Internal Audit Checklist of Scrap Material

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C Published: 31 August 2013
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· SCRAP MATERIAL

· Ensure that a separate space / scrap yard is earmarked for keeping the scrap material. The scrap yard should have an
enclosure and a gate with a lock and key.

· Ensure that a proper record is kept of receipts, issues, opening and the closing balances quantity of each item of scrap in
the scrap yard

· Check that proper slips are kept at the point of generation of scrap and at the receiving end ie the scrap yard. At the
generation point(s) the output / production / scrap generation slip should be made in 2 copies giving details of the item of
scrap and the Qty of scrap.

· The weighment / measurement / counting can take place either at the point(s) of generation or at the scrap yard.
However, the scrap generation slip should contain the details of the quantity. The slips should have a serial control and
should be authorised by a responsible person. The scrap yard should receive the material on the basis of slip and enter
the receipt in the scrap register. Weighment should be carried out at the scrap yard if not already made at the production
floor. The weighment should be carried out in the presence of a person each from the scrap yard and the production.
Thus the scrap yard entries for receipt of scrap should be made on the basis of generation slips only. The issues entries
should be made on the basis of sales invoices raised on customers / issue slips for consumption within the plant.

· It should be ensured that the entries in respect of receipts and issues in the Scrap Stock Register are made on the basis
of generation slips / Sales invoices / issues slips.

· The generation slips / Sales invoices / issue slips should be authorised by a responsible person.

· Scrap Generation points should be identified and a booklet of generation slips with a serial control given at each
generation point. The scrap yard person should sign on one copy of the slip as an acknowledgement of having received
the scrap qty as given in the slip and return the slip back to the generation point. The second copy of the slip is to be
retained at the scrap yard.

· For sale of scrap ensure that a comparative chart of offers / quotations is prepared and the Sales order is made in the
name of the best quoted party. All the offers / quotations should be properly evaluated.

· Scrap sale should be effected on spot payment terms - cash / DDs at the time of delivery. Ensure that full amount is
collected from the customer before the material is allowed to be lifted.

· Ensure that Sales Tax / excise duty is properly charged in the Sales Invoice.

· Ensure that no debit balances appear in the Sundry Debtors ledger in respect of scrap customers.

· Ensure proper counting / weighment / measurement of scrap at the Scrap generation point(s) / Scrap yard.

· The Scrap Stock Register should be kept updated at all times.

· A gate pass should be issued at the time of despatch of material from the Scrap Yard and the gate pass should then be
checked at the exit gate by the security.

· A periodical physical verification of scrap stock in scrap yard should be made and the physical Qty tallied with the book
quantity. The discrepancies, if any should be reported.

· The total scrap generation as per the Scrap Stock Register should be tallied with the quantity of scrap generation of
various types as shown by the costing data. Comment if any difference / discrepancy is observed.