Auditing is a business function that reviews internal processes or functions. Internal audits provide information for business owners to ensure employees follow guidelines for their job. Owners may also find areas that need changes to improve or enhance business functions. Procurement is a function responsible for making major purchases or acquisitions for the company. This function faces scrutiny because it spends the company's capital. Overspending can decrease company assets for future use.
A company's purchase order process is often the start of the procurement process. Auditors will review the purchase order system in place, who authorises purchase orders and if this document is used in the receiving and accounts payable process. Because every purchase order cannot be reviewed in the audit process, a sample is typically chosen among a large group of purchase orders. Auditors use this sample to determine if any deficiencies exist and if these allow employees to abuse the purchase order system.
Receiving is the process a company uses to physically check goods and store them in the company's facilities. Auditors review this process to ensure employees are not stealing items and that all goods are in acceptable condition. Companies must also ensure the terms listed on the receiving documents---such as shipping manifest or pick ticket copy---match the information listed on the company's internal purchase order.
Accounts payable is an accounting function responsible for paying the invoice relating to procurement acquisitions. Auditors will ensure the company has a matching process in place to ensure the accountant compares the purchase order, receiving information and vendor invoice prior to making payments. The invoice represents the final bill for goods or services from a vendor or supplier. Auditing this process is again done through a sampling process to ensure auditors can review a select few pieces of information.
Auditors will also interview company management during the procurement audit to determine how well they monitor this function. Owners and managers are typically responsible for creating internal controls which protect the integrity of procurement information. Auditors interview management to determine their knowledge of the process, purpose of internal controls and how often they personally supervise employees.