GROUP 1

AUDIT OF THE
PROCUREMENT
FUNCTION
 Our Team

Azza Rahma Heba Ilham Farsya

Nabila Abdullah Nugraha
Saeed
Content
01 Purpose and Benefits of Audit

02 Auditing Steps

03 Procurement Auditing

04 Audit of Procurement Planning

05 Audit of Procurement
Implementation
06 Audit of Inspection and
Receipt of Goods/Services
07 Audit payment and reporting
Purpose and Benefits of Audit

01
to achieve goals, in accordance
with the organization's vision and
mission;

assess the economics, efficiency and

02
effectiveness of procurement; and
protect company assets (funds) from
waste, mismanagement, misuse and
various other forms of irregularities

encourage the development and

maintenance of reliable procurement

03 information management and the

disclosure of this information in
periodic reports, including fulfilling
accountability obligations

04
ensure that procurement
activities are in accordance with
applicable rules and regulations
 procurement organization

Audit Scope
An audit of the procurement function
assesses the entire procurement function,
including its organization,
guidelines/regulations that guide
procurement, planning, processes and
completion of procurement (receipt of
goods/services).
Audit
This scope can vary, depending on the
strategy and complexity of the procurement Scope
system in each organization. The procurement
process in organizations that involve public
funds (have public accountability) may be
more complex when compared to companies
that do not have public accountability
because the demands for accountability and
transparency in these companies are greater.

procurement process
 Auditing Steps
An audit of the procurement function is to assess whether the procurement process is in accordance with the
principles of good governance. In accordance with this objective, the audit process must be able to obtain
sufficient, relevant and reliable evidence, as well as assess the suitability of the practices that occur with the
guidelines that are the criteria. In general, the goods/services procurement audit process includes several
steps which include the following.

Collection and evaluation of

Audit planning Reporting.
audit findings

The process of procuring goods and
services must reflect the organization's
desire to obtain goods/services to meet
its needs economically, efficiently and
effectively. In general, the procurement
process begins with planning,
implementation, reporting and evaluation
or procurement activities. Each activity at
each stage is guided by systems,
procedures and policies as guidelines for
good procurement governance.
Procurement planning includes determining
the need for goods/services (input) in
company operations, including the level of
quality, quantity, and determining the time
when the goods/services must be available
This stage is the implementation of the
procurement plan. The activities involved in
implementing procurement are in accordance with
the level of complexity of the procurement
process,
After the procurement process produces a selected
supplier, the procurement committee is
responsible for ensuring that the goods/services
received are in accordance with the order in quantity
received, quality level, and delivery time
Payment is the final part of the procurement process.
Payment can only be made if the handover of the
goods/services has been declared to contain no
problems (clear) and has been ratified by the
competent authorities. Each payment must be
supported by proof of billing and complete
supporting documents and the bill is due.

The purchasing function is
vulnerable to corruption as it
involves large amounts of
money and the interaction
between buyers and sellers
presents various opportunities
for deviant behavior. Buyers
may collude with suppliers in
determining offer prices,
discriminate in favor of specific
suppliers, interfere with
evaluators' work unethically,
and accept bribes.
The strategic placement of the procurement
Various irregularities that may
function in the company's organizational
occur in procurement include
structure is crucial for its effectiveness. The
the procurement of fictitious
procurement organization is responsible for
goods, marked-up procurement
planning, managing the procurement
prices, and the failure to collect
process, assessing the accuracy of
or remit taxes in connection
goods/services specifications, authorizing
with procurement. To prevent
payments, and providing procurement to the
corruption in procurement, the
responsible organization. For government
procurement system should be
procurement, there are specific position
transparent, efficient, and
levels responsible for managing and
based on principles such as
controlling the procurement of government
value for money, honesty,
goods/services. Private organizations also
fairness, accountability,
require a documented description of the
transparency, efficiency,
duties, authorities, and responsibilities of
competence, and integrity
the procurement organization.
The procurement function
The procurement function must be equipped with a
procurement manual, which serves as guidelines for all
procurement activities and must adhere to the
principles of separation of duties. Furthermore,
procurement regulations should not conflict with higher
authorities' regulations and should be socialized
adequately. Procurement officers must understand the
regulations well and have adequate knowledge about
the goods/services required. An audit of the
procurement organization assesses the effectiveness of
the procurement organization in procuring
goods/services efficiently by evaluating the placement
of the procurement organization in the company's
organizational structure, the competence of personnel,
and the adequacy of procurement procedures in guiding
the procurement process within the framework of good
governance.
 Audit of
Procurement
Planning
Procurement planning starts from identifying the needs of
each top user unit for goods/services. The company must
have a list of goods/services requirements which contain
specifications, quantity required, quality standards and
usage time.
In trading companies, this list is equipped with maximum
and minimum stock limits, whether goods are subject to
VAT or not. With this list, companies can avoid several
conditions such as:

