Procurement audit training course- Procurement Training

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Transcript of Procurement audit training course- Procurement Training

  1. 1. P ROCUREMENT AUDIT C OURSE B USINESS S ERVICES S UPPORT L IMITED T RAINING www.businessservicessupport.com
  2. 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 practices2 COPYRIGHT TO BUSINESS SERVICES SUPPORT LIMITED2011
  3. 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 noncomplianceHow are contract management issues identified and reportedIs technical compliance and physical completion review evidenced?How is fraud (and corruption) identified and reported? 3 COPYRIGHT TO BUSINESS SERVICES SUPPORT LIMITED2011
  4. 4. A SSESSING S UPPLIER S F INANCIAL S TRENGTHS & S YSTEMS Two Basic Issues 1.Is the function performing well? Yes No2.Are there improvements that need to be made? Yes: what are they? No: all operating well 4 COPYRIGHT TO BUSINESS SERVICES SUPPORT LIMITED2011
  5. 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 testing6. Audit completion meeting: findings and recommendations7. Write, issue and discuss audit report COPYRIGHT TO BUSINESS SERVICES SUPPORT LIMITED5 2011
  6. 6. P ROCUREMENT A UDIT P ROCEDURES Tenders and award of contracts What is the policy and process?Purchase OrderWho authorises purchase orders?Are POs used at receiving and payment stages?ReceivingDo physical goods (and services) match those ordered?Are all terms on receiving document appropriate?6 COPYRIGHT TO BUSINESS SERVICES SUPPORT LIMITED2011
  7. 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 LIMITED2011
  8. 8. P ROCUREMENT A UDIT P ROCEDURES Legal AgreementsWhat 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 LIMITED2011
  9. 9. P ROCUREMENT R ISK M ANAGEMENT KEY RISKS INCLUDE: Adverse impact on budgets, cash-flow and profitabilityCustomers kept waiting or turned downHelplessness 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 LIMITED2011
  10. 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 LIMITED2011
  11. 11. P ROCUREMENT R ISK M ANAGEMENT KEY RISKS INCLUDE: Exposure to internal and external fraudExploited 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 LIMITED2011
  12. 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.Organisations activities become subject of public scrutiny and investigation12 COPYRIGHT TO BUSINESS SERVICES SUPPORT LIMITED2011
  13. 13. K EY I NTERNAL C ONTROLS Receiving controlsReporting controlsSupervisory controls Reconciliation controlsSegregation of dutiesAuthorisation controlsRecording controls 13 COPYRIGHT TO BUSINESS SERVICES SUPPORT LIMITED2011
  14. 14. AUDIT T ESTING ..methods and techniques for testing and validating exposures should be reflective of the risk materiality and likelihood of occurrence14 COPYRIGHT TO BUSINESS SERVICES SUPPORT LIMITED2011
  15. 15. AUDIT T ESTING TYPES OF TESTS 1.Walkthrough Tests: walk one or two transactions sequentially through all the processing stages of the system2.Enables the auditor to: Confirm their understanding of the systemHighlight key controls which would need to be evaluated furtherPROCUREMENT: Contract Purchase Order Receipt Invoice Payment 15 COPYRIGHT TO BUSINESS SERVICES SUPPORT LIMITED2011
  16. 16. AUDIT T ESTING Substantive Tests - objectives of such tests may include evidence of: CompletenessExistenceValuationOwnershipDisclosureProcurement: amounts owed to creditors at the end of the period, goods ordered not yet received etc 16 COPYRIGHT TO BUSINESS SERVICES SUPPORT LIMITED2011
  17. 17. AUDIT T ESTING Types of tests Audit Interviewing: useful for Finding out informationGaining access to other individualsFurther informationGauge opinionsProcurement: how are suppliers authorised?17 COPYRIGHT TO BUSINESS SERVICES SUPPORT LIMITED2011
  18. 18. AUDIT T ESTING Audit Interviewing: key Preparation: Know the interviewee Know yourself! Know what you want to accomplishOpening of the interview: establish rapport and mutual confidenceDuring the interview: tact, patience and firmness, be a good listener. Types of questions, accuracy of informationAt the end of the interview: summarise, thanks, next stepsAfter the interview: follow up, document findingsProcurement: how are suppliers authorised? 18 COPYRIGHT TO BUSINESS SERVICES SUPPORT LIMITED2011
  19. 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 LIMITED2011
  20. 20. F RAUD P REVENTION Fraud awareness training Our ethics and policiesExternalWhat to look forProcurement fraud training Procurement risksAssociated controlsCOPYRIGHT TO BUSINESS SERVICES SUPPORT LIMITED2011