ZD has experienced rapid growth, fueled by the demand for eco-friendly products. The procurement department faces pressure to manage increasing purchase volumes essential for production demands. Informal reports have suggested possible circumvention of the company’s procurement policies by splitting larger purchase orders into smaller, less scrutinized transactions.
1. Audit Objectives:
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To identify and analyze instances of split purchase orders within the last fiscal year to ascertain compliance with the organization’s procurement policies, particularly regarding approval thresholds.
2. Risk Assessment:
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Risk of Non-compliance: There’s a risk that split purchase orders are being used to bypass required approvals for larger expenditures, potentially leading to unauthorized or unnecessary spending.
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Risk of Fraud: Splitting purchase orders can indicate fraudulent attempts to evade internal control systems, leading to financial losses.
3. Scope:
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The audit will review all purchase orders issued during the fiscal year 2023.
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Departments included are Production and Research & Development (R&D).
4. Methodology:
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Data Extraction: Purchase order data will be extracted from the ERP system, focusing on the specified departments.
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Key Analysis Techniques:
– Sequence Analysis: Review sequences of orders to single vendors issued close together to identify patterns indicating potential splitting.
– Threshold Analysis: Examine groups of orders whose combined totals exceed $10,000.
5. Audit Logic:
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Data Collection: Gather data including vendor details, purchase amounts, dates, and approvers.
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Analysis Steps: 1. Identify purchase orders to “EcoSupplies” that are each just under the $10,000 threshold and issued within days of each other. 2. Check if the combined amount of closely issued POs to the same vendor exceeds the threshold without requisite approvals.
6. Data Fields:
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PO Number
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Vendor ID
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Date of Issue
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Amount
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Approver ID and Name
7. Expected Outcomes:
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Identification of any split purchase orders that circumvent approval protocols.
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Recommendations for policy adjustments or the implementation of system checks to prevent future occurrences.
8. Reporting:
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A detailed audit report outlining instances of policy circumvention and their financial implications will be provided.
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The report will be presented to senior management during the quarterly management meeting.
9. Timeline:
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Planning Phase: 2 weeks
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Execution Phase: 4 weeks
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Reporting Phase: 2 weeks
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Review Phase: 2 weeks after report submission
10. Approval:
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Prepared by: EH
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Reviewed by: OH
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Approved by: WD
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Date: 24 April 2024
11. Visualizations:
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Timeline illustrating the issuance of purchase orders to EcoSupplies.
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Pie chart showing the distribution of split purchase orders across departments.
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Risk heat map highlighting departments where policy circumvention is most frequent.
– This structured document adheres to the specified layout to guide the audit process thoroughly and effectively, ensuring all necessary aspects are covered comprehensively.
12. Get the ACL Script:
OPEN PO_Table
SORT ON VENDOR_ID DATE_OF_ISSUE TO “Sorted_POs” OPEN ISOLOCALE root OPEN “Sorted_POS”
SET FILTER TO (VENDOR_ID = RECOFFSET(VENDOR_ID, 1 ) AND
RECOFFSET(DATE_OF_ISSUE, 1) – DATE_OF_ISSUE <= %v_no_of_Days% ) OR
(VENDOR_ID = RECOFFSET(VENDOR_ID, -1 ) AND RECOFFSET(DATE_OF_ISSUE, -1) –
DATE_OF_ISSUE >= -%v_no_of_Days%)
OPEN “Sorted_Invoice”
COMMENT – Execution of Split_ completed
EXTRACT RECORD TO “r_Potential_Split_PO” OPEN
