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Procurement Internal Audit Checklist

The document outlines an internal audit checklist for procurement, detailing steps for pre-audit preparation, governance, vendor management, purchasing, contract management, and compliance. It emphasizes the importance of documentation, monitoring vendor performance, and ensuring compliance with legal and organizational standards. The checklist serves as a comprehensive guide to evaluate and improve procurement processes within an organization.

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Herbert Ngwarai
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665 views4 pages

Procurement Internal Audit Checklist

The document outlines an internal audit checklist for procurement, detailing steps for pre-audit preparation, governance, vendor management, purchasing, contract management, and compliance. It emphasizes the importance of documentation, monitoring vendor performance, and ensuring compliance with legal and organizational standards. The checklist serves as a comprehensive guide to evaluate and improve procurement processes within an organization.

Uploaded by

Herbert Ngwarai
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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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.

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