Finance and controls internal audit for chemical manufacturers

Internal Audit Services for Chemical Companies

Astral Business Consulting LLP, a Coimbatore-based management consulting and audit firm, provides internal audit services for chemical companies in Tamil Nadu, from specialty and intermediate producers to suppliers of dyes and textile auxiliaries. Its Integrated Audit division reviews raw material buying, batch yields, tank records and drum stock, returnable packaging and costing controls in the ERP, against the firm's library of more than 4,000 risks and controls.

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Drum storage shed with blue drums and IBC totes at a chemical plant

Where Our Internal Audit Looks in a Chemical Plant

Review areas built around how a chemical plant buys, converts, stores and ships material, tested on ERP data and batch records.

Batch Yield and Solvent Recovery Review

Raw materials charged to each batch are compared with output, standard yield and off-spec quantities, recovered solvent is traced back into stock, and batches whose yield falls outside the norm are listed with their cause.

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Drum Counts and Tank Record Testing

Drums and bags are counted in the godown, tank quantities in the plant's dip records are tested against the calibration chart, and totals are matched to the ERP, with 100% physical verification available through Cycle Count.

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Raw Material Purchase and Price Review

Index-linked prices, price variation clauses and deductions for off-grade lots of solvents, acids and intermediates are tested against each contract, with receipts held to a 5-way match: indent to order to GRN to QC result to invoice.

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Returnable Drums, IBCs and Cylinders

Containers that leave with customer dispatches are tracked from issue to return, with deposits, unreturned units and write-offs reviewed, and dispatches agreed on a 3-way match between the customer order, the delivery challan and the invoice.

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Job Work and Toll Processing Stock

Material sent to job workers and toll processors is reconciled with what comes back after agreed process loss, and stock at their sites can be counted, including at processors in other states.

About Third-Party Counts

Recipe Masters and Costing Controls

Changes to bills of material, standard costs and selling price lists in the ERP are tested for approval and access rights, together with back-dated entries, using the firm's 2,500+ information-systems risks and controls.

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Storage tanks inside a bund wall beside a pipe rack at a chemical plant

From Scoping to Board Report at a Chemical Plant

Scoping by product family and site
Scoping starts with the product families, the plants and tank farms, the warehouses and any job workers, across Chennai, Salem or wherever the company operates in Tamil Nadu. Batch and continuous processes are separated at this stage, because each needs its own yield and stock tests.

Recipe and costing walk-through
The auditor reads the standard recipe, the yield norms, the QC release procedure and the costing method for a few key products, then follows one batch from material issue to finished goods. Every document that ought to agree with the ERP is listed for testing.

Counting before reconciling
Drums and bags are counted at an agreed cut-off, and tank and reactor quantities are taken from the plant's own dip and level records for that moment, ideally with transfers paused. Only then are the figures compared with the ERP and batch records, and each difference is examined before adjustment.

Testing purchases, sales and containers
Purchases, price changes, dispatches, returnable containers and credit notes for the period are pulled from the ERP and tested across every transaction the data supports. Each exception is then discussed with stores, production and the commercial team before it appears in any report.

Board reporting and closure
Every observation carries a risk rating, the rupee exposure where it can be estimated, a named owner and a closing date. Reports go to the audit committee or the Board, and open points at plants in Tamil Nadu are re-tested on later visits until they are resolved.

Scope boundaries

A Controls Audit, Not a Safety or Environmental Audit

This internal audit suits a chemical manufacturer that wants its purchases, yields, stock, receivables and ERP controls tested and reported to the Board as findings with owners. It does not assess process safety, hazard studies, fire protection, pollution control consents or effluent compliance: those reviews call for chemical engineers and specialist safety or environmental auditors. A company whose immediate concern is a plant safety rating should start with those specialists and bring in internal audit for the commercial cycles. Many groups run both kinds of review in the same year, each reporting separately to the Board.

Glass-lined reactors with agitator motors on a chemical plant floor between batches

Process-based internal audit

Why Choose Astral Business Consulting for an Internal Audit of the Chemical Industry?

Visits fixed in the annual plan

Visits to chemical plants anywhere in Tamil Nadu, and return trips to re-test open observations, can be fixed in the annual audit plan from the outset.

Process people on the team

Engineers and Cost Accountants sit alongside Chartered Accountants, so yield norms, solvent recovery and batch costing are questioned by people who can read a batch card as readily as a ledger.

