Survey Reinforces Need for Independent Auditing

18 Jul

calculator and cashIt is widely understood that a coordinated audit program, leveraging the resources of Internal Audit and the strategic use of 3rd party auditors is a smart business practice and represents good corporate governance.  The audit process results in improved transparency and solid control testing, both important elements when attempting to ensure that an organization is securing maximum value for the money spent while incurring the least amount of risk.

Adding fuel to the “pro” audit argument is a global study of 550 accounts payable departments conducted by software provider Basware. The eye-opening results certainly reinforce the need for organizations to periodically review procurement and AP processes and controls and to monitor the performance of both the organization’s own AP department and that of its vendor network.  Perhaps most alarming, the Basware study found that just 40% of invoices generated were based upon purchase orders and where a valid P.O. did exist, many financial departments had trouble reconciling against them.  Further, among the survey respondents, which processed on average 93,000 invoices per year, 7% contained errors.  These errors led delays in paying suppliers among 35% of the respondents and delays in being paid among 24% of the respondents.

In spite of the fact that many vendor agreements contain AP guidelines and even spell out accounts payable criteria related to prompt pay discounts, late fee avoidance, days payable targets, fiscal period reconciliation parameters, etc… too often performance in this area goes unchecked. A parting thought, inspired by the words of Sir Edward Coke, the noted seventeenth-century English jurist;  “Precaution is better than cure.”  Read More.

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