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Variations in procurement auditing


All stakeholders are interested in knowing if the objectives of an organisation are being met as planned.

Opinion by Nyasha Chizu

The goals of the organisation are supposed to be achieved in a certain style. A procurement audit is therefore necessary given the fact that between 60%-80% of operational expenditure is channelled through procurement activities.

Literary, organisational expenditure, save for salaries, are handled ordinarily by the procurement section.

This, therefore, gives rise to the need to ensure that expenditure is in line with organisational objectives and company policy.

According to the Institute of Internal Auditors, auditing is an independent, objective assurance and consulting activity designed to add value and improve an organisation’s operations.

It helps an organisation accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes.

From the definition above, audit process is for reviewing operations to assist the organisation to accomplish its objectives. Management is expected to receive a report covering the findings, weaknesses and recommendations for corrective action and future improvements discovered during the review.

Procurement audit focus areas can be classified into five categories. The most common type of audit in the public sector and other institutes is verification of compliance with procurement policies and procedures.

The main focus is to check if procedures were followed. The main weakness of this type of audit is that since procurement is a complex process, underhand deals are performed in compliance with the policies; hence it is difficult to pin down perpetrators.

In the event that fraud is suspected, forensic audit is necessary to fish out irregularities in the tendering process.

Forensic auditing is defined as a process of applying auditing skills to situations that have a legal implication. These types of audits are expensive and thorough with the aim of gathering evidence that can be presented to a court of law.

Value for money procurement audits are undertaken to verify if the organisational processes are efficient. Value for money audits go beyond the establishment of whether policies and procedures were followed.

They also evaluate the opportunity costs of any capital outlay to an organisation.

Procurement policies and procedures might have been complied with, such as obtaining three quotations in order to make a procurement decision. Value for money audit verifies if the quotations used were competitive.

There are various scientific measures that can be applied to make an informed assessment of a procurement process.
In procurement, benchmarking audits can be done to establish the performance of a procurement unit.

The benchmarking can be done within the same organisation comparing the present and past performance of the procurement division in terms of efficiency and effectiveness. Organisations with decentralised procurement units can compare the performance of divisional or regional procurement teams.

The benchmarking can be extended to comparison with external organisations, all in the quest to establish if the procurement unit is performing in line with expectations.

Audit of procurement can be done simply by performance monitoring of the unit. Targets are set, and the targets are reviewed and progress appropriately monitored.

Procurement audit can be carried out at three stages of procurement. They can be carried out at pre contract stage, post contract stage or on a perpetual basis. Given the various variations, it is important for organisations to adopt the appropriate procurement audit type in order to yield results.

Nyasha Chizu is a Fellow of CIPS and the CIPS Zimbabwe branch chairman writing in his personal capacity.

Feedback: chizunyasha@yahoo.com

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