Research On Internal Control Of Inventory Management Cycle In D Company

At the beginning of this century, there were many scandals occurred on corporate governance and financial management in many countries of the world, which prompted these countries to formulate laws and regulations to require enterprises to strengthen their financial management and internal control.Internal control covers various aspects of enterprise management, in which of them, inventory management is one of the most important control actives. Especially to manufacturing enterprise, inventory is the lifeblood of its production, existing through the whole process of operation. Once troubles happened, it should lead to production interruption, liquidity occupation, and assets devaluation or loss.D company, the study object of this report, is a large-scale Japanese machinery manufacturing enterprises, with many kinds of inventory and complicated production processes. Though the organizational structure of the company is relatively perfect, there are still many defects in inventory management, for example the management of inventory is not complete; responsibility is not clear; the data of the system doesn’t keep accordance to the actual; inventory check tends to be formational, and there is no watching on the management of scrap. The purpose of this report is to develop a series of management methods, based on both theory and practice, to make it clear what are key control areas of inventory management based on risk; furthermore, to find the most important control processes in these key control areas; to develop detailed processes.In order to guarantee the management of inventory developed is complete, the report focuses on the internal logistics of the inventory. At first, make it clear what kinds of inventory there are in D company and what the possible conditions of inventory’s in-warehouse and out-of-warehouse, dividing the key control areas into operation process. While developing the inventory management methods, the internal control in the incompatible duties separation, authorized examination and approval, the accounting control system, protection of property control and other control method is applied to the formulation of management strategies so as to ensure the effectiveness of internal control measures. In addition to specific control activities, also the requirements had been analyzed from the control environment, risk, information, communication and supervision.It is expected that through the establishment of D company’s inventory management system, the requirements of the internal control can be connected to the inventory management; the deficiency can be made up, and the risk of inventory management can be reduced in the future.