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Procurement Audit Course Business Services Support Limited Training DELIVERED BY: BSS Management Consultancy Visit <a href=www.businessservicessupport.com Tel: 0845 226 4315 " id="pdf-obj-0-2" src="pdf-obj-0-2.jpg">

Procurement Audit Course

Business Services Support Limited Training

Procurement Audit Course Business Services Support Limited Training DELIVERED BY: BSS Management Consultancy Visit <a href=www.businessservicessupport.com Tel: 0845 226 4315 " id="pdf-obj-0-8" src="pdf-obj-0-8.jpg">

DELIVERED BY:

BSS Management Consultancy Visit www.businessservicessupport.com Tel: 0845 226 4315

Objectives To give delegates a good understand of the why and how of carrying out an

Objectives

To give delegates a good understand of the why and how

of carrying out an audit of the procurement function, its procedures and practices

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Objectives To give delegates a good understand of the why and how of carrying out an

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Format  What are the procurement procedures, are they followed?  What guidelines exist regarding legal

Format

  • What are the procurement procedures, are they followed?

  • What guidelines exist regarding legal agreements, are they complied with and what is the procedure for non-compliance

  • How are contract management issues identified and reported

  • Is technical compliance and physical completion review evidenced?

  • How is fraud (and corruption) identified and reported?

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Assessing Supplier’s Financial Strengths Two Basic Issues & Systems 1. Is the function performing well? 

Assessing Supplier’s Financial Strengths

Two Basic Issues

& Systems

  • 1. Is the function performing well?

Yes No

  • 2. Are there improvements that need to be made?

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  • Yes: what are they?

  • No: all operating well

Assessing Supplier’s Financial Strengths Two Basic Issues & Systems 1. Is the function performing well? 

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Stages to the Audit 5 1. Risk assessment approach 2. Evaluate internal controls 3. Test controls

Stages to the Audit

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1. Risk assessment approach

Stages to the Audit 5 1. Risk assessment approach 2. Evaluate internal controls 3. Test controls
2. Evaluate internal controls 3. Test controls 4. Analyse results of tests to determine the way
2. Evaluate internal controls
3. Test controls
4. Analyse results of tests to determine
the way forward
5. Perform substantive testing
6. Audit completion meeting: findings
and recommendations
7. Write, issue and discuss audit
report

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Procurement Audit Procedures  Tenders and award of contracts • What is the policy and process?

Procurement Audit Procedures

  • Tenders and award of contracts

What is the policy and process?

  • Purchase Order

Who authorises purchase orders? Are POs used at receiving and payment stages?

Procurement Audit Procedures  Tenders and award of contracts • What is the policy and process?
  • Receiving

Do physical goods (and services) match those ordered? Are all terms on receiving document appropriate?

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Procurement Audit Procedures  Accounts Payable  Do invoices match orders, and receipts?  Are invoices

Procurement Audit Procedures

  • Accounts Payable

    • Do invoices match orders, and receipts?

    • Are invoices accurate, payments correctly made and recorded?

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  • Management

    • How is procurement managed?

    • Are controls in place and adequately monitored and followed up?

Procurement Audit Procedures  Accounts Payable  Do invoices match orders, and receipts?  Are invoices

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8 Procurement Audit Procedures Legal Agreements What are our key procurement requirements? Does the agreement comply

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Procurement Audit Procedures

Legal Agreements

What are our key procurement requirements?
What are our
key procurement
requirements?
Does the agreement comply with our standards?
Does the
agreement
comply with our
standards?
What do our procurement procedures say about non- compliance?
What do our
procurement
procedures say
about non-
compliance?
What is our legal position with the contracting parties?
What is our legal
position with the
contracting
parties?

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9 Procurement Risk Management KEY RISKS INCLUDE: • • • • • • Adverse impact on

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Procurement Risk Management

KEY RISKS INCLUDE:

9 Procurement Risk Management KEY RISKS INCLUDE: • • • • • • Adverse impact on

Adverse impact on budgets, cash-flow and profitability Customers kept waiting or turned down Helplessness in dealing with supplier price increases. Output prices forced up with loss of competitiveness.

Poor supplier performance or, worse, allocation or loss

of supply.

Fragmentation and loss of procurement negotiating

leverage.

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10 Procurement Risk Management KEY RISKS INCLUDE: • • • • • Legally unsound contracts heavily

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Procurement Risk Management

KEY RISKS INCLUDE:

10 Procurement Risk Management KEY RISKS INCLUDE: • • • • • Legally unsound contracts heavily

Legally unsound contracts heavily biased in suppliers’

favour.

