Inventory control weaknesses –a
case study of lubricant
Norazira Abd Karim and Anuar Nawawi
Faculty of Accountancy, Universiti Teknologi MARA, Shah Alam, Malaysia, and
Ahmad Saiful Azlin Puteh Salin
Faculty of Accountancy, Universiti Teknologi MARA, Perak Branch,
Tapah Campus, Malaysia
Purpose –For a manufacturing company, inventorycontrol and management is crucial to ensure smooth
production and sustainable sales performance, as well as preventing stockout that will result in customer
switch to competitors. This paper aims to examine the effectiveness of cycle count activities, one of the
inventory control tools to manage inventory. Beside, this study also wishes to identify any loopholes in
practicesand procedures in inventory control of companies.
Design/methodology/approach –One of the lubricant manufacturing companies in Malaysia was
selected as a case study and mixed method data collectionof document analysis and observation were used.
The analysis and examination was conducted by using Committee of Sponsoring Organization of the
TreadwayCommission Framework 2013 as guidance.
Findings –This study foundthat problems in inventory control can be causedby inconsistency of practices
due to incomplete or absent standard operating procedures. Furthermore, no segregation of duties and
excessivereliance on one person to conduct many tasks willlead to human error and fraud.
Research limitations/implications –This paper enhances the theoretical understanding on the
inventory controland management system applied in the manufacturing organizationparticularly. However,
frequent changes of the managementin the organization of the case study make the study difﬁcult to obtain
consistent information. Not all standard operating procedures were revised or updated and available for
examination.In addition, some of the reports needed for investigation are conﬁdential and requeststo observe
and scrutinize information from those documentsare denied by the company. Thus, more in-depth analysis
and veriﬁcationon the issues of interest were unable to be conducted.
Practical implications –This study provides an indicator that cycle count activities need to be
conducted frequently on a regular basis so that the physical inventory and recording system are accurate.
Cycle count activities also must involves various related departments in the company in which regular
training is essentialto ensure employees are aware and understand their responsibility andaccountability on
Originality/value –This study is originalas it focuses on the inventory control management of one of the
largest lubricantmanufacturing in Malaysia, particularly on cycle countactivities which is scare in literature.
Furthermore, the company allows research access to the documents and operations conducted in the
company,which is usually difﬁcult to obtain from many companies.
Keywords Case study, Malaysia, Fraud, Internal control, Inventory management, COSO framework
Paper type Case study
Important balance sheet items include assets. Assets are the most important thing in
any organization. Presentation of assets in ﬁnancial statement can be divided into two,
Journalof Financial Crime
Vol.25 No. 2, 2018
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