Alchemy Notes. Machine Operator

Machine operator

1. Take raw materials that are brought to her in the morning, and empty them one bag at a time into the machine.
2. The machine will automatically sort the spheres by size. Then she cures the ones that are too large, and manually separate the green spheres from the gold spheres.
3. The green ones go into a non-spec bin, and the gold ones go into the helixination process.
4. At the end of the process she bags up the final spheres. The gold spheres go 10 to a bag, and the green 20 to a bag.
5. For the bagging process, she does the counting of the spheres herself. It’s a manual process.
6. She doesn’t compare the number of the spheres she physically counts to the counters on the machine.
7. The hellxination process of the machine operations is basically a micro-sandblasting process to take that sphere to the exact specifications that it needs to be.
8. The counter on the hellxination process cannot distinguish the color of the sphere.
9. Shipping clerks come through periodically throughout the day and pick up the gold and green spheres after they are bagged. Shipping clerks do not count them again before they are packed for shipping.
10. Curing is basically a compression of the sphere so the larger-sized spheres are compressed down to the right spec size.
11. The machine operator does not reconcile the materials that get cured. Management may do something with those numbers.
12. The machine operator bags up the finished product with gold spheres 10 to a bag and green spheres 20 to a bag.
13. Green spheres are not as profitable as gold ones. It’s just the only way they can get raw materials. Green spheres come in the raw materials.
14. The machine operator does not sign off and count the raw materials when they are brought to her from receiving. When raw materials are brought from receiving, there are counted at her machine.
15. Typical mix of spheres in the bags she pours in at the beginning: Most of the spheres are green, and there will be usually less than 10 gold that are gold. There’s even an orange one that will sneak in every now and then.
16. One bag of spheres gets put in at a time, which can be approximately 100 spheres to a bag.
17. The machine operator doesn’t have time to pick up the green spheres before they are put into the machine. The ones that are the larger size need to be cured anyway, so the machine will automatically send them to curing.
18. The machine operator occasionally finds gold spheres in the non-spec box or green spheres in the final- output bin. She then takes out the wrong spheres and throw them into the right bin. Nobody knows when there is a mistake and she is not penalized.
19. The machine operator does not adjust the account if she puts a green sphere through helixination.
20. The machine operator has access to the holding box of gold spheres, so she could take a gold sphere from the end of the process and put it back through.
21. Security is good. No pockets in their aprons and all their personal belongings are in the lockers. It would hard to sneak out with a gold sphere.
22. The machine operator never uses trap door on the machine and doesn’t know what it’s for.
23. The spheres occasionally fall out of the bag onto the floor. She picks them up and put them back through the process. She doesn’t put them into her pocket.
24. Who has access to the production floor? The machine operators and their supervisors, receiving and shipping, maintenance and housekeeping
25. There was a rumor of a guy that tried to steal spheres and then he got fired.
26. The machine operator keeps a log and notes the number of the spheres she has cured each day and the number of the spheres that have gone through hellxination process each day. The log is picked up by Ben, her supervisor every evening.
27. The laser counters are reliable; they get recalibrated and set back to zero every night. There’s a manual clicker that’s on the machine that is broken for a while. Nothing is done after she reports.
28. The final counter numbers are picked up by her supervisor.
29. She may start half of the bag, process it out, leave the other half and finish it next day.
30. She gets paid by number of spheres that go through hellxination.
31. Orange spheres are just scrap, so she just tosses it if she finds one.
32. Waste in the hellxination process: 1) small amount of sandblasting dust 2)Most of the bag is going to be green spheres and less than 10 are gold spheres.
33. Maintenance comes in every night They clean out the hellxination area and recalibrate the counters.
34. She is not sure about inventory and physicals.
35. She has very vague memory of Code of Conduct, and doesn’t know the updates.
36. She knows about the ethics hotline. It’s posted in the lounge. She wouldn’t use it, because she just calls her brother, who is the CEO of the company, when she has a problem.
37. Avoid fraud -> There’s swipe cards to get on the floor.
38. She hasn’t been asked to change the accounts.
39. Trained shipping guys can work on the machines if someone’s out.
40. They have annual medical or eyesight exams.
41. She doesn’t know that some of her medical records are missing.
42. Her eyesight is 20/20 but is color-blind.
43. Joe Boso is Ben’s boss

Internal auditor:

