Sugar Manufacturing Company is a manufacturing company where raw material is converted into finished product. In addition to various other important considerations from audit point of view, some special consideration will receive attention on the part of an Auditor. They may be as under:
1- Raw material is purchased in sufficient large quantities either from the farmers or contractors. In this behalf, various types of receipts issued to the farmers or contractors should be checked. Also the stock of goods should be physically checked in order to ensure the quality and quantity of raw material purchased.
2- Sugar industry is a process industry and proper and strong cost accounting system is required. Necessary accounts pertaining to work-in-process, material, factory overhead and finished goods are to be properly maintained. Production record is to be properly maintained by the Factory and information in this behalf conveyed to the Head Office.
3- Sugar industry is a seasonal industry. Necessary record is to be checked to ensure that the various expenses etc pertain to the period in which the factory was working. No worth while expenses are to be incurred during the closure of the factory.
4- Considerable quantity of by-product is available in a sugar factory. This by-product is usually sold and considerable amount is received. So it is required that all the incomes and expenses of by-product department should be properly vouched.
5- Considerable expenses are incurred in the transportation-in of raw material and transportation-out of finished product. Necessary record should be checked to ensure that all these expenses are properly accounted for.
6- Necessary machinery etc might be imported and the finished goods exported. Hence necessary export and import documents in this behalf are to be thoroughly checked to ensure that all these transactions are properly and correctly recorded.
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