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I recently conducted an internal audit for a light manufacturing company that imports raw materials from China and assembles them locally. During the audit, I reviewed the full process: importing on credit, paying customs and transportation fees, warehousing, processing in the machine room, and transferring finished goods to stock or sales orders.
One key challenge I noticed was ensuring that all related costs (freight, customs, warehousing, etc.) were accurately allocated to inventory and reflected properly in the cost of goods sold (COGS).
I would like to know from other professionals:
What best practices or methods do you use to allocate such costs?
How do you maintain accurate inventory valuation in these cases?
What are the most common mistakes to avoid during audits of this nature?
