A typical procurement process follows a structured cycle critical to ensuring operational efficiency and financial integrity. It includes the following steps:
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Identify – Determine the goods or services needed by the organization.
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Request – Create a purchase requisition and obtain necessary approvals.
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Source – Identify, evaluate, and select suppliers; issue RFQ/RFP, review bids, and finalize contracts.
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Order – Issue a formal purchase order to the selected supplier.
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Receive – Accept and inspect the goods or services delivered.
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Pay – Match invoice with PO and receipt, then process payment.
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Review – Evaluate supplier performance and maintain records for compliance.
A core control in this process is triangulation, or the three-way match, which compares the Purchase Order (PO), the Receiving Report (or Bill of Lading), and the Vendor Invoice. This match is documented and processed using a voucher to approve and record the transaction.
Practical Example: Triangulation in Action
In a hospital audit, a department ordered 100 medical kits via a PO at $50 each. Upon delivery, the receiving team logged 100 kits in the receiving report. Later, the vendor submitted an invoice for 100 kits at the agreed price. The auditor reviewed the voucher packet—which included the PO, receiving report, and invoice—and confirmed all three documents matched in quantity, price, and description.
Audit Considerations
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Assertions Audited:
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Accuracy – Are amounts correctly recorded?
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Occurrence – Did the transaction actually happen?
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Completeness – Is the entire transaction captured?
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Internal Controls:
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Mandatory three-way match before payment approval.
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Segregation of duties between ordering, receiving, and payment.
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Audit Tests:
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Select a sample of vouchers and verify supporting documents match.
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Review any mismatches or overrides for proper justification and approval.
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This triangulation ensures reliability in procurement and prevents overpayments, fraud, or duplicate transactions.