Marv Johnson, auditor in charge in the audit of receiving operations, warmly greeted Phil Goldsmith, the assistant just assigned to his job.
"Man, do I need you, " he said. "Art Lash got yanked off this job to do some emergency audits of patent royalties, and he left me in midstream."
"Art's pretty good at those royalty audits," replied Phil. "What was he working on for you?"
"Direct deliveries, " answered Marv.
"Oh, those deliveries that bypass the receiving department," said Phil.
"That's right, " said Marv. "I'm glad you know all about them."
"Hold on," Phil cautioned. "I don't know beans about them, except that they exist. Maybe Art's working papers will fill me in."
"You've just put your finger on it,"
said Marv.
"I did?"
"You bet. Art left me with a mess of scrap notes that will have to be put into shape."
"Didn't he write up the procedures?"
queried Phil.
"No," said Marv. "And I could kick myself for not being on top of things.
He really did a good job of sampling, and testing, and getting corrective action.
But he didn't complete his papers.
And that's what I'd like you to do.
Here are his notes."
Marv handed Phil a 7-column worksheet that was partly completed, and a pile of different-sized pieces of paper containing Art's scrawls.
Phil looked at the accumulation briefly, and then said, "The worksheet seems okay, as far as it goes, but I can't even read what Art's got on his scrap notes."
"Okay," offered Marv. "I've gotten used to his scrawls. Let me read the stuff to you and you can make notes.
Then you can complete the 7-column worksheet and put together a proper set of papers showing general infonnation, purpose, scope, findings, opinion, recommendations, a summary of Art's tests and a record of audit findings."
"Fair enough," agreed Phil, and opened a pad of comment paper, with pencil at the ready.
"Art's job was to take a random sample of 40 receiving memos (RMs) and check the timeliness with which documents for direct deliveries were processed,"
said Marv.
"Any particular reason?" asked Phil.
"Yes. Accounts payable is crying about the delays in getting evidence of receipt of direct deliveries. As a result, they're not earning discounts, the suppliers are screaming, and some of them won't even deal with us any more."
"Sounds serious," said Phil. "Let's start at the beginning. Can anybody ask for a direct delivery?"
"No sir! The user department must be authorized to do so. Those authorized are provided with a 'direct delivery'
(DD) stamp which they use to imprint the authorization on their requests to purchase (RTPs) that they prepare. The girls in procurement services will reject any DD request that is unauthorized."
"Can anything be delivered direct?"
"Almost always the item ordered is something that's off the shelf, that's needed immediately, and that's delivered the same day that the buyer orders it. All the items in our test*were that way."
"What happens in procurement?"
asked Phil.
"The buyer gets the RTP from procurement services, calls the supplier, and tells him what's needed and where to deliver it. Then procurement is required by purchasing directive 123 to get the purchase order (PO) issued and have it in the hands of receiving people no later than three days after the order is placed."
"Why so fast?"
"If the PO is not down there, the receiving people can't write an RM and get it to accounts payable in time to earn the discount, " Marv answered.
"How long do the receiving people have to write an RM?" asked Phil.
"Two days after they get a packing sheet (P/S) from the user — the one who asked for the direct delivery. The P/S, of course, accompanies the item on the truck from the supplier."
"Of course. But how long does the user have to get the P/S to receiving?"
asked Phil.
"Within two days after he gets the direct delivery and signs the P/S —
giving the copy back to the truck driver — he has to send the approved P/S to receiving."
"I'd be willing to bet that the users take their own sweet time about it."
"They used to, " said Marv, "but we've got a new receiving department manager. And he told the users flat out that anyone who doesn't follow the rules gets his DD privileges taken vary. So just about everybody has fallen into line."
"How did Art make his tests?" queried Phil.
"He took a random sample of40 RMs issued for DDs in the last month."
"And then?"
"He showed on his worksheet the dates the users received the P/Ss, the dates receiving got the P/Ss from the users, the dates the POs came to receiving from procurement, and the dates that receiving prepared the RMs." "Is that what Art's schedule shows?" asked Phil.
"Yes, " said Marv. "And that's all it shows. He never finished the damn thing. Look at it."
Marv then showed Phil the worksheet (Figure 1). "You can see that he put in the manufacturing dates of the various actions. You know about manufacturing dates, don't you Phil?"
"Oh, yes. Those are the consecutive numbers from 1-1000 given to all working days. They exclude Saturdays, Sundays, and holidays. They're much easier to work with than calendar days."
"Right. He got to that. But he never showed the spans between the dates.
They still have to be entered on the right-hand side of the worksheet."
"What are the numbers in parentheses in the worksheet headings?"
asked Phil.
"Oh, they show the allowable number of days. In column 2, the (2) means that the user has 2 days to get the P/S to receiving. In column 3 the (3) shows that the buyer has 3 days from the date of his order — same day, almost invariably, as the day the user receives the P/S — to get the PO to receiving. In column 4, the (2) shows that receiving has 2 days after the receipt of the P/S from the user, to prepared the RM."
"How about getting the RM to accounts payable?" asked Phil.
"We found that without fail receiving personnel hand-carry all those RMs to accounts payable at the end ofevery day."
"So when does accounts payable start hurting?" asked Phil.
"The discount terms on these items are always 1%, 10 days. Accounts payable must have 5 days to process payment after receipt of the RM. That leaves 3 days for the PO to get to receiving and 2 days thereafter for receiving to issue its RM. So if procurement takes more than the allotted time and/or if receiving does, then we can't earn the discount."
"How about the user?"
"He is required to get the P/S to receiving in two days. But ifhe stretched it to three days, he'd still be okay —
because the processing of the PO and the P/S start at the same time."
"How big was the population?" asked Phil.
"About 550 DDs for the month,"
said Marv. "I told Art to start with a sample of 40."
"Was that enough? " asked Phil.
"He thought so, " said Marv, "because he promptly isolated the problem, just by scanning his figures on the worksheet."
"Did he carry through?" asked Phil.
"I've got to hand it to him. He sure did. He got Noel Benson, receiving department manager, to report all late POs to John Carr of procurement. He got John to monitor his buyers and raise hell if they don't get those POs out in three days. He talked to Noel last Tuesday and to John last Wednesday, if you want the dates for your record of audit findings. I'd say that the matter's corrected. But let's make sense out of the working papers. Okay?"
"Can do, " replied Phil. "I'll complete the worksheet, summarize the statistics, write up the story in our usual style, prepare a simple flowchart, write up a record of audit findings, and let you have the whole segment before the day is out. What letter shall I use for the working paper references?"
"I've assigned G to that segment,"
said Marv. "Carry on, old boy, it's a pleasure to have you on board."
Required: 

Complete the working papers in line with the assignment that Phil has undertaken.