1 Source: [Link].
com
Table of Contents
PURCHASING AUDIT WORK PROGRAM: SAMPLE 1........................................................................................... 3
PURCHASING AUDIT WORK PROGRAM: SAMPLE 2........................................................................................... 7
2 Source: [Link]
PURCHASING AUDIT WORK PROGRAM: SAMPLE 1
PROJECT TEAM (LIST MEMBERS)
Project Phase Date Comments
Planning
Fieldwork
Report Issuance (Local)
Report Issuance (Worldwide)
AUDIT OBJECTIVES
Objective Comments Initial
Ensure that the purchasing process is
adequately controlled.
Ensure proper segregation of duties in
the purchasing process.
Provide information on internal control
weaknesses and comment on the
process's overall efficiency and
improvement opportunities.
Time Audit Step Initial Index
Steps
Administration
Planning
• Discuss the nature and scope of the audit with key ABC
personnel.
• Discuss timing with key management.
• Schedule timing with the auditee.
• Finalize audit program.
• Schedule staffing as appropriate.
Reporting
3 Source: [Link]
Time Audit Step Initial Index
• Create a summary scorecard for each process reviewed.
• Using the standard report template, create the internal audit
report (including a compilation of findings from work
performed).
• Hold a closing meeting with key company management to
review the draft internal audit report and findings.
• Publish the final report and distribute it.
Other Administrative
• Compile test work and key support data into a work paper
binder. Include a binder index of key information.
• Include a final budget vs. actual (BVA) summary for the job in
the work paper binder.
• Include in the work paper binder a copy of the final report.
• Discuss job economics with the internal audit manager, as
necessary.
• Follow up on satisfaction surveys.
• Submit a report to the internal audit report database.
• File work papers in the internal audit file room.
Preliminary Field Work
• Identify key contacts for audit areas.
• Obtain and document an understanding of the overall
operating organization structure. Consider the following areas:
− Personnel: Organization charts, total number of personnel,
divisions, job descriptions, etc.
− Transactions: The volume/value of various transaction
types processed.
− Systems: Application modules, interfaces, tracking systems
and related management reporting.
− “Customers”: Who are the process's key external and
internal customers?
• Obtain electronic copies of relevant files as considered
necessary to facilitate testing and process analysis.
Detailed Audit Procedures
Understand the Process
• Conduct interviews with key purchasing individuals to
4 Source: [Link]
Time Audit Step Initial Index
understand the purchasing process.
• Create process maps to visualize the information flow and
identify key points of control and risk.
• Review relevant written departmental policies,
procedures/goals and objectives, including all purchasing
policies.
• Evaluate current practices against known best practices.
• Interview key purchasing department management to
understand each area's workflow. Document the discussion.
Detail Testing
a) Perform detailed testing on 20 selected purchasing
transactions to assess the operation and effectiveness of key
controls. A wide variety of dollar-value procurements from all
commodity groups will be selected. The selection will be
tested for the following:
− The purchase is properly authorized.
− POs are accurately completed.
− Purchase orders are placed timely.
− All items tested from the PR were ordered.
− Vendor selection is accurate between the PR and PO.
− Pricing between the PR and the PO is accurate.
Testing will be performed to facilitate the following:
− Enhance our understanding of the “nuts and bolts” of the
process.
− Test our understanding of key controls.
− Assess if key controls were operating consistently.
b) Test all transactions selected for the following, if not
specifically noted in Step No. A above:
− Authorization
− Validation
− Accuracy
− Proper process
− Completeness
− Timeliness
Discuss the sample size and approach with the IA manager
before commencing testing.
c) Test to see if adequate controls exist in the receiving function.
− Does receiving match the number of goods received to the
PO?
5 Source: [Link]
Time Audit Step Initial Index
Does receiving receive goods that do not have a PO? How
often does a product come in that a PO needs to be generated
for then?
d) Analyze the return to vendor (RTV) process. Test for:
− Quantity outstanding
− Length of time outstanding
− Processes in place to track outstanding goods
e) Purchasing proper process.
− What should be on a PO and what shouldn’t?
− Perform cutoff testing to see if purchasing is cutting POs
that do not need to be cut.
− Ensure that purchasing is not processing transactions that
do not have a PO.
f) Identify metrics used by management to monitor/manage the
entire process.
− Test the accuracy of metrics as deemed necessary.
− Assess the need for additional/different metrics.
6 Source: [Link]
PURCHASING AUDIT WORK PROGRAM: SAMPLE 2
PROJECT TEAM (LIST MEMBERS)
Project Phase Date Comments
Planning
Fieldwork
Report Issuance (Local)
Report Issuance (Worldwide)
Time Project Work Step Initial Index
Scope
Review compliance with established procedures for the purchasing
function. Specific areas of focus include the requisitioning process,
consistent pricing, identifying and obtaining key vendors, proper
authorization, adequacy of supporting documentation, timeliness of
receiving process, and segregation of duties.