Unproductive use of human resources.

Insufficient 'internal challenge’ of specifications and

decision making.

Decision-makers prey to the tactics of salespeople.

Political embarrassment or damage to company image and reputation.

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11 Procurement Risk Management KEY RISKS INCLUDE: • • • • Exposure to internal and external

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Procurement Risk Management

KEY RISKS INCLUDE:

Exposure to internal and external fraud

Exploited and manipulated by monopolies, cartels and hostile contractors.

Supplier innovations passed to competitors.

Beaten to the market by competitors with new products or services.

11 Procurement Risk Management KEY RISKS INCLUDE: • • • • Exposure to internal and external

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Procurement Risk Management KEY RISKS INCLUDE: • Damage to brand and company reputation by unethical behaviour

Procurement Risk Management

KEY RISKS INCLUDE:

Damage to brand and company reputation by unethical behaviour or incompetence.

Organisation is penalised for non-compliance with

regulatory requirements.

Organisation’s activities become subject of public

scrutiny and investigation

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13 Key Internal Controls Receiving controls Reporting controls Supervisory controls Reconciliation controls Segregation of duties Authorisation

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Key Internal Controls Receiving controls Reporting controls Supervisory controls Reconciliation controls Segregation of duties Authorisation Recording
Key Internal Controls
Receiving
controls
Reporting
controls
Supervisory
controls
Reconciliation
controls
Segregation
of duties
Authorisation
Recording
controls
controls

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Audit Testing “ .. methods and techniques for testing and validating exposures should be reflective of

Audit Testing

..

methods

and techniques for testing

and validating exposures should be

reflective of the risk materiality and

likelihood of occurrence”

Audit Testing “ .. methods and techniques for testing and validating exposures should be reflective of

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TYPES OF TESTS Audit Testing 1. Walkthrough Tests: “walk” one or two transactions sequentially through all

TYPES OF TESTS

Audit Testing

  • 1. Walkthrough Tests: “walk” one or two transactions sequentially through all the processing stages of the system

  • 2. Enables the auditor to:

Confirm their understanding of the system

Highlight key controls which would need to be evaluated further

PROCUREMENT:

Contract Purchase Order Receipt InvoicePayment

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Audit Testing Substantive Tests - objectives of such tests may include evidence of: • Completeness •

Audit Testing

Substantive Tests - objectives of such tests may include evidence of:

Completeness

Existence

Valuation

Ownership

Disclosure

Audit Testing Substantive Tests - objectives of such tests may include evidence of: • Completeness •

Procurement: amounts owed to creditors at the end of the

period, goods ordered not yet received etc

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Audit Testing Types of tests  Audit Interviewing: useful for  Finding out information  Gaining

Audit Testing

Types of tests

  • Audit Interviewing: useful for

    • Finding out information

    • Gaining access to other individuals

    • Further information

    • Gauge opinions

Procurement: how are suppliers authorised?

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Audit Testing Audit Interviewing: key • Preparation: – Know the interviewee – Know yourself! – Know

Audit Testing

Audit Interviewing: key

Preparation:

Know the interviewee

Know yourself!

Know what you want to accomplish

Audit Testing Audit Interviewing: key • Preparation: – Know the interviewee – Know yourself! – Know

Opening of the interview: establish rapport and mutual confidence

During the interview: tact, patience and firmness, be a good listener. Types of questions, accuracy of information

At the end of the interview: summarise, thanks, next steps

After the interview: follow up, document findings

Procurement: how are suppliers authorised?

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Fraud Prevention Key Control is Communication : • • • • • • What is “fraud”?

Fraud Prevention

Key Control is Communication:

What is “fraud”?

Fraud Prevention Key Control is Communication : • • • • • • What is “fraud”?

How can it happen?

What is its impact?

What can you do to prevent it? What can you do if you suspect it? What lessons can we learn from previous frauds?

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Fraud Prevention  Fraud awareness training  External  Our ethics and policies  What to

Fraud Prevention

  • Fraud awareness training

Fraud Prevention  Fraud awareness training  External  Our ethics and policies  What to
  • External

  • Our ethics and policies

  • What to look for

  • Procurement fraud training

    • Procurement risks

    • Associated controls

Fraud Prevention  Fraud awareness training  External  Our ethics and policies  What to

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