Procurement audit training course- Procurement Training
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Business Services Support Limited offer procurement audit training course as part of its training programme. This presentation takes you through some of the salient points to watch for in procurement auditing.
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Procurement audit training course- Procurement Training
- 1. P ROCUREMENT AUDIT C OURSE B USINESS S ERVICES S UPPORT L IMITED T RAINING www.businessservicessupport.com
- 2. O BJECTIVES To give delegates a good understand of the why and how of carrying out an audit of the procurement function, its procedures and practices 2 COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
- 3. F ORMAT What are the procurement procedures, are they followed? What guidelines exist regarding legal agreements, are they complied with and what is the procedure for noncompliance How are contract management issues identified and reported Is technical compliance and physical completion review evidenced? How is fraud (and corruption) identified and reported? 3 COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
- 4. A SSESSING S UPPLIER ’ S F INANCIAL S TRENGTHS & S YSTEMS 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 4 COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
- 5. S TAGES TO THE A UDIT 1. Risk assessment approach 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 COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 5 2011
- 6. P ROCUREMENT A UDIT P ROCEDURES 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? 6 COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
- 7. P ROCUREMENT A UDIT P ROCEDURES 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? 7 COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
- 8. P ROCUREMENT A UDIT P ROCEDURES Legal Agreements What are our key procurement requirements? Does the agreement comply with our standards? What do our procurement procedures say about noncompliance? What is our legal position with the contracting parties? 8 COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
- 9. P ROCUREMENT R ISK M ANAGEMENT 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. 9 COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
- 10. P ROCUREMENT R ISK M ANAGEMENT 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. 10 COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
- 11. P ROCUREMENT R ISK M ANAGEMENT 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 COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
- 12. P ROCUREMENT R ISK M ANAGEMENT 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 12 COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
- 13. K EY I NTERNAL C ONTROLS Receiving controls Reporting controls Supervisory controls Reconciliation controls Segregation of duties Authorisation controls Recording controls 13 COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
- 14. AUDIT T ESTING “..methods and techniques for testing and validating exposures should be reflective of the risk materiality and likelihood of occurrence” 14 COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
- 15. AUDIT T ESTING TYPES OF TESTS 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 → Invoice→ Payment 15 COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
- 16. AUDIT T ESTING Substantive Tests - objectives of such tests may include evidence of: • Completeness • Existence • Valuation • Ownership • Disclosure Procurement: amounts owed to creditors at the end of the period, goods ordered not yet received etc 16 COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
- 17. AUDIT T ESTING Types of tests Audit Interviewing: useful for Finding out information Gaining access to other individuals Further information Gauge opinions Procurement: how are suppliers authorised? 17 COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
- 18. AUDIT T ESTING 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? 18 COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
- 19. F RAUD P REVENTION 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? COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
- 20. F RAUD P REVENTION Fraud awareness training Our ethics and policies External What to look for Procurement fraud training Procurement risks Associated controls COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011