Field Work
• Conduct an entrance meeting. Restate the scope and timing of the
audit. Establish a schedule for status meetings and communication
protocol. Provide customer satisfaction forms and discuss
expectations.
• Interview key personnel to gain an understanding of the purchasing
process.
− Determine what management and other exception reports are
used and review them as appropriate. (What metrics are
maintained?) Identify and evaluate performance measurements
(internal and external).
• Understand and review the purchase requisition (PR) and purchase
order (PO) processes.
− Identify PR/PO documentation requirements and approval levels
and limits.
• Understand the receiving/inspection process. Test a selection of
receipts to ensure agreement with PO.
− Does receiving receive goods that do not have POs? If so, how
often?
• Understand the following items:
− How is each department being held accountable for its budget?
7 Source: [Link]
Time Project Work Step Initial Index
− Identify how purchasing objectives are met. Are cross-functional
teams used?
− Determine how errors are tracked and monitored.
− Ensure that the training process includes employees having
adequate skills in materials management.
• Interview key people to understand the procedures and processes
involved in the contract process.
• Determine the various facility's involvement in the contract
negotiation, review and approval process.
− Determine who has the authority to make commitments for the
facility.
− Inquire about side letters and other agreements made outside
the formal contract process.
• Review department procedures for adequacy and determine that
contracts and/or agreements are current and properly approved.
• Interview key people to understand the procedures and processes
involved in the inventory process.
− Review controls surrounding inventory (e.g., stockroom
security).
− Understand the inventory reconciliation process.
• Analyze possibilities of centralized corporate procurement programs
for specific products/services.
• Identify vendors who have debit balances in accounts payable and
what we are doing about it. Use trial balance to test.
• Test 20 purchase requisitions and POs for compliance with
corporate policy (authorization, completed form, timely placement of
order, accurate vendor selection and correct pricing)
− Pull two invoices from the top 10 vendors and list the item
purchased and the price paid.
− Determine whether competitive bidding is required for the items
listed and, if so, if it has occurred.
− Examine group purchasing contracts and determine if listed
items are covered and, if so, if the contract price was paid.
• Test five capital purchase requisitions and POs for compliance with
corporate policy. Determine if:
− The asset acquisition requisition was properly approved.
− They were processed timely per facility policy.
− Written PO/purchase requisition was used.
◦ If competitive bidding occurs, ensure that the price paid
agrees with the bid prices. If competitive bidding does not
occur, ensure that this complies with the policy.
◦ If group contracts were used, ensure that the contracted price
was paid.
◦ Ensure that purchased items are included in the capital
8 Source: [Link]
Time Project Work Step Initial Index
budget for the appropriate cost center.
◦ Determine if the cost of maintenance and supplies was
considered during equipment purchase and selection.
◦ Determine if manufacturer warranties were maintained and
filed.
• Test five receipts (receiving documents) for agreement to PO and
inspection requirements (receipts should be for POs previously
tested)
− Was the asset physically received properly and promptly?
− Was the packing slip properly date-stamped upon receipt?
− Was the asset received, inspected and compared to the packing
slip?
− Was the packing slip filed for easy reference or attached to the
AP package?
− Was the asset stored with appropriate security measures or
forwarded to the appropriate department (having obtained an
appropriate signature from the department or other documentary
evidence) promptly?
• Test 10 storeroom stock requisitions for compliance.
• Stratify PO and test for duplicates.
• What is the return-to-vendor (RTV) process?
− Quantity outstanding, length of time outstanding, and can we
track outstanding goods?
• Do employees sign a conflict-of-interest statement?
• Determine the top 10 vendors.
− Is competitive bidding required?
− Do prices match contractual agreements?
• Determine the feasibility of procurement card use.
• If an automated match of PO to invoice, note whether the dollar
parameter to generate a nonmatch complies with the policy (e.g.,
greater than $0.25). Select 10 POs that have not matched and
ensure that they were resolved promptly.
• Select the test sample and trace it to respective invoices if a manual
match. Ensure that amounts match and that any differences have
been adequately resolved.
• How are changes affected to the vendor master file? Determine
adequate control and review of changes, additions, deletions, and
nonactive and new vendors.
Final
• Reporting: Draft
− Prepare a preliminary draft of the audit report using the standard
9 Source: [Link]
Time Project Work Step Initial Index
format.
• Reporting: Issuing Draft
− Issue preliminary report to management for their comments and
determination of action-item implementation timing/who will be
responsible for the implementation.
• Set the deadline for management’s response.
• Validate the accuracy of the report with the auditee. This is an
ongoing step, with open communication occurring throughout the
review.
10 Source: [Link]
