Procurement Department Audit

An audit reviews the procurement process to identify the process loopholes that might result in misusing spending of company’s funds and offer suggestions for improvement. While audit procedures vary among organizations, there are several key procedures included in all procurement audits.

Purchase Order Indenting Process
The process starts with the initialisation of purchase request and a review is done on the information received for purchase of goods or services.

Vendor Evaluation and Selection Review
Establishing qualified suppliers is a crucial function of the procurement department. An audit reviews the process for placing a vendor on the approved supplier list. Review suppliers against the approval criteria, and flag any that don’t meet the criteria. Once on the approved list, the vendor receiving the order is determined by its ability to supply the product in accordance with the company’s standards for quality, price and delivery. Audits review the selected vendor list as well as the selection process. For example, a selection process might require collection of three competing bids from the approved supplier list, with the order being awarded to the supplier with the lowest bid. Mark any instances when the selection does not follow the process or when an order is placed with an unapproved vendor.

Purchase Order to Payment authentication
A purchase order submitted to the procurement department starts the purchasing process. The purchase order document contains all the vital information for ordering the needed item. During the audit function, a random sample of purchase orders is reviewed for accuracy. Check to see that the proper authorization signature appears on the document. Cross-check the purchase order with the packing list, bill of sale and final invoice to ensure the item description, quantities and price match from one document to the next. Additionally, check a sample of receiving receipts to make sure an authorized purchase order exists for goods received.

Internal Process Review
In addition to reviewing the paperwork side of purchasing, audit procedures also include an evaluation of employee functions during the purchasing process. Auditors might, for example, check if a list and samples of authorized signatures exists and if employees are using the list when verifying purchase orders. Review steps in the formal bidding process to make sure they are being followed. Ask if accounts payable and receiving checklists are being implemented. Determine if conflict-of-interest policies and opportunities for training and purchasing certification are available for employees.

Procurement team capability analysis
We interview the team and find their roles in the value process mapping and assess their capabilities and training if needed.

Department KPI
We will develop department reporting and evaluation structure to suit your business requirements.