(1) Excessive purchases,

(2) Excess/shortage stock,
(3) Funds tied to goods/services that are
not yet needed, and
(4) Purchasing goods/services that are
not accordance with the quality
standards.
Audit of procurement planning to meet the goods/services needs of user units within the company. In
this audit, the auditor emphasizes his assessment of the accuracy of the relationship between the
purchasing plan (specifications, quantity, time) and the planned use of goods/services in each user
unit. For trading companies, in addition to assessing the accuracy of the relationship between
purchasing plans and sales plans, an assessment is also carried out regarding the accuracy of
inventory quantities in maintaining business stability. Some fraud that may occur at this stage is:

1. Budget inflation (symptoms of inflation seen from unrealistic unit prices)

2. Directed procurement plans (technical specifications aimed at certain brands or certain entrepreneurs)
3. Not publicly announcing the procurement plan at the start of budget implementation
4. Engineered work packaging (work can only be carried out by certain groups)
5. Break up the procurement of goods into several packages to avoid auctions
6. Breaking down the procurement of goods which according to the nature of the work should be one unit
7. Unify or centralize several activities spread across several work units (satker) which, according to the nature of the work
and level of efficiency, should be carried out in each work unit
8. Combine multiple work packages the nature of the work and the amount of its value should be able to be processed by
small businesses become can be done only by medium and big business
9. Purchase plans that do not meet your needs
10. Determining unrealistic time schedules
11. Selection of the direct appointment method for contracts which should be through public auction
12. Selection of evaluation methods with a merit point system for evaluations which should be a knockout system (for win
a particular product/brand or provider of goods)
13. The budget allocation for planned activities is carried out by self-management, the implementation is carried out by
contractual means to the goods provider or vice versa.
 Audit of Procurement Implementation

The methods generally used in procuring goods/services are direct purchase, direct appointment, limited tender
and open tender. Competition is the basis of procurement which ensures that companies get the best
goods/services through competition in tenders. Apart from that, procurement through open tenders can also
create a positive impression for the company, because it shows the values of integrity, quality and
professionalism in procuring goods/services.

Technological developments have greatly supported the goods procurement process through the application of
communication and information technology, better known as electronic procurement (e-Procurement). Using this
method makes it possible to make the procurement process run more quickly, transparently and accountably.
This procurement method can prevent collusion, corruption and various other deviant behavior in the
procurement process by limiting physical meetings between the procurement committee and suppliers.

To meet routine needs, many companies today only carry out transactions with certain suppliers in the
procurement of goods/services. This is part of an efficient procurement strategy because the procurement
process is shorter and less involved many suppliers. Companies that implement the Just in Time (JIT) method in
their production processes integrate supplier strengths into their business strategy. With this strategy, the
procurement process does not run too complicated which takes up a lot of time and energy in selecting offers
from many suppliers and handling goods/services received from new suppliers, which makes the procurement
costly.
 For procurement of government goods/services (funds sourced from APBN/APBD) Presidential
Regulation no. 70 of 2012 concerning Procurement of Government Goods/Services has provided
guidance on how the procurement of goods/services is carried out and the limits authority of
the official/officer who handles the procurement of said goods/services. This local regulation
also provides definitions of several procurement methods and their value limits, as follows.

