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8/10/2019 Procurement Audit Course.pptx
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PROCUREMENTAUDITCOURSEBUSINESSSERVICESSUPPORTL IMITEDTRAINING
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OBJECTIVES
To give delegates a good understand of the why and how ofcarrying out an audit of the procurement function, its
procedures and practices
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Two Basic Issues
1. Is the function performing well?
Yes No
2. Are there improvements that need to be made?
Yes: what are they?
No: all operating well
ASSESSINGSUPPLIERSFINANCIAL
STRENGTHS& SYSTEMS
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STAGESTOTHEAUDIT
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1. Risk assessment approach
2. Evaluate internal controls
3. Test controls
4. Analyse results of tests to determinethe way forward
5. Perform substantive testing
6. Audit completion meeting: findings
and recommendations
7. Write, issue and discuss audit
report
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PROCUREMENTAUDITPROCEDURES
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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?
Receiving
Do physical goods (and services) match those
ordered?
Are all terms on receiving document appropriate?
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Accounts Payable Do invoices match orders, and receipts?
Are invoices accurate, payments correctly made and recorded?
Management
How is procurement managed?
Are controls in place and adequately monitored and followed
up?
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PROCUREMENTAUDITPROCEDURES
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Legal Agreements
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What are our
key
procurement
requirements?
Does the
agreement
comply with
our standards?
What do our
procurement
procedures say
about non-
compliance?
What is our
legal position
with the
contracting
parties?
PROCUREMENTAUDITPROCEDURES
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PROCUREMENTRISKMANAGEMENT
KEY RISKS INCLUDE:
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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KEY RISKS INCLUDE:
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.
PROCUREMENTRISKMANAGEMENT
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PROCUREMENTRISKMANAGEMENT
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.
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PROCUREMENTRISKMANAGEMENT
KEY RISKS INCLUDE:
Damage to brand and company reputation by unethical
behaviour or incompetence.
Organisation is penalised for non-compliance withregulatory requirements.
Organisations activities become subject of public
scrutiny and investigation
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KEYINTERNALCONTROLS
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Reportingcontrols
Recordingcontrols
Reconciliationcontrols
Authorisationcontrols
Segregationof duties
Supervisorycontrols
Receivingcontrols
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..methods and techniques for testingand validating exposures should be
reflective of the risk materiality and
likelihood of occurrence
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AUDITTESTING
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TYPES OF TESTS1. 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 Invoice
Payment
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Substantive Tests - objectives of such tests may includeevidence of:
Completeness
Existence
Valuation
Ownership
Disclosure
Procurement: amounts owed to creditors at the end of the
period, goods ordered not yet received etc
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AUDITTESTING
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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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AUDITTESTING
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Audit Interviewing: key
Preparation:
Know the interviewee
Know yourself!
Know what you want to accomplish
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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AUDITTESTING
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FRAUDPREVENTION
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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FRAUDPREVENTION
Fraud awareness training External
Our ethics and policies
What to look for
Procurement fraud training
Procurement risks
Associated controls