Purchasing Audit Work Program

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Table of Contents
PURCHASING AUDIT WORK PROGRAM: SAMPLE 1........................................................................................... 3
PURCHASING AUDIT WORK PROGRAM: SAMPLE 2........................................................................................... 7
2 Source: www.knowledgeleader.com
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
• 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
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?
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.
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?
− 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
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
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.

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1 Source: www.knowledgeleader.

PROJECT TEAM (LIST MEMBERS)

Project Phase Date Comments

Report Issuance (Local)

Report Issuance (Worldwide)

Objective Comments Initial

Ensure that the purchasing process is

Ensure proper segregation of duties in

Provide information on internal control

Time Audit Step Initial Index

• Discuss timing with key management.

• Schedule timing with the auditee.

• Finalize audit program.

• Schedule staffing as appropriate.

• Create a summary scorecard for each process reviewed.

• Using the standard report template, create the internal audit

• Hold a closing meeting with key company management to

• Publish the final report and distribute it.

• Include in the work paper binder a copy of the final report.

• Discuss job economics with the internal audit manager, as

• 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

• Obtain electronic copies of relevant files as considered

Detailed Audit Procedures

Understand the Process

• Conduct interviews with key purchasing individuals to

understand the purchasing process.

• Create process maps to visualize the information flow and

• Review relevant written departmental policies,

• Evaluate current practices against known best practices.

• Interview key purchasing department management to

a) Perform detailed testing on 20 selected purchasing

b) Test all transactions selected for the following, if not

c) Test to see if adequate controls exist in the receiving function.

Does receiving receive goods that do not have a PO? How

d) Analyze the return to vendor (RTV) process. Test for:

e) Purchasing proper process.

f) Identify metrics used by management to monitor/manage the

PROJECT TEAM (LIST MEMBERS)

Project Phase Date Comments

Report Issuance (Local)

Report Issuance (Worldwide)

Time Project Work Step Initial Index

Review compliance with established procedures for the purchasing

• Conduct an entrance meeting. Restate the scope and timing of the

• Interview key personnel to gain an understanding of the purchasing

• Understand and review the purchase requisition (PR) and purchase

• Understand the receiving/inspection process. Test a selection of

• Understand the following items:

− Identify how purchasing objectives are met. Are cross-functional

• Interview key people to understand the procedures and processes

• Determine the various facility's involvement in the contract

• Review department procedures for adequacy and determine that

• Interview key people to understand the procedures and processes

• Analyze possibilities of centralized corporate procurement programs

• Identify vendors who have debit balances in accounts payable and

• Test 20 purchase requisitions and POs for compliance with

budget for the appropriate cost center.

• Test five receipts (receiving documents) for agreement to PO and