Stinnett San Antonio Senior Manager Steve Kienlen shares insights on vendor audit as we conclude our series on Internal Audit Month. Steve has over 16 years of internal audit, public accounting and operations experience, with extensive industry knowledge including IT, oil and gas, telecom, non-profit and manufacturing.
Trust but verify. Third-party vendors are often trusted business partners and they can provide critical services as our clients build, grow and maintain their operations. But things don’t always go as planned, mistakes happen, and even trusted partners can sometimes make decisions that put their own interests first. Vendor audits serve multiple purposes such as pursuing the identification of billing errors, conflicts of interest and even fraud.
The vendor analytics and vendor audits Stinnett performs for our clients primarily seek to answer certain key questions:
- Where do the risks of overbillings and conflicts of interest appear to be the highest?
- What contractual terms are in place governing the business relationship?
- Is the vendor being audited one with whom our client can continue a relationship of trust?
Because every client and vendor have a unique operating relationship, there is no cookie-cutter approach to answering these questions. However, certain procedures are frequently included in the reviews:
- Comparison of a sample of invoices to contractual terms, such as approved rate sheets.
- Interviews with key members of the vendor’s management team.
- Analysis of the vendor’s expenses to identify activities which might represent violations of the client’s code of conduct.
- Analysis of documentation to substantiate the amounts invoiced to our client, such as payroll records supporting labor hours, rental receipts supporting equipment charges, and payments to third parties for subcontracted activity.
During our reviews, we also seek to identify the root causes which might be contributing factors for any issues identified. In turn, those root causes are communicated to our clients to help reduce future risk.
This concludes our series on Internal Audit Awareness Month and we look forward to bringing you future insights on the latest trends in internal audit.