Did you know that billing schemes are the second most common form of fraud for organizations with fewer than 100 employees?
Fraud can cost a business thousands of dollars. And the procurement department is one of the most common areas for fraud.
Without a proper auditing system in place, you won’t even know where in the department it’s happening. That’s why we’ve gathered 7 steps to help you audit yours! Read on to learn what they are:
1. Meet with the managers
The first thing you’ll want to do before you start your audit of the procurement department is to schedule a meeting with the managers. Specifically the managers of that department.
You’ll want to discuss with them what they think areas of improvement could be. Discuss the processes that are occurring within the department. Getting a manager’s perspective can help you understand what to focus on.
2. Prioritize the Procurement Department
After hearing from the managers about the current state of the department. Start to prioritize the different processes. Each process may have different challenges. Prioritizing them can ensure that you are getting to the bigger challenges first.
The procurement process will take you through the process of making a company purchase with specific vendors. If you sense an issue with choosing the vendors, you may want to tackle that area first. If you feel as though the process is taking a bad turn in the very beginning then you’ll want to go through each step.
This is where the meeting with the managers comes into play. And why it is a vital step to the audit.
3. Purchasing Forms
Depending on where you’ll start your audit you will eventually get to purchasing forms. Or more commonly known as purchase orders. You will want to select a random group of these purchase forms to audit.
This will mean checking that each section is filled out correctly. Make sure that the signatures on this purchase order are valid as well. Finally, check the information on the final invoice and any other documents that should have the same information.
4. Vendors and Selection
Every company has a process of putting vendors on an approved list. This is an area of the procurement process is likely to have fraud. Review this process to ensure that it is up to date and meets the standards that the company requires. Set aside any orders that are made without this process for your later report.
Next, look at the vendors on the approved list and review them by the criteria required once again. Set aside the vendors that don’t meet the criteria.
5. Review Procedures
As an auditor, you will also review the overall procedures taken by the employees in this department. Whether these procedures are signature reviewing or purchase order approval by a manager.
Review the steps that employees should be doing to ensure that the procurement process is done correctly. If there are steps being skipped or not done efficiently record them for your report.
6. Compile Your findings
Finally, gather all of your findings and come up with some suggestions for how to improve them. Now you will meet with the managers one more time to discuss your findings.
Highlight the processes that were done incorrectly or not done at all. This will help managers address them right away. Ask the managers for suggestions on how to improve or fix problems as well.
7. End Report
Now you will create your end report detailing your experience. This will be sent to higher management or the executives of the company. In it, you will include everything you have found as well as how they will be improved in the future.
It is important that you also include all instances of fraud found in the procurement department. And immediately report it to higher management as you find it.
More Tips for Improvement
Auditing your company can be a long and tedious process. But can catch instances of fraud that can save you thousands. Not to mention you’ll be able to improve your business!
To learn more about how to improve your business and it’s relationship with the government contact us.