1. He has been with Alchemy for 2.5 years.
2. He has a CPA. It took him about 2.5 days to get it. His staff don’t have their CPA yet.
3. He worked with E&Y for 3 years. His staff are all fresh out of college with no work experience. They don’t have training related to 404.
4. He reports directly to the CEO Chris Ready. He makes a presentation to the audit committee. Chris determines the content of his audit plan. Internal auditor makes recommendations but Chris has the final say.
5. The internal auditor is concerned that he doesn’t have access to the audit committee outside of regular presentations. It would work more effectively if he can report directly to the committee.
6. He has documentation in relation to his audit plan, but doesn’t have it with him today.
7. High on his priority list is the manufacturing process and the reconciliation process of the spheres from the time they come from receiving through the manufacturing process and on through shipping.
8. An internal audit report on H.R. policy is the only full report they’ve done so far. No other 404 work.
9. There is mention of an appendix A, but the external auditor is not given the appendix A.
10. He has been asked to do something he is uncomfortable with. Chris insists that he not include the appendix to the external auditor. He keeps a memo, which is a record of conversation that he had with Chris.
11. When the internal auditor recommended looking at the manufacturing process, Chris redirected him to the H.R. policy.
12. When Chris came aboard, he dismantled the entire internal audit department. It was reinstated about 2.5 years ago.
13. They are working on the readiness plan.
14. His understanding surrounding Section 404 is that Section 404 of Sarbanes-Oxley Act of 2002 provides guidance on the internal controls audit. This audit’s a very detailed audit.
15. Section 302 of Sarbanes-Oxley Act of 2002 implements certification requirements for the principal executive officers and the principal financial auditors.
16. Section 906 provides that any periodic reports that contain financial statements must also be accompanied by a written statement from the chief executive officer and the chief financial officer. And these statements certify that those reports are in compliance with the Securities Exchange Act. The information in the report does fairly represent the financial condition and the results of operation for the company.
17. Signing off on these items, the CEOs are certifying that the information in these reports does fairly represent the company’s financial condition, and the operations of the company.
18. Coso is the Committee if Sponsoring Organizations of the Treadway Commission. It’s a report in four volumes. The first volume is the executive summary, the second is the frame work, the third is the reporting to external parties, and the fourth is evaluation tools.
19. Joe Boso is the supervisor of quality control and output reconciliation. He is promoted not in accordance with the H.R. policy and procedures. There’s a freeze on external hiring. He had worked as a booth operator.
20. The H.R. Policies are randomly tested.
21. They didn’t feel like they needed to follow up on the missing eyesight exam reports.
22. They have swipe cards that are used to access all the departments. There’s camera. Each employee has I.D.
23. The hot line calls don’t come to his office. He doesn’t know if the calls come to the parent company.
24. Parent company doesn’t perform audits of Alchemy Inc.
25. 3 weaknesses. 2 of them had to do with access to some of the holding tanks. The other one had to do with completeness of input from the color sorting to the helixination process.
26. 20 machines are on the factory floor. 15 in Michigan, 2 in Taiwan, 2 in the U.K. and one in India.
27. 2 shipping clerks, 2 receiving clerks and 1 manager

CEO Chris Ready

1. They send out monthly newsletter to share the news about the company.
2. His assistant is in charge of distributing the newsletter in hard copy and via E-mail. The email version of the newsletter includes an “Ask Me Anything” button.
3. “Open door policy” His door is always open for the staff. The afternoon of every fourth Friday is set aside for employee meetings and conversations.
4. Every employee receives “Code of Conduct” when they join the company.
5. Hot line Added step: audit committee monitors all the activities of the hot line and follows up.
6. Audit committee has six members. Two are financial experts. None of them serve on the audit committees of any other public company.
7. Risk-assessment process: Internal audit performs an annual risk assessment (Internal Audit meeting with executive management to explore fraud risks; monthly meeting of executive management to discuss key business risks)
8. How are audit committee and board involved in the risk-assessment process? They report risks to the audit committee, which they review to ensure that they are comfortable with the way they are dealing with risks. The board supports the process, and helps to push the right message down through the organization.
9. He receives many favorable reports from the Internal Audit about the company’s controls.

