Internal Auditing Department PURCHASING DEPARTMENT W/P Ref.

# Auditor Initials

I.

PLANNING SECTION / ADMINISTRATION A. Prepare an Audit Program to provide guidance as to the procedures to be performed for the review. B. Obtain the most current policy and procedure statement for the Purchasing Department C. Obtain the most current organization chart and review lines of reporting. D. Prepare a flow chart of the transaction process. E. Hold introductory meetings with the auditee. F. Obtain and review prior period audit report and workpapers for any significant concerns.

II.

CONFIRMING PURCHASE ORDERS

(FC-Field Confirming) & (CO-Confirming Order)

A. Obtain an understanding of the issues surrounding FC and CO purchase orders. Understanding should include Purchasing Department (PD) and Requisitioning Department (RD) involvement, JD Edwards, documentation requirements etc. 1. Prepare a transaction flow narrative to describe the requisition, quote and purchase order process. Provide supporting schedules and screens where necessary. B. Obtain or create strategy queries of the JD Edwards PD system to identify all purchase orders coded FC and CO transacted during a certain period. The period for this review is ____________. 1. Make a selection of purchase orders based on a certain criteria. Obtain and review actual purchase order documentation maintained in PD files. Run queries to provide text detail as to the nature of the PO, bids etc. Comment on any internal control issues. i. ii. Ensure documentation is original and free from alteration. Ensure the necessary documentation is signed and approved by PD management.

iii. Review any supporting documentation i.e. bids, contracts, proposals contained within the files. If not sufficient, comment on same. Ensure JD Edwardss text screens are consistent with documentation. iv. Review documentation maintained by the RD.

Internal Auditing Department PURCHASING DEPARTMENT W/P Ref. #

2. For the selection of purchase orders tested in B1, trace and agree the purchase order amount to the G/L system. (Liability and Expense accounts). Particular attention should be made to the Expense account. i. Comment on any variances between the purchasing and general ledger systems.

Auditor Initials

3. For the selection of purchase orders tested in B1, create queries to obtain a detail history of expenses charged against the purchase order. i. ii. Review and comment on any variances between incoming invoices and the purchase order. Vouch random expenses against the purchase order. Note the invoice date and the period the charges are incurred.

iii. Agree the PO#, business unit, account, sub, invoice amount and vendor name from A/P query to actual invoice. 4. For the selection of purchase orders tested in B1, create queries to identify personnel approving the PO in the purchasing system. Comment on any internal control issues. i. Review personnel and ensure that they are authorized for the particular type of order and business unit. Agree to system approval files. Ensure that personnel are within the proper authorization limits with respect to the PO amount. Agree to system approval files.

ii.

iii. Evaluate the timing of the approval process with the invoice or other commitment date. 5. For the selection of purchase orders tested in B1, create queries to identify the change orders that have been processed. i. Review each change for any documentation, approval/authorization to support the change order. Comment on any internal control issues.

Internal Auditing Department PURCHASING DEPARTMENT W/P Ref. #

6. For the selection of purchase orders tested in B1, create queries to identify PO amount, amount received and the remaining open balance. i. Review and ensure that zero balance POs have been closed and that no further charges can be applied. Comment on any internal control issues.

Auditor Initials

III.

JDE SYSTEM APPROVAL FILES 1. Gain an understanding of the JDE approval tables and processes. Create a query to provide all authorized personnel with authorized limits by business unit. Comment on any internal control issues. i. Review and evaluate personnel authorized within each business unit. Comment on terminated, transferred or separated personnel. Review authorized limitations for consistency and reasonableness.

IV.

ACCESS SECURITY PURCHASING SYSTEM (JDE) 1. Gain an understanding of access procedures and processes for the purchasing system. Make the necessary inquiries with the Database Security Administrator. Comment on any internal control issues i. Identify purchasing related programs on JDE. Run a query to identify users and their system capabilities as to add, change or delete records. Evaluate internal controls. Identify the JDE screens from which a requisition order is created. Run query to identify all users who can access these screens and execute a requisition order from the purchasing files in JDE. Evaluate internal controls.

ii.

iii. Run queries to identify all users with AS/400 access capability. Determine whether the IBM Status on terminated employees has been disabled preventing access to JDE files. Evaluate internal controls. iv. Run query to identify all users who gained access to Purchase Order Entry and Receipts screens since the beginning of the fiscal year. Note the number of occurrences. v. Run query to provide all requisitions issued during a certain period for selected business units. Make note to the users who placed the order from the business unit. Note whether the users
3

Internal Auditing Department PURCHASING DEPARTMENT W/P Ref. #

belong to or have business involvement with the particular business unit from that being created. V. OUTSTANDING & CLOSED PURCHASE ORDERS 1. Gain an understanding of receiving on open orders and how orders remain open and outstanding for periods of time. Evaluate & comment on internal controls.
i.

Auditor Initials

Run query to obtain all purchase orders with open and remaining dollars that have not been properly closed out on the JDE system. The status will include all statuses other than 999. Summarize by open orders and open dollars by fiscal year. a) Make a selection of purchase orders outstanding and ensure that no unauthorized charges have occurred.

2. Gain an understanding of how purchase orders are invoiced and properly closed and purged from the JDE system. Comment on internal controls. i. Run query to obtain all purchase orders with open and remaining dollars that have been closed out on the JDE system. The status will only include those orders advanced to 999. Summarize by fiscal year.

VI.

VENDOR BIDS 1. Obtain an understanding of the bid process, support documentation, JDE processing and involvement and policy and procedure requirements. Comment on internal control issues. i. Run query to obtain all purchase orders in excess of $5,000, closed out to status code 999 originated during the current fiscal period. Ensure compliance to policy and procedure requirements.

Internal Auditing Department PURCHASING DEPARTMENT W/P Ref. #

VII. VENDOR BLANKETS 1. Obtain an understanding of the blanket process, release orders support documentation, JDE processing and involvement and policy and procedure requirements. Comment on internal control issues. i. Run query to identify blanket orders and release orders transacted during a certain period. a) Review and evaluate the approval process. Ensure that the blanket order is properly approved. Review to ensure blanket releases are initiated after the blanket order has been approved. b) Review selected release orders and ensure unit cost, quantity and extended is in agreement with the blanket order set up in JDE. Evaluate any over releases. c) Review selected invoices charged against released orders. Evaluate internal controls. VIII. MINOR PURCHASE ORDERS (OM) 1. Obtain an understanding of Minor Orders, documentation requirements, JDE processes, approvals and policy and procedure requirements. Comment on internal control issues. i. Run query to identify all orders coded (OM) in excess of $1,000 originated during a certain period. Summarize those orders not in compliance with policy by business unit. a) Review the minor order approval process for a selection of those orders not in compliance with policy and procedure statements IX. VENDOR DATABASE (cursory review)
1.

Auditor Initials

Obtain a general top-level understanding of the vendor database, new vendor set-up and vendor (no longer used) purge from the JDE system. i. Review the processes of obtaining new vendors, new tax identification numbers (TIN) and certificates.