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, STR Responsible Sourcing Division 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 STR Responsible Sourcing Division’s 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, STR auditors confirm a specific audit date in advance with the facility. On occasion, and if instructed by Costco, this audit may be unannounced. 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 a team of 2-3 auditors, and takes up one full working day, depending on the size of the facility. The auditing team will consist of fl
uent native speakers (often with more than one dialect ability) and readers of the manufacturing country’s language 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 STR Auditors: 1. 2. 3. 4. Review of facility policies or handbooks and licenses, Review of employment contracts as required by the country’s labor laws. Review of worker age documentation and verification. Review of 3 months worth of payroll documentation, including but not limited to payroll records, time cards, 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. 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. Tour of the facility floor to evaluate health and safety conditions, production capacity, use of outside subcontractors, waste water treatment, chemical and hazardous material containment, etc. Tour of the dormitories and dining room facilities, if provided, to evaluate health and safety conditions. Taking of photos as necessary to document non-compliance areas, if any. Supply Chain Security checklist to identify/review compliance with anti-terrorism preventative measures. 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.
5.
6. 7. 8. 9. 10.
Should you have any questions, please contact Charlene Elenes and Hellen Ni at codeofconductaudit@strrs Last Revised 09.07.11 Privileged and Confidential © 2010 STR. All Rights Reserved
Activities at Conclusion of Audit: • • • Auditors discuss the results with your designated facility management personnel, answer any of your questions, provide a Corrective Action Summary, and clari
fy 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 time table 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 STR 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 STR, please be sure the Costco supplier authorizes STR to release a copy of this audit report to you. Facility follows up within 5 days with a Action Plan (AP) sent directly to STR and to Costco For questions on re-audit, if required, and shipment approval, please contact the following at Costco: Ms. Betty Pien Mr. Preston Witt Mr. Gavin Jamieson bpien@costco pwitt@costco gjamieson@costco
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. We encourage the facility to work with the local STR auditors as required if you do not understand the audit results and are not sure how to achieve full com
pliance. This follow-up consultation service is provided by STR at no additional charge. Thank you for your full understanding and cooperation.
Should you have any questions, please contact Charlene Elenes and Hellen Ni at codeofconductaudit@strrs Last Revised 09.07.11 Privileged and Confidential © 2010 STR. All Rights Reserved
SAMPLE FACILITY EVALUATION CHECKLIST
Child Labor Copies of adequate proof of age documents available for all employees, including photo ID 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 employees 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
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 emergenciespulleys
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?
Quota, Transshipment, Subcontracting Relevant shipping documents with the correct country of origin are viewed OPA certificates are viewed, if applicable 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
Should you have any questions, please contact Charlene Elenes and Hellen Ni at codeofconductaudit@strrs Last Revised 09.07.11 Privileged and Confidential © 2010 STR. All Rights Reserved

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