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PROCUREMENT AUDIT WORK PROGRAM
Area
Purchasing
Objective
Purchasing function is performed in accordance with
management’s policies and procedures.
Purchasing is performed in an effective, efficient, and
economical manner.
Purchasing function protects the best interests of the
company in getting the highest quality product at the
lowest price, thereby avoiding actual or apparent conflict
of interest.
Purchasing function ensures continual supply of needed
materials without any significant delays impacting overall
supply chain.
Procedures are established to validate that what has
been ordered is received before financial settlement.
No undue influence by vendors to get order, or no
favoritism shown to vendors unless warranted through
product quality and price.
Risk Risk Indication
Purchase order information enlisting quantity/ price etc may be High
incorrect.
Unauthorized purchases can be made.
Vendor due diligence/ selection is not performed resulting in
purchases made for personal use rather than for the benefit of
an organization.
Adjustment to vendor accounts for returned merchandize/
alteration in purchase order may be made without approprite
approvals.
Inadequate division of responsibilities between purchasing,
receiving, and accounts payable may permit fraud.
Duplicate payments for purchases may be made.
Unauthorized goods or services may be accepted by the
company resulting in cost over run.
Purchasing function may not be operated in an efficient,
effective, and economical manner.
Control
Pre-numbered purchase orders are used. Logs should be maintained
of these numbers and missing numbers warrant independent
investigation.
Approved system embedded Purchasing Authority Delegation Matrix
in place. As one limit is reached, either additional signatures or
higher levels of management should be required to approve the
order.
Segregation is maintained between receiving and placing orders.
Receipts of goods are matched with authorized purchase orders.
Requests For Proposals (RFPs) are sent to vendors with Business
Requirement Analysis for assessing vendors due diligence.
Testing
1. Assess whether the purchasing department is organizationally independent of payment function.
2. Check if the responsibilities of the purchasing department clearly defined.
3. Check company policy on purchasing is covered by a written manual.
4. Check if there is a conflict of interest policy covering relationship with vendors.
5. Check if the purchasing department is consulted on favorable purchasing opportunities, economic ordering
quantities, and revision of purchasing specifications.
6. Assess the procedure for requesting bids. Obtain approvals of bid committee over purchases made beyond
specified amount as documented in the purchasing manual.
7. Assess vendor selection criteria.
8. Check if purchase orders issued are Pre- Numbered.
9. Check if there exist procedures governing the negotiations of long-term contracts.
10. Check if all purchase orders are reviewed by someone other than the individual preparing the purchase order
(reasonableness of order and vendor selection).
11.Check if price quotations or bids are obtained from two or more suppliers on significant purchases if catalog or
advertised prices are not available.
12. Check if all purchase orders are cancelled after payment to avoid duplicate payment of the same invoice.
13. Check if buyers are prohibited from accepting gifts from vendors.
14. Check if vendor price lists are regularly updated.
