Internal Audit

Guide for Procurement of Audit Services

Procurement of Audit Services

An effective audit can improve management operations and yield significant cost savings regardless of the organization’s size. It can also help save the organization resources on a substandard audit. The procurement audit guide can help financially.

  • Verifies financial transactions and determines whether funds were expended according to applicable laws, regulations and procedures.
  • Provides management with timelier reporting about noncompliance with laws and regulations.
  • Provides management team with objective appraisals of financial accounting systems and administrative controls; and
  • Determines reliability of financial records and reports.

What is a procurement audit?

A procurement audit entails periodically reviewing and verifying procurement processes, contracts, and history with vendors to ensure accuracy and compliance with the terms stipulated in a contract and improve efficiency.

What is the essence of procurement auditing?

It helps organizations to fulfil three essential functions, such as:

Eliminate fraud

It empowers to uncover and eliminate fraud across a procurement system in an organization. Taking a holistic look at history makes it easy to identify irregularities timely.

Compliance

Periodic auditing reveals whether the suppliers have complied with the terms stipulated in the contracts so that it helps to terminate the non-performing contracts.

Efficiency

In an audit, it is accessible to change the contract terms where the organization derives better outcomes by trimming down input. The auditing reveals issues with procurement and identifies opportunities for change.

How to conduct a procurement audit?

An audit holds significant benefits for an organization. Auditing is an intensive process that reviews an organization’s working systems and processes and makes the requirement need to change to manage the procurement better.

READ  Consumer Goods and Retail Audit Checklist

Therefore, it is required to analyse documents, liaise with stakeholders[1], and make a detailed report of all findings for the management’s consideration. Here is the following to run an audit

  1. Involve managers and direct stakeholders
     Manage the data, move it from one place to another, process it into information, and make decisions based on the findings.
    In an auditing process, the general meeting with procurement managers and direct stakeholders across the organization.
    The goal is to review the job perspective, analyze the working process, and improve procurement to run more efficiently.
  2. Focus on problem areas
    There are three main auditings, i.e. auditing procurement processes, contracts, and procurement history, to evaluate performance timely. The procurement managers and stakeholders identify the problem areas within a procurement process and determine the required change. It helps to focus on the issues and fix them timely.
  3. Audit requisition and purchasing forms
    Purchase orders must be filled out whenever the procurement department orders inventory. Sometimes, it constitutes opportunities for unscrupulous employees to manipulate figures and commit fraud. Analyzing each document will be impossible, given the volume of purchase orders the procurement department may have processed. Therefore, check the signatures, notes, and order details, and cross-check the pricing details for future issues.
  4. Vendor selection
    An organization has criteria for selecting vendors for the procurement process. It includes performance data, pricing, risk ratings,  and other competitive analysis for an efficient audit.
    During auditing, the organization reviews the vendor history and analyses the vendor to determine whether they meet the selection standards.
  5. Audit procedures and processes
    Review the processes employees implement while purchasing orders, procurement tasks and requisitions. After assessing the data then, determine the best course of action.
  6. Process the insights
    After the research and auditing, provide all the details for the higher management’s assessment. After identifying all the problem areas identified, discuss with employees, managers, and direct stakeholders for ideas to manage the risk. Gathered all the information, processed it, and analyzed it with the help of the stakeholders for the data points.
  7. Report the findings
    After verifying the organization’s procurement, make a format for higher management to the senior stakeholders for their decision-making.
READ  Stock Audit of Bank Borrowers: Procedure, Documents Required

Conclusion

A procurement audit is essential for a business to ensure that all systems and procedures function effectively and without fraudulent activities. Regular internal and external audits will help ensure that a business stays compliant with legal and business regulations.

Also Read: Advertising Audit & Risk Management Investment Analysis

Trending Posted