Auditing Procurement and Contracts

Introduction

Procurement is one of the highest-risk areas in any organisation. Large sums flow through purchasing and contract processes, and weaknesses can lead to overpayment, poor value, favouritism, bid rigging, kickbacks and contracts that fail to deliver what was promised. Regulators, boards and the public expect procurement to be fair, transparent and well controlled.

This Auditing Procurement and Contracts training course gives auditors a structured, risk-based approach to reviewing the full procure-to-pay and contract life cycle. Participants learn how to audit needs identification, sourcing and tendering, supplier selection, contract award, contract management, variations, invoicing and payment.

The course places particular emphasis on fraud and corruption red flags, data analytics for procurement and how to add value by identifying savings and process improvements as well as control gaps.

Course Objectives

By the end of this training course, participants will be able to:

• Identify the main risks across the procurement and contract life cycle
• Plan a risk-based audit of procurement and contract management
• Evaluate controls over requisitioning, sourcing and tendering
• Assess the fairness and transparency of supplier selection and award
• Audit contract management, variations and performance monitoring
• Test invoicing, receipting and payment controls
• Recognise procurement fraud and corruption red flags
• Use data analytics to target procurement audit work

Target Audience

This training course is suitable for a wide range of professionals, including:

• Internal auditors and audit managers
• Procurement and contracts managers
• Compliance and anti-fraud professionals
• Finance and accounts payable managers
• Government and public sector auditors
• Risk and governance professionals

Training Methodology

The course uses sample tender files, evaluation reports, contracts and purchase data to provide realistic practice. Participants map procurement processes, test controls, analyse spend data for anomalies and investigate red flags in case studies drawn from public and private sector organisations.

Target Competencies

• Procurement risk assessment
• Tender process review
• Contract management auditing
• Procure-to-pay control testing
• Procurement fraud detection
• Spend data analytics

Day One: Procurement Risks and Audit Planning

• The procurement and contract life cycle from need to closure
• Procurement policies, delegations and governance structures
• Common procurement risks and audit findings
• Public sector and private sector procurement differences
• Risk assessment and scoping of a procurement audit
• Data and document requests for procurement audits
• Exercise: building a procurement risk and control matrix

Day Two: Sourcing, Tendering and Supplier Selection

• Requisition approval and needs justification
• Choosing procurement methods and thresholds
• Specifications that are fair and non-restrictive
• Tender advertisement, clarification and bid opening controls
• Evaluation criteria, scoring and evaluation committees
• Conflict of interest declarations and independence
• Exercise: reviewing a tender evaluation file

Day Three: Contract Award and Contract Management

• Contract approval, signing authorities and documentation
• Key contract terms that protect the organisation
• Contract management plans and responsibilities
• Monitoring supplier performance and service levels
• Controlling variations, extensions and claims
• Contract closure and lessons learned
• Case study: a contract with uncontrolled variations

Day Four: Purchase-to-Pay Controls

• Purchase orders, goods receipt and three-way matching
• Supplier master data creation and changes
• Invoice processing, approval and duplicate prevention
• Payment runs and bank detail change controls
• Petty cash, purchasing cards and low-value purchases
• Accruals and commitments reporting
• Exercise: testing a sample of payments

Day Five: Fraud, Analytics and Reporting

• Bid rigging, kickbacks and fictitious supplier schemes
• Split purchases and threshold avoidance
• Analytics for spend patterns, duplicates and suspicious suppliers
• Linking supplier and employee data to detect conflicts
• Identifying savings and value-for-money opportunities
• Writing persuasive procurement audit reports
• Personal action plan for procurement auditing