Trimurti & Co., Chartered Accountants, are appointed as the statutory auditors of Techno Industries Ltd., a medium-sized manufacturing company…

Trimurti & Co., Chartered Accountants, are appointed as the statutory auditors of Techno Industries Ltd., a medium-sized manufacturing company engaged in producing automobile parts. The audit team is led by CA Aakriti, assisted by one qualified assistant, Mr. Pradeep, and two articled trainees. While planning the audit, the team notes that Techno Industries Ltd. recently implemented a new Inventory Management System (IMS). The management claims that the new system allows real-time tracking of raw materials, automated reorder levels, and barcode-based issuance of materials for production. During the preliminary review, Mr. Pradeep notices that the value of raw materials has increased by 35% compared to last year, whereas production levels increased by only 12%. He suspects possible errors in valuation or inclusion of obsolete stock. Further, the IMS allows only store managers to update inventory records. However, during walkthrough, an articled trainee observes that two production supervisors also have access to change stock quantities, without any documented authorisation. Analytical review reveals that payments to one of the major suppliers, Alpha Metals, have doubled compared to previous year, despite no proportional increase in material purchases. To understand the functioning of the new IMS, the audit team prepares a visual diagram showing flow of material requisitions, approvals, barcode scanning, and issuance of materials to the shop floor. This helps them identify gaps in segregation of duties and authorization.