Procure to Pay : Procurement Planning Internal Audit Checklist

We had discussed about the procure to pay steps earlier, if you haven’t read it click here. In this article we discuss about the check points that an Internal Auditor must keep in his mind while auditing the sub-area of procurement planning under the P2P audit.

Note that the design aspects of the procurement planning has to be appropriately tested before testing the effectiveness of the controls. The controls have to be tested only after obtaining sufficient confidence in the design of the system in place.

Next is to check if Planning parameters updated in the system are complete:

• Review system configuration to check if the system defines mandatory fields in the planning parameters module
• Review if the system allows purchase order to be raised for an item for which planning parameters have not been created.
• Review the planning parameters extract to identify instances of incomplete/blank parameters

Check if the MRP run logic is accurate: 

• Review change management controls over the system under review
• Review system configuration to verify that MRP run logic has been accurately defined. For a sample inventory item, trace the system logic to test accuracy

Once we are confident about the logic set in the MRP, we need to assess if the Procurement quantities defined are as per the MRP run: 

• Understand process for using MRP run output for actual procurement. In case any manual intervention is performed, understand the process for comparing actual and planned procurement.
• Understand whether variance thresholds are established and variances are explained on the event the threshold is exceeded or met. Ensure that the variance thresholds set are logical and are not unreasonable.
• For a sample of analysis of budget versus actual procurement test check if the company has performed a variance analysis, accordingly reviewed and approved it.

Other General Points – Procurement Plan:

• Review the policies/ procedures/ guidelines for preparation and review of the procurement plan
• On a sample basis test check that the plan was prepared and approved as per the guidelines

This is just to guide you or to give a head start. Not all organisations have the same procurement process, so it is important to be aware of the system and accordingly adjust the check points. Thanks for reading.