPTER 4

Accounting
Staff

Conduct independent stock-taking and inspection on fixed asset items,

make enquiry into any irregularities (e.g. missing items), and report to the
management on the findings.

Management

Review the fixed asset reports and initiate enquiry if there is any anomaly
(e.g. frequent reports of missing items, or frequent disposal/replacement of
valuable items).

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