Professional Documents
Culture Documents
• In this system the entity invites suppliers to give their quotations. The supplier
with the lowest quotation wins the contract. It is a kind of contract mostly
followed by large organizations and governments when purchases are of large
value.
TYPES OF TENDER
• Open Tender.
• Restricted Tender
• Negotiated Tender
• Company purchase many small items on day to day basis. It becomes difficult to
have inventory for all. It is most popular method for purchasing items which are
used regularly. There are two methods: Agreement is made to supply a Fixed
Quantity of the product at a Fixed Price for a Specific Period. Agreement is made
to supply for a Specific Period but the Quantity is unknown.
• ADVANTAGES: Flexible Avoid negotiation Avoid placement of new order again and
again Advantage to supplier to plan the work at his place Reduces clerical activities
Protections against higher pricing in future
• DISADVANTAGES Petty frauds It requires flexible internal control Poor vendor
performances Difficult to determine and forecast the quantity
WHAT IS SUBCONTRACTING?
EXAMPLES
• Tyre warehouse near automobile manufacturing units. Petrol pumps in transport
undertaking. Aviation fuel pumps at airport.
Best practices:
• Comply with ethical buying practices and policy.
• Review and update signature authorizations periodically.
• Obtain pre-approval of consultant agreements by Purchasing.
• Verify receipt of goods and services against contract/ purchase order and invoice
information.
• Reconcile ledgers for accuracy of recorded transactions.
• Monitor to ensure that invoices are paid in a timely manner.
Best practices:
• Theft of goods
• Inventory shortages
• Additional costs incurred for replacement of goods
Review and reconciliation
Practice timely review of supplier’s invoice, packing slips, and purchase
orders. Check accuracy of the information for prior payment, correct
quantity ordered, and price charged. Monthly ledger reconciliation enables
you to find improper charges and validate appropriate financial transactions.
Best practices:
AUDIT OBJECTIVES:
b.Review vendor list for inactive vendors (no activity for 3 or more
years)
Vendor Testing
i.For all POs selected for testing note whether: Ensure documentation is
original and free from alteration
iii. Additionally, for purchases over Determine which method as used to secure
$25,000. Perform testing for the the selection.
following: competitive bid
competitive sealed bid
newspaper notification
request for proposal (RFP)
purchase catalog
inter-local contract
reverse auction procedure
Determine whether the selection appears
reasonable and is justified.
Ensure that documentation is available to
support the selection process.
B.Determine the total number of sealed bids obtained/processed
during the audit period. Select a judgmental sample to Bid
proposals were properly completed, with scope specifications and
special terms and conditions. Sealed bids received were properly
completed (i.e. references, felony conviction notification, conflict of
Purchase Order Testing
b.Run a query for the i.Select a judgmental Check for PO’s not
audit period for all sample of PO’s to properly “closed”
“open” PO’s. verify the following:
9962869008
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