SAMPLE OF AUDIT PROCEDURE ON PROCUREMENT

Agency
Internal Audit Group
Audit of Procurement and Management of Supplies, Property and Equipment

General Objective: To evaluate economy and efficiency in the procurement and management of supplies, property and equipment

Specific Objectives:

1. To ensure compliance with prescribed policies and procedures on procurement and management of supplies, property and
equipment;
2. To ascertain adequacy of internal control; and
3. To determine the extent to which the desired results are being achieved.

Scope: 2006 Transactions

Operations Audit Department
Audit Program Audit Procedures Purpose
Responsible
Person
Timetable
1. Check compliance to policies
/ prescribed procedures and
evaluate adequacy of
internal control
1. Review the pertinent policies,
systems and prescribed
procedures
To enable the auditors to
familiarize with and
internalize the policies,
systems and procedures in
preparation for audit work
1 day, to be
undertaken
before the
field work
2. Obtain database of supplies,
property and equipment

To serve as reference in
selecting samples for audit
thereby ensuring their
probative value.

2 day
(depending
on response
by auditee), to
be under-
taken prior to
the conduct of
field work
Operations Audit Department
Audit Program Audit Procedures Purpose
Responsible
Person
Timetable
3. From the unit under audit, obtain
the following:
a. Organizational structure
b. Manpower complement
c. Employees individual duties
and responsibilities
d. Special Orders (SO) for OICs
e. List of signing authorities /
composition of BAC
To serve as easy reference
in identifying responsible
personnel, authorized
signatories and in
conducting the walk-through.
1 hour
(depending
on the
response of
auditee) to be
gathered on
site after the
entrance audit
conference
List of
requirements
to be faxed
prior to field
work
4. Conduct walk through on flow of
transactions
a. Observe actual process
b. Take a look at records,
documents, reports and other
output/result of the process
c. Interview the employees
handling the tasks
d. Compare actual task with list
of individual duties and
responsibilities
e. Take note of lapses,
deviations, inconsistencies
and violation of policies. Note
To validate actual process
flow with the prescribed
procedure
To identify risk areas in the
process flow
To assess efficiency of
operations
To check that distribution of
manpower corresponds to
the volume of transactions
being handled by the
auditee.

Operations Audit Department
Audit Program Audit Procedures Purpose
Responsible
Person
Timetable
down observations and
recommendations including
actions taken by auditee.
5. Under the supervision of the team
leader, take sample transactions
from disbursement voucher
register
a. Obtain disbursement voucher
from concerned unit (COA
and/or Cash Division)
b. Check contents, accuracy and
propriety of entries on the
documents
c. Match signatures in the
various documents to ensure
their consistency and
authenticity
d. Accomplish the working paper
according to mode of
acquisition using the attached
format:
Public Bidding
Procurement WP 1
Procurement Service
Office Procurement WP
2
Direct Contracting
Procurement WP 3
To check for any
irregularities (violation of
policies) in the transactions
To determine completeness
and propriety of documents.
To check propriety of
signatories on disbursement
vouchers and supporting
documents.
To check that purchases of
goods are based on valid,
approved request and
properly executed as to
price, quantity, quality and
supplier.
To validate the accuracy and
timeliness of the procured
goods.






Operations Audit Department
Audit Program Audit Procedures Purpose
Responsible
Person
Timetable
Emergency Purchase
Procurement WP 4
Negotiated Purchase
Procurement WP 5
Repeat Order
Procurement WP 6
e. Compare quantity of supplies
purchased with APP
Check APPs data such as
item description, quantity,
estimated cost, etc.
f. Take note of lapses,
deviations, inconsistencies
and violation of policies. Note
down observations and
recommendations including
actions taken by the auditee.






