A procurement audit is the independent examination of, and expression of opinion on, the procurement records of an enterprise by an appointed auditor in pursuance of that appointment and in compliance with any relevant statutory obligation: If we take the example
of a limited company audit, then we can immediately appreciate that (before a new audit client is accepted, the auditor concerned must ensure that there are no independence or other ethical problems likely to cause conflict with the ethical code. Furthermore, it is important for the new auditor to ensure that he has been appointed in a proper and legal manner – it will be appreciated that one auditor‘s appointment is normally another auditor‘s removal or resignation). Essentially, the initial procedures to be observed can be considered in 2 stages:
- Procedures before accepting nomination; and
- Procedures after accepting nomination.
Procedure before accepting nomination
The nominee auditor must take the following steps:
- Ensure that he is professionally qualified to act i.e. is not disqualified on any legal or ethical grounds.
- Ensure that the firm‘s existing resources are adequate to service the needs of the new client. This will raise questions of staff and time availability and the firm‘s technical expertise.
- Seek references in respect of the new client company, it may be, as is often the case, that the directors of the company are already personally known to the firm, if not, independent enquiries should be made concerning the status of the company and its directors.
- Communicate with the retiring auditor:
Procedures after accepting nomination
- Ensure that the outgoing auditor‘s removal or resignation has been properly conducted in accordance with the Companies Act 1962. The new auditor should see a valid notice of the outgoing auditor‘s resignation, or confirm that the outgoing auditor was properly removed at a general meeting of the company.
- Ensure that the new auditor‘s appointment is valid. The new auditor should obtain a copy
of the resolution passed at the general meeting appointing him as the company‘s auditor.
- Set up and submit a letter of engagement to the directors of the company.