Food Distribution Company
RubinBrown provides on-going internal audit services to a privately held, family owned food distributor with revenues over $1 billion. The primary objective of our internal audit work is to ensure that adequate operational and financial internal controls are in place. An internal audit risk assessment was completed and a three-year internal audit plan was developed. Internal audits are completed quarterly at the direction of the CFO in an out-sourcing arrangement. The internal audit team assigned to this client has a significant amount of experience in the food and distribution industries.
Packaging Equipment Manufacturer
RubinBrown also serves a privately held packaging equipment manufacturer with internal audit services. We complete quarterly reviews at their field locations to ensure proper corporate governance is in place and to test compliance with company policies. With over ten divisions and 20 manufacturing locations, each facility is visited once every three years. Corporate activities are audited at the direction of the CFO in an out-sourcing arrangement. We have recently completed fraud testing at this client using data mining and analysis.
A publicly traded diversified manufacturer co-sources internal audit with RubinBrown. This company’s desire to maintain a low fixed cost structure and a high level of expertise led to the decision to utilize our internal audit resources. Internal audits and Sarbanes-Oxley projects are completed as needed each year at the direction of an Internal Audit Director who reports directly to the Audit Committee.
RubinBrown assisted a $100MM manufacturer in identifying and resolving a physical inventory issue at a decentralized warehouse. The warehouse had a poor inventory system, inefficient layout, and inexperienced warehouse personnel. Furthermore, the receiving, shipping, and cycle counting processes in place were not effective. Due to all of these factors, the client was not able to maintain accurate inventory records at the warehouse and was in danger of losing a significant customer.
RubinBrown assisted the company by:
- Facilitating a wall-to-wall physical inventory count and reconciliation
- Designing procedures to ensure proper inventory management
- Recommending the appropriate warehouse layout to maximize efficiency
- Communicating planned improvements to the client’s customers
A large distributor experienced a significant and unexplained book-to-physical inventory adjustment over several years. The unexpected adjustments prompted the private equity investors to engage RubinBrown to determine why the inventory adjustment occurred and how to prevent future negative adjustments.
Through discussions with management and review of inventory records, it was determined that the client’s standard cost system was not properly relieving inventory at the time of sale. Working with management and the private equity investors, RubinBrown provided expertise by:
- Recommending new standard cost procedures that accurately relieved inventory
- Developing a tool that evaluated potential book to physical differences on a monthly basis
- Comparing the capabilities of the existing general ledger system to the client’s current needs (most likely resulting in a new system)
- Evaluating existing staffing capabilities
A $1 billion food manufacturer utilized a co-packing facility for finished good production. Raw materials were provided by our client to the co-packer who then produced the finished goods. The co-packer had negotiated an accepted production loss percentage at 2 percent. Any production loss, spoilage, damaged product, etc. in excess of 2 percent was to be bourn by the contractor and credited to the client.
Raw material inventory levels were tracked and monitored by the co-packer who also completed a monthly inventory roll forward of the raw materials, work in process, and finished goods. Over time, the raw material inventory levels did not reconcile with the finished goods shipments alerting the client to significant differences in on-hand inventory.
RubinBrown assisted the company by:
- Working with the co-packer to determine the root cause of inventory differences.
- Evaluating inventory control procedures at the co-packer and recommending improvements.
- Reconciling usage records at the co-packer to our client’s records, and assessing the dollar impact.
Risk Services Resource Links
The Risk Services Group has compiled the following resources that may be helpful to you or your business:
Institute of Internal Auditors (IIA) – www.theiia.org
Information Systems Audit and Control Association (ISACA) – www.isaca.org
The Committee of Sponsoring Organizations of the Treadway Commission (COSO) – www.coso.org
Compliance Week – www.complianceweek.com
Public Company Accounting Oversight Board – www.pcaob.org
Securities & Exchange Commission – www.sec.gov
American Institute of Certified Public Accountants – www.aicpa.org
Missouri Society of Certified Public Accountants – www.mocpa.org