Internal Audit Checklist – Procurement
1. Pre-Audit Preparation
• Review the procurement policy and procedures manual.
• Understand the organization's procurement process, including sourcing, purchasing, and supplier management.
• Identify applicable regulations, standards, and organizational policies.
• Obtain the procurement data for the audit period (e.g., purchase orders, contracts, invoices).
2. Governance and Procurement Policies & Procedures
• Ensure there is a formal, written procurement policy in place.
• Verify that the policy aligns with relevant laws, regulations, industry standards, and organizational objectives.
• Assess whether the policy includes roles, responsibilities, and authority levels.
• Check for periodic review and updates of the procurement policy.
• Evaluate the accessibility and understanding of the policy among procurement staff.
3. Procurement Planning
• Assess whether procurement needs are identified and planned in advance.
• Review the process for developing procurement plans, including budget and timelines.
• Review annual procurement plans and their alignment with organizational goals.
• Assess the process for identifying procurement needs.
• Verify budgetary approvals for planned procurements.
4. Vendor Selection and Management
• Confirm that there is a standard process for vendor selection.
• Verify the use of proper evaluation criteria, such as price, quality, and reliability.
• Ensure a transparent vendor selection process (e.g., competitive bidding, request for proposals).
• Ensure that vendor selection is transparent, and any conflicts of interest are disclosed.
• Check that vendors undergo due diligence before being approved (e.g., financial stability, reputation).
• Review the process for contract negotiation and approval.
• Review the procedure of the vendor approval for the single source suppliers.
• Verify vendor evaluations are documented and based on pre-defined criteria.
• Assess the controls on the vendor master data in the system.
• Assess the process for monitoring vendor performance.
5. Purchasing Process
• Verify that purchase requisitions are properly authorized.
• Examine the procurement process to ensure it is being followed as per policy.
• Review purchase orders for accuracy, completeness, and approval.
• Ensure segregation of duties in the procurement process to prevent conflicts of interest.
• Check compliance with approved procurement thresholds and limits.
• Ensure that proper records are maintained for all procurement transactions.
6. Contract Management
• Review the procurement contracts for compliance with organizational and legal requirements.
• Ensure contracts are reviewed and approved by appropriate authorities.
• Verify that contracts include key terms such as scope, deliverables, timelines, and penalties.
• Check for compliance with contractual obligations by both parties.
• Assess the process for contract renewals and amendments.
• Confirm that contracts are stored and accessible for future reference.
• Check for the inclusion of performance metrics, penalties, and dispute resolution clauses.
7. Receipt of Goods and Services
• Verify that goods and services received match purchase orders and invoices.
• Check documentation for the receipt of goods, including inspection reports.
• Confirm that goods/services are received as per the agreed terms.
• Ensure that discrepancies are recorded and resolved promptly.
8. Payment Process
• Verify that payments are made only for goods and services received and approved.
• Review the process for matching invoices with purchase orders and goods receipts.
• Check for proper matching of invoices, purchase orders, and receiving reports (three-way matching).
• Review the timeliness of payments to vendors and compliance with payment terms.
• Ensure that payments are authorized and processed in a timely manner.
• Check that payments are made to approved vendors only.
• Assess whether there is segregation of duties between procurement, receiving, and accounting functions.
• Verify that discounts, penalties, and payment terms are properly applied.
9. Compliance and Risk Management
• Assess compliance with regulatory and legal requirements.
• Identify and evaluate procurement-related risks and mitigation measures.
• Check for compliance with anti-corruption and ethical standards in procurement activities.
• Verify compliance with environmental and sustainability regulations, where applicable.
• Assess the procurement process for potential risks, such as fraud, conflicts of interest, or vendor dependency.
• Review mitigation strategies for identified procurement risks.
• Evaluate the contingency plans in place in case of supplier failure or emergencies.
10. Supplier Performance & Evaluation
• Evaluate the process for monitoring vendor performance and quality control.
• Ensure that there is a mechanism for dealing with underperforming suppliers.
• Review feedback loops for continuous improvement and supplier relationship management.
11. Monitoring and Reporting
• Verify the existence of periodic procurement reports and their accuracy.
• Check whether procurement activities are monitored against key performance indicators (KPIs).
• Assess the process for addressing procurement audit findings and recommendations.
12. Records and Documentation
• Ensure proper documentation of all procurement activities, including contracts, invoices, and correspondence.
• Verify that procurement records are maintained in accordance with organizational retention policies and regulatory
requirements.
• Verify that records are complete, accurate, and securely stored.
• Assess the security and confidentiality of procurement records.
13. Audit Trails & Reporting
• Ensure that all procurement activities are properly logged with an audit trail.
• Review internal audit reports to identify any gaps or discrepancies in the procurement process.
• Verify that regular procurement reviews and audits are conducted.
14. Continuous Improvement
• Assess whether there are processes in place to identify opportunities for process improvements in procurement.
• Review feedback mechanisms for stakeholders involved in procurement activities.
• Check for training and capacity-building initiatives for procurement staff.
• Ensure that audit findings and recommendations are used to enhance procurement policies and practices.