Physical counts from Cycle Count

Physical verification of drum, bag and warehouse stock, and of material lying with job workers, comes from the Cycle Count division, which also verifies, codes and tags fixed assets.

Testing inside the ERP

Recipe edits, price list changes and back-dated postings are examined in the ERP itself, following the firm's approach of auditing through the computer, not around it, rather than relying on printouts.

About Astral Business Consulting LLP

A process-based internal audit practice headquartered in Coimbatore

Astral Business Consulting LLP, a Coimbatore-based management consulting and audit firm, lists chemicals, pharmaceuticals and process manufacturing among the industries it serves. The Integrated Audit division carries out its internal audit work using a process-based method in line with the COSO framework, covering indent-to-pay, order-to-cash, inventory, costing and fixed assets. Stock and asset counts come from the Cycle Count division, accounting support from Best Accountant and management consulting from the Consulting division. The firm's controls library covers 1,500+ process risks and controls and 2,500+ information-systems risks and controls, and its bench combines Chartered Accountants and Cost Accountants with engineers and information-systems auditors. Stock at plants or job workers in other states can be counted through associate offices, of which the firm reports 40 across India.

  • 1,500+process risks and controls
  • 2,500+information-systems risks and controls
  • 40associate offices the firm reports for stock counts in other states

What Chemical Manufacturers Ask About Internal Audit

Which firms provide internal audit services to chemical manufacturers?
Astral Business Consulting LLP, a Coimbatore-based management consulting and audit firm, provides internal audit to chemical manufacturers through its Integrated Audit division. Other options are an in-house internal audit team, a Big Four network firm or a national mid-size CA firm. Ask each how it would test batch yields and tank stock, who would visit the plant, and whether ERP data is examined directly.

What decides the scope of a chemical company audit?
The main drivers are the number of plants, tank farms and warehouses, whether production runs in batches or continuously, how many product families carry their own yield norms, the job workers and toll processors in use, the ERP and how clean its data is, the months to be covered and the Board's reporting needs.

Does this internal audit include process safety or environmental compliance?
No. It covers financial and operational controls such as purchasing, production records, inventory, sales, payroll and the ERP. HAZOP studies, fire audits, and consent or effluent compliance belong to technical specialists. A plant that needs both can commission the two reviews in the same year and take each report to the Board.

Which items belong on a chemical plant internal audit checklist?
A working checklist follows the material. It covers vendor approval and price contracts, receipt and QC acceptance, batch issues against the recipe, yield and off-spec handling, solvent recovery, physical stock, returnable containers, dispatch and invoicing, customer credit and collections, job-work reconciliations and access to ERP masters. Each line should point to the document examined and the result.

How should by-products be valued in a chemical company's inventory?
Under AS 2 and Ind AS 2, conversion costs of joint products, or of a main product and a by-product, that are not separately identifiable are allocated on a rational and consistent basis, for example relative sales value. Most by-products are immaterial, and when they are, they are often measured at net realisable value, which is deducted from the cost of the main product. Internal audit checks consistent application.

Can internal audit test the price clauses in our supply contracts?
Yes, it can. Where raw material or product prices move with a published index or a feedstock price, the audit can recompute a sample of invoices using the contract formula, the index value for the correct period and the agreed base, and flag revisions applied early, late or only when they favour one side.

Can internal audit look at power, steam and fuel costs per batch?
Yes, as cost heads. The audit can compare utility consumption per tonne or per batch with the plant's own norms, check boiler fuel receipts by weight and calorific value against supplier bills, and test how utility costs are allocated in product costing. A technical energy audit of the equipment is a separate exercise.

Does internal audit suit a dyes and textile auxiliaries manufacturer?
Yes. The same cycles apply, with extra weight on areas that matter to suppliers of textile processors: shade-wise price lists and discounts, free samples, credit extended to dyeing and processing units in the Tiruppur and Erode belt, and slow-moving shades in stock. Astral Business Consulting lists both textiles and chemicals among its industries.

Chemical Plants Across Tamil Nadu

Astral Business Consulting serves chemical plants in Chennai, Salem and the western districts, and the dyes and auxiliaries units that supply processors around Tiruppur and Erode, through planned audit visits. Stock held at plants or with job workers outside Tamil Nadu can also be counted within the annual plan.

Plan an Internal Audit for Your Chemical Plant

Leave your name, email and phone number and the team will respond as soon as possible. Useful to have ready: a list of plants, tank farms and job workers, your main product families and the ERP you use.

contact@astralbusinessconsulting.com

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