To check if purchases made
were within the approved
plan.
6. Check entries in the stock
card/equipment ledger card
a. Check if issued RIR were
recorded in the stock
card/equipment ledger card
b. Check if withdrawal of supplies
were posted in the stock card
and supported by proper
documents.
c. Compare stock card against
To check accuracy and
timeliness of entries in the
stock card/equipment ledger
card
To check the accuracy of the
inventory records.
To check inventory of
unused supplies are within
the reasonable limits.


Operations Audit Department
Audit Program Audit Procedures Purpose
Responsible
Person
Timetable
APP and physical inventory.
d. Scrutinize the stock card for
unusual entries
e. Take note of balances of
individual items and check
cases of slow moving supplies
and/or excessive stocks.
f. Take note of lapses,
deviations, inconsistencies
and violation of policies. Note
down observations and
recommendations including
actions taken by the auditee.

7. Conduct inspection of storage
facility
a. Look for the person
responsible in handling the key
to store room.
b. Check arrangement of
supplies (i.e. usage of storage
rack/shelves, supplies are
secured from falling or sliding
and if properly labeled).
c. Check if the aisles and
passageways are clear for
safe and efficient handling of
storage materials/supplies.
d. Check if storage (roof &
To ascertain that effective
security controls are in
place, thus offer adequate
protection against loss and
deterioration.
To check process of
safekeeping that will ensure
easy handling of supplies
and materials.

Operations Audit Department
Audit Program Audit Procedures Purpose
Responsible
Person
Timetable
ceiling) are free from leaks.
e. Check if theres proper control
for materials that are fire or
pest control hazards (i.e.
availability of fire extinguisher).
f. Check security control as to
unauthorized entry.
g. Note down observations and
recommendations including
actions taken by the auditee.
8. Conduct random physical
count/inventory of supplies,
property and equipment.
a. Check the stock cards against
supplies
b. Check existence of property
on inventory list
c. Note down observations and
recommendations including
actions taken by the auditee.
To validate existence of
property and equipment.
To check balances stock
cards are reconciled with the
supplies on hand.

2. Follow through of previous
audit observations
Follow-up actions taken/and or
compliance with previous audit
recommendations.
To check whether the
previous audit
recommendations were put
into action / unacceptable
practices had been stopped
or the previous observations
still exist.

Operations Audit Department
Audit Program Audit Procedures Purpose
Responsible
Person
Timetable
3. Organize observations and
prepare draft report
Prepare draft report by each member
of the audit team with supporting
schedules / annexes
Indicate effect to the Agency
operations and risks that may
be encountered
List down auditors
recommended courses of
action, persons/units
responsible in implementing
the recommendations
Indicate auditors name after
each audit observation.
To document the details of
audit observation in each
area which the branch/unit
shows strength and
weaknesses.

4. Discuss findings with
concerned auditee /
personnel
Discuss the findings with concerned
auditee and/or supervisor of the unit
audited.
For validation / confirmation
Note down auditee / unit
heads comments (items
concurred / disagreed) and / or
commitments
To validate / confirm the
audit observations to the
concerned personnel / unit.

5. Exit conference 1. Discuss result of audit with the
manager/OIC.
2. Provide auditee in hard and soft
copy of the report with covering
transmittal memo indicating due
date for response.
To clarify some issues that
may not be fully understood.
To ensure that the
observations and
recommendations are
acceptable to auditee to

Operations Audit Department
Audit Program Audit Procedures Purpose
Responsible
Person
Timetable
assure recommendations will
be acted upon.
To close the audit
engagement.
6. Consolidate and finalize
report
Consolidate and finalize report
7. Submit report to Top
Management
Submit hard copy of report to Top
Management (CEO, DCEO, SVP-
Technical and SVP Operations).
To inform management on
the status of audited area,
thus formulate strategies,
decision making and take
remedial actions.

8. Monitor auditees
commitment and actions
taken on audit
recommendations.
1. Monitor response and audit rating.
2. Monitor action taken and
implementation of recommended
actions on just concluded audit.
To determine / assess
whether the completed audit
engagement assist the
branch/unit in improving the
weak areas and attain
objectives.