Hubbell Policies

count may be limited to only those areas, which fall below 95% accuracy, only if the location's general ledger accounts can be accurately reconciled to the perpetual inventory records.

Cycle Count Independence

The cycle count program and administration of tasks associated with cycle counting must report through finance and must remain independent from those responsible for the custody of the perpetual inventory balance (operations). If circumstances arise where it is suspected that there has been a breach or potential breach of cycle count independence, the Director, Internal Audit must be notified immediately to discuss possible compliance exposures. An investigation will be conducted to determine the extent of the breach and based on evidence obtained, the lack of independence may result in the location’s removal from the cycle count program.

Authorization

Written authorization to rely upon the results of the cycle count program in lieu of conducting a full physical inventory count must be obtained from the Director, Internal Audit, or the appropriate designee. Authorization will be determined based on the results of Internal Audit ’s evaluation of the operation's cycle counting program and testing of the perpetual inventory records to confirm their accuracy. Once authorized, the location may continue to rely upon the cycle counting program, provided accuracy levels remain at the 95% or greater composite accuracy rate described below, and procedures remain in compliance with this Policy.

F. Recertifications, Compliance Reviews, and Quarterly Monitoring

Recertifications

Once a location has been established in the Cycle Counting Program the location will be required to have the certified inventory recertified at least every three years. If, after completion of the recertification, the accuracy level is not at least 95%, a full physical inventory count would be required until the location could regain certified status. To regain certification, a minimum 25 weeks of cycle count results will be required.

Compliance reviews

Cycle count compliance reviews will be conducted at least every three years in alignment with the recertification process of the inventory. These reviews provide assurance that the location ’s procedures and controls associated with the cycle counting program remain adequate to rely on the perpetual inventory records in lieu of an annual physical inventory count.

Quarterly Monitoring

The following requirements are applicable for all certified locations: At a minimum of each fiscal quarter end, all locations must provide Internal Audit with the following:

• Cycle Count ABC Reporting stats outlining the rolling 13-week average Composite Accuracy Rate (same report that is being distributed to weekly to Management.

• Evidence that the applicable miscellaneous audits were completed timely and reported to management.

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