1. Auction General is a method for selecting providers of goods/construction work/other services for
all work that can be followed by all providers of goods/construction work/other services that meet
the requirements
2. Limited tendering is a method of selecting providers of goods/construction work where the number
of providers capable of carrying out is believed to be limited and for complex work
3. Simple auction is a method of selecting providers of goods/other services for work with a maximum
value of IDR 5,000,000,000.00 (five billion rupiah)
4. Direct selection is a method of selecting construction work providers for work with a maximum
value of IDR 5,000,000,000.00 (five billion rupiah)
5. General selection is a method of selecting consultancy service providers for work can be followed
by all consulting service providers who meet the requirements
6. Simple selection is a method of selecting consultancy service providers for consultancy services
with a maximum value of IDR 200,000,000.00 (two hundred million rupiah)
7. Competition is a method of selecting service providers that competes for original ideas, creativity
and certain innovations whose prices/costs cannot be determined based on unit price
8. Contest is a method of selecting goods providers by competing goods/ certain objects that do not
have a market price and whose price/cost cannot be determined based on the unit price
9. Direct appointment is a method of selecting providers of goods/services by directly appointing one
provider of goods/services
10. Direct procurement is the procurement of goods/services directly to providers of goods/services,
without going through a direct auction/selection/appointment.
 In general, procurement of goods/services is carried out through
tenders either open or limited and the following activities limited
are:

1. Formation of a procurement committee/official (pokja A key element of transparency and fairness in tender
committee with a working period of 1 year/more) for implementation is the confidentiality of tender
procurement/procurement service unit information. The tender committee must be able to
2. Preparation and validation of Self Estimated Price (HPS) maintain the confidentiality of information from tender
3. Preparation and validation of goods provider selection
participants and ensure that the information is not
documents
leaked, not mixed up, and not manipulated for the
4. Announcement of auction/selection/procurement
5. Prequalification/postqualification of goods providers
benefit of certain tender participants. The place and
6. Registration and retrieval of documents selecting goods time for the opening of the tender which is attended
providers by all tender participants must be agreed upon and
7. Explanation (aanwijzing) acceptable. This can reduce the risk of leaks and
8. Submission and opening of bidding documents manipulation of tender confidentiality.
9. Evaluate offers
10. Announcement of winners
11. Bidder's objection
12. Appointment of auction winner
13. Contract signing.
 Audit of Inspection and Receipt of
Goods/Services
Fraud may still occur after the contract is signed. So therefore. The
implementation/delivery stage must receive serious attention. Inadequate control at this
stage can result in:

Failure to meet quantity and The practice of giving

quality standards or other
implementation standards
Transfer of goods for resale
or personal use by certain
parties;
gratuities:
Presentation of a larger or
smaller invoice.
Falsification of quality or
standard certificates;

Handling of receipt of goods/services must be carried out very carefully. The officer
carrying out the inspection must have adequate technical skills regarding the
specifications of the goods/services purchased and use his professional skills carefully.

Provisions for receiving goods as stated in the goods/services procurement guidelines are
the main guidance for inspection officers in carrying out their duties of authority and
responsibility. Therefore, all activities in inspection of receipt of goods/services must
reflect the implementation of these rules and regulations.
 Audit of Payments and Reporting

Payment and reporting is the final part of the procurement process. This stage concerns the completion of the
organization's obligations to suppliers and the procurement committee's accountability for the duties, authority
and responsibilities assigned to it.

To fulfill internal cross check needs, the cashier/treasurer function must be separate from the recording and
operational functions. Every payment made to a supplier must be based on an invoice from the supplier,
accompanied by a minutes of handover of goods/services stating that the goods/services delivered by the
supplier are in accordance with the specifications and are declared acceptable by the goods/services
verification and acceptance section of the committee. procurement.

The final obligation of the procurement committee is to prepare a procurement report, which reports on the
implementation of the procurement, the ability to obtain goods/services in accordance with the specified
specifications and the amount of funds absorbed in the procurement. A good procurement report should also
present (if any) the problems faced. in the procurement process and innovations that should be made to increase
procurement efficiency
THANK
YOU