Receiving clerk

1. He has been with the company for 2 years.
2. He has no other roles within the company. He just works for Receiving.
3. Ben Ease is a regular, typical boss. He comes and collects receiving logs weekly.
4. There’s another receiving clerk. The other receiving clerk does his job when he is sick. (To take up the slack; shipping clerk is cross-trained and can also help)
5. The spheres are shipped to him multiple times a day from supply.
6. He takes over the spheres over by the machine operator, and counts them out in front of the machine operator. He then checks his count against the shipping slip, and writes it down on the goods-received log.
7. He doesn’t count the spheres that he received by color.
8. There’s just green and gold spheres that usually come in. He gets an orange one every once in a while, but it’s very rare.
9. Nobody assists him in the counting process. The machine operator watches him count, but doesn’t recount the spheres.
10. He brings over the spheres to the machine every day.
11. The machine operator doesn’t sign off on the receipt of goods received after he drops off the spheres at the machine.
12. Every day he takes over six bags to begin with. If more are needed, he will bring another bag.
13. He doesn’t keep a log of how many go to each operator. He just leaves the bags with the operators when they’re counted.
14. Normal ratio of green and gold is 9 to 1.
15. Management and his supervisor have access to the spheres when he is not around.
16. There isn’t really any documentation in relation to the receipt of the spheres aside from the receiving log that he keeps. The guy from the supply comes by, and he receives the bags. He counts the bags to make sure it checks with the shipping sheet. Then he takes them over to the machine operator, counts each pieces, and logs it down on his receiving log. There’s only one receiving log.
17. Ben gets the log weekly from him. No one else checks his work.
18. There’s never been a discrepancy.
19. He doesn’t keep a copy of the shipping invoice? He logs everything and supply bills them later. He assumes Accounting compare the numbers at some point.
20. He doesn’t have a schedule of future shipment so that he can develop an expectation of what’s coming in? The spheres come roughly the same time every day. On a day-to-day basis, the numbers are a little different, but it’s not that much.
21. He always does the counting.
22. He doesn’t see or compare the amounts received to the P.O. He just compares it to the shipping slip.
23. The process has never been reviewed by internal audit or anyone else.
24. C. J. Ready is the machine operator. He doesn’t know the relationship between C. J. and Chris.

Ship Clerk

1. She has been working in the shipping process for various companies for over six years. She has worked for Alchemy for under a year.
2. She steps into the process after the spheres have made their way through the machine and are ready to be shipped. She records down on a clipboard the number of gold spheres on the laser counter. Management collects those clipboards every week.
3. She puts the green and gold spheres in collection bins to be sent to their parent company.
4. No many orange spheres come through.
5. Ratio of gold and green is 1 to 10.
6. Green spheres can be mixed with gold ones, but it’s really unlikely.
7. If Alchem receives wrongs spheres, they do not tell the shipping clerk.
8. The bags received from machine operator are not mixed with green and gold spheres.
9. If a green sphere comes through the hellixination process, she doesn’t adjust the shipping log for gold spheres. She has never changed the laser-counter number.
10. She has no idea what the trapdoor is used for.
11. She doesn’t’ check the bin to see if green spheres are mixed with gold one. But she will tell if she sees a mistake.
12. There is restricted access to the factory floor.
13. Security measures: Swipe card; I.D to the gate.
14. Operations, Management, shipping and receiving personnel has access.
15. Only shipping clerks have access to the shipping bags on the shipping dock.
16. She doesn’t reconcile reports every day between what is received by machine operaor and what is shipped out, but she’s sure someone else does.
17. There’s a shipping log.
18. She doesn’t really store the spheres because they have to be shipped out on a daily basis.
19. She sends the green spheres to the same address and contact person at the parent company.
20. She ships the spheres to Alchem twice daily.
21. Alchem sends receipt acknowledgements to the management.
22. There’s follow up to verify that a shipment has been received by Alchem.
23. She sometimes ships a partial box of spheres to Alchem because they can’t work overtime and have to ship out whenever they have done at the end of the day.
24. She has never been audited by Internal Audit.
25. She doesn’t send any documentation to Alchem.
26. All the bags of green and gold spheres go into the collection bins. That’s the only way she send them.
27. She can open the bins when they’re in the factory. The bags are like Ziplocs.
28. She or the other shipping clerk backs up the operator if one is out sick.
29. The other shipping clerk or the corss-trained receiving clerks are her backup.
30. There are 2 shipping clerks?
31. She is paid hourly with no overtime. There’s one shift per day.
32. She has no idea if there is a formally documented Code Of Conduct?
33. She signed a lot of papers when she got hired on.
34. Ben Ease is her boss. Ben is the manager of the shipping floor and department. He collects the shipping logs weekly.

36. She doesn’t have E-mail.