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2. Costco Audit Procedure and Checklist (October 2022)

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111 views3 pages

2. Costco Audit Procedure and Checklist (October 2022)

checklist

Uploaded by

tjr8571
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© © All Rights Reserved
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AUDIT PROCEDURE OUTLINE

The following is a general outline of the audit procedures. The actual audits do not necessarily follow
this order. However, all steps as indicated below are completed during the audit as applicable. In
addition, if further steps or documents are needed to ensure a complete understanding of the facility
situation, the audit company will request the facility to provide all such information as necessary. Your
full cooperation is appreciated to ensure a smooth and beneficial audit for all parties involved.

 We request a senior facility management representative be present during this audit. This
person shall have full knowledge of the facility operation, the authority to comply with the
Auditors requests, and to respond accurately on behalf of the facility owners and management.
 We also request the production manager and personnel manager be present during this audit.
These individuals are necessary to answer a series of questions regarding production capacity,
machines, lead times, hiring practices, and payroll records.
 For most audits, ARCHE ADVISORS will confirm a two-week window in advance with the facility
per Costco’s policy.
 Auditors arrive at the facility and provide their business cards and identification badges upon
entry. Please be sure to notify your entry security guards in advance of their visit.
 Audit is conducted by 1-2 auditors, and takes up to two full working day, depending on the size
of the facility.
 Auditors will hold an opening meeting with the facility’s designated management person of
authority, production and personnel managers, and any other managers you wish to have
present. During this meeting, the auditors will describe the audit format.
 Whenever possible, a representative of the Costco supplier, if this is not the same as the facility,
should also be present.
 No other unrelated parties shall be present during this audit.

Key Activities Conducted by the Auditors:

1. Review of facility policies or handbooks and licenses,


2. Review of employment contracts as required by the country’s labor laws.
3. Review of worker age documentation and verification.
4. Review of 3 months’ worth of payroll documentation, including but not limited to payroll records,
timecards, production sheets, attendance records, proof of insurance payment or tax payment, etc.
These documents are necessary in order to determine if the facility is in full compliance with the
country’s national and regional labor laws on minimum wage, overtime wage, overtime and holiday
hours, etc.
5. Contractors and Temp Agencies: review of 3 months of payroll documentation time records, work
permits/authorization, age documentation and labor contracts.
6. Interviews of workers selected randomly and conducted in private by the auditors without the
presence of any other facility personnel. Workers will be asked general questions such as the
facility’s hiring policies, length of employment, working conditions, employment practices,
disciplinary policies, freedom of movement during non-working hours, etc.
7. Tour of the facility floor to evaluate health and safety conditions, production capacity, use of outside
subcontractors, wastewater treatment, chemical and hazardous material containment, etc.
8. Tour of the dormitories and dining room facilities, if provided, to evaluate health and safety
conditions.
9. Taking of photos as necessary to document non-compliance areas, if any.
10. Supply Chain Security checklist to identify/review compliance with anti-terrorism preventative
measures.
11. If product made at this facility is subject to quota for entry into the customer’s destination country,
review and verification of customs and quota documents, shipping invoices and country of origin
documentation.
Activities at Conclusion of Audit:
Created: 1017 1
Last Revised: 1022
 Auditors discuss the results with your designated facility management personnel, answer any of
your questions, provide a Corrective Action Summary, and clarify the local labor and environmental
laws as necessary
 Auditors provide facility with corrective actions to make all required future improvements with the
goal of 100% compliance within a timetable to be determined by and acceptable to Costco
 The designated facility management person of authority signs the Corrective Action Summary,
verifies that he or she understands the findings, and makes any comments if so desired

Post-Audit Activities:

 Within 5-7 days from this audit, a formal, typed copy of this audit report will be sent to all parties
indicated on the initial audit application form. A copy will be automatically sent to Costco.
 If you, the facility, are not the actual Costco supplier or the direct audit applicant to the audit
company, please be sure the Costco supplier authorizes the audit company to release a copy of
this audit report to you.
 Facility follows up within 5 days with an Action Plan (AP) sent directly to Costco
 For questions on re-audit, if required, and shipment approval, please contact the following at Costco
[email protected]

Please note that it is Costco’s desire that all parties work as a team to help the facility achieve 100% full
compliance within a reasonable timetable.

SAMPLE FACILITY EVALUATON CHECKLIST


Child Labor
Created: 1017 2
Last Revised: 1022
 Copies of adequate proof of age documents available for all employees, including photo ID or I-9’s
for USA Suppliers.
 Visual check of all areas of facility: kitchen, housing, restrooms
 Hiring age on employee contracts or applications is of legal limit
 Hiring age reported by employees matches other findings
 Documents are available for randomly selected employees on the work floor

Wage and Hour

 Number of employee’s present matches number of timecards and number of people on payroll
 Average hours worked as shown on timecards does not exceed legal limits
 All hours worked are listed on time records and are compensated accordingly
 Hours worked and overtime are calculated and compensated correctly
 Employees are aware of terms of either written or oral employment contracts
 Employee reports match findings of payroll and timecard records
 Contractors and Temp Agencies: most recent payroll, time records and work permits/authorization,
age documentation and labor contracts.

Health and Safety

 Work area is well-lit, ventilated, free from debris, and aisles are marked and clear
 There is functioning fire equipment and first aid supplies in all work areas
 Unlocked, marked, and accessible exit doors with multiple exits in each area
 Machine pulleys have guards, tagging needles are disposed of properly
 There are a sufficient number of clean, functioning restrooms with running water and trash cans
 Chemicals are used, stored, and disposed of properly
 Food area is sanitized and has fire equipment and freezers for storage
 Employees are trained for emergencies

Employee Environment

 Obtain reported work hours, wages, and overtime policies from different work stations
 Disciplinary practices and freedom of movement are described
 Security frisking and pregnancy testing are verified
 Production quota: ability to meet goal and consequences for not meeting
 Overall suggestions for improvement from employees
 Do employee reports match other findings?

Transshipment, Subcontracting

 Relevant shipping documents with the correct country of origin are viewed
 Names and addresses of subcontractors are disclosed
 Labels and work on production floor match your work orders – are your goods in the facility?
 Packing, shipping, and trash areas are checked for evidence of diverted shipments

Created: 1017 3
Last Revised